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

Rhea-AI Summary

KeyCorp reported net income of $698 million for Q2 2021, a 18.1% increase from Q1 2021 and a staggering 339.0% year-over-year rise. Earnings per diluted share rose to $0.72, compared to $0.61 in Q1 2021. Record revenues of $1.773 billion were driven by strong performance in commercial and consumer sectors, alongside an 8% year-over-year rise in noninterest income. Credit quality improved with lower nonperforming loans, while a new $1.5 billion share repurchase program and a potential dividend increase were announced. Key retains a robust capital position with a Common Equity Tier 1 ratio of 9.9%.

Positive

• Net income increased 18.1% from Q1 2021 and 339.0% year-over-year.
• Record revenue of $1.773 billion, up 1.3% from Q1 2021.
• Noninterest income rose 8% year-over-year.
• Strong credit quality with lower nonperforming loans.
• New share repurchase authorization of $1.5 billion.

Negative

• Net interest margin decreased from 2.76% in Q2 2020 to 2.52% in Q2 2021.
• Average loans dropped $7.1 billion year-over-year, down 6.6%.

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

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

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

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

-  Chris Gorman, Chairman and CEO

 

Selected Financial Highlights
dollars in millions, except per share data												Change 2Q21 vs.
		2Q21			1Q21			2Q20				1Q21		2Q20
Income (loss) from continuing operations attributable to Key common shareholders		$	698		$	591		$	159			18.1	%	339.0	%
Income (loss) from continuing operations attributable to Key common shareholders per      common share — assuming dilution		.72			.61			.16				18.0		350.0
Return on average tangible common equity from continuing operations (a)		22.34		%	18.25		%	4.96		%		N/A		N/A
Return on average total assets from continuing operations		1.63			1.44			.45				N/A		N/A
Common Equity Tier 1 ratio (b)		9.9			9.9			9.1				N/A		N/A
Book value at period end		$	16.75		$	16.22		$	16.07			3.3	%	4.2	%
Net interest margin (TE) from continuing operations		2.52		%	2.61		%	2.76		%		N/A		N/A

(a)	The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Return on average tangible common equity from continuing operations." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b)	June 30, 2021 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Net interest income (TE)	$	1,023		$	1,012		$	1,025			1.1	%	(.2)	%
Noninterest income	750			738			692				1.6		8.4
Total revenue	$	1,773		$	1,750		$	1,717			1.3	%	3.3	%

TE = Taxable Equivalent

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

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

Noninterest Income
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Trust and investment services income	$	133		$	133		$	123			—	%	8.1	%
Investment banking and debt placement fees	217			162			156				34.0		39.1
Service charges on deposit accounts	83			73			68				13.7		22.1
Operating lease income and other leasing gains	36			38			60				(5.3)		(40.0)
Corporate services income	55			64			52				(14.1)		5.8
Cards and payments income	113			105			91				7.6		24.2
Corporate-owned life insurance income	30			31			35				(3.2)		(14.3)
Consumer mortgage income	26			47			62				(44.7)		(58.1)
Commercial mortgage servicing fees	44			34			12				29.4		266.7
Other income	13			51			33				(74.5)		(60.6)
Total noninterest income	$	750		$	738		$	692			1.6	%	8.4	%

 

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

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

Noninterest Expense
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Personnel expense	$	623		$	624		$	572			(.2)	%	8.9	%
Nonpersonnel expense	453			447			441				1.3		2.7
Total noninterest expense	$	1,076		$	1,071		$	1,013			.5	%	6.2	%

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

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

BALANCE SHEET HIGHLIGHTS
Average Loans
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Commercial and industrial (a)	$	51,808		$	52,581		$	60,480			(1.5)	%	(14.3)	%
Other commercial loans	19,034			18,848			19,850				1.0		(4.1)
Total consumer loans	29,972			29,299			27,611				2.3		8.6
Total loans	$	100,814		$	100,728		$	107,941			.1	%	(6.6)	%

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

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

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

Average Deposits
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Non-time deposits	$	139,480		$	132,267		$	118,694			5.5	%	17.5	%
Certificates of deposit ($100,000 or more)	2,212			2,571			4,950				(14.0)		(55.3)
Other time deposits	2,630			2,902			4,333				(9.4)		(39.3)
Total deposits	$	144,322		$	137,740		$	127,977			4.8	%	12.8	%
Cost of total deposits	.05		%	.06		%	.30		%		N/A		N/A

N/A = Not Applicable

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

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

ASSET QUALITY
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Net loan charge-offs	$	22		$	114		$	96			(80.7)	%	(77.1)	%
Net loan charge-offs to average total loans	.09		%	.46		%	.36		%		N/A		N/A
Nonperforming loans at period end	$	694		$	728		$	760			(4.7)		(8.7)
Nonperforming assets at period end	738			790			951				(6.6)		(22.4)
Allowance for loan and lease losses	1,220			1,438			1,708				(15.2)		(28.6)
Allowance for credit losses	1,372			1,616			1,906				(15.1)		(28.0)
Allowance for loan and lease losses to nonperforming loans	175.8		%	197.5		%	224.7		%		N/A		N/A
Allowance for credit losses to nonperforming loans	197.7			222.0			250.8				N/A		N/A
Provision for credit losses	$	(222)		$	(93)		$	482			138.7	%	(146.1)	%

N/A = Not Applicable

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

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

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

CAPITAL

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

Capital Ratios
	6/30/2021		3/31/2021		6/30/2020
Common Equity Tier 1 (a)	9.9	%	9.9	%	9.1	%
Tier 1 risk-based capital (a)	11.3		11.3		10.5
Total risk based capital (a)	13.2		13.4		12.8
Tangible common equity to tangible assets (b)	7.4		7.5		7.6
Leverage (a)	8.7		8.9		8.8

(a)	June 30, 2021 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
(b)	The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

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

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

Summary of Changes in Common Shares Outstanding
in thousands									Change 2Q21 vs.
		2Q21		1Q21		2Q20			1Q21		2Q20
Shares outstanding at beginning of period		972,587		975,773		975,319			(.3)	%	(.3)	%
Open market repurchases and return of shares under employee compensation      plans		(13,304)		(9,277)		(19)			43.4		N/M
Shares issued under employee compensation plans (net of cancellations)		993		6,091		647			(83.7)		53.5
	Shares outstanding at end of period	960,276		972,587		975,947			(1.3)	%	(1.6)	%

N/M = Not Meaningful

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

LINE OF BUSINESS RESULTS

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

Major Business Segments
dollars in millions												Change 2Q21 vs.
		2Q21			1Q21			2Q20				1Q21		2Q20
Revenue from continuing operations (TE)
Consumer Bank		$	854		$	867		$	835			(1.5)	%	2.3	%
Commercial Bank		874			859			879				1.7		(.6)
Other (a)		45			24			3				87.5		1,400.0
	Total	$	1,773		$	1,750		$	1,717			1.3	%	3.3	%
Income (loss) from continuing operations attributable to Key
Consumer Bank		$	259		$	220		$	98			17.7	%	164.3	%
Commercial Bank		434			384			106				13.0		309.4
Other (a)		31			14			(19)				121.4		N/M
	Total	$	724		$	618		$	185			17.2	%	291.4	%

(a)

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

TE = Taxable Equivalent, N/M = Not Meaningful

 

Consumer Bank
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Summary of operations
Net interest income (TE)	$	600		$	610		$	589			(1.6)	%	1.9	%
Noninterest income	254			257			246				(1.2)		3.3
Total revenue (TE)	854			867			835				(1.5)		2.3
Provision for credit losses	(70)			(23)			155				(204.3)		(145.2)
Noninterest expense	584			601			552				(2.8)		5.8
Income (loss) before income taxes (TE)	340			289			128				17.6		165.6
Allocated income taxes (benefit) and TE adjustments	81			69			30				17.4		170.0
Net income (loss) attributable to Key	$	259		$	220		$	98			17.7	%	164.3	%
Average balances
Loans and leases	$	40,598		$	39,249		$	37,300			3.4	%	8.8	%
Total assets	43,991			42,476			42,194				3.6		4.3
Deposits	88,412			85,033			79,235				4.0		11.6
Assets under management at period end	$	47,737		$	45,218		$	39,722			5.6	%	20.2	%

TE = Taxable Equivalent

 

Additional Consumer Bank Data
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Noninterest income
Trust and investment services income	$	104		$	101		$	87			3.0	%	19.5	%
Service charges on deposit accounts	47			38			36				23.7		30.6
Cards and payments income	62			54			47				14.8		31.9
Consumer mortgage income	26			47			61				(44.7)		(57.4)
Other noninterest income	15			17			15				(11.8)		.0
Total noninterest income	$	254		$	257		$	246			(1.2)	%	3.3	%
Average deposit balances
NOW and money market deposit accounts	$	56,038		$	54,685		$	49,143			2.5	%	14.0	%
Savings deposits	6,523			5,878			4,816				11.0		35.4
Certificates of deposit ($100,000 or more)	2,083			2,424			4,520				(14.1)		(53.9)
Other time deposits	2,615			2,888			4,296				(9.5)		(39.1)
Noninterest-bearing deposits	21,153			19,159			16,460				10.4		28.5
Total deposits	$	88,412		$	85,033		$	79,235			4.0		11.6	%
Home equity loans
Average balance	$	9,081		$	9,234		$	9,893
Combined weighted-average loan-to-value ratio (at date of origination)	68		%	69		%	70		%
Percent first lien positions	70			68			63
Other data
Branches	1,014			1,068			1,077
Automated teller machines	1,329			1,368			1,394

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

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

 

Commercial Bank
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Summary of operations
Net interest income (TE)	$	419		$	413		$	458			1.5	%	(8.5)	%
Noninterest income	455			446			421				2.0		8.1
Total revenue (TE)	874			859			879				1.7		(.6)
Provision for credit losses	(131)			(67)			326				95.5		(140.2)
Noninterest expense	451			443			441				1.8		2.3
Income (loss) before income taxes (TE)	554			483			112				14.7		394.6
Allocated income taxes and TE adjustments	120			99			6				21.2		N/M
Net income (loss) attributable to Key	$	434		$	384		$	106			13.0	%	309.4	%
Average balances
Loans and leases	$	59,953		$	61,221		$	70,336			(2.1)	%	(14.8)	%
Loans held for sale	1,341			1,237			2,012				8.4		(33.3)
Total assets	69,101			70,448			79,267				(1.9)		(12.8)
Deposits	54,814			51,894			47,954				5.6	%	14.3	%

TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Commercial Bank Data
dollars in millions											Change 2Q21 vs.
	2Q21			1Q21			2Q20				1Q21		2Q20
Noninterest income
Trust and investment services income	$	27		$	32		$	37			(15.6)	%	(27.0)
Investment banking and debt placement fees	215			162			156				32.7		37.8	%
Operating lease income and other leasing gains	35			38			59				(7.9)		(40.7)
Corporate services income	47			56			45				(16.1)		4.4
Service charges on deposit accounts	34			33			30				3.0		13.3
Cards and payments income	49			52			45				(5.8)		8.9
Payments and services income	130			141			120				(7.8)		8.3
Commercial mortgage servicing fees	44			34			12				29.4		266.7
Other noninterest income	4			39			37				(89.7)		(89.2)
Total noninterest income	$	455		$	446		$	421			2.0	%	8.1	%

N/M = Not Meaningful

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

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

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

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

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

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 July 20, 2021. A replay of the call will be available through July 29, 2021.

*****

KeyCorp
Second Quarter 2021
Financial Supplement
Page
12	Financial Highlights
14	GAAP to Non-GAAP Reconciliation
16	Consolidated Balance Sheets
17	Consolidated Statements of Income
18	Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
20	Noninterest Expense
20	Personnel Expense
21	Loan Composition
21	Loans Held for Sale Composition
21	Summary of Changes in Loans Held for Sale
22	Summary of Loan and Lease Loss Experience From Continuing Operations
23	Asset Quality Statistics From Continuing Operations
23	Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
23	Summary of Changes in Nonperforming Loans From Continuing Operations
24	Line of Business Results

 

Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			6/30/2021			3/31/2021			6/30/2020
Summary of operations
	Net interest income (TE)		$	1,023		$	1,012		$	1,025
	Noninterest income		750			738			692
		Total revenue (TE)	1,773			1,750			1,717
	Provision for credit losses		(222)			(93)			482
	Noninterest expense		1,076			1,071			1,013
	Income (loss) from continuing operations attributable to Key		724			618			185
	Income (loss) from discontinued operations, net of taxes		5			4			2
	Net income (loss) attributable to Key		729			622			187
	Income (loss) from continuing operations attributable to Key common shareholders		698			591			159
	Income (loss) from discontinued operations, net of taxes		5			4			2
	Net income (loss) attributable to Key common shareholders		703			595			161
Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.73		$	.61		$	.16
	Income (loss) from discontinued operations, net of taxes		—			—			—
	Net income (loss) attributable to Key common shareholders (a)		.73			.62			.17
	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.72			.61			.16
	Income (loss) from discontinued operations, net of taxes — assuming dilution		—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution (a)		.73			.61			.17
	Cash dividends declared		.185			.185			.185
	Book value at period end		16.75			16.22			16.07
	Tangible book value at period end		13.81			13.30			13.12
	Market price at period end		20.65			19.98			12.18
Performance ratios
	From continuing operations:
	Return on average total assets		1.63		%	1.44		%	.45		%
	Return on average common equity		18.21			14.98			4.05
	Return on average tangible common equity (b)		22.34			18.25			4.96
	Net interest margin (TE)		2.52			2.61			2.76
	Cash efficiency ratio (b)		59.9			60.3			57.9
	From consolidated operations:
	Return on average total assets		1.64		%	1.45		%	.46		%
	Return on average common equity		18.34			15.08			4.10
	Return on average tangible common equity (b)		22.50			18.37			5.02
	Net interest margin (TE)		2.55			2.60			2.76
	Loan to deposit (c)		70.4			73.1			80.4
Capital ratios at period end
	Key shareholders' equity to assets		9.9		%	10.0		%	10.2		%
	Key common shareholders' equity to assets		8.9			9.0			9.2
	Tangible common equity to tangible assets (b)		7.4			7.5			7.6
	Common Equity Tier 1 (d)		9.9			9.9			9.1
	Tier 1 risk-based capital (d)		11.3			11.3			10.5
	Total risk-based capital (d)		13.2			13.4			12.8
	Leverage (d)		8.7			8.9			8.8
Asset quality — from continuing operations
	Net loan charge-offs		$	22		$	114		$	96
	Net loan charge-offs to average loans		.09		%	.46		%	.36		%
	Allowance for loan and lease losses		$	1,220		$	1,438		$	1,708
	Allowance for credit losses		1,372			1,616			1,906
	Allowance for loan and lease losses to period-end loans		1.21		%	1.42		%	1.61		%
	Allowance for credit losses to period-end loans		1.36			1.60			1.80
	Allowance for loan and lease losses to nonperforming loans		175.8			197.5			224.7
	Allowance for credit losses to nonperforming loans		197.7			222.0			250.8
	Nonperforming loans at period-end		$	694		$	728		$	760
	Nonperforming assets at period-end		738			790			951
	Nonperforming loans to period-end portfolio loans		.69		%	.72		%	.72		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets		.73			.78			.89
Trust assets
	Assets under management		$	47,737		$	45,218		$	39,722
Other data
	Average full-time equivalent employees		17,157			17,086			16,646
	Branches		1,014			1,068			1,077
	Taxable-equivalent adjustment		$	6		$	7		$	7

 

Financial Highlights (continued)
(dollars in millions, except per share amounts)
		Six months ended
		6/30/2021			6/30/2020
Summary of operations
	Net interest income (TE)	$	2,035		$	2,014
	Noninterest income	1,488			1,169
	Total revenue (TE)	3,523			3,183
	Provision for credit losses	(315)			841
	Noninterest expense	2,147			1,944
	Income (loss) from continuing operations attributable to Key	1,342			330
	Income (loss) from discontinued operations, net of taxes	9			3
	Net income (loss) attributable to Key	1,351			333
	Income (loss) from continuing operations attributable to Key common shareholders	1,289			277
	Income (loss) from discontinued operations, net of taxes	9			3
	Net income (loss) attributable to Key common shareholders	1,298			280
Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	1.34		$	.29
	Income (loss) from discontinued operations, net of taxes	.01			—
	Net income (loss) attributable to Key common shareholders (a)	1.35			.29
	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	1.33			.28
	Income (loss) from discontinued operations, net of taxes — assuming dilution	.01			—
	Net income (loss) attributable to Key common shareholders — assuming dilution (a)	1.34			.29
	Cash dividends paid	.37			.37
Performance ratios
	From continuing operations:
	Return on average total assets	1.55		%	.43		%
	Return on average common equity	16.64			3.58
	Return on average tangible common equity (b)	20.34			4.40
	Net interest margin (TE)	2.56			2.88
	Cash efficiency ratio (b)	60.1			60.0
	From consolidated operations:
	Return on average total assets	1.55		%	.43		%
	Return on average common equity	16.76			3.62
	Return on average tangible common equity (b)	20.48			4.45
	Net interest margin (TE)	2.57			2.87
Asset quality — from continuing operations
	Net loan charge-offs	$	136		$	180
	Net loan charge-offs to average total loans	.27		%	.35		%
Other data
	Average full-time equivalent employees	17,122			16,587
Taxable-equivalent adjustment		13			15

(a)	Earnings per share may not foot due to rounding.
(b)	The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(c)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(d)	June 30, 2021, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

 

GAAP to Non-GAAP Reconciliations

(dollars in millions)

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

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

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

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

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

 

	Three months ended										Six months ended
	6/30/2021			3/31/2021			6/30/2020				6/30/2021			6/30/2020
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)	$	17,941		$	17,634		$	17,542
Less: Intangible assets (a)	2,828			2,842			2,877
Preferred Stock (b)	1,856			1,856			1,856
Tangible common equity (non-GAAP)	$	13,257		$	12,936		$	12,809
Total assets (GAAP)	$	181,115		$	176,203		$	171,192
Less: Intangible assets (a)	2,828			2,842			2,877
Tangible assets (non-GAAP)	$	178,287		$	173,361		$	168,315
Tangible common equity to tangible assets ratio (non-GAAP)	7.44		%	7.46		%	7.61		%
Pre-provision net revenue
Net interest income (GAAP)	$	1,017		$	1,005		$	1,018			$	2,022		$	1,999
Plus: Taxable-equivalent adjustment	6			7			7				13			15
Noninterest income	750			738			692				1,488			1,169
Less: Noninterest expense	1,076			1,071			1,013				2,147			1,944
Pre-provision net revenue from continuing operations (non-GAAP)	$	697		$	679		$	704			$	1,376		$	1,239
Average tangible common equity
Average Key shareholders' equity (GAAP)	$	17,271		$	17,769		$	17,688			$	17,519		$	17,452
Less: Intangible assets (average) (c)	2,840			2,844			2,886				2,840			2,894
Preferred stock (average)	1,900			1,900			1,900				1,900			1,900
Average tangible common equity (non-GAAP)	$	12,531		$	13,025		$	12,902			$	12,779		$	12,658
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)	$	698		$	591		$	159			$	1,289		$	277
Average tangible common equity (non-GAAP)	12,531			13,025			12,902				12,779			12,658
Return on average tangible common equity from continuing operations (non- GAAP)	22.34		%	18.25		%	4.96		%		20.34		%	4.40		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)	$	703		$	595		$	161			$	1,298		$	280
Average tangible common equity (non-GAAP)	12,531			13,025			12,902				12,779			12,658
Return on average tangible common equity consolidated (non-GAAP)	22.50		%	18.37		%	5.02		%		20.48		%	4.45		%

 

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
	Three months ended										Six months ended
	6/30/2021			3/31/2021			6/30/2020				6/30/2021			6/30/2020
Cash efficiency ratio
Noninterest expense (GAAP)	$	1,076		$	1,071		$	1,013			$	2,147		$	1,944
Less: Intangible asset amortization	14			15			18				29			35
Adjusted noninterest expense (non-GAAP)	$	1,062		$	1,056		$	995			$	2,118		$	1,909
Net interest income (GAAP)	$	1,017		$	1,005		$	1,018			$	2,022		$	1,999
Plus: Taxable-equivalent adjustment	6			7			7				13			15
Noninterest income	750			738			692				1,488			1,169
Total taxable-equivalent revenue (non-GAAP)	$	1,773		$	1,750		$	1,717			$	3,523		$	3,183
Cash efficiency ratio (non-GAAP)	59.9		%	60.3		%	57.9		%		60.1		%	60.0		%

(a)	For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, intangible assets exclude $4 million, $4 million, and $5 million, respectively, of period-end purchased credit card receivables.
(b)	Net of capital surplus.
(c)	For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, average intangible assets exclude $4 million, $4 million, and $6 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2021, and June 30, 2020, average intangible assets exclude $4 million and $6 million, respectively, of average purchased credit card receivables
GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets
(dollars in millions)
			6/30/2021			3/31/2021			6/30/2020
Assets
	Loans		$	100,730		$	100,926		$	106,159
	Loans held for sale		1,537			2,296			2,007
	Securities available for sale		34,638			33,923			23,600
	Held-to-maturity securities		6,175			6,857			9,075
	Trading account assets		851			811			645
	Short-term investments		20,460			15,376			14,036
	Other investments		635			621			655
		Total earning assets	165,026			160,810			156,177
	Allowance for loan and lease losses		(1,220)			(1,438)			(1,708)
	Cash and due from banks		792			938			1,059
	Premises and equipment		785			737			776
	Goodwill		2,673			2,673			2,664
	Other intangible assets		159			173			218
	Corporate-owned life insurance		4,304			4,296			4,251
	Accrued income and other assets		7,966			7,347			6,976
	Discontinued assets		630			667			779
		Total assets	$	181,115		176,203			171,192
Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	85,242		$	82,777		$	78,853
		Savings deposits	6,993			6,655			5,371
		Certificates of deposit ($100,000 or more)	2,064			2,437			4,476
		Other time deposits	2,493			2,782			4,011
		Total interest-bearing deposits	96,792			94,651			92,711
		Noninterest-bearing deposits	49,280			47,532			42,802
		Total deposits	146,072			142,183			135,513
	Federal funds purchased and securities sold under repurchase agreements		211			281			267
	Bank notes and other short-term borrowings		723			744			1,716
	Accrued expense and other liabilities		2,957			2,862			2,420
	Long-term debt		13,211			12,499			13,734
		Total liabilities	163,174			158,569			153,650
Equity
	Preferred stock		1,900			1,900			1,900
	Common shares		1,257			1,257			1,257
	Capital surplus		6,232			6,213			6,240
	Retained earnings		13,689			13,166			12,154
	Treasury stock, at cost		(5,287)			(5,005)			(4,945)
	Accumulated other comprehensive income (loss)		150			103			936
		Key shareholders' equity	17,941			17,634			17,542
	Noncontrolling interests		—			—			—
		Total equity	17,941			17,634			17,542
Total liabilities and equity			$	181,115		$	176,203		$	171,192
Common shares outstanding (000)			960,276			972,587			975,947

 

Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended										Six months ended
			6/30/2021			3/31/2021			6/30/2020				6/30/2021			6/30/2020
Interest income
	Loans		$	888		$	889		$	980			$	1,777		$	2,006
	Loans held for sale		11			11			21				22			40
	Securities available for sale		133			130			121				263			250
	Held-to-maturity securities		45			45			56				90			118
	Trading account assets		5			5			5				10			13
	Short-term investments		6			5			7				11			13
	Other investments		2			2			—				4			1
		Total interest income	1,090			1,087			1,190				2,177			2,441
Interest expense
	Deposits		16			21			96				37			265
	Federal funds purchased and securities sold under repurchase agreements		—			—			—				—			6
	Bank notes and other short-term borrowings		3			1			5				4			10
	Long-term debt		54			60			71				114			161
		Total interest expense	73			82			172				155			442
Net interest income			1,017			1,005			1,018				2,022			1,999
Provision for credit losses			(222)			(93)			482				(315)			841
Net interest income after provision for credit losses			1,239			1,098			536				2,337			1,158
Noninterest income
	Trust and investment services income		133			133			123				266			256
	Investment banking and debt placement fees		217			162			156				379			272
	Service charges on deposit accounts		83			73			68				156			152
	Operating lease income and other leasing gains		36			38			60				74			90
	Corporate services income		55			64			52				119			114
	Cards and payments income		113			105			91				218			157
	Corporate-owned life insurance income		30			31			35				61			71
	Consumer mortgage income		26			47			62				73			82
	Commercial mortgage servicing fees		44			34			12				78			30
	Other income		13			51			33				64			(55)
		Total noninterest income	750			738			692				1,488			1,169
Noninterest expense
	Personnel		623			624			572				1,247			1,087
	Net occupancy		75			76			71				151			147
	Computer processing		71			73			56				144			111
	Business services and professional fees		51			50			49				101			93
	Equipment		25			25			25				50			49
	Operating lease expense		31			34			34				65			70
	Marketing		31			26			24				57			45
	Intangible asset amortization		14			15			18				29			35
	Other expense		155			148			164				303			307
		Total noninterest expense	1,076			1,071			1,013				2,147			1,944
Income (loss) from continuing operations before income taxes			913			765			215				1,678			383
	Income taxes		189			147			30				336			53
Income (loss) from continuing operations			724			618			185				1,342			330
	Income (loss) from discontinued operations, net of taxes		5			4			2				9			3
Net income (loss)			729			622			187				1,351			333
	Less:  Net income (loss) attributable to noncontrolling interests		—			—			—				—			—
Net income (loss) attributable to Key			$	729		$	622		$	187			$	1,351		$	333
Income (loss) from continuing operations attributable to Key common shareholders			$	698		$	591		$	159			$	1,289		$	277
Net income (loss) attributable to Key common shareholders			703			595			161				1,298			280
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.73		$	.61		$	.16			$	1.34		$	.29
Income (loss) from discontinued operations, net of taxes			—			—			—				.01			—
Net income (loss) attributable to Key common shareholders (a)			.73			.62			.17				1.35			.29
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.72		$	.61		$	.16			$	1.33		$	.28
Income (loss) from discontinued operations, net of taxes			—			—			—				.01			—
Net income (loss) attributable to Key common shareholders (a)			.73			.61			.17				1.34			.29
Cash dividends declared per common share			$	.185		$	.185		$	.185			$	.370		$	.370
Weighted-average common shares outstanding (000)			961,292			964,878			967,147				957,423			967,380
	Effect of common share options and other stock awards		9,514			9,419			4,994				9,740			6,892
Weighted-average common shares and potential common shares outstanding (000) (b)			970,806			974,297			972,141				967,163			974,272

(a)	Earnings per share may not foot due to rounding.
(b)	Assumes conversion of common share options and other stock awards, as applicable.

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
		Second Quarter 2021									First Quarter 2021									Second Quarter 2020
		Average						Yield/			Average						Yield/			Average						Yield/
		Balance			Interest (a)			Rate (a)			Balance			Interest (a)			Rate (a)			Balance			Interest (a)			Rate (a)
Assets
	Loans: (b), (c)
	Commercial and industrial (d)	$	51,808		$	450		3.52			$	52,581		$	453		3.48			$	60,480		$	518		3.44
	Real estate — commercial mortgage	12,825			117			3.67			12,658			114			3.67			13,510			128			3.80
	Real estate — construction	$	2,149		$	20		3.68			$	2,048		$	19		3.75			$	1,756		$	17		3.97
	Commercial lease financing	4,060			30			2.98			4,142			31			2.99			4,584			33			2.96
	Total commercial loans	$	70,842		$	617		3.53			$	71,429		$	617		3.50			$	80,330		$	696		3.49
	Real estate — residential mortgage	11,055			81			2.92			9,699			76			3.12			7,783			69			3.57
	Home equity loans	$	9,089		$	85		3.76			$	9,282		$	85		3.73			$	9,949		$	97		3.89
	Consumer direct loans	4,910			57			4.69			4,817			56			4.72			4,152			55			5.24
	Credit cards	$	908		$	22		9.79			$	933		$	24		10.45			$	983		$	25		10.22
	Consumer indirect loans	4,010			32			3.23			4,568			37			3.30			4,744			45			3.82
	Total consumer loans	$	29,972		$	277		3.74			$	29,299		$	278		3.84			$	27,611		$	291		4.22
	Total loans	100,814			894			3.59			100,728			895			3.60			107,941			987			3.67
	Loans held for sale	$	1,616		$	11		2.60			$	1,531		$	11		2.89			$	2,463		$	21		3.50
	Securities available for sale (b), (e)	33,623			133			3.13			30,039			130			1.76			20,749			121			2.43
	Held-to-maturity securities (b)	$	6,452		$	45		2.75			$	7,188		$	46		2.53			$	9,331		$	56		2.43
	Trading account assets	837			5			2.56			848			5			2.15			760			5			2.43
	Short-term investments	$	18,817		$	6		0.13			$	16,510		$	5		0.13			$	7,892		$	7		0.31
	Other investments (e)	622			2			1.02			614			2			1.40			672			—			0.29
	Total earning assets	$	162,781		$	1,096		2.72			$	157,458		$	1,094		2.81			$	149,808		$	1,197		3.22
	Allowance for loan and lease losses	(1,442)									(1,623)									(1,413)
	Accrued income and other assets	$	16,531								$	16,398								$	15,704
	Discontinued assets	650									686									793
	Total assets	$	178,520								$	172,919								$	164,892
Liabilities
	NOW and money market deposit accounts	$	83,981		$	9		.05			$	81,439		$	10		.05			$	75,297		$	56		.30
	Savings deposits	6,859			1			.03			6,203			1			.03			5,130			—			.04
	Certificates of deposit ($100,000 or more)	$	2,212		$	4		.72			$	2,571		$	6		.96			$	4,950		$	24		1.93
	Other time deposits	2,630			2			.38			2,902			4			.57			4,333			16			1.52
	Total interest-bearing deposits	$	95,682		$	16		.07			$	93,115		$	21		.09			$	89,710		$	96		.43
	Federal funds purchased and securities sold under repurchase agreements	251			—			.02			243			—			.04			242			—			.03
	Bank notes and other short-term borrowings	$	744		$	3		1.19			$	878		$	1		.64			$	2,869		$	5		.57
	Long-term debt (f), (g)	11,978			54			1.83			12,831			60			1.93			12,954			71			2.30
	Total interest-bearing liabilities	$	108,655		$	73		.27			$	107,067		$	82		.31			$	105,775		$	172		.66
	Noninterest-bearing deposits	48,640									44,625									38,267
	Accrued expense and other liabilities	$	3,304								$	2,772								$	2,369
	Discontinued liabilities (g)	650									686									793
	Total liabilities	$	161,249								$	155,150								$	147,204
Equity
	Key shareholders' equity	$	17,271								$	17,769								$	17,688
	Noncontrolling interests	—									—									—
	Total equity	$	17,271								$	17,769								$	17,688
	Total liabilities and equity	$	178,520								$	172,919								$	164,892
Interest rate spread (TE)								2.45	%								2.50	%								2.56	%
Net interest income (TE) and net interest margin (TE)					1,023			2.52	%					1,012			2.61	%					1,025			2.76	%
TE adjustment (b)					6									7									7
	Net interest income, GAAP basis				$	1,017								$	1,005								$	1,018

(a)	Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $132 million, $126 million, and $135 million of assets from commercial credit cards for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively.
(e)	Yield is calculated on the basis of amortized cost.
(f)	Rate calculation excludes basis adjustments related to fair value hedges.
(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates  From Continuing Operations
(dollars in millions)
		Six months ended June 30, 2021										Six months ended June 30, 2020
		Average						Yield/				Average						Yield/
		Balance			Interest (a)			Rate (a)				Balance			Interest (a)			Rate (a)
Assets
	Loans: (b), (c)
	Commercial and industrial (d)	$	52,194		$	902		3.48	%			$	54,973		$	1,026		3.75	%
	Real estate — commercial mortgage	12,742			232			3.67				13,529			283			4.20
	Real estate — construction	2,099			39			3.71				1,711			37			4.35
	Commercial lease financing	4,101			61			2.99				4,575			72			3.17
	Total commercial loans	71,136			1,234			3.49				74,788			1,418			3.81
	Real estate — residential mortgage	10,380			154			2.97				7,500			137			3.66
	Home equity loans	9,189			173			3.79				10,052			210			4.19
	Consumer direct loans	4,864			113			4.70				3,930			109			5.56
	Credit cards	920			46			10.12				1,032			56			10.89
	Consumer indirect loans	4,288			69			3.25				4,756			91			3.84
	Total consumer loans	29,641			555			3.77				27,270			603			4.44
	Total loans	100,777			1,789			3.58				102,058			2,021			3.98
	Loans held for sale	1,574			22			2.74				2,174			40			3.71
	Securities available for sale (b), (e)	31,841			263			1.66				20,960			250			2.46
	Held-to-maturity securities (b)	6,818			90			2.63				9,575			118			2.47
	Trading account assets	842			10			2.35				913			13			2.73
	Short-term investments	17,670			11			0.13				4,828			13			0.52
	Other investments (e)	618			4			1.21				643			1			0.34
	Total earning assets	160,140			2,189			2.75				141,151			2,456			3.51
	Allowance for loan and lease losses	(1532)										(1255)
	Accrued income and other assets	16,463										15,268
	Discontinued assets	668										815
	Total assets	$	175,739									$	155,979
Liabilities
	NOW and money market deposit accounts	$	82,717		20			.05				$	71,009		168			.47
	Savings deposits	6,533			1			.03				4,893			1			.04
	Certificates of deposit ($100,000 or more)	2,390			10			.85				5,630			58			2.08
	Other time deposits	2,766			6			.48				4,617			38			1.67
	Total interest-bearing deposits	94,406			37			.08				86,149			265			.62
	Federal funds purchased and securities sold under repurchase agreements	247			—			.03				1,122			6			1.05
	Bank notes and other short-term borrowings	811			4			.89				2,135			10			.90
	Long-term debt (f), (g)	12,402			114			1.87				12,698			161			2.62
	Total interest-bearing liabilities	107,866			155			.29				102,104			442			.87
	Noninterest-bearing deposits	46,638										33,004
	Accrued expense and other liabilities	3,048										2,604
	Discontinued liabilities (g)	668										815
	Total liabilities	158,220										138,527
Equity
	Key shareholders' equity	17,519										17,452
	Noncontrolling interests	—										—
	Total equity	17,519										17,452
	Total liabilities and equity	$	175,739									$	155,979
Interest rate spread (TE)								2.46	%									2.64	%
Net interest income (TE) and net interest margin (TE)					2,035			2.56	%						2,014			2.88	%
TE adjustment (b)					13										15
	Net interest income, GAAP basis				$	2,022									$	1,999

(a)	Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the six months ended June 30, 2021, and June 30, 2020, respectively.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $129 million and $140 million of assets from commercial credit cards for the six months ended June 30, 2021, and June 30, 2020, respectively.
(e)	Yield is calculated on the basis of amortized cost.
(f)	Rate calculation excludes basis adjustments related to fair value hedges.
(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Noninterest Expense
(dollars in millions)
	Three months ended										Six months ended
	6/30/2021			3/31/2021			6/30/2020				6/30/2021			6/30/2020
Personnel (a)	$	623		$	624		$	572			$	1,247		$	1,087
Net occupancy	75			76			71				151			147
Computer processing	71			73			56				144			111
Business services and professional fees	51			50			49				101			93
Equipment	25			25			25				50			49
Operating lease expense	31			34			34				65			70
Marketing	31			26			24				57			45
Intangible asset amortization	14			15			18				29			35
Other expense	155			148			164				303			307
Total noninterest expense	$	1,076		$	1,071		$	1,013			$	2,147		$	1,944
Average full-time equivalent employees (b)	17,157			17,086			16,646				17,122			16,587

(a)	Additional detail provided in Personnel Expense table below.
(b)	The number of average full-time equivalent employees has not been adjusted for discontinued operations.

 

Personnel Expense
(in millions)
	Three months ended										Six months ended
	6/30/2021			3/31/2021			6/30/2020				6/30/2021			6/30/2020
Salaries and contract labor	$	321		$	320		$	332			$	641		$	648
Incentive and stock-based compensation	210			196			162				406			264
Employee benefits	92			107			76				199			168
Severance	—			1			2				1			7
Total personnel expense	$	623		$	624		$	572			$	1,247		$	1,087

 

Loan Composition
(dollars in millions)
											Percent change 6/30/2021 vs
	6/30/2021			3/31/2021			6/30/2020				3/31/2021		6/30/2020
Commercial and industrial (a)	$	50,672		$	52,486		$	58,297			(3.5)	%	(13.1)	%
Commercial real estate:
Commercial mortgage	12,965			12,702			13,465				2.1		(3.7)
Construction	2,132			2,122			1,919				.5		11.1
Total commercial real estate loans	15,097			14,824			15,384				1.8		(1.9)
Commercial lease financing (b)	4,061			4,104			4,524				(1.0)		(10.2)
Total commercial loans	69,830			71,414			78,205				(2.2)		(10.7)
Residential — prime loans:
Real estate — residential mortgage	12,131			10,300			8,149				17.8		48.9
Home equity loans	9,047			9,158			9,782				(1.2)		(7.5)
Total residential — prime loans	21,178			19,458			17,931				8.8		18.1
Consumer direct loans	5,049			4,862			4,327				3.8		16.7
Credit cards	923			909			974				1.5		(5.2)
Consumer indirect loans	3,750			4,283			4,722				(12.4)		(20.6)
Total consumer loans	30,900			29,512			27,954				4.7		10.5
Total loans (c), (d)	$	100,730		$	100,926		$	106,159			(.2)	%	(5.1)	%

(a)	Loan balances include $135 million, $126 million, and $132 million of commercial credit card balances at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.
(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $19 million, $21 million, and $18 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)	Total loans exclude loans of $636 million at June 30, 2021, $675 million at March 31, 2021, and $780 million at June 30, 2020, related to the discontinued operations of the education lending business.
(d)	Accrued interest of $225 million, $241 million, and $225 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

 

Loans Held for Sale Composition
(dollars in millions)
											Percent change 6/30/2021 vs
	6/30/2021			3/31/2021			6/30/2020				3/31/2021		6/30/2020
Commercial and industrial	$	233		$	1,175		$	419			(80.2)	%	(44.4)	%
Real estate — commercial mortgage	1,073			837			1,107				28.2		(3.1)
Commercial lease financing	—			—			—				N/M		N/M
Real estate — residential mortgage	231			236			250				(2.1)		(7.6)
Consumer direct loans	—			48			231				N/M		N/M
Total loans held for sale	$	1,537		$	2,296		$	2,007			(33.1)	%	(23.4)	%

N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale
(in millions)
	2Q21			1Q21			4Q20			3Q20			2Q20
Balance at beginning of period	$	2,296		$	1,583		$	1,724		$	2,007		$	2,143
New originations	3,573			4,010			3,835			3,282			3,621
Transfers from (to) held to maturity, net	(71)			83			(24)			75			(15)
Loan sales	(4,195)			(3,303)			(3,932)			(3,583)			(3,679)
Loan draws (payments), net	(27)			(73)			(19)			(57)			(61)
Valuation and other adjustments	(39)			(4)			—			—			(2)
Balance at end of period	$	1,537		$	2,296		$	1,583		$	1,724		$	2,007

 

Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
	Three months ended										Six months ended
	6/30/2021			3/31/2021			6/30/2020				6/30/2021			6/30/2020
Average loans outstanding	$	100,814		$	100,728		$	107,941			$	100,777		$	102,058
Allowance for loan and lease losses at the end of the prior period	$	1,438		$	1,626		$	1359			$	1,626		$	900
Cumulative effect from change in accounting principle (a)	—			—			—				—			204
Allowance for loan and lease losses at the beginning of the period	1,438			1,626			1,359				1,626			1,104
Loans charged off:
Commercial and industrial	41			73			71				114			351
Real estate — commercial mortgage	4			35			2				39			19
Real estate — construction	—			—			—				—			—
Total commercial real estate loans	4			35			2				39			19
Commercial lease financing	—			4			4				4			35
Total commercial loans	45			112			77				157			405
Real estate — residential mortgage	1			—			2				1			2
Home equity loans	4			2			2				6			11
Consumer direct loans	7			8			10				15			37
Credit cards	9			6			12				15			39
Consumer indirect loans	5			7			7				12			28
Total consumer loans	26			23			33				49			117
Total loans charged off	71			135			110				206			522
Recoveries:
Commercial and industrial	32			8			5				40			34
Real estate — commercial mortgage	6			1			—				7			3
Real estate — construction	—			—			—				—			—
Total commercial real estate loans	6			1			—				7			3
Commercial lease financing	—			1			1				1			1
Total commercial loans	38			10			6				48			38
Real estate — residential mortgage	—			1			—				1			1
Home equity loans	1			1			1				2			7
Consumer direct loans	2			2			2				4			7
Credit cards	3			2			2				5			8
Consumer indirect loans	5			5			3				10			18
Total consumer loans	11			11			8				22			41
Total recoveries	49			21			14				70			78
Net loan charge-offs	(22)			(114)			(96)				(136)			(443)
Provision (credit) for loan and lease losses	(196)			(74)			445				(270)			965
Allowance for loan and lease losses at end of period	$	1,220		$	1,438		$	1,708			$	1,220		$	1,626
Liability for credit losses on lending-related commitments at the end of the prior      period	$	178		$	197		$	161			$	197		$	68
Liability for credit losses on contingent guarantees at the end of the prior period	—			—			—				—			7
Cumulative effect from change in accounting principle (a), (b)	—			—			—				—			66
Liability for credit losses on lending-related commitments at beginning of period	178			197			161				197			141
Provision (credit) for losses on lending-related commitments	(26)			(19)			37				(45)			56
Liability for credit losses on lending-related commitments at end of period (c)	$	152		$	178		$	198			$	152		$	197
Total allowance for credit losses at end of period	$	1,372		$	1,616		$	1,906			$	1,372		$	1,823
Net loan charge-offs to average total loans	.09		%	.46		%	.36		%		.27		%	.35		%
Allowance for loan and lease losses to period-end loans	1.21			1.42			1.61				1.21			1.61
Allowance for credit losses to period-end loans	1.36			1.60			1.80				1.36			1.80
Allowance for loan and lease losses to nonperforming loans	175.8			197.5			224.7				175.8			224.7
Allowance for credit losses to nonperforming loans	197.7			222.0			250.8				197.7			250.8
Discontinued operations — education lending business:
Loans charged off	$	1		1			$	2			$	2		$	5
Recoveries	—			1			2				1			5
Net loan charge-offs	$	(1)		—			$	—			(1)			$	(1)

(a)	The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.
(b)	Six months ended June 30, 2020, excludes $4 million related to the provision for other financial assets as a result of the change in accounting principle.
(c)	Included in "Accrued expense and other liabilities" on the balance sheet.

 

Asset Quality Statistics From Continuing Operations
(dollars in millions)
	2Q21			1Q21			4Q20			3Q20			2Q20
Net loan charge-offs	$	22		$	114		$	135		$	128		$	96
Net loan charge-offs to average total loans	.09		%	.46		%	.53		%	.49		%	.36		%
Allowance for loan and lease losses	$	1,220		$	1,438		$	1,626		$	1,730		$	1,708
Allowance for credit losses (a)	1,372			1,616			1,823			1,938			1,906
Allowance for loan and lease losses to period-end loans	1.21		%	1.42		%	1.61		%	1.68		%	1.61		%
Allowance for credit losses to period-end loans	1.36			1.60			1.80			1.88			1.80
Allowance for loan and lease losses to nonperforming loans	175.8			197.5			207.1			207.4			224.7
Allowance for credit losses to nonperforming loans	197.7			222.0			232.2			232.4			250.8
Nonperforming loans at period end	$	694		$	728		$	785		$	834		$	760
Nonperforming assets at period end	738			790			937			1,003			951
Nonperforming loans to period-end portfolio loans	.69		%	.72		%	.78		%	.81		%	.72		%
Nonperforming assets to period-end portfolio loans plus OREO and other      nonperforming assets	.73			.78			.92			.97			.89

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

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Commercial and industrial	$	355		$	387		$	385		$	459		$	404
Real estate — commercial mortgage	66			66			104			104			91
Real estate — construction	—			—			—			1			1
Total commercial real estate loans	66			66			104			105			92
Commercial lease financing	7			8			8			6			9
Total commercial loans	428			461			497			570			505
Real estate — residential mortgage	99			95			110			96			89
Home equity loans	146			148			154			146			141
Consumer direct loans	4			5			5			3			3
Credit cards	3			3			2			2			2
Consumer indirect loans	14			16			17			17			20
Total consumer loans	266			267			288			264			255
Total nonperforming loans	694			728			785			834			760
OREO	9			12			100			105			112
Nonperforming loans held for sale	32			47			49			61			75
Other nonperforming assets	3			3			3			3			4
Total nonperforming assets	$	738		$	790		$	937		$	1,003		$	951
Accruing loans past due 90 days or more	74			92			86			73			87
Accruing loans past due 30 through 89 days	190			191			241			336			419
Restructured loans — accruing and nonaccruing (a)	334			376			363			306			310
Restructured loans included in nonperforming loans (a)	177			192			229			168			166
Nonperforming assets from discontinued operations — education lending business	5			5			5			6			7
Nonperforming loans to period-end portfolio loans	.69		%	.72		%	.78		%	.81		%	.72		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets	.73			.78			.92			.97			.89

(a)

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

 

Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
	2Q21			1Q21			4Q20			3Q20			2Q20
Balance at beginning of period	$	728		$	785		$	834		$	760		$	632
Loans placed on nonaccrual status	186			196			300			387			293
Charge-offs	(74)			(135)			(160)			(150)			(111)
Loans sold	(10)			(13)			(9)			(6)			(5)
Payments	(92)			(37)			(83)			(83)			(29)
Transfers to OREO	—			(3)			(3)			—			—
Transfers to nonperforming loans held for sale	—			—			—			—			—
Loans returned to accrual status	(44)			(65)			(94)			(74)			(20)
Balance at end of period	$	694		$	728		$	785		$	834		$	760

 

Line of Business Results
(dollars in millions)
																	Percentage change 2Q21 vs.
	2Q21			1Q21			4Q20			3Q20			2Q20				1Q21		2Q20
Consumer Bank
Summary of operations
Total revenue (TE)	$	854		$	867		$	899		$	866		$	835			(1.5)	%	2.3	%
Provision for credit losses	(70)			(23)			(5)			(3)			155				(204.3)		145.2
Noninterest expense	584			601			606			567			552				(2.8)		5.8
Net income (loss) attributable to Key	259			220			228			231			98				17.7		164.3
Average loans and leases	40,598			39,249			39,455			38,476			37,300				3.4		8.8
Average deposits	88,412			85,033			82,854			82,836			79,235				4.0		11.6
Net loan charge-offs	34			36			28			23			40				(5.6)		(15.0)
Net loan charge-offs to average total loans	.34		%	.37		%	.28		%	.24		%	.43		%		(8.1)		(20.9)
Nonperforming assets at period end	$	274		$	345		$	374		$	353		$	332			(20.6)		(17.5)
Return on average allocated equity	28.74		%	26.10		%	25.95		%	26.44		%	11.50		%		10.1		149.9
Commercial Bank
Summary of operations
Total revenue (TE)	$	874		$	859		$	923		$	813		$	879			1.7	%	(.6)	%
Provision for credit losses	(131)			(67)			44			150			326				95.5		(120.6)
Noninterest expense	451			443			498			447			441				1.8		2.3
Net income (loss) attributable to Key	434			384			311			174			106				13.0		309.4
Average loans and leases	59,953			61,221			62,016			66,264			70,336				(2.1)		(14.8)
Average loans held for sale	1,341			1,237			1,285			1,383			2,012				8.4		(33.3)
Average deposits	54,814			51,894			52,489			51,585			47,954				5.6		14.3
Net loan charge-offs	9			78			108			103			57				(88.5)		(84.2)
Net loan charge-offs to average total loans	.06		%	.52		%	.69		%	.62		%	.33		%		N/A		N/A
Nonperforming assets at period end	$	464		$	441		$	558		$	645		$	616			5.2		(24.7)
Return on average allocated equity	20.79		%	17.45		%	23.87		%	13.43		%	8.66		%		N/A		N/A

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

 

 

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SOURCE KeyCorp

FAQ

What were KeyCorp's earnings for Q2 2021?

KeyCorp reported net income of $698 million for Q2 2021.

How much did KeyCorp increase its dividend in Q2 2021?

KeyCorp will evaluate an increase to the common stock dividend in the fourth quarter of 2021.

What is KeyCorp's stock symbol?

KeyCorp's stock symbol is KEY.

What was KeyCorp's Common Equity Tier 1 ratio in Q2 2021?

KeyCorp's Common Equity Tier 1 ratio stood at 9.9% in Q2 2021.

How much did KeyCorp authorize for share repurchases?

KeyCorp authorized up to $1.5 billion for share repurchases.