KEY
$23.29
Keycorp
($.60)
(2.51%)
Earnings Details
3rd Quarter September 2021
Thursday, October 21, 2021 6:33:00 AM
Tweet Share Watch
Summary

Keycorp Beats

Keycorp (KEY) reported 3rd Quarter September 2021 earnings of $0.65 per share on revenue of $1.9 billion. The consensus earnings estimate was $0.57 per share on revenue of $1.8 billion. The Earnings Whisper number was $0.63 per share. Revenue grew 4.7% 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
$0.65
Earnings Whisper
$0.63
Consensus Estimate
$0.57
Reported Revenue
$1.88 Bil
Revenue Estimate
$1.75 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

KeyCorp Reports Third Quarter 2021 Net Income Of $616 Million, Or $.65 Per Diluted Common Share

CLEVELAND, Oct. 21, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $616 million, or $.65 per diluted common share for the third quarter of 2021. This compared to $698 million, or $.72 per diluted common share, for the second quarter of 2021 and $397 million, or $.41 per diluted common share, for the third quarter of 2020.

Our results this quarter continue to reflect the strength of our distinctive business model, strong risk management practices, and significant momentum from recent investments in teammates and digital capabilities. 

We delivered positive operating leverage with record third quarter revenue, reflecting broad-based growth across our businesses. We continue to add and deepen relationships in both our consumer and commercial businesses. Importantly, we achieved record consumer loan originations and record investment banking results for the quarter. 

Our strong risk culture and disciplined underwriting practices continue to result in positive credit trends. Credit quality remained strong this quarter, with lower nonperforming loans and net charge-offs as a percent of loans of 11 basis points. In the third quarter, we entered into an accelerated share repurchase program which was supported by capital relief generated from the sale of our nonstrategic indirect auto loan portfolio. We remain committed to our capital priorities and maximizing stakeholder value. 

Chris Gorman, Chairman and CEO


Selected Financial Highlights









dollars in millions, except per share data





Change 3Q21 vs.



3Q21

2Q21

3Q20


2Q21

3Q20

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

$

616


$

698


$

397



(11.7)

%

55.2

%

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

.65


.72


.41



(9.7)


58.5


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

18.55

%

21.34

%

12.19

%


N/A

N/A

Return on average total assets from continuing operations

1.41


1.63


1.00



N/A

N/A

Common Equity Tier 1 ratio (b)

9.6


9.9


9.5



N/A

N/A

Book value at period end

$

16.82


$

16.75


$

16.25



.4

%

3.5

%

Net interest margin (TE) from continuing operations

2.47

%

2.52

%

2.62

%


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) 

September 30, 2021 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 


INCOME STATEMENT HIGHLIGHTS








Revenue














dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Net interest income (TE)

$

1,025


$

1,023


$

1,006



.2

%

1.9

%

Noninterest income

797


750


681



6.3


17.0


Total revenue

$

1,822


$

1,773


$

1,687



2.8

%

8.0

%








TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the third quarter of 2021, an increase of $19 million from the third quarter of 2020. The increase in net interest income reflects higher earning asset balances and lower interest-bearing deposit costs, partially offset by a lower net interest margin. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity, partly offset by higher loan fees from the Paycheck Protection Program ("PPP") forgiveness.

Compared to the second quarter of 2021, taxable-equivalent net interest income increased by $2 million, and the net interest margin decreased by 5 basis points. Both net interest income and the net interest margin were impacted by higher earning asset balances, including elevated levels of liquidity, partially offset by lower earning asset yields. Net interest income also benefited from one additional business day in the third quarter of 2021.


Noninterest Income














dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Trust and investment services income

$

129


$

133


$

128



(3.0)

%

.8

%

Investment banking and debt placement fees

235


217


146



8.3


61.0


Service charges on deposit accounts

91


83


77



9.6


18.2


Operating lease income and other leasing gains

37


36


38



2.8


(2.6)


Corporate services income

69


55


51



25.5


35.3


Cards and payments income

111


113


114



(1.8)


(2.6)


Corporate-owned life insurance income

33


30


30



10.0


10.0


Consumer mortgage income

33


26


51



26.9


(35.3)


Commercial mortgage servicing fees

34


44


18



(22.7)


88.9


Other income

25


13


28



92.3


(10.7)


Total noninterest income

$

797


$

750


$

681



6.3

%

17.0

%








Compared to the third quarter of 2020, noninterest income increased by $116 million, primarily driven by an $89 million increase in investment banking and debt placement fees, driven by higher volumes in equity underwriting and advisory transactions. Corporate services income and commercial mortgage servicing fees increased $18 million and $16 million, respectively. Partially offsetting these increases was consumer mortgage income, which decreased $18 million, due to lower gain on sale margins.

Compared to the second quarter of 2021, noninterest income increased by $47 million, reflecting broad-based growth in our fee-based businesses. Notable drivers of the quarter-over-quarter increase were investment banking and debt placement fees and corporate services income, which increased $18 million and $14 million, respectively. Partially offsetting these increases was a $10 million decrease in commercial mortgage servicing fees, reflecting lower activity-related fees.


Noninterest Expense














dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Personnel expense

$

640


$

623


$

588



2.7

%

8.8

%

Nonpersonnel expense

472


453


449



4.2


5.1


Total noninterest expense

$

1,112


$

1,076


$

1,037



3.3

%

7.2

%








Key's noninterest expense was $1.1 billion for the third quarter of 2021, an increase of $75 million from the year-ago period. The increase is primarily related to higher personnel costs of $52 million, reflecting higher incentive and stock-based compensation, attributed to an increase in fee production and Key's increased stock price. Additionally, other drivers for the year-over-year increase include higher business services and professional fees and marketing expense.

Compared to the second quarter of 2021, noninterest expense increased $36 million. The increase is primarily related to other expense, which is up $18 million reflecting elevated charitable contributions and a pension settlement charge. Additionally, personnel expense increased $17 million, mostly driven by an $8 million increase in employee benefits and a $7 million increase in salaries and contract labor due to one additional day in the quarter.



BALANCE SHEET HIGHLIGHTS








Average Loans








dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Commercial and industrial (a)

$

49,868


$

51,808


$

57,067



(3.7)

%

(12.6)

%

Other commercial loans

19,362


19,034


19,677



1.7


(1.6)


Total consumer loans

30,908


29,972


28,175



3.1


9.7


Total loans

$

100,138


$

100,814


$

104,919



(.7)

%

(4.6)

%








(a)

Commercial and industrial average loan balances include $137 million, $132 million, and $129 million of assets from commercial credit cards at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

Average loans were $100.1 billion for the third quarter of 2021, a decrease of $4.8 billion compared to the third quarter of 2020. Commercial loans decreased $7.5 billion, reflecting decreased utilization versus the year-ago period and a decline in PPP balances. Consumer loans increased $2.7 billion, reflecting strength from Key's consumer mortgage business and Laurel Road, partly offset by the sale of the indirect auto loan portfolio.

Compared to the second quarter of 2021, average loans decreased by $676 million. Commercial loans decreased $1.6 billion, driven by a $3.3 billion decline in PPP loan balances, partially offset by core portfolio growth in commercial and industrial loans and commercial real estate loans. Consumer loans continue to reflect strength from Key's consumer mortgage business, partly offset by the sale of the indirect auto loan portfolio, which reduced average loans by $763 million.


Average Deposits








dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Non-time deposits

$

142,537


$

139,480


$

127,347



2.2

%

11.9

%

Certificates of deposit ($100,000 or more)

1,975


2,212


3,862



(10.7)


(48.9)


Other time deposits

2,404


2,630


3,735



(8.6)


(35.6)


Total deposits

$

146,916


$

144,322


$

134,944



1.8

%

8.9

%








Cost of total deposits

.04

%

.05

%

.16

%


N/A

N/A








N/A = Not Applicable

Average deposits totaled $146.9 billion for the third quarter of 2021, an increase of $12.0 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, including higher commercial escrow deposits, partially offset by a decline in time deposits.

Compared to the second quarter of 2021, average deposits increased by $2.6 billion, primarily driven by commercial growth.


ASSET QUALITY








dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Net loan charge-offs

$

29


$

22


$

128



31.8

%

(77.3)

%

Net loan charge-offs to average total loans

.11

%

.09

%

.49

%


N/A

N/A

Nonperforming loans at period end

$

554


$

694


$

834



(20.2)


(33.6)


Nonperforming assets at period end

599


738


1,003



(18.8)


(40.3)


Allowance for loan and lease losses

1,084


1,220


1,730



(11.1)


(37.3)


Allowance for credit losses

1,236


1,372


1,938



(9.9)


(36.2)


Allowance for loan and lease losses to nonperforming loans

195.7

%

175.8

%

207.4

%


N/A

N/A

Allowance for credit losses to nonperforming loans

223.1


197.7


232.4



N/A

N/A

Provision for credit losses

$

(107)


$

(222)


$

160



(51.8)

%

(166.9)

%








N/A = Not Applicable

Key's provision for credit losses was a net benefit of $107 million, including a $136 million reserve release for the third quarter of 2021, compared to an expense of $160 million in the third quarter of 2020 and a net benefit of $222 million in the second quarter of 2021. The reserve release was largely driven by a continued improvement in the economic outlook.

Net loan charge-offs for the third quarter of 2021 totaled $29 million, or .11% of average total loans. These results compare to $128 million, or .49%, for the third quarter of 2020 and $22 million, or .09%, for the second quarter of 2021. Net charge-offs in the current quarter included $22 million related to the sale of the indirect auto loan portfolio. Key's allowance for credit losses was $1.2 billion, or 1.25% of total period-end loans at September 30, 2021, compared to 1.88% at September 30, 2020, and 1.36% at June 30, 2021.

At September 30, 2021, Key's nonperforming loans totaled $554 million, which represented .56% of period-end portfolio loans. These results compare to .81% at September 30, 2020, and .69% at June 30, 2021. Nonperforming assets at September 30, 2021, totaled $599 million, and represented .61% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .97% at September 30, 2020, and .73% at June 30, 2021.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2021. On September 10, Key entered into an accelerated share repurchase program.

Capital Ratios









9/30/2021

6/30/2021

9/30/2020

Common Equity Tier 1 (a)

9.6

%

9.9

%

9.5

%

Tier 1 risk-based capital (a)

10.9


11.3


10.9


Total risk based capital (a)

12.7


13.2


13.3


Tangible common equity to tangible assets (b)

7.0


7.4


7.8


Leverage (a)

8.4


8.7


8.7






(a)

September 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 third quarter of 2021. As shown in the preceding table, at September 30, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.6% and 10.9%, respectively. Key's tangible common equity ratio was 7.0% at September 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 3Q21 vs.



3Q21

2Q21

3Q20


2Q21

3Q20

Shares outstanding at beginning of period

960,276


972,587


975,947



(1.3)

%

(1.6)

%

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

(29,923)


(13,304)


(1)



124.9


N/M

Shares issued under employee compensation plans (net of cancellations)

191


993


259



(80.8)


(26.3)



Shares outstanding at end of period

930,544


960,276


976,205



(3.1)

%

(4.7)

%









N/M = Not Meaningful

During the third quarter of 2021, Key declared a dividend of $.185 per common share and completed $593 million of common share repurchases. Of the $593 million total common shares repurchased in the third quarter of 2021, $468 million were related to the initial settlement of the accelerated share repurchase program and $125 million were purchased in the open market.

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 3Q21 vs.



3Q21

2Q21

3Q20


2Q21

3Q20

Revenue from continuing operations (TE)







Consumer Bank

$

870


$

852


$

864



2.1

%

.7

%

Commercial Bank

891


873


811



2.1


9.9


Other (a)

61


48


12



27.1


N/M


Total

$

1,822


$

1,773


$

1,687



2.8

%

8.0

%









Income (loss) from continuing operations attributable to Key







Consumer Bank

$

241


$

257


$

229



(6.2)

%

5.2

%

Commercial Bank

384


433


173



(11.3)


122.0


Other (a)

18


34


22



(47.1)


(18.2)



Total

$

643


$

724


$

424



(11.2)

%

51.7

%









(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 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Summary of operations







Net interest income (TE)

$

582


$

599


$

598



(2.8)

%

(2.7)

%

Noninterest income

288


253


266



13.8


8.3


Total revenue (TE)

870


852


864



2.1


.7


Provision for credit losses

(38)


(70)


(3)



45.7


N/M

Noninterest expense

591


584


567



1.2


4.2


Income (loss) before income taxes (TE)

317


338


300



(6.2)


5.7


Allocated income taxes (benefit) and TE adjustments

76


81


71



(6.2)


7.0


Net income (loss) attributable to Key

$

241


$

257


$

229



(6.2)

%

5.2

%








Average balances







Loans and leases

$

39,796


$

40,598


$

38,354



(2.0)

%

3.8

%

Total assets

42,981


43,818


43,304



(1.9)


(.7)


Deposits

89,156


88,412


82,829



.8


7.6









Assets under management at period end

$

52,867


$

51,013


$

43,949



3.6

%

20.3

%








TE = Taxable Equivalent

 

 


Additional Consumer Bank Data








dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Noninterest income







Trust and investment services income

$

105


$

104


$

100



1.0

%

5.0

%

Service charges on deposit accounts

56


48


44



16.7


27.3


Cards and payments income

62


62


55




12.7


Consumer mortgage income

33


26


51



26.9


(35.3)


Other noninterest income

32


13


16



146.2


100.0


Total noninterest income

$

288


$

253


$

266



13.8

%

8.3

%








Average deposit balances







NOW and money market deposit accounts

$

56,353


$

56,038


$

52,539



.6

%

7.3

%

Savings deposits

6,749


6,523


5,168



3.5


30.6


Certificates of deposit ($100,000 or more)

1,846


2,083


3,550



(11.4)


(48.0)


Other time deposits

2,398


2,616


3,701



(8.3)


(35.2)


Noninterest-bearing deposits

21,810


21,152


17,872



3.1


22.0


Total deposits

$

89,156


$

88,412


$

82,830



.8

%

7.6

%








Other data







Branches

1,000


1,014


1,077





Automated teller machines

1,316


1,329


1,388












 

Consumer Bank Summary of Operations (3Q21 vs. 3Q20)

  • Net income attributable to Key of $241 million for the third quarter of 2021, compared to $229 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $16 million, compared to the third quarter of 2020, driven by the lower interest rate environment, partially offset by strong consumer mortgage balance sheet growth and fees related to PPP loans
  • Average loans and leases increased $1.4 billion, or 3.8%, from the third quarter of 2020, driven by growth in consumer mortgage, partially offset by the sale of the indirect auto loan portfolio
  • Average deposits increased $6.3 billion, or 7.6%, from the third quarter of 2020, driven by retention of consumer stimulus payments and relationship growth
  • Provision for credit losses decreased $35 million, compared to the third quarter of 2020. The provision for credit losses was a net benefit and was driven by improvements in expected economic conditions and continued strength in client credit quality
  • Noninterest income increased $22 million, or 8.3%, from the year ago quarter, driven by higher service charges on deposit accounts and cards and payments income, partially offset by lower consumer mortgage income, due to lower gain on sale margins
  • Noninterest expense increased $24 million, or 4.2%, from the year ago quarter, driven by higher production-related incentives and support expenses related to higher loan volumes

 


Commercial Bank















dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Summary of operations







Net interest income (TE)

$

414


$

418


$

427



(1.0)

%

(3.0)

%

Noninterest income

477


455


384



4.8


24.2


Total revenue (TE)

891


873


811



2.1


9.9


Provision for credit losses

(69)


(131)


150



(47.3)


(146.0)


Noninterest expense

470


451


447



4.2


5.1


Income (loss) before income taxes (TE)

490


553


214



(11.4)


129.0


Allocated income taxes and TE adjustments

106


120


41



(11.7)


158.5


Net income (loss) attributable to Key

$

384


$

433


$

173



(11.3)

%

122.0

%








Average balances







Loans and leases

$

59,914


$

59,953


$

66,378



(.1)

%

(9.7)

%

Loans held for sale

1,190


1,341


1,383



(11.3)


(14.0)


Total assets

69,285


69,101


74,530



0.3


(7.0)


Deposits

56,546


54,814


51,585



3.2

%

9.6

%








TE = Taxable Equivalent, N/M = Not Meaningful

 


 

Additional Commercial Bank Data








dollars in millions





Change 3Q21 vs.


3Q21

2Q21

3Q20


2Q21

3Q20

Noninterest income







Trust and investment services income

$

24


$

27


$

28



(11.1)

%

(14.3)


Investment banking and debt placement fees

234


215


146



8.8


60.3

%

Operating lease income and other leasing gains

37


35


38



5.7


(2.6)









Corporate services income

63


47


44



34.0


43.2


Service charges on deposit accounts

34


34


33




3.0


Cards and payments income

44


49


60



(10.2)


(26.7)


Payments and services income

141


130


137



8.5


2.9









Commercial mortgage servicing fees

34


44


18



(22.7)


88.9


Other noninterest income

7


4


17



75.0


(58.8)


Total noninterest income

$

477


$

455


$

384



4.8

%

24.2

%








N/M = Not Meaningful

Commercial Bank Summary of Operations (3Q21 vs. 3Q20)


  • Net income attributable to Key of $384 million for the third quarter of 2021, compared to $173 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $13 million, compared to the third quarter of 2020, as lower average loan balances offset fees related to PPP loans
  • Average loan and lease balances decreased $6.5 billion, compared to the third quarter of 2020, driven by lower commercial and industrial line draws and PPP loan forgiveness
  • Average deposit balances increased $5.0 billion, or 9.6%, compared to the third quarter of 2020, driven by growth in targeted relationships and the impact of government programs
  • Provision for credit losses decreased $219 million, compared to the third quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions
  • Noninterest income increased $93 million, from the year-ago quarter, driven by elevated investment banking client activity and commercial mortgage servicing fees, partially offset by lower cards and payments income as individuals roll off unemployment benefits
  • Noninterest expense increased by $23 million, or 5.1%, from the third quarter of 2020, driven by higher production-related incentives related to strong revenue production

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

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 September 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 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.


 

INVESTOR RELATIONS:

KEY MEDIA NEWSROOM:

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 October 21, 2021. A replay of the call will be available through October 30, 2021.

*****

 

           

KeyCorp

Third 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




9/30/2021

6/30/2021

9/30/2020

Summary of operations





Net interest income (TE)

$

1,025


$

1,023


$

1,006



Noninterest income

797


750


681




Total revenue (TE)

1,822


1,773


1,687



Provision for credit losses

(107)


(222)


160



Noninterest expense

1,112


1,076


1,037



Income (loss) from continuing operations attributable to Key

643


724


424



Income (loss) from discontinued operations, net of taxes

2


5


4



Net income (loss) attributable to Key

645


729


428









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

616


698


397



Income (loss) from discontinued operations, net of taxes

2


5


4



Net income (loss) attributable to Key common shareholders

618


703


401








Per common share





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

$

.65


$

.73


$

.41



Income (loss) from discontinued operations, net of taxes





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

.66


.73


.41









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

.65


.72


.41



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





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

.65


.73


.41









Cash dividends declared

.185


.185


.185



Book value at period end

16.82


16.75


16.25



Tangible book value at period end

13.80


13.81


13.32



Market price at period end

21.62


20.65


11.93








Performance ratios





From continuing operations:





Return on average total assets

1.41

%

1.63

%

1.00

%


Return on average common equity

15.28

%

17.54


9.98



Return on average tangible common equity (b)

18.55


21.34


12.19



Net interest margin (TE)

2.47


2.52


2.62



Cash efficiency ratio (b)

60.2


59.9


60.6









From consolidated operations:





Return on average total assets

1.41


1.64

%

1.00

%


Return on average common equity

15.33


17.67


10.08



Return on average tangible common equity (b)

18.61


21.49


12.31



Net interest margin (TE)

2.46


2.55


2.62



Loan to deposit (c)

66.5


70.4


77.2








Capital ratios at period end





Key shareholders' equity to assets

9.4

%

9.9

%

10.4

%


Key common shareholders' equity to assets

8.4


8.9


9.3



Tangible common equity to tangible assets (b)

7.0


7.4


7.8



Common Equity Tier 1 (d)

9.6


9.9


9.5



Tier 1 risk-based capital (d)

10.9


11.3


10.9



Total risk-based capital (d)

12.7


13.2


13.3



Leverage (d)

8.4


8.7


8.7








Asset quality — from continuing operations





Net loan charge-offs

$

29


$

22


$

128



Net loan charge-offs to average loans

.11

%

.09

%

.49

%


Allowance for loan and lease losses

$

1,084


$

1,220


$

1,730



Allowance for credit losses

1,236


1,372


1,938



Allowance for loan and lease losses to period-end loans

1.10

%

1.21

%

1.68

%


Allowance for credit losses to period-end loans

1.25


1.36


1.88



Allowance for loan and lease losses to nonperforming loans

195.7


175.8


207.4



Allowance for credit losses to nonperforming loans

223.1


197.7


232.4



Nonperforming loans at period-end

$

554


$

694


$

834



Nonperforming assets at period-end

599


738


1,003



Nonperforming loans to period-end portfolio loans

.56

%

.69

%

.81

%


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

.61


.73


.97








Trust assets





Assets under management

$

52,867


$

51,013


$

43,949








Other data





Average full-time equivalent employees

17,009


17,003


17,097



Branches

1,000


1,014


1,077



Taxable-equivalent adjustment

$

9


$

6


$

6


 

     





Financial Highlights (continued)

(dollars in millions, except per share amounts)



Nine months ended



9/30/2021

9/30/2020

Summary of operations




Net interest income (TE)

$

3,060


$

3,020



Noninterest income

2,285


1,850



Total revenue (TE)

5,345


4,870



Provision for credit losses

(422)


1,001



Noninterest expense

3,259


2,981



Income (loss) from continuing operations attributable to Key

1,985


754



Income (loss) from discontinued operations, net of taxes

11


7



Net income (loss) attributable to Key

1,996


761







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

1,905


674



Income (loss) from discontinued operations, net of taxes

11


7



Net income (loss) attributable to Key common shareholders

1,916


681






Per common share




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

$

1.99


$

.70



Income (loss) from discontinued operations, net of taxes

.01


.01



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

2.00


.70







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

1.98


.69



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

.01


.01



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

1.99


.70







Cash dividends paid

.56


.56






Performance ratios




From continuing operations:




Return on average total assets

1.50

%

.63

%


Return on average common equity

15.98


5.75



Return on average tangible common equity (b)

19.43


7.06



Net interest margin (TE)

2.53


2.78



Cash efficiency ratio (b)

60.1


60.2







From consolidated operations:




Return on average total assets

1.50

%

.63

%


Return on average common equity

16.07


5.81



Return on average tangible common equity (b)

19.54


7.13



Net interest margin (TE)

2.52


2.78






Asset quality — from continuing operations




Net loan charge-offs

$

165


$

308



Net loan charge-offs to average total loans

.22

%

.40

%





Other data




Average full-time equivalent employees

17,034


16,758






Taxable-equivalent adjustment

22


21


(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) 

September 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


Nine months ended


9/30/2021

6/30/2021

9/30/2020


9/30/2021

9/30/2020

Tangible common equity to tangible assets at period-end







Key shareholders' equity (GAAP)

$

17,510


$

17,941


$

17,722





Less: Intangible assets (a)

2,814


2,828


2,862





Preferred Stock (b)

1,856


1,856


1,856





Tangible common equity (non-GAAP)

$

12,840


$

13,257


$

13,004





Total assets (GAAP)

$

187,035


$

181,115


$

170,540





Less: Intangible assets (a)

2,814


2,828


2,862





Tangible assets (non-GAAP)

$

184,221


$

178,287


$

167,678





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

6.97

%

7.44

%

7.76

%




Pre-provision net revenue







Net interest income (GAAP)

$

1,016


$

1,017


$

1,000



$

3,038


$

2,999


Plus: Taxable-equivalent adjustment

9


6


6



22


21


Noninterest income

797


750


681



2,285


1,850


Less: Noninterest expense

1,112


1,076


1,037



3,259


2,981


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

$

710


$

697


$

650



$

2,086


$

1,889


Average tangible common equity







Average Key shareholders' equity (GAAP)

$

17,899


$

17,859


$

17,730



$

17,843


$

17,545


Less: Intangible assets (average) (c)

2,823


2,840


2,870



2,834


2,886


Preferred stock (average)

1,900


1,900


1,900



1,900


1,900


Average tangible common equity (non-GAAP)

$

13,176


$

13,119


$

12,960



$

13,109


$

12,759


Return on average tangible common equity from continuing operations







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

$

616


$

698


$

397



$

1,905


$

674


Average tangible common equity (non-GAAP)

13,176


13,119


12,960



13,109


12,759









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

18.55

%

21.34

%

12.19

%


19.43

%

7.06

%

Return on average tangible common equity consolidated







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

$

618


$

703


$

401



$

1,916


$

681


Average tangible common equity (non-GAAP)

13,176


13,119


12,960



13,109


12,759









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

18.61

%

21.49

%

12.31

%


19.54

%

7.13

%

 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)


Three months ended


Nine months ended


9/30/2021

6/30/2021

9/30/2020


9/30/2021

9/30/2020

Cash efficiency ratio







Noninterest expense (GAAP)

$

1,112


$

1,076


$

1,037



$

3,259


$

2,981


Less: Intangible asset amortization

15


14


15



44


50


Adjusted noninterest expense (non-GAAP)

$

1,097


$

1,062


$

1,022



$

3,215


$

2,931









Net interest income (GAAP)

$

1,016


$

1,017


$

1,000



$

3,038


$

2,999


Plus: Taxable-equivalent adjustment

9


6


6



22


21


Noninterest income

797


750


681



2,285


1,850


Total taxable-equivalent revenue (non-GAAP)

$

1,822


$

1,773


$

1,687



$

5,345


$

4,870









Cash efficiency ratio (non-GAAP)

60.2

%

59.9

%

60.6

%


60.1

%

60.2

%








(a)

For the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, intangible assets exclude $3 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 September 30, 2021, June 30, 2021, and September 30, 2020, average intangible assets exclude $3 million, $4 million, and $5 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2021, and September 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)










9/30/2021

6/30/2021

9/30/2020

Assets





Loans

$

98,609


$

100,730


$

103,081



Loans held for sale

1,805


1,537


1,724



Securities available for sale

40,594


34,638


26,895



Held-to-maturity securities

8,423


6,175


8,384



Trading account assets

902


851


733



Short-term investments

19,608


20,460


14,148



Other investments

607


635


620




Total earning assets

170,548


165,026


155,585



Allowance for loan and lease losses

(1,084)


(1,220)


(1,730)



Cash and due from banks

763


792


956



Premises and equipment

678


785


765



Goodwill

2,673


2,673


2,664



Other intangible assets

144


159


203



Corporate-owned life insurance

4,312


4,304


4,274



Accrued income and other assets

8,404


7,966


7,084



Discontinued assets

597


630


739




Total assets

$

187,035


181,115


170,540








Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$

87,242


$

85,242


$

80,791




Savings deposits

7,259


6,993


5,585




Certificates of deposit ($100,000 or more)

1,890


2,064


3,345




Other time deposits

2,315


2,493


3,450




Total interest-bearing deposits

98,706


96,792


93,171




Noninterest-bearing deposits

53,225


49,280


43,575




Total deposits

151,931


146,072


136,746



Federal funds purchased and securities sold under repurchase agreements 

228


211


213



Bank notes and other short-term borrowings

767


723


818



Accrued expense and other liabilities

3,434


2,957


2,356



Long-term debt

13,165


13,211


12,685




Total liabilities

169,525


163,174


152,818








Equity





Preferred stock

1,900


1,900


1,900



Common shares

1,257


1,257


1,257



Capital surplus

6,141


6,232


6,263



Retained earnings

14,133


13,689


12,375



Treasury stock, at cost

(5,876)


(5,287)


(4,940)



Accumulated other comprehensive income (loss)

(45)


150


867




Key shareholders' equity

17,510


17,941


17,722



Noncontrolling interests






Total equity

17,510


17,941


17,722


Total liabilities and equity

$

187,035


$

181,115


$

170,540








Common shares outstanding (000)

930,544


960,276


976,205


 

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)




Three months ended


Nine months ended




9/30/2021

6/30/2021

9/30/2020


9/30/2021

9/30/2020

Interest income








Loans

$

882


$

888


$

927



$

2,659


$

2,933



Loans held for sale

13


11


18



35


58



Securities available for sale

135


133


115



398


365



Held-to-maturity securities

43


45


53



133


171



Trading account assets

4


5


3



14


16



Short-term investments

9


6


1



20


14



Other investments

1


2


2



5


3




Total interest income

1,087


1,090


1,119



3,264


3,560


Interest expense








Deposits

15


16


54



52


319



Federal funds purchased and securities sold under repurchase agreements






6



Bank notes and other short-term borrowings

2


3


1



6


11



Long-term debt

54


54


64



168


225




Total interest expense

71


73


119



226


561


Net interest income

1,016


1,017


1,000



3,038


2,999


Provision for credit losses

(107)


(222)


160



(422)


1,001


Net interest income after provision for credit losses

1,123


1,239


840



3,460


1,998


Noninterest income








Trust and investment services income

129


133


128



395


384



Investment banking and debt placement fees

235


217


146



614


418



Service charges on deposit accounts

91


83


77



247


229



Operating lease income and other leasing gains

37


36


38



111


128



Corporate services income

69


55


51



188


165



Cards and payments income

111


113


114



329


271



Corporate-owned life insurance income

33


30


30



94


101



Consumer mortgage income

33


26


51



106


133



Commercial mortgage servicing fees

34


44


18



112


48



Other income

25


13


28



89


(27)




Total noninterest income

797


750


681



2,285


1,850


Noninterest expense








Personnel

640


623


588



1,887


1,675



Net occupancy

74


75


76



225


223



Computer processing

67


71


59



211


170



Business services and professional fees

56


51


49



157


142



Equipment

25


25


25



75


74



Operating lease expense

30


31


33



95


103



Marketing

32


31


22



89


67



Intangible asset amortization

15


14


15



44


50



Other expense

173


155


170



476


477




Total noninterest expense

1,112


1,076


1,037



3,259


2,981


Income (loss) from continuing operations before income taxes

808


913


484



2,486


867



Income taxes

165


189


60



501


113


Income (loss) from continuing operations

643


724


424



1,985


754



Income (loss) from discontinued operations, net of taxes

2


5


4



11


7


Net income (loss)

645


729


428



1,996


761



Less:  Net income (loss) attributable to noncontrolling interests







Net income (loss) attributable to Key

$

645


$

729


$

428



$

1,996


$

761











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

$

616


$

698


$

397



$

1,905


$

674


Net income (loss) attributable to Key common shareholders

618


703


401



1,916


681


Per common share







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

$

.65


$

.73


$

.41



$

1.99


$

.70


Income (loss) from discontinued operations, net of taxes





.01


.01


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

.66


.73


.41



2.00


.70


Per common share — assuming dilution







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

$

.65


$

.72


$

.41



$

1.98


$

.69


Income (loss) from discontinued operations, net of taxes





.01


.01


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

.65


.73


.41



1.99


.70











Cash dividends declared per common share

$

.185


$

.185


$

.185



$

.555


$

.555











Weighted-average common shares outstanding (000)

942,446


957,423


967,804



955,069


967,632



Effect of common share options and other stock awards

10,077


9,740


6,184



9,712


6,648


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

952,523


967,163


973,988



964,781


974,280


(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)



Third Quarter 2021


Second Quarter 2021


Third 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)

$

49,868


$

445


3.54



$

51,808


$

450


3.48



$

57,067


$

474


3.31



Real estate — commercial mortgage

13,306


120


3.56



12,825


117


3.67



13,202


117


3.54



Real estate — construction

2,134


19


3.53



2,149


20


3.68



1,987


18


3.57



Commercial lease financing

3,922


27


2.80



4,060


30


2.98



4,488


35


3.10



Total commercial loans

69,230


611


3.50



70,842


617


3.49



76,744


644


3.34



Real estate — residential mortgage

13,168


92


2.78



11,055


81


2.92



8,398


73


3.46



Home equity loans

8,894


84


3.75



9,089


85


3.76



9,580


91


3.82



Consumer direct loans

5,175


59


4.55



4,910


57


4.69



4,403


56


5.07



Credit cards

917


23


10.07



908


22


9.79



967


25


10.24



Consumer indirect loans

2,754


22


3.15



4,010


32


3.19



4,827


44


3.66



Total consumer loans

30,908


280


3.60



29,972


277


3.71



28,175


289


4.10



Total loans

100,138


891


3.53



100,814


894


3.56



104,919


933


3.55



Loans held for sale

1,447


13


3.66



1,616


11


2.60



1,924


18


3.61



Securities available for sale (b), (e)

36,923


135


1.48



33,623


133


1.57



24,941


115


1.90



Held-to-maturity securities (b)

6,507


43


2.66



6,452


45


2.75



8,677


53


2.44



Trading account assets

743


4


2.19



837


5


2.56



686


3


2.08



Short-term investments

19,274


9


.18



18,817


6


.13



12,525


1


.04



Other investments (e)

614


1


.99



622


2


1.02



640


2


1.49



Total earning assets

165,646


1,096


2.64



162,781


1,096


2.70



154,312


1,125


2.93



Allowance for loan and lease losses

(1,222)





(1,442)





(1,696)





Accrued income and other assets

16,947





16,531





16,195





Discontinued assets

618





650





752





Total assets

$

181,989





$

178,520





$

169,563




Liabilities













NOW and money market deposit accounts

$

85,333


$

10


.05



$

83,981


$

9


.05



$

80,175


$

26


.13



Savings deposits

7,117



.01



6,859


1


.03



5,478


1


.04



Certificates of deposit ($100,000 or more)

1,975


3


.59



2,212


4


.72



3,862


16


1.60



Other time deposits

2,404


2


.26



2,630


2


.38



3,735


11


1.17



Total interest-bearing deposits

96,829


15


.06



95,682


16


.07



93,250


54


.23



Federal funds purchased and securities sold under repurchase agreements

231



.02



251



.02



225



.05



Bank notes and other short-term borrowings

671


2


1.11



744


3


1.19



761


1


.68



Long-term debt (f), (g)

12,601


54


1.73



11,978


54


1.79



12,801


64


2.12



Total interest-bearing liabilities

110,332


71


.26



108,655


73


.27



107,037


119


.45



Noninterest-bearing deposits

50,087





48,640





41,694





Accrued expense and other liabilities

3,053





2,716





2,350





Discontinued liabilities (g)

618





650





752





Total liabilities

$

164,090





$

160,661





$

151,833




Equity













Key shareholders' equity

$

17,899





$

17,859





$

17,730





Noncontrolling interests













Total equity

17,899





17,859





17,730





Total liabilities and equity

$

181,989





$

178,520





$

169,563




Interest rate spread (TE)



2.38

%




2.43

%




2.48

%

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


$

1,025


2.47

%



$

1,023


2.52

%



$

1,006


2.62

%

TE adjustment (b)


9





6





6




Net interest income, GAAP basis


$

1,016





$

1,017





$

1,000



(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 September 30, 2021, June 30, 2021, and September 30, 2020.   

(c) 

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

(d) 

Commercial and industrial average balances include $137 million, $132 million, and $129 million of assets from commercial credit cards for the three months ended September 30, 2021, June 30, 2021, and September 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)



Nine months ended September 30, 2021



Nine months ended September 30, 2020



Average


Yield/



Average


Yield/



Balance

Interest (a)

Rate (a)



Balance

Interest (a)

Rate (a)

Assets










Loans: (b), (c)










Commercial and industrial (d)

$

51,410


$

1,347


3.50

%



$

55,676


$

1,500


3.60

%


Real estate — commercial mortgage

12,932


351


3.63




13,419


400


3.98



Real estate — construction

2,111


58


3.65




1,804


55


4.06



Commercial lease financing

4,041


89


2.93




4,546


107


3.15



Total commercial loans

70,494


1,845


3.50




75,445


2,062


3.65



Real estate — residential mortgage

11,320


246


2.89




7,801


210


3.59



Home equity loans

9,089


257


3.78




9,894


301


4.07



Consumer direct loans

4,969


173


4.65




4,089


165


5.38



Credit cards

919


69


10.10




1,010


81


10.68



Consumer indirect loans

3,771


91


3.22




4,779


135


3.78



Total consumer loans

30,068


836


3.71




27,573


892


4.32



Total loans

100,562


2,681


3.56




103,018


2,954


3.83



Loans held for sale

1,531


35


3.03




2,090


58


3.68



Securities available for sale (b), (e)

33,553


398


1.60




22,297


365


2.25



Held-to-maturity securities (b)

6,713


133


2.64




9,274


171


2.46



Trading account assets

809


14


2.30




837


16


2.55



Short-term investments

18,211


20


.15




7,412


14


.24



Other investments (e)

616


5


1.14




642


3


.72



Total earning assets

161,995


3,286


2.71




145,570


3,581


3.30



Allowance for loan and lease losses

(1,427)






(1,403)





Accrued income and other assets

16,626






15,579





Discontinued assets

651






794





Total assets

$

177,845






$

160,540




Liabilities










NOW and money market deposit accounts

$

83,599


$

30


.05




$

74,087


$

194


.35



Savings deposits

6,730


1


.02




5,089


2


.04



Certificates of deposit ($100,000 or more)

2,250


13


.77




5,036


74


1.96



Other time deposits

2,644


8


.41




4,321


49


1.53



Total interest-bearing deposits

95,223


52


.07




88,533


319


.48



Federal funds purchased and securities sold under repurchase agreements

242



.03




821


6


.95



Bank notes and other short-term borrowings

764


6


.96




1,674


11


.87



Long-term debt (f), (g)

12,469


168


1.80




12,733


225


2.45



Total interest-bearing liabilities

108,698


226


.28




103,761


561


.73



Noninterest-bearing deposits

47,800






35,922





Accrued expense and other liabilities

2,853






2,518





Discontinued liabilities (g)

651






794





Total liabilities

$

160,002






$

142,995




Equity










Key shareholders' equity

$

17,843






$

17,545





Noncontrolling interests










Total equity

17,843






17,545





Total liabilities and equity

$

177,845






$

160,540




Interest rate spread (TE)



2.44

%





2.57

%

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


$

3,060


2.53

%




$

3,020


2.78

%

TE adjustment (b)


22






21




Net interest income, GAAP basis


$

3,038






$

2,999













(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 nine months ended September 30, 2021, and September 30, 2020, respectively.  

(c) 

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

(d) 

Commercial and industrial average balances include $131 million and $137 million of assets from commercial credit cards for the nine months ended September 30, 2021, and September 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


Nine months ended


9/30/2021

6/30/2021

9/30/2020


9/30/2021

9/30/2020

Personnel (a)

$

640


$

623


$

588



$

1,887


$

1,675


Net occupancy

74


75


76



225


223


Computer processing

67


71


59



211


170


Business services and professional fees

56


51


49



157


142


Equipment

25


25


25



75


74


Operating lease expense

30


31


33



95


103


Marketing

32


31


22



89


67


Intangible asset amortization

15


14


15



44


50


Other expense

173


155


170



476


477


Total noninterest expense

$

1,112


$

1,076


$

1,037



$

3,259


$

2,981


Average full-time equivalent employees (b)

17,009


17,003


17,097



17,034


16,758


(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


Nine months ended


9/30/2021

6/30/2021

9/30/2020


9/30/2021

9/30/2020

Salaries and contract labor

$

328


$

321


$

339



$

969


$

987


Incentive and stock-based compensation

212


210


155



618


419


Employee benefits

100


92


93



299


261


Severance



1



1


8


Total personnel expense

$

640


$

623


$

588



$

1,887


$

1,675


 

 

Loan Composition

(dollars in millions)











Percent change 9/30/2021 vs


9/30/2021

6/30/2021

9/30/2020


6/30/2021

9/30/2020

Commercial and industrial (a)

$

49,553


$

50,672


$

55,025



(2.2)

%

(9.9)

%

Commercial real estate:







Commercial mortgage

13,674


12,965


13,059



5.5


4.7


Construction

2,120


2,132


1,947



(.6)


8.9


Total commercial real estate loans

15,794


15,097


15,006



4.6


5.3


Commercial lease financing (b)

3,982


4,061


4,450



(1.9)


(10.5)


Total commercial loans

69,329


69,830


74,481



(.7)


(6.9)


Residential — prime loans:







Real estate — residential mortgage

14,204


12,131


8,715



17.1


63.0


Home equity loans

8,747


9,047


9,488



(3.3)


(7.8)


Total residential — prime loans

22,951


21,178


18,203



8.4


26.1


Consumer direct loans

5,324


5,049


4,395



5.4


21.1


Credit cards

928


923


970



.5


(4.3)


Consumer indirect loans

77


3,750


5,032



(97.9)


(98.5)


Total consumer loans

29,280


30,900


28,600



(5.2)


2.4


Total loans (c), (d)

$

98,609


$

100,730


$

103,081



(2.1)

%

(4.3)

%

(a) 

Loan balances include $139 million, $135 million, and $128 million of commercial credit card balances at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

(b) 

Commercial lease financing includes receivables held as collateral for a secured borrowing of $16 million, $19 million, and $18 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c) 

Total loans exclude loans of $602 million at September 30, 2021, $636 million at June 30, 2021, and $743 million at September 30, 2020, related to the discontinued operations of the education lending business.

(d) 

Accrued interest of$211 million, $225 million, and $235 million at September 30, 2021, June 30, 2021, and September 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 9/30/2021 vs


9/30/2021

6/30/2021

9/30/2020


6/30/2021

9/30/2020

Commercial and industrial

$

122


$

233


$

336



(47.6)

%

(63.7)

%

Real estate — commercial mortgage

1,446


1,073


1,031



34.8


40.3


Commercial lease financing



1



N/M


N/M


Real estate — residential mortgage

237


231


288



2.6


(17.7)


Consumer direct loans



68



N/M


N/M


Total loans held for sale

$

1,805


$

1,537


$

1,724



17.4

%

4.7

%








 N/M = Not Meaningful

 

 

Summary of Changes in Loans Held for Sale

(in millions)








3Q21

2Q21

1Q21

4Q20

3Q20

Balance at beginning of period

$

1,537


$

2,296


$

1,583


$

1,724


$

2,007


New originations

3,328


3,573


4,010


3,835


3,282


Transfers from (to) held to maturity, net

3,305


(71)


83


(24)


75


Loan sales

(6,405)


(4,195)


(3,303)


(3,932)


(3,583)


Loan draws (payments), net

8


(27)


(73)


(19)


(57)


Valuation and other adjustments

32


(39)


(4)




Balance at end of period

$

1,805


$

1,537


$

2,296


$

1,583


$

1,724


 

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)









Three months ended


Nine months ended


9/30/2021

6/30/2021

9/30/2020


9/30/2021

9/30/2020

Average loans outstanding

$

100,138


$

100,814


$

104,919



$

100,562


$

103,018


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

$

1,220


$

1,438


$

1,708



$

1,626


$

900


Cumulative effect from change in accounting principle (a)






204


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

1,220


1,438


1,708



1,626


1,104


Loans charged off:







Commercial and industrial

27


41


101



141


232









Real estate — commercial mortgage


4


13



39


18


Real estate — construction







Total commercial real estate loans


4


13



39


18


Commercial lease financing

1



10



5


16


Total commercial loans

28


45


124



185


266


Real estate — residential mortgage

(2)


1




(1)


2


Home equity loans

1


4


4



7


10


Consumer direct loans

7


7


8



22


30


Credit cards

6


9


9



21


32


Consumer indirect loans

26


5


6



38


22


Total consumer loans

38


26


27



87


96


Total loans charged off

66


71


151



272


362


Recoveries:







Commercial and industrial

20


32


9



60


19









Real estate — commercial mortgage

1


6


2



8


3


Real estate — construction







Total commercial real estate loans

1


6


2



8


3


Commercial lease financing

6





7


1


Total commercial loans

27


38


11



75


23


Real estate — residential mortgage

1



1



2


1


Home equity loans

2


1


3



4


6


Consumer direct loans

2


2


2



6


6


Credit cards

1


3


2



6


6


Consumer indirect loans

4


5


4



14


12


Total consumer loans

10


11


12



32


31


Total recoveries

37


49


23



107


54


Net loan charge-offs

(29)


(22)


(128)



(165)


(308)


Provision (credit) for loan and lease losses

(107)


(196)


150



(377)


934


Allowance for loan and lease losses at end of period

$

1,084


$

1,220


$

1,730



$

1,084


$

1,730









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

$

152


$

178


$

198



$

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

152


178


198



197


141


Provision (credit) for losses on lending-related commitments


(26)


10



(45)


67


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

$

152


$

152


$

208



$

152


$

208









Total allowance for credit losses at end of period

$

1,236


$

1,372


$

1,938



$

1,236


$

1,938









Net loan charge-offs to average total loans

.11

%

.09

%

.49

%


.22

%

.40

%

Allowance for loan and lease losses to period-end loans

1.10


1.21


1.68



1.10


1.68


Allowance for credit losses to period-end loans

1.25


1.36


1.88



1.25


1.88


Allowance for loan and lease losses to nonperforming loans

195.7


175.8


207.4



195.7


207.4


Allowance for credit losses to nonperforming loans

223.1


197.7


232.4



223.1


232.4









Discontinued operations — education lending business:







Loans charged off

$

1


1


$



$

3


$

4


Recoveries

1





2


3


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) 

Nine months ended September 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)


3Q21

2Q21

1Q21

4Q20

3Q20

Net loan charge-offs

$

29


$

22


$

114


$

135


$

128


Net loan charge-offs to average total loans

.11

%

.09

%

.46

%

.53

%

.49

%

Allowance for loan and lease losses

$

1,084


$

1,220


$

1,438


$

1,626


$

1,730


Allowance for credit losses (a)

1,236


1,372


1,616


1,823


1,938


Allowance for loan and lease losses to period-end loans

1.10

%

1.21

%

1.42

%

1.61

%

1.68

%

Allowance for credit losses to period-end loans

1.25


1.36


1.60


1.80


1.88


Allowance for loan and lease losses to nonperforming loans

195.7


175.8


197.5


207.1


207.4


Allowance for credit losses to nonperforming loans

223.1


197.7


222.0


232.2


232.4


Nonperforming loans at period end

$

554


$

694


$

728


$

785


$

834


Nonperforming assets at period end

599


738


790


937


1,003


Nonperforming loans to period-end portfolio loans

.56

%

.69

%

.72

%

.78

%

.81

%

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

.61


.73


.78


.92


.97


(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)


9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Commercial and industrial

$

253


$

355


$

387


$

385


$

459








Real estate — commercial mortgage

49


66


66


104


104


Real estate — construction





1


Total commercial real estate loans

49


66


66


104


105


Commercial lease financing

5


7


8


8


6


Total commercial loans

307


428


461


497


570


Real estate — residential mortgage

93


99


95


110


96


Home equity loans

146


146


148


154


146


Consumer direct loans

4


4


5


5


3


Credit cards

3


3


3


2


2


Consumer indirect loans

1


14


16


17


17


Total consumer loans

247


266


267


288


264


Total nonperforming loans

554


694


728


785


834


OREO

8


9


12


100


105


Nonperforming loans held for sale

35


32


47


49


61


Other nonperforming assets

2


3


3


3


3


Total nonperforming assets

$

599


$

738


$

790


$

937


$

1,003


Accruing loans past due 90 days or more

82


74


92


86


73


Accruing loans past due 30 through 89 days

164


190


191


241


336


Restructured loans — accruing and nonaccruing (a)

270


334


376


363


306


Restructured loans included in nonperforming loans (a)

146


177


192


229


168


Nonperforming assets from discontinued operations — education lending business 

4


5


5


5


6


Nonperforming loans to period-end portfolio loans

.56

%

.69

%

.72

%

.78

%

.81

%

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

.61


.73


.78


.92


.97


(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)


3Q21

2Q21

1Q21

4Q20

3Q20

Balance at beginning of period

$

694


$

728


$

785


$

834


$

760


Loans placed on nonaccrual status

116


186


196


300


387


Charge-offs

(66)


(74)


(135)


(160)


(150)


Loans sold

(17)


(10)


(13)


(9)


(6)


Payments

(136)


(92)


(37)


(83)


(83)


Transfers to OREO

(1)



(3)


(3)



Transfers to nonperforming loans held for sale






Loans returned to accrual status

(36)


(44)


(65)


(94)


(74)


Balance at end of period

$

554


$

694


$

728


$

785


$

834


 

 

Line of Business Results

(dollars in millions)

















Percentage change 3Q21 vs.


3Q21

2Q21

1Q21

4Q20

3Q20


2Q21

3Q20

Consumer Bank









Summary of operations









Total revenue (TE)

$

870


$

852


$

864


$

896


$

864



2.1

%

.7

%

Provision for credit losses

(38)


(70)


(23)


(5)


(3)



45.7


N/M

Noninterest expense

591


584


601


606


567



1.2


4.2


Net income (loss) attributable to Key

241


257


217


225


229



(6.2)


5.2


Average loans and leases

39,796


40,598


39,249


38,033


38,354



(2.0)


3.8


Average deposits

89,156


88,412


85,033


82,845


82,829



.8


7.6


Net loan charge-offs

35


34


36


28


23



2.9


52.2


Net loan charge-offs to average total loans

.35

%

.34

%

.37

%

.29

%

.24

%


2.9


45.8


Nonperforming assets at period end

$

254


$

274


$

277


$

300


$

281



(7.3)


(9.6)


Return on average allocated equity

25.81

%

28.53

%

25.74

%

25.60

%

26.21

%


(9.5)


(1.5)











Commercial Bank









Summary of operations









Total revenue (TE)

$

891


$

873


$

858


$

922


$

811



2.1

%

9.9

%

Provision for credit losses

(69)


(131)


(67)


44


150



(47.3)


(187.3)


Noninterest expense

470


451


443


499


447



4.2


5.1


Net income (loss) attributable to Key

384


433


383


310


173



(11.3)


122.0


Average loans and leases

59,914


59,953


61,221


63,432


66,378



(.1)


(9.7)


Average loans held for sale

1,190


1,341


1,237


1,285


1,383



(11.3)


(14.0)


Average deposits

56,546


54,814


51,894


52,489


51,585



3.2


9.6


Net loan charge-offs

(6)


9


78


108


103



N/M

N/M

Net loan charge-offs to average total loans

(.04)

%

.06

%

.52

%

.68

%

.62

%


N/M

N/M

Nonperforming assets at period end

$

345


$

464


$

514


$

637


$

722



(25.6)


(52.2)


Return on average allocated equity

18.68

%

20.74

%

17.41

%

23.79

%

13.35

%


(9.9)


39.9


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

 

 

(PRNewsfoto/KeyCorp)

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/keycorp-reports-third-quarter-2021-net-income-of-616-million-or-65-per-diluted-common-share-301405581.html

SOURCE KeyCorp