KEY
$16.42
Keycorp
($.16)
(.97%)
Earnings Details
2nd Quarter June 2022
Thursday, July 21, 2022 6:30:00 AM
Tweet Share Watch
Summary

Keycorp Beats

Keycorp (KEY) reported 2nd Quarter June 2022 earnings of $0.54 per share on revenue of $1.9 billion. The consensus earnings estimate was $0.52 per share on revenue of $1.8 billion. The Earnings Whisper number was $0.50 per share. Revenue grew 2.2% on a year-over-year basis.

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
$0.54
Earnings Whisper
$0.50
Consensus Estimate
$0.52
Reported Revenue
$1.88 Bil
Revenue Estimate
$1.79 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

KEYCORP REPORTS SECOND QUARTER 2022 NET INCOME OF $504 MILLION, OR $.54 PER DILUTED COMMON SHARE

Positive operating leverage compared to the prior quarter and year-ago period

Revenue up 6% from the prior quarter, driven by growth in net interest income

Strong loan growth across commercial and consumer businesses

Credit quality remains strong with net charge-offs to average loans of 16 basis points

Expanded Laurel Road's offering for healthcare professionals and completed acquisition of GradFin

CLEVELAND, July 21, 2022 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $504 million, or $.54 per diluted common share for the second quarter of 2022. This compared to $420 million, or $.45 per diluted common share, for the first quarter of 2022 and $698 million, or $.72 per diluted common share, for the second quarter of 2021.

Key's second quarter results demonstrate the strength and resiliency of both our business model and our team, while navigating dynamic market conditions. We remain well positioned to support our clients through the economic cycle. 

This quarter, we continued to gain market share and deepen client relationships in both our commercial and consumer businesses, resulting in strong loan growth across our franchise. Additionally, we expanded Laurel Road's targeted offering to nurses and completed the acquisition of GradFin, a leading loan counselor for healthcare professionals.

The quality of our balance sheet continues to be a strength, as we focus on delivering sound, profitable growth. Credit quality remains strong, supported by our strong risk culture and disciplined underwriting practices.

We delivered positive operating leverage. Further, we remain confident in our ability to make continued progress against our long-term financial targets and to deliver value for all of our stakeholders.

Chris Gorman, Chairman and CEO

 

Selected Financial Highlights















Dollars in millions, except per share data





Change 2Q22 vs.



2Q22

1Q22

2Q21


1Q22

2Q21

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

$     504

$     420

$     698


20.0 %

(27.8) %

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

.54

.45

.72


20.0

(25.0)

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

20.90 %

14.12 %

21.34 %


N/A

N/A

Return on average total assets from continuing operations

1.16

.99

1.63


N/A

N/A

Common Equity Tier 1 ratio (b)

9.2

9.4

9.9


N/A

N/A

Book value at period end

$   13.48

$   14.43

$   16.75


(6.6)

(19.5)

Net interest margin (TE) from continuing operations

2.61 %

2.46 %

2.52 %


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, 2022 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS














Revenue














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Net interest income (TE)

$      1,104

$      1,020

$      1,023


8.2 %

7.9 %

Noninterest income

688

676

750


1.8

(8.3)

Total revenue

$      1,792

$      1,696

$      1,773


5.7 %

1.1 %








TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.1 billion for the second quarter of 2022 and the net interest margin was 2.61%. Compared to the second quarter of 2021, net interest income increased $81 million and the net interest margin increased by nine basis points. Net interest income and the net interest margin benefited from higher earning asset balances, a favorable balance sheet mix, and higher interest rates. Net interest income and the net interest margin were negatively impacted by the exit of the indirect auto loan portfolio and lower loan fees from the Paycheck Protection Program ("PPP").

Compared to the first quarter of 2022, taxable-equivalent net interest income increased by $84 million and the net interest margin increased by 15 basis points. Net interest income and the net interest margin benefited from a favorable balance sheet mix and higher interest rates, partly offset by lower loan fees related to the PPP and higher interest-bearing deposit costs. Net interest income also benefited from one additional day in the quarter. 

Noninterest Income














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Trust and investment services income

$        137

$        136

$        133


.7 %

3.0 %

Investment banking and debt placement fees

149

163

217


(8.6)

(31.3)

Service charges on deposit accounts

96

91

83


5.5

15.7

Operating lease income and other leasing gains

28

32

36


(12.5)

(22.2)

Corporate services income

88

90

55


(2.2)

60.0

Cards and payments income

85

80

113


6.3

(24.8)

Corporate-owned life insurance income

35

31

30


12.9

16.7

Consumer mortgage income

14

21

26


(33.3)

(46.2)

Commercial mortgage servicing fees

45

36

44


25.0

2.3

Other income

11

(4)

13


375.0

(15.4)

Total noninterest income

$        688

$        676

$        750


1.8 %

(8.3) %








Compared to the second quarter of 2021, noninterest income decreased by $62 million. The decrease was largely due to investment banking and debt placement fees, down $68 million, reflecting a slowdown in capital markets activity. Other drivers for the decrease include cards and payments income and consumer mortgage income, down $28 million and $12 million, respectively. Cards and payments income decreased as a result of lower levels of prepaid card activity. Consumer mortgage income decreased reflecting higher balance sheet retention as well as lower gain on sale margins. Partially offsetting the decrease was a $33 million increase in corporate services income, due to higher derivatives trading income. 

Compared to the first quarter of 2022, noninterest income increased by $12 million. The primary drivers were other income, which increased $15 million, reflecting market-related adjustments in the prior quarter and commercial mortgage servicing, up $9 million, as a result of higher special servicing fees. Partially offsetting the increase was a $14 million decrease in investment banking and debt placement fees, related to a slowdown in capital markets activity.

Noninterest Expense














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Personnel expense

$        607

$        630

$        623


(3.7) %

(2.6) %

Nonpersonnel expense

471

440

453


7.0

4.0

Total noninterest expense

$      1,078

$      1,070

1,076


.7 %

.2 %








Key's noninterest expense was $1.1 billion for the second quarter of 2022, an increase of $2 million from the year-ago period. Nonpersonnel expense increased $18 million, including an increase in other expense, due to higher travel and entertainment, as well as an increase in computer processing expense. Personnel expense decreased $16 million, driven by lower incentive and stock-based compensation, reflecting lower production related incentives, partially offset by an increase in salaries and contract labor, as a result of higher merit increases and technology contract labor.

Compared to the first quarter of 2022, noninterest expense increased $8 million. The increase was driven by nonpersonnel expense, which increased $31 million, largely due to higher other expense, reflecting increased travel and entertainment. Other contributing factors for the linked quarter increase include higher marketing expense and net occupancy expense. Partially offsetting the linked quarter increase was a $23 million decrease in personnel expense. The decrease was related to lower incentive and stock-based compensation as a result of lower production-related incentives and lower employee benefits expense.  

BALANCE SHEET HIGHLIGHTS














Average Loans














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Commercial and industrial (a)

$    53,858

$    51,574

$    51,808


4.4 %

4.0 %

Other commercial loans

21,173

20,556

19,034


3.0

11.2

Total consumer loans

34,107

31,632

29,972


7.8

13.8

Total loans

$  109,138

$  103,762

$  100,814


5.2 %

8.3 %








(a)

Commercial and industrial average loan balances include $153 million, $141 million, and $132 million of assets from commercial credit cards at June 30, 2022, March 31, 2022, and June 30, 2021, respectively.

Average loans were $109.1 billion for the second quarter of 2022, an increase of $8.3 billion compared to the second quarter of 2021. Commercial loans increased by $4.2 billion, reflecting strength in commercial mortgage real estate loans and core commercial and industrial loans, which mitigated the impact of a $6.8 billion decline in PPP balances. Consumer loans increased $4.1 billion, due to strength from Key's consumer mortgage business and Laurel Road, partly offset by the sale of the indirect auto loan portfolio.

Compared to the first quarter of 2022, average loans increased by $5.4 billion. Commercial loans increased $2.9 billion, reflecting strength in commercial and industrial loans and commercial mortgage real estate loans. Consumer loans increased $2.5 billion, driven by continued strength in Key's consumer mortgage business and Laurel Road.

Average Deposits














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Non-time deposits

$ 144,012

$ 146,426

$ 139,480


(1.6) %

3.2 %

Certificates of deposit ($100,000 or more)

1,487

1,639

2,212


(9.3)

(32.8)

Other time deposits

1,972

2,098

2,630


(6.0)

(25.0)

Total deposits

$ 147,471

$ 150,163

$ 144,322


(1.8) %

2.2 %








Cost of total deposits

.06 %

.04 %

.05 %


N/A

N/A








N/A = Not Applicable

Average deposits totaled $147.5 billion for the second quarter of 2022, an increase of $3.1 billion compared to the year-ago quarter. The increase reflects growth from consumer and commercial relationships, including higher commercial escrow and retail deposits, partially offset by a decline in time deposits.

Compared to the first quarter of 2022, average deposits decreased by $2.7 billion, largely reflecting seasonal commercial outflows and public sector deposit outflows related to stimulus funds.

ASSET QUALITY














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Net loan charge-offs

$       44

$       33

$       22


33.3 %

100.0 %

Net loan charge-offs to average total loans

.16 %

.13 %

.09 %


N/A

N/A

Nonperforming loans at period end

$      429

$      439

$      694


(2.3)

(38.2)

Nonperforming assets at period end

463

467

738


(0.9)

(37.3)

Allowance for loan and lease losses

1,099

1,105

1,220


(0.5)

(9.9)

Allowance for credit losses

1,272

1,271

1,372


0.1

(7.3)

Provision for credit losses

45

83

(222)


(45.8)

120.3








Allowance for loan and lease losses to nonperforming loans

256.2 %

251.7 %

175.8 %


N/A

N/A

Allowance for credit losses to nonperforming loans

296.5

289.5

197.7


N/A

N/A








N/A = Not Applicable

Key's provision for credit losses was $45 million, compared to a net benefit of $222 million in the second quarter of 2021 and provision of $83 million in the first quarter of 2022.

Net loan charge-offs for the second quarter of 2022 totaled $44 million, or .16% of average total loans. These results compare to $22 million, or .09%, for the second quarter of 2021 and $33 million, or .13%, for the first quarter of 2022. Key's allowance for credit losses was $1.3 billion, or 1.13% of total period-end loans at June 30, 2022, compared to 1.36% at June 30, 2021, and 1.19% at March 31, 2022.

At June 30, 2022, Key's nonperforming loans totaled $429 million, which represented .38% of period-end portfolio loans. These results compare to .69% at June 30, 2021, and .41% at March 31, 2022. Nonperforming assets at June 30, 2022, totaled $463 million, and represented .41% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .73% at June 30, 2021, and .44% at March 31, 2022.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2022.

Capital Ratios









6/30/2022

3/31/2022

6/30/2021

Common Equity Tier 1 (a)

9.2 %

9.4 %

9.9 %

Tier 1 risk-based capital (a)

10.4

10.7

11.3

Total risk based capital (a)

12.0

12.4

13.2

Tangible common equity to tangible assets (b)

5.3

6.0

7.4

Leverage (a)

8.8

8.6

8.7





(a)

June 30, 2022 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 2022. As shown in the preceding table, at June 30, 2022, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.2% and 10.4%, respectively. Key's tangible common equity ratio was 5.3% at June 30, 2022.

Key elected the CECL phase-in option provided by regulatory guidance which delayed for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. Effective for the first quarter 2022, Key is now in the three-year transition period. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by 12 basis points.

Summary of Changes in Common Shares Outstanding













In thousands





Change 2Q22 vs.



2Q22

1Q22

2Q21


1Q22

2Q21

Shares outstanding at beginning of period

932,398

928,850

972,587


.4 %

(4.1) %

Open market repurchases, repurchases under the accelerated repurchase
     program, and return of shares under employee compensation plans

(24)

(1,707)

(13,304)


(98.6)

(99.8)

Shares issued under employee compensation plans (net of cancellations)

269

5,255

993


(94.9)

(72.9)


Shares outstanding at end of period

932,643

932,398

960,276


— %

(2.9) %









During the second quarter of 2022, Key declared a dividend of $.195 per common share.

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 2Q22 vs.



2Q22

1Q22

2Q21


1Q22

2Q21

Revenue from continuing operations (TE)







Consumer Bank

$         824

$         799

$         852


3.1 %

(3.3) %

Commercial Bank

844

810

871


4.2

(3.1)

Other (a)

124

87

50


42.5

148.0


Total

$       1,792

$       1,696

$       1,773


5.7 %

1.1 %









Income (loss) from continuing operations attributable to Key







Consumer Bank

$         107

$           70

$         257


52.9 %

(58.4) %

Commercial Bank

315

283

432


11.3

(27.1)

Other (a)

108

94

35


14.9

208.6


Total

$         530

$         447

$         724


18.6 %

(26.8) %









(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

 

Consumer Bank














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Summary of operations







Net interest income (TE)

$         570

$         543

$         599


5.0 %

(4.8) %

Noninterest income

254

256

253


(.8)

.4

Total revenue (TE)

824

799

852


3.1

(3.3)

Provision for credit losses

8

43

(70)


(81.4)

111.4

Noninterest expense

676

663

584


2.0

15.8

Income (loss) before income taxes (TE)

140

93

338


50.5

(58.6)

Allocated income taxes (benefit) and TE adjustments

33

23

81


43.5

(59.3)

Net income (loss) attributable to Key

$         107

$           70

$         257


52.9 %

(58.4) %








Average balances







Loans and leases

$     40,818

$     38,637

$     40,598


5.6 %

.5 %

Total assets

43,868

41,814

43,818


4.9

.1

Deposits

91,256

91,468

88,412


(.2)

3.2








Assets under management at period end

$     49,003

$     53,707

$     51,013


(8.8) %

(3.9) %








TE = Taxable Equivalent

 

Additional Consumer Bank Data














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Noninterest income







Trust and investment services income

$       104

$       106

$       104


(1.9) %

— %

Service charges on deposit accounts

59

54

48


9.3

22.9

Cards and payments income

62

57

62


8.8

Consumer mortgage income

14

21

26


(33.3)

(46.2)

Other noninterest income

15

18

13


(16.7)

15.4

Total noninterest income

$       254

$       256

$       253


(.8) %

.4 %








Average deposit balances







NOW and money market deposit accounts

$  57,884

$  58,625

$  56,038


(1.3) %

3.3 %

Savings deposits

7,515

7,233

6,523


3.9

15.2

Certificates of deposit ($100,000 or more)

1,375

1,520

2,083


(9.5)

(34.0)

Other time deposits

1,966

2,090

2,616


(5.9)

(24.8)

Noninterest-bearing deposits

22,516

22,000

21,152


2.3

6.4

Total deposits

$  91,256

$  91,468

$  88,412


(.2) %

3.2 %








Other data







Branches

978

993

1,014




Automated teller machines

1,284

1,308

1,329











 

Consumer Bank Summary of Operations (2Q22 vs. 2Q21)

  • Net income attributable to Key of $107 million for the second quarter of 2022, compared to $257 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $29 million, compared to the second quarter of 2021, related to the sale of the indirect auto portfolio, partially offset by strong consumer mortgage and Laurel Road balance sheet growth
  • Average loans and leases increased $220 million, or 0.5%, from the second quarter of 2021, driven by growth in consumer mortgage and Laurel Road, largely offset by the sale of the indirect auto loan portfolio
  • Average deposits increased $2.8 billion, or 3.2%, from the second quarter of 2021, driven by higher retail deposits
  • Provision for credit losses increased $78 million, compared to the second quarter of 2021, due to a reserve release in the year-ago quarter as uncertainty caused by the pandemic subsided 
  • Noninterest income increased $1 million, or 0.4%, from the year-ago quarter, driven by an increase in service charges on deposit accounts, partially offset by a decline in consumer mortgage income, reflecting lower gain on sale margins and higher balance sheet retention
  • Noninterest expense increased $92 million, or 15.8%, from the year-ago quarter, driven by higher salary and employee benefits expense, as well as investments in digital, security, and fraud

 

Commercial Bank














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Summary of operations







Net interest income (TE)

$         440

$         415

$         417


6.0 %

5.5 %

Noninterest income

404

395

454


2.3

(11.0)

Total revenue (TE)

844

810

871


4.2

(3.1)

Provision for credit losses

37

41

(131)


9.8

128.2

Noninterest expense

414

417

451


(.7)

(8.2)

Income (loss) before income taxes (TE)

393

352

551


11.6

(28.7)

Allocated income taxes and TE adjustments

78

69

119


13.0

(34.5)

Net income (loss) attributable to Key

$         315

$         283

$         432


11.3 %

(27.1) %








Average balances







Loans and leases

$     67,834

$     64,701

$     59,953


4.8 %

13.1 %

Loans held for sale

1,016

1,323

1,341


(23.2)

(24.2)

Total assets

78,824

74,860

69,101


5.3

14.1

Deposits

54,864

57,289

54,814


(4.2) %

0.1 %








TE = Taxable Equivalent

 

Additional Commercial Bank Data














Dollars in millions





Change 2Q22 vs.


2Q22

1Q22

2Q21


1Q22

2Q21

Noninterest income







Trust and investment services income

$           33

$           30

$           27


10.0 %

22.2 %

Investment banking and debt placement fees

149

163

215


(8.6)

(30.7)

Operating lease income and other leasing gains

27

32

35


(15.6)

(22.9)

Corporate services income

80

82

47


(2.4)

70.2

Service charges on deposit accounts

36

36

34


5.9

Cards and payments income

23

22

49


4.5

(53.1)

Payments and services income

139

140

130


(0.7)

6.9








Commercial mortgage servicing fees

45

36

44


25.0

2.3

Other noninterest income

11

(6)

3


283.3

266.7

Total noninterest income

$         404

$         395

$         454


2.3 %

(11.0) %








 

Commercial Bank Summary of Operations (2Q22 vs. 2Q21)

  • Net income attributable to Key of $315 million for the second quarter of 2022, compared to $432 million for the year-ago quarter
  • Taxable-equivalent net interest income increased by $23 million, compared to the second quarter of 2021, reflecting core loan growth in commercial and industrial loans and commercial mortgage real estate loans and higher interest rates, partially offset by lower loan fees from the PPP
  • Average loan and lease balances increased $7.9 billion, compared to the second quarter of 2021, reflecting growth in core commercial and industrial loans and commercial mortgage real estate loans, partially offset by a decline in PPP balances
  • Average deposit balances increased $50 million, or 0.1%, compared to the second quarter of 2021, driven by growth in targeted relationships and higher commercial escrow deposits, partially offset by outflows in interest-bearing deposits
  • Provision for credit losses increased $168 million, compared to the second quarter of 2021, due to a reserve release in the year-ago period as uncertainty caused by the pandemic subsided
  • Noninterest income decreased $50 million from the year-ago quarter, driven by lower investment banking and debt placement fees and lower cards and payments income, partially offset by an increase in corporate services income
  • Noninterest expense decreased $37 million, or 8.2%, from the second quarter of 2021, driven by lower incentive compensation, reflecting a decrease in investment banking and debt placement fees

 

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

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 $187.0 billion at June 30, 2022.

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 approximately 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.

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, 2021, 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 8:00 a.m. ET, on July 21, 2022. A replay of the call will be available through July 30, 2022.

For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

 

*****

 

           

KeyCorp

Second Quarter 2022

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

21

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




6/30/2022

3/31/2022

6/30/2021

Summary of operations





Net interest income (TE)

$         1,104

$         1,020

$         1,023


Noninterest income

688

676

750



Total revenue (TE)

1,792

1,696

1,773


Provision for credit losses

45

83

(222)


Noninterest expense

1,078

1,070

1,076


Income (loss) from continuing operations attributable to Key

530

447

724


Income (loss) from discontinued operations, net of taxes

3

1

5


Net income (loss) attributable to Key

533

448

729








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

504

420

698


Income (loss) from discontinued operations, net of taxes

3

1

5


Net income (loss) attributable to Key common shareholders

507

421

703







Per common share





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

$            .54

$            .45

$            .73


Income (loss) from discontinued operations, net of taxes


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

.55

.46

.73








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

.54

.45

.72


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


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

.54

.45

.73








Cash dividends declared

.195

.195

.185


Book value at period end

13.48

14.43

16.75


Tangible book value at period end

10.40

11.41

13.81


Market price at period end

17.23

22.38

20.65







Performance ratios





From continuing operations:





Return on average total assets

1.16 %

.99 %

1.63 %


Return on average common equity

16.17

11.45

17.54


Return on average tangible common equity (b)

20.90

14.12

21.34


Net interest margin (TE)

2.61

2.46

2.52


Cash efficiency ratio (b)

59.5

62.4

59.9








From consolidated operations:





Return on average total assets

1.16 %

.99 %

1.64 %


Return on average common equity

16.27

11.47

17.67


Return on average tangible common equity (b)

21.03

14.15

21.49


Net interest margin (TE)

2.60

2.46

2.55


Loan to deposit (c)

78.3

72.9

70.4







Capital ratios at period end





Key shareholders' equity to assets

7.7 %

8.5 %

9.9 %


Key common shareholders' equity to assets

6.7

7.4

8.9


Tangible common equity to tangible assets (b)

5.3

6.0

7.4


Common Equity Tier 1 (d)

9.2

9.4

9.9


Tier 1 risk-based capital (d)

10.4

10.7

11.3


Total risk-based capital (d)

12.0

12.4

13.2


Leverage (d)

8.8

8.6

8.7







Asset quality — from continuing operations





Net loan charge-offs

$             44

$             33

$             22


Net loan charge-offs to average loans

.16 %

.13 %

.09 %


Allowance for loan and lease losses

$         1,099

$         1,105

$         1,220


Allowance for credit losses

1,272

1,271

1,372


Allowance for loan and lease losses to period-end loans

.98 %

1.04 %

1.21 %


Allowance for credit losses to period-end loans

1.13

1.19

1.36


Allowance for loan and lease losses to nonperforming loans

256.2

251.7

175.8


Allowance for credit losses to nonperforming loans

296.5

289.5

197.7


Nonperforming loans at period-end

$           429

$           439

$           694


Nonperforming assets at period-end

463

467

738


Nonperforming loans to period-end portfolio loans

.38 %

.41 %

.69 %


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

.41

.44

.73







Trust assets





Assets under management

$       49,003

$       53,707

$       51,013







Other data





Average full-time equivalent employees

17,414

17,110

17,003


Branches

978

993

1,014


Taxable-equivalent adjustment

$              7

$              6

$              6

 

Financial Highlights (continued)

(Dollars in millions, except per share amounts)



Six months ended



6/30/2022

6/30/2021

Summary of operations




Net interest income (TE)

$                  2,124

$                  2,035


Noninterest income

1,364

1,488


Total revenue (TE)

3,488

3,523


Provision for credit losses

128

(315)


Noninterest expense

2,148

2,147


Income (loss) from continuing operations attributable to Key

977

1,342


Income (loss) from discontinued operations, net of taxes

4

9


Net income (loss) attributable to Key

981

1,351






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

924

1,289


Income (loss) from discontinued operations, net of taxes

4

9


Net income (loss) attributable to Key common shareholders

928

1,298





Per common share




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

$                    1.00

$                    1.34


Income (loss) from discontinued operations, net of taxes

.01


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

1.00

1.35






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

.99

1.33


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

.01


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

1.00

1.34






Cash dividends paid

.39

.37





Performance ratios




From continuing operations:




Return on average total assets

1.08 %

1.55 %


Return on average common equity

13.62

16.33


Return on average tangible common equity (b)

17.15

19.88


Net interest margin (TE)

2.53

2.56


Cash efficiency ratio (b)

60.9

60.1






From consolidated operations:




Return on average total assets

1.08 %

1.55 %


Return on average common equity

13.68

16.45


Return on average tangible common equity (b)

17.23

20.02


Net interest margin (TE)

2.53

2.57





Asset quality — from continuing operations




Net loan charge-offs

$                      77

$                     136


Net loan charge-offs to average total loans

.15 %

.27 %





Other data




Average full-time equivalent employees

17,262

17,046





Taxable-equivalent adjustment

13

13

(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, 2022, 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


6/30/2022

3/31/2022

6/30/2021


6/30/2022

6/30/2021

Tangible common equity to tangible assets at period-end







Key shareholders' equity (GAAP)

$  14,427

$  15,308

$  17,941




Less: Intangible assets (a)

2,868

2,810

2,828




Preferred Stock (b)

1,856

1,856

1,856




Tangible common equity (non-GAAP)

$    9,703

$  10,642

$  13,257




Total assets (GAAP)

$ 187,008

$ 181,221

$ 181,115




Less: Intangible assets (a)

2,868

2,810

2,828




Tangible assets (non-GAAP)

$ 184,140

$ 178,411

$ 178,287




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

5.27 %

5.96 %

7.44 %




Pre-provision net revenue







Net interest income (GAAP)

$    1,097

$    1,014

$    1,017


$    2,111

$    2,022

Plus: Taxable-equivalent adjustment

7

6

6


13

13

Noninterest income

688

676

750


1,364

1,488

Less: Noninterest expense

1,078

1,070

1,076


2,148

2,147

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

$       714

$       626

$       697


$    1,340

$    1,376

Average tangible common equity







Average Key shareholders' equity (GAAP)

$  14,398

$  16,780

$  17,859


$  15,583

$  17,814

Less: Intangible assets (average) (c)

2,827

2,814

2,840


2,821

2,840

Preferred stock (average)

1,900

1,900

1,900


1,900

1,900

Average tangible common equity (non-GAAP)

$    9,671

$  12,066

$  13,119


$  10,862

$  13,074

Return on average tangible common equity from continuing operations







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

$       504

$       420

$       698


$       924

$    1,289

Average tangible common equity (non-GAAP)

9,671

12,066

13,119


10,862

13,074








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

20.90 %

14.12 %

21.34 %


17.15 %

19.88 %

Return on average tangible common equity consolidated







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

$       507

$       421

$       703


$       928

$    1,298

Average tangible common equity (non-GAAP)

9,671

12,066

13,119


10,862

13,074








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

21.03 %

14.15 %

21.49 %


17.23 %

20.02 %

  

GAAP to Non-GAAP Reconciliations (continued)

(Dollars in millions)


Three months ended


Six months ended


6/30/2022

3/31/2022

6/30/2021


6/30/2022

6/30/2021

Cash efficiency ratio







Noninterest expense (GAAP)

$    1,078

$    1,070

$    1,076


$    2,148

$    2,147

Less: Intangible asset amortization

12

11

14


23

29

Adjusted noninterest expense (non-GAAP)

$    1,066

$    1,059

$    1,062


$    2,125

$    2,118








Net interest income (GAAP)

$    1,097

$    1,014

$    1,017


$    2,111

$    2,022

Plus: Taxable-equivalent adjustment

7

6

6


13

13

Noninterest income

688

676

750


1,364

1,488

Total taxable-equivalent revenue (non-GAAP)

$    1,792

$    1,696

$    1,773


$    3,488

$    3,523








Cash efficiency ratio (non-GAAP)

59.5 %

62.4 %

59.9 %


60.9 %

60.1 %








(a)

For the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, intangible assets exclude $2 million, $2 million, and $4 million, respectively, of period-end purchased credit card receivables. 

(b)

Net of capital surplus.

(c)

For the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, average intangible assets exclude $2 million, $3 million, and $4 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2022, and June 30, 2021, average intangible assets exclude $2 million, and $4 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(Dollars in millions)










6/30/2022

3/31/2022

6/30/2021

Assets





Loans

$       112,390

$       106,600

$       100,730


Loans held for sale

1,306

1,170

1,537


Securities available for sale

42,437

43,681

34,638


Held-to-maturity securities

8,186

6,871

6,175


Trading account assets

809

848

851


Short-term investments

2,456

3,881

20,460


Other investments

969

722

635



Total earning assets

168,553

163,773

165,026


Allowance for loan and lease losses

(1,099)

(1,105)

(1,220)


Cash and due from banks

678

684

792


Premises and equipment

638

647

785


Goodwill

2,752

2,694

2,673


Other intangible assets

118

118

159


Corporate-owned life insurance

4,343

4,340

4,304


Accrued income and other assets

10,529

9,544

7,966


Discontinued assets

496

526

630



Total assets

$       187,008

$       181,221

$       181,115







Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$         83,628

$         86,829

$         85,242



Savings deposits

7,934

7,840

6,993



Certificates of deposit ($100,000 or more)

1,421

1,533

2,064



Other time deposits

1,909

2,037

2,493



Total interest-bearing deposits

94,892

98,239

96,792



Noninterest-bearing deposits

50,973

50,424

49,280



Total deposits

145,865

148,663

146,072


Federal funds purchased and securities sold under repurchase agreements 

3,234

599

211


Bank notes and other short-term borrowings

2,809

2,222

723


Accrued expense and other liabilities

4,056

3,615

2,957


Long-term debt

16,617

10,814

13,211



Total liabilities

172,581

165,913

163,174







Equity





Preferred stock

1,900

1,900

1,900


Common shares

1,257

1,257

1,257


Capital surplus

6,241

6,214

6,232


Retained earnings

15,118

14,793

13,689


Treasury stock, at cost

(5,923)

(5,927)

(5,287)


Accumulated other comprehensive income (loss)

(4,166)

(2,929)

150



Key shareholders' equity

14,427

15,308

17,941

Total liabilities and equity

$       187,008

$       181,221

$       181,115







Common shares outstanding (000)

932,643

932,398

960,276

 

Consolidated Statements of Income

(Dollars in millions, except per share amounts)




Three months ended


Six months ended




6/30/2022

3/31/2022

6/30/2021


6/30/2022

6/30/2021

Interest income








Loans

$                923

$                837

$                888


$             1,760

$             1,777


Loans held for sale

10

12

11


22

22


Securities available for sale

188

173

133


361

263


Held-to-maturity securities

48

46

45


94

90


Trading account assets

7

6

5


13

10


Short-term investments

13

4

6


17

11


Other investments

4

2

2


6

4



Total interest income

1,193

1,080

1,090


2,273

2,177

Interest expense








Deposits

20

14

16


34

37


Federal funds purchased and securities sold under repurchase agreements

6


6


Bank notes and other short-term borrowings

9

3

3


12

4


Long-term debt

61

49

54


110

114



Total interest expense

96

66

73


162

155

Net interest income

1,097

1,014

1,017


2,111

2,022

Provision for credit losses

45

83

(222)


128

(315)

Net interest income after provision for credit losses

1,052

931

1,239


1,983

2,337

Noninterest income








Trust and investment services income

137

136

133


273

266


Investment banking and debt placement fees

149

163

217


312

379


Service charges on deposit accounts

96

91

83


187

156


Operating lease income and other leasing gains

28

32

36


60

74


Corporate services income

88

90

55


178

119


Cards and payments income

85

80

113


165

218


Corporate-owned life insurance income

35

31

30


66

61


Consumer mortgage income

14

21

26


35

73


Commercial mortgage servicing fees

45

36

44


81

78


Other income

11

(4)

13


7

64



Total noninterest income

688

676

750


1,364

1,488

Noninterest expense








Personnel

607

630

623


1,237

1,247


Net occupancy

78

73

75


151

151


Computer processing

78

77

71


155

144


Business services and professional fees

52

53

51


105

101


Equipment

26

23

25


49

50


Operating lease expense

27

28

31


55

65


Marketing

34

28

31


62

57


Other expense

176

158

169


334

332



Total noninterest expense

1,078

1,070

1,076


2,148

2,147

Income (loss) from continuing operations before income taxes

662

537

913


1,199

1,678


Income taxes

132

90

189


222

336

Income (loss) from continuing operations

530

447

724


977

1,342


Income (loss) from discontinued operations, net of taxes

3

1

5


4

9

Net income (loss)

533

448

729


981

1,351


Less:  Net income (loss) attributable to noncontrolling interests


Net income (loss) attributable to Key

$                533

$                448

$                729


$                981

1,351










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

$                504

$                420

$                698


$                924

$             1,289

Net income (loss) attributable to Key common shareholders

507

421

703


928

1,298

Per common share







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

$                 .54

$                 .45

$                 .73


$               1.00

$               1.34

Income (loss) from discontinued operations, net of taxes


.01

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

.55

.46

.73


1.00

1.35

Per common share — assuming dilution







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

$                 .54

$                 .45

$                 .72


$                 .99

$               1.33

Income (loss) from discontinued operations, net of taxes


.01

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

.54

.45

.73


1.00

1.34










Cash dividends declared per common share

$               .195

$               .195

$               .185


$               .390

$               .370










Weighted-average common shares outstanding (000)

924,302

922,941

957,423


923,717

961,292


Effect of common share options and other stock awards

7,506

10,692

9,740


9,087

9,514

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

931,808

933,634

967,163


932,805

970,806

(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 2022


First Quarter 2022


Second Quarter 2021



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)

$       53,858

$              449

3.34 %


$       51,574

$              410

3.22 %


$       51,808

$              450

3.48 %


Real estate — commercial mortgage

15,231

136

3.58


14,587

121

3.37


12,825

117

3.67


Real estate — construction

2,125

20

3.81


2,027

17

3.37


2,149

20

3.68


Commercial lease financing

3,817

24

2.47


3,942

24

2.41


4,060

30

2.98


Total commercial loans

75,031

629

3.36


72,130

572

3.21


70,842

617

3.49


Real estate — residential mortgage

18,383

131

2.85


16,309

112

2.75


11,055

81

2.92


Home equity loans

8,208

78

3.83


8,345

74

3.61


9,089

85

3.76


Consumer direct loans

6,514

68

4.19


5,954

61

4.16


4,910

57

4.69


Credit cards

943

24

10.20


932

24

10.36


908

22

9.79


Consumer indirect loans

59


92


4,010

32

3.19


  Total consumer loans

34,107

301

3.53


31,632

271

3.45


29,972

277

3.71


  Total loans

109,138

930

3.41


103,762

843

3.28


100,814

894

3.56


Loans held for sale

1,107

10

3.49


1,485

12

3.32


1,616

11

2.60


Securities available for sale (b), (e)

43,023

188

1.60


44,923

173

1.50


33,623

133

1.57


Held-to-maturity securities (b)

7,291

48

2.65


7,188

46

2.54


6,452

45

2.75


Trading account assets

854

7

3.45


842

6

2.74


837

5

2.56


Short-term investments

3,591

13

1.45


7,323

4

.25


18,817

6

.13


Other investments (e)

800

4

2.27


651

2

1.26


622

2

1.02


Total earning assets

165,804

1,200

2.83


166,174

1,086

2.62


162,781

1,096

2.70


Allowance for loan and lease losses

(1,103)




(1,056)




(1,442)




Accrued income and other assets

18,826




17,471




16,531




Discontinued assets

505




539




650




Total assets

$    184,032




$    183,128




$    178,520



Liabilities













NOW and money market deposit accounts

$       85,389

$                18

.08


$       88,515

$                11

.05


$       83,981

$                  9

.05


Savings deposits

7,891

.01


7,599

.01


6,859

1

.03


Certificates of deposit ($100,000 or more)

1,487

1

.44


1,639

2

.44


2,212

4

.72


Other time deposits

1,972

1

.13


2,098

1

.15


2,630

2

.38


Total interest-bearing deposits

96,739

20

.08


99,851

14

.06


95,682

16

.07


Federal funds purchased and securities sold under repurchase agreements

2,792

6

.88


287

.13


251

.02


Bank notes and other short-term borrowings

1,943

9

1.77


705

3

1.94


744

3

1.19


Long-term debt (f), (g)

12,662

61

1.92


10,830

49

1.79


11,978

54

1.79


Total interest-bearing liabilities

114,136

96

.34


111,673

66

.24


108,655

73

.27


Noninterest-bearing deposits

50,732




50,312




48,640




Accrued expense and other liabilities

4,261




3,824




2,716




Discontinued liabilities (g)

505




539




650




Total liabilities

$    169,634




$    166,348




$    160,661



Equity













Key shareholders' equity

$       14,398




$       16,780




$       17,859




Noncontrolling interests










Total equity

14,398




16,780




17,859




Total liabilities and equity

$    184,032




$    183,128




$    178,520



Interest rate spread (TE)



2.50 %




2.38 %




2.43 %

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


$           1,104

2.61 %



$           1,020

2.46 %



$           1,023

2.52 %

TE adjustment (b)


7




6




6



Net interest income, GAAP basis


$           1,097




$           1,014




$           1,017


(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, 2022, March 31, 2022, and June 30, 2021.   

(c)

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

(d)

Commercial and industrial average balances include $153 million, $141 million, and $132 million of assets from commercial credit cards for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, 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, 2022



Six months ended June 30, 2021



Average


Yield/



Average


Yield/



Balance

Interest (a)

Rate (a)



Balance

Interest (a)

Rate (a)

Assets










Loans: (b), (c)










Commercial and industrial (d)

$         52,723

$               858

3.28 %



$         52,194

$               902

3.49 %


Real estate — commercial mortgage

14,910

257

3.48



12,742

232

3.67


Real estate — construction

2,076

37

3.60



2,099

39

3.71


Commercial lease financing

3,879

48

2.44



4,101

61

2.99


Total commercial loans

73,588

1,200

3.28



71,136

1,234

3.49


Real estate — residential mortgage

17,352

243

2.80



10,380

154

2.97


Home equity loans

8,276

153

3.72



9,189

173

3.79


Consumer direct loans

6,236

129

4.18



4,864

113

4.70


Credit cards

938

48

10.28



920

46

10.12


Consumer indirect loans

75



4,288

69

3.25


Total consumer loans

32,877

573

3.49



29,641

555

3.77


Total loans

106,465

1,773

3.35



100,777

1,789

3.58


Loans held for sale

1,295

22

3.40



1,574

22

2.74


Securities available for sale (b), (e)

43,968

361

1.55



31,841

263

1.66


Held-to-maturity securities (b)

7,239

94

2.59



6,818

90

2.63


Trading account assets

848

13

3.10



842

10

2.35


Short-term investments

5,447

17

.65



17,670

11

.13


Other investments (e)

726

6

1.82



618

4

1.21


Total earning assets

165,988

2,286

2.72



160,140

2,189

2.75


Allowance for loan and lease losses

(1,080)





(1,532)




Accrued income and other assets

18,152





16,463




Discontinued assets

522





668




Total assets

$       183,582





$       175,739



Liabilities










NOW and money market deposit accounts

$         86,943

$                 29

.07



$         82,717

$                 20

.05


Savings deposits

7,746

1

.01



6,533

1

.03


Certificates of deposit ($100,000 or more)

1,562

3

.44



2,390

10

.85


Other time deposits

2,035

1

.14



2,766

6

.48


Total interest-bearing deposits

98,286

34

.07



94,406

37

.08


Federal funds purchased and securities sold under repurchase agreements

1,547

6

.81



247

.03


Bank notes and other short-term borrowings

1,327

12

1.82



811

4

.89


Long-term debt (f), (g)

11,751

110

1.86



12,402

114

1.85


Total interest-bearing liabilities

112,911

162

.29



107,866

155

.29


Noninterest-bearing deposits

50,523





46,638




Accrued expense and other liabilities

4,043





2,753




Discontinued liabilities (g)

522





668




Total liabilities

$       167,999





$       157,925



Equity










Key shareholders' equity

$         15,583





$         17,814




Noncontrolling interests








Total equity

15,583





17,814




Total liabilities and equity

$       183,582





$       175,739



Interest rate spread (TE)



2.44 %





2.46 %

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


$           2,124

2.53 %




$           2,035

2.56 %

TE adjustment (b)


13





13



Net interest income, GAAP basis


$           2,111





$           2,022












(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, 2022, and June 30, 2021, respectively.  

(c)

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

(d)

Commercial and industrial average balances include $147 million and $129 million of assets from commercial credit cards for the six months ended June 30, 2022, and June 30, 2021, 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


6/30/2022

3/31/2022

6/30/2021


6/30/2022

6/30/2021

Personnel (a)

$            607

$            630

$            623


$         1,237

$         1,247

Net occupancy

78

73

75


151

151

Computer processing

78

77

71


155

144

Business services and professional fees

52

53

51


105

101

Equipment

26

23

25


49

50

Operating lease expense

27

28

31


55

65

Marketing

34

28

31


62

57

Other expense

176

158

169


334

332

Total noninterest expense

$         1,078

$         1,070

$         1,076


$         2,148

$         2,147

Average full-time equivalent employees (b)

17,414

17,110

17,003


17,262

17,046

(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

(Dollars in millions)









Three months ended


Six months ended


6/30/2022

3/31/2022

6/30/2021


6/30/2022

6/30/2021

Salaries and contract labor

$            357

$            348

$           321


$            705

$            641

Incentive and stock-based compensation

163

183

210


346

406

Employee benefits

83

97

92


180

199

Severance

4

2


6

1

Total personnel expense

$            607

$            630

$           623


$         1,237

$         1,247

 

Loan Composition

(Dollars in millions)











Change 6/30/2022 vs


6/30/2022

3/31/2022

6/30/2021


3/31/2022

6/30/2021

Commercial and industrial (a)

$        55,245

$        52,815

$        50,672


4.6 %

9.0 %

Commercial real estate:







Commercial mortgage

15,636

15,124

12,965


3.4

20.6

Construction

2,144

2,065

2,132


3.8

.6

  Total commercial real estate loans

17,780

17,189

15,097


3.4

17.8

Commercial lease financing (b)

3,956

3,916

4,061


1.0

(2.6)

  Total commercial loans

76,981

73,920

69,830


4.1

10.2

Residential — prime loans:







Real estate — residential mortgage

19,588

17,181

12,131


14.0

61.5

Home equity loans

8,134

8,258

9,047


(1.5)

(10.1)

  Total residential — prime loans

27,722

25,439

21,178


9.0

30.9

Consumer direct loans

6,665

6,249

5,049


6.7

32.0

Credit cards

967

930

923


4.0

4.8

Consumer indirect loans

55

62

3,750


(11.3)

(98.5)

Total consumer loans

35,409

32,680

30,900


8.4

14.6

  Total loans (c), (d)

$      112,390

$      106,600

$      100,730


5.4 %

11.6 %

(a)

Loan balances include $161 million, $147 million, and $135 million of commercial credit card balances at June 30, 2022, March 31, 2022, and June 30, 2021, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $12 million, $14 million, and $19 million at June 30, 2022, March 31, 2022, and June 30, 2021, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

Total loans exclude loans of $498 million at June 30, 2022, $531 million at March 31, 2022, and $636 million at June 30, 2021, related to the discontinued operations of the education lending business.

(d)

Accrued interest of $233 million, $193 million, and $225 million at June 30, 2022, March 31, 2022, and June 30, 2021, 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)













Change 6/30/2022 vs


6/30/2022

3/31/2022

6/30/2021


3/31/2022

6/30/2021

Commercial and industrial

$            213

$            216

$            233


(1.4) %

(8.6) %

Real estate — commercial mortgage

1,004

819

1,073


22.6

(6.4)

Real estate — construction

6

21


(71.4) %

N/M

Real estate — residential mortgage

83

114

231


(27.2)

(64.1)

Total loans held for sale

$         1,306

$         1,170

$         1,537


11.6 %

(15.0) %


 N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(Dollars in millions)








2Q22

1Q22

4Q21

3Q21

2Q21

Balance at beginning of period

$          1,170

$         2,729

$         1,805

$         1,537

$         2,296

New originations

2,837

2,724

5,704

3,328

3,573

Transfers from (to) held to maturity, net

(57)

(1)

3,305

(71)

Loan sales

(2,506)

(4,269)

(4,742)

(6,405)

(4,195)

Loan draws (payments), net

(133)

(12)

(12)

8

(27)

Valuation and other adjustments

(5)

(2)

(25)

32

(39)

Balance at end of period

$          1,306

$         1,170

$         2,729

$         1,805

$         1,537

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(Dollars in millions)









Three months ended


Six months ended


6/30/2022

3/31/2022

6/30/2021


6/30/2022

6/30/2021

Average loans outstanding

$ 109,138

$ 103,762

$ 100,814


$ 106,465

$ 100,777

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

1,105

1,061

1,438


1,061

1,626

Loans charged off:







Commercial and industrial

39

30

41


69

114








Real estate — commercial mortgage

3

4

4


7

39

Real estate — construction


  Total commercial real estate loans

3

4

4


7

39

Commercial lease financing

2


2

4

  Total commercial loans

42

36

45


78

157

Real estate — residential mortgage

(2)

(1)

1


(3)

1

Home equity loans

1

4


1

6

Consumer direct loans

10

7

7


17

15

Credit cards

8

7

9


15

15

Consumer indirect loans

1

1

5


2

12

  Total consumer loans

17

15

26


32

49

  Total loans charged off

59

51

71


110

206

Recoveries:







Commercial and industrial

8

11

32


19

40








Real estate — commercial mortgage

1

1

6


2

7

Real estate — construction

1


1

  Total commercial real estate loans

2

1

6


3

7

Commercial lease financing

1


1

1

  Total commercial loans

11

12

38


23

48

Real estate — residential mortgage

1


1

1

Home equity loans

1

1

1


2

2

Consumer direct loans

1

2

2


3

4

Credit cards

1

2

3


3

5

Consumer indirect loans

1

5


1

10

  Total consumer loans

4

6

11


10

22

  Total recoveries

15

18

49


33

70

Net loan charge-offs

(44)

(33)

(22)


(77)

(136)

Provision (credit) for loan and lease losses

38

77

(196)


115

(270)

Allowance for loan and lease losses at end of period

$    1,099

$    1,105

$    1,220


$    1,099

$    1,220








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

166

160

178


160

197

Provision (credit) for losses on lending-related commitments

7

6

(26)


13

(45)

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

$       173

$       166

$       152


$       173

$       152








Total allowance for credit losses at end of period

$    1,272

$    1,271

$    1,372


$    1,272

$    1,372








Net loan charge-offs to average total loans

.16 %

.13 %

.09 %


.15 %

.27 %

Allowance for loan and lease losses to period-end loans

.98

1.04

1.21


.98

1.21

Allowance for credit losses to period-end loans

1.13

1.19

1.36


1.13

1.36

Allowance for loan and lease losses to nonperforming loans

256.2

251.7

175.8


256.2

175.8

Allowance for credit losses to nonperforming loans

296.5

289.5

197.7


296.5

197.7








Discontinued operations — education lending business:







Loans charged off

$          1

2

$          1


$          3

$          2

Recoveries

1


1

1

  Net loan charge-offs

$         —

$         (2)

$         (1)


$         (2)

$         (1)

(a)

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

 

Asset Quality Statistics From Continuing Operations

(Dollars in millions)


2Q22

1Q22

4Q21

3Q21

2Q21

Net loan charge-offs

$         44

$         33

$         19

$         29

$         22

Net loan charge-offs to average total loans

.16 %

.13 %

.08 %

.11 %

.09 %

Allowance for loan and lease losses

$    1,099

$    1,105

$    1,061

$    1,084

$    1,220

Allowance for credit losses (a)

1,272

1,271

1,221

1,236

1,372

Allowance for loan and lease losses to period-end loans

.98 %

1.04 %

1.04 %

1.10 %

1.21 %

Allowance for credit losses to period-end loans

1.13

1.19

1.20

1.25

1.36

Allowance for loan and lease losses to nonperforming loans

256.2

251.7

233.7

195.7

175.8

Allowance for credit losses to nonperforming loans

296.5

289.5

268.9

223.1

197.7

Nonperforming loans at period end

$       429

$       439

$       454

$       554

$       694

Nonperforming assets at period end

463

467

489

599

738

Nonperforming loans to period-end portfolio loans

.38 %

.41 %

.45 %

.56 %

.69 %

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

.41

.44

.48

.61

.73

(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)


6/30/2022

3/31/2022

12/31/2021

9/30/2021

6/30/2021

Commercial and industrial

$       197

$       186

$       191

$       253

$       355







Real estate — commercial mortgage

35

40

44

49

66

Real estate — construction

Total commercial real estate loans

35

40

44

49

66

Commercial lease financing

2

3

4

5

7

Total commercial loans

234

229

239

307

428

Real estate — residential mortgage

67

73

72

93

99

Home equity loans

120

129

135

146

146

Consumer direct loans

3

4

4

4

4

Credit cards

3

3

3

3

3

Consumer indirect loans

2

1

1

1

14

Total consumer loans

195

210

215

247

266

  Total nonperforming loans

429

439

454

554

694

OREO

9

8

8

8

9

Nonperforming loans held for sale

25

20

24

35

32

Other nonperforming assets

3

2

3

  Total nonperforming assets

$       463

$       467

$       489

$       599

$       738

Accruing loans past due 90 days or more

41

55

68

82

74

Accruing loans past due 30 through 89 days

137

122

165

164

190

Restructured loans — accruing and nonaccruing (a)

216

219

220

270

334

Restructured loans included in nonperforming loans (a)

94

98

99

146

177

Nonperforming assets from discontinued operations — education lending business 

3

4

4

4

5

Nonperforming loans to period-end portfolio loans

.38 %

.41 %

.45 %

.56 %

.69 %

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

.41

.44

.48

.61

.73

(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

(Dollars in millions)


2Q22

1Q22

4Q21

3Q21

2Q21

Balance at beginning of period

$          439

$          454

$          554

$          694

$          728

Loans placed on nonaccrual status

118

87

116

116

186

Charge-offs

(59)

(50)

(51)

(66)

(74)

Loans sold

(8)

(38)

(17)

(10)

Payments

(35)

(27)

(68)

(136)

(92)

Transfers to OREO

(2)

(1)

(1)

(1)

Loans returned to accrual status

(24)

(24)

(58)

(36)

(44)

Balance at end of period

$          429

$          439

$          454

$          554

$          694

 

Line of Business Results

(Dollars in millions)

















Change 2Q22 vs.


2Q22

1Q22

4Q21

3Q21

2Q21


1Q22

2Q21

Consumer Bank









Summary of operations









Total revenue (TE)

$             824

$             799

$             839

$             870

$             852


3.1 %

(3.3) %

Provision for credit losses

8

43

14

(38)

(70)


(81.4)

111.4

Noninterest expense

676

663

613

591

584


2.0

15.8

Net income (loss) attributable to Key

107

70

161

241

257


52.9

(58.4)

Average loans and leases

40,818

38,637

37,792

39,796

40,598


5.6

.5

Average deposits

91,256

91,468

90,271

89,156

88,412


(.2)

3.2

Net loan charge-offs

23

22

22

35

34


4.5

(32.4)

Net loan charge-offs to average total loans

.23 %

.23 %

.23 %

.35 %

.34 %


(32.4)

Nonperforming assets at period end

$             203

$             217

$             222

$             254

$             274


(6.5)

(25.9)

Return on average allocated equity

11.66 %

7.91 %

18.05 %

25.81 %

28.53 %


47.4

(59.1)










Commercial Bank









Summary of operations









Total revenue (TE)

$             844

$             810

$          1,028

$             886

$             871


4.2 %

(3.1) %

Provision for credit losses

37

41

(12)

(69)

(131)


(9.8)

128.2

Noninterest expense

414

417

501

470

451


(.7)

(8.2)

Net income (loss) attributable to Key

315

283

449

381

432


11.3

(27.1)

Average loans and leases

67,834

64,701

61,127

59,914

59,953


4.8

13.1

Average loans held for sale

1,016

1,323

1,962

1,190

1,341


(23.2)

(24.2)

Average deposits

54,864

57,289

59,537

56,522

54,814


(4.2)

.1

Net loan charge-offs

21

11

(6)

9


90.9

133.3

Net loan charge-offs to average total loans

.12 %

.07 %

— %

(.04) %

.06 %


71.4

100.0

Nonperforming assets at period end

$             260

$             250

$             267

$             345

$             464


4.0

(44.0)

Return on average allocated equity

14.16 %

13.21 %

21.54 %

18.54 %

20.69 %


7.2

(31.6)


TE = Taxable Equivalent

 

(PRNewsfoto/KeyCorp)

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/keycorp-reports-second-quarter-2022-net-income-of-504-million-or-54-per-diluted-common-share-301590870.html

SOURCE KeyCorp