Company Announcements

KeyCorp Reports Record First Quarter 2021 Net Income Of $591 Million, Or $.61 Per Diluted Common Share

CLEVELAND, April 20, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $591 million, or $.61 per diluted common share for the first quarter of 2021. This compared to $549 million, or $.56 per diluted common share, for the fourth quarter of 2020 and $118 million, or $.12 per diluted common share, for the first quarter of 2020. 

This was a strong start to the year for Key as we executed our strategy, grew and expanded client relationships, and delivered positive operating leverage. Our results reflect strong credit quality as well as record first quarter revenues, with strength in our investment banking business and ongoing momentum from our consumer growth engines.

We have continued to make investments in our business to position the company for success. In March, we successfully launched Laurel Road for Doctors, a digital platform tailored to the unique financial needs of healthcare professionals. Additionally, this platform expands our digital reach nationally, for this targeted client segment. Laurel Road for Doctors underscores our commitment to both targeted scale and digital transformation.

Credit quality continued to be a strength this quarter. Our strong risk management practices contributed to broad-based improvement in our credit metrics. 

Maintaining our strong capital position also remains a priority. Our Common Equity Tier 1 ratio at the end of the first quarter was 9.8%, which is above our targeted range of 9.0% to 9.5%. In January, our Board of Directors authorized a $900 million share repurchase program of which we executed $135 million in the first quarter. 

I remain optimistic about the future as we emerge from the pandemic and the economic recovery continues. Key is well-positioned to grow and deliver on our commitments to all of our stakeholders.

     -  Chris Gorman, Chairman and CEO

Selected Financial Highlights









dollars in millions, except per share data


Change 1Q21 vs.



1Q21

4Q20

1Q20


4Q20

1Q20

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

$

591


$

549


$

118



7.7

%

400.8

%

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

.61


.56


.12



8.9


408.3


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

18.25

%

16.61

%

3.82

%


N/A

N/A

Return on average total assets from continuing operations

1.44


1.35


.40



N/A

N/A

Common Equity Tier 1 ratio (b)

9.8


9.7


8.9



N/A

N/A

Book value at period end

$

16.22


$

16.53


$

15.95



(1.9)

%

1.7

%

Net interest margin (TE) from continuing operations

2.61

%

2.70

%

3.01

%


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)

March 31, 2021 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS








Revenue














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Net interest income (TE)

$

1,012


$

1,043


$

989



(3.0)

%

2.3

%

Noninterest income

738


802


477



(8.0)


54.7


Total revenue

$

1,750


$

1,845


$

1,466



(5.1)

%

19.4

%









TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the first quarter of 2021, compared to taxable-equivalent net interest income of $989 million for the first quarter of 2020. 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. 

Compared to the fourth quarter of 2020, taxable-equivalent net interest income decreased by $31 million and the net interest margin decreased by 9 basis points. The decrease in both net interest income and the net interest margin reflects lower reinvestment yields, lower loan fees, and an unfavorable balance sheet mix, including elevated levels of liquidity, partly offset by lower interest-bearing deposit costs. Net interest income was also impacted by two fewer days in the first quarter of 2021.

Noninterest Income














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Trust and investment services income

$

133


$

123


$

133



8.1

%

%

Investment banking and debt placement fees

162


243


116



(33.3)


39.7


Service charges on deposit accounts

73


82


84



(11.0)


(13.1)


Operating lease income and other leasing gains

38


39


30



(2.6)


26.7


Corporate services income

64


63


62



1.6


3.2


Cards and payments income

105


97


66



8.2


59.1


Corporate-owned life insurance income

31


38


36



(18.4)


(13.9)


Consumer mortgage income

47


43


20



9.3


135.0


Commercial mortgage servicing fees

34


32


18



6.3


88.9


Other income

51


42


(88)



21.4


(158.0)


Total noninterest income

$

738


$

802


$

477



(8.0)

%

54.7

%








Compared to the first quarter of 2020, noninterest income increased by $261 million, primarily driven by a $139 million increase in other income including $92 million of market-related valuation adjustments in the year-ago quarter. Investment banking and debt placement fees increased $46 million from the year-ago period, due to strength in the debt and equity markets. Cards and payments income increased $39 million, due to heightened prepaid card activity. Additionally, investments made in Key's mortgage business continue to drive consumer mortgage income and commercial mortgage servicing fees, which increased $27 million and $16 million, respectively, from the year-ago quarter.

Compared to the fourth quarter of 2020, noninterest income decreased by $64 million. The largest driver of the quarter-over-quarter decrease was a $81 million decrease in investment banking and debt placement fees, partially driven by expected seasonality. Partially offsetting the decrease was a $10 million increase in trust and investment services income and a $8 million increase in cards and payments income. 

Noninterest Expense














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Personnel expense

$

624


$

661


$

515



(5.6)

%

21.2

%

Nonpersonnel expense

447


467


416



(4.3)


7.5


Total noninterest expense

$

1,071


$

1,128


$

931



(5.1)

%

15.0

%








Key's noninterest expense was $1.1 billion for the first quarter of 2021, an increase of $140 million from the year-ago period. The increase is primarily related to higher personnel costs of $109 million, reflecting higher incentive and stock-based compensation, attributed to an increase in revenue and stock performance and an increase in employee benefits. Other drivers for the year-over-year increases include payments-related expenses from prepaid card activity incurred in the current period, as well as computer processing expenses.

Compared to the fourth quarter of 2020, noninterest expense decreased $57 million. This was largely due to decreases in severance, incentive and stock-based compensation, and salaries and contract labor. Additionally, other expense decreased $22 million, partially due to lower charitable contributions.

BALANCE SHEET HIGHLIGHTS














Average Loans














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Commercial and industrial (a)

$

52,581


$

53,562


$

49,466



(1.8)

%

6.3

%

Other commercial loans

18,848


19,174


19,779



(1.7)


(4.7)


Total consumer loans

29,299


28,974


26,929



1.1


8.8


Total loans

$

100,728


$

101,710


$

96,174



(1.0)

%

4.7

%










(a)

Commercial and industrial average loan balances include $126 million, $129 million, and $145 million of assets from commercial credit cards at March 31, 2021, December 31, 2020, and March 31, 2020, respectively.

Average loans were $100.7 billion for the first quarter of 2021, an increase of $4.6 billion compared to the first quarter of 2020. Commercial loans increased $2.2 billion, reflecting Key's participation in the Paycheck Protection Program ("PPP"), partially offset by decreased utilization versus the year-ago period. Consumer loans increased $2.4 billion, driven by strength from Laurel Road and Key's consumer mortgage business.

Compared to the fourth quarter of 2020, average loans decreased by $1.0 billion. Commercial loans declined due to the forgiveness of a portion of PPP loans and lower commercial utilization rates. Consumer loans continue to reflect strength from Key's consumer mortgage business, as well as Laurel Road.

Average Deposits














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Non-time deposits

$

132,267


$

129,529


$

99,117



2.1

%

33.4

%

Certificates of deposit ($100,000 or more)

2,571


2,983


6,310



(13.8)


(59.3)


Other time deposits

2,902


3,209


4,901



(9.6)


(40.8)


Total deposits

$

137,740


$

135,721


$

110,328



1.5

%

24.8

%








Cost of total deposits

.06

%

.08

%

.62

%


N/A

N/A









N/A = Not Applicable

Average deposits totaled $137.7 billion for the first quarter of 2021, an increase of $27.4 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 fourth quarter of 2020, average deposits increased by $2.0 billion, primarily driven by broad-based commercial growth and higher consumer balances.

ASSET QUALITY














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Net loan charge-offs

$

114


$

135


$

84



(15.6)

%

35.7

%

Net loan charge-offs to average total loans

.46

%

.53

%

.35

%


N/A

N/A

Nonperforming loans at period end

$

728


$

785


$

632



(7.3)


15.2


Nonperforming assets at period end

790


937


844



(15.7)


(6.4)


Allowance for loan and lease losses

1,438


1,626


1,359



(11.6)


5.8


Allowance for credit losses

1,616


1,823


1,520



(11.4)


6.3


Allowance for loan and lease losses to nonperforming loans

197.5

%

207.1

%

215.0

%


N/A

N/A

Allowance for credit losses to nonperforming loans

222.0


232.2


240.5



N/A

N/A

Provision for credit losses

$

(93)


$

20


$

359



(565.0)

%

(125.9)

%









N/A = Not Applicable

Key's provision for credit losses was a net benefit of $93 million, including a $207 million reserve release for the first quarter of 2021, compared to an expense of $359 million in the first quarter of 2020 and an expense of $20 million in the fourth quarter of 2020. The reserve release was largely driven by expected improvement in the economic outlook.

Net loan charge-offs for the first quarter of 2021 totaled $114 million, or .46% of average total loans. These results compare to $84 million, or .35%, for the first quarter of 2020 and $135 million, or .53%, for the fourth quarter of 2020. Key's allowance for credit losses was $1.6 billion, or 1.60% of total period-end loans at March 31, 2021, compared to 1.47% at March 31, 2020, and 1.80% at December 31, 2020.

At March 31, 2021, Key's nonperforming loans totaled $728 million, which represented .72% of period-end portfolio loans. These results compare to .61% at March 31, 2020, and .78% at December 31, 2020. Nonperforming assets at March 31, 2021, totaled $790 million, and represented .78% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .82% at March 31, 2020, and .92% at December 31, 2020.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at March 31, 2021.

Capital Ratios









3/31/2021

12/31/2020

3/31/2020

Common Equity Tier 1 (a)

9.8

%

9.7

%

8.9

%

Tier 1 risk-based capital (a)

11.2


11.1


10.2


Total risk-based capital (a)

13.4


13.4


12.2


Tangible common equity to tangible assets (b)

7.5


7.9


8.3


Leverage (a)

8.9


8.9


9.8








(a)

March 31, 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 first quarter of 2021. As shown in the preceding table, at March 31, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.8% and 11.2%, respectively. Key's tangible common equity ratio was 7.5% at March 31, 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 25 basis points.

Summary of Changes in Common Shares Outstanding













in thousands





Change 1Q21 vs.



1Q21

4Q20

1Q20


4Q20

1Q20

Shares outstanding at beginning of period

975,773


976,205


977,189




(.1)

%

Open market repurchases and return of shares under employee compensation
     plans

(9,277)


(1,092)


(7,862)



749.5


18.0


Shares issued under employee compensation plans (net of cancellations)

6,091


660


5,992



822.9

%

1.7



Shares outstanding at end of period

972,587


975,773


975,319



(.3)


(.3)

%









N/M = Not Meaningful

Consistent with Key's 2020 Capital Plan, during the first quarter of 2021, Key declared a dividend of $.185 per common share. In January, Key announced a new share repurchase authorization program of up to $900 million, applicable through September 30, 2021. During the first quarter, Key completed $135 million of common share repurchases.

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 1Q21 vs.



1Q21

4Q20

1Q20


4Q20

1Q20

Revenue from continuing operations (TE)







Consumer Bank

$

864


$

896


$

810



(3.6)

%

6.7

%

Commercial Bank

858


922


641



(6.9)


33.9


Other (a)

28


27


15



3.7


86.7



Total

$

1,750


$

1,845


$

1,466



(5.1)

%

19.4

%









Income (loss) from continuing operations attributable to Key







Consumer Bank

$

217


$

225


$

103



(3.6)

%

110.7

%

Commercial Bank

383


310


66



23.5


480.3


Other (a)

18


40


(24)



(55.0)


N/M


Total

$

618


$

575


$

145



7.5

%

326.2

%











(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 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Summary of operations







Net interest income (TE)

$

607


$

638


$

581



(4.9)

%

4.5

%

Noninterest income

257


258


229



(.4)


12.2


Total revenue (TE)

864


896


810



(3.6)


6.7


Provision for credit losses

(23)


(5)


136



(360.0)


(116.9)


Noninterest expense

601


606


539



(.8)


11.5


Income (loss) before income taxes (TE)

286


295


135



(3.1)


111.9


Allocated income taxes (benefit) and TE adjustments

69


70


32



(1.4)


115.6


Net income (loss) attributable to Key

$

217


$

225


$

103



(3.6)

%

110.7

%








Average balances







Loans and leases

$

39,249


$

39,448


$

33,175



(.5)

%

18.3

%

Total assets

42,476


42,666


36,415



(.4)


16.6


Deposits

85,033


82,845


73,133



2.6


16.3









Assets under management at period end

$

45,218


$

44,140


$

36,189



2.4

%

24.9

%









TE = Taxable Equivalent

 

Additional Consumer Bank Data














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Noninterest income







Trust and investment services income

$

101


$

95


$

93



6.3

%

8.6

%

Service charges on deposit accounts

39


49


55



(20.4)


(29.1)


Cards and payments income

54


54


49




10.2


Consumer mortgage income

47


43


20



9.3


135.0


Other noninterest income

16


17


12



(5.9)


33.3


Total noninterest income

$

257


$

258


$

229



(.4)

%

12.2

%








Average deposit balances







NOW and money market deposit accounts

$

54,684


$

53,045


$

45,569



3.1

%

20.0

%

Savings deposits

5,878


5,407


4,345



8.7


35.3


Certificates of deposit ($100,000 or more)

2,424


2,801


5,587



(13.5)


(56.6)


Other time deposits

2,888


3,187


4,869



(9.4)


(40.7)


Noninterest-bearing deposits

19,159


18,406


12,763



4.1


50.1


Total deposits

$

85,033


$

82,845


$

73,133



2.6


16.3

%








Home equity loans







Average balance

$

9,234


$

9,360


$

10,093





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

69

%

69

%

70

%




Percent first lien positions

68


66


62












Other data







Branches

1,068


1,073


1,082





Automated teller machines

1,368


1,386


1,398












Consumer Bank Summary of Operations (1Q21 vs. 1Q20)

  • Net income attributable to Key of $217 million for the first quarter of 2021, compared to $103 million for the year-ago quarter
  • Taxable-equivalent net interest income increased by $26 million, or 4.5%, compared to the first quarter of 2020, 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 $6.1 billion, or 18.3%, driven by benefit from the PPP, as well as growth from Laurel Road and consumer mortgage
  • Average deposits increased $11.9 billion, or 16.3%, from the first quarter of 2020. This was driven by consumer stimulus payments and relationship growth
  • Provision for credit losses decreased $159 million compared to the first 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 $28 million, or 12.2%, from the year ago quarter, due to higher trust and investment services income, and strength in consumer mortgage income
  • Noninterest expense increased $62 million, or 11.5%, from the year ago quarter, driven by higher variable compensation from significantly favorable revenue and higher variable expenses related to higher loan volumes

 

Commercial Bank





















dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Summary of operations







Net interest income (TE)

$

411


$

420


$

421



(2.1)

%

(2.4)

%

Noninterest income

447


502


220



(11.0)


103.2


Total revenue (TE)

858


922


641



(6.9)


33.9


Provision for credit losses

(67)


44


222



(252.3)


(130.2)


Noninterest expense

443


498


362



(11.0)


22.4


Income (loss) before income taxes (TE)

482


380


57



26.8


745.6


Allocated income taxes and TE adjustments

99


70


(9)



41.4


N/M

Net income (loss) attributable to Key

$

383


$

310


$

66



23.5

%

480.3

%








Average balances







Loans and leases

$

60,885


$

61,680


$

62,104



(1.3)

%

(2.0)

%

Loans held for sale

1,237


1,285


1,607



(3.7)


(23.0)


Total assets

70,114


70,969


71,410



(1.2)


(1.8)


Deposits

51,894


52,489


36,443



(1.1)

%

42.4

%









TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Commercial Bank Data














dollars in millions





Change 1Q21 vs.


1Q21

4Q20

1Q20


4Q20

1Q20

Noninterest income







Trust and investment services income

$

32


$

28


$

39



14.3

%

(17.9)


Investment banking and debt placement fees

162


243


116



(33.3)


39.7

%

Operating lease income and other leasing gains

38


39


30



(2.6)


26.7









Corporate services income

56


55


58



1.8


(3.4)


Service charges on deposit accounts

33


32


29



3.1


13.8


Cards and payments income

51


43


17



18.6


200.0


Payments and services income

140


130


104



7.7


34.6









Commercial mortgage servicing fees

34


32


18



6.3


88.9


Other noninterest income

41


30


(87)



36.7


147.1


Total noninterest income

$

447


$

502


$

220



(11.0)

%

103.2

%









N/M = Not Meaningful

Commercial Bank Summary of Operations (1Q21 vs. 1Q20)

  • Net income attributable to Key of $383 million for the first quarter of 2021, compared to $66 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $10 million, compared to the first quarter of 2020, as the lower interest rate environment offset fees related to PPP loans
  • Average loan and lease balances decreased $1.2 billion, compared to the first quarter of 2020 as lower utilization offset PPP loans
  • Average deposit balances increased $15.5 billion, or 42.4%, compared to the first quarter of 2020, driven by growth in targeted relationships and the impact of government programs
  • Provision for credit losses decreased $289 million compared to the first quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions
  • Noninterest income increased $227 million, from the year-ago quarter, driven by favorable market-related adjustments to customer derivatives compared to detriments in 2020, increased investment banking client activity, and higher cards and payments income related to prepaid card revenue
  • Noninterest expense increased by $81 million, or 22.4%, from the first quarter of 2020, driven by higher variable compensation from significantly favorable revenue and elevated variable expenses related to prepaid card

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

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 $176.2 billion at March 31, 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 1,400 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, 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/irat 10:00 a.m. ET, on Tuesday, April 20, 2021. A replay of the call will be available through April 29, 2021.

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

*****

KeyCorp

First Quarter 2021

Financial Supplement


Page


14

Financial Highlights

15

GAAP to Non-GAAP Reconciliation

17

Consolidated Balance Sheets

18

Consolidated Statements of Income

19

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




3/31/2021

12/31/2020

3/31/2020

Summary of operations





Net interest income (TE)

$

1,012


$

1,043


$

989



Noninterest income

738


802


477




Total revenue (TE)

1,750


1,845


1,466



Provision for credit losses

(93)


20


359



Noninterest expense

1,071


1,128


931



Income (loss) from continuing operations attributable to Key

618


575


145



Income (loss) from discontinued operations, net of taxes

4


7


1



Net income (loss) attributable to Key

622


582


146









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

591


549


118



Income (loss) from discontinued operations, net of taxes

4


7


1



Net income (loss) attributable to Key common shareholders

595


556


119








Per common share





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

$

.61


$

.57


$

.12



Income (loss) from discontinued operations, net of taxes


.01




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

.62


.57


.12









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

.61


.56


.12



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


.01




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

.61


.57


.12









Cash dividends declared

.185


.185


.185



Book value at period end

16.22


16.53


15.95



Tangible book value at period end

13.30


13.61


12.98



Market price at period end

19.98


16.41


10.37








Performance ratios





From continuing operations:





Return on average total assets

1.44

%

1.35

%

.40

%


Return on average common equity

14.98


13.65


3.10



Return on average tangible common equity (b)

18.25


16.61


3.82



Net interest margin (TE)

2.61


2.70


3.01



Cash efficiency ratio (b)

60.3


60.3


62.3









From consolidated operations:





Return on average total assets

1.45

%

1.36

%

.40

%


Return on average common equity

15.08


13.82


3.12



Return on average tangible common equity (b)

18.37


16.82


3.86



Net interest margin (TE)

2.60


2.69


3.00



Loan to deposit (c)

73.1


76.5


92.1








Capital ratios at period end





Key shareholders' equity to assets

10.0

%

10.6

%

11.1

%


Key common shareholders' equity to assets

9.0


9.5


10.0



Tangible common equity to tangible assets (b)

7.5


7.9


8.3



Common Equity Tier 1 (d)

9.8


9.7


8.9



Tier 1 risk-based capital (d)

11.2


11.1


10.2



Total risk-based capital (d)

13.4


13.4


12.2



Leverage (d)

8.9


8.9


9.8








Asset quality — from continuing operations





Net loan charge-offs

$

114


$

135


$

84



Net loan charge-offs to average loans

.46

%

.53

%

.35

%


Allowance for loan and lease losses

$

1,438


$

1,626


$

1,359



Allowance for credit losses

1,616


1,823


1,520



Allowance for loan and lease losses to period-end loans

1.42

%

1.61

%

1.32

%


Allowance for credit losses to period-end loans

1.60


1.80


1.47



Allowance for loan and lease losses to nonperforming loans

197.5


207.1


215.0



Allowance for credit losses to nonperforming loans

222.0


232.2


240.5



Nonperforming loans at period-end

$

728


$

785


$

632



Nonperforming assets at period-end

790


937


844



Nonperforming loans to period-end portfolio loans

.72

%

.78

%

.61

%


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

.78


.92


.82








Trust assets





Assets under management

$

45,218


$

44,140


$

36,189








Other data





Average full-time equivalent employees

17,086


17,029


16,529



Branches

1,068


1,073


1,082



Taxable-equivalent adjustment

$

7


$

8


$

8




(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)

March 31, 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


3/31/2021

12/31/2020

3/31/2020

Tangible common equity to tangible assets at period-end




Key shareholders' equity (GAAP)

$

17,634


$

17,981


$

17,411


Less: Intangible assets (a)

2,842


2,848


2,894


Preferred Stock (b)

1,856


1,856


1,856


Tangible common equity (non-GAAP)

$

12,936


$

13,277


$

12,661


Total assets (GAAP)

$

176,203


$

170,336


$

156,197


Less: Intangible assets (a)

2,842


2,848


2,894


Tangible assets (non-GAAP)

$

173,361


$

167,488


$

153,303


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

7.46

%

7.93

%

8.26

%

Pre-provision net revenue




Net interest income (GAAP)

$

1,005


$

1,035


$

981


Plus: Taxable-equivalent adjustment

7


8


8


Noninterest income

738


802


477


Less: Noninterest expense

1,071


1,128


931


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

$

679


$

717


$

535


Average tangible common equity




Average Key shareholders' equity (GAAP)

$

17,769


$

17,905


$

17,216


Less: Intangible assets (average) (c)

2,844


2,855


2,902


Preferred stock (average)

1,900


1,900


1,900


Average tangible common equity (non-GAAP)

$

13,025


$

13,150


$

12,414


Return on average tangible common equity from continuing operations




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

$

591


$

549


$

118


Average tangible common equity (non-GAAP)

13,025


13,150


12,414






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

18.25

%

16.61

%

3.82

%

Return on average tangible common equity consolidated




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

$

595


$

556


$

119


Average tangible common equity (non-GAAP)

13,025


13,150


12,414






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

18.37

%

16.82

%

3.86

%

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)


Three months ended


3/31/2021

12/31/2020

3/31/2020

Cash efficiency ratio




Noninterest expense (GAAP)

$

1,071


$

1,128


$

931


Less: Intangible asset amortization

15


15


17


Adjusted noninterest expense (non-GAAP)

$

1,056


$

1,113


$

914






Net interest income (GAAP)

$

1,005


$

1,035


$

981


Plus: Taxable-equivalent adjustment

7


8


8


Noninterest income

738


802


477


Total taxable-equivalent revenue (non-GAAP)

$

1,750


$

1,845


$

1,466






Cash efficiency ratio (non-GAAP)

60.3

%

60.3

%

62.3

%





(a)

For the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, intangible assets exclude $4 million, $4 million, and $6 million, respectively, of period-end purchased credit card receivables. 

(b)

Net of capital surplus.

(c)

For the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, average intangible assets exclude $4 million, $5 million, and $7 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(dollars in millions)










3/31/2021

12/31/2020

3/31/2020

Assets





Loans

$

100,926


$

101,185


$

103,198



Loans held for sale

2,296


1,583


2,143



Securities available for sale

33,923


27,556


20,807



Held-to-maturity securities

6,857


7,595


9,638



Trading account assets

811


735


795



Short-term investments

15,376


16,194


4,073



Other investments

621


621


679




Total earning assets

160,810


155,469


141,333



Allowance for loan and lease losses

(1,438)


(1,626)


(1,359)



Cash and due from banks

938


1,091


865



Premises and equipment

737


753


791



Goodwill

2,673


2,664


2,664



Other intangible assets

173


188


236



Corporate-owned life insurance

4,296


4,286


4,243



Accrued income and other assets

7,347


6,812


6,604



Discontinued assets

667


699


820




Total assets

$

176,203


170,336


156,197








Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$

82,777


$

80,427


$

71,005




Savings deposits

6,655


5,913


4,753




Certificates of deposit ($100,000 or more)

2,437


2,733


5,630




Other time deposits

2,782


3,010


4,623




Total interest-bearing deposits

94,651


92,083


86,011




Noninterest-bearing deposits

47,532


43,199


29,293




Total deposits

142,183


135,282


115,304



Federal funds purchased and securities sold under repurchase agreements 

281


220


2,444



Bank notes and other short-term borrowings

744


759


4,606



Accrued expense and other liabilities

2,862


2,385


2,700



Long-term debt

12,499


13,709


13,732




Total liabilities

158,569


152,355


138,786








Equity





Preferred stock

1,900


1,900


1,900



Common shares

1,257


1,257


1,257



Capital surplus

6,213


6,281


6,222



Retained earnings

13,166


12,751


12,174



Treasury stock, at cost

(5,005)


(4,946)


(4,956)



Accumulated other comprehensive income (loss)

103


738


814




Key shareholders' equity

17,634


17,981


17,411



Noncontrolling interests






Total equity

17,634


17,981


17,411


Total liabilities and equity

$

176,203


$

170,336


$

156,197








Common shares outstanding (000)

972,587


975,773


975,319


 

Consolidated Statements of Income

(dollars in millions, except per share amounts)




Three months ended




3/31/2021

12/31/2020

3/31/2020

Interest income





Loans

$

889


$

933


$

1,026



Loans held for sale

11


11


19



Securities available for sale

130


119


129



Held-to-maturity securities

45


51


62



Trading account assets

5


4


8



Short-term investments

5


4


6



Other investments

2


3


1




Total interest income

1,087


1,125


1,251


Interest expense





Deposits

21


28


169



Federal funds purchased and securities sold under repurchase agreements



6



Bank notes and other short-term borrowings

1


1


5



Long-term debt

60


61


90




Total interest expense

82


90


270


Net interest income

1,005


1,035


981


Provision for credit losses

(93)


20


359


Net interest income after provision for credit losses

1,098


1,015


622


Noninterest income





Trust and investment services income

133


123


133



Investment banking and debt placement fees

162


243


116



Service charges on deposit accounts

73


82


84



Operating lease income and other leasing gains

38


39


30



Corporate services income

64


63


62



Cards and payments income

105


97


66



Corporate-owned life insurance income

31


38


36



Consumer mortgage income

47


43


20



Commercial mortgage servicing fees

34


32


18



Other income

51


42


(88)




Total noninterest income

738


802


477


Noninterest expense





Personnel

624


661


515



Net occupancy

76


75


76



Computer processing

73


62


55



Business services and professional fees

50


54


44



Equipment

25


26


24



Operating lease expense

34


35


36



Marketing

26


30


21



Intangible asset amortization

15


15


17



Other expense

148


170


143




Total noninterest expense

1,071


1,128


931


Income (loss) from continuing operations before income taxes

765


689


168



Income taxes

147


114


23


Income (loss) from continuing operations

618


575


145



Income (loss) from discontinued operations, net of taxes

4


7


1


Net income (loss)

622


582


146



Less:  Net income (loss) attributable to noncontrolling interests




Net income (loss) attributable to Key

$

622


$

582


$

146








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

$

591


$

549


$

118


Net income (loss) attributable to Key common shareholders

595


556


119


Per common share




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

$

.61


$

.57


$

.12


Income (loss) from discontinued operations, net of taxes


.01



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

.62


.57


.12


Per common share — assuming dilution




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

$

.61


$

.56


$

.12


Income (loss) from discontinued operations, net of taxes


.01



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

.61


.57


.12








Cash dividends declared per common share

$

.185


$

.185


$

.185








Weighted-average common shares outstanding (000)

964,878


967,987


967,446



Effect of common share options and other stock awards

9,419


8,473


8,664


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

974,297


976,460


976,110




(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)



First Quarter 2021


Fourth Quarter 2020


First 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)

$

52,581


$

453


3.48

%


$

53,562


$

477


3.54

%


$

49,466


$

508


4.13

%


Real estate — commercial mortgage

12,658


114


3.67



12,862


121


3.74



13,548


155


4.60



Real estate — construction

2,048


19


3.75



1,959


19


3.79



1,666


20


4.75



Commercial lease financing

4,142


31


2.99



4,353


32


2.92



4,565


39


3.39



Total commercial loans

71,429


617


3.50



72,736


649


3.55



69,245


722


4.19



Real estate — residential mortgage

9,699


76


3.12



8,968


74


3.29



7,215


68


3.75



Home equity loans

9,282


85


3.73



9,410


91


3.81



10,155


113


4.49



Consumer direct loans

4,817


56


4.72



4,583


56


4.93



3,709


54


5.91



Credit cards

933


24


10.45



973


26


10.57



1,082


31


11.50



Consumer indirect loans

4,568


37


3.30



5,040


45


3.56



4,768


46


3.86



Total consumer loans

29,299


278


3.84



28,974


292


4.01



26,929


312


4.66



Total loans

100,728


895


3.60



101,710


941


3.68



96,174


1,034


4.32



Loans held for sale

1,531


11


2.89



1,621


11


2.76



1,885


19


3.99



Securities available for sale (b), (e)

30,039


130


1.76



28,046


119


1.75



21,172


129


2.49



Held-to-maturity securities (b)

7,188


45


2.53



7,939


51


2.56



9,820


62


2.51



Trading account assets

848


5


2.15



744


4


2.21



1,065


8


2.95



Short-term investments

16,510


5


.13



14,111


4


0.14



1,764


6


1.42



Other investments (e)

614


2


1.40



615


3


1.31



614


1


0.40



Total earning assets

157,458


1,094


2.81



154,786


1,133


2.93



132,494


1,259


3.82



Allowance for loan and lease losses

(1,623)





(1,715)





(1,097)





Accrued income and other assets

16,398





15,861





14,831





Discontinued assets

686





717





838





Total assets

$

172,919





$

169,649





$

147,066




Liabilities













NOW and money market deposit accounts

$

81,439


10


.05



$

80,636


12


.06



$

66,721


112


.67



Savings deposits

6,203


1


.03



5,737



.03



4,655


1


.05



Certificates of deposit ($100,000 or more)

2,571


6


.96



2,983


9


1.20



6,310


34


2.20



Other time deposits

2,902


4


.57



3,209


7


.80



4,901


22


1.81



Total interest-bearing deposits

93,115


21


.09



92,565


28


.12



82,587


169


.82



Federal funds purchased and securities sold under repurchase agreements

243



.04



220



.04



2,002


6


1.17



Bank notes and other short-term borrowings

878


1


.64



791


1


.73



1,401


5


1.58



Long-term debt (f), (g)

12,831


60


1.93



12,118


61


2.05



12,443


90


2.96



Total interest-bearing liabilities

107,067


82


.31



105,694


90


.34



98,433


270


1.10



Noninterest-bearing deposits

44,625





43,156





27,741





Accrued expense and other liabilities

2,772





2,177





2,838





Discontinued liabilities (g)

686





717





838





Total liabilities

155,150





151,744





129,850




Equity













Key shareholders' equity

17,769





17,905





17,216





Noncontrolling interests













Total equity

17,769





17,905





17,216





Total liabilities and equity

$

172,919





$

169,649





$

147,066




Interest rate spread (TE)



2.50

%




2.59

%




2.72

%

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


1,012


2.61

%



1,043


2.70

%



989


3.01

%

TE adjustment (b)


7





8





8




Net interest income, GAAP basis


$

1,005





$

1,035





$

981





(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 March 31, 2021, December 31, 2020, and March 31, 2020.   

(c)

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

(d)

Commercial and industrial average balances include $126 million, $129 million, and $145 million of assets from commercial credit cards for the three months ended March 31, 2021, December 31, 2020, and March 31, 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


3/31/2021

12/31/2020

3/31/2020

Personnel (a)

$

624


$

661


$

515


Net occupancy

76


75


76


Computer processing

73


62


55


Business services and professional fees

50


54


44


Equipment

25


26


24


Operating lease expense

34


35


36


Marketing

26


30


21


Intangible asset amortization

15


15


17


Other expense

148


170


143


Total noninterest expense

$

1,071


$

1,128


$

931


Average full-time equivalent employees (b)

17,086


17,029


16,529




(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


3/31/2021

12/31/2020

3/31/2020

Salaries and contract labor

$

320


$

342


$

316


Incentive and stock-based compensation

196


208


102


Employee benefits

107


89


92


Severance

1


22


5


Total personnel expense

$

624


$

661


$

515


 

Loan Composition

(dollars in millions)











Percent change 3/31/2021 vs


3/31/2021

12/31/2020

3/31/2020


12/31/2020

3/31/2020

Commercial and industrial (a)

$

52,486


$

52,907


$

55,983



(.8)

%

(6.2)

%

Commercial real estate:







Commercial mortgage

12,702


12,687


13,548



.1


(6.2)


Construction

2,122


1,987


1,710



6.8


24.1


Total commercial real estate loans

14,824


14,674


15,258



1.0


(2.8)


Commercial lease financing (b)

4,104


4,399


4,677



(6.7)


(12.3)


Total commercial loans

71,414


71,980


75,918



(.8)


(5.9)


Residential — prime loans:







Real estate — residential mortgage

10,300


9,298


7,498



10.8


37.4


Home equity loans

9,158


9,360


10,103



(2.2)


(9.4)


Total residential — prime loans

19,458


18,658


17,601



4.3


10.6


Consumer direct loans

4,862


4,714


3,833



3.1


26.8


Credit cards

909


989


1,041



(8.1)


(12.7)


Consumer indirect loans

4,283


4,844


4,805



(11.6)


(10.9)


Total consumer loans

29,512


29,205


27,280



1.1


8.2


Total loans (c), (d)

$

100,926


$

101,185


$

103,198



(.3)

%

(2.2)

%



(a)

Loan balances include $126 million, $127 million, and $143 million of commercial credit card balances at March 31, 2021, December 31, 2020, and March 31, 2020, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $21 million, $23 million, and $14 million at March 31, 2021, December 31, 2020, and March 31, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

Total loans exclude loans of $675 million at March 31, 2021, $710 million at December 31, 2020, and $821 million at March 31, 2020, related to the discontinued operations of the education lending business.

(d)

Accrued interest of $242 million, $241 million, and $241 million at March 31, 2021, December 31, 2020, and March 31, 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 3/31/2021 vs


3/31/2021

12/31/2020

3/31/2020


12/31/2020

3/31/2020

Commercial and industrial

$

1,175


$

249


$

446



371.9

%

163.5

%

Real estate — commercial mortgage

837


1,014


1,284



(17.5)


(34.8)


Commercial lease financing



8



N/M

N/M

Real estate — residential mortgage

236


264


152



(10.6)


55.3


Consumer direct loans

48


56


253



(14.3)


(81.0)


Total loans held for sale

$

2,296


$

1,583


$

2,143



45.0

%

7.1

%


 N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(in millions)








1Q21

4Q20

3Q20

2Q20

1Q20

Balance at beginning of period

$

1,583


$

1,724


$

2,007


$

2,143


$

1,334


New originations

4,010


3,835


3,282


3,621


3,333


Transfers from (to) held to maturity, net

83


(24)


75


(15)


200


Loan sales

(3,303)


(3,932)


(3,583)


(3,679)


(2,649)


Loan draws (payments), net

(73)


(19)


(57)


(61)


(77)


Valuation adjustments

(4)




(2)


2


Balance at end of period

$

2,296


$

1,583


$

1,724


$

2,007


$

2,143


 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)






Three months ended


3/31/2021

12/31/2020

3/31/2020

Average loans outstanding

$

100,728


$

101,710


$

96,174


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

$

1,626


$

1,730


$

900


Cumulative effect from change in accounting principle (a)



204


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

1,626


1,730


1,104


Loans charged off:




Commercial and industrial

73


119


60






Real estate — commercial mortgage

35


1


3


Real estate — construction




Total commercial real estate loans

35


1


3


Commercial lease financing

4


19


2


Total commercial loans

112


139


65


Real estate — residential mortgage




Home equity loans

2


1


4


Consumer direct loans

8


7


12


Credit cards

6


7


11


Consumer indirect loans

7


6


9


Total consumer loans

23


21


36


Total loans charged off

135


160


101


Recoveries:




Commercial and industrial

8


15


5






Real estate — commercial mortgage

1



1


Real estate — construction




Total commercial real estate loans

1



1


Commercial lease financing

1




Total commercial loans

10


15


6


Real estate — residential mortgage

1




Home equity loans

1


1


2


Consumer direct loans

2


1


2


Credit cards

2


2


2


Consumer indirect loans

5


6


5


Total consumer loans

11


10


11


Total recoveries

21


25


17


Net loan charge-offs

(114)


(135)


(84)


Provision (credit) for loan and lease losses

(74)


31


339


Allowance for loan and lease losses at end of period

$

1,438


$

1,626


$

1,359






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

$

197


$

208


$

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

197


208


141


Provision (credit) for losses on lending-related commitments

(19)


(11)


20


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

$

178


$

197


$

161






Total allowance for credit losses at end of period

$

1,616


$

1,823


$

1,520






Net loan charge-offs to average total loans

.46

%

.53

%

.35

%

Allowance for loan and lease losses to period-end loans

1.42


1.61


1.32


Allowance for credit losses to period-end loans

1.60


1.80


1.47


Allowance for loan and lease losses to nonperforming loans

197.5


207.1


215.0


Allowance for credit losses to nonperforming loans

222.0


232.2


240.5






Discontinued operations — education lending business:




Loans charged off

$

1


1


$

2


Recoveries

1


2


1


Net loan charge-offs

$


1


$

(1)




(a)

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

(b)

Three months ended March 31, 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)


1Q21

4Q20

3Q20

2Q20

1Q20

Net loan charge-offs

$

114


$

135


$

128


$

96


$

84


Net loan charge-offs to average total loans

.46

%

.53

%

.49

%

.36

%

.35

%

Allowance for loan and lease losses

$

1,438


$

1,626


$

1,730


$

1,708


$

1,359


Allowance for credit losses (a)

1,616


1,823


1,938


1,906


1,520


Allowance for loan and lease losses to period-end loans

1.42

%

1.61

%

1.68

%

1.61

%

1.32

%

Allowance for credit losses to period-end loans

1.60


1.80


1.88


1.80


1.47


Allowance for loan and lease losses to nonperforming loans

197.5


207.1


207.4


224.7


215.0


Allowance for credit losses to nonperforming loans

222.0


232.2


232.4


250.8


240.5


Nonperforming loans at period end

$

728


$

785


$

834


$

760


$

632


Nonperforming assets at period end

790


937


1,003


951


844


Nonperforming loans to period-end portfolio loans

.72

%

.78

%

.81

%

.72

%

.61

%

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

.78


.92


.97


.89


.82




(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)


3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Commercial and industrial

$

387


$

385


$

459


$

404


$

277








Real estate — commercial mortgage

66


104


104


91


87


Real estate — construction



1


1


2


Total commercial real estate loans

66


104


105


92


89


Commercial lease financing

8


8


6


9


5


Total commercial loans

461


497


570


505


371


Real estate — residential mortgage

95


110


96


89


89


Home equity loans

148


154


146


141


143


Consumer direct loans

5


5


3


3


4


Credit cards

3


2


2


2


3


Consumer indirect loans

16


17


17


20


22


Total consumer loans

267


288


264


255


261


Total nonperforming loans

728


785


834


760


632


OREO

12


100


105


112


119


Nonperforming loans held for sale

47


49


61


75


89


Other nonperforming assets

3


3


3


4


4


Total nonperforming assets

$

790


$

937


$

1,003


$

951


$

844


Accruing loans past due 90 days or more

92


86


73


87


128


Accruing loans past due 30 through 89 days

191


241


336


419


393


Restructured loans — accruing and nonaccruing (a)

376


363


306


310


340


Restructured loans included in nonperforming loans (a)

192


229


168


166


172


Nonperforming assets from discontinued operations — education lending business 

5


5


6


7


7


Nonperforming loans to period-end portfolio loans

.72

%

.78

%

.81

%

.72

%

.61

%

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

.78


.92


.97


.89


.82




(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)


1Q21

4Q20

3Q20

2Q20

1Q20

Balance at beginning of period

$

785


$

834


$

760


$

632


$

577


Loans placed on nonaccrual status

196


300


387


293


219


Charge-offs

(135)


(160)


(150)


(111)


(100)


Loans sold

(13)


(9)


(6)


(5)


(4)


Payments

(37)


(83)


(83)


(29)


(31)


Transfers to OREO

(3)


(3)




(3)


Transfers to nonperforming loans held for sale






Loans returned to accrual status

(65)


(94)


(74)


(20)


(26)


Balance at end of period

$

728


$

785


$

834


$

760


$

632


 

Line of Business Results

(dollars in millions)

















Percentage change 1Q21 vs.


1Q21

4Q20

3Q20

2Q20

1Q20


4Q20

1Q20

Consumer Bank









Summary of operations









Total revenue (TE)

$

864


$

896


$

864


$

832


$

810



(3.6)

%

6.7

%

Provision for credit losses

(23)


(5)


(3)


155


136



(360.0)


(103.7)


Noninterest expense

601


606


567


552


539



(.8)


11.5


Net income (loss) attributable to Key

217


225


229


96


103



(3.6)


110.7


Average loans and leases

39,249


39,448


38,468


37,291


33,175



(.5)


18.3


Average deposits

85,033


82,845


82,829


79,233


73,133



2.6


16.3


Net loan charge-offs

36


28


23


40


43



28.6


(16.3)


Net loan charge-offs to average total loans

.37

%

.28

%

.24

%

.43

%

.52

%


N/A

N/A

Nonperforming assets at period end

$

345


$

374


$

353


$

332


$

342



(7.8)


.9


Return on average allocated equity

25.76

%

25.61

%

26.22

%

11.28

%

12.30

%


N/A

N/A










Commercial Bank









Summary of operations









Total revenue (TE)

$

858


$

922


$

811


$

867


$

641



(6.9)

%

33.9

%

Provision for credit losses

(67)


44


150


326


222



(252.3)


(80.2)


Noninterest expense

443


498


447


441


362



(11.0)


22.4


Net income (loss) attributable to Key

383