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KeyCorp Reports Record Fourth Quarter 2020 Net Income Of $549 Million, Or $.56 Per Diluted Common Share

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CLEVELAND, Jan. 21, 2021 /PRNewswire/ -- KeyCorp (NYSE:KEY) today announced net income from continuing operations attributable to Key common shareholders of $549 million, or $.56 per diluted common share for the fourth quarter of 2020. This compared to $397 million, or $.41 per diluted common share, for the third quarter of 2020 and $439 million, or $.45 per diluted common share, for the fourth quarter of 2019. 

Key's record fourth quarter results marked a great finish to the year. I was extremely proud of the way our dedicated and resilient team came together to support our clients when they needed us most, while concurrently delivering strong results across our company.

We achieved a record level of revenue for both the fourth quarter and the full year. Fee income was up 23% from the year-ago period, with growth coming from consumer mortgage and investment banking. 

Credit quality remained strong this quarter, with net charge-offs of 53 basis points. Our provision for credit losses reflects our strong credit metrics and our outlook for the economy. We have continued to support our clients while maintaining our moderate risk profile through the business cycle. 

We have maintained our discipline in managing our strong capital position. At the end of the quarter, our Common Equity Tier 1 ratio was 9.8%, which was above our targeted range. Last week, our Board of Directors approved a new share repurchase authorization of up to $900 million and announced our first quarter dividend of $.185 per common share.

While 2020 presented many challenges, we remained focused on serving our clients, growing our business, and maintaining strong risk practices. Our success is due to our dedicated team, the strength of our business model, and our targeted relationship strategy. We have positioned our company to succeed and I remain confident in our ability to grow and to deliver on our commitments.

Chris Gorman, Chairman and CEO

Selected Financial Highlights















dollars in millions, except per share data





Change 4Q20 vs.



4Q20

3Q20

4Q19


3Q20

4Q19

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

$

549


$

397


$

439



38.3

%

25.1

%

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

.56


.41


.45



36.6


24.4


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

16.61

%

12.19

%

14.09

%


N/A

N/A

Return on average total assets from continuing operations

1.35


1.00


1.27



N/A

N/A

Common Equity Tier 1 ratio (b)

9.8


9.5


9.4



N/A

N/A

Book value at period end

$

16.53


$

16.25


$

15.54



1.7

%

6.4

%

Net interest margin (TE) from continuing operations

2.70

%

2.62

%

2.98

%


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)     12/31/20 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS














Revenue














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Net interest income (TE)

$

1,043


$

1,006


$

987



3.7

%

5.7

%

Noninterest income

802


681


651



17.8


23.2


Total revenue

$

1,845


$

1,687


$

1,638



9.4

%

12.6

%









TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.043 billion for the fourth quarter of 2020, compared to taxable-equivalent net interest income of $987 million for the fourth quarter of 2019. The increase in net interest income reflects higher earning asset balances and loan fees, 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 and Key's participation in the Paycheck Protection Program ("PPP").

Compared to the third quarter of 2020, taxable-equivalent net interest income increased by $37 million and the net interest margin increased by 8 basis points. The increase in both net interest income and the net interest margin reflects lower interest-bearing deposit costs and higher loan fees related to PPP, partly offset by elevated levels of liquidity. 

Noninterest Income














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Trust and investment services income

$

123


$

128


$

120



(3.9)

%

2.5

%

Investment banking and debt placement fees

243


146


181



66.4


34.3


Service charges on deposit accounts

82


77


86



6.5


(4.7)


Operating lease income and other leasing gains

39


38


39



2.6



Corporate services income

63


51


65



23.5


(3.1)


Cards and payments income

97


114


67



(14.9)


44.8


Corporate-owned life insurance income

38


30


39



26.7


(2.6)


Consumer mortgage income

43


51


21



(15.7)


104.8


Commercial mortgage servicing fees

32


18


19



77.8


68.4


Other income

42


28


14



50.0


200.0


Total noninterest income

$

802


$

681


$

651



17.8

%

23.2

%








Compared to the fourth quarter of 2019, noninterest income increased by $151 million, primarily driven by a $62 million increase in investment banking and debt placement fees. The record fourth quarter of 2020 for investment banking and debt placement fees was largely related to strong M&A activity. Cards and payments income increased $30 million from the year-ago period, driven by higher prepaid card activity. Additionally, investments made in Key's mortgage business continue to drive consumer mortgage income and commercial mortgage servicing fees, which increased $22 million and $13 million, respectively, from the year-ago quarter.

Compared to the third quarter of 2020, noninterest income increased by $121 million. The largest driver of the quarter-over-quarter increase was a $97 million increase in investment banking and debt placement fees, largely driven by strong M&A activity and higher loan syndication. Commercial mortgage servicing fees were also strong, up $14 million compared to prior quarter and corporate services income increased $12 million, primarily driven by higher derivatives income. Partially offsetting these increases were a $17 million decrease in cards and payments income related to lower prepaid card activity and a $8 million decrease in consumer mortgage income. 

Noninterest Expense














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Personnel expense

$

661


$

588


$

551



12.4

%

20.0

%

Nonpersonnel expense

467


449


429



4.0


8.9


Total noninterest expense

$

1,128


$

1,037


$

980



8.8

%

15.1

%








Key's noninterest expense was $1.128 billion for the fourth quarter of 2020, an increase of $148 million from the year-ago period. The increase is primarily related to higher personnel costs of $110 million, reflecting higher production-related incentives and higher salaries due to merit increases. Other drivers for the year-over-year increases include payments-related expenses from prepaid card activity incurred in the current period, as well as COVID-19-related costs related to steps that Key has taken to ensure the health and safety of teammates.

Compared to the third quarter of 2020, noninterest expense increased $91 million. The increase was largely due to incentive-related costs following a strong quarter for investment banking revenue, higher severance, as well as higher related stock-based compensation which drove the increase in personnel costs quarter-over-quarter.

BALANCE SHEET HIGHLIGHTS














Average Loans














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Commercial and industrial (a)

$

53,562


$

57,067


$

48,345



(6.1)

%

10.8

%

Other commercial loans

19,174


19,677


19,312



(2.6)


(.7)


Total consumer loans

28,974


28,175


25,950



2.8


11.7


Total loans

$

101,710


$

104,919


$

93,607



(3.1)

%

8.7

%










(a)

Commercial and industrial average loan balances include $129 million, $129 million, and $146 million of assets from commercial credit cards at December 31, 2020, September 30, 2020, and December 31, 2019, respectively.

Average loans were $101.7 billion for the fourth quarter of 2020, an increase of $8.1 billion compared to the fourth quarter of 2019. Commercial loans increased $5.1 billion, reflecting Key's participation in the PPP, partially offset by decreased utilization versus the year-ago period. Consumer loans increased $3.0 billion, driven by strength from Laurel Road and Key's consumer mortgage business.

Compared to the third quarter of 2020, average loans decreased by $3.2 billion. Commercial loans declined as clients paid down elevated line draws from earlier in the year. Consumer loans continue to reflect strength from Laurel Road, as well as Key's consumer mortgage business.

Average Deposits














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Non-time deposits

$

129,529


$

127,347


$

100,518



1.7

%

28.9

%

Certificates of deposit ($100,000 or more)

2,983


3,862


6,899



(22.8)


(56.8)


Other time deposits

3,209


3,735


5,187



(14.1)


(38.1)


Total deposits

$

135,721


$

134,944


$

112,604



.6

%

20.5

%








Cost of total deposits

.08

%

.16

%

.71

%


N/A


N/A










N/A = Not Applicable

Average deposits totaled $135.7 billion for the fourth quarter of 2020, an increase of $23.1 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits as a result of lower interest rates.

Compared to the third quarter of 2020, average deposits increased by $777 million, primarily driven by broad-based commercial growth and higher consumer balances. This growth was offset by a continued decline in time deposits.

ASSET QUALITY














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Net loan charge-offs

$

135


$

128


$

99



5.5

%

36.4

%

Net loan charge-offs to average total loans

.53

%

.49

%

.42

%


N/A


N/A


Nonperforming loans at period end

$

785


$

834


$

577



(5.9)


36.0


Nonperforming assets at period end

937


1,003


715



(6.6)


31.0


Allowance for loan and lease losses

1,626


1,730


900



(6.0)


80.7


Allowance for credit losses

1,823


1,938


968



(5.9)


88.3


Allowance for loan and lease losses to nonperforming loans

207.1

%

207.4

%

156.0

%


N/A


N/A


Allowance for credit losses to nonperforming loans

232.2


232.4


167.8



N/A


N/A


Provision for credit losses

$

20


$

160


$

109



(87.5)

%

(81.7)

%









N/A = Not Applicable

Key's provision for credit losses was $20 million for the fourth quarter of 2020, compared to $109 million for the fourth quarter of 2019 and $160 million for the third quarter of 2020. The provision for credit losses reflects the adoption of the accounting standard, often referred to as Current Expected Credit Losses ("CECL"), beginning in the first quarter of 2020. This framework requires that management estimate credit losses over the full remaining expected life and consider expected future changes in macroeconomic conditions.

Net loan charge-offs for the fourth quarter of 2020 totaled $135 million, or .53% of average total loans. These results compare to $99 million, or .42%, for the fourth quarter of 2019 and $128 million, or .49%, for the third quarter of 2020. Key's allowance for credit losses was $1.8 billion, or 1.80% of total period-end loans at December 31, 2020, compared to 1.02% at December 31, 2019, and 1.88% at September 30, 2020.

At December 31, 2020, Key's nonperforming loans totaled $785 million, which represented .78% of period-end portfolio loans. These results compare to .61% at December 31, 2019, and .81% at September 30, 2020. Nonperforming assets at December 31, 2020, totaled $937 million, and represented .92% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .75% at December 31, 2019, and .97% at September 30, 2020.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2020.

Capital Ratios









12/31/2020

9/30/2020

12/31/2019

Common Equity Tier 1 (a)

9.8

%

9.5

%

9.4

%

Tier 1 risk-based capital (a)

11.1


10.9


10.9


Total risk based capital (a)

13.4


13.3


12.8


Tangible common equity to tangible assets (b)

7.9


7.8


8.6


Leverage (a)

8.9


8.7


9.9








(a)

12/31/2020 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 fourth quarter of 2020. As shown in the preceding table, at December 31, 2020, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.8% and 11.1%, respectively. Key's tangible common equity ratio was 7.9% at December 31, 2020.

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 29 basis points.

Summary of Changes in Common Shares Outstanding













in thousands





Change 4Q20 vs.



4Q20

3Q20

4Q19


3Q20

4Q19

Shares outstanding at beginning of period

976,205


975,947


988,538




(1.2)

%

Open market repurchases and return of shares under employee compensation plans

(1,092)


(1)


(12,968)



N/M


(91.6)


Shares issued under employee compensation plans (net of cancellations)

660


259


1,619



154.8

%

(59.2)



Shares outstanding at end of period

975,773


976,205


977,189




(.1)

%










N/M = Not Meaningful

Consistent with Key's 2020 Capital Plan, during the fourth quarter of 2020, Key declared a dividend of $.185 per common share. Key announced a new share repurchase authorization program of up to $900 million, applicable through September 30, 2021.

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 4Q20 vs.



4Q20

3Q20

4Q19


3Q20

4Q19

Revenue from continuing operations (TE)







Consumer Bank

$

905


$

871


$

825



3.9

%

9.7

%

Commercial Bank

913


804


771



13.6


18.4


Other (a)

27


12


42



125.0


(35.7)



Total

$

1,845


$

1,687


$

1,638



9.4

%

12.6

%









Income (loss) from continuing operations attributable to Key







Consumer Bank

$

228


$

241


$

168



(5.4)

%

35.7

%

Commercial Bank

308


160


311



92.5


(1.0)


Other (a)

39


23


(13)



69.6


N/M



Total

$

575


$

424


$

466



35.6

%

23.4

%











(a)

Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

TE = Taxable Equivalent, N/M = Not Meaningful

 

Consumer Bank





















dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Summary of operations







Net interest income (TE)

$

645


$

604


$

587



6.8

%

9.9

%

Noninterest income

260


267


238



(2.6)


9.2


Total revenue (TE)

905


871


825



3.9


9.7


Provision for credit losses

(4)


(16)


55



(75.0)


(129.1)


Noninterest expense

611


571


550



7.0


11.1


Income (loss) before income taxes (TE)

298


316


220



(5.7)


35.5


Allocated income taxes (benefit) and TE adjustments

70


75


52



(6.7)


34.6


Net income (loss) attributable to Key

$

228


$

241


$

168



(5.4)

%

35.7

%








Average balances







Loans and leases

$

41,137


$

41,471


$

34,148



(.8)

%

20.5

%

Total assets

44,357


44,888


37,709



(1.2)


17.6


Deposits

83,171


83,175


73,561




13.1









Assets under management at period end

$

44,140


$

41,312


$

40,833



6.8

%

8.1

%









TE = Taxable Equivalent

 

Additional Consumer Bank Data














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Noninterest income







Trust and investment services income

$

95


$

100


$

91



(5.0)

%

4.4

%

Service charges on deposit accounts

50


44


58



13.6


(13.8)


Cards and payments income

54


55


53



(1.8)


1.9


Consumer mortgage income

43


51


20



(15.7)


115.0


Other noninterest income

18


17


16



5.9


12.5


Total noninterest income

$

260


$

267


$

238



(2.6)

%

9.2

%








Average deposit balances







NOW and money market deposit accounts

$

53,055


$

52,550


$

44,765



1.0

%

18.5

%

Savings deposits

5,408


5,169


4,332



4.6


24.8


Certificates of deposit ($100,000 or more)

2,801


3,550


6,065



(21.1)


(53.8)


Other time deposits

3,187


3,701


5,164



(13.9)


(38.3)


Noninterest-bearing deposits

18,720


18,205


13,235



2.8


41.4


Total deposits

$

83,171


$

83,175


$

73,561




13.1

%








Home equity loans







Average balance

$

9,360


$

9,528


$

10,295





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

69

%

70

%

70

%




Percent first lien positions

66


64


61












Other data







Branches

1,073


1,077


1,098





Automated teller machines

1,386


1,388


1,420












Consumer Bank Summary of Operations (4Q20 vs. 4Q19)

  • Net income attributable to Key of $228 million for the fourth quarter of 2020, compared to $168 million for the year-ago quarter
  • Taxable-equivalent net interest income increased by $58 million, or 9.9%, compared to the fourth quarter of 2019, driven by strong balance sheet growth and fees related to PPP loans, partially offset by the lower interest rate environment
  • Average loans and leases increased $7.0 billion, or 20.5%, driven by benefit from the PPP, as well as growth from Laurel Road and consumer mortgage
  • Average deposits increased $9.6 billion, or 13.1%, from the fourth quarter of 2019. This was driven by consumer stimulus payments, lower spend activity, and relationship growth
  • Provision for credit losses decreased $59 million compared to the fourth quarter of 2019. The decrease in provision for credit losses is attributable to lower net charge-offs and a reduced allowance from the third quarter of 2020, driven by continued strength in client credit quality
  • Noninterest income increased $22 million, or 9.2%, from the year ago quarter, driven by strength in consumer mortgage income and higher trust and investment services income
  • Noninterest expense increased $61 million, or 11.1%, from the year ago quarter driven by higher variable compensation from strong revenue growth and higher variable expenses related to higher loan volumes

 

Commercial Bank





















dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Summary of operations







Net interest income (TE)

$

413


$

421


$

416



(1.9)

%

(.7)

%

Noninterest income

500


383


355



30.5


40.8


Total revenue (TE)

913


804


771



13.6


18.4


Provision for credit losses

42


163


38



(74.2)


10.5


Noninterest expense

494


443


393



11.5


25.7


Income (loss) before income taxes (TE)

377


198


340



90.4


10.9


Allocated income taxes and TE adjustments

69


38


29



81.6


137.9


Net income (loss) attributable to Key

$

308


$

160


$

311



92.5

%

(1.0)

%








Average balances







Loans and leases

$

59,992


$

62,925


$

58,535



(4.7)

%

2.5

%

Loans held for sale

1,285


1,383


1,465



(7.1)


(12.3)


Total assets

69,277


72,613


67,135



(4.6)


3.2


Deposits

52,163


51,238


38,224



1.8

%

36.5

%









TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Commercial Bank Data














dollars in millions





Change 4Q20 vs.


4Q20

3Q20

4Q19


3Q20

4Q19

Noninterest income







Trust and investment services income

$

28


$

27


$

29



3.7

%

(3.4)


Investment banking and debt placement fees

243


146


179



66.4


35.8

%

Operating lease income and other leasing gains

39


38


39



2.6










Corporate services income

55


44


58



25.0


(5.2)


Service charges on deposit accounts

31


32


27



(3.1)


14.8


Cards and payments income

43


60


15



(28.3)


186.7


Payments and services income

129


136


100



(5.1)


29.0









Commercial mortgage servicing fees

32


18


19



77.8


68.4


Other noninterest income

29


18


(11)



61.1


N/M


Total noninterest income

$

500


$

383


$

355



30.5

%

40.8

%









N/M = Not Meaningful

Commercial Bank Summary of Operations (4Q20 vs. 4Q19)

  • Net income attributable to Key of $308 million for the fourth quarter of 2020, compared to $311 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $3.0 million, compared to the fourth quarter of 2019, as the lower interest rate environment offset balance sheet growth and fees related to PPP loans
  • Average loan and lease balances increased $1.5 billion, or 2.5%, compared to the fourth quarter of 2019 as PPP loans offset lower utilization
  • Average deposit balances increased $14 billion, or 36.5%, compared to the fourth quarter of 2019, driven by growth in targeted relationships and the impact of government programs
  • Provision for credit losses increased $4.0 million compared to the fourth quarter of 2019
  • Noninterest income increased $145 million, from the fourth quarter of 2019, driven by a record quarter in investment banking income, benefit from market-related adjustments to customer derivatives, and higher cards and payments income related to prepaid card revenue
  • Noninterest expense increased by $101 million, or 25.7%, from the fourth quarter of 2019, driven by elevated variable expenses related to prepaid card and higher variable compensation from strong revenue growth

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

KeyCorp's roots trace back 190 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 $170.3 billion at December 31, 2020.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,400 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

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www.key.com/ir

www.key.com/newsroom

 

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts.  Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete.  Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2019, 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 reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive regulation of the U.S. financial services industry. In addition to the aforementioned factors, the COVID–19 global pandemic is adversely affecting us, our clients, and third–party service providers, among others, and its impact may adversely affect our business and results of operations over a period of time. 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 Thursday, January 21, 2021. A replay of the call will be available through January 30, 2021.

*****

KeyCorp

Fourth Quarter 2020

Financial Supplement

Page


14

Financial Highlights

16

GAAP to Non-GAAP Reconciliation

18

Consolidated Balance Sheets

19

Consolidated Statements of Income

20

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

22

Noninterest Expense

22

Personnel Expense

23

Loan Composition

23

Loans Held for Sale Composition

23

Summary of Changes in Loans Held for Sale

24

Summary of Loan and Lease Loss Experience From Continuing Operations

25

Asset Quality Statistics From Continuing Operations

25

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

25

Summary of Changes in Nonperforming Loans From Continuing Operations

26

Line of Business Results

 

Financial Highlights

(dollars in millions, except per share amounts)




Three months ended




12/31/2020

9/30/2020

12/31/2019

Summary of operations





Net interest income (TE)

$

1,043


$

1,006


$

987



Noninterest income

802


681


651




Total revenue (TE)

1,845


1,687


1,638



Provision for credit losses

20


160


109



Noninterest expense

1,128


1,037


980



Income (loss) from continuing operations attributable to Key

575


424


466



Income (loss) from discontinued operations, net of taxes

7


4


3



Net income (loss) attributable to Key

582


428


469









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

549


397


439



Income (loss) from discontinued operations, net of taxes

7


4


3



Net income (loss) attributable to Key common shareholders

556


401


442








Per common share





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

$

.57


$

.41


$

.45



Income (loss) from discontinued operations, net of taxes

.01





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

.57


.41


.45









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

.56


.41


.45



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

.01





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

.57


.41


.45









Cash dividends declared

.185


.185


.185



Book value at period end

16.53


16.25


15.54



Tangible book value at period end

13.61


13.32


12.56



Market price at period end

16.41


11.93


20.24








Performance ratios





From continuing operations:





Return on average total assets

1.35

%

1.00

%

1.27

%


Return on average common equity

13.65


9.98


11.40



Return on average tangible common equity (b)

16.61


12.19


14.09



Net interest margin (TE)

2.70


2.62


2.98



Cash efficiency ratio (b)

60.3


60.6


58.7









From consolidated operations:





Return on average total assets

1.36

%

1.00

%

1.27

%


Return on average common equity

13.82


10.08


11.48



Return on average tangible common equity (b)

16.82


12.31


14.19



Net interest margin (TE)

2.69


2.62


2.97



Loan to deposit (c)

76.5


77.2


86.6








Capital ratios at period end





Key shareholders' equity to assets

10.6

%

10.4

%

11.8

%


Key common shareholders' equity to assets

9.5


9.3


10.5



Tangible common equity to tangible assets (b)

7.9


7.8


8.6



Common Equity Tier 1 (d)

9.8


9.5


9.4



Tier 1 risk-based capital (d)

11.1


10.9


10.9



Total risk-based capital (d)

13.4


13.3


12.8



Leverage (d)

8.9


8.7


9.9








Asset quality — from continuing operations





Net loan charge-offs

$

135


$

128


$

99



Net loan charge-offs to average loans

.53

%

.49

%

.42

%


Allowance for loan and lease losses

$

1,626


$

1,730


$

900



Allowance for credit losses

1,823


1,938


968



Allowance for loan and lease losses to period-end loans

1.61

%

1.68

%

.95

%


Allowance for credit losses to period-end loans

1.80


1.88


1.02



Allowance for loan and lease losses to nonperforming loans (e)

207.1


207.4


156.0



Allowance for credit losses to nonperforming loans (e)

232.2


232.4


167.8



Nonperforming loans at period-end (e)

$

785


$

834


$

577



Nonperforming assets at period-end (e)

937


1,003


715



Nonperforming loans to period-end portfolio loans (e)

.78

%

.81

%

.61

%


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

.92


.97


.75








Trust assets





Assets under management

$

44,140


$

41,312


$

40,833








Other data





Average full-time equivalent employees

17,029


17,097


16,537



Branches

1,073


1,077


1,098








Taxable-equivalent adjustment

$

8


$

6


$

8


 





Financial Highlights (continued)

(dollars in millions, except per share amounts)



Twelve months ended



12/31/2020

12/31/2019

Summary of operations




Net interest income (TE)

$

4,063


$

3,941



Noninterest income

2,652


2,459



Total revenue (TE)

6,715


6,400



Provision for credit losses

1,021


445



Noninterest expense

4,109


3,901



Income (loss) from continuing operations attributable to Key

1,329


1,708



Income (loss) from discontinued operations, net of taxes

14


9



Net income (loss) attributable to Key

1,343


1,717







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

$

1,223


$

1,611



Income (loss) from discontinued operations, net of taxes

14


9



Net income (loss) attributable to Key common shareholders

1,237


1,620






Per common share




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

$

1.26


$

1.62



Income (loss) from discontinued operations, net of taxes

.01


.01



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

1.28


1.63







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

1.26


1.61



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

.01


.01



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

1.27


1.62







Cash dividends paid

.74


.71






Performance ratios




From continuing operations:




Return on average total assets

.82

%

1.19

%


Return on average common equity

7.77


10.83



Return on average tangible common equity (b)

9.51


13.46



Net interest margin (TE)

2.77


3.04



Cash efficiency ratio (b)

60.2


59.6







From consolidated operations:




Return on average total assets

.82

%

1.19

%


Return on average common equity

7.86


10.89



Return on average tangible common equity (b)

9.62


13.53



Net interest margin (TE)

2.76


3.03






Asset quality — from continuing operations




Net loan charge-offs

$

443


$

424



Net loan charge-offs to average total loans

.43

%

.46

%





Other data




Average full-time equivalent employees

16,826


17,045






Taxable-equivalent adjustment

29


32




(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)

December 31, 2020, 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" and certain ratios excluding notable items.

 

Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without notable items, in order to enable a better understanding of company results, increase comparability of period-to-period results, and to evaluate and forecast those results.

 

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


Twelve months ended


12/31/2020

9/30/2020

12/31/2019


12/31/2020

12/31/2019

Tangible common equity to tangible assets at period-end







Key shareholders' equity (GAAP)

$

17,981


$

17,722


$

17,038





Less: Intangible assets (a)

2,848


2,862


2,910





Preferred Stock (b)

1,856


1,856


1,856





Tangible common equity (non-GAAP)

$

13,277


$

13,004


$

12,272





Total assets (GAAP)

$

170,336


$

170,540


$

144,988





Less: Intangible assets (a)

2,848


2,862


2,910





Tangible assets (non-GAAP)

$

167,488


$

167,678


$

142,078





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

7.9

%

7.8

%

8.6

%




Pre-provision net revenue







Net interest income (GAAP)

$

1,035


$

1,000


$

979



$

4,034


$

3,909


Plus: Taxable-equivalent adjustment

8


6


8



29


32


Noninterest income

802


681


651



2,652


2,459


Less: Noninterest expense

1,128


1,037


980



4,109


3,901


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

$

717


$

650


$

658



$

2,606


$

2,499


Average tangible common equity







Average Key shareholders' equity (GAAP)

$

17,905


$

17,730


$

17,178



$

17,636


$

16,636


Less: Intangible assets (average) (c)

2,855


2,870


2,919



2,878


2,909


Preferred stock (average)

1,900


1,900


1,900



1,900


1,755


Average tangible common equity (non-GAAP)

$

13,150


$

12,960


$

12,359



$

12,858


$

11,972


Return on average tangible common equity from continuing operations







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

$

549


$

397


$

439



$

1,223


$

1,611


Plus: Notable items, after tax (d)



29




183


Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)

$

549


$

397


$

468



$

1,223


$

1,794


Average tangible common equity (non-GAAP)

13,150


12,960


12,359



12,858


11,972









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

16.61

%

12.19

%

14.09

%


9.51

%

13.46

%

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

16.61

%

12.19

%

15.02

%


9.51

%

14.98

%

Return on average tangible common equity consolidated







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

$

556


$

401


$

442



$

1,237


$

1,620


Average tangible common equity (non-GAAP)

13,150


12,960


12,359



12,858


11,972









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

16.82

%

12.31

%

14.19

%


9.62

%

13.53

%

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)


Three months ended


Twelve months ended


12/31/2020

9/30/2020

12/31/2019


12/31/2020

12/31/2019

Cash efficiency ratio







Noninterest expense (GAAP)

$

1,128


$

1,037


$

980



$

4,109


$

3,901


Less: Intangible asset amortization

15


15


19



65


89


Adjusted noninterest expense (non-GAAP)

$

1,113


$

1,022


$

961



$

4,044


$

3,812


Less: Notable items (d)



22




100


Adjusted noninterest expense excluding notable items (non-GAAP)

$

1,113


$

1,022


$

939



$

4,044


$

3,712









Net interest income (GAAP)

$

1,035


$

1,000


$

979



$

4,034


$

3,909


Plus: Taxable-equivalent adjustment

8


6


8



29


32


Noninterest income

802


681


651



2,652


2,459


Total taxable-equivalent revenue (non-GAAP)

$

1,845


$

1,687


$

1,638



$

6,715


$

6,400









Cash efficiency ratio (non-GAAP)

60.3

%

60.6

%

58.7

%


60.2

%

59.6

%








Cash efficiency ratio excluding notable items (non-GAAP)

60.3

%

60.6

%

57.3

%


60.2

%

58.0

%



(a)

For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, intangible assets exclude $4 million, $5 million, and $7 million, respectively, of period-end purchased credit card receivables. 

(b)

Net of capital surplus.

(c)

For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, average intangible assets exclude $5 million, $5 million, and $8 million, respectively, of average purchased credit card receivables. For the twelve months ended December 31, 2020, and December 31, 2019, average intangible assets exclude $6 million and $10 million, respectively, of average purchase credit card receivables.

(d)

Additional detail provided in Notable Items table on page 24 of this release.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(dollars in millions)










12/31/2020

9/30/2020

12/31/2019

Assets





Loans

$

101,185


$

103,081


$

94,646



Loans held for sale

1,583


1,724


1,334



Securities available for sale

27,556


26,895


21,843



Held-to-maturity securities

7,595


8,384


10,067



Trading account assets

735


733


1,040



Short-term investments

16,194


14,148


1,272



Other investments

621


620


605




Total earning assets

155,469


155,585


130,807



Allowance for loan and lease losses

(1,626)


(1,730)


(900)



Cash and due from banks

1,091


956


732



Premises and equipment

753


765


814



Goodwill

2,664


2,664


2,664



Other intangible assets

188


203


253



Corporate-owned life insurance

4,286


4,274


4,233



Accrued income and other assets

6,812


7,084


5,494



Discontinued assets

699


739


891




Total assets

$

170,336


170,540


144,988








Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$

80,427


$

80,791


$

66,714




Savings deposits

5,913


5,585


4,651




Certificates of deposit ($100,000 or more)

2,733


3,345


6,598




Other time deposits

3,010


3,450


5,054




Total interest-bearing deposits

92,083


93,171


83,017




Noninterest-bearing deposits

43,199


43,575


28,853




Total deposits

135,282


136,746


111,870



Federal funds purchased and securities sold under repurchase agreements 

220


213


387



Bank notes and other short-term borrowings

759


818


705



Accrued expense and other liabilities

2,385


2,356


2,540



Long-term debt

13,709


12,685


12,448




Total liabilities

152,355


152,818


127,950








Equity





Preferred stock

1,900


1,900


1,900



Common shares

1,257


1,257


1,257



Capital surplus

6,281


6,263


6,295



Retained earnings

12,751


12,375


12,469



Treasury stock, at cost

(4,946)


(4,940)


(4,909)



Accumulated other comprehensive income (loss)

738


867


26




Key shareholders' equity

17,981


17,722


17,038



Noncontrolling interests






Total equity

17,981


17,722


17,038


Total liabilities and equity

$

170,336


$

170,540


$

144,988








Common shares outstanding (000)

975,773


976,205


977,189


 

Consolidated Statements of Income

(dollars in millions, except per share amounts)




Three months ended


Twelve months ended




12/31/2020

9/30/2020

12/31/2019


12/31/2020

12/31/2019

Interest income








Loans

$

933


$

927


$

1,046



$

3,866


$

4,267



Loans held for sale

11


18


17



69


63



Securities available for sale

119


115


137



484


537



Held-to-maturity securities

51


53


63



222


262



Trading account assets

4


3


8



20


32



Short-term investments

4


1


12



18


61



Other investments

3


2


2



6


13




Total interest income

1,125


1,119


1,285



4,685


5,235


Interest expense








Deposits

28


54


201



347


853



Federal funds purchased and securities sold under repurchase agreements



1



6


2



Bank notes and other short-term borrowings

1


1


4



12


17



Long-term debt

61


64


100



286


454




Total interest expense

90


119


306



651


1326


Net interest income

1,035


1,000


979



4,034


3,909


Provision for credit losses

20


160


109



1,021


445


Net interest income after provision for credit losses

1015


840


870



3,013


3,464


Noninterest income








Trust and investment services income

123


128


120



507


475



Investment banking and debt placement fees

243


146


181



661


630



Service charges on deposit accounts

82


77


86



311


337



Operating lease income and other leasing gains

39


38


39



167


162



Corporate services income

63


51


65



228


236



Cards and payments income

97


114


67



368


275



Corporate-owned life insurance income

38


30


39



139


136



Consumer mortgage income

43


51


21



176


63



Commercial mortgage servicing fees

32


18


19



80


77



Other income

42


28


14



15


68




Total noninterest income

802


681


651



2,652


2,459


Noninterest expense








Personnel

661


588


551



2,336


2,250



Net occupancy

75


76


76



298


293



Computer processing

62


59


51



232


214



Business services and professional fees

54


49


54



196


186



Equipment

26


25


25



100


100



Operating lease expense

35


33


32



138


123



Marketing

30


22


27



97


96



FDIC assessment

9


6


8



32


31



Intangible asset amortization

15


15


19



65


89



OREO expense, net


(1)


3



8


13



Other expense

161


165


134



607


506




Total noninterest expense

1,128


1,037


980



4,109


3,901


Income (loss) from continuing operations before income taxes

689


484


541



1,556


2,022



Income taxes

114


60


75



227


314


Income (loss) from continuing operations

575


424


466



1,329


1,708



Income (loss) from discontinued operations, net of taxes

7


4


3



14


9


Net income (loss)

582


428


469



1,343


1,717



Less:  Net income (loss) attributable to noncontrolling interests







Net income (loss) attributable to Key

$

582


$

428


$

469



$

1,343


$

1,717











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

$

549


$

397


$

439



$

1,223


$

1,611


Net income (loss) attributable to Key common shareholders

556


401


442



1,237


1,620


Per common share







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

$

.57


$

.41


$

.45



$

1.26


$

1.62


Income (loss) from discontinued operations, net of taxes

0.01





.01


.01


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

.57


.41


.45



1.28


1.63


Per common share — assuming dilution







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

$

.56


$

.41


$

.45



$

1.26


$

1.61


Income (loss) from discontinued operations, net of taxes

0.01





.01


.01


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

.57


.41


.45



1.27


1.62











Cash dividends declared per common share

$

.185


$

.185


$

.185



$

.740


$

.710











Weighted-average common shares outstanding (000)

967,987


967,804


973,450



967,783


992,091



Effect of common share options and other stock awards

8,473


6,184


10,911



7,024


10,163


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

976,460


973,988


984,361



974,807


1,002,254




(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)



Fourth Quarter 2020


Third Quarter 2020


Fourth Quarter 2019



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)

$

53,562


$

477


3.54

%


$

57,067


$

474


3.31

%


$

48,345


$

522


4.28

%


Real estate — commercial mortgage

12,862


121


3.74



13,202


117


3.54



13,335


159


4.71



Real estate — construction

1,959


19


3.79



1,987


18


3.57



1,495


18


4.87



Commercial lease financing

4,353


32


2.92



4,488


35


3.10



4,482


39


3.52



Total commercial loans

72,736


649


3.55



76,744


644


3.34



67,657


738


4.33



Real estate — residential mortgage

8,968


74


3.29



8,398


73


3.46



6,777


65


3.83



Home equity loans

9,410


91


3.81



9,580


91


3.82



10,362


122


4.69



Consumer direct loans

4,583


56


4.93



4,403


56


5.07



3,125


51


6.45



Credit cards

973


26


10.57



967


25


10.24



1,103


32


11.38



Consumer indirect loans

5,040


45


3.56



4,827


44


3.66



4,583


46


3.99



Total consumer loans

28,974


292


4.01



28,175


289


4.10



25,950


316


4.84



Total loans

101,710


941


3.68



104,919


933


3.55



93,607


1,054


4.47



Loans held for sale

1,621


11


2.76



1,924


17


3.61



1,653


17


4.11



Securities available for sale (b), (e)

28,046


119


1.75



24,941


115


1.90



22,262


137


2.49



Held-to-maturity securities (b)

7,939


51


2.56



8,677


53


2.44



10,264


63


2.43



Trading account assets

744


4


2.21



686


4


2.08



1,103


8


3.08



Short-term investments

14,111


4


.14



12,525


1


0.04



2,716


12


1.73



Other investments (e)

615


3


1.31



640


2


1.49



603


2


1.82



Total earning assets

154,786


1,133


2.93



154,312


1,125


2.93



132,208


1,293


3.90



Allowance for loan and lease losses

(1,715)





(1,696)





(882)





Accrued income and other assets

15,861





16,195





14,402





Discontinued assets

717





752





908





Total assets

$

169,649





$

169,563





$

146,636




Liabilities













NOW and money market deposit accounts

$

80,636


12


.06



$

80,175


26


.13



$

66,412


135


.81



Savings deposits

5,737



.03



5,478


1


.04



4,660


1


.07



Certificates of deposit ($100,000 or more)

2,983


9


1.20



3,862


16


1.60



6,899


40


2.31



Other time deposits

3,209


7


.80



3,735


11


1.17



5,187


25


1.92



Total interest-bearing deposits

92,565


28


.12



93,250


54


.23



83,158


201


.96



Federal funds purchased and securities sold under repurchase agreements

220



.04



225



.05



267


1


.75



Bank notes and other short-term borrowings

791


1


.73



761


1


.68



801


4


2.02



Long-term debt (f), (g)

12,118


61


2.05



12,801


64


2.12



12,531


100


3.22



Total interest-bearing liabilities

105,694


90


.34



107,037


119


.45



96,757


306


1.25



Noninterest-bearing deposits

43,156





41,694





29,446





Accrued expense and other liabilities

2,177





2,350





2,347





Discontinued liabilities (g)

717





752





908





Total liabilities

151,744





151,833





129,458




Equity













Key shareholders' equity

17,905





17,730





17,178





Noncontrolling interests













Total equity

17,905





17,730





17,178