KeyBank 2015 Annual Report Download - page 53

Our noninterest income was $1.9 billion, up $83 million, or 4.6%, from 2014. Investment banking and debt
placement fees benefited from our business model and had a record high year, increasing $48 million from 2014.
Trust and investment services income increased $30 million, primarily due to the full-year 2015 impact of the
September 2014 acquisition of Pacific Crest Securities. Noninterest income for 2015 also included increases of
$20 million in corporate services income due to higher loan commitment fees and $17 million in cards and
payments income due to higher merchant services, purchase card, and ATM debit card fees driven by increased
volume. Other income also increased $10 million. These increases were partially offset by declines of $27
million in net gains from principal investing and $23 million in operating lease income and other leasing gains.
In 2016, we expect mid-single-digit (4% to 6%) growth in noninterest income compared to 2015.
Our noninterest expense was $2.8 billion, an increase of $79 million, or 2.9%, from 2014. We recognized $61
million of merger-, efficiency-, and pension-related charges in 2015 compared to $80 million of efficiency- and
pension-related charges in 2014. Personnel expense increased $61 million, driven by higher incentive and stock-
based compensation, employee benefits, and salaries, partially offset by lower technology contract labor and
severance. Nonpersonnel expense increased $18 million, primarily due to increases in marketing of $8 million
and computer processing of $6 million. In 2016, we expect noninterest expense to be relatively stable (plus or
minus 2%) with 2015.
Average loans totaled $58.6 billion for 2015, compared to $55.7 billion in 2014. Commercial, financial and
agricultural loan growth of $3.3 billion was broad-based across our commercial lines of business. Consumer
loans were slightly down, as modest increases across our core consumer loan portfolio, primarily direct term
loans and credit cards, were offset by run-off in our designated consumer exit portfolio. For 2016, we anticipate
average loan growth in the mid-single-digit (4% to 6%) range.
Average deposits, excluding deposits in foreign office, totaled $70.1 billion for 2015, an increase of $2.9 billion
compared to 2014. NOW and money market deposit accounts and demand deposits increased $2 billion and $1.9
billion, respectively, reflecting growth in the commercial mortgage servicing business and inflows from
commercial and consumer clients. These increases were partially offset by run-off in certificates of deposit and
other time deposits. Our consolidated loan to deposit ratio was 87.8% at December 31, 2015, compared to 84.6%
at December 31, 2014.
We maintained credit discipline in 2015, and our asset quality ratios remained strong. The provision for credit
losses was $166 million for 2015 compared to $57 million for 2014. The increase in our provision is due to the
growth in our loan portfolio over the past twelve months as well as lower recoveries in 2015 compared to 2014.
Net loan charge-offs were $142 million, or .24%, of average loan balances for 2015, compared to $113 million,
or .20%, for 2014. Our nonperforming loans declined to $387 million, or .65%, of period-end loans at
December 31, 2015, compared to $418 million, or .73%, at December 31, 2014. Our ALLL was $796 million, or
1.33% of period-end loans, compared to $794 million, or 1.38%, at December 31, 2014, and represented 206%
and 190% coverage of nonperforming loans at December 31, 2015, and December 31, 2014, respectively. In
2016, 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 ALLL, as a percentage of period-end loans, to remain relatively stable (plus or minus 2%,
which would approximate a three basis point change) with 2015.
Our capital ratios remain strong. Our tangible common equity and Tier 1 risk-based capital ratios were 9.98%
and 11.35%, respectively, at December 31, 2015, compared to 9.88% and 11.90%, respectively, at December 31,
2014. In addition, our Common Equity Tier 1 was 10.94% at December 31, 2015. 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.
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