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KeyCorp Reports Third Quarter 2017 Net Income Of $349 Million, Or $.32 Per Common Share

3Q17 results included a net impact of $.03 per common share related to merger-related charges and a merchant services gain adjustment

3Q17 results reflected year-over-year positive operating leverage, momentum in fee-based businesses and strong returns

Company Release - 10/19/2017 6:30 AM ET

CLEVELAND, Oct. 19, 2017 /PRNewswire/ --


Earnings Per Share

Cash Efficiency(a) 

Return on Tangible
Common Equity(a)

Reported                             

$.32


62.2%


12.2%


Adjusted (Non-GAAP)(b)      

$.35


59.7%


13.2%



(a)

Non-GAAP measure; see pages 15-17 for reconciliation

(b)

Excludes notable items; see page 15 for detail

 

KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $349 million, or $.32 per common share, compared to $393 million or $.36 per common share, for the second quarter of 2017 and $165 million, or $.16 per common share, for the third quarter of 2016. During the third quarter of 2017, Key's results included $36 million of merger-related charges and a $5 million merchant services gain adjustment, resulting in a pre-tax net impact of $41 million, or $.03 per common share.

"Third quarter results reflect strong returns and the seventh consecutive quarter of positive operating leverage compared to the prior year, as we continue to execute on our strategic priorities, grow our businesses, and deliver on the commitments we have made. Key's return on average tangible common equity, excluding notable items, was 13.2% for the quarter."

"We continue to have momentum in our fee-based businesses, including investment banking and debt placement fees, which were up 4% from the second quarter, and cards and payments income, which grew 7% on a linked-quarter basis. The cash efficiency ratio for the third quarter, excluding notable items, was 59.7%."

"We continue to invest for growth in support of our relationship strategy, including the recent HelloWallet and merchant services acquisitions, as well as Cain Brothers, which closed early in the fourth quarter. These investments enhance our focus on organic growth by investing in our people, products and capabilities to continue to drive positive operating leverage and future growth."

- Beth Mooney, Chairman and CEO

 



Selected Financial Highlights















dollars in millions, except per share data





Change 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Income (loss) from continuing operations attributable to Key common shareholders

$

349

$

393

$

165


(11.2)%

111.5%

Income (loss) from continuing operations attributable to Key common shareholders per
     common share — assuming dilution

.32

.36

.16


(11.1)

100.0

Return on average total assets from continuing operations

1.07%

1.23%

.55%


N/A

N/A

Common Equity Tier 1 ratio (a)

10.26

9.91

9.56


N/A

N/A

Book value at period end

$

13.18

$

13.02

$

12.78


1.2%

3.1%

Net interest margin (TE) from continuing operations

3.15%

3.30%

2.85%


N/A

N/A


















(a)

9/30/2017 ratio is estimated.













TE = Taxable Equivalent, N/A = Not Applicable






 


INCOME STATEMENT HIGHLIGHTS














Revenue














dollars in millions





Change 3Q17 vs.


3Q17

2Q17

3Q16


2Q17

3Q16

Net interest income (TE)

$

962


$

987


$

788



(2.5)%

22.1%

Noninterest income

592


653


549



(9.3)

7.8

Total revenue

$

1,554


$

1,640


$

1,337



(5.2)%

16.2%








 TE = Taxable Equivalent; N/M = Not Meaningful


Third quarter 2017 net interest income included $48 million of purchase accounting accretion related to the acquisition of First Niagara.

Taxable-equivalent net interest income was $962 million for the third quarter of 2017, and the net interest margin was 3.15%, compared to taxable-equivalent net interest income of $788 million and a net interest margin of 2.85% for the third quarter of 2016, reflecting the benefit from the First Niagara acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances.

Compared to the second quarter of 2017, taxable-equivalent net interest income decreased by $25 million, and the net interest margin decreased by 15 basis points. The decrease in net interest income and the net interest margin reflects a decline in purchase accounting accretion of $52 million, including $42 million from the finalization of previous estimates recognized in the second quarter. Lower purchase accounting accretion was partially offset by higher earning asset yields and balances.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $145 million from the third quarter of 2016 and $27 million from the second quarter of 2017.


Noninterest Income














dollars in millions





Change 3Q17 vs.


3Q17

2Q17

3Q16


2Q17

3Q16

Trust and investment services income

$

135


$

134


$

122



.7%

10.7%

Investment banking and debt placement fees

141


135


156



4.4

(9.6)

Service charges on deposit accounts

91


90


85



1.1

7.1

Operating lease income and other leasing gains

16


30


6



(46.7)

166.7

Corporate services income

54


55


51



(1.8)

5.9

Cards and payments income

75


70


66



7.1

13.6

Corporate-owned life insurance income

31


33


29



(6.1)

6.9

Consumer mortgage income

7


6


6



16.7

16.7

Mortgage servicing fees

21


15


15



40.0

40.0

Net gains (losses) from principal investing

3



5



N/M

(40.0)

Other income

18


85


8



(78.8)

125.0

Total noninterest income

$

592


$

653


$

549



(9.3)%

7.8%








N/M = Not Meaningful

Key's noninterest income was $592 million for the third quarter of 2017, compared to $549 million for the year-ago quarter. Growth was largely driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing momentum in Key's core businesses. Broad-based growth across many fee income categories more than offset a decline in investment banking and debt placement fees, related to strong market conditions in the year-ago period.

Compared to the second quarter of 2017, noninterest income decreased by $61 million. The largest driver of this decrease was a $64 million one-time gain related to Key's merchant services business in the second quarter of 2017, recognized in other income.  Excluding the one-time merchant services gain, noninterest income grew on a linked-quarter basis, driven by momentum in fee-based businesses, including growth in investment banking and debt placement fees, mortgage servicing fees, and cards and payments income, which also benefited from the recent merchant services acquisition. Operating lease income and other leasing gains decreased $14 million, related to lease residual losses in the third quarter of 2017.


Noninterest Expense














dollars in millions





Change 3Q17 vs.


3Q17

2Q17

3Q16


2Q17

3Q16

Personnel expense

$

558


$

551


$

594



1.3%

(6.1)%

Non-personnel expense

434


444


488



(2.3)

(11.1)

     Total noninterest expense

$

992


$

995


$

1,082



(.3)

(8.3)








Merger-related charges

36


44


189



(18.2)

(81.0)

     Total noninterest expense excluding merger-related charges

$

956


$

951


$

893



.5%

7.1%








Key's noninterest expense was $992 million for the third quarter of 2017, and included $36 million of merger-related charges. Merger-related charges for the quarter were made up of $25 million of personnel expense and $11 million of non-personnel expense, mostly reflected in marketing and computer processing expense.

Excluding merger-related charges, noninterest expense was $63 million higher than the third quarter of last year. The increase from the prior year, reflected in both personnel and non-personnel expense, was primarily driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing business investments and recent acquisitions, partially offset by merger cost savings.

Excluding merger-related charges, noninterest expense increased $5 million from the second quarter of 2017. Key incurred a number of notable items in the second quarter of 2017, including a $20 million charitable contribution and a $4 million credit related to purchase accounting finalization. Excluding these notable items as well as merger-related charges, noninterest expense increased $21 million from the second quarter of 2017. The increase represents recent business acquisitions, including HelloWallet and merchant services, as well as seasonal trends in marketing and personnel. Business services and professional fees were also higher in the third quarter, related to short-term initiatives.

 BALANCE SHEET HIGHLIGHTS


Average Loans














dollars in millions





Change 3Q17 vs.


3Q17

2Q17

3Q16


2Q17

3Q16

Commercial and industrial (a)

$

41,416


$

40,666


$

37,318



1.8%

11.0%

Other commercial loans

21,598


21,990


19,110



(1.8)

13.0

Home equity loans

12,314


12,473


11,968



(1.3)

2.9

Other consumer loans

11,486


11,373


9,301



1.0

23.5

Total loans

$

86,814


$

86,502


$

77,697



.4%

11.7%









(a) 

Commercial and industrial average loan balances include $117 million, $117 million, and $107 million of assets from commercial credit cards at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

Average loans were $86.8 billion for the third quarter of 2017, an increase of $9.1 billion compared to the third quarter of 2016, primarily reflecting a full-quarter impact of the First Niagara acquisition, as well as growth in commercial and industrial loans, which was broad-based and spread across Key's commercial lines of business.

Compared to the second quarter of 2017, average loans increased by $312 million, driven primarily by growth in commercial and industrial loans. Commercial real estate loans declined as a result of paydowns and clients taking advantage of attractive capital markets alternatives. Consumer loans were relatively stable, as the home equity portfolio continued to decline, largely the result of paydowns.

At September 30, 2017, the remaining fair value discount on the First Niagara acquired loan portfolio was $302 million, compared to $345 million at June 30, 2017.


Average Deposits















dollars in millions





Change 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Non-time deposits

$

92,039


$

92,018


$

85,683



7.4%

Certificates of deposit ($100,000 or more)

6,402


6,111


4,204



4.8%

52.3

Other time deposits

4,664


4,650


5,031



.3

(7.3)

     Total deposits

$

103,105


$

102,779


$

94,918



.3%

8.6%









Cost of total deposits

.28%


.26%


.21%



N/A

N/A










N/A = Not Applicable

Average deposits totaled $103.1 billion for the third quarter of 2017, an increase of $8.2 billion compared to the year-ago quarter, primarily reflecting a full-quarter impact of the First Niagara acquisition, and core retail and commercial deposit growth.

Compared to the second quarter of 2017, average deposits increased by $326 million, driven by growth in noninterest-bearing deposits from commercial deposit inflows and short-term escrows. Certificates of deposit balances also grew and helped offset the managed exit of certain public sector relationships.


ASSET QUALITY














dollars in millions





Change 3Q17 vs.


3Q17

2Q17

3Q16


2Q17

3Q16

Net loan charge-offs

$

32

$

66

$

44


(51.5)%

(27.3)%

Net loan charge-offs to average total loans

.15%

.31%

.23%


N/A

N/A

Nonperforming loans at period end (a)

$

517

$

507

$

723


2.0

(28.5)

Nonperforming assets at period end (a)

556

556

760


(26.8)

Allowance for loan and lease losses

880

870

865


1.1

1.7

Allowance for loan and lease losses to nonperforming loans (a)

170.2%

171.6%

119.6%


N/A

N/A

Provision for credit losses

$

51

$

66

$

59


(22.7)%

(13.6)%









(a)

Nonperforming loan balances exclude $783 million, $835 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.



N/A = Not Applicable

Key's provision for credit losses was $51 million for the third quarter of 2017, compared to $59 million for the third quarter of 2016 and $66 million for the second quarter of 2017. The third quarter 2017 provision reflects a large recovery in the commercial and industrial portfolio. Key's allowance for loan and lease losses was $880 million, or 1.02% of total period-end loans, at September 30, 2017, compared to 1.01% at September 30, 2016, and 1.01% at June 30, 2017.

Net loan charge-offs for the third quarter of 2017 totaled $32 million, or .15% of average total loans, reflecting a large recovery in the commercial and industrial portfolio. These results compare to $44 million, or .23%, for the third quarter of 2016, and $66 million, or .31%, for the second quarter of 2017.

At September 30, 2017, Key's nonperforming loans totaled $517 million, which represented .60% of period-end portfolio loans. These results compare to .85% at September 30, 2016, and .59% at June 30, 2017. Nonperforming assets at September 30, 2017, totaled $556 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at September 30, 2016, and .64% at June 30, 2017.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2017.

Capital Ratios









9/30/2017

6/30/2017

9/30/2016

Common Equity Tier 1 (a)

10.26%

9.91%

9.56%

Tier 1 risk-based capital (a)

11.11

10.73

10.53

Total risk based capital (a)

13.09

12.64

12.63

Tangible common equity to tangible assets (b)

8.49

8.56

8.27

Leverage (a)

9.83

9.95

10.22






(a)

9/30/2017 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 "tangible common equity." 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.

Key's capital position remained strong throughout the third quarter. As shown in the preceding table, at September 30, 2017, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.26% and 11.11%, respectively. The increase in these ratios was primarily driven by a change in methodology for multipurpose facilities. Key's tangible common equity ratio was 8.49% at September 30, 2017.

As a "standardized approach" banking organization, Key's mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules") 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 10.15% at September 30, 2017.  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 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Shares outstanding at beginning of period

1,092,739


1,097,479


842,703



(.4)%


29.7%


Open market repurchases and return of shares under employee
compensation plans

(15,298)


(5,072)


(5,240)



201.6


191.9


Shares issued under employee compensation plans (net of cancellations)

1,598


332


4,857



381.3


(67.1)


Common shares issued to acquire First Niagara



239,735



N/M

NM

     Shares outstanding at end of period

1,079,039


1,092,739


1,082,055



(1.3)%


(.3)%











N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the third quarter of 2017, Key declared a dividend of $.095 per common share. Key also completed $277 million of common share repurchases during the quarter, including $271 million of common share repurchases in the open market and $6 million of share repurchases related to employee equity compensation programs.


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 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Revenue from continuing operations (TE)







Key Community Bank

$

959


$

1,010


$

783



(5.0)%


22.5%


Key Corporate Bank

560


596


556



(6.0)


.7


Other Segments

30


35


16



(14.3)


87.5


    Total segments

1,549


1,641


1,355



(5.6)


14.3


Reconciling Items

5


(1)


(18)



N/M

N/M

    Total

$

1,554


$

1,640


$

1,337



(5.2)%


16.2%










Income (loss) from continuing operations attributable to Key







Key Community Bank

$

161


$

196


$

97



(17.9)%


66.0%


Key Corporate Bank

190


222


160



(14.4)


18.8


Other Segments

23


28


16



(17.9)


43.8


    Total segments

374


446


273



(16.1)


37.0


Reconciling Items (a)

(11)


(39)


(102)



N/M

N/M

    Total

$

363


$

407


$

171



(10.8)%


112.3%











(a)

Reconciling items consists primarily of the unallocated portion of merger-related charges and items not allocated to the business segments because they do not reflect their normal operations.



TE = Taxable Equivalent, N/M = Not Meaningful

 


Key Community Bank























dollars in millions





Change 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Summary of operations







Net interest income (TE)

$

670


$

674


$

533



(.6)%


25.7%


Noninterest income

289


336


250



(14.0)


15.6



Total revenue (TE)

959


1,010


783



(5.0)


22.5


Provision for credit losses

59


47


39



25.5


51.3


Noninterest expense

643


651


590



(1.2)


9.0



Income (loss) before income taxes (TE)

257


312


154



(17.6)


66.9


Allocated income taxes (benefit) and TE adjustments

96


116


57



(17.2)


68.4



Net income (loss) attributable to Key

$

161


$

196


$

97



(17.9)%


66.0%










Average balances







Loans and leases

$

47,595


$

47,461


$

41,548



.3%


14.6%


Total assets

51,708


51,502


44,218



.4


16.9


Deposits

79,563


79,601


69,397




14.6










Assets under management at period end

$

38,660


$

37,613


$

36,752



2.8%


5.2%










TE = Taxable Equivalent

 

 


Additional Key Community Bank Data















dollars in millions





Change 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Noninterest income







Trust and investment services income

$

101


$

99


$

86



2.0%


17.4%


Service charges on deposit accounts

78


77


70



1.3


11.4


Cards and payments income

65


60


54



8.3


20.4


Other noninterest income

45


100


40



(55.0)


12.5


     Total noninterest income

$

289


$

336


$

250



(14.0)%


15.6%










Average deposit balances







NOW and money market deposit accounts

$

44,481


$

45,127


$

38,417



(1.4)%


15.8%


Savings deposits

5,165


5,293


4,369



(2.4)


18.2


Certificates of deposit ($100,000 or more)

4,195


4,016


2,606



4.5


61.0


Other time deposits

4,657


4,640


4,944



.4


(5.8)


Noninterest-bearing deposits

21,065


20,525


19,061



2.6%


10.5


     Total deposits

$

79,563


$

79,601


$

69,397




14.6%










Home equity loans







Average balance

$

12,182


$

12,330


$

11,703





Combined weighted-average loan-to-value ratio (at date of origination)

69%


71%


70%





Percent first lien positions

60


60


55













Other data







Branches

1,208


1,210


1,322





Automated teller machines

1,588


1,589


1,701













 

Key Community Bank Summary of Operations (3Q17 vs. 3Q16)

  • Positive operating leverage compared to prior year
  • Net income increased $64 million, or 66%, from prior year
  • Average commercial and industrial loans increased $2.7 billion, or 17.2%, from the prior year
  • Average deposits increased $10.2 billion, or 14.6%, from the prior year

Key Community Bank recorded net income attributable to Key of $161 million for the third quarter of 2017, compared to $97 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the full-quarter impact of the First Niagara acquisition.

Taxable-equivalent net interest income increased by $137 million, or 25.7%, from the third quarter of 2016. The increase was primarily attributable to the full-quarter impact of the First Niagara acquisition, as well as the benefit from higher interest rates. Average loans and leases increased $6 billion, or 14.6%, largely driven by a $2.7 billion, or 17.2%, increase in commercial and industrial loans. Additionally, average deposits increased $10.2 billion, or 14.6%, from one year ago.

Noninterest income was up $39 million, or 15.6%, from the year-ago quarter, driven by the full quarter impact of the First Niagara acquisition, including the addition of Key Insurance and Benefits Services. Strength in cards and payments, which includes the full-quarter impact of Key's merchant services acquisition in the second quarter of 2017, and higher assets under management from market growth also contributed to the increase.

The provision for credit losses increased by $20 million, or 51.3%, and net loan charge-offs increased $10 million from the third quarter of 2016, primarily related to the acquisition of First Niagara.

Noninterest expense increased by $53 million, or 9%, from the year-ago quarter, largely driven by the full-quarter impact of the First Niagara acquisition, as well as core business activity, ongoing investments, recent acquisitions and seasonal trends. Personnel expense increased $29 million, while non-personnel expense increased by $24 million, including higher marketing expense and higher intangible amortization expense.


Key Corporate Bank























dollars in millions





Change 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Summary of operations







Net interest income (TE)

$

291


$

312


$

278



(6.7)%


4.7%


Noninterest income

269


284


278



(5.3)


(3.2)



Total revenue (TE)

560


596


556



(6.0)


.7


Provision for credit losses

(11)


19


23



(157.9)


(147.8)


Noninterest expense

303


299


310



1.3


(2.3)



Income (loss) before income taxes (TE)

268


278


223



(3.6)


20.2


Allocated income taxes and TE adjustments

78


56


63



39.3


23.8



Net income (loss)

190


222


160



(14.4)


18.8


Less: Net income (loss) attributable to noncontrolling interests





N/M

N/M


Net income (loss) attributable to Key

$

190


$

222


$

160



(14.4)%


18.8%










Average balances







Loans and leases

$

38,040


$

37,721


$

34,561



.8%


10.1%


Loans held for sale

1,521


1,000


1,103



52.1


37.9


Total assets

45,276


44,148


40,584



2.6


11.6


Deposits

21,559


21,145


22,708



2.0%


(5.1)%










TE = Taxable Equivalent, N/M = Not Meaningful

 


Additional Key Corporate Bank Data















dollars in millions





Change 3Q17 vs.



3Q17

2Q17

3Q16


2Q17

3Q16

Noninterest income







Trust and investment services income

$

34


$

35


$

36



(2.9)%


(5.6)%


Investment banking and debt placement fees

137


134


153



2.2


(10.5)


Operating lease income and other leasing gains

13


22


10



(40.9)


30.0










Corporate services income

41


38


36



7.9


13.9


Service charges on deposit accounts

13


13


15




(13.3)


Cards and payments income

10


10


10






Payments and services income

64


61


61



4.9


4.9










Mortgage servicing fees

18


12


13



50.0


38.5


Other noninterest income

3


20


5



(85.0)


(40.0)



Total noninterest income

$

269


$

284


$

278



(5.3)%


(3.2)%


















Key Corporate Bank Summary of Operations (3Q17 vs. 3Q16)

  • Positive operating leverage compared to prior year
  • Net income up $30 million, or 18.8%, from prior year
  • Average loan and lease balances up $3.5 billion, or 10.1%, from the prior year

Key Corporate Bank recorded net income attributable to Key of $190 million for the third quarter of 2017, compared to $160 million for the same period one year ago.

Taxable-equivalent net interest income increased by $13 million, or 4.7%, compared to the third quarter of 2016.  Average loan and lease balances increased $3.5 billion, or 10.1%, from the year-ago quarter, driven by growth in commercial and industrial and commercial mortgage loans. Average deposit balances decreased $1.1 billion, or 5.1%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

Noninterest income was down $9 million, or 3.2%, from the prior year. This decline was mostly due to lower investment banking and debt placement fees, resulting from strong market conditions and activity in the third quarter of 2016. This decrease was partially offset by growth in mortgage servicing fees and corporate services income compared to the prior year.

During the third quarter of 2017, Key Corporate Bank benefited from a large recovery in the commercial and industrial portfolio, as well as improving credit quality in the overall portfolio. Accordingly, the provision for credit losses decreased $34 million, or 147.8%, compared to the third quarter of 2016, with $21 million less of net loan charge-offs.

Noninterest expense decreased by $7 million, or 2.3%, from the third quarter of 2016. The decrease from the prior year was largely driven by lower performance-based compensation. Slightly offsetting this decrease were higher levels of operating lease expense, business services and professional fees, and cards and payments expense.

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 $23 million for the third quarter of 2017, compared to $16 million for the same period last year, driven by increases in operating lease income and other leasing gains and corporate-owned life insurance income.

*****

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $136.7 billion at September 30, 2017.

Key provides deposit, lending, cash management, insurance, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,200 branches and more than 1,500 ATMs. 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.

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, 2016, 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 19, 2017.  An audio replay of the call will be available through October 29, 2017.

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.  

*****


Financial Highlights

(dollars in millions, except per share amounts)




Three months ended




9/30/2017

6/30/2017

9/30/2016

Summary of operations





Net interest income (TE)

$

962


$

987


$

788



Noninterest income

592


653


549



     Total revenue (TE)

1,554


1,640


1,337



Provision for credit losses

51


66


59



Noninterest expense

992


995


1,082



Income (loss) from continuing operations attributable to Key

363


407


171



Income (loss) from discontinued operations, net of taxes (a)

1


5


1



Net income (loss) attributable to Key

364


412


172









Income (loss) from continuing operations attributable to Key common shareholders

349


393


165



Income (loss) from discontinued operations, net of taxes (a)

1


5


1



Net income (loss) attributable to Key common shareholders

350


398


166








Per common share





Income (loss) from continuing operations attributable to Key common shareholders

$

.32


$

.36


$

.17



Income (loss) from discontinued operations, net of taxes (a)





Net income (loss) attributable to Key common shareholders (b)

.32


.37


.17









Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

.32


.36


.16



Income (loss) from discontinued operations, net of taxes — assuming dilution (a)





Net income (loss) attributable to Key common shareholders — assuming dilution (b)

.32


.36


.17









Cash dividends declared

.095


.095


.085



Book value at period end

13.18


13.02


12.78



Tangible book value at period end

10.52


10.40


10.14



Market price at period end

18.82


18.74


12.17








Performance ratios





From continuing operations:





Return on average total assets

1.07

%

1.23

%

.55

%


Return on average common equity

9.74


11.12


5.09



Return on average tangible common equity (c)

12.21


13.80


6.16



Net interest margin (TE)

3.15


3.30


2.85



Cash efficiency ratio (c)

62.2


59.3


80.0









From consolidated operations:





Return on average total assets

1.06

%

1.23

%

.55

%


Return on average common equity

9.77


11.26


5.12



Return on average tangible common equity (c)

12.25


13.98


6.20



Net interest margin (TE)

3.13


3.28


2.83



Loan to deposit (d)

86.2


87.2


84.7








Capital ratios at period end





Key shareholders' equity to assets

11.15

%

11.23

%

11.04

%


Key common shareholders' equity to assets

10.40


10.48


10.18



Tangible common equity to tangible assets (c)

8.49


8.56


8.27



Common Equity Tier 1 (e)

10.26


9.91


9.56



Tier 1 risk-based capital (e)

11.11


10.73


10.53



Total risk-based capital (e)

13.09


12.64


12.63



Leverage (e)

9.83


9.95


10.22








Asset quality — from continuing operations





Net loan charge-offs

$

32


$

66


$

44



Net loan charge-offs to average loans

.15

%

.31

%

.23

%


Allowance for loan and lease losses

$

880


$

870


$

865



Allowance for credit losses

937


918


918



Allowance for loan and lease losses to period-end loans

1.02

%

1.01

%

1.01

%


Allowance for credit losses to period-end loans

1.08


1.06


1.07



Allowance for loan and lease losses to nonperforming loans (f)

170.2


171.6


119.6



Allowance for credit losses to nonperforming loans (f)

181.2


181.1


127.0



Nonperforming loans at period-end (f)

$

517


$

507


$

723



Nonperforming assets at period-end (f)

556


556


760



Nonperforming loans to period-end portfolio loans (f)

.60

%

.59

%

.85

%


Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)

.64


.64


.89








Trust assets





Assets under management

$

38,660


$

37,613


$

36,752








Other data





Average full-time equivalent employees

18,548


18,344


17,079



Branches

1,208


1,210


1,322








Taxable-equivalent adjustment

$

14


$

14


$

8


 






Financial Highlights (continued)

(dollars in millions, except per share amounts)



Nine months ended



9/30/2017


9/30/2016

Summary of operations





Net interest income (TE)

$

2,878



$

2,005



Noninterest income

1,822



1,453



 Total revenue (TE)

4,700



3,458



Provision for credit losses

180



200



Noninterest expense

3,000



2,536



Income (loss) from continuing operations attributable to Key

1,094



557



Income (loss) from discontinued operations, net of taxes (a)

6



5



Net income (loss) attributable to Key

1,100



562








Income (loss) from continuing operations attributable to Key common shareholders

$

1,038