Exhibit 99.1

			NEWS

FOR IMMEDIATE RELEASE

KEYCORP REPORTS THIRD QUARTER 2015

NET INCOME OF $216 MILLION, OR $.26 PER COMMON SHARE

Positive operating leverage from prior year

Revenue up 7% from prior year, reflecting growth in net interest income

and noninterest income

Average loans up 6% from prior year, driven by a

15% increase in commercial, financial and agricultural loans

Expenses include a $19 million pension settlement charge

Credit quality remains strong, with net charge-offs to average loans of .27%

Disciplined capital management with common share repurchases of $123 million

CLEVELAND, October 15, 2015 — KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $216 million, or $.26 per common share, compared to $230 million, or $.27 per common share, for the second quarter of 2015, and $197 million, or $.23 per common share, for the third quarter of 2014. During the third quarter of 2015, Key incurred $19 million, or $.01 per common share, of costs related to a pension settlement charge, compared to $20 million, or $.01 per common share, during the third quarter of 2014.

For the nine months ended September 30, 2015, net income from continuing operations attributable to Key common shareholders was $668 million, or $.78 per common share, compared to $671 million, or $.76 per common share, for the same period one year ago.

“Key’s third quarter results reflect our continued success in growing our business, managing expenses and maintaining strong credit quality,” said Chairman and Chief Executive Officer Beth Mooney.

“We generated positive operating leverage relative to the same period last year, driven by a 7% increase in revenue along with well-managed expenses. Revenue trends reflect growth in new and expanded relationships across our company, which drove higher net interest income, as well as continued momentum in our fee-based businesses,” continued Mooney. “We saw good loan growth again this quarter, with average balances up 6% from the prior year, driven by a 15% increase in commercial, financial and agricultural loans. Loan balances increased in both the Community Bank and Corporate Bank.”

“Results compared with the prior quarter reflect higher net interest income and variability in capital markets revenues, which declined relative to our record second quarter,” said Mooney. “Expenses, excluding the pension settlement charge, were lower than the previous quarter.”

“Additionally, credit quality remains strong, with net charge-offs to average loans of .27%, which is below our targeted range,” added Mooney.

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

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THIRD QUARTER 2015 FINANCIAL RESULTS, from continuing operations

Compared to Third Quarter of 2014

 

•

Average loans up 6%, driven by 15% growth in commercial, financial and agricultural loans

 

•

Average deposits, excluding deposits in foreign office, up 3% due to continued growth in commercial mortgage servicing and inflows from commercial and consumer clients

 

•

Net interest income (taxable-equivalent) up $17 million, as higher earning asset balances offset lower earning asset yields

 

•

Noninterest income up $53 million due to strength in Key’s core fee-based businesses, which included a full-quarter impact of the September 2014 Pacific Crest Securities acquisition

 

•

Noninterest expense up $18 million primarily attributable to higher performance-based compensation and a full-quarter impact of the September 2014 Pacific Crest Securities acquisition

 

•

Asset quality remained strong, with net loan charge-offs to average loans of .27%

 

•

Disciplined capital management, repurchasing $123 million of common shares during the third quarter of 2015 and maintaining a solid capital position with an estimated Common Equity Tier 1 ratio of 10.51%

Compared to Second Quarter of 2015

 

•

Average loans up 2%, primarily driven by a 5% increase in commercial, financial and agricultural loans

 

•

Average deposits, excluding deposits in foreign office, down slightly reflecting a decline in short-term noninterest-bearing deposit balances from commercial clients and lower certificates of deposit

 

•

Net interest income (taxable-equivalent) up $7 million attributable to improvement in the earning asset mix, partly offset by slightly lower earning asset yields and loan fees

 

•

Noninterest income down $18 million, primarily due to lower investment banking and debt placement fees partially offset by growth in other fee-based businesses

 

•

Noninterest expense up $13 million, driven by a $19 million pension settlement charge in the third quarter

 

•

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

Selected Financial Highlights

 

dollars in millions, except per share data														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Income (loss) from continuing operations attributable to Key common shareholders		$	216			$	230			$	197				(6.1	)%			9.6	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution			.26				.27				.23				(3.7	)			13.0
Return on average total assets from continuing operations			.95	%			1.03	%			.92	%			N/A				N/A
Common Equity Tier 1 (a), (b)			10.51				10.71				N/A				N/A				N/A
Tier 1 common equity (a)			N/A				N/A				11.26	%			N/A				N/A
Book value at period end		$	12.47			$	12.21			$	11.74				2.1	%			6.2	%
Net interest margin (TE) from continuing operations			2.87	%			2.88	%			2.96	%			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.

(b)	9-30-15 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

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October 15, 2015

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INCOME STATEMENT HIGHLIGHTS

Revenue

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Net interest income (TE)		$	598			$	591			$	581				1.2	%			2.9	%
Noninterest income			470				488				417				(3.7	)			12.7
Total revenue		$	1,068			$	1,079			$	998				(1.0	)%			7.0	%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $598 million for the third quarter of 2015, and the net interest margin was 2.87%. These results compare to taxable-equivalent net interest income of $581 million and a net interest margin of 2.96% for the third quarter of 2014. The increase in net interest income reflects higher earning asset balances moderated by lower earning asset yields, which also drove the decline in the net interest margin.

Compared to the second quarter of 2015, taxable-equivalent net interest income increased by $7 million, and the net interest margin was essentially unchanged. The increase in net interest income and the relatively stable net interest margin were primarily attributable to improvement in the earning asset mix, partly offset by slightly lower earning asset yields and loan fees. One additional day in the third quarter of 2015 also contributed to the increase in net interest income compared to the prior quarter.

Noninterest Income

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Trust and investment services income		$	108			$	111			$	99				(2.7	)%			9.1	%
Investment banking and debt placement fees			109				141				88				(22.7	)			23.9
Service charges on deposit accounts			68				63				68				7.9				—
Operating lease income and other leasing gains			15				24				17				(37.5	)			(11.8	)
Corporate services income			57				43				42				32.6				35.7
Cards and payments income			47				47				42				—				11.9
Corporate-owned life insurance income			30				30				26				—				15.4
Consumer mortgage income			3				4				3				(25.0	)			—
Mortgage servicing fees			11				9				9				22.2				22.2
Net gains (losses) from principal investing			11				11				9				—				22.2
Other income			11				5				14				120.0				(21.4	)
Total noninterest income		$	470			$	488			$	417				(3.7	)%			12.7	%

Key’s noninterest income was $470 million for the third quarter of 2015, compared to $417 million for the year-ago quarter. The increase from the prior year was primarily attributable to strength in Key’s core fee-based businesses, which included a full-quarter impact of the September 2014 acquisition of Pacific Crest Securities. The third quarter of 2015 included $21 million of higher investment banking and debt placement fees, $15 million of increased corporate services income, and $9 million of higher trust and investment services income. Additionally, cards and payments income increased $5 million due to higher revenue from credit card and merchant fees.

Compared to the second quarter of 2015, noninterest income decreased by $18 million. The primary cause for the decline was $32 million in lower investment banking and debt placement fees, reflecting the variability of the business. Additionally, operating lease income and other leasing gains decreased $9 million. These decreases were partially offset by $14 million in higher corporate services income due to increased derivative income and loan commitment fees, a $6 million increase in other income and $5 million of higher service charges on deposit accounts.

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October 15, 2015

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Noninterest Expense

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Personnel expense		$	426			$	408			$	405				4.4	%			5.2	%
Nonpersonnel expense			298				303				301				(1.7	)			(1.0	)
Total noninterest expense		$	724			$	711			$	706				1.8	%			2.5	%

Key’s noninterest expense was $724 million for the third quarter of 2015, compared to $706 million in the third quarter of last year. Personnel costs increased $21 million year-over-year primarily due to increased performance-based compensation related to a strong capital markets business performance, along with a full-quarter impact of the September 2014 acquisition of Pacific Crest Securities. Nonpersonnel expense remained relatively stable as lower occupancy costs offset an increase in business services and professional fees.

Compared to the second quarter of 2015, noninterest expense increased by $13 million. This increase was primarily driven by a pension settlement charge of $19 million and partially offset by $5 million in lower nonpersonnel expense, largely related to lower occupancy costs.

BALANCE SHEET HIGHLIGHTS

In the third quarter of 2015, Key had average assets of $94.8 billion compared to $91.3 billion in the third quarter of 2014 and $93.9 billion in the second quarter of 2015.

Average Loans

 

dollars in millions														Change 9-30-15 vs.
		9-30-15				6-30-15				9-30-14				6-30-15				9-30-14
Commercial, financial and agricultural (a)		$	30,374			$	29,017			$	26,456				4.7	%			14.8	%
Other commercial loans			13,098				13,161				13,317				(.5	)			(1.6	)
Total home equity loans			10,510				10,510				10,658				—				(1.4	)
Other consumer loans			5,299				5,290				5,365				.2				(1.2	)
Total loans		$	59,281			$	57,978			$	55,796				2.2	%			6.2	%

 

(a)	Commercial, financial and agricultural average loan balances include $88 million, $88 million, and $92 million of assets from commercial credit cards at September 30, 2015, June 30, 2015, and September 30, 2014, respectively.

Average loans were $59.3 billion for the third quarter of 2015, an increase of $3.5 billion compared to the third quarter of 2014. The loan growth occurred primarily in the commercial, financial and agricultural portfolio, which increased $3.9 billion and was broad-based across Key’s commercial lines of business. Consumer loans declined $214 million as a result of the run-off in Key’s consumer exit portfolios. Key’s core consumer loan portfolio remained relatively stable to the year-ago quarter.

Compared to the second quarter of 2015, average loans increased by $1.3 billion, driven by commercial, financial and agricultural loans, which grew $1.8 billion on a period-end basis.

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

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Average Deposits

 

dollars in millions														Change 9-30-15 vs.
		9-30-15				6-30-15				9-30-14				6-30-15				9-30-14
Non-time deposits (a)		$	64,928			$	65,109			$	61,699				(.3	)%			5.2	%
Certificates of deposit ($100,000 or more)			1,985				2,010				2,629				(1.2	)			(24.5	)
Other time deposits			3,064				3,136				3,413				(2.3	)			(10.2	)
Total deposits		$	69,977			$	70,255			$	67,741				(.4	)%			3.3	%
Cost of total deposits (a)			.15	%			.15	%			.16	%			N/A				N/A

 

(a)	Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $70 billion for the third quarter of 2015, an increase of $2.2 billion compared to the year-ago quarter. NOW and money market deposit accounts increased by $2.3 billion, and noninterest-bearing deposits increased by $966 million, reflecting continued growth in the commercial mortgage servicing business and inflows from commercial and consumer clients. These increases were partially offset by a decline in certificates of deposit.

Compared to the second quarter of 2015, average deposits, excluding deposits in foreign office, decreased by $278 million. The decrease was driven by a decline in short-term noninterest-bearing deposit balances from commercial clients and lower certificates of deposit. These decreases were partly offset by increases in NOW and money market deposit accounts.

ASSET QUALITY

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Net loan charge-offs		$	41			$	36			$	31				13.9	%			32.3	%
Net loan charge-offs to average total loans			.27	%			.25	%			.22	%			N/A				N/A
Nonperforming loans at period end (a)		$	400			$	419			$	401				(4.5	)%			(.2	)%
Nonperforming assets at period end			417				440				418				(5.2	)			(.2	)
Allowance for loan and lease losses			790				796				804				(.8	)			(1.7	)
Allowance for loan and lease losses to nonperforming loans			197.5	%			190.0	%			200.5	%			N/A				N/A
Provision for credit losses		$	45			$	41			$	19				9.8	%			136.8	%

 

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

N/A = Not Applicable

Key’s provision for credit losses was $45 million for the third quarter of 2015, compared to $19 million for the third quarter of 2014 and $41 million for the second quarter of 2015. Key’s allowance for loan and lease losses was $790 million, or 1.31% of total period-end loans, at September 30, 2015, compared to 1.43% at September 30, 2014, and 1.37% at June 30, 2015.

Net loan charge-offs for the third quarter of 2015 totaled $41 million, or .27% of average total loans. These results compare to $31 million, or .22%, for the third quarter of 2014, and $36 million, or .25%, for the second quarter of 2015.

At September 30, 2015, Key’s nonperforming loans totaled $400 million and represented .67% of period-end portfolio loans, compared to .71% at September 30, 2014, and .72% at June 30, 2015. Nonperforming assets at September 30, 2015 totaled $417 million and represented .69% of period-end portfolio loans and OREO and other nonperforming assets, compared to .74% at September 30, 2014, and .75% at June 30, 2015.

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October 15, 2015

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CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at September 30, 2015.

Capital Ratios

 

		9-30-15				6-30-15				9-30-14
Common Equity Tier 1 (a), (b)			10.51	%			10.71	%			N/A
Tier 1 common equity (b)			N/A				N/A				11.26	%
Tier 1 risk-based capital (a)			10.90	%			11.11	%			12.01
Total risk based capital (a)			12.51				12.66				14.10
Tangible common equity to tangible assets (b)			9.90				9.86				10.26
Leverage (a)			10.67				10.74				11.15

 

(a)	9-30-15 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 September 30, 2015, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.51% and 10.90%, respectively. In addition, the tangible common equity ratio was 9.90% at September 30, 2015.

In October 2013, federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). 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 ratio as calculated under the fully phased-in Regulatory Capital Rules was 10.41% at September 30, 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 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Shares outstanding at beginning of period			843,608				850,920				876,823				(.9	)%			(3.8	)%
Common shares repurchased			(8,386	)			(8,794	)			(8,830	)			(4.6	)			(5.0	)
Shares reissued (returned) under employee benefit plans			63				1,482				484				(95.7	)			(87.0	)
Shares outstanding at end of period			835,285				843,608				868,477				(1.0	)%			(3.8	)%

As previously reported, Key’s 2015 capital plan includes common share repurchases of up to $725 million, which are expected to be executed through the second quarter of 2016. During the third quarter of 2015, Key completed $123 million of common share repurchases, including repurchases to offset issuances of common shares under employee compensation plans.

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.

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October 15, 2015

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In the third quarter of 2015, Key enhanced the approach used to determine the commercial reserve factors used in estimating the quantitative component of the commercial allowance for loan and lease losses. In addition, Key began utilizing an enhanced framework to quantify commercial allowance for loan and lease loss adjustments resulting from qualitative factors not fully captured within the statistical analysis of expected loss. The impact of these changes was largely neutral to the total allowance for loan and lease losses at September 30, 2015. However, because the quantitative reserve is allocated to the business segments at a loan level, while the qualitative portion is allocated at the portfolio level, the impact of the methodology enhancements on the allowance for each business segment and each portfolio caused the business segment and commercial portfolio reserves to increase or decrease accordingly. While the impact of the increases and decreases on the business segment and commercial portfolio reserves was not significant, the current quarter provision for credit losses within each business segment is not comparable to prior period amounts as a result of these methodology enhancements.

Major Business Segments

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Revenue from continuing operations (TE)
Key Community Bank		$	579			$	560			$	558				3.4	%			3.8	%
Key Corporate Bank			454				477				400				(4.8	)			13.5
Other Segments			35				44				44				(20.5	)			(20.5	)
Total segments			1,068				1,081				1,002				(1.2	)			6.6
Reconciling Items			—				(2	)			(4	)			N/M				N/M
Total		$	1,068			$	1,079			$	998				(1.0	)%			7.0	%
Income (loss) from continuing operations attributable to Key
Key Community Bank		$	71			$	67			$	60				6.0	%			18.3	%
Key Corporate Bank			138				133				134				3.8				3.0
Other Segments			26				31				27				(16.1	)			(3.7	)
Total segments			235				231				221				1.7				6.3
Reconciling Items			(13	)			4				(18	)			N/M				N/M
Total		$	222			$	235			$	203				(5.5	)%			9.4	%

TE = Taxable Equivalent, N/M = Not Meaningful

Key Community Bank

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Summary of operations
Net interest income (TE)		$	379			$	362			$	359				4.7	%			5.6	%
Noninterest income			200				198				199				1.0				.5
Total revenue (TE)			579				560				558				3.4				3.8
Provision for credit losses			18				3				21				500.0				(14.3	)
Noninterest expense			448				450				441				(.4	)			1.6
Income (loss) before income taxes (TE)			113				107				96				5.6				17.7
Allocated income taxes (benefit) and TE adjustments			42				40				36				5.0				16.7
Net income (loss) attributable to Key		$	71			$	67			$	60				6.0	%			18.3	%
Average balances
Loans and leases		$	31,039			$	30,707			$	30,103				1.1	%			3.1	%
Total assets			33,090				32,753				32,173				1.0				2.9
Deposits			51,234				50,766				50,303				.9				1.9
Assets under management at period end		$	35,158			$	38,399			$	39,249				(8.4	)%			(10.4	)%

TE = Taxable Equivalent

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Additional Key Community Bank Data

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Noninterest income
Trust and investment services income		$	73			$	76			$	73				(3.9	)%			—
Service charges on deposit accounts			56				52				57				7.7				(1.8	)%
Cards and payments income			43				43				39				—				10.3
Other noninterest income			28				27				30				3.7				(6.7	)
Total noninterest income		$	200			$	198			$	199				1.0	%			.5	%
Average deposit balances
NOW and money market deposit accounts		$	28,568			$	28,284			$	27,403				1.0	%			4.3	%
Savings deposits			2,362				2,385				2,419				(1.0	)			(2.4	)
Certificates of deposit ($100,000 or more)			1,560				1,547				2,072				.8				(24.7	)
Other time deposits			3,061				3,132				3,406				(2.3	)			(10.1	)
Deposits in foreign office			271				299				320				(9.4	)			(15.3	)
Noninterest-bearing deposits			15,412				15,119				14,683				1.9				5.0
Total deposits		$	51,234			$	50,766			$	50,303				.9	%			1.9	%
Home equity loans
Average balance		$	10,281			$	10,266			$	10,368
Weighted-average loan-to-value ratio (at date of origination)			71	%			71	%			71	%
Percent first lien positions			60				60				59
Other data
Branches			972				989				997
Automated teller machines			1,259				1,280				1,290

Key Community Bank Summary of Operations

 

•

Positive operating leverage from prior year

 

•

Net income increased to $71 million, up 18.3% from prior year

 

•

Commercial, financial and agricultural loan growth of $1 billion, or 8.7% from prior year

 

•

Average deposits up $931 million, or 1.9% from the prior year

Key Community Bank recorded net income attributable to Key of $71 million for the third quarter of 2015, compared to net income attributable to Key of $60 million for the year-ago quarter.

Taxable-equivalent net interest income increased by $20 million, or 5.6%, from the third quarter of 2014 due to an increase in average loans and leases of 3.1%, including commercial, financial and agricultural loans, which grew by $1 billion, or 8.7%, from the prior year. Average deposits increased 1.9% from one year ago.

Noninterest income remained relatively stable from the year-ago quarter. Core revenue continues to improve, driven by growth in cards and payments income of $4 million, mostly offset by lower service charges on deposit accounts and a decrease in other income.

The provision for credit losses decreased by $3 million, or 14.3%, from the third quarter of 2014, due to the enhancements to the approach utilized to determine the allowance for loan and lease losses discussed above.

Noninterest expense increased by $7 million, or 1.6%, from the year-ago quarter. Personnel expense increased $1 million while nonpersonnel expense increased by $6 million.

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 9

 

Key Corporate Bank

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Summary of operations
Net interest income (TE)		$	220			$	227			$	215				(3.1	)%			2.3	%
Noninterest income			234				250				185				(6.4	)			26.5
Total revenue (TE)			454				477				400				(4.8	)			13.5
Provision for credit losses			30				41				2				(26.8	)			N/M
Noninterest expense			246				252				213				(2.4	)			15.5
Income (loss) before income taxes (TE)			178				184				185				(3.3	)			(3.8	)
Allocated income taxes and TE adjustments			42				51				51				(17.6	)			(17.6	)
Net income (loss)			136				133				134				2.3				1.5
Less: Net income (loss) attributable to noncontrolling interests			(2	)			—				—				N/M				N/M
Net income (loss) attributable to Key		$	138			$	133			$	134				3.8	%			3.0	%
Average balances
Loans and leases		$	26,425			$	25,298			$	23,215				4.5	%			13.8	%
Loans held for sale			918				1,234				481				(25.6	)			90.9
Total assets			32,163				31,228				28,268				3.0				13.8
Deposits			18,809				19,708				17,599				(4.6	)			6.9
Assets under management at period end			—				—			$	34				N/M				N/M

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

 

dollars in millions														Change 3Q15 vs.
		3Q15				2Q15				3Q14				2Q15				3Q14
Noninterest income
Trust and investment services income		$	35			$	35			$	26				—				34.6	%
Investment banking and debt placement fees			108				139				86				(22.3	)%			25.6
Operating lease income and other leasing gains			16				18				14				(11.1	)			14.3
Corporate services income			46				33				30				39.4				53.3
Service charges on deposit accounts			11				11				11				—				—
Cards and payments income			4				4				3				—				33.3
Payments and services income			61				48				44				27.1				38.6
Mortgage servicing fees			11				9				9				22.2				22.2
Other noninterest income			3				1				6				200.0				(50.0	)
Total noninterest income		$	234			$	250			$	185				(6.4	)%			26.5	%

N/M = Not Meaningful

Key Corporate Bank Summary of Operations

 

•

Investment banking and debt placement fees up 25.6% from the prior year

 

•

Revenue up 13.5% from the prior year

 

•

Average loan and lease balances up 13.8% from the prior year

Key Corporate Bank recorded net income attributable to Key of $138 million for the third quarter of 2015, an increase of $4 million, or 3%, from the same period one year ago.

Taxable-equivalent net interest income increased by $5 million, or 2.3%, compared to the third quarter of 2014. Average earning assets increased $3 billion, or 12.2%, from the year-ago quarter, primarily driven by growth in commercial, financial and agricultural loans. Average deposit balances increased $1.2 billion, or 6.9%, from the year-ago quarter, driven by commercial mortgage servicing deposits and other commercial client inflows.

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Noninterest income was up $49 million, or 26.5% from the prior year. Investment banking and debt placement fees increased $22 million, or 25.6%, driven by strength in syndications, debt underwriting, and financial advisory fees. Corporate services income increased $16 million, or 53.3%, due to higher derivatives income and loan commitment fees. Trust and investment services income increased $9 million, or 34.6%, primarily due to the September 2014 acquisition of Pacific Crest Securities.

The provision for credit losses increased $28 million from the same period one year ago, primarily due to the enhancements to the approach utilized to determine the allowance for loan and lease losses discussed above, as well as a 13.8% increase in average loan balances.

Noninterest expense increased by $33 million, or 15.5%, from the third quarter of 2014. This increase was driven primarily by higher personnel expense, from increased performance-based compensation related to a strong capital markets business performance, along with a full quarter impact of the September 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 $26 million for the third quarter of 2015, essentially unchanged compared to net income attributable to Key of $27 million for the same period last year.

*****

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 $95.4 billion at September 30, 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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CONTACTS:

 

ANALYSTS Vernon L. Patterson 216.689.0520 Vernon_Patterson@KeyBank.com   Melanie S. Misconish 216.689.4545 Melanie_S_Misconish@KeyBank.com		MEDIA Jack Sparks 720.904.4554 Jack_Sparks@KeyBank.com Twitter: @keybank_news

 

INVESTOR RELATIONS: www.key.com/ir		KEY MEDIA NEWSROOM: www.key.com/newsroom

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as “goal,” “objective,” “plan,” “expect,” “assume,” “anticipate,” “intend,” “project,” “believe,” “estimate,” or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key’s actual results to differ from those described in the forward-looking statements can be found in KeyCorp’s Form 10-K for the year ended December 31, 2014, as well as in KeyCorp’s subsequent SEC filings, all of which have been filed with the Securities and Exchange Commission (the “SEC”) and are available on Key’s website (www.key.com/ir) and on the SEC’s website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive and increasing regulation of the U.S. financial services industry. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

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, October 15, 2015. An audio replay of the call will be available through October 22, 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

Third Quarter 2015

Financial Supplement

Page

13	Financial Highlights

15	GAAP to Non-GAAP Reconciliation

18	Consolidated Balance Sheets

19	Consolidated Statements of Income

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

22	Noninterest Expense

22	Personnel Expense

23	Loan Composition

23	Loans Held for Sale Composition

23	Summary of Changes in Loans Held for Sale

24	Exit Loan Portfolio From Continuing Operations

24	Asset Quality Statistics From Continuing Operations

25	Summary of Loan and Lease Loss Experience From Continuing Operations

26	Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

27	Summary of Changes in Nonperforming Loans From Continuing Operations

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

28	Line of Business Results

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Financial Highlights

(dollars in millions, except per share amounts)

 

		Three months ended
		9-30-15				6-30-15				9-30-14
Summary of operations
Net interest income (TE)		$	598			$	591			$	581
Noninterest income			470				488				417
Total revenue (TE)			1,068				1,079				998
Provision for credit losses			45				41				19
Noninterest expense			724				711				706
Income (loss) from continuing operations attributable to Key			222				235				203
Income (loss) from discontinued operations, net of taxes (a)			(3	)			3				(17	)
Net income (loss) attributable to Key			219				238				186
Income (loss) from continuing operations attributable to Key common shareholders		$	216			$	230			$	197
Income (loss) from discontinued operations, net of taxes (a)			(3	)			3				(17	)
Net income (loss) attributable to Key common shareholders			213				233				180
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.26			$	.27			$	.23
Income (loss) from discontinued operations, net of taxes (a)			—				—				(.02	)
Net income (loss) attributable to Key common shareholders (b)			.26				.28				.21
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.26				.27				.23
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)			—				—				(.02	)
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			.25				.27				.21
Cash dividends paid			.075				.075				.065
Book value at period end			12.47				12.21				11.74
Tangible book value at period end			11.17				10.92				10.47
Market price at period end			13.01				15.02				13.33
Performance ratios
From continuing operations:
Return on average total assets			.95	%			1.03	%			.92	%
Return on average common equity			8.30				8.96				7.68
Return on average tangible common equity (c)			9.27				10.01				8.55
Net interest margin (TE)			2.87				2.88				2.96
Cash efficiency ratio (c)			66.9				65.1				69.7
From consolidated operations:
Return on average total assets			.92	%			1.02	%			.81	%
Return on average common equity			8.19				9.07				7.01
Return on average tangible common equity (c)			9.14				10.14				7.81
Net interest margin (TE)			2.84				2.85				2.94
Loan to deposit (d)			89.3				87.3				87.4
Capital ratios at period end
Key shareholders’ equity to assets			11.22	%			11.19	%			11.68	%
Key common shareholders’ equity to assets			10.91				10.89				11.36
Tangible common equity to tangible assets (c)			9.90				9.86				10.26
Common Equity Tier 1 (c), (e)			10.51				10.71				N/A
Tier 1 common equity (c)			N/A				N/A				11.26
Tier 1 risk-based capital (e)			10.90				11.11				12.01
Total risk-based capital (e)			12.51				12.66				14.10
Leverage (e)			10.67				10.74				11.15
Asset quality — from continuing operations
Net loan charge-offs		$	41			$	36			$	31
Net loan charge-offs to average loans			.27	%			.25	%			.22	%
Allowance for loan and lease losses		$	790			$	796			$	804
Allowance for credit losses			844				841				839
Allowance for loan and lease losses to period-end loans			1.31	%			1.37	%			1.43	%
Allowance for credit losses to period-end loans			1.40				1.44				1.49
Allowance for loan and lease losses to nonperforming loans			197.5				190.0				200.5
Allowance for credit losses to nonperforming loans			211.0				200.7				209.2
Nonperforming loans at period end (f)		$	400			$	419			$	401
Nonperforming assets at period end			417				440				418
Nonperforming loans to period-end portfolio loans			.67	%			.72	%			.71	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.69				.75				.74
Trust and brokerage assets
Assets under management		$	35,158			$	38,399			$	39,283
Nonmanaged and brokerage assets			46,796				48,789				48,273
Other data
Average full-time equivalent employees			13,555				13,455				13,905
Branches			972				989				997
Taxable-equivalent adjustment		$	7			$	7			$	6

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Financial Highlights (continued)

(dollars in millions, except per share amounts)

 

		Nine months ended
		9-30-15				9-30-14
Summary of operations
Net interest income (TE)		$	1,766			$	1,729
Noninterest income			1,395				1,307
Total revenue (TE)			3,161				3,036
Provision for credit losses			121				35
Noninterest expense			2,104				2,057
Income (loss) from continuing operations attributable to Key			685				688
Income (loss) from discontinued operations, net of taxes (a)			5				(41	)
Net income (loss) attributable to Key			690				647
Income (loss) from continuing operations attributable to Key common shareholders		$	668			$	671
Income (loss) from discontinued operations, net of taxes (a)			5				(41	)
Net income (loss) attributable to Key common shareholders			673				630
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.79			$	.77
Income (loss) from discontinued operations, net of taxes (a)			.01				(.05	)
Net income (loss) attributable to Key common shareholders (b)			.80				.72
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.78				.76
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)			.01				(.05	)
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			.79				.71
Cash dividends paid			.215				.185
Performance ratios
From continuing operations:
Return on average total assets			1.00	%			1.06	%
Return on average common equity			8.67				8.84
Return on average tangible common equity (c)			9.69				9.83
Net interest margin (TE)			2.88				2.98
Cash efficiency ratio (c)			65.7				66.7
From consolidated operations:
Return on average total assets			.99	%			.95	%
Return on average common equity			8.74				8.30
Return on average tangible common equity (c)			9.76				9.23
Net interest margin (TE)			2.85				2.94
Asset quality — from continuing operations
Net loan charge-offs		$	105			$	81
Net loan charge-offs to average total loans			.24	%			.20	%
Other data
Average full-time equivalent employees			13,525				13,942
Taxable-equivalent adjustment		$	20			$	18

 

(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 this release.

(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)	9-30-15 ratio is estimated.

(f)	Loan balances exclude $12 million, $12 million, and $14 million of purchased credit impaired loans at September 30, 2015, June 30, 2015, and September 30, 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
		9-30-15				6-30-15				9-30-14
Tangible common equity to tangible assets at period end
Key shareholders’ equity (GAAP)		$	10,705			$	10,590			$	10,486
Less:    Intangible assets (a)			1,084				1,085				1,105
Preferred Stock, Series A (b)			281				281				282
Tangible common equity (non-GAAP)		$	9,340			$	9,224			$	9,099
Total assets (GAAP)		$	95,422			$	94,606			$	89,784
Less:    Intangible assets (a)			1,084				1,085				1,105
Tangible assets (non-GAAP)		$	94,338			$	93,521			$	88,679
Tangible common equity to tangible assets ratio (non-GAAP)			9.90	%			9.86	%			10.26	%
Common Equity Tier 1 at period end
Key shareholders’ equity (GAAP)		$	10,705			$	10,590				—
Less:    Preferred Stock, Series A (b)			281				281				—
Common Equity Tier 1 capital before adjustments and              deductions			10,424				10,309				—
Less:    Goodwill, net of deferred taxes			1,037				1,034				—
Intangible assets, net of deferred taxes			30				33				—
Deferred tax assets			1				1				—
Net unrealized gains (losses) on available-for-sale              securities, net of deferred taxes			55				—				—
Accumulated gains (losses) on cash flow hedges, net of              deferred taxes			20				(20	)			—
Amounts in accumulated other comprehensive income              (loss) attributed to pension and              postretirement benefit costs, net of deferred taxes			(386	)			(361	)			—
Total Common Equity Tier 1 capital (c)		$	9,667			$	9,622				—
Net risk-weighted assets (regulatory) (c)		$	91,998			$	89,851				—
Common Equity Tier 1 ratio (non-GAAP) (c)			10.51	%			10.71	%			—
Tier 1 common equity at period end
Key shareholders’ equity (GAAP)			—				—			$	10,486
Qualifying capital securities			—				—				340
Less:    Goodwill			—				—				1,051
Accumulated other comprehensive income (loss) (d)			—				—				(366	)
Other assets (e)			—				—				110
Total Tier 1 capital (regulatory)			—				—				10,031
Less:    Qualifying capital securities			—				—				340
Preferred Stock, Series A (b)			—				—				282
Total Tier 1 common equity (non-GAAP)			—				—			$	9,409
Net risk-weighted assets (regulatory)			—				—			$	83,547
Tier 1 common equity ratio (non-GAAP)			—				—				11.26	%

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GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

 

		Three months ended
		9-30-15				6-30-15				9-30-14
Pre-provision net revenue
Net interest income (GAAP)		$	591			$	584			$	575
Plus:    Taxable-equivalent adjustment			7				7				6
Noninterest income (GAAP)			470				488				417
Less:    Noninterest expense (GAAP)			724				711				706
Pre-provision net revenue from continuing operations (non-GAAP)		$	344			$	368			$	292
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	10,614			$	10,590			$	10,473
Less:    Intangible assets (average) (f)			1,083				1,086				1,037
Preferred Stock, Series A (average)			290				290				291
Average tangible common equity (non-GAAP)		$	9,241			$	9,214			$	9,145
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	216			$	230			$	197
Average tangible common equity (non-GAAP)			9,241				9,214				9,145
Return on average tangible common equity from continuing operations (non-GAAP)			9.27	%			10.01	%			8.55	%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	213			$	233			$	180
Average tangible common equity (non-GAAP)			9,241				9,214				9,145
Return on average tangible common equity consolidated (non-GAAP)			9.14	%			10.14	%			7.81	%
Cash efficiency ratio
Noninterest expense (GAAP)		$	724			$	711			$	706
Less:    Intangible asset amortization (GAAP)			9				9				10
Adjusted noninterest expense (non-GAAP)		$	715			$	702			$	696
Net interest income (GAAP)		$	591			$	584			$	575
Plus:    Taxable-equivalent adjustment			7				7				6
Noninterest income (GAAP)			470				488				417
Total taxable-equivalent revenue (non-GAAP)		$	1,068			$	1,079			$	998
Cash efficiency ratio (non-GAAP)			66.9	%			65.1	%			69.7	%
		Three months ended
		9-30-15
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
Common Equity Tier 1 under current RCR		$	9,667
Adjustments from current RCR to the fully phased-in RCR:
Deferred tax assets and other intangible assets (g)			(45	)
Common Equity Tier 1 anticipated under the fully phased-in RCR (h)		$	9,622
Net risk-weighted assets under current RCR		$	91,998
Adjustments from current RCR to the fully phased-in RCR:
Mortgage servicing assets (i)			479
All other assets (j)			(10	)
Total risk-weighted assets anticipated under the fully phased-in RCR (h)		$	92,467
Common Equity Tier 1 ratio under the fully phased-in RCR (h)			10.41	%

 

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GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

 

		Nine months ended
		9-30-15				9-30-14
Pre-provision net revenue
Net interest income (GAAP)		$	1,746			$	1,711
Plus:    Taxable-equivalent adjustment			20				18
Noninterest income (GAAP)			1,395				1,307
Less:    Noninterest expense (GAAP)			2,104				2,057
Pre-provision net revenue from continuing operations (non-GAAP)		$	1,057			$	979
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	10,591			$	10,435
Less:    Intangible assets (average) (k)			1,086				1,020
Preferred Stock, Series A (average)			290				291
Average tangible common equity (non-GAAP)		$	9,215			$	9,124
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	668			$	671
Average tangible common equity (non-GAAP)			9,215				9,124
Return on average tangible common equity from continuing operations (non-GAAP)			9.69	%			9.83	%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	673			$	630
Average tangible common equity (non-GAAP)			9,215				9,124
Return on average tangible common equity consolidated (non-GAAP)			9.76	%			9.23	%
Cash efficiency ratio
Noninterest expense (GAAP)		$	2,104			$	2,057
Less:    Intangible asset amortization (GAAP)			27				29
Adjusted noninterest expense (non-GAAP)		$	2,077			$	2,028
Net interest income (GAAP)		$	1,746			$	1,711
Plus:    Taxable-equivalent adjustment			20				18
Noninterest income (GAAP)			1,395				1,307
Total taxable-equivalent revenue (non-GAAP)		$	3,161			$	3,036
Cash efficiency ratio (non-GAAP)			65.7	%			66.8	%

 

(a)	For the three months ended September 30, 2015, June 30, 2015, and September 30, 2014, intangible assets exclude $50 million, $55 million, and $72 million, respectively, of period-end purchased credit card receivables.

(b)	Net of capital surplus.

(c)	9-30-15 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 September 30, 2014.

(f)	For the three months ended September 30, 2015, June 30, 2015, and September 30, 2014, average intangible assets exclude $52 million, $58 million, and $76 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 intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule.

(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%.

(j)	Under the fully implemented rule, certain deferred tax assets and intangible assets subject to the transition provision are no longer required to be risk-weighted because they are deducted directly from capital.

(k)	For the nine months ended September 30, 2015, and September 30, 2014, average intangible assets exclude $58 million and $82 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

---

KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 18

 

Consolidated Balance Sheets

(dollars in millions)

 

		9-30-15				6-30-15				9-30-14
Assets
Loans		$	60,085			$	58,264			$	56,155
Loans held for sale			916				835				784
Securities available for sale			14,376				14,244				12,245
Held-to-maturity securities			4,936				5,022				4,997
Trading account assets			811				674				965
Short-term investments			1,964				3,222				2,342
Other investments			691				703				822
Total earning assets			83,779				82,964				78,310
Allowance for loan and lease losses			(790	)			(796	)			(804	)
Cash and due from banks			470				693				651
Premises and equipment			771				788				832
Operating lease assets			315				296				304
Goodwill			1,060				1,057				1,051
Other intangible assets			74				83				126
Corporate-owned life insurance			3,516				3,502				3,456
Derivative assets			793				536				413
Accrued income and other assets			3,348				3,314				3,024
Discontinued assets			2,086				2,169				2,421
Total assets		$	95,422			$	94,606			$	89,784
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts		$	37,301			$	36,024			$	33,941
Savings deposits			2,338				2,370				2,390
Certificates of deposit ($100,000 or more)			2,001				2,032				2,533
Other time deposits			3,020				3,105				3,338
Total interest-bearing deposits			44,660				43,531				42,202
Noninterest-bearing deposits			25,985				26,640				25,697
Deposits in foreign office — interest-bearing			428				498				557
Total deposits			71,073				70,669				68,456
Federal funds purchased and securities sold under repurchase agreements			407				444				657
Bank notes and other short-term borrowings			677				528				996
Derivative liabilities			676				560				384
Accrued expense and other liabilities			1,562				1,537				1,613
Long-term debt			10,310				10,267				7,172
Discontinued liabilities			—				—				3
Total liabilities			84,705				84,005				79,281
Equity
Preferred stock, Series A			290				290				291
Common shares			1,017				1,017				1,017
Capital surplus			3,914				3,898				3,984
Retained earnings			8,764				8,614				8,082
Treasury stock, at cost			(3,008	)			(2,884	)			(2,563	)
Accumulated other comprehensive income (loss)			(272	)			(345	)			(325	)
Key shareholders’ equity			10,705				10,590				10,486
Noncontrolling interests			12				11				17
Total equity			10,717				10,601				10,503
Total liabilities and equity		$	95,422			$	94,606			$	89,784
Common shares outstanding (000)			835,285				843,608				868,477

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 19

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

		Three months ended												Nine months ended
		9-30-15				6-30-15				9-30-14				9-30-15				9-30-14
Interest income
Loans		$	542			$	532			$	531			$	1,597			$	1,576
Loans held for sale			10				12				4				29				13
Securities available for sale			75				72				67				217				210
Held-to-maturity securities			24				24				25				72				70
Trading account assets			5				5				6				15				19
Short-term investments			1				2				2				5				4
Other investments			4				5				4				14				16
Total interest income			661				652				639				1,949				1,908
Interest expense
Deposits			27				26				28				79				91
Federal funds purchased and securities sold under repurchase agreements			—				—				1				—				2
Bank notes and other short-term borrowings			2				2				2				6				6
Long-term debt			41				40				33				118				98
Total interest expense			70				68				64				203				197
Net interest income			591				584				575				1,746				1,711
Provision for credit losses			45				41				19				121				35
Net interest income after provision for credit losses			546				543				556				1,625				1,676
Noninterest income
Trust and investment services income			108				111				99				328				291
Investment banking and debt placement fees			109				141				88				318				271
Service charges on deposit accounts			68				63				68				192				197
Operating lease income and other leasing gains			15				24				17				58				81
Corporate services income			57				43				42				143				125
Cards and payments income			47				47				42				136				123
Corporate-owned life insurance income			30				30				26				91				80
Consumer mortgage income			3				4				3				10				7
Mortgage servicing fees			11				9				9				33				35
Net gains (losses) from principal investing			11				11				9				51				60
Other income (a)			11				5				14				35				37
Total noninterest income			470				488				417				1,395				1,307
Noninterest expense
Personnel			426				408				405				1,223				1,182
Net occupancy			60				66				66				191				198
Computer processing			41				42				39				121				118
Business services and professional fees			40				42				36				115				118
Equipment			22				22				25				66				73
Operating lease expense			11				12				11				34				31
Marketing			17				15				15				40				33
FDIC assessment			8				8				9				24				21
Intangible asset amortization			9				9				10				27				29
OREO expense, net			2				1				1				5				3
Other expense			88				86				89				258				251
Total noninterest expense			724				711				706				2,104				2,057
Income (loss) from continuing operations before income taxes			292				320				267				916				926
Income taxes			72				84				64				230				232
Income (loss) from continuing operations			220				236				203				686				694
Income (loss) from discontinued operations, net of taxes			(3	)			3				(17	)			5				(41	)
Net income (loss)			217				239				186				691				653
Less: Net income (loss) attributable to noncontrolling interests			(2	)			1				—				1				6
Net income (loss) attributable to Key		$	219			$	238			$	186			$	690			$	647
Income (loss) from continuing operations attributable to Key common shareholders		$	216			$	230			$	197			$	668			$	671
Net income (loss) attributable to Key common shareholders			213				233				180				673				630
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.26			$	.27			$	.23			$	.79			$	.77
Income (loss) from discontinued operations, net of taxes			—				—				(.02	)			.01				(.05	)
Net income (loss) attributable to Key common shareholders (b)			.26				.28				.21				.80				.72
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders		$	.26			$	.27			$	.23			$	.78			$	.76
Income (loss) from discontinued operations, net of taxes			—				—				(.02	)			.01				(.05	)
Net income (loss) attributable to Key common shareholders (b)			.25				.27				.21				.79				.71
Cash dividends declared per common share		$	.075			$	.075			$	.065			$	.215			$	.185
Weighted-average common shares outstanding (000)			831,430				839,454				867,350				839,758				875,728
Effect of common share options and other stock awards			7,450				6,858				6,772				7,613				6,723
Weighted-average common shares and potential common shares outstanding (000) (c)			838,880				846,312				874,122				847,371				882,451

 

(a)

For each of the three months ended September 30, 2015, June 30, 2015, and September 30, 2014, net securities gains (losses) totaled less than $1 million. For the three months ended September 30, 2015, June 30, 2015, and September 30, 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.

---

KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 20

 

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

(dollars in millions)

 

		Third Quarter 2015												Second Quarter 2015												Third 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)		$	30,374			$	244				3.19	%		$	29,017			$	233				3.23	%		$	26,456			$	218				3.28	%
Real estate — commercial mortgage			7,988				73				3.65				7,981				74				3.70				8,142				78				3.79
Real estate — construction			1,164				11				3.78				1,199				11				3.60				1,030				10				3.78
Commercial lease financing			3,946				35				3.57				3,981				36				3.58				4,145				38				3.66
Total commercial loans			43,472				363				3.32				42,178				354				3.36				39,773				344				3.44
Real estate — residential mortgage			2,258				24				4.19				2,237				23				4.22				2,204				24				4.35
Home equity:
Key Community Bank			10,281				101				3.88				10,266				99				3.89				10,368				102				3.91
Other			229				4				7.87				244				5				7.86				290				6				7.80
Total home equity loans			10,510				105				3.96				10,510				104				3.98				10,658				108				4.01
Consumer other — Key Community Bank			1,597				26				6.51				1,571				26				6.52				1,534				26				6.87
Credit cards			759				21				10.74				737				19				10.57				716				20				11.12
Consumer other:
Marine			645				10				6.38				702				11				6.30				856				13				6.23
Other			40				1				8.00				43				1				7.77				55				2				7.63
Total consumer other			685				11				6.47				745				12				6.38				911				15				6.32
Total consumer loans			15,809				187				4.69				15,800				184				4.69				16,023				193				4.78
Total loans			59,281				550				3.69				57,978				538				3.72				55,796				537				3.82
Loans held for sale			939				10				3.96				1,263				12				3.91				502				4				3.87
Securities available for sale (b), (e)			14,247				74				2.11				13,360				73				2.17				11,939				67				2.25
Held-to-maturity securities (b)			4,923				24				1.95				4,965				24				1.91				5,108				25				1.90
Trading account assets			699				5				2.50				805				5				2.55				893				6				2.68
Short-term investments			2,257				1				.26				3,228				2				.26				3,048				2				.19
Other investments (e)			696				4				2.52				713				5				2.48				847				4				2.12
Total earning assets			83,042				668				3.21				82,312				659				3.21				78,133				645				3.30
Allowance for loan and lease losses			(790	)											(793	)											(809	)
Accrued income and other assets			10,399												10,140												9,799
Discontinued assets			2,118												2,194												4,138
Total assets		$	94,769											$	93,853											$	91,261
Liabilities
NOW and money market deposit accounts		$	36,289				15				.16			$	36,122				14				.16			$	33,969				12				.14
Savings deposits			2,371				—				.02				2,393				—				.02				2,428				1				.02
Certificates of deposit ($100,000 or more) (f)			1,985				6				1.27				2,010				6				1.25				2,629				8				1.23
Other time deposits			3,064				6				.70				3,136				5				.70				3,413				7				.83
Deposits in foreign office			492				—				.23				583				1				.23				595				—				.23
Total interest-bearing deposits			44,201				27				.24				44,244				26				.24				43,034				28				.26
Federal funds purchased and securities sold under repurchase agreements			859				—				.08				557				—				.02				1,176				1				.19
Bank notes and other short-term borrowings			567				2				1.51				657				2				1.39				484				2				1.79
Long-term debt (f), (g)			7,895				41				2.19				6,968				40				2.30				4,868				33				2.88
Total interest-bearing liabilities			53,522				70				.53				52,426				68				.52				49,562				64				.52
Noninterest-bearing deposits			26,268												26,594												25,302
Accrued expense and other liabilities			2,236												2,039												1,768
Discontinued liabilities (g)			2,118												2,194												4,138
Total liabilities			84,144												83,253												80,770
Equity
Key shareholders’ equity			10,614												10,590												10,473
Noncontrolling interests			11												10												18
Total equity			10,625												10,600												10,491
Total liabilities and equity		$	94,769											$	93,853											$	91,261
Interest rate spread (TE)											2.68	%											2.69	%											2.78	%
Net interest income (TE) and net interest margin (TE)							598				2.87	%							591				2.88	%							581				2.96	%
TE adjustment (b)							7												7												6
Net interest income, GAAP basis						$	591											$	584											$	575

 

(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 $88 million, $88 million, and $92 million of assets from commercial credit cards for the three months ended September 30, 2015, June 30, 2015, and September 30, 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 Key’s matched funds transfer pricing methodology to discontinued operations.

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

---

KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 21

 

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

(dollars in millions)

 

		Nine months ended September 30, 2015												Nine months ended September 30, 2014
		Average Balance				Interest (a)				Yield/ Rate (a)				Average Balance				Interest (a)				Yield/ Rate (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural (d)		$	29,244			$	700				3.20	%		$	26,100			$	643				3.29	%
Real estate — commercial mortgage			8,021				220				3.67				7,944				226				3.81
Real estate — construction			1,168				33				3.76				1,056				33				4.13
Commercial lease financing			3,998				107				3.57				4,280				118				3.67
Total commercial loans			42,431				1,060				3.34				39,380				1,020				3.46
Real estate — residential mortgage			2,241				71				4.22				2,193				72				4.40
Home equity:
Key Community Bank			10,287				299				3.89				10,332				302				3.92
Other			244				14				7.85				307				18				7.79
Total home equity loans			10,531				313				3.98				10,639				320				4.03
Consumer other — Key Community Bank			1,572				77				6.56				1,484				77				6.96
Credit cards			743				60				10.80				706				58				10.93
Consumer other:
Marine			701				33				6.34				926				43				6.20
Other			44				3				7.68				60				4				7.75
Total consumer other			745				36				6.42				986				47				6.29
Total consumer loans			15,832				557				4.71				16,008				574				4.79
Total loans			58,263				1,617				3.71				55,388				1,594				3.85
Loans held for sale			1,000				29				3.77				469				13				3.79
Securities available for sale (b), (e)			13,569				217				2.15				12,229				210				2.29
Held-to-maturity securities (b)			4,945				72				1.93				4,950				70				1.87
Trading account assets			740				15				2.62				953				19				2.66
Short-term investments			2,627				5				.26				2,672				4				.18
Other investments (e)			717				14				2.60				890				16				2.45
Total earning assets			81,861				1,969				3.22				77,551				1,926				3.31
Allowance for loan and lease losses			(792	)											(825	)
Accrued income and other assets			10,255												9,786
Discontinued assets			2,194												4,323
Total assets		$	93,518											$	90,835
Liabilities
NOW and money market deposit accounts		$	35,793				42				.15			$	34,105				35				.14
Savings deposits			2,383				—				.02				2,466				1				.03
Certificates of deposit ($100,000 or more) (f)			2,004				19				1.27				2,731				28				1.38
Other time deposits			3,138				17				.71				3,558				26				.96
Deposits in foreign office			534				1				.23				639				1				.23
Total interest-bearing deposits			43,852				79				.24				43,499				91				.28
Federal funds purchased and securities sold under repurchase agreements			713				—				.05				1,371				2				.18
Bank notes and other short-term borrowings			577				6				1.48				538				6				1.65
Long-term debt (f), (g)			7,003				118				2.32				5,169				98				2.65
Total interest-bearing liabilities			52,145				203				.52				50,577				197				.52
Noninterest-bearing deposits			26,377												23,760
Accrued expense and other liabilities			2,200												1,724
Discontinued liabilities (g)			2,194												4,323
Total liabilities			82,916												80,384
Equity
Key shareholders’ equity			10,591												10,435
Noncontrolling interests			11												16
Total equity			10,602												10,451
Total liabilities and equity		$	93,518											$	90,835
Interest rate spread (TE)											2.70	%											2.79	%
Net interest income (TE) and net interest margin (TE)							1,766				2.88	%							1,729				2.98	%
TE adjustment (b)							20												18
Net interest income, GAAP basis						$	1,746											$	1,711

 

(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 $88 million and $94 million of assets from commercial credit cards for the nine months ended September 30, 2015, and September 30, 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 Key’s matched funds transfer pricing methodology to discontinued operations.

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

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 22

 

Noninterest Expense

(dollars in millions)

 

		Three months ended												Nine months ended
		9-30-15				6-30-15				9-30-14				9-30-15				9-30-14
Personnel (a)		$	426			$	408			$	405			$	1,223			$	1,182
Net occupancy			60				66				66				191				198
Computer processing			41				42				39				121				118
Business services and professional fees			40				42				36				115				118
Equipment			22				22				25				66				73
Operating lease expense			11				12				11				34				31
Marketing			17				15				15				40				33
FDIC assessment			8				8				9				24				21
Intangible asset amortization			9				9				10				27				29
OREO expense, net			2				1				1				5				3
Other expense			88				86				89				258				251
Total noninterest expense		$	724			$	711			$	706			$	2,104			$	2,057
Average full-time equivalent employees (b)			13,555				13,455				13,905				13,525				13,942

 

(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												Nine months ended
		9-30-15				6-30-15				9-30-14				9-30-15				9-30-14
Salaries		$	234			$	227			$	227			$	681			$	667
Technology contract labor, net			13				11				11				33				43
Incentive and stock-based compensation			103				109				89				295				263
Employee benefits			75				56				71				202				187
Severance			1				5				7				12				22
Total personnel expense		$	426			$	408			$	405			$	1,223			$	1,182

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

Page 23

 

Loan Composition

(dollars in millions)

 

														Percent change 9-30-15 vs.
		9-30-15				6-30-15				9-30-14				6-30-15				9-30-14
Commercial, financial and agricultural (a)		$	31,095			$	29,285			$	26,683				6.2	%			16.5	%
Commercial real estate:
Commercial mortgage			8,180				7,874				8,276				3.9				(1.2	)
Construction			1,070				1,254				1,036				(14.7	)			3.3
Total commercial real estate loans			9,250				9,128				9,312				1.3				(.7	)
Commercial lease financing (b)			3,929				4,010				4,135				(2.0	)			(5.0	)
Total commercial loans			44,274				42,423				40,130				4.4				10.3
Residential — prime loans:
Real estate — residential mortgage			2,267				2,252				2,213				.7				2.4
Home equity:
Key Community Bank			10,282				10,296				10,380				(.1	)			(.9	)
Other			222				236				283				(5.9	)			(21.6	)
Total home equity loans			10,504				10,532				10,663				(.3	)			(1.5	)
Total residential — prime loans			12,771				12,784				12,876				(.1	)			(.8	)
Consumer other — Key Community Bank			1,612				1,595				1,546				1.1				4.3
Credit cards			770				753				724				2.3				6.4
Consumer other:
Marine			620				673				828				(7.9	)			(25.1	)
Other			38				36				51				5.6				(25.5	)
Total consumer other			658				709				879				(7.2	)			(25.1	)
Total consumer loans			15,811				15,841				16,025				(.2	)			(1.3	)
Total loans (c), (d)		$	60,085			$	58,264			$	56,155				3.1	%			7.0	%

Loans Held for Sale Composition

(dollars in millions)

 

														Percent change 9-30-15 vs.
		9-30-15				6-30-15				9-30-14				6-30-15				9-30-14
Commercial, financial and agricultural		$	74			$	217			$	30				(65.9	)%			146.7	%
Real estate — commercial mortgage			806				576				725				39.9				11.2
Commercial lease financing			10				7				10				42.9				—
Real estate — residential mortgage			26				35				19				(25.7	)			36.8
Total loans held for sale (e)		$	916			$	835			$	784				9.7	%			16.8	%

Summary of Changes in Loans Held for Sale

(in millions)

 

		3Q15				2Q15				1Q15				4Q14				3Q14
Balance at beginning of period		$	835			$	1,649			$	734			$	784			$	435
New originations			1,673				1,650				2,130				2,465				1,593
Transfers from (to) held to maturity, net			24				6				10				2				—
Loan sales			(1,616	)			(2,466	)			(1,204	)			(2,516	)			(1,243	)
Loan draws (payments), net			—				(4	)			(21	)			(1	)			(1	)
Balance at end of period (e)		$	916			$	835			$	1,649			$	734			$	784

 

(a)	Loan balances include $88 million, $89 million, and $90 million of commercial credit card balances at September 30, 2015, June 30, 2015, and September 30, 2014, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $162 million, $191 million, and $367 million at September 30, 2015, June 30, 2015, and September 30, 2014, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

At September 30, 2015, total loans include purchased loans of $119 million, of which $12 million were purchased credit impaired. At June 30, 2015, total loans include purchased loans of $125 million, of which $12 million were purchased credit impaired. At September 30, 2014, total loans include purchased loans of $143 million, of which $14 million were purchased credit impaired.

(d)	Total loans exclude loans of $1.9 billion at September 30, 2015, $2 billion at June 30, 2015, and $2.4 billion at September 30, 2014, related to the discontinued operations of the education lending business.

(e)	Total loans held for sale exclude loans held for sale of $169 million at September 30, 2015, and $179 million at June 30, 2015, related to the discontinued operations of the education lending business.

N/M = Not Meaningful

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Exit Loan Portfolio From Continuing Operations

(in millions)

 

		Balance Outstanding								Change 9-30-15 vs. 6-30-15				Net Loan Charge-offs								Balance on Nonperforming Status
		9-30-15				6-30-15								3Q15 (c)				2Q15				9-30-15				6-30-15
Residential properties — homebuilder		$	6			$	6				—				—				—			$	5			$	8
Marine and RV floor plan			1				2			$	(1	)			—				—				—				1
Commercial lease financing (a)			798				831				(33	)		$	(1	)			—				—				—
Total commercial loans			805				839				(34	)			(1	)			—				5				9
Home equity — Other			222				236				(14	)			(1	)		$	1				7				8
Marine			620				673				(53	)			3				3				6				8
RV and other consumer			44				47				(3	)			(1	)			—				1				1
Total consumer loans			886				956				(70	)			1				4				14				17
Total exit loans in loan portfolio		$	1,691			$	1,795			$	(104	)			—			$	4			$	19			$	26
Discontinued operations — education lending business (not included in exit loans above) (b)		$	1,891			$	1,962			$	(71	)		$	7			$	2			$	8			$	6

 

(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)	Excludes loans held for sale of $169 million at September 30, 2015, and $179 million at June 30, 2015.

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

Asset Quality Statistics From Continuing Operations

(dollars in millions)

 

		3Q15				2Q15				1Q15				4Q14				3Q14
Net loan charge-offs		$	41			$	36			$	28			$	32			$	31
Net loan charge-offs to average total loans			.27	%			.25	%			.20	%			.22	%			.22	%
Allowance for loan and lease losses		$	790			$	796			$	794			$	794			$	804
Allowance for credit losses (a)			844				841				835				829				839
Allowance for loan and lease losses to period-end loans			1.31	%			1.37	%			1.37	%			1.38	%			1.43	%
Allowance for credit losses to period-end loans			1.40				1.44				1.44				1.44				1.49
Allowance for loan and lease losses to nonperforming loans			197.5				190.0				181.7				190.0				200.5
Allowance for credit losses to nonperforming loans			211.0				200.7				191.1				198.3				209.2
Nonperforming loans at period end (b)		$	400			$	419			$	437			$	418			$	401
Nonperforming assets at period end			417				440				457				436				418
Nonperforming loans to period-end portfolio loans			.67	%			.72	%			.75	%			.73	%			.71	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.69				.75				.79				.76				.74

 

(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, $12 million, $12 million, $13 million, and $14 million of purchased credit impaired loans at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, and September 30, 2014, respectively.

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October 15, 2015

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Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)

 

		Three months ended												Nine months ended
		9-30-15				6-30-15				9-30-14				9-30-15				9-30-14
Average loans outstanding		$	59,281			$	57,978			$	55,796			$	58,263			$	55,388
Allowance for loan and lease losses at beginning of period		$	796			$	794			$	814			$	794			$	848
Loans charged off:
Commercial, financial and agricultural			26				21				12				59				35
Real estate — commercial mortgage			—				—				—				2				3
Real estate — construction			—				—				2				1				4
Total commercial real estate loans			—				—				2				3				7
Commercial lease financing			2				1				1				5				6
Total commercial loans			28				22				15				67				48
Real estate — residential mortgage			1				1				2				4				7
Home equity:
Key Community Bank			6				8				9				21				29
Other			1				2				2				4				8
Total home equity loans			7				10				11				25				37
Consumer other — Key Community Bank			6				6				7				18				23
Credit cards			7				8				9				23				27
Consumer other:
Marine			4				5				4				14				18
Other			—				—				1				1				2
Total consumer other			4				5				5				15				20
Total consumer loans			25				30				34				85				114
Total loans charged off			53				52				49				152				162
Recoveries:
Commercial, financial and agricultural			2				6				6				13				27
Real estate — commercial mortgage			—				—				2				2				4
Real estate — construction			—				1				1				1				16
Total commercial real estate loans			—				1				3				3				20
Commercial lease financing			2				1				2				7				8
Total commercial loans			4				8				11				23				55
Real estate — residential mortgage			—				1				—				1				2
Home equity:
Key Community Bank			2				1				3				5				7
Other			2				1				1				4				4
Total home equity loans			4				2				4				9				11
Consumer other — Key Community Bank			1				2				1				5				4
Credit cards			1				1				—				2				1
Consumer other:
Marine			1				2				2				6				7
Other			1				—				—				1				1
Total consumer other			2				2				2				7				8
Total consumer loans			8				8				7				24				26
Total recoveries			12				16				18				47				81
Net loan charge-offs			(41	)			(36	)			(31	)			(105	)			(81	)
Provision (credit) for loan and lease losses			36				37				21				102				37
Foreign currency translation adjustment			(1	)			1				—				(1	)			—
Allowance for loan and lease losses at end of period		$	790			$	796			$	804			$	790			$	804
Liability for credit losses on lending-related commitments at beginning of period		$	45			$	41			$	37			$	35			$	37
Provision (credit) for losses on lending-related commitments			9				4				(2	)			19				(2	)
Liability for credit losses on lending-related commitments at end of period (a)		$	54			$	45			$	35			$	54			$	35
Total allowance for credit losses at end of period		$	844			$	841			$	839			$	844			$	839
Net loan charge-offs to average total loans			.27	%			.25	%			.22	%			.24	%			.20	%
Allowance for loan and lease losses to period-end loans			1.31				1.37				1.43				1.31				1.43
Allowance for credit losses to period-end loans			1.40				1.44				1.49				1.40				1.49
Allowance for loan and lease losses to nonperforming loans			197.5				190.0				200.5				197.5				200.5
Allowance for credit losses to nonperforming loans			211.0				200.7				209.2				211.0				209.2
Discontinued operations — education lending business:
Loans charged off		$	9			$	6			$	10			$	25			$	34
Recoveries			2				4				3				10				11
Net loan charge-offs		$	(7	)		$	(2	)		$	(7	)		$	(15	)		$	(23	)

 

(a)	Included in “accrued expense and other liabilities” on the balance sheet.

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

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Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)

 

		9-30-15				6-30-15				3-31-15				12-31-14				9-30-14
Commercial, financial and agricultural		$	89			$	100			$	98			$	59			$	47
Real estate — commercial mortgage			23				26				30				34				41
Real estate — construction			9				12				12				13				14
Total commercial real estate loans			32				38				42				47				55
Commercial lease financing			21				18				20				18				14
Total commercial loans			142				156				160				124				116
Real estate — residential mortgage			67				67				72				79				81
Home equity:
Key Community Bank			174				176				182				185				174
Other			7				8				9				10				10
Total home equity loans			181				184				191				195				184
Consumer other — Key Community Bank			1				1				2				2				2
Credit cards			2				2				2				2				1
Consumer other:
Marine			6				8				9				15				16
Other			1				1				1				1				1
Total consumer other			7				9				10				16				17
Total consumer loans			258				263				277				294				285
Total nonperforming loans (a)			400				419				437				418				401
Nonperforming loans held for sale			—				—				—				—				—
OREO			17				20				20				18				16
Other nonperforming assets			—				1				—				—				1
Total nonperforming assets		$	417			$	440			$	457			$	436			$	418
Accruing loans past due 90 days or more		$	54			$	66			$	111			$	96			$	71
Accruing loans past due 30 through 89 days			271				181				216				235				340
Restructured loans — accruing and nonaccruing (b)			287				300				268				270				264
Restructured loans included in nonperforming loans (b)			160				170				141				157				137
Nonperforming assets from discontinued operations — education lending business			8				6				8				11				9
Nonperforming loans to period-end portfolio loans			.67	%			.72	%			.75	%			.73	%			.71	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.69				.75				.79				.76				.74

 

(a)	Loan balances exclude $12 million, $12 million, $12 million, $13 million, and $14 million of purchased credit impaired loans at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, and September 30, 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 Third Quarter 2015 Profit

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Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

 

		3Q15				2Q15				1Q15				4Q14				3Q14
Balance at beginning of period		$	419			$	437			$	418			$	401			$	396
Loans placed on nonaccrual status			81				92				123				103				109
Charge-offs			(53	)			(52	)			(47	)			(49	)			(49	)
Loans sold			(2	)			—				—				(2	)			—
Payments			(16	)			(25	)			(9	)			(17	)			(13	)
Transfers to OREO			(4	)			(5	)			(7	)			(6	)			(7	)
Loans returned to accrual status			(25	)			(28	)			(41	)			(12	)			(35	)
Balance at end of period (a)		$	400			$	419			$	437			$	418			$	401

 

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

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

(in millions)

 

		3Q15				2Q15				1Q15				4Q14				3Q14
Balance at beginning of period		$	20			$	20			$	18			$	16			$	12
Properties acquired — nonperforming loans			4				5				7				6				7
Valuation adjustments			(2	)			(1	)			(1	)			(2	)			(1	)
Properties sold			(5	)			(4	)			(4	)			(2	)			(2	)
Balance at end of period		$	17			$	20			$	20			$	18			$	16

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KeyCorp Reports Third Quarter 2015 Profit

October 15, 2015

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Line of Business Results

(dollars in millions)

 

																						Percent change 3Q15 vs.
		3Q15				2Q15				1Q15				4Q14				3Q14				2Q15				3Q14
Key Community Bank
Summary of operations
Total revenue (TE)		$	579			$	560			$	549			$	558			$	558				3.4	%			3.8	%
Provision for credit losses			18				3				30				11				21				500.0				(14.3	)
Noninterest expense			448				450				441				449				441				(.4	)			1.6
Net income (loss) attributable to Key			71				67				49				62				60				6.0				18.3
Average loans and leases			31,039				30,707				30,662				30,478				30,103				1.1				3.1
Average deposits			51,234				50,766				50,417				50,851				50,303				.9				1.9
Net loan charge-offs			21				20				28				28				28				5.0				(25.0	)
Net loan charge-offs to average total loans			.27	%			.26	%			.37	%			.36	%			.37	%			N/A				N/A
Nonperforming assets at period end		$	307			$	305			$	328			$	340			$	338				.7				(9.2	)
Return on average allocated equity			10.49	%			10.05	%			7.27	%			9.15	%			8.89	%			N/A				N/A
Average full-time equivalent employees			7,326				7,400				7,452				7,414				7,573				(1.0	)			(3.3	)
Key Corporate Bank
Summary of operations
Total revenue (TE)		$	454			$	477			$	401			$	460			$	400				(4.8	)%			13.5	%
Provision for credit losses			30				41				6				7				2				(26.8	)			N/M
Noninterest expense			246				252				214				244				213				(2.4	)			15.5
Net income (loss) attributable to Key			138				133				129				149				134				3.8				3.0
Average loans and leases			26,425				25,298				24,722				23,798				23,215				4.5				13.8
Average loans held for sale			918				1,234				775				855				481				(25.6	)			90.9
Average deposits			18,809				19,708				18,567				18,355				17,599				(4.6	)			6.9
Net loan charge-offs			20				12				(4	)			(3	)			(1	)			66.7				N/M
Net loan charge-offs to average total loans			.30	%			.19	%			(.07	)%			(.05	)%			(.02	)%			N/A				N/A
Nonperforming assets at period end		$	85			$	105			$	93			$	41			$	20				(19.0	)			325.0
Return on average allocated equity			28.65	%			29.62	%			28.04	%			33.63	%			31.59	%			N/A				N/A
Average full-time equivalent employees			2,173				2,058				2,057				2,043				1,998				5.6				8.8

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