Exhibit 99.1

  NEWS

FOR IMMEDIATE RELEASE

KEYCORP REPORTS FIRST QUARTER 2015

NET INCOME OF $222 MILLION, OR $.26 PER COMMON SHARE

Revenue up from prior year, with well-managed expenses

Average loans up 5% from prior year, driven by a

12% increase in commercial, financial and agricultural loans

Credit quality remains strong, with net loan charge-offs to average loans of .20%

Disciplined capital management, with plans to continue high levels

of capital return to shareholders

CLEVELAND, April 16, 2015 – KeyCorp (NYSE: KEY) today announced first quarter net income from continuing operations attributable to Key common shareholders of $222 million, or $.26 per common share, compared to $246 million, or $.28 per common share, for the fourth quarter of 2014, and $232 million, or $.26 per common share, for the first quarter of 2014.

“Our first quarter results were solid and reflect our continued focus on growing our businesses,” said Chairman and Chief Executive Officer Beth Mooney. “Revenue was up from the prior year and expenses were well-managed as we generated positive operating leverage. Our asset quality continued to be strong, and we remain committed to improving productivity and efficiency.”

“In the first quarter, we continued to benefit from solid loan growth, driven by our commercial businesses, as well as the traction we are gaining from investments in areas such as trust and investment services and cards and payments. While we saw growth in several of our other fee-based businesses, we experienced lower capital markets revenue in the quarter,” added Mooney.

“Additionally, we were pleased to receive no objection to our 2015 capital plans. We expect to return a significant amount of our net income to our shareholders over the next five quarters, including a share repurchase program of up to $725 million and, subject to approval by our Board of Directors, an increase in the quarterly dividend,” continued Mooney. “We anticipate these actions will lead to an estimated payout ratio that is among the highest in our peer group for the third consecutive year.”

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 2

 

FIRST QUARTER 2015 FINANCIAL RESULTS, from continuing operations

Compared to First Quarter of 2014

 

•

Average loans up 5.1%, driven by a 11.5% growth in commercial, financial and agricultural loans

 

•

Average deposits up 4.9%, due to growth in noninterest-bearing deposits

 

•

Net interest income (taxable-equivalent) up $8 million, driven by higher loan balances partially offset by lower earning asset yields

 

•

Noninterest income up $2 million, reflecting increases in trust and investment services income primarily from the third quarter 2014 acquisition of Pacific Crest Securities and various other line items, partially offset by declines in investment banking and debt placement fees and operating lease income and other leasing gains

 

•

Noninterest expense up $5 million primarily due to the acquisition of Pacific Crest Securities and higher employee benefits expense

 

•

Solid asset quality, with net loan charge-offs to average loans remaining well below our targeted range of 40-60 basis points

 

•

Disciplined capital management, with the announcement of new planned capital actions including a share repurchase program of up to $725 million and, subject to approval by Key’s Board of Directors, an increase of the quarterly common share dividend to $.075 per share

Compared to Fourth Quarter of 2014

 

•

Average loans up 1.7%, primarily driven by an increase in commercial, financial and agricultural loans

 

•

Average deposits declined slightly, reflecting lower certificates of deposit balances

 

•

Net interest income (taxable-equivalent) down $11 million, primarily due to fewer days in the first quarter

 

•

Noninterest income down $53 million, primarily due to lower investment banking and debt placement fees

 

•

Noninterest expense down $35 million, reflecting lower personnel and marketing expense, as well as a decline in business services and professional fees

 

•

Asset quality remains strong, with net loan charge-offs to average loans relatively flat to prior quarter and remaining well below the targeted range

 

•

Disciplined capital management, repurchasing $208 million of common shares during the first quarter of 2015 and maintaining a solid capital position with Common Equity Tier 1 of 10.82%

Selected Financial Highlights

 

dollars in millions, except per share data														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Income (loss) from continuing operations attributable to Key common shareholders		$	222			$	246			$	232				(9.8	)%			(4.3	)%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution			.26				.28				.26				(7.1	)			—
Return on average total assets from continuing operations			1.03	%			1.12	%			1.13	%			N/A				N/A
Common Equity Tier 1 (a)			10.82				N/A				N/A				N/A				N/A
Tier 1 common equity (a)			N/A				11.17				11.27				N/A				N/A
Book value at period end		$	12.12			$	11.91			$	11.43				1.8	%			6.0	%
Net interest margin (TE) from continuing operations			2.91	%			2.94	%			3.00	%			N/A				N/A

 

(a)

The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Common Equity Tier 1” (compliance date of January 1, 2015, under the Regulatory Capital Rules) and “Tier 1 common equity” (prior to January 1, 2015). The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of this release.

TE = Taxable Equivalent, N/A = Not Applicable

 

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 3

 

INCOME STATEMENT HIGHLIGHTS

Revenue

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Net interest income (TE)		$	577			$	588			$	569				(1.9	)%			1.4	%
Noninterest income			437				490				435				(10.8	)			.5
Total revenue		$	1,014			$	1,078			$	1,004				(5.9	)%			1.0	%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $577 million for the first quarter of 2015, and the net interest margin was 2.91%. These results compare to taxable-equivalent net interest income of $569 million and a net interest margin of 3.00% for the first quarter of 2014. The increase in net interest income reflects higher loan balances mitigated by lower earning asset yields, which also drove the decline in the net interest margin.

Compared to the fourth quarter of 2014, taxable-equivalent net interest income decreased by $11 million, and the net interest margin declined by three basis points. The decrease in net interest income was primarily attributable to fewer days in the first quarter of 2015. The decline in net interest margin reflects lower earning asset yields.

Noninterest Income

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Trust and investment services income		$	109			$	112			$	98				(2.7	)%			11.2	%
Investment banking and debt placement fees			68				126				84				(46.0	)			(19.0	)
Service charges on deposit accounts			61				64				63				(4.7	)			(3.2	)
Operating lease income and other leasing gains			19				15				29				26.7				(34.5	)
Corporate services income			43				53				42				(18.9	)			2.4
Cards and payments income			42				43				38				(2.3	)			10.5
Corporate-owned life insurance income			31				38				26				(18.4	)			19.2
Consumer mortgage income			3				3				2				—				50.0
Mortgage servicing fees			13				11				15				18.2				(13.3	)
Net gains (losses) from principal investing			29				18				24				61.1				20.8
Other income			19				7				14				171.4				35.7
Total noninterest income		$	437			$	490			$	435				(10.8	)%			.5	%

Key’s noninterest income was $437 million for the first quarter of 2015, compared to $435 million for the year-ago quarter. Trust and investment services income increased $11 million, primarily due to the impact of the third quarter 2014 Pacific Crest Securities acquisition. Increases in net gains from principal investing, corporate-owned life insurance income, cards and payments income, and other income also contributed to the growth in the quarter. These increases were partially offset by a $16 million decline in investment banking and debt placement fees as a result of lower financial advisory fees. Additionally, operating lease income and other leasing gains declined by $10 million primarily due to the termination of a leveraged lease in the prior year.

Compared to the fourth quarter of 2014, noninterest income decreased by $53 million. First quarter results reflect seasonality and variability in several fee categories. Growth in operating lease income and other leasing gains, net gains from principal investing, and other income was more than offset by a $58 million quarter-over-quarter decline in investment banking and debt placement fees. This decline was primarily caused by lower revenue from loan syndications and financial advisory fees.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 4

 

Noninterest Expense

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Personnel expense		$	389			$	409			$	388				(4.9	)%			.3	%
Nonpersonnel expense			280				295				276				(5.1	)			1.4
Total noninterest expense		$	669			$	704			$	664				(5.0	)%			.8	%

Key’s noninterest expense was $669 million for the first quarter of 2015, compared to $664 million in the first quarter of last year. The increase was mainly related to the third quarter 2014 acquisition of Pacific Crest Securities and higher employee benefits costs. Partially offsetting the increase in expenses were $8 million in lower business services and professional fees, as well as continued cost savings across the organization. Additionally, expenses included $7 million in costs associated with Key’s continuous improvement efforts to drive efficiency and productivity. These costs were primarily in personnel expense and were $3 million less than the year-ago quarter.

Compared to the fourth quarter of 2014, noninterest expense decreased by $35 million. The largest driver of this reduction was a $20 million decrease in personnel expense due to lower incentive compensation expense, partially offset by higher employee benefits costs. Other decreases included $8 million in marketing expense and $5 million in business services and professional fees.

BALANCE SHEET HIGHLIGHTS

In the first quarter of 2015, Key had average assets of $91.9 billion compared to $90.2 billion in the first quarter of 2014 and $91.1 billion in the fourth quarter of 2014. Compared to the first quarter of 2014, average loans grew 5.1% to $57.5 billion while average deposits grew 4.9% to $68.8 billion. In addition, Key’s average total investment securities increased, with a higher percentage of Ginnie Mae securities, as Key continued to position the portfolio for upcoming regulatory liquidity requirements.

Average Loans

 

dollars in millions														Change 3-31-15 vs.
		3-31-15				12-31-14				3-31-14				12-31-14				3-31-14
Commercial, financial and agricultural (a)		$	28,321			$	27,188			$	25,390				4.2	%			11.5	%
Other commercial loans			13,304				13,357				13,337				(.4	)			(.2	)
Total home equity loans			10,576				10,639				10,630				(.6	)			(.5	)
Other consumer loans			5,311				5,357				5,389				(.9	)			(1.4	)
Total loans		$	57,512			$	56,541			$	54,746				1.7	%			5.1	%

 

(a)	Commercial, financial and agricultural average loan balances include $87 million, $90 million, and $94 million of assets from commercial credit cards at March 31, 2015, December 31, 2014, and March 31, 2014, respectively.

Average loans were $57.5 billion for the first quarter of 2015, an increase of $2.8 billion compared to the first quarter of 2014. The loan growth occurred primarily in the commercial, financial and agricultural portfolio, which increased $2.9 billion and was broad-based across Key’s commercial lines of business. Consumer loans remained relatively stable as modest increases across Key’s core consumer loan portfolio were offset by run-off in Key’s consumer exit portfolios.

Compared to the fourth quarter of 2014, average loans increased by $971 million, driven by commercial, financial and agricultural loans, which increased by $1.1 billion. On a period-end basis, commercial, financial and agricultural loans increased $801 million over the linked quarter driven by strong demand that carried over from the fourth quarter of 2014.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 5

 

Average Deposits

 

dollars in millions														Change 3-31-15 vs.
		3-31-15				12-31-14				3-31-14				12-31-14				3-31-14
Non-time deposits (a)		$	63,606			$	63,541			$	59,197				.1	%			7.4	%
Certificates of deposit ($100,000 or more)			2,017				2,277				2,758				(11.4	)			(26.9	)
Other time deposits			3,217				3,306				3,679				(2.7	)			(12.6	)
Total deposits		$	68,840			$	69,124			$	65,634				(.4	)%			4.9	%
Cost of total deposits (a)			.15	%			.15	%			.20	%			N/A				N/A

 

(a)	Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $68.8 billion for the first quarter of 2015, an increase of $3.2 billion compared to the year-ago quarter. Noninterest-bearing deposits increased by $3.6 billion, and NOW and money market deposit accounts increased $888 million, mostly due to the commercial mortgage servicing business. These increases were partially offset by a decline in certificates of deposit.

Compared to the fourth quarter of 2014, average deposits, excluding deposits in foreign office, decreased slightly primarily due to an expected decline in certificates of deposit.

ASSET QUALITY

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Net loan charge-offs		$	28			$	32			$	20				(12.5	)%			40.0	%
Net loan charge-offs to average total loans			.20	%			.22	%			.15	%			N/A				N/A
Nonperforming loans at period end (a)		$	437			$	418			$	449				4.5				(2.7	)
Nonperforming assets at period end			457				436				469				4.8				(2.6	)
Allowance for loan and lease losses			794				794				834				—				(4.8	)
Allowance for loan and lease losses to nonperforming loans			181.7	%			190.0	%			185.7	%			N/A				N/A
Provision (credit) for loan and lease losses		$	29			$	22			$	6				31.8				383.3
Provision for credit losses			35				22				4				59.1	%			775.0	%

 

(a)	Loan balances exclude $12 million, $13 million, and $16 million of purchased credit impaired loans at March 31, 2015, December 31, 2014, and March 31, 2014, respectively.

N/A = Not Applicable

Key’s provision for loan and lease losses was $29 million for the first quarter of 2015, compared to $22 million for the fourth quarter of 2014 and $6 million for the year-ago quarter. Key’s allowance for loan and lease losses was $794 million, or 1.37% of total period-end loans, at March 31, 2015, compared to 1.38% at December 31, 2014, and 1.50% at March 31, 2014.

Net loan charge-offs for the first quarter of 2015 totaled $28 million, or .20% of average total loans. These results compare to $32 million, or .22%, for the fourth quarter of 2014, and $20 million, or .15%, for the same period last year.

At March 31, 2015, Key’s nonperforming loans totaled $437 million and represented .75% of period-end portfolio loans, compared to .73% at December 31, 2014, and .81% at March 31, 2014. Nonperforming assets at March 31, 2015 totaled $457 million and represented .79% of period-end portfolio loans and OREO and other nonperforming assets, compared to .76% at December 31, 2014, and .85% at March 31, 2014.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 6

 

CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at March 31, 2015.

Capital Ratios

 

		3-31-15				12-31-14				3-31-14
Common Equity Tier 1 (a), (b)			10.82	%			N/A				N/A
Tier 1 common equity (b)			N/A				11.17	%			11.27	%
Tier 1 risk-based capital (a)			11.22				11.90				12.01
Total risk based capital (a)			13.01				13.89				14.23
Tangible common equity to tangible assets (b)			9.92				9.88				10.14
Leverage (a)			10.90				11.26				11.30

 

(a)	3-31-15 ratio is estimated.

(b)

The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Common Equity Tier 1” (compliance date of January 1, 2015, under the Regulatory Capital Rules) and “Tier 1 common equity” (prior to January 1, 2015). The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. See below for further information on the Regulatory Capital Rules.

As shown in the preceding table, at March 31, 2015, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.82% and 11.22%, respectively. In addition, the tangible common equity ratio was 9.92% at March 31, 2015.

In October 2013, federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). While the Regulatory Capital Rules became effective January 1, 2014, the mandatory compliance date for Key as a “standardized approach” banking organization began on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Key’s estimated Common Equity Tier 1 as calculated under the fully phased-in Regulatory Capital Rules was 10.58% at March 31, 2015. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.

Summary of Changes in Common Shares Outstanding

 

in thousands														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Shares outstanding at beginning of period			859,403				868,477				890,724				(1.0	)%			(3.5	)%
Common shares repurchased			(14,087	)			(9,786	)			(9,845	)			44.0				43.1
Shares reissued (returned) under employee benefit plans			5,571				712				3,990				682.4				39.6
Common shares exchanged for Series A Preferred Stock			33				—				—				N/M				N/M
Shares outstanding at end of period			850,920				859,403				884,869				(1.0	)%			(3.8	)%

During the first quarter of 2015, Key completed $208 million of common share repurchases pursuant to its 2014 capital plan, including repurchases to offset issuances of common shares under employee compensation plans.

As previously reported, Key’s 2015 capital plan, which received no objection from the Federal Reserve during the Comprehensive Capital Analysis and Review process, includes common share repurchases of up to $725 million. This authorization includes repurchases to offset issuances of common shares under our employee compensation plans. Share repurchases are expected to be executed through the second quarter of 2016.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 7

 

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.

Major Business Segments

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Revenue from continuing operations (TE)
Key Community Bank		$	549			$	558			$	546				(1.6	)%			.5	%
Key Corporate Bank			401				460				392				(12.8	)			2.3
Other Segments			67				62				65				8.1				3.1
Total segments			1,017				1,080				1,003				(5.8	)			1.4
Reconciling Items			(3	)			(2	)			1				N/M				N/M
Total		$	1,014			$	1,078			$	1,004				(5.9	)%			1.0	%
Income (loss) from continuing operations attributable to Key
Key Community Bank		$	50			$	62			$	62				(19.4	)%			(19.4	)%
Key Corporate Bank			126				150				136				(16.0	)			(7.4	)
Other Segments			45				36				37				25.0				21.6
Total segments			221				248				235				(10.9	)			(6.0	)
Reconciling Items			7				3				3				133.3				133.3
Total		$	228			$	251			$	238				(9.2	)%			(4.2	)%

TE = Taxable equivalent, N/M = Not Meaningful

Key Community Bank

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Summary of operations
Net interest income (TE)		$	358			$	362			$	363				(1.1	)%			(1.4	)%
Noninterest income			191				196				183				(2.6	)			4.4
Total revenue (TE)			549				558				546				(1.6	)			.5
Provision for credit losses			29				12				11				141.7				163.6
Noninterest expense			440				447				436				(1.6	)			.9
Income (loss) before income taxes (TE)			80				99				99				(19.2	)			(19.2	)
Allocated income taxes (benefit) and TE adjustments			30				37				37				(18.9	)			(18.9	)
Net income (loss) attributable to Key		$	50			$	62			$	62				(19.4	)%			(19.4	)%
Average balances
Loans and leases		$	30,662			$	30,478			$	29,797				.6	%			2.9	%
Total assets			32,716				32,564				31,918				.5				2.5
Deposits			50,417				50,850				49,910				(.9	)			1.0
Assets under management at period end		$	39,281			$	39,157			$	38,814				.3	%			1.2	%

TE = Taxable Equivalent

 

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 8

 

Additional Key Community Bank Data

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Noninterest income
Trust and investment services income		$	74			$	75			$	71				(1.3	)%			4.2	%
Service charges on deposit accounts			51				54				52				(5.6	)			(1.9	)
Cards and payments income			38				40				35				(5.0	)			8.6
Other noninterest income			28				27				25				3.7				12.0
Total noninterest income		$	191			$	196			$	183				(2.6	)%			4.4	%
Average deposit balances
NOW and money market deposit accounts		$	27,873			$	27,690			$	27,431				.7	%			1.6	%
Savings deposits			2,377				2,378				2,465				—				(3.6	)
Certificates of deposit ($100,000 or more)			1,558				1,793				2,163				(13.1	)			(28.0	)
Other time deposits			3,211				3,301				3,673				(2.7	)			(12.6	)
Deposits in foreign office			333				332				309				.3				7.8
Noninterest-bearing deposits			15,065				15,356				13,869				(1.9	)			8.6
Total deposits		$	50,417			$	50,850			$	49,910				(.9	)%			1.0	%
Home equity loans
Average balance		$	10,316			$	10,365			$	10,305
Weighted-average loan-to-value ratio (at date of origination)			71	%			71	%			71	%
Percent first lien positions			60				60				58
Other data
Branches			992				994				1,027
Automated teller machines			1,287				1,287				1,330

Key Community Bank Summary of Operations

 

•

Average loan growth of $865 million, or 2.9% from the prior year

 

•

Average noninterest-bearing deposits up $1.2 billion, or 8.6% from the prior year

 

•

Noninterest income growth of 4.4% led by cards and payments and trust and investment services income growth versus the prior year

Key Community Bank recorded net income attributable to Key of $50 million for the first quarter of 2015, compared to net income attributable to Key of $62 million for the year-ago quarter.

Taxable-equivalent net interest income decreased by $5 million, or 1.4%, from the first quarter of 2014 due to declines in the deposit spread in the current period as a result of the continued low-rate environment. Average loans and leases grew 2.9% while average deposits increased 1.0% from one year ago.

Noninterest income increased $8 million, or 4.4%, from the year-ago quarter. This growth was balanced across the business with trust and investment services income and cards and payments income each increasing by $3 million.

The provision for credit losses increased by $18 million from the first quarter of 2014 related to loan growth.

Noninterest expense increased by $4 million, or .9%, from the year-ago quarter. Personnel expense increased $8 million and was partially offset by reduced infrastructure and internally-allocated costs.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 9

 

Key Corporate Bank

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Summary of operations
Net interest income (TE)		$	213			$	219			$	196				(2.7	)%			8.7	%
Noninterest income			188				241				196				(22.0	)			(4.1	)
Total revenue (TE)			401				460				392				(12.8	)			2.3
Provision for credit losses			8				4				(3	)			100.0				N/M
Noninterest expense			217				246				202				(11.8	)			7.4
Income (loss) before income taxes (TE)			176				210				193				(16.2	)			(8.8	)
Allocated income taxes and TE adjustments			49				60				57				(18.3	)			(14.0	)
Net income (loss)			127				150				136				(15.3	)			(6.6	)
Less: Net income (loss) attributable to noncontrolling interests			1				—				—				N/M				N/M
Net income (loss) attributable to Key		$	126			$	150			$	136				(16.0	)%			(7.4	)%
Average balances
Loans and leases		$	24,722			$	23,798			$	21,991				3.9	%			12.4	%
Loans held for sale			775				855				429				(9.4	)			80.7
Total assets			30,297				28,996				27,171				4.5				11.5
Deposits			18,567				18,356				15,993				1.1				16.1
Assets under management at period end			—				—			$	79				N/M				N/M

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

 

dollars in millions														Change 1Q15 vs.
		1Q15				4Q14				1Q14				4Q14				1Q14
Noninterest income
Trust and investment services income		$	35			$	37			$	27				(5.4	)%			29.6	%
Investment banking and debt placement fees			68				125				84				(45.6	)			(19.0	)
Operating lease income and other leasing gains			14				17				21				(17.6	)			(33.3	)
Corporate services income			32				43				29				(25.6	)			10.3
Service charges on deposit accounts			10				10				11				—				(9.1	)
Cards and payments income			4				3				3				33.3				33.3
Payments and services income			46				56				43				(17.9	)			7.0
Mortgage servicing fees			13				11				15				18.2				(13.3	)
Other noninterest income			12				(5	)			6				N/M				100.0
Total noninterest income		$	188			$	241			$	196				(22.0	)%			(4.1	)%

N/M = Not Meaningful

Key Corporate Bank Summary of Operations

 

•

Average loan and lease balances up 12.4% from the prior year

 

•

Average deposits up 16.1% from the prior year

 

•

Revenue up 2.3% from the prior year

Key Corporate Bank recorded net income attributable to Key of $126 million for the first quarter of 2015, compared to $136 million for the same period one year ago.

Taxable-equivalent net interest income increased by $17 million, or 8.7%, compared to the first quarter of 2014. Average earning assets increased $2.4 billion, or 9.9%, from the year-ago quarter, primarily driven by loan growth in commercial, financial and agricultural and real estate commercial mortgage. This growth in earning assets drove an increase of $7 million in earning asset spread. Average deposit balances increased $2.6 billion, or 16.1%, from the year-ago quarter, driven by commercial mortgage servicing deposits and other commercial client inflows. This growth in deposit balances drove an increase of $13 million in deposit and borrowing spread.

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Page 10

 

Noninterest income was down $8 million, or 4.1% from the prior year. The majority of this decline was related to investment banking and debt placement fees, which decreased $16 million from the prior year primarily due to lower financial advisory fees. Operating lease income and other leasing gains declined by $7 million due to the termination of a leveraged lease in the prior year. Partially offsetting these declines were increases in trust and investment services income of $8 million, primarily due to the third quarter 2014 acquisition of Pacific Crest Securities and an increase in other income of $6 million.

The provision for credit losses increased $11 million compared to the first quarter of 2014 related to loan growth.

Noninterest expense increased by $15 million, or 7.4%, from the first quarter of 2014. This increase was due to expenses related to the third quarter 2014 acquisition of Pacific Crest Securities.

Other Segments

Other Segments consist of Corporate Treasury, Key’s Principal Investing unit and various exit portfolios. Other Segments generated net income attributable to Key of $45 million for the first quarter of 2015, compared to net income attributable to Key of $37 million for the same period last year. These results were primarily due to increases of $5 million in net gains from principal investing and $4 million in corporate-owned life insurance from the prior year, partially offset by a $4 million increase in personnel expense.

*****

KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation’s largest bank-based financial services companies, Key had assets of approximately $94.2 billion at March 31, 2015.

Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 12 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

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CONTACTS:
ANALYSTS		MEDIA
Vernon L. Patterson		Jack Sparks
216.689.0520		720.904.4554
Vernon_Patterson@KeyBank.com		Jack_Sparks@KeyBank.com
		Twitter: @keybank_news
Kelly L. Dillon
216.689.3133
Kelly_L_Dillon@KeyBank.com
Melanie S. Misconish
216.689.4545
Melanie_S_Misconish@KeyBank.com
INVESTOR		KEY MEDIA
RELATIONS: www.key.com/ir		NEWSROOM: www.key.com/newsroom

 

Notes to Editors:

A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, April 16, 2015. An audio replay of the call will be available through April 23, 2015.

For up-to-date company information, media contacts, and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

*****

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KeyCorp

First Quarter 2015

Financial Supplement

 

Page
13		Financial Highlights
15		GAAP to Non-GAAP Reconciliation
17		Consolidated Balance Sheets
18		Consolidated Statements of Income
19		Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
20		Noninterest Expense
20		Personnel Expense
21		Loan Composition
21		Loans Held for Sale Composition
21		Summary of Changes in Loans Held for Sale
22		Exit Loan Portfolio From Continuing Operations
22		Asset Quality Statistics From Continuing Operations
23		Summary of Loan and Lease Loss Experience From Continuing Operations
24		Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
25		Summary of Changes in Nonperforming Loans From Continuing Operations
25		Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
26		Line of Business Results

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Financial Highlights

(dollars in millions, except per share amounts)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Summary of operations
Net interest income (TE)		$	577			$	588			$	569
Noninterest income			437				490				435
Total revenue (TE)			1,014				1,078				1,004
Provision for credit losses			35				22				4
Noninterest expense			669				704				664
Income (loss) from continuing operations attributable to Key			228				251				238
Income (loss) from discontinued operations, net of taxes (a)			5				2				4
Net income (loss) attributable to Key			233				253				242
Income (loss) from continuing operations attributable to Key common shareholders		$	222			$	246			$	232
Income (loss) from discontinued operations, net of taxes (a)			5				2				4
Net income (loss) attributable to Key common shareholders			227				248				236
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.26			$	.29			$	.26
Income (loss) from discontinued operations, net of taxes (a)			.01				—				—
Net income (loss) attributable to Key common shareholders (b)			.27				.29				.27
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.26				.28				.26
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)			.01				—				—
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			.26				.28				.26
Cash dividends paid			.065				.065				.055
Book value at period end			12.12				11.91				11.43
Tangible book value at period end			10.84				10.65				10.28
Market price at period end			14.16				13.90				14.24
Performance ratios
From continuing operations:
Return on average total assets			1.03	%			1.12	%			1.13	%
Return on average common equity			8.76				9.50				9.33
Return on average tangible common equity (c)			9.80				10.64				10.38
Net interest margin (TE)			2.91				2.94				3.00
Cash efficiency ratio (c)			65.1				64.4				65.1
From consolidated operations:
Return on average total assets			1.03	%			1.10	%			1.09	%
Return on average common equity			8.96				9.58				9.50
Return on average tangible common equity (c)			10.02				10.72				10.56
Net interest margin (TE)			2.88				2.93				2.95
Loan to deposit (d)			86.9				84.6				87.5
Capital ratios at period end
Key shareholders’ equity to assets			11.26	%			11.22	%			11.46	%
Key common shareholders’ equity to assets			10.95				10.91				11.14
Tangible common equity to tangible assets (c)			9.92				9.88				10.14
Common Equity Tier 1 (c), (e)			10.82				N/A				N/A
Tier 1 common equity (c)			N/A				11.17				11.27
Tier 1 risk-based capital (e)			11.22				11.90				12.01
Total risk-based capital (e)			13.01				13.89				14.23
Leverage (e)			10.90				11.26				11.30

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April 16, 2015

Page 14

 

Financial Highlights (continued)

(dollars in millions)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Asset quality — from continuing operations
Net loan charge-offs		$	28			$	32			$	20
Net loan charge-offs to average total loans			.20	%			.22	%			.15	%
Allowance for loan and lease losses		$	794			$	794			$	834
Allowance for credit losses			835				829				869
Allowance for loan and lease losses to period-end loans			1.37	%			1.38	%			1.50	%
Allowance for credit losses to period-end loans			1.44				1.44				1.57
Allowance for loan and lease losses to nonperforming loans			181.7				190.0				185.7
Allowance for credit losses to nonperforming loans			191.1				198.3				193.5
Nonperforming loans at period end (f)		$	437			$	418			$	449
Nonperforming assets at period end			457				436				469
Nonperforming loans to period-end portfolio loans			.75	%			.73	%			.81	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.79				.76				.85
Trust and brokerage assets — from continuing operations
Assets under management		$	39,281			$	39,157			$	38,893
Nonmanaged and brokerage assets			49,508				49,147				47,396
Other data
Average full-time equivalent employees			13,591				13,590				14,055
Branches			992				994				1,027
Taxable-equivalent adjustment		$	6			$	6			$	6

 

(a)

In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund. As a result of these decisions, Key has accounted for these businesses as discontinued operations.

(b)	Earnings per share may not foot due to rounding.

(c)

The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity,” “Common Equity Tier 1” (compliance date of January 1, 2015, under the Regulatory Capital Rules) “Tier 1 common equity” (prior to January 1, 2015), and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of document.

(d)	Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts for periods prior to September 30, 2014) divided by period-end consolidated total deposits (excluding deposits in foreign office).

(e)	3-31-15 ratio is estimated.

(f)	Loan balances exclude $12 million, $13 million, and $16 million of purchased credit impaired loans at March 31, 2015, December 31, 2014, and March 31, 2014, respectively.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

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GAAP to Non-GAAP Reconciliations

(dollars in millions)

The table below presents certain non-GAAP financial measures related to “tangible common equity,” “return on tangible common equity,” “Common Equity Tier 1,” “Tier 1 common equity,” “pre-provision net revenue,” and “cash efficiency ratio.”

The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). The Regulatory Capital Rules require higher and better-quality capital and introduces a new capital measure, “Common Equity Tier 1,” a non-GAAP financial measure. The mandatory compliance date for Key as a “standardized approach” banking organization began on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Prior to January 1, 2015, the Federal Reserve focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, also a non-GAAP financial measure.

Common Equity Tier 1 is not formally defined by GAAP and is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key’s capital adequacy using tangible common equity and Common Equity Tier 1, management believes it is useful to enable investors to assess Key’s capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key’s intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key’s results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Tangible common equity to tangible assets at period end
Key shareholders’ equity (GAAP)		$	10,603			$	10,530			$	10,403
Less:    Intangible assets (a)			1,088				1,090				1,012
Preferred Stock, Series A (b)			281				282				282
Tangible common equity (non-GAAP)		$	9,234			$	9,158			$	9,109
Total assets (GAAP)		$	94,206			$	93,821			$	90,802
Less:    Intangible assets (a)			1,088				1,090				1,012
Tangible assets (non-GAAP)		$	93,118			$	92,731			$	89,790
Tangible common equity to tangible assets ratio (non-GAAP)			9.92	%			9.88	%			10.14	%
Common Equity Tier 1 at period end
Key shareholders’ equity (GAAP)		$	10,603				—				—
Less:    Preferred Stock, Series A (b)			281				—				—
Common Equity Tier 1 capital before adjustments and deductions			10,322				—				—
Less:    Goodwill			1,057				—				—
Intangible assets, net of deferred tax liabilities			36				—				—
Deferred tax assets			12				—				—
Net unrealized gains (losses) on available-for-sale securities			52				—				—
Accumulated gain (loss) on cash flow hedges			(8	)			—				—
Amounts recorded in accumulated other comprehensive income (loss) related to pension and postretirements benefit costs			(364	)			—				—
Total Common Equity Tier 1 capital (c)		$	9,537				—				—
Net risk-weighted assets (regulatory) (c)		$	88,123				—				—
Common Equity Tier 1 ratio (non-GAAP) (c)			10.82	%			—				—
Tier 1 common equity at period end
Key shareholders’ equity (GAAP)			—			$	10,530			$	10,403
Qualifying capital securities			—				339				339
Less:    Goodwill			—				1,057				979
Accumulated other comprehensive income (loss) (d)			—				(395	)			(367	)
Other assets (e)			—				83				84
Total Tier 1 capital (regulatory)			—				10,124				10,046
Less:    Qualifying capital securities			—				339				339
Preferred Stock, Series A (b)			—				282				282
Total Tier 1 common equity (non-GAAP)			—			$	9,503			$	9,425
Net risk-weighted assets (regulatory)			—			$	85,100			$	83,637
Tier 1 common equity ratio (non-GAAP)			—				11.17	%			11.27	%

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GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Pre-provision net revenue
Net interest income (GAAP)		$	571			$	582			$	563
Plus:    Taxable-equivalent adjustment			6				6				6
Noninterest income (GAAP)			437				490				435
Less:    Noninterest expense (GAAP)			669				704				664
Pre-provision net revenue from continuing operations (non-GAAP)		$	345			$	374			$	340
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	10,570			$	10,562			$	10,371
Less:    Intangible assets (average) (f)			1,089				1,096				1,013
Preferred Stock, Series A (average)			290				291				291
Average tangible common equity (non-GAAP)		$	9,191			$	9,175			$	9,067
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	222			$	246			$	232
Average tangible common equity (non-GAAP)			9,191				9,175				9,067
Return on average tangible common equity from continuing operations (non-GAAP)			9.80	%			10.64	%			10.38	%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	227			$	248			$	236
Average tangible common equity (non-GAAP)			9,191				9,175				9,067
Return on average tangible common equity consolidated (non-GAAP)			10.02	%			10.72	%			10.56	%
Cash efficiency ratio
Noninterest expense (GAAP)		$	669			$	704			$	664
Less:    Intangible asset amortization (GAAP)			9				10				10
Adjusted noninterest expense (non-GAAP)		$	660			$	694			$	654
Net interest income (GAAP)		$	571			$	582			$	563
Plus:    Taxable-equivalent adjustment			6				6				6
Noninterest income (GAAP)			437				490				435
Total taxable-equivalent revenue (non-GAAP)		$	1,014			$	1,078			$	1,004
Cash efficiency ratio (non-GAAP)			65.1	%			64.4	%			65.1	%
		Three months ended
		3-31-15
Common Equity Tier 1 under the Regulatory Capital Rules (estimates)
Common Equity Tier 1 under current regulatory rules		$	9,537
Adjustments from current regulatory rules to the Regulatory Capital Rules:
Deferred tax assets and other assets (g)			(73	)
Common Equity Tier 1 anticipated under the Regulatory Capital Rules (h)		$	9,464
Net risk-weighted assets under current regulatory rules		$	88,123
Adjustments from current regulatory rules to the Regulatory Capital Rules:
Mortgage servicing assets (i)			486
Deferred tax assets (i)			338
Significant investments (i)			535
Total risk-weighted assets anticipated under the Regulatory Capital Rules (h)		$	89,482
Common Equity Tier 1 ratio under the Regulatory Capital Rules (h)			10.58	%

 

(a)	For the three months ended March 31, 2015, December 31, 2014, and March 31, 2014, intangible assets exclude $61 million, $68 million, and $84 million, respectively, of period-end purchased credit card receivables.

(b)	Net of capital surplus.

(c)	3-31-15 amount is estimated.

(d)

Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans.

(e)	Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at December 31, 2014, and March 31, 2014.

(f)	For the three months ended March 31, 2015, December 31, 2014, and March 31, 2014, average intangible assets exclude $64 million, $69 million, and $89 million, respectively, of average purchased credit card receivables.

(g)	Includes the deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards, as well as the deductible portion of purchased credit card receivables.

(h)	The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies’ Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the “standardized approach.”

(i)	Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.

GAAP = U.S. generally accepted accounting principles

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April 16, 2015

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Consolidated Balance Sheets

(dollars in millions)

 

		3-31-15				12-31-14				3-31-14
Assets
Loans		$	57,953			$	57,381			$	55,445
Loans held for sale			1,649				734				401
Securities available for sale			13,120				13,360				12,359
Held-to-maturity securities			5,005				5,015				4,826
Trading account assets			789				750				840
Short-term investments			3,378				4,269				2,922
Other investments			730				760				899
Total earning assets			82,624				82,269				77,692
Allowance for loan and lease losses			(794	)			(794	)			(834	)
Cash and due from banks			506				653				409
Premises and equipment			806				841				862
Operating lease assets			306				330				294
Goodwill			1,057				1,057				979
Other intangible assets			92				101				117
Corporate-owned life insurance			3,488				3,479				3,425
Derivative assets			731				609				427
Accrued income and other assets			3,144				2,952				3,004
Discontinued assets			2,246				2,324				4,427
Total assets		$	94,206			$	93,821			$	90,802
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts		$	35,623			$	34,536			$	34,373
Savings deposits			2,413				2,371				2,513
Certificates of deposit ($100,000 or more)			1,982				2,040				2,849
Other time deposits			3,182				3,259				3,682
Total interest-bearing deposits			43,200				42,206				43,417
Noninterest-bearing deposits			27,948				29,228				23,244
Deposits in foreign office — interest-bearing			474				564				605
Total deposits			71,622				71,998				67,266
Federal funds purchased and securities sold under repurchase agreements			517				575				1,417
Bank notes and other short-term borrowings			608				423				464
Derivative liabilities			825				784				408
Accrued expense and other liabilities			1,308				1,621				1,297
Long-term debt			8,713				7,875				7,712
Discontinued liabilities			—				3				1,819
Total liabilities			83,593				83,279				80,383
Equity
Preferred stock, Series A			290				291				291
Common shares			1,017				1,017				1,017
Capital surplus			3,910				3,986				3,961
Retained earnings			8,445				8,273				7,793
Treasury stock, at cost			(2,780	)			(2,681	)			(2,335	)
Accumulated other comprehensive income (loss)			(279	)			(356	)			(324	)
Key shareholders’ equity			10,603				10,530				10,403
Noncontrolling interests			10				12				16
Total equity			10,613				10,542				10,419
Total liabilities and equity		$	94,206			$	93,821			$	90,802
Common shares outstanding (000)			850,920				859,403				884,869

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 18

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Interest income
Loans		$	523			$	534			$	519
Loans held for sale			7				8				4
Securities available for sale			70				67				72
Held-to-maturity securities			24				23				22
Trading account assets			5				6				6
Short-term investments			2				2				1
Other investments			5				6				6
Total interest income			636				646				630
Interest expense
Deposits			26				26				32
Federal funds purchased and securities sold under repurchase agreements			—				—				1
Bank notes and other short-term borrowings			2				3				2
Long-term debt			37				35				32
Total interest expense			65				64				67
Net interest income			571				582				563
Provision for credit losses			35				22				4
Net interest income after provision for credit losses			536				560				559
Noninterest income
Trust and investment services income			109				112				98
Investment banking and debt placement fees			68				126				84
Service charges on deposit accounts			61				64				63
Operating lease income and other leasing gains			19				15				29
Corporate services income			43				53				42
Cards and payments income			42				43				38
Corporate-owned life insurance income			31				38				26
Consumer mortgage income			3				3				2
Mortgage servicing fees			13				11				15
Net gains (losses) from principal investing			29				18				24
Other income (a)			19				7				14
Total noninterest income			437				490				435
Noninterest expense
Personnel			389				409				388
Net occupancy			65				63				64
Computer processing			38				40				38
Business services and professional fees			33				38				41
Equipment			22				23				24
Operating lease expense			11				11				10
Marketing			8				16				5
FDIC assessment			8				9				6
Intangible asset amortization			9				10				10
OREO expense, net			2				2				1
Other expense			84				83				77
Total noninterest expense			669				704				664
Income (loss) from continuing operations before income taxes			304				346				330
Income taxes			74				94				92
Income (loss) from continuing operations			230				252				238
Income (loss) from discontinued operations, net of taxes			5				2				4
Net income (loss)			235				254				242
Less: Net income (loss) attributable to noncontrolling interests			2				1				—
Net income (loss) attributable to Key		$	233			$	253			$	242
Income (loss) from continuing operations attributable to Key common shareholders		$	222			$	246			$	232
Net income (loss) attributable to Key common shareholders			227				248				236
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.26			$	.29			$	.26
Income (loss) from discontinued operations, net of taxes			.01				—				—
Net income (loss) attributable to Key common shareholders (b)			.27				.29				.27
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders		$	.26			$	.28			$	.26
Income (loss) from discontinued operations, net of taxes			.01				—				—
Net income (loss) attributable to Key common shareholders (b)			.26				.28				.26
Cash dividends declared per common share		$	.065			$	.065			$	.055
Weighted-average common shares outstanding (000)			848,580				858,811				884,727
Effect of convertible preferred stock			—				20,602				—
Effect of common share options and other stock awards			8,542				6,773				7,163
Weighted-average common shares and potential common shares outstanding (000) (c)			857,122				886,186				891,890

 

(a)

For each of the three months ended March 31, 2015, December 31, 2014, and March 31, 2014, net securities gains (losses) totaled less than $1 million. For the three months ended March 31, 2015, impairment losses related to securities totaled less than $1 million. For the three months ended December 31, 2014, and March 31, 2014, Key did not have any impairment losses related to securities.

(b)	Earnings per share may not foot due to rounding.

(c)	Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 19

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)

 

		First Quarter 2015												Fourth Quarter 2014												First Quarter 2014
		Average Balance				Interest (a)				Yield/Rate (a)				Average Balance				Interest (a)				Yield/Rate (a)				Average Balance				Interest (a)				Yield/Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural (d)		$	28,321			$	223				3.18	%		$	27,188			$	223				3.24	%		$	25,390			$	206				3.29	%
Real estate — commercial mortgage			8,095				73				3.67				8,161				77				3.73				7,807				74				3.84
Real estate — construction			1,139				11				3.90				1,077				10				3.90				1,091				12				4.55
Commercial lease financing			4,070				36				3.57				4,119				38				3.67				4,439				42				3.78
Total commercial loans			41,625				343				3.33				40,545				348				3.40				38,727				334				3.49
Real estate — residential mortgage			2,229				24				4.26				2,223				24				4.28				2,187				24				4.44
Home equity:
Key Community Bank			10,316				99				3.89				10,365				103				3.91				10,305				100				3.92
Other			260				5				7.82				274				5				7.84				325				6				7.77
Total home equity loans			10,576				104				3.99				10,639				108				4.01				10,630				106				4.04
Consumer other — Key Community Bank			1,546				25				6.66				1,552				27				6.78				1,438				25				7.06
Credit cards			732				20				11.01				728				20				11.02				701				20				11.28
Consumer other:
Marine			755				12				6.35				802				13				6.29				996				15				6.18
Other			49				1				7.32				52				—				7.52				67				1				7.55
Total consumer other			804				13				6.41				854				13				6.36				1,063				16				6.26
Total consumer loans			15,887				186				4.74				15,996				192				4.76				16,019				191				4.83
Total loans			57,512				529				3.72				56,541				540				3.79				54,746				525				3.88
Loans held for sale			795				7				3.33				871				8				3.72				446				4				3.34
Securities available for sale (b), (e)			13,087				70				2.17				12,153				67				2.20				12,346				72				2.33
Held-to-maturity securities (b)			4,947				24				1.93				4,947				23				1.91				4,767				22				1.84
Trading account assets			717				5				2.80				868				6				2.84				981				6				2.51
Short-term investments			2,399				2				.27				3,520				2				.27				2,486				1				.17
Other investments (e)			742				5				2.79				792				6				2.77				936				6				2.57
Total earning assets			80,199				642				3.20				79,692				652				3.27				76,708				636				3.32
Allowance for loan and lease losses			(793	)											(798	)											(842	)
Accrued income and other assets			10,223												9,868												9,791
Discontinued assets			2,271												2,359												4,493
Total assets		$	91,900											$	91,121											$	90,150
Liabilities
NOW and money market deposit accounts		$	34,952				13				.15			$	34,811				13				.14			$	34,064				12				.14
Savings deposits			2,385				—				.02				2,388				—				.02				2,475				—				.03
Certificates of deposit ($100,000 or more) (f)			2,017				7				1.30				2,277				7				1.25				2,758				10				1.50
Other time deposits			3,217				6				.72				3,306				6				.76				3,679				10				1.07
Deposits in foreign office			529				—				.22				543				—				.24				660				—				.22
Total interest-bearing deposits			43,100				26				.24				43,325				26				.24				43,636				32				.30
Federal funds purchased and securities sold under repurchase agreements			720				—				.03				621				—				.02				1,469				1				.17
Bank notes and other short-term borrowings			506				2				1.56				772				3				1.17				587				2				1.63
Long-term debt (f), (g)			6,126				37				2.52				5,135				35				2.80				5,169				32				2.57
Total interest-bearing liabilities			50,452				65				.52				49,853				64				.51				50,861				67				.54
Noninterest-bearing deposits			26,269												26,342												22,658
Accrued expense and other liabilities			2,327												1,989												1,750
Discontinued liabilities (g)			2,271												2,359												4,493
Total liabilities			81,319												80,543												79,762
Equity
Key shareholders’ equity			10,570												10,562												10,371
Noncontrolling interests			11												16												17
Total equity			10,581												10,578												10,388
Total liabilities and equity		$	91,900											$	91,121											$	90,150
Interest rate spread (TE)											2.68	%											2.76	%											2.78	%
Net interest income (TE) and net interest margin (TE)							577				2.91	%							588				2.94	%							569				3.00	%
TE adjustment (b)							6												6												6
Net interest income, GAAP basis						$	571											$	582											$	563

 

(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)	Commercial, financial and agricultural average balances include $87 million, $90 million, and $94 million of assets from commercial credit cards for the three months ended March 31, 2015, December 31, 2014, and March 31, 2014, respectively.

(e)	Yield is calculated on the basis of amortized cost.

(f)	Rate calculation excludes basis adjustments related to fair value hedges.

(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 20

 

Noninterest Expense

(dollars in millions)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Personnel (a)		$	389			$	409			$	388
Net occupancy			65				63				64
Computer processing			38				40				38
Business services and professional fees			33				38				41
Equipment			22				23				24
Operating lease expense			11				11				10
Marketing			8				16				5
FDIC assessment			8				9				6
Intangible asset amortization			9				10				10
OREO expense, net			2				2				1
Other expense			84				83				77
Total noninterest expense		$	669			$	704			$	664
Average full-time equivalent employees (b)			13,591				13,590				14,055

 

(a)	Additional detail provided in table below.

(b)	The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Personnel Expense

(in millions)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Salaries		$	218			$	224			$	220
Technology contract labor, net			10				12				17
Incentive compensation			70				105				72
Employee benefits			72				53				63
Stock-based compensation			13				13				11
Severance			6				2				5
Total personnel expense		$	389			$	409			$	388

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 21

 

Loan Composition

(dollars in millions)

 

														Percent change 3-31-15 vs.
		3-31-15				12-31-14				3-31-14				12-31-14				3-31-14
Commercial, financial and agricultural (a)		$	28,783			$	27,982			$	26,224				2.9	%			9.8	%
Commercial real estate:
Commercial mortgage			8,162				8,047				7,877				1.4				3.6
Construction			1,142				1,100				1,007				3.8				13.4
Total commercial real estate loans			9,304				9,147				8,884				1.7				4.7
Commercial lease financing (b)			4,064				4,252				4,396				(4.4	)			(7.6	)
Total commercial loans			42,151				41,381				39,504				1.9				6.7
Residential — prime loans:
Real estate — residential mortgage			2,231				2,225				2,183				.3				2.2
Home equity:
Key Community Bank			10,270				10,366				10,281				(.9	)			(.1	)
Other			253				267				315				(5.2	)			(19.7	)
Total home equity loans			10,523				10,633				10,596				(1.0	)			(.7	)
Total residential — prime loans			12,754				12,858				12,779				(.8	)			(.2	)
Consumer other — Key Community Bank			1,547				1,560				1,436				(.8	)			7.7
Credit cards			727				754				698				(3.6	)			4.2
Consumer other:
Marine			730				779				965				(6.3	)			(24.4	)
Other			44				49				63				(10.2	)			(30.2	)
Total consumer other			774				828				1,028				(6.5	)			(24.7	)
Total consumer loans			15,802				16,000				15,941				(1.2	)			(.9	)
Total loans (c), (d)		$	57,953			$	57,381			$	55,445				1.0	%			4.5	%

Loans Held for Sale Composition

(dollars in millions)

 

														Percent change 3-31-15 vs.
		3-31-15				12-31-14				3-31-14				12-31-14				3-31-14
Commercial, financial and agricultural		$	183			$	63			$	44				190.5	%			315.9	%
Real estate — commercial mortgage			1,408				638				333				120.7				322.8
Commercial lease financing			14				15				8				(6.7	)			75.0
Real estate — residential mortgage			44				18				16				144.4				175.0
Total loans held for sale		$	1,649			$	734			$	401				124.7	%			311.2	%

Summary of Changes in Loans Held for Sale

(in millions)

 

		1Q15				4Q14				3Q14				2Q14				1Q14
Balance at beginning of period		$	734			$	784			$	435			$	401			$	611
New originations			2,130				2,465				1,593				978				645
Transfers from (to) held to maturity, net			10				2				—				(8	)			3
Loan sales			(1,204	)			(2,516	)			(1,243	)			(934	)			(596	)
Loan draws (payments), net			(21	)			(1	)			(1	)			(2	)			(262	)
Balance at end of period		$	1,649			$	734			$	784			$	435			$	401

 

(a)	Loan balances include $87 million, $88 million, and $95 million of commercial credit card balances at March 31, 2015, December 31, 2014, and March 31, 2014, respectively.

(b)

Commercial lease financing includes receivables of $230 million, $302 million, and $124 million held as collateral for a secured borrowing at March 31, 2015, December 31, 2014, and March 31, 2014, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

At March 31, 2015, total loans include purchased loans of $130 million, of which $12 million were purchased credit impaired. At December 31, 2014, total loans include purchased loans of $138 million, of which $13 million were purchased credit impaired. At March 31, 2014, total loans include purchased loans of $159 million, of which $16 million were purchased credit impaired.

(d)	Total loans exclude loans of $2.2 billion at March 31, 2015, $2.3 billion at December 31, 2014, and $4.4 billion at March 31, 2014, related to the discontinued operations of the education lending business.

N/M = Not Meaningful

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 22

 

Exit Loan Portfolio From Continuing Operations

(in millions)

 

		Balance Outstanding								Change 3-31-15 vs.				Net Loan Charge-offs								Balance on Nonperforming Status
		3-31-15				12-31-14				12-31-14				1Q15(b)				4Q14(b)				3-31-15				12-31-14
Residential properties — homebuilder		$	6			$	10			$	(4	)		$	1				—			$	8			$	9
Marine and RV floor plan			6				7				(1	)			—				—				5				5
Commercial lease financing (a)			877				967				(90	)			(1	)		$	3				—				1
Total commercial loans			889				984				(95	)			—				3				13				15
Home equity — Other			253				267				(14	)			—				—				9				10
Marine			730				779				(49	)			2				3				9				15
RV and other consumer			50				54				(4	)			1				(1	)			1				1
Total consumer loans			1,033				1,100				(67	)			3				2				19				26
Total exit loans in loan portfolio		$	1,922			$	2,084			$	(162	)		$	3			$	5			$	32			$	41
Discontinued operations — education lending business (not included in exit loans above)		$	2,219			$	2,295			$	(76	)		$	6			$	8			$	8			$	11

 

(a)

Includes (1) the business aviation, commercial vehicle, office products, construction, and industrial leases; (2) Canadian lease financing portfolios; (3) European lease financing portfolios; and (4) all remaining balances related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases.

(b)	Credit amounts indicate recoveries exceeded charge-offs.

Asset Quality Statistics From Continuing Operations

(dollars in millions)

 

		1Q15				4Q14				3Q14				2Q14				1Q14
Net loan charge-offs		$	28			$	32			$	31			$	30			$	20
Net loan charge-offs to average total loans			.20	%			.22	%			.22	%			.22	%			.15	%
Allowance for loan and lease losses		$	794			$	794			$	804			$	814			$	834
Allowance for credit losses (a)			835				829				839				851				869
Allowance for loan and lease losses to period-end loans			1.37	%			1.38	%			1.43	%			1.46	%			1.50	%
Allowance for credit losses to period-end loans			1.44				1.44				1.49				1.53				1.57
Allowance for loan and lease losses to nonperforming loans			181.7				190.0				200.5				205.6				185.7
Allowance for credit losses to nonperforming loans			191.1				198.3				209.2				214.9				193.5
Nonperforming loans at period end (b)		$	437			$	418			$	401			$	396			$	449
Nonperforming assets at period end			457				436				418				410				469
Nonperforming loans to period-end portfolio loans			.75	%			.73	%			.71	%			.71	%			.81	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.79				.76				.74				.74				.85

 

(a)	Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related unfunded commitments.

(b)	Loan balances exclude $12 million, $13 million, $14 million, $15 million, and $16 million of purchased credit impaired loans at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014, and March 31, 2014, respectively.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 23

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)

 

		Three months ended
		3-31-15				12-31-14				3-31-14
Average loans outstanding		$	57,512			$	56,541			$	54,746
Allowance for loan and lease losses at beginning of period		$	794			$	804			$	848
Loans charged off:
Commercial, financial and agricultural			12				10				12
Real estate — commercial mortgage			2				3				2
Real estate — construction			1				1				2
Total commercial real estate loans			3				4				4
Commercial lease financing			2				4				3
Total commercial loans			17				18				19
Real estate — residential mortgage			2				3				3
Home equity:
Key Community Bank			7				8				10
Other			1				1				3
Total home equity loans			8				9				13
Consumer other — Key Community Bank			6				7				8
Credit cards			8				7				6
Consumer other:
Marine			5				5				7
Other			1				—				1
Total consumer other			6				5				8
Total consumer loans			30				31				38
Total loans charged off			47				49				57
Recoveries:
Commercial, financial and agricultural			5				6				10
Real estate — commercial mortgage			2				—				1
Real estate — construction			—				1				14
Total commercial real estate loans			2				1				15
Commercial lease financing			4				2				2
Total commercial loans			11				9				27
Real estate — residential mortgage			—				—				1
Home equity:
Key Community Bank			2				2				3
Other			1				1				1
Total home equity loans			3				3				4
Consumer other — Key Community Bank			2				2				2
Credit cards			—				—				—
Consumer other:
Marine			3				2				3
Other			—				1				—
Total consumer other			3				3				3
Total consumer loans			8				8				10
Total recoveries			19				17				37
Net loan charge-offs			(28	)			(32	)			(20	)
Provision (credit) for loan and lease losses			29				22				6
Foreign currency translation adjustment			(1	)			—				—
Allowance for loan and lease losses at end of period		$	794			$	794			$	834
Liability for credit losses on lending-related commitments at beginning of period		$	35			$	35			$	37
Provision (credit) for losses on lending-related commitments			6				—				(2	)
Liability for credit losses on lending-related commitments at end of period (a)		$	41			$	35			$	35
Total allowance for credit losses at end of period		$	835			$	829			$	869
Net loan charge-offs to average total loans			.20	%			.22	%			.15	%
Allowance for loan and lease losses to period-end loans			1.37				1.38				1.50
Allowance for credit losses to period-end loans			1.44				1.44				1.57
Allowance for loan and lease losses to nonperforming loans			181.7				190.0				185.7
Allowance for credit losses to nonperforming loans			191.1				198.3				193.5
Discontinued operations — education lending business:
Loans charged off		$	10			$	11			$	13
Recoveries			4				3				4
Net loan charge-offs		$	(6	)		$	(8	)		$	(9	)
(a)    Included in “accrued expense and other liabilities” on the balance sheet.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 24

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)

 

		3-31-15				12-31-14				9-30-14				6-30-14				3-31-14
Commercial, financial and agricultural		$	98			$	59			$	47			$	37			$	60
Real estate — commercial mortgage			30				34				41				38				37
Real estate — construction			12				13				14				9				11
Total commercial real estate loans			42				47				55				47				48
Commercial lease financing			20				18				14				15				18
Total commercial loans			160				124				116				99				126
Real estate — residential mortgage			72				79				81				89				105
Home equity:
Key Community Bank			182				185				174				178				188
Other			9				10				10				11				11
Total home equity loans			191				195				184				189				199
Consumer other — Key Community Bank			2				2				2				2				2
Credit cards			2				2				1				1				1
Consumer other:
Marine			9				15				16				15				15
Other			1				1				1				1				1
Total consumer other			10				16				17				16				16
Total consumer loans			277				294				285				297				323
Total nonperforming loans (a)			437				418				401				396				449
Nonperforming loans held for sale			—				—				—				1				1
OREO			20				18				16				12				12
Other nonperforming assets			—				—				1				1				7
Total nonperforming assets		$	457			$	436			$	418			$	410			$	469
Accruing loans past due 90 days or more		$	111			$	96			$	71			$	83			$	89
Accruing loans past due 30 through 89 days			216				235				340				274				267
Restructured loans — accruing and nonaccruing (b)			268				270				264				266				294
Restructured loans included in nonperforming loans (b)			141				157				137				142				178
Nonperforming assets from discontinued operations — education lending business			8				11				9				19				20
Nonperforming loans to period-end portfolio loans			.75	%			.73	%			.71	%			.71	%			.81	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.79				.76				.74				.74				.85

 

(a)	Loan balances exclude $12 million, $13 million, $14 million, $15 million, and $16 million of purchased credit impaired loans at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014, and March 31, 2014, respectively.

 

(b)

Restructured loans (i.e., troubled debt restructurings) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 25

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

 

		1Q15				4Q14				3Q14				2Q14				1Q14
Balance at beginning of period		$	418			$	401			$	396			$	449			$	508
Loans placed on nonaccrual status			123				103				109				79				98
Charge-offs			(47	)			(49	)			(49	)			(56	)			(57	)
Loans sold			—				(2	)			—				(21	)			(3	)
Payments			(9	)			(17	)			(13	)			(17	)			(21	)
Transfers to OREO			(7	)			(6	)			(7	)			(4	)			(3	)
Loans returned to accrual status			(41	)			(12	)			(35	)			(34	)			(73	)
Balance at end of period (a)		$	437			$	418			$	401			$	396			$	449

 

(a)	Loan balances exclude $12 million, $13 million, $14 million, $15 million, and $16 million of purchased credit impaired loans at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014, and March 31, 2014, respectively.

Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations

(in millions)

 

		1Q15				4Q14				3Q14				2Q14				1Q14
Balance at beginning of period		$	18			$	16			$	12			$	12			$	15
Properties acquired — nonperforming loans			7				6				7				4				3
Valuation adjustments			(1	)			(2	)			(1	)			(1	)			(1	)
Properties sold			(4	)			(2	)			(2	)			(3	)			(5	)
Balance at end of period		$	20			$	18			$	16			$	12			$	12

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KeyCorp Reports First Quarter 2015 Profit

April 16, 2015

Page 26

 

Line of Business Results

(dollars in millions)

 

																						Percent change 1Q15 vs.
		1Q15				4Q14				3Q14				2Q14				1Q14				4Q14				1Q14
Key Community Bank
Summary of operations
Total revenue (TE)		$	549			$	558			$	558			$	553			$	546				(1.6	)%			.5	%
Provision for credit losses			29				12				27				25				11				141.7				163.6
Noninterest expense			440				447				439				442				436				(1.6	)			.9
Net income (loss) attributable to Key			50				62				58				54				62				(19.4	)			(19.4	)
Average loans and leases			30,662				30,478				30,103				30,034				29,797				.6				2.9
Average deposits			50,417				50,850				50,302				50,230				49,910				(.9	)			1.0
Net loan charge-offs			28				28				28				33				28				—				—
Net loan charge-offs to average total loans			.37	%			.36	%			.37	%			.44	%			.38	%			N/A				N/A
Nonperforming assets at period end		$	328			$	340			$	338			$	331			$	357				(3.5	)			(8.1	)
Return on average allocated equity			7.38	%			9.14	%			8.60	%			7.96	%			8.97	%			N/A				N/A
Average full-time equivalent employees			7,475				7,414				7,573				7,569				7,698				.8				(2.9	)
Key Corporate Bank
Summary of operations
Total revenue (TE)		$	401			$	460			$	400			$	395			$	392				(12.8	)%			2.3	%
Provision for credit losses			8				4				(3	)			(4	)			(3	)			100.0				N/M
Noninterest expense			217				246				215				208				202				(11.8	)			7.4
Net income (loss) attributable to Key			126				150				136				135				136				(16.0	)			(7.4	)
Average loans and leases			24,722				23,798				23,215				22,886				21,991				3.9				12.4
Average loans held for sale			775				855				481				429				429				(9.4	)			80.7
Average deposits			18,567				18,356				17,600				16,359				15,993				1.1				16.1
Net loan charge-offs			(4	)			(3	)			(1	)			(2	)			(12	)			N/M				N/M
Net loan charge-offs to average total loans			(.07	)%			(.05	)%			(.02	)%			(.04	)%			(.22	)%			N/A				N/A
Nonperforming assets at period end		$	93			$	41			$	20			$	22			$	53				126.8				75.5
Return on average allocated equity			27.44	%			33.89	%			32.08	%			35.65	%			35.65	%			N/A				N/A
Average full-time equivalent employees			2,064				2,043				1,998				1,940				1,916				1.0				7.7

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful