Business Segment Reporting

3 Months Ended

Mar. 31, 2019

19. Business Segment Reporting

Key previously reported its results of operations through two reportable business segments, Key Community Bank and Key Corporate Bank. In the first quarter of 2019, Key underwent a company-wide organizational change, resulting in the realignment of its businesses into two reportable business segments, Consumer Bank and Commercial Bank, with the remaining operations that do not meet the criteria for disclosure as a separate reportable business recorded in Other. The new business segment structure aligns with how management reviews performance and makes decisions by client, segment and business unit. Prior period information was restated to conform to the new business segment structure. Additionally, goodwill was reallocated to the new segments on a relative fair value basis. On March 31, 2019, the Consumer Bank was allocated goodwill in the amount of $1.6 billion and the Commercial Bank was allocated goodwill in the amount of $912 million.

The following is a description of the segments and their primary businesses at March 31, 2019.

Consumer Bank

The Consumer Bank serves individuals and small businesses throughout our 15-state branch footprint by offering a variety of deposit and investment products, personal finance and financial wellness services, lending, mortgage and home equity, credit card, treasury services, and business advisory services. The Consumer Bank also purchases retail auto sales contracts via a network of auto dealerships. The auto dealerships finance the sale of automobiles as the initial lender and then assign the contracts to us pursuant to dealer agreements. In addition, wealth management and investment services are offered to assist institutional, non-profit, and high-net-worth clients with their banking, trust, portfolio management, life insurance, charitable giving, and related needs.

Commercial Bank

The Commercial Bank is an aggregation of our Institutional and Commercial operating segments. The Commercial operating segment is a full-service corporate bank focused principally on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate, and technology. The Commercial operating segment is also a significant servicer of commercial mortgage loans and a significant special servicer of CMBS. The Institutional operating segment delivers a broad suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance.

Other

Other includes various corporate treasury activities such as management of our investment securities portfolio, long-term debt, short-term liquidity and funding activities, and balance sheet risk management, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also include intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

The development and application of the methodologies that we use to allocate items among our business segments is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocations drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

The table below shows selected financial data for our business segments for the three-month periods ended March 31, 2019, and March 31, 2018.



Three months ended March 31,	Consumer Bank						Commercial Bank						Other						Total Key
dollars in millions	2019			2018			2019			2018			2019			2018			2019			2018
SUMMARY OF OPERATIONS
Net interest income (TE)	$	594		$	553		$	399		$	405		$	(8	)	$	(6	)	$	985		$	952
Noninterest income	214			229			300			325			22			47			536			601
Total revenue (TE) ^(a)	808			782			699			730			14			41			1,521			1,553
Provision for credit losses	45			34			15			28			2			(1		)	62			61
Depreciation and amortization expense	23			27			29			35			36			41			88			103
Other noninterest expense	524			549			338			346			13			8			875			903
Income (loss) from continuing operations before income taxes (TE)	216			172			317			321			(37		)	(7		)	496			486
Allocated income taxes and TE adjustments	52			41			64			45			(26		)	(16		)	90			70
Income (loss) from continuing operations	164			131			253			276			(11		)	9			406			416
Income (loss) from discontinued operations, net of taxes	—			—			—			—			1			2			1			2
Net income (loss)	164			131			253			276			(10		)	11			407			418
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—			—			—			—			—
Net income (loss) attributable to Key	$	164		$	131		$	253		$	276		$	(10	)	$	11		$	407		$	418

AVERAGE BALANCES ^(b)
Loans and leases	$	31,403		$	31,647		$	57,210		$	54,131		$	1,036		$	1,149		$	89,649		$	86,927
Total assets ^(a)	34,814			34,802			64,817			61,750			40,489			38,363			140,120			134,915
Deposits	71,289			67,421			34,418			32,794			1,869			2,341			107,576			102,556
OTHER FINANCIAL DATA
Net loan charge-offs ^(b)	$	34		$	35		$	30		$	19		—			—			$	64		$	54
Return on average allocated equity ^(b)	19.83		%	16.41		%	23.66		%	25.31		%	(.56		)%	.50		%	10.49		%	11.33		%
Return on average allocated equity	19.83			16.41			23.66			25.31			(.51		)	.62			10.51			11.39
Average full-time equivalent employees ^(c)	9,631			10,106			2,360			2,457			5,563			5,977			17,554			18,540


(a)	Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software, and goodwill held by our major business segments, are located in the United States.


(b)	From continuing operations.

(c)

The number of average full-time equivalent employees was not adjusted for discontinued operations.