KeyBank 2014 Annual Report Download - page 50

Our noninterest income was $1.8 billion, up $31 million, or 1.8%, from 2013. Investment banking and debt
placement fees benefited from our business model and had a record high year, increasing $64 million from 2013.
Net gains (losses) from principal investing were $26 million higher than prior year, and trust and investment
services income increased $10 million. These increases were partially offset by declines of $21 million in
operating lease income and other leasing, $20 million in service charges on deposits accounts, $12 million in
mortgage servicing fees, and $9 million in consumer mortgage income. Other income also decreased $15 million.
In 2015, we expect mid-single-digit growth compared to 2014, including the full-year impact of the recently-
acquired Pacific Crest Securities.
Our noninterest expense was $2.8 billion, a decrease of $61 million, or 2.2%, from 2013. We recognized $80
million of efficiency- and pension-related charges in 2014 compared to $117 million in 2013. Personnel expense
declined $18 million, driven by lower net technology contract labor, severance, and employee benefits, partially
offset by higher incentive compensation and stock-based compensation. Nonpersonnel expense decreased $43
million, primarily due to declines in net occupancy costs of $14 million, provision (credit) for losses on lending-
related commitments of $10 million, and equipment expense of $8 million. In 2015, we expect noninterest
expense to be relatively stable with 2014.
Average loans totaled $55.7 billion for 2014, compared to $53.1 billion in 2013. Commercial, financial and
agricultural loan growth of $2.7 billion from the prior year was broad-based across our commercial lines of
business. Consumer loans remained relatively stable, as modest increases across our core consumer loan
portfolio, primarily home equity loans and direct term loans, were mostly offset by run-off in our designated
consumer exit portfolio. For 2015, we anticipate average loans growth in the mid-single-digit range, benefiting
from the strength in our commercial businesses.
Average deposits, excluding deposits in foreign office, totaled $67.3 billion for 2014, an increase of $1.9 billion
compared to 2013. Demand deposits and NOW and money market deposit accounts each increased $1.4 billion,
mostly due to growth related to commercial client inflows as well as increases related to the commercial
mortgage servicing business. These increases were partially offset by run-off in certificates of deposit. Our
consolidated loan to deposit ratio was 84.6% at December 31, 2014, compared to 83.8% at December 31, 2013.
Our asset quality statistics continued to improve during 2014. The provision for loan and lease losses was $59
million for 2014 compared to $130 million for 2013. Net loan charge-offs declined to $113 million, or .20%, of
average loan balances for 2014, compared to $168 million, or .32%, for 2013. In addition, our nonperforming
loans declined to $418 million, or .73%, of period-end loans at December 31, 2014, compared to $508 million, or
.93%, at December 31, 2013. Our ALLL was $794 million, or 1.38%, of period-end loans, compared to $848
million, or 1.56%, at December 31, 2013, and represented 190% and 166.9% coverage of nonperforming loans at
December 31, 2014, and December 31, 2013, respectively. In 2015, we expect net loan charge-offs to average
loans to remain below our long-term targeted range of 40 to 60 basis points and the provision for loan and lease
losses to approximate net loan charge-offs.
Our tangible common equity ratio and Tier 1 common ratio both remain strong at December 31, 2014, at 9.88%
and 11.17% respectively, compared to 9.80% and 11.22%, respectively, at December 31, 2013. We have
identified four primary uses of capital:
1. Investing in our businesses, supporting our clients, and loan growth;
2. Maintaining or increasing our common share dividend;
3. Returning capital in the form of common share repurchases to our shareholders; and
4. Remaining disciplined and opportunistic about how we invest in our franchise to include selective
acquisitions over time.
Our capital management remains focused on creating value. During 2014, we announced an 18% increase in the
common share dividend and repurchased $496 million of common shares, resulting in a peer-leading shareholder
payout of approximately 82% of our 2014 net income.
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