Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

11. Goodwill and Other Intangible Assets

Our annual goodwill impairment testing is performed as of October 1 each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Additional information pertaining to our accounting policy for goodwill and other intangible assets is summarized in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Goodwill and Other Intangible Assets.”

We conducted a qualitative analysis as of October 1, 2018 and concluded that it was not more likely than not that the fair values of our reporting units were less than their respective carrying values. As such, goodwill was not impaired.

During the most recent quantitative assessment in 2017, we determined that the estimated fair value of the Key Community Bank unit was 48% greater than its carrying amount and the estimated fair value of the Key Corporate Bank unit was 39% greater than its carrying amount. The carrying amounts of the Key Community Bank and Key Corporate Bank units represent the average equity based on risk-weighted regulatory capital for goodwill impairment testing and management reporting purposes.

Based on our quarterly review of impairment indicators during 2018 and 2017, it was not necessary to perform further reviews of goodwill recorded in our Key Community Bank or Key Corporate Bank units. We will continue to monitor the Key Community Bank and Key Corporate Bank units as appropriate.

Changes in the carrying amount of goodwill by reporting unit are presented in the following table:



in millions	Key Community Bank			Key Corporate Bank		Total
BALANCE AT DECEMBER 31, 2016	$	2,088		$	358	$	2,446
Fair value measurement adjustments - First Niagara acquisition	15			3		18
Additional ownership interest in Key Merchant Services	4			—		4
Acquisition of HelloWallet	17			—		17
Acquisition of Cain Brothers	—			53		53
BALANCE AT DECEMBER 31, 2017	2,124			414		2,538
KIBS divestiture	(22		)	—		(22		)
BALANCE AT DECEMBER 31, 2018	$	2,102		$	414	$	2,516

Additional information regarding the above acquisitions and divestiture is provided in Note 14 (“Acquisitions, Divestiture, and Discontinued Operations”).

As of December 31, 2018, we expect goodwill in the amount of $540 million to be deductible for tax purposes in future periods.

There were no accumulated impairment losses related to the Key Community Bank unit or the Key Corporate Bank unit at December 31, 2018, December 31, 2017, and December 31, 2016.

The following table shows the gross carrying amount and the accumulated amortization of intangible assets subject to amortization:



	2018				2017
December 31, in millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible assets subject to amortization:
Core deposit intangibles	$	396	$	184	$	461	$	192
PCCR intangibles	152		138		152		126
Other intangible assets	115		25		128		7
Total	$	663	$	347	$	741	$	325

Intangible assets acquired during the year ended December 31, 2017, were as follows:



in millions	KMS		HelloWallet		Cain Brothers		Total
Intangible assets subject to amortization:
Customer relationships	$	85	—		$	29	$	114
Trade name	—		—		1		1
Proprietary software	—		$	12	—		12
Total	$	85	$	12	$	30	$	127

Acquired customer relationships of KMS are being amortized over an estimated useful life of ten years utilizing an accelerated method. Proprietary software intangible assets of HelloWallet are being amortized on a straight line basis over their average useful life of three years. Acquired customer relationships of Cain Brothers are being amortized on an accelerated basis over an average useful life of eight years. The Cain Brothers trade name intangible asset is being amortized on a straight line basis over the estimated useful life of three years.

The following table presents estimated intangible asset amortization expense for the next five years.



	Estimated
in millions	2019		2020		2021		2022		2023
Intangible asset amortization expense	$	80	$	62	$	52	$	42	$	34