KeyCorp reported Q1/16 net income from continuing operations of $182 million, down from $222 million for Q1/15. During Q1/16, Key said it incurred merger-related expense totaling $24 million. Total revenue of $1.04 billion was up from $1.01 billion a year earlier.

The following highlights were excerpted from the news release comparing Q1/16 with Q1/15:

• Average commercial, financial and agriculture loans were up 11.5% to $31.6 billion compared to $28.3 billion in the same quarter in 2015.
• Net interest income was $612 million and net interest margin was 2.89% compared to net interest income of $577 million and net interest margin of 2.91%. Key noted the $35 million increase reflected higher earning asset balances and an increase in earning asset yields, largely the result of Key’s loan portfolio re-pricing to the higher short-term interest rates that resulted from the Fed’s decision to raise the target range for the fed funds rate in mid-December of 2015.
• Asset quality measures in Q1/16 were impacted by credit migration, primarily in the oil and gas portfolio. Key noted its Q1/16 provision charge more than doubled to $89 million compared to $35 million a year earlier and its nonperforming loans represented 1.12% of period-end portfolio loans compared to .65% and .75% at December 31, 2015 and March 31, 2015, respectively. Key again noted the increase was primarily the result of deterioration in the oil and gas portfolio.
• At March 31, 2015 operating lease assets were $362 million up over 18% from $306 million a year earlier.
• Average commercial lease financing balances in Q1/16 of $3,957 million compared to $4,070 million in the same quarter in 2015. Interest income of $36 million and yield of 3.65% compared to $36 million and yield of 3.57% a year earlier.

“While the operating environment remains challenging, our results reflect continued momentum in our core businesses and progress on our strategic initiatives,” said Beth Mooney, KeyCorp chairman and CEO. “Excluding merger-related expense, we generated positive operating leverage relative to the same period last year, driven by a 3% increase in revenue and well-controlled expenses. Net interest income was up 6% from last year, benefiting from growth in average loans of 5%.”

“Credit quality measures this quarter were impacted by credit migration in our oil and gas portfolio, reflecting current market conditions.  Net charge-offs remained below our targeted range,” added Mooney.

“We also continue to make progress on our First Niagara Financial Group acquisition, including reaching an important milestone of shareholders from both companies approving the merger,” Mooney continued. “We are excited about the opportunity we have as we prepare to bring these two companies together, and we remain confident in our ability to deliver on our commitments and financial targets.”