KEY
$20.97
Keycorp
$.66
3.25%
Earnings Details
2nd Quarter June 2021
Tuesday, July 20, 2021 6:30:00 AM
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Summary

Keycorp Beats

Keycorp (KEY) reported 2nd Quarter June 2021 earnings of $0.72 per share on revenue of $1.8 billion. The consensus earnings estimate was $0.55 per share on revenue of $1.7 billion. The Earnings Whisper number was $0.58 per share. Revenue fell 2.2% compared to the same quarter a year ago.

KeyCorp is a bank holding company. The Company through its subsidiaries, provides retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to its clients.

Results
Reported Earnings
$0.72
Earnings Whisper
$0.58
Consensus Estimate
$0.55
Reported Revenue
$1.84 Bil
Revenue Estimate
$1.73 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

KeyCorp Reports Record Second Quarter 2021 Net Income Of $698 Million, Or $.72 Per Diluted Common Share

CLEVELAND, July 20, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $698 million, or $.72 per diluted common share for the second quarter of 2021. This compared to $591 million, or $.61 per diluted common share, for the first quarter of 2021 and $159 million, or $.16 per diluted common share, for the second quarter of 2020.

Our results this quarter reflect the success of our productive, client-centric team, strong risk management practices, and momentum from recent investments in both our teammates and digital capabilities.

We generated record second quarter revenue, driven by growth in both our commercial and consumer businesses, as we acquired and deepened relationships across our franchise. Our fee-based businesses reported another strong quarter, with noninterest income up 8% year-over-year. Our investment banking business generated record fees for the second quarter. Furthermore, our investment banking revenue in the second quarter represents the second-highest quarter in our history. With broad-based growth across our targeted industry verticals and continued investments in our teammates, our investment banking business has delivered a decade of consistent growth. 

Credit quality remained strong this quarter, with lower nonperforming loans and net charge-offs as a percent of loans of 9 basis points. Our positive credit trends reflect our strong risk culture and disciplined underwriting practices. Our capital position also continues to be one of our strengths, with a Common Equity Tier 1 ratio of 9.9% at the end of the quarter. Earlier this month, our Board of Directors approved a new share repurchase authorization of up to $1.5 billion and will evaluate an increase to the common stock dividend in the fourth quarter 2021.

Chris Gorman, Chairman and CEO

 

Selected Financial Highlights















dollars in millions, except per share data





Change 2Q21 vs.



2Q21

1Q21

2Q20


1Q21

2Q20

Income (loss) from continuing operations attributable to Key common shareholders

$

698


$

591


$

159



18.1

%

339.0

%

Income (loss) from continuing operations attributable to Key common shareholders per
     common share — assuming dilution

.72


.61


.16



18.0


350.0


Return on average tangible common equity from continuing operations (a)

22.34

%

18.25

%

4.96

%


N/A

N/A

Return on average total assets from continuing operations

1.63


1.44


.45



N/A

N/A

Common Equity Tier 1 ratio (b)

9.9


9.9


9.1



N/A

N/A

Book value at period end

$

16.75


$

16.22


$

16.07



3.3

%

4.2

%

Net interest margin (TE) from continuing operations

2.52

%

2.61

%

2.76

%


N/A

N/A









(a)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Return on average tangible common equity from continuing operations." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(b)

June 30, 2021 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS














Revenue














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Net interest income (TE)

$

1,023


$

1,012


$

1,025



1.1

%

(.2)

%

Noninterest income

750


738


692



1.6


8.4


Total revenue

$

1,773


$

1,750


$

1,717



1.3

%

3.3

%








TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the second quarter of 2021, a decrease of $2 million from the second quarter of 2020. The decrease in net interest income reflects a decrease in the net interest margin, largely offset by higher earning asset balances. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity.

Compared to the first quarter of 2021, taxable-equivalent net interest income increased by $11 million, and the net interest margin decreased by 9 basis points. Both net interest income and the net interest margin were impacted by higher earning asset balances, including elevated levels of liquidity, lower interest-bearing deposit costs, and higher loan fees from the Paycheck Protection Program ("PPP") forgiveness, partially offset by lower earning asset yields. Net interest income also benefited from one additional day in the second quarter of 2021.

Noninterest Income














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Trust and investment services income

$

133


$

133


$

123



%

8.1

%

Investment banking and debt placement fees

217


162


156



34.0


39.1


Service charges on deposit accounts

83


73


68



13.7


22.1


Operating lease income and other leasing gains

36


38


60



(5.3)


(40.0)


Corporate services income

55


64


52



(14.1)


5.8


Cards and payments income

113


105


91



7.6


24.2


Corporate-owned life insurance income

30


31


35



(3.2)


(14.3)


Consumer mortgage income

26


47


62



(44.7)


(58.1)


Commercial mortgage servicing fees

44


34


12



29.4


266.7


Other income

13


51


33



(74.5)


(60.6)


Total noninterest income

$

750


$

738


$

692



1.6

%

8.4

%








 

Compared to the second quarter of 2020, noninterest income increased by $58 million, primarily driven by a $61 million increase in investment banking and debt placement fees. Commercial mortgage servicing fees increased $32 million. Additionally, cards and payments income increased $22 million, reflecting broad-based growth across credit, debit, and merchant product categories. Partially offsetting these increases were consumer mortgage income and other income, which decreased $36 million and $20 million, respectively.

Compared to the first quarter of 2021, noninterest income increased by $12 million. The largest driver of the quarter-over-quarter increase was a $55 million increase in investment banking and debt placement fees, reflecting broad-based growth in all areas. Commercial mortgage servicing fees and service charges on deposit accounts both increased $10 million. Partially offsetting these increases were a $38 million decrease in other income, reflecting market-related valuation adjustments, and a $21 million decrease in consumer mortgage income.

Noninterest Expense














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Personnel expense

$

623


$

624


$

572



(.2)

%

8.9

%

Nonpersonnel expense

453


447


441



1.3


2.7


Total noninterest expense

$

1,076


$

1,071


$

1,013



.5

%

6.2

%








Key's noninterest expense was $1.1 billion for the second quarter of 2021, an increase of $63 million from the year-ago period. The increase is primarily related to higher personnel costs of $51 million, reflecting higher incentive and stock-based compensation, attributed to an increase in revenue and stock performance and an increase in employee benefits. Additionally, other drivers for the year-over-year increase include higher computer processing expense and marketing expense.

Compared to the first quarter of 2021, noninterest expense increased $5 million. Incentive and stock-based compensation increased $14 million, reflecting Key's strong investment banking performance, offset by a $15 million decrease in employee benefits.

BALANCE SHEET HIGHLIGHTS














Average Loans














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Commercial and industrial (a)

$

51,808


$

52,581


$

60,480



(1.5)

%

(14.3)

%

Other commercial loans

19,034


18,848


19,850



1.0


(4.1)


Total consumer loans

29,972


29,299


27,611



2.3


8.6


Total loans

$

100,814


$

100,728


$

107,941



.1

%

(6.6)

%








(a)

Commercial and industrial average loan balances include $132 million, $126 million, and $135 million of assets from commercial credit cards at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

Average loans were $100.8 billion for the second quarter of 2021, a decrease of $7.1 billion compared to the second quarter of 2020. Commercial loans decreased $9.5 billion, reflecting decreased utilization versus the year-ago period, partly offset by growth in PPP loans. Consumer loans increased $2.4 billion, reflecting strength from Laurel Road and Key's consumer mortgage business, partly offset by Key's exit from the indirect auto lending business.

Compared to the first quarter of 2021, average loans increased by $86 million. Commercial loans declined due to lower commercial utilization rates, partly offset by growth in PPP loans. Consumer loans continue to reflect strength from Key's consumer mortgage business, partly offset by Key's exit from the indirect auto lending business.

Average Deposits














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Non-time deposits

$

139,480


$

132,267


$

118,694



5.5

%

17.5

%

Certificates of deposit ($100,000 or more)

2,212


2,571


4,950



(14.0)


(55.3)


Other time deposits

2,630


2,902


4,333



(9.4)


(39.3)


Total deposits

$

144,322


$

137,740


$

127,977



4.8

%

12.8

%








Cost of total deposits

.05

%

.06

%

.30

%


N/A

N/A








N/A = Not Applicable

Average deposits totaled $144.3 billion for the second quarter of 2021, an increase of $16.3 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits.

Compared to the first quarter of 2021, average deposits increased by $6.6 billion, primarily driven by broad-based commercial growth and higher consumer balances.

ASSET QUALITY














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Net loan charge-offs

$

22


$

114


$

96



(80.7)

%

(77.1)

%

Net loan charge-offs to average total loans

.09

%

.46

%

.36

%


N/A

N/A

Nonperforming loans at period end

$

694


$

728


$

760



(4.7)


(8.7)


Nonperforming assets at period end

738


790


951



(6.6)


(22.4)


Allowance for loan and lease losses

1,220


1,438


1,708



(15.2)


(28.6)


Allowance for credit losses

1,372


1,616


1,906



(15.1)


(28.0)


Allowance for loan and lease losses to nonperforming loans

175.8

%

197.5

%

224.7

%


N/A

N/A

Allowance for credit losses to nonperforming loans

197.7


222.0


250.8



N/A

N/A

Provision for credit losses

$

(222)


$

(93)


$

482



138.7

%

(146.1)

%








N/A = Not Applicable

Key's provision for credit losses was a net benefit of $222 million, including a $244 million reserve release for the second quarter of 2021, compared to an expense of $482 million in the second quarter of 2020 and a net benefit of $93 million in the first quarter of 2021. The reserve release was largely driven by a continued improvement in the economic outlook.

Net loan charge-offs for the second quarter of 2021 totaled $22 million, or .09% of average total loans. These results compare to $96 million, or .36%, for the second quarter of 2020 and $114 million, or .46%, for the first quarter of 2021. Key's allowance for credit losses was $1.4 billion, or 1.36% of total period-end loans at June 30, 2021, compared to 1.80% at June 30, 2020, and 1.60% at March 31, 2021.

At June 30, 2021, Key's nonperforming loans totaled $694 million, which represented .69% of period-end portfolio loans. These results compare to .72% at June 30, 2020, and .72% at March 31, 2021. Nonperforming assets at June 30, 2021, totaled $738 million, and represented .73% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at June 30, 2020, and .78% at March 31, 2021.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2021.

Capital Ratios









6/30/2021

3/31/2021

6/30/2020

Common Equity Tier 1 (a)

9.9

%

9.9

%

9.1

%

Tier 1 risk-based capital (a)

11.3


11.3


10.5


Total risk based capital (a)

13.2


13.4


12.8


Tangible common equity to tangible assets (b)

7.4


7.5


7.6


Leverage (a)

8.7


8.9


8.8






(a)

June 30, 2021 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

Key's capital position remained strong in the second quarter of 2021. As shown in the preceding table, at June 30, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.9% and 11.3%, respectively. Key's tangible common equity ratio was 7.4% at June 30, 2021.

Key has elected the CECL phase-in option provided by regulatory guidance which delays for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by 20 basis points.

Summary of Changes in Common Shares Outstanding













in thousands





Change 2Q21 vs.



2Q21

1Q21

2Q20


1Q21

2Q20

Shares outstanding at beginning of period

972,587


975,773


975,319



(.3)

%

(.3)

%

Open market repurchases and return of shares under employee compensation
     plans

(13,304)


(9,277)


(19)



43.4


N/M


Shares issued under employee compensation plans (net of cancellations)

993


6,091


647



(83.7)


53.5



Shares outstanding at end of period

960,276


972,587


975,947



(1.3)

%

(1.6)

%









N/M = Not Meaningful

During the second quarter of 2021, Key declared a dividend of $.185 per common share and completed $300 million of common share repurchases. Capital distributions for the quarter were consistent with the regulatory capital distribution guidelines. In July of 2021, Key's Board of Directors approved a new share repurchase authorization program of up to $1.5 billion, applicable for the third quarter of 2021 through the third quarter of 2022, that supersedes the remaining capacity under the previous authorization. Additionally, Key will evaluate an increase to the per share common dividend in the fourth quarter of 2021, subject to Board approval.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.

Major Business Segments















dollars in millions





Change 2Q21 vs.



2Q21

1Q21

2Q20


1Q21

2Q20

Revenue from continuing operations (TE)







Consumer Bank

$

854


$

867


$

835



(1.5)

%

2.3

%

Commercial Bank

874


859


879



1.7


(.6)


Other (a)

45


24


3



87.5


1,400.0



Total

$

1,773


$

1,750


$

1,717



1.3

%

3.3

%









Income (loss) from continuing operations attributable to Key







Consumer Bank

$

259


$

220


$

98



17.7

%

164.3

%

Commercial Bank

434


384


106



13.0


309.4


Other (a)

31


14


(19)



121.4


N/M


Total

$

724


$

618


$

185



17.2

%

291.4

%









(a)

Other includes other segments that consists of corporate treasury, 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 includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

 TE = Taxable Equivalent, N/M = Not Meaningful

 

Consumer Bank





















dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Summary of operations







Net interest income (TE)

$

600


$

610


$

589



(1.6)

%

1.9

%

Noninterest income

254


257


246



(1.2)


3.3


Total revenue (TE)

854


867


835



(1.5)


2.3


Provision for credit losses

(70)


(23)


155



(204.3)


(145.2)


Noninterest expense

584


601


552



(2.8)


5.8


Income (loss) before income taxes (TE)

340


289


128



17.6


165.6


Allocated income taxes (benefit) and TE adjustments

81


69


30



17.4


170.0


Net income (loss) attributable to Key

$

259


$

220


$

98



17.7

%

164.3

%








Average balances







Loans and leases

$

40,598


$

39,249


$

37,300



3.4

%

8.8

%

Total assets

43,991


42,476


42,194



3.6


4.3


Deposits

88,412


85,033


79,235



4.0


11.6









Assets under management at period end

$

47,737


$

45,218


$

39,722



5.6

%

20.2

%








TE = Taxable Equivalent

 

Additional Consumer Bank Data














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Noninterest income







Trust and investment services income

$

104


$

101


$

87



3.0

%

19.5

%

Service charges on deposit accounts

47


38


36



23.7


30.6


Cards and payments income

62


54


47



14.8


31.9


Consumer mortgage income

26


47


61



(44.7)


(57.4)


Other noninterest income

15


17


15



(11.8)


.0


Total noninterest income

$

254


$

257


$

246



(1.2)

%

3.3

%








Average deposit balances







NOW and money market deposit accounts

$

56,038


$

54,685


$

49,143



2.5

%

14.0

%

Savings deposits

6,523


5,878


4,816



11.0


35.4


Certificates of deposit ($100,000 or more)

2,083


2,424


4,520



(14.1)


(53.9)


Other time deposits

2,615


2,888


4,296



(9.5)


(39.1)


Noninterest-bearing deposits

21,153


19,159


16,460



10.4


28.5


Total deposits

$

88,412


$

85,033


$

79,235



4.0


11.6

%








Home equity loans







Average balance

$

9,081


$

9,234


$

9,893





Combined weighted-average loan-to-value ratio (at date of origination)

68

%

69

%

70

%




Percent first lien positions

70


68


63












Other data







Branches

1,014


1,068


1,077





Automated teller machines

1,329


1,368


1,394












Consumer Bank Summary of Operations (2Q21 vs. 2Q20)

  • Net income attributable to Key of $259 million for the second quarter of 2021, compared to $98 million for the year-ago quarter
  • Taxable-equivalent net interest income increased by $11 million, or 1.9%, compared to the second quarter of 2020, driven by strong consumer mortgage balance sheet growth and fees related to PPP loans, partially offset by the lower interest rate environment
  • Average loans and leases increased $3.3 billion, or 8.8%, driven by growth in consumer mortgage and benefit from the PPP
  • Average deposits increased $9.2 billion, or 11.6%, from the second quarter of 2020, driven by retention of consumer stimulus payments and relationship growth
  • Provision for credit losses decreased $225 million, compared to the second quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions and continued strength in client credit quality
  • Noninterest income increased $8 million, or 3.3%, from the year ago quarter, driven by higher trust and investment services income and client spend activity, partially offset by lower consumer mortgage income, due to lower gain on sale volume
  • Noninterest expense increased $32 million, or 5.8%, from the year ago quarter, driven by higher variable compensation and support expenses related to higher loan volumes

 

Commercial Bank





















dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Summary of operations







Net interest income (TE)

$

419


$

413


$

458



1.5

%

(8.5)

%

Noninterest income

455


446


421



2.0


8.1


Total revenue (TE)

874


859


879



1.7


(.6)


Provision for credit losses

(131)


(67)


326



95.5


(140.2)


Noninterest expense

451


443


441



1.8


2.3


Income (loss) before income taxes (TE)

554


483


112



14.7


394.6


Allocated income taxes and TE adjustments

120


99


6



21.2


N/M

Net income (loss) attributable to Key

$

434


$

384


$

106



13.0

%

309.4

%








Average balances







Loans and leases

$

59,953


$

61,221


$

70,336



(2.1)

%

(14.8)

%

Loans held for sale

1,341


1,237


2,012



8.4


(33.3)


Total assets

69,101


70,448


79,267



(1.9)


(12.8)


Deposits

54,814


51,894


47,954



5.6

%

14.3

%








TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Commercial Bank Data














dollars in millions





Change 2Q21 vs.


2Q21

1Q21

2Q20


1Q21

2Q20

Noninterest income







Trust and investment services income

$

27


$

32


$

37



(15.6)

%

(27.0)


Investment banking and debt placement fees

215


162


156



32.7


37.8

%

Operating lease income and other leasing gains

35


38


59



(7.9)


(40.7)









Corporate services income

47


56


45



(16.1)


4.4


Service charges on deposit accounts

34


33


30



3.0


13.3


Cards and payments income

49


52


45



(5.8)


8.9


Payments and services income

130


141


120



(7.8)


8.3









Commercial mortgage servicing fees

44


34


12



29.4


266.7


Other noninterest income

4


39


37



(89.7)


(89.2)


Total noninterest income

$

455


$

446


$

421



2.0

%

8.1

%








N/M = Not Meaningful

Commercial Bank Summary of Operations (2Q21 vs. 2Q20)

  • Net income attributable to Key of $434 million for the second quarter of 2021, compared to $106 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $39 million, compared to the second quarter of 2020, as lower average loan balances offset fees related to PPP loans
  • Average loan and lease balances decreased $10.4 billion, compared to the second quarter of 2020, driven by lower commercial and industrial line draws
  • Average deposit balances increased $6.9 billion, or 14.3%, compared to the second quarter of 2020, driven by growth in targeted relationships and the impact of government programs
  • Provision for credit losses decreased $457 million, compared to the second quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions
  • Noninterest income increased $34 million, from the year-ago quarter, driven by elevated investment banking client activity and commercial mortgage servicing fees, partially offset by favorable market-related adjustments to customer derivatives in the year-ago period
  • Noninterest expense increased by $10 million, or 2.3%, from the second quarter of 2020, driven by higher personnel-related costs

*******************************************

KeyCorp's roots trace back nearly 200 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $181.1 billion at June 30, 2021.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,300 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.




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www.key.com/ir

www.key.com/newsroom

 

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts.  Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2020, as well as in KeyCorp's subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the "SEC") and are or will be available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov). These factors may include, among others, deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, and the impact of the COVID-19 global pandemic on us, our clients, our third-party service providers, and the markets. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 10:00 a.m. ET, on July 20, 2021. A replay of the call will be available through July 29, 2021.

*****

KeyCorp

Second Quarter 2021

Financial Supplement


Page


12

Financial Highlights

14

GAAP to Non-GAAP Reconciliation

16

Consolidated Balance Sheets

17

Consolidated Statements of Income

18

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

20

Noninterest Expense

20

Personnel Expense

21

Loan Composition

21

Loans Held for Sale Composition

21

Summary of Changes in Loans Held for Sale

22

Summary of Loan and Lease Loss Experience From Continuing Operations

23

Asset Quality Statistics From Continuing Operations

23

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

23

Summary of Changes in Nonperforming Loans From Continuing Operations

24

Line of Business Results

 

Financial Highlights

(dollars in millions, except per share amounts)




Three months ended




6/30/2021

3/31/2021

6/30/2020

Summary of operations





Net interest income (TE)

$

1,023


$

1,012


$

1,025



Noninterest income

750


738


692




Total revenue (TE)

1,773


1,750


1,717



Provision for credit losses

(222)


(93)


482



Noninterest expense

1,076


1,071


1,013



Income (loss) from continuing operations attributable to Key

724


618


185



Income (loss) from discontinued operations, net of taxes

5


4


2



Net income (loss) attributable to Key

729


622


187









Income (loss) from continuing operations attributable to Key common shareholders

698


591


159



Income (loss) from discontinued operations, net of taxes

5


4


2



Net income (loss) attributable to Key common shareholders

703


595


161








Per common share





Income (loss) from continuing operations attributable to Key common shareholders

$

.73


$

.61


$

.16



Income (loss) from discontinued operations, net of taxes





Net income (loss) attributable to Key common shareholders (a)

.73


.62


.17









Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

.72


.61


.16



Income (loss) from discontinued operations, net of taxes — assuming dilution





Net income (loss) attributable to Key common shareholders — assuming dilution (a)

.73


.61


.17









Cash dividends declared

.185


.185


.185



Book value at period end

16.75


16.22


16.07



Tangible book value at period end

13.81


13.30


13.12



Market price at period end

20.65


19.98


12.18








Performance ratios





From continuing operations:





Return on average total assets

1.63

%

1.44

%

.45

%


Return on average common equity

18.21


14.98


4.05



Return on average tangible common equity (b)

22.34


18.25


4.96



Net interest margin (TE)

2.52


2.61


2.76



Cash efficiency ratio (b)

59.9


60.3


57.9









From consolidated operations:





Return on average total assets

1.64

%

1.45

%

.46

%


Return on average common equity

18.34


15.08


4.10



Return on average tangible common equity (b)

22.50


18.37


5.02



Net interest margin (TE)

2.55


2.60


2.76



Loan to deposit (c)

70.4


73.1


80.4








Capital ratios at period end





Key shareholders' equity to assets

9.9

%

10.0

%

10.2

%


Key common shareholders' equity to assets

8.9


9.0


9.2



Tangible common equity to tangible assets (b)

7.4


7.5


7.6



Common Equity Tier 1 (d)

9.9


9.9


9.1



Tier 1 risk-based capital (d)

11.3


11.3


10.5



Total risk-based capital (d)

13.2


13.4


12.8



Leverage (d)

8.7


8.9


8.8








Asset quality — from continuing operations





Net loan charge-offs

$

22


$

114


$

96



Net loan charge-offs to average loans

.09

%

.46

%

.36

%


Allowance for loan and lease losses

$

1,220


$

1,438


$

1,708



Allowance for credit losses

1,372


1,616


1,906



Allowance for loan and lease losses to period-end loans

1.21

%

1.42

%

1.61

%


Allowance for credit losses to period-end loans

1.36


1.60


1.80



Allowance for loan and lease losses to nonperforming loans

175.8


197.5


224.7



Allowance for credit losses to nonperforming loans

197.7


222.0


250.8



Nonperforming loans at period-end

$

694


$

728


$

760



Nonperforming assets at period-end

738


790


951



Nonperforming loans to period-end portfolio loans

.69

%

.72

%

.72

%


Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets

.73


.78


.89








Trust assets





Assets under management

$

47,737


$

45,218


$

39,722








Other data





Average full-time equivalent employees

17,157


17,086


16,646



Branches

1,014


1,068


1,077



Taxable-equivalent adjustment

$

6


$

7


$

7


 





Financial Highlights (continued)

(dollars in millions, except per share amounts)



Six months ended



6/30/2021

6/30/2020

Summary of operations




Net interest income (TE)

$

2,035


$

2,014



Noninterest income

1,488


1,169



Total revenue (TE)

3,523


3,183



Provision for credit losses

(315)


841



Noninterest expense

2,147


1,944



Income (loss) from continuing operations attributable to Key

1,342


330



Income (loss) from discontinued operations, net of taxes

9


3



Net income (loss) attributable to Key

1,351


333







Income (loss) from continuing operations attributable to Key common shareholders

1,289


277



Income (loss) from discontinued operations, net of taxes

9


3



Net income (loss) attributable to Key common shareholders

1,298


280






Per common share




Income (loss) from continuing operations attributable to Key common shareholders

$

1.34


$

.29



Income (loss) from discontinued operations, net of taxes

.01




Net income (loss) attributable to Key common shareholders (a)

1.35


.29







Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution

1.33


.28



Income (loss) from discontinued operations, net of taxes — assuming dilution

.01




Net income (loss) attributable to Key common shareholders — assuming dilution (a)

1.34


.29







Cash dividends paid

.37


.37






Performance ratios




From continuing operations:




Return on average total assets

1.55

%

.43

%


Return on average common equity

16.64


3.58



Return on average tangible common equity (b)

20.34


4.40



Net interest margin (TE)

2.56


2.88



Cash efficiency ratio (b)

60.1


60.0







From consolidated operations:




Return on average total assets

1.55

%

.43

%


Return on average common equity

16.76


3.62



Return on average tangible common equity (b)

20.48


4.45



Net interest margin (TE)

2.57


2.87






Asset quality — from continuing operations




Net loan charge-offs

$

136


$

180



Net loan charge-offs to average total loans

.27

%

.35

%





Other data




Average full-time equivalent employees

17,122


16,587






Taxable-equivalent adjustment

13


15


(a)

Earnings per share may not foot due to rounding.

(b)

The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(c)

Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.

(d)

June 30, 2021, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

 

GAAP to Non-GAAP Reconciliations

(dollars in millions)

The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "pre-provision net revenue," and "cash efficiency ratio."


The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock.


The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.


The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.


Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

 


Three months ended


Six months ended


6/30/2021

3/31/2021

6/30/2020


6/30/2021

6/30/2020

Tangible common equity to tangible assets at period-end







Key shareholders' equity (GAAP)

$

17,941


$

17,634


$

17,542





Less: Intangible assets (a)

2,828


2,842


2,877





Preferred Stock (b)

1,856


1,856


1,856





Tangible common equity (non-GAAP)

$

13,257


$

12,936


$

12,809





Total assets (GAAP)

$

181,115


$

176,203


$

171,192





Less: Intangible assets (a)

2,828


2,842


2,877





Tangible assets (non-GAAP)

$

178,287


$

173,361


$

168,315





Tangible common equity to tangible assets ratio (non-GAAP)

7.44

%

7.46

%

7.61

%




Pre-provision net revenue







Net interest income (GAAP)

$

1,017


$

1,005


$

1,018



$

2,022


$

1,999


Plus: Taxable-equivalent adjustment

6


7


7



13


15


Noninterest income

750


738


692



1,488


1,169


Less: Noninterest expense

1,076


1,071


1,013



2,147


1,944


Pre-provision net revenue from continuing operations (non-GAAP)

$

697


$

679


$

704



$

1,376


$

1,239


Average tangible common equity







Average Key shareholders' equity (GAAP)

$

17,271


$

17,769


$

17,688



$

17,519


$

17,452


Less: Intangible assets (average) (c)

2,840


2,844


2,886



2,840


2,894


Preferred stock (average)

1,900


1,900


1,900



1,900


1,900


Average tangible common equity (non-GAAP)

$

12,531


$

13,025


$

12,902



$

12,779


$

12,658


Return on average tangible common equity from continuing operations







Net income (loss) from continuing operations attributable to Key common
shareholders (GAAP)

$

698


$

591


$

159



$

1,289


$

277


Average tangible common equity (non-GAAP)

12,531


13,025


12,902



12,779


12,658









Return on average tangible common equity from continuing operations (non-
GAAP)

22.34

%

18.25

%

4.96

%


20.34

%

4.40

%

Return on average tangible common equity consolidated







Net income (loss) attributable to Key common shareholders (GAAP)

$

703


$

595


$

161



$

1,298


$

280


Average tangible common equity (non-GAAP)

12,531


13,025


12,902



12,779


12,658









Return on average tangible common equity consolidated (non-GAAP)

22.50

%

18.37

%

5.02

%


20.48

%

4.45

%

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)


Three months ended


Six months ended


6/30/2021

3/31/2021

6/30/2020


6/30/2021

6/30/2020

Cash efficiency ratio







Noninterest expense (GAAP)

$

1,076


$

1,071


$

1,013



$

2,147


$

1,944


Less: Intangible asset amortization

14


15


18



29


35


Adjusted noninterest expense (non-GAAP)

$

1,062


$

1,056


$

995



$

2,118


$

1,909









Net interest income (GAAP)

$

1,017


$

1,005


$

1,018



$

2,022


$

1,999


Plus: Taxable-equivalent adjustment

6


7


7



13


15


Noninterest income

750


738


692



1,488


1,169


Total taxable-equivalent revenue (non-GAAP)

$

1,773


$

1,750


$

1,717



$

3,523


$

3,183









Cash efficiency ratio (non-GAAP)

59.9

%

60.3

%

57.9

%


60.1

%

60.0

%








(a)

For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, intangible assets exclude $4 million, $4 million, and $5 million, respectively, of period-end purchased credit card receivables. 

(b)

Net of capital surplus.

(c)

For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, average intangible assets exclude $4 million, $4 million, and $6 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2021, and June 30, 2020, average intangible assets exclude $4 million and $6 million, respectively, of average purchased credit card receivables

 GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(dollars in millions)










6/30/2021

3/31/2021

6/30/2020

Assets





Loans

$

100,730


$

100,926


$

106,159



Loans held for sale

1,537


2,296


2,007



Securities available for sale

34,638


33,923


23,600



Held-to-maturity securities

6,175


6,857


9,075



Trading account assets

851


811


645



Short-term investments

20,460


15,376


14,036



Other investments

635


621


655




Total earning assets

165,026


160,810


156,177



Allowance for loan and lease losses

(1,220)


(1,438)


(1,708)



Cash and due from banks

792


938


1,059



Premises and equipment

785


737


776



Goodwill

2,673


2,673


2,664



Other intangible assets

159


173


218



Corporate-owned life insurance

4,304


4,296


4,251



Accrued income and other assets

7,966


7,347


6,976



Discontinued assets

630


667


779




Total assets

$

181,115


176,203


171,192








Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$

85,242


$

82,777


$

78,853




Savings deposits

6,993


6,655


5,371




Certificates of deposit ($100,000 or more)

2,064


2,437


4,476




Other time deposits

2,493


2,782


4,011




Total interest-bearing deposits

96,792


94,651


92,711




Noninterest-bearing deposits

49,280


47,532


42,802




Total deposits

146,072


142,183


135,513



Federal funds purchased and securities sold under repurchase agreements 

211


281


267



Bank notes and other short-term borrowings

723


744


1,716



Accrued expense and other liabilities

2,957


2,862


2,420



Long-term debt

13,211


12,499


13,734




Total liabilities

163,174


158,569


153,650








Equity





Preferred stock

1,900


1,900


1,900



Common shares

1,257


1,257


1,257



Capital surplus

6,232


6,213


6,240



Retained earnings

13,689


13,166


12,154



Treasury stock, at cost

(5,287)


(5,005)


(4,945)



Accumulated other comprehensive income (loss)

150


103


936




Key shareholders' equity

17,941


17,634


17,542



Noncontrolling interests






Total equity

17,941


17,634


17,542


Total liabilities and equity

$

181,115


$

176,203


$

171,192








Common shares outstanding (000)

960,276


972,587


975,947


 

Consolidated Statements of Income

(dollars in millions, except per share amounts)




Three months ended


Six months ended




6/30/2021

3/31/2021

6/30/2020


6/30/2021

6/30/2020

Interest income








Loans

$

888


$

889


$

980



$

1,777


$

2,006



Loans held for sale

11


11


21



22


40



Securities available for sale

133


130


121



263


250



Held-to-maturity securities

45


45


56



90


118



Trading account assets

5


5


5



10


13



Short-term investments

6


5


7



11


13



Other investments

2


2




4


1




Total interest income

1,090


1,087


1,190



2,177


2,441


Interest expense








Deposits

16


21


96



37


265



Federal funds purchased and securities sold under repurchase agreements






6



Bank notes and other short-term borrowings

3


1


5



4


10



Long-term debt

54


60


71



114


161




Total interest expense

73


82


172



155


442


Net interest income

1,017


1,005


1,018



2,022


1,999


Provision for credit losses

(222)


(93)


482



(315)


841


Net interest income after provision for credit losses

1,239


1,098


536



2,337


1,158


Noninterest income








Trust and investment services income

133


133


123



266


256



Investment banking and debt placement fees

217


162


156



379


272



Service charges on deposit accounts

83


73


68



156


152



Operating lease income and other leasing gains

36


38


60



74


90



Corporate services income

55


64


52



119


114



Cards and payments income

113


105


91



218


157



Corporate-owned life insurance income

30


31


35



61


71



Consumer mortgage income

26


47


62



73


82



Commercial mortgage servicing fees

44


34


12



78


30



Other income

13


51


33



64


(55)




Total noninterest income

750


738


692



1,488


1,169


Noninterest expense








Personnel

623


624


572



1,247


1,087



Net occupancy

75


76


71



151


147



Computer processing

71


73


56



144


111



Business services and professional fees

51


50


49



101


93



Equipment

25


25


25



50


49



Operating lease expense

31


34


34



65


70



Marketing

31


26


24



57


45



Intangible asset amortization

14


15


18



29


35



Other expense

155


148


164



303


307




Total noninterest expense

1,076


1,071


1,013



2,147


1,944


Income (loss) from continuing operations before income taxes

913


765


215



1,678


383



Income taxes

189


147


30



336


53


Income (loss) from continuing operations

724


618


185



1,342


330



Income (loss) from discontinued operations, net of taxes

5


4


2



9


3


Net income (loss)

729


622


187



1,351


333



Less:  Net income (loss) attributable to noncontrolling interests







Net income (loss) attributable to Key

$

729


$

622


$

187



$

1,351


$

333











Income (loss) from continuing operations attributable to Key common shareholders

$

698


$

591


$

159



$

1,289


$

277


Net income (loss) attributable to Key common shareholders

703


595


161



1,298


280


Per common share







Income (loss) from continuing operations attributable to Key common shareholders

$

.73


$

.61


$

.16



$

1.34


$

.29


Income (loss) from discontinued operations, net of taxes





.01



Net income (loss) attributable to Key common shareholders (a)

.73


.62


.17



1.35


.29


Per common share — assuming dilution







Income (loss) from continuing operations attributable to Key common shareholders

$

.72


$

.61


$

.16



$

1.33


$

.28


Income (loss) from discontinued operations, net of taxes





.01



Net income (loss) attributable to Key common shareholders (a)

.73


.61


.17



1.34


.29











Cash dividends declared per common share

$

.185


$

.185


$

.185



$

.370


$

.370











Weighted-average common shares outstanding (000)

961,292


964,878


967,147



957,423


967,380



Effect of common share options and other stock awards

9,514


9,419


4,994



9,740


6,892


Weighted-average common shares and potential common shares outstanding (000) (b)

970,806


974,297


972,141



967,163


974,272


(a)

Earnings per share may not foot due to rounding.

(b)

Assumes conversion of common share options and other stock awards, as applicable.

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)



Second Quarter 2021


First Quarter 2021


Second Quarter 2020



Average


Yield/


Average


Yield/


Average


Yield/



Balance

Interest (a)

Rate (a)


Balance

Interest (a)

Rate (a)


Balance

Interest (a)

Rate (a)

Assets













Loans: (b), (c)













Commercial and industrial (d)

$

51,808


$

450


3.52



$

52,581


$

453


3.48



$

60,480


$

518


3.44



Real estate — commercial mortgage

12,825


117


3.67



12,658


114


3.67



13,510


128


3.80



Real estate — construction

$

2,149


$

20


3.68



$

2,048


$

19


3.75



$

1,756


$

17


3.97



Commercial lease financing

4,060


30


2.98



4,142


31


2.99



4,584


33


2.96



Total commercial loans

$

70,842


$

617


3.53



$

71,429


$

617


3.50



$

80,330


$

696


3.49



Real estate — residential mortgage

11,055


81


2.92



9,699


76


3.12



7,783


69


3.57



Home equity loans

$

9,089


$

85


3.76



$

9,282


$

85


3.73



$

9,949


$

97


3.89



Consumer direct loans

4,910


57


4.69



4,817


56


4.72



4,152


55


5.24



Credit cards

$

908


$

22


9.79



$

933


$

24


10.45



$

983


$

25


10.22



Consumer indirect loans

4,010


32


3.23



4,568


37


3.30



4,744


45


3.82



Total consumer loans

$

29,972


$

277


3.74



$

29,299


$

278


3.84



$

27,611


$

291


4.22



Total loans

100,814


894


3.59



100,728


895


3.60



107,941


987


3.67



Loans held for sale

$

1,616


$

11


2.60



$

1,531


$

11


2.89



$

2,463


$

21


3.50



Securities available for sale (b), (e)

33,623


133


3.13



30,039


130


1.76



20,749


121


2.43



Held-to-maturity securities (b)

$

6,452


$

45


2.75



$

7,188


$

46


2.53



$

9,331


$

56


2.43



Trading account assets

837


5


2.56



848


5


2.15



760


5


2.43



Short-term investments

$

18,817


$

6


0.13



$

16,510


$

5


0.13



$

7,892


$

7


0.31



Other investments (e)

622


2


1.02



614


2


1.40



672



0.29



Total earning assets

$

162,781


$

1,096


2.72



$

157,458


$

1,094


2.81



$

149,808


$

1,197


3.22



Allowance for loan and lease losses

(1,442)





(1,623)





(1,413)





Accrued income and other assets

$

16,531





$

16,398





$

15,704





Discontinued assets

650





686





793





Total assets

$

178,520





$

172,919





$

164,892




Liabilities













NOW and money market deposit accounts

$

83,981


$

9


.05



$

81,439


$

10


.05



$

75,297


$

56


.30



Savings deposits

6,859


1


.03



6,203


1


.03



5,130



.04



Certificates of deposit ($100,000 or more)

$

2,212


$

4


.72



$

2,571


$

6


.96



$

4,950


$

24


1.93



Other time deposits

2,630


2


.38



2,902


4


.57



4,333


16


1.52



Total interest-bearing deposits

$

95,682


$

16


.07



$

93,115


$

21


.09



$

89,710


$

96


.43



Federal funds purchased and securities sold under repurchase agreements

251



.02



243



.04



242



.03



Bank notes and other short-term borrowings

$

744


$

3


1.19



$

878


$

1


.64



$

2,869


$

5


.57



Long-term debt (f), (g)

11,978


54


1.83



12,831


60


1.93



12,954


71


2.30



Total interest-bearing liabilities

$

108,655


$

73


.27



$

107,067


$

82


.31



$

105,775


$

172


.66



Noninterest-bearing deposits

48,640





44,625





38,267





Accrued expense and other liabilities

$

3,304





$

2,772





$

2,369





Discontinued liabilities (g)

650





686





793





Total liabilities

$

161,249





$

155,150





$

147,204




Equity













Key shareholders' equity

$

17,271





$

17,769





$

17,688





Noncontrolling interests













Total equity

$

17,271





$

17,769





$

17,688





Total liabilities and equity

$

178,520





$

172,919





$

164,892




Interest rate spread (TE)



2.45

%




2.50

%




2.56

%

Net interest income (TE) and net interest margin (TE)


1,023


2.52

%



1,012


2.61

%



1,025


2.76

%

TE adjustment (b)


6




7




7



Net interest income, GAAP basis


$

1,017





$

1,005





$

1,018



(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020.   

(c)

For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)

Commercial and industrial average balances include $132 million, $126 million, and $135 million of assets from commercial credit cards for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

(e)

Yield is calculated on the basis of amortized cost.

(f)

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates  From Continuing Operations

(dollars in millions)



Six months ended June 30, 2021



Six months ended June 30, 2020



Average


Yield/



Average


Yield/



Balance

Interest (a)

Rate (a)



Balance

Interest (a)

Rate (a)

Assets










Loans: (b), (c)










Commercial and industrial (d)

$

52,194


$

902


3.48

%



$

54,973


$

1,026


3.75

%


Real estate — commercial mortgage

12,742


232

3.67




13,529


283

4.20



Real estate — construction

2,099


39


3.71




1,711


37


4.35



Commercial lease financing

4,101


61


2.99




4,575


72


3.17



Total commercial loans

71,136


1,234


3.49




74,788


1,418


3.81



Real estate — residential mortgage

10,380


154


2.97




7,500


137


3.66



Home equity loans

9,189


173


3.79




10,052


210


4.19



Consumer direct loans

4,864


113


4.70




3,930


109


5.56



Credit cards

920


46


10.12




1,032


56


10.89



Consumer indirect loans

4,288


69


3.25




4,756


91


3.84



Total consumer loans

29,641


555


3.77




27,270


603


4.44



  Total loans

100,777


1,789


3.58




102,058


2,021


3.98



Loans held for sale

1,574


22


2.74




2,174


40


3.71



Securities available for sale (b), (e)

31,841


263


1.66




20,960


250


2.46



Held-to-maturity securities (b)

6,818


90


2.63




9,575


118


2.47



Trading account assets

842


10


2.35




913


13


2.73



Short-term investments

17,670


11


0.13




4,828


13


0.52



Other investments (e)

618


4


1.21




643


1


0.34



Total earning assets

160,140


2,189


2.75




141,151


2,456


3.51



Allowance for loan and lease losses

(1532)






(1255)





Accrued income and other assets

16,463






15,268





Discontinued assets

668






815





Total assets

$

175,739






$

155,979




Liabilities










NOW and money market deposit accounts

$

82,717


20


.05




$

71,009


168


.47



Savings deposits

6,533


1


.03




4,893


1


.04



Certificates of deposit ($100,000 or more)

2,390


10


.85




5,630


58


2.08



Other time deposits

2,766


6


.48




4,617


38


1.67



Total interest-bearing deposits

94,406


37


.08




86,149


265


.62



Federal funds purchased and securities sold under repurchase agreements

247



.03




1,122


6


1.05



Bank notes and other short-term borrowings

811


4


.89




2,135


10


.90



Long-term debt (f), (g)

12,402


114


1.87




12,698


161


2.62



Total interest-bearing liabilities

107,866


155


.29




102,104


442


.87



Noninterest-bearing deposits

46,638






33,004





Accrued expense and other liabilities

3,048






2,604





Discontinued liabilities (g)

668






815





Total liabilities

158,220






138,527




Equity










Key shareholders' equity

17,519






17,452





Noncontrolling interests










Total equity

17,519






17,452





Total liabilities and equity

$

175,739






$

155,979




Interest rate spread (TE)



2.46

%





2.64

%

Net interest income (TE) and net interest margin (TE)


2,035

2.56

%




2,014


2.88

%

TE adjustment (b)


13





15




Net interest income, GAAP basis


$

2,022






$

1,999













(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the six months ended June 30, 2021, and June 30, 2020, respectively.  

(c)

For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)

Commercial and industrial average balances include $129 million and $140 million of assets from commercial credit cards for the six months ended June 30, 2021, and June 30, 2020, respectively.

(e)

Yield is calculated on the basis of amortized cost.

(f)

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.

 TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Noninterest Expense

(dollars in millions)









Three months ended


Six months ended


6/30/2021

3/31/2021

6/30/2020


6/30/2021

6/30/2020

Personnel (a)

$

623


$

624


$

572



$

1,247


$

1,087


Net occupancy

75


76


71



151


147


Computer processing

71


73


56



144


111


Business services and professional fees

51


50


49



101


93


Equipment

25


25


25



50


49


Operating lease expense

31


34


34



65


70


Marketing

31


26


24



57


45


Intangible asset amortization

14


15


18



29


35


Other expense

155


148


164



303


307


Total noninterest expense

$

1,076


$

1,071


$

1,013



$

2,147


$

1,944


Average full-time equivalent employees (b)

17,157


17,086


16,646



17,122


16,587


(a)

Additional detail provided in Personnel Expense table below.

(b)

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

 

Personnel Expense

(in millions)









Three months ended


Six months ended


6/30/2021

3/31/2021

6/30/2020


6/30/2021

6/30/2020

Salaries and contract labor

$

321


$

320


$

332



$

641


$

648


Incentive and stock-based compensation

210


196


162



406


264


Employee benefits

92


107


76



199


168


Severance


1


2



1


7


Total personnel expense

$

623


$

624


$

572



$

1,247


$

1,087


 

Loan Composition

(dollars in millions)











Percent change 6/30/2021 vs


6/30/2021

3/31/2021

6/30/2020


3/31/2021

6/30/2020

Commercial and industrial (a)

$

50,672


$

52,486


$

58,297



(3.5)

%

(13.1)

%

Commercial real estate:







Commercial mortgage

12,965


12,702


13,465



2.1


(3.7)


Construction

2,132


2,122


1,919



.5


11.1


  Total commercial real estate loans

15,097


14,824


15,384



1.8


(1.9)


Commercial lease financing (b)

4,061


4,104


4,524



(1.0)


(10.2)


  Total commercial loans

69,830


71,414


78,205



(2.2)


(10.7)


Residential — prime loans:







Real estate — residential mortgage

12,131


10,300


8,149



17.8


48.9


Home equity loans

9,047


9,158


9,782



(1.2)


(7.5)


  Total residential — prime loans

21,178


19,458


17,931



8.8


18.1


Consumer direct loans

5,049


4,862


4,327



3.8


16.7


Credit cards

923


909


974



1.5


(5.2)


Consumer indirect loans

3,750


4,283


4,722



(12.4)


(20.6)


Total consumer loans

30,900


29,512


27,954



4.7


10.5


Total loans (c), (d)

$

100,730


$

100,926


$

106,159



(.2)

%

(5.1)

%

(a)

Loan balances include $135 million, $126 million, and $132 million of commercial credit card balances at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $19 million, $21 million, and $18 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

Total loans exclude loans of $636 million at June 30, 2021, $675 million at March 31, 2021, and $780 million at June 30, 2020, related to the discontinued operations of the education lending business.

(d)

Accrued interest of $225 million, $241 million, and $225 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

 

Loans Held for Sale Composition

(dollars in millions)













Percent change 6/30/2021 vs


6/30/2021

3/31/2021

6/30/2020


3/31/2021

6/30/2020

Commercial and industrial

$

233


$

1,175


$

419



(80.2)

%

(44.4)

%

Real estate — commercial mortgage

1,073


837


1,107



28.2


(3.1)


Commercial lease financing





N/M

N/M

Real estate — residential mortgage

231


236


250



(2.1)


(7.6)


Consumer direct loans


48


231



N/M

N/M

Total loans held for sale

$

1,537


$

2,296


$

2,007



(33.1)

%

(23.4)

%

 N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(in millions)








2Q21

1Q21

4Q20

3Q20

2Q20

Balance at beginning of period

$

2,296


$

1,583


$

1,724


$

2,007


$

2,143


New originations

3,573


4,010


3,835


3,282


3,621


Transfers from (to) held to maturity, net

(71)


83


(24)


75


(15)


Loan sales

(4,195)


(3,303)


(3,932)


(3,583)


(3,679)


Loan draws (payments), net

(27)


(73)


(19)


(57)


(61)


Valuation and other adjustments

(39)


(4)




(2)


Balance at end of period

$

1,537


$

2,296


$

1,583


$

1,724


$

2,007


 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)









Three months ended


Six months ended


6/30/2021

3/31/2021

6/30/2020


6/30/2021

6/30/2020

Average loans outstanding

$

100,814


$

100,728


$

107,941



$

100,777


$

102,058


Allowance for loan and lease losses at the end of the prior period

$

1,438


$

1,626


$

1359



$

1,626


$

900


Cumulative effect from change in accounting principle (a)






204


Allowance for loan and lease losses at the beginning of the period

1,438


1,626


1,359



1,626


1,104


Loans charged off:







Commercial and industrial

41


73


71



114


351









Real estate — commercial mortgage

4


35


2



39


19


Real estate — construction







  Total commercial real estate loans

4


35


2



39


19


Commercial lease financing


4


4



4


35


  Total commercial loans

45


112


77



157


405


Real estate — residential mortgage

1



2



1


2


Home equity loans

4


2


2



6


11


Consumer direct loans

7


8


10



15


37


Credit cards

9


6


12



15


39


Consumer indirect loans

5


7


7



12


28


  Total consumer loans

26


23


33



49


117


  Total loans charged off

71


135


110



206


522


Recoveries:







Commercial and industrial

32


8


5



40


34









Real estate — commercial mortgage

6


1




7


3


Real estate — construction







  Total commercial real estate loans

6


1




7


3


Commercial lease financing


1


1



1


1


  Total commercial loans

38


10


6



48


38


Real estate — residential mortgage


1




1


1


Home equity loans

1


1


1



2


7


Consumer direct loans

2


2


2



4


7


Credit cards

3


2


2



5


8


Consumer indirect loans

5


5


3



10


18


  Total consumer loans

11


11


8



22


41


  Total recoveries

49


21


14



70


78


Net loan charge-offs

(22)


(114)


(96)



(136)


(443)


Provision (credit) for loan and lease losses

(196)


(74)


445



(270)


965


Allowance for loan and lease losses at end of period

$

1,220


$

1,438


$

1,708



$

1,220


$

1,626









Liability for credit losses on lending-related commitments at the end of the prior
     period

$

178


$

197


$

161



$

197


$

68


Liability for credit losses on contingent guarantees at the end of the prior period






7


Cumulative effect from change in accounting principle (a), (b)






66


Liability for credit losses on lending-related commitments at beginning of period

178


197


161



197


141


Provision (credit) for losses on lending-related commitments

(26)


(19)


37



(45)


56


Liability for credit losses on lending-related commitments at end of period (c)

$

152


$

178


$

198



$

152


$

197









Total allowance for credit losses at end of period

$

1,372


$

1,616


$

1,906



$

1,372


$

1,823









Net loan charge-offs to average total loans

.09

%

.46

%

.36

%


.27

%

.35

%

Allowance for loan and lease losses to period-end loans

1.21


1.42


1.61



1.21


1.61


Allowance for credit losses to period-end loans

1.36


1.60


1.80



1.36


1.80


Allowance for loan and lease losses to nonperforming loans

175.8


197.5


224.7



175.8


224.7


Allowance for credit losses to nonperforming loans

197.7


222.0


250.8



197.7


250.8









Discontinued operations — education lending business:







Loans charged off

$

1


1


$

2



$

2


$

5


Recoveries


1


2



1


5


  Net loan charge-offs

$

(1)



$



(1)


$

(1)


(a)

The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.

(b)

Six months ended June 30, 2020, excludes $4 million related to the provision for other financial assets as a result of the change in accounting principle.

(c)

Included in "Accrued expense and other liabilities" on the balance sheet.

 

Asset Quality Statistics From Continuing Operations

(dollars in millions)


2Q21

1Q21

4Q20

3Q20

2Q20

Net loan charge-offs

$

22


$

114


$

135


$

128


$

96


Net loan charge-offs to average total loans

.09

%

.46

%

.53

%

.49

%

.36

%

Allowance for loan and lease losses

$

1,220


$

1,438


$

1,626


$

1,730


$

1,708


Allowance for credit losses (a)

1,372


1,616


1,823


1,938


1,906


Allowance for loan and lease losses to period-end loans

1.21

%

1.42

%

1.61

%

1.68

%

1.61

%

Allowance for credit losses to period-end loans

1.36


1.60


1.80


1.88


1.80


Allowance for loan and lease losses to nonperforming loans

175.8


197.5


207.1


207.4


224.7


Allowance for credit losses to nonperforming loans

197.7


222.0


232.2


232.4


250.8


Nonperforming loans at period end

$

694


$

728


$

785


$

834


$

760


Nonperforming assets at period end

738


790


937


1,003


951


Nonperforming loans to period-end portfolio loans

.69

%

.72

%

.78

%

.81

%

.72

%

Nonperforming assets to period-end portfolio loans plus OREO and other
     nonperforming assets

.73


.78


.92


.97


.89


(a)

Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)


6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

Commercial and industrial

$

355


$

387


$

385


$

459


$

404








Real estate — commercial mortgage

66


66


104


104


91


Real estate — construction




1


1


Total commercial real estate loans

66


66


104


105


92


Commercial lease financing

7


8


8


6


9


Total commercial loans

428


461


497


570


505


Real estate — residential mortgage

99


95


110


96


89


Home equity loans

146


148


154


146


141


Consumer direct loans

4


5


5


3


3


Credit cards

3


3


2


2


2


Consumer indirect loans

14


16


17


17


20


Total consumer loans

266


267


288


264


255


Total nonperforming loans

694


728


785


834


760


OREO

9


12


100


105


112


Nonperforming loans held for sale

32


47


49


61


75


Other nonperforming assets

3


3


3


3


4


Total nonperforming assets

$

738


$

790


$

937


$

1,003


$

951


Accruing loans past due 90 days or more

74


92


86


73


87


Accruing loans past due 30 through 89 days

190


191


241


336


419


Restructured loans — accruing and nonaccruing (a)

334


376


363


306


310


Restructured loans included in nonperforming loans (a)

177


192


229


168


166


Nonperforming assets from discontinued operations — education lending business 

5


5


5


6


7


Nonperforming loans to period-end portfolio loans

.69

%

.72

%

.78

%

.81

%

.72

%

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets

.73


.78


.92


.97


.89


(a)

Restructured loans (i.e., troubled debt restructuring) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider.  These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)


2Q21

1Q21

4Q20

3Q20

2Q20

Balance at beginning of period

$

728


$

785


$

834


$

760


$

632


Loans placed on nonaccrual status

186


196


300


387


293


Charge-offs

(74)


(135)


(160)


(150)


(111)


Loans sold

(10)


(13)


(9)


(6)


(5)


Payments

(92)


(37)


(83)


(83)


(29)


Transfers to OREO


(3)


(3)




Transfers to nonperforming loans held for sale






Loans returned to accrual status

(44)


(65)


(94)


(74)


(20)


Balance at end of period

$

694


$

728


$

785


$

834


$

760


 

Line of Business Results

(dollars in millions)

















Percentage change 2Q21 vs.


2Q21

1Q21

4Q20

3Q20

2Q20


1Q21

2Q20

Consumer Bank









Summary of operations









Total revenue (TE)

$

854


$

867


$

899


$

866


$

835



(1.5)

%

2.3

%

Provision for credit losses

(70)


(23)


(5)


(3)


155



(204.3)


145.2


Noninterest expense

584


601


606


567


552



(2.8)


5.8


Net income (loss) attributable to Key

259


220


228


231


98



17.7


164.3


Average loans and leases

40,598


39,249


39,455


38,476


37,300



3.4


8.8


Average deposits

88,412


85,033


82,854


82,836


79,235



4.0


11.6


Net loan charge-offs

34


36


28


23


40



(5.6)


(15.0)


Net loan charge-offs to average total loans

.34

%

.37

%

.28

%

.24

%

.43

%


(8.1)


(20.9)


Nonperforming assets at period end

$

274


$

345


$

374


$

353


$

332



(20.6)


(17.5)


Return on average allocated equity

28.74

%

26.10

%

25.95

%

26.44

%

11.50

%


10.1


149.9











Commercial Bank









Summary of operations









Total revenue (TE)

$

874


$

859


$

923


$

813


$

879



1.7

%

(.6)

%

Provision for credit losses

(131)


(67)


44


150


326



95.5


(120.6)


Noninterest expense

451


443


498


447


441



1.8


2.3


Net income (loss) attributable to Key

434


384


311


174


106



13.0


309.4


Average loans and leases

59,953


61,221


62,016


66,264


70,336



(2.1)


(14.8)


Average loans held for sale

1,341


1,237


1,285


1,383


2,012



8.4


(33.3)


Average deposits

54,814


51,894


52,489


51,585


47,954



5.6


14.3


Net loan charge-offs

9


78


108


103


57



(88.5)


(84.2)


Net loan charge-offs to average total loans

.06

%

.52

%

.69

%

.62

%

.33

%


N/A


N/A


Nonperforming assets at period end

$

464


$

441


$

558


$

645


$

616



5.2


(24.7)


Return on average allocated equity

20.79

%

17.45

%

23.87

%

13.43

%

8.66

%


N/A


N/A


TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

 

(PRNewsfoto/KeyCorp)

 

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SOURCE KeyCorp