Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

12. 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 quantitative Step 1 analysis as of October 1, 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. As such, goodwill was not impaired. 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. In 2016, we conducted a qualitative assessment 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; therefore, goodwill was not impaired.

Based on our quarterly review of impairment indicators during 2017 and 2016, 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 since it is particularly dependent upon economic conditions that impact credit risk and behavior.

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, 2015	$	979	$	81	$	1,060
Acquisition of First Niagara	1,109		277		1,386
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

Additional information regarding the above acquisitions is provided in Note 2 (“Business Combination”) and Note 15 (“Acquisitions, Divestiture, and Discontinued Operations”).

As of December 31, 2017, we expected goodwill in the amount of $627 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, 2017, December 31, 2016, and December 31, 2015.

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



	2017				2016
December 31, in millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible assets subject to amortization:
Core deposit intangibles	$	461	$	192	$	461	$	125
PCCR intangibles	152		126		152		110
Other intangible assets ^(a)	128		7		74		68
Total	$	741	$	325	$	687	$	303


(a)	Carrying amount and accumulated amortization excludes $18 million at December 31, 2016, related to the discontinued operations of Austin and the sale of Victory.

As a result of the acquisition of First Niagara on August 1, 2016, intangible assets were recognized at the acquisition date fair value of $385 million. The core deposit intangible asset recognized as part of the First Niagara merger of $356 million is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. The commercial purchased credit card relationships recognized as part of the First Niagara merger are being amortized over their estimated useful life of approximately six years utilizing an accelerated method. The consumer purchased credit card relationships recognized as part of the First Niagara merger are being amortized over their estimated useful life of approximately nine years utilizing an accelerated method.

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
	2018		2019		2020		2021		2022
Intangible asset amortization expense	$	96	$	79	$	64	$	52	$	42

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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