Strong balance sheet with significant capital build: Common Equity Tier 1 of 9.8%(a), up 50 basis points from the prior quarter and above targeted range

Focus on relationships and balance sheet optimization drives reduction in risk-weighted assets, down $7 billion(b), compared to the prior quarter

Increased average deposits and continued to strengthen liquidity and funding, average deposits up $2 billion compared to the prior quarter

Growth in noninterest income; noninterest income represents approximately 40% of total revenue

Strong risk management drives solid credit quality: net charge-offs to average loans of 24 basis points

CLEVELAND, Oct. 19, 2023 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $266 million, or $.29 per diluted common share for the third quarter of 2023. This compared to $250 million, or $.27 per diluted common share, for the second quarter of 2023 and $513 million, or $.55 per diluted common share, for the third quarter of 2022.

Comments from Chairman and CEO, Chris Gorman

"Key's third quarter results reflect continued momentum across our franchise, supported by our strong balance sheet and disciplined risk management. Our focus on relationship banking drove both core deposit growth and a planned reduction in non-relationship loan balances.

Our Common Equity Tier 1 ratio is above our targeted capital range, increasing by 50 basis points, to 9.8%, through proactive balance sheet management. We remain well positioned to support our clients and return capital to our shareholders.

Another strength of our company is credit quality. We continue to benefit from our high-quality, relationship-based loan portfolio and our distinctive, underwrite-to-distribute business model. Net charge-offs to average loans remained low, at 24 basis points.

We remain committed to strengthening both capital and liquidity, managing risk, and improving earnings while continuing to invest. I am confident in the long-term outlook for Key and in our ability to deliver value to all of our stakeholders."

(a)

September 30, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)

September 30, 2023 figures are estimated.

 

Selected Financial Highlights













Dollars in millions, except per share data



Change 3Q23 vs.


3Q23

2Q23

3Q22

2Q23

3Q22

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

$      266

$      250

$      513

6.4 %

(48.1) %

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

.29

.27

.55

7.4

(47.3)

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

12.40 %

11.04 %

21.19 %

N/A

N/A

Return on average total assets from continuing operations

.62

.58

1.14

N/A

N/A

Common Equity Tier 1 ratio (b)

9.8

9.3

9.1

N/A

N/A

Book value at period end

$   11.65

$   12.18

$   11.62

(4.4)

.3

Net interest margin (TE) from continuing operations

2.01 %

2.12 %

2.74 %

N/A

N/A








(a)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Return on average tangible common equity from continuing operations." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(b)

September 30, 2023 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS












Revenue












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Net interest income (TE)

$        923

$        986

$      1,203

(6.4) %

(23.3) %

Noninterest income

643

609

683

5.6

(5.9)

Total revenue

$      1,566

$      1,595

$      1,886

(1.8) %

(17.0) %







TE = Taxable Equivalent

Taxable-equivalent net interest income was $923 million for the third quarter of 2023 and the net interest margin was 2.01%. Compared to the third quarter of 2022, net interest income decreased $280 million, and the net interest margin decreased by 73 basis points. The decrease in net interest income and the net interest margin reflects higher interest-bearing deposit costs and a shift in funding mix to higher cost deposits and borrowings due to the higher interest rate environment. Partly offsetting the decline in net interest income and the net interest margin were higher earning asset balances and yields.

Compared to the second quarter of 2023, taxable-equivalent net interest income decreased by $63 million, and the net interest margin decreased by 11 basis points. The decline in net interest income and the net interest margin reflects a planned reduction in earning asset balances and the impact of higher interest rates on interest-bearing deposit costs, which outpaced the benefit from higher earning asset yields. Net interest income and the net interest margin benefited from an improved funding mix as higher-cost wholesale borrowings declined, and lower-cost interest-bearing deposits increased. Additionally, net interest income benefited from one additional day in the quarter.

Noninterest Income












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Trust and investment services income

$        130

$        126

$        127

3.2 %

2.4 %

Investment banking and debt placement fees

141

120

154

17.5

(8.4)

Cards and payments income

90

85

91

5.9

(1.1)

Service charges on deposit accounts

69

69

92

—

(25.0)

Corporate services income

73

86

96

(15.1)

(24.0)

Commercial mortgage servicing fees

46

50

44

(8.0)

4.5

Corporate-owned life insurance income

35

32

33

9.4

6.1

Consumer mortgage income

15

14

14

7.1

7.1

Operating lease income and other leasing gains

22

23

19

(4.3)

15.8

Other income

22

4

13

450.0

69.2

Total noninterest income

$        643

$        609

$        683

5.6 %

(5.9) %








Compared to the third quarter of 2022, noninterest income decreased by $40 million. The decrease was driven by a $23 million decline in corporate services income and a $23 million decline in service charges on deposit accounts. The decrease in corporate services income was reflective of lower customer derivatives trading revenue. The decline in service charges on deposit accounts was driven by a reduction in overdraft and non-sufficient funds fees and lower account analysis fees related to the interest rate environment. Additionally, investment banking and debt placement fees declined $13 million, reflecting lower capital markets activity. Partly offsetting the decline was a $9 million increase in other income, driven by higher trading income and broad-based growth across fee categories.

Compared to the second quarter of 2023, noninterest income increased by $34 million, driven by a $21 million increase in investment banking and debt placement fees and an $18 million increase in other income from higher trading income and a gain on a loan sale. Partly offsetting the increase was a decrease in corporate services income, which declined $13 million, reflective of lower customer derivatives trading revenue.

Noninterest Expense












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Personnel expense

$        663

$        622

$        655

6.6 %

1.2 %

Net occupancy

67

65

72

3.1

(6.9)

Computer processing

89

95

77

(6.3)

15.6

Business services and professional fees

38

41

47

(7.3)

(19.1)

Equipment

20

22

23

(9.1)

(13.0)

Operating lease expense

18

21

24

(14.3)

(25.0)

Marketing

28

29

30

(3.4)

(6.7)

Other expense

187

181

178

3.3

5.1

Total noninterest expense

$      1,110

$      1,076

$      1,106

3.2 %

.4 %








Compared to the third quarter of 2022, noninterest expense increased $4 million, driven by $12 million of higher computer processing expense from technology investments, as well as a $9 million increase in other expense. Personnel expense increased $8 million, due to higher salaries and contract labor and employee benefits, partially offset by lower incentive and stock-based compensation. Additionally, business services and professional fees and operating lease expense declined $9 million and $6 million, respectively.

Compared to the second quarter of 2023, noninterest expense increased $34 million. The increase was due to a $41 million increase in personnel expense, primarily from incentive and stock-based compensation, reflecting a higher stock price, production-related incentives, and other incentive funding. The increase was partly offset by a decline in computer processing expense of $6 million and broad-based declines among expense categories.

BALANCE SHEET HIGHLIGHTS












Average Loans












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Commercial and industrial (a)

$    59,187

$    61,426

$    56,151

(3.6) %

5.4 %

Other commercial loans

22,371

22,623

22,200

(1.1)

.8

Total consumer loans

36,069

36,623

36,067

(1.5)

.0

Total loans

$  117,627

$  120,672

$  114,418

(2.5) %

2.8 %







(a)

Commercial and industrial average loan balances include $202 million, $194 million, and $162 million of assets from commercial credit cards at September 30, 2023, June 30, 2023, and September 30, 2022, respectively.


Average loans were $117.6 billion for the third quarter of 2023, an increase of $3.2 billion compared to the third quarter of 2022. The growth in average loans was driven by commercial loans, which increased by $3.2 billion, largely reflecting growth in commercial and industrial loans of $3.0 billion.

Compared to the second quarter of 2023, average loans decreased by $3.0 billion, driven by a reduction in non-relationship loan balances as part of Key's planned balance sheet optimization efforts. Average commercial loans declined by $2.5 billion, reflective of a $2.2 billion decrease in commercial and industrial loans. Additionally, average consumer loans declined $554 million, driven by lower consumer mortgage and home equity loan balances.

Average Deposits












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Non-time deposits

$  129,743

$  127,687

$  140,169

1.6 %

(7.4) %

Certificates of deposit ($100,000 or more)

5,446

3,851

1,347

41.4

304.3

Other time deposits

9,636

11,365

2,713

(15.2)

255.2

Total deposits

$  144,825

$  142,903

$  144,229

1.3 %

.4 %







Cost of total deposits

1.88 %

1.49 %

.16 %

N/A

N/A







N/A = Not Applicable

Average deposits totaled $144.8 billion for the third quarter of 2023, an increase of $596 million compared to the year-ago quarter. The increase was driven by higher wholesale deposits and public sector deposits, partly offset by a continuation of impacts from changing client behavior reflective of higher interest rates and a normalization of pandemic-related deposits.

Compared to the second quarter of 2023, average deposits increased by $1.9 billion, driven by an increase in both consumer and commercial deposit balances. The increase was partly offset by a decline in other time deposits, reflecting a decrease in wholesale deposit balances.

ASSET QUALITY












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Net loan charge-offs

$        71

$        52

$        43

36.5 %

65.1 %

Net loan charge-offs to average total loans

.24 %

.17 %

.15 %

N/A

N/A

Nonperforming loans at period end

$      455

$      431

$      390

5.6

16.7

Nonperforming assets at period end

471

462

419

1.9

12.4

Allowance for loan and lease losses

1,488

1,480

1,144

0.5

30.1

Allowance for credit losses

1,778

1,771

1,338

0.4

32.9

Provision for credit losses

81

167

109

(51.5)

(25.7)







Allowance for loan and lease losses to nonperforming loans

327 %

343 %

293 %

N/A

N/A

Allowance for credit losses to nonperforming loans

391

411

343

N/A

N/A







N/A = Not Applicable

Key's provision for credit losses was $81 million, compared to $109 million in the third quarter of 2022 and $167 million in the second quarter of 2023. The decline from the year-ago period and prior quarter reflects a more stable economic outlook and the impact of current balance sheet optimization efforts.

Net loan charge-offs for the third quarter of 2023 totaled $71 million, or 0.24% of average total loans. These results compare to $43 million, or 0.15%, for the third quarter of 2022 and $52 million, or 0.17%, for the second quarter of 2023. Key's allowance for credit losses was $1.8 billion, or 1.54% of total period-end loans at September 30, 2023, compared to 1.15% at September 30, 2022, and 1.49% at June 30, 2023.

At September 30, 2023, Key's nonperforming loans totaled $455 million, which represented 0.39% of period-end portfolio loans. These results compare to 0.34% at September 30, 2022, and 0.36% at June 30, 2023. Nonperforming assets at September 30, 2023, totaled $471 million, and represented 0.41% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.36% at September 30, 2022, and 0.39% at June 30, 2023.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2023.

Capital Ratios







9/30/2023

6/30/2023

9/30/2022

Common Equity Tier 1 (a)

9.8 %

9.3 %

9.1 %

Tier 1 risk-based capital (a)

11.4

10.8

10.7

Total risk-based capital (a)

13.8

13.1

12.7

Tangible common equity to tangible assets (b)

4.4

4.5

4.3

Leverage (a)

8.9

8.7

8.9




(a)

September 30, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.


Key's capital position remained strong in the third quarter of 2023. As shown in the preceding table, at September 30, 2023, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.8% and 11.4%, respectively. Key's tangible common equity ratio was 4.4% at September 30, 2023.

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

Summary of Changes in Common Shares Outstanding











In thousands



Change 3Q23 vs.


3Q23

2Q23

3Q22

2Q23

3Q22

Shares outstanding at beginning of period

935,733

935,229

932,643

.1 %

.3 %

Open market repurchases and return of shares under employee compensation plans

(10)

(38)

(3)

73.7

(233.3)

Shares issued under employee compensation plans (net of cancellations)

438

542

298

(19.2)

47.0

Shares outstanding at end of period

936,161

935,733

932,938

— %

.3 %








N/M = Not Meaningful

Key declared a dividend of $.205 per common share for the third quarter of 2023.

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 3Q23 vs.


3Q23

2Q23

3Q22

2Q23

3Q22

Revenue from continuing operations (TE)





Consumer Bank

$         791

$         803

$         877

(1.5) %

(9.8) %

Commercial Bank

790

805

878

(1.9)

(10.0)

Other (a)

(15)

(13)

131

(15.4)

(111.5)

Total

$       1,566

$       1,595

$       1,886

(1.8) %

(17.0) %








Income (loss) from continuing operations attributable to Key





Consumer Bank

$           76

$           82

$         125

(7.3) %

(39.2) %

Commercial Bank

226

214

287

5.6

(21.3)

Other (a)

—

(10)

128

100.0

(100.0)

Total

$         302

$         286

$         540

5.6 %

(44.1) %








(a)

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

TE = Taxable Equivalent

 

 

Consumer Bank












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Summary of operations





Net interest income (TE)

$         548

$         558

$         618

(1.8) %

(11.3) %

Noninterest income

243

245

259

(.8)

(6.2)

Total revenue (TE)

791

803

877

(1.5)

(9.8)

Provision for credit losses

14

32

37

(56.3)

(62.2)

Noninterest expense

677

663

675

2.1

.3

Income (loss) before income taxes (TE)

100

108

165

(7.4)

(39.4)

Allocated income taxes (benefit) and TE adjustments

24

26

40

(7.7)

(40.0)

Net income (loss) attributable to Key

$           76

$           82

$         125

(7.3) %

(39.2) %







Average balances





Loans and leases

$     42,250

$     42,934

$     42,568

(1.6) %

(.7) %

Total assets

45,078

45,761

45,659

(1.5)

(1.3)

Deposits

83,863

82,498

90,170

1.7

(7.0)







Assets under management at period end

$     52,516

$     53,952

$     47,846

(2.7) %

9.8 %







TE = Taxable Equivalent

 

 

Additional Consumer Bank Data












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Noninterest income





Trust and investment services income

$       105

$       101

$        99

4.0 %

6.1 %

Service charges on deposit accounts

40

41

56

(2.4)

(28.6)

Cards and payments income

66

66

64

—

3.1

Consumer mortgage income

15

14

13

7.1

15.4

Other noninterest income

17

23

27

(26.1)

(37.0)

Total noninterest income

$       243

$       245

$       259

(.8) %

(6.2) %







Average deposit balances





Money market deposits

$  28,775

$  27,340

$  31,510

5.2 %

(8.7) %

Demand deposits

23,202

23,845

25,186

(2.7)

(7.9)

Savings deposits

5,681

6,298

7,556

(9.8)

(24.8)

Certificates of deposit ($100,000 or more)

5,003

3,550

1,238

40.9

304.1

Other time deposits

3,751

2,864

1,838

31.0

104.1

Noninterest-bearing deposits

17,451

18,601

22,842

(6.2)

(23.6)

Total deposits

$  83,863

$  82,498

$  90,170

1.7 %

(7.0) %







Other data





Branches

959

965

976


Automated teller machines

1,249

1,255

1,270










Consumer Bank Summary of Operations (3Q23 vs. 3Q22)

  • Key's Consumer Bank recorded net income attributable to Key of $76 million for the third quarter of 2023, compared to $125 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $70 million, or 11.3%, compared to the third quarter of 2022, reflecting higher interest-bearing deposit costs
  • Average loans and leases decreased $318 million, or 0.7%, from the third quarter of 2022, driven by lower home equity and consumer direct loans
  • Average deposits decreased $6.3 billion, or 7.0%, from the third quarter of 2022, reflecting elevated inflation-related spend, changing client behavior due to higher interest rates, and a normalization of pandemic-related deposits
  • Provision for credit losses decreased $23 million compared to the third quarter of 2022, driven by an improved economic outlook and current balance sheet optimization efforts
  • Noninterest income decreased $16 million from the year-ago quarter, driven by lower service charges on deposit accounts due to a planned reduction in overdraft and non-sufficient funds fees
  • Noninterest expense increased $2 million from the year-ago quarter, reflecting an increase in marketing expense and higher salaries, partially offset by a decline in incentive compensation

Commercial Bank












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Summary of operations





Net interest income (TE)

$         430

$         459

$         484

(6.3) %

(11.2) %

Noninterest income

360

346

394

4.0

(8.6)

Total revenue (TE)

790

805

878

(1.9)

(10.0)

Provision for credit losses

68

134

74

(49.3)

(8.1)

Noninterest expense

431

405

451

6.4

(4.4)

Income (loss) before income taxes (TE)

291

266

353

9.4

(17.6)

Allocated income taxes and TE adjustments

65

52

66

25.0

(1.5)

Net income (loss) attributable to Key

$         226

$         214

$         287

5.6 %

(21.3) %







Average balances





Loans and leases

$     74,951

$     77,277

$     71,464

(3.0) %

4.9 %

Loans held for sale

1,268

1,014

1,036

25.0

22.4

Total assets

85,274

87,106

81,899

(2.1)

4.1

Deposits

54,896

51,420

52,272

6.8 %

5.0 %







TE = Taxable Equivalent

 

 

Additional Commercial Bank Data












Dollars in millions



Change 3Q23 vs.

3Q23

2Q23

3Q22

2Q23

3Q22

Noninterest income





Trust and investment services income

$           25

$           24

$           29

4.2 %

(13.8) %

Investment banking and debt placement fees

141

120

154

17.5

(8.4)

Cards and payments income

17

22

19

(22.7)

(10.5)

Service charges on deposit accounts

28

27

36

3.7

(22.2)

Corporate services income

64

77

89

(16.9)

(28.1)

Commercial mortgage servicing fees

45

50

44

(10.0)

2.3

Operating lease income and other leasing gains

22

24

19

(8.3)

15.8

Other noninterest income

18

2

4

800.0

350.0

Total noninterest income

$         360

$         346

$         394

4.0 %

(8.6) %








Commercial Bank Summary of Operations (3Q23 vs. 3Q22)

  • Key's Commercial Bank recorded net income attributable to Key of $226 million for the third quarter of 2023 compared to $287 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $54 million, or 11.2%, compared to the third quarter of 2022, primarily reflecting higher interest-bearing deposit costs and a shift in funding mix to higher-cost deposits
  • Average loan and lease balances, driven by relationship clients, increased $3.5 billion, or 4.9%, compared to the third quarter of 2022
  • Average deposit balances increased $2.6 billion compared to the third quarter of 2022, reflecting an increase in public sector deposits and commercial client growth
  • Provision for credit losses decreased $6 million compared to the third quarter of 2022, driven by a more stable economic outlook and current balance sheet optimization efforts
  • Noninterest income decreased $34 million from the year-ago quarter, primarily driven by a decline in corporate services income and a decrease in investment banking and debt placement fees, reflecting lower syndication fees
  • Noninterest expense decreased $20 million from the third quarter of 2022, primarily driven by a decline in personnel expense from lower incentive compensation, as well as a decrease in operating lease expense

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 $188 billion at September 30, 2023.

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

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts.  Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2022, Form 10-Q for the quarter ended March 31, 2023, 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, the soundness of other financial institutions and the impact of changes in the interest rate environment. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 10:00 a.m. ET, on October 19, 2023. A replay of the call will be available through October 28, 2023.

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
Third Quarter 2023
Financial Supplement

Basis of Presentation

Use of Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Key's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document, the financial supplement, or conference call slides related to this document, all of which can be found on Key's website (www.key.com/ir).

Annualized Data
Certain returns, yields, performance ratios, or quarterly growth rates are presented on an "annualized" basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts.

Taxable Equivalent
Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at the federal statutory rate. This adjustment puts all earning assets, most notably tax-exempt municipal securities, and certain lease assets, on a common basis that facilitates comparison of results to results of peers.

Earnings Per Share Equivalent
Certain income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total consolidated earnings per share performance excluding the impact of such items. When the impact of certain income or expense items is disclosed separately, the after-tax amount is computed using the marginal tax rate, with this then being the amount used to calculate the earnings per share equivalent.

Financial Highlights

(Dollars in millions, except per share amounts)



Three months ended



9/30/2023

6/30/2023

9/30/2022

Summary of operations



Net interest income (TE)

$           923

$           986

$         1,203

Noninterest income

643

609

683


Total revenue (TE)

1,566

1,595

1,886

Provision for credit losses

81

167

109

Noninterest expense

1,110

1,076

1,106

Income (loss) from continuing operations attributable to Key

302

286

540

Income (loss) from discontinued operations, net of taxes

1

1

2

Net income (loss) attributable to Key

303

287

542







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

266

250

513

Income (loss) from discontinued operations, net of taxes

1

1

2

Net income (loss) attributable to Key common shareholders

267

251

515






Per common share



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

$            .29

$            .27

$            .55

Income (loss) from discontinued operations, net of taxes

—

—

—

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

.29

.27

.55







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

.29

.27

.55

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

—

—

—

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

.29

.27

.55







Cash dividends declared

.205

.205

.195

Book value at period end

11.65

12.18

11.62

Tangible book value at period end

8.65

9.16

8.56

Market price at period end

10.76

9.24

16.02






Performance ratios



From continuing operations:



Return on average total assets

.62 %

.58 %

1.14 %

Return on average common equity

9.31

8.42

16.33

Return on average tangible common equity (b)

12.40

11.04

21.19

Net interest margin (TE)

2.01

2.12

2.74

Cash efficiency ratio (b)

70.3

66.8

58.0







From consolidated operations:



Return on average total assets

.62 %

.58 %

1.14 %

Return on average common equity

9.35

8.45

16.39

Return on average tangible common equity (b)

12.45

11.09

21.28

Net interest margin (TE)

2.01

2.12

2.73

Loan to deposit (c)

80.8

83.0

81.3






Capital ratios at period end



Key shareholders' equity to assets

7.1 %

7.1 %

7.0 %

Key common shareholders' equity to assets

5.8

5.8

5.7

Tangible common equity to tangible assets (b)

4.4

4.5

4.3

Common Equity Tier 1 (d)

9.8

9.3

9.1

Tier 1 risk-based capital (d)

11.4

10.8

10.7

Total risk-based capital (d)

13.8

13.1

12.7

Leverage (d)

8.9

8.7

8.9






Asset quality — from continuing operations



Net loan charge-offs

$             71

$             52

$             43

Net loan charge-offs to average loans

.24 %

.17 %

.15 %

Allowance for loan and lease losses

$         1,488

$         1,480

$         1,144

Allowance for credit losses

1,778

1,771

1,338

Allowance for loan and lease losses to period-end loans

1.29 %

1.24 %

.98 %

Allowance for credit losses to period-end loans

1.54

1.49

1.15

Allowance for loan and lease losses to nonperforming loans

327

343

293

Allowance for credit losses to nonperforming loans

391

411

343

Nonperforming loans at period-end

$           455

$           431

$           390

Nonperforming assets at period-end

471

462

419

Nonperforming loans to period-end portfolio loans

.39 %

.36 %

.34 %

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

.41

.39

.36






Trust assets



Assets under management

$       52,516

$       53,952

$       47,846

Other data



Average full-time equivalent employees

17,666

17,754

17,907

Branches

959

965

976

Taxable-equivalent adjustment

$              8

$              8

$              7

 


Financial Highlights (continued)

(Dollars in millions, except per share amounts)


Nine months ended


9/30/2023

9/30/2022

Summary of operations


Net interest income (TE)

$                  3,015

$                  3,327

Noninterest income

1,860

2,047

Total revenue (TE)

4,875

5,374

Provision for credit losses

387

237

Noninterest expense

3,362

3,254

Income (loss) from continuing operations attributable to Key

899

1,517

Income (loss) from discontinued operations, net of taxes

3

6

Net income (loss) attributable to Key

902

1,523





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

791

1,437

Income (loss) from discontinued operations, net of taxes

3

6

Net income (loss) attributable to Key common shareholders

794

1,443




Per common share


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

$                     .85

$                    1.55

Income (loss) from discontinued operations, net of taxes

—

.01

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

.86

1.56





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

.85

1.54

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

—

.01

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

.85

1.55





Cash dividends paid

.62

.59




Performance ratios


From continuing operations:


Return on average total assets

.62 %

1.10 %

Return on average common equity

9.18

14.48

Return on average tangible common equity (b)

12.17

18.41

Net interest margin (TE)

2.20

2.60

Cash efficiency ratio (b)

68.4

59.9





From consolidated operations:


Return on average total assets

.62 %

1.10 %

Return on average common equity

9.22

14.54

Return on average tangible common equity (b)

12.22

18.49

Net interest margin (TE)

2.20

2.60




Asset quality — from continuing operations


Net loan charge-offs

$                     168

$                     120

Net loan charge-offs to average total loans

.19 %

.15 %




Other data


Average full-time equivalent employees

17,880

17,477




Taxable-equivalent adjustment

23

20


(a)

Earnings per share may not foot due to rounding.

(b)

The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(c)

Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.

(d)

September 30, 2023, 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 provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.

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

Three months ended

Nine months ended

9/30/2023

6/30/2023

9/30/2022

9/30/2023

9/30/2022

Tangible common equity to tangible assets at period-end





  Key shareholders' equity (GAAP)

$  13,356

$  13,844

$  13,290


  Less: Intangible assets (a)

2,816

2,826

2,856


Preferred Stock (b)

2,446

2,446

2,446


Tangible common equity (non-GAAP)

$    8,094

$    8,572

$    7,988


  Total assets (GAAP)

$ 187,851

$ 195,037

$ 190,051


  Less: Intangible assets (a)

2,816

2,826

2,856


Tangible assets (non-GAAP)

$ 185,035

$ 192,211

$ 187,195


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

4.37 %

4.46 %

4.27 %


Pre-provision net revenue





  Net interest income (GAAP)

$       915

$       978

$    1,196

$    2,992

$    3,307

  Plus: Taxable-equivalent adjustment

8

8

7

23

20

Noninterest income

643

609

683

1,860

2,047

  Less: Noninterest expense

1,110

1,076

1,106

3,362

3,254

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

$       456

$       519

$       780

$    1,513

$    2,120

Average tangible common equity





  Average Key shareholders' equity (GAAP)

$  13,831

$  14,412

$  14,614

$  14,020

$  15,256

  Less: Intangible assets (average) (c)

2,821

2,831

2,863

2,831

2,835

Preferred stock (average)

2,500

2,500

2,148

2,500

1,984

  Average tangible common equity (non-GAAP)

$    8,510

$    9,081

$    9,603

$    8,689

$  10,437

Return on average tangible common equity from continuing operations





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

$       266

$       250

$       513

$       791

$    1,437

  Average tangible common equity (non-GAAP)

8,510

9,081

9,603

8,689

10,437







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

12.40 %

11.04 %

21.19 %

12.17 %

18.41 %

Return on average tangible common equity consolidated





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

$       267

$       251

$       515

$       794

$    1,443

  Average tangible common equity (non-GAAP)

8,510

9,081

9,603

8,689

10,437







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

12.45 %

11.09 %

21.28 %

12.22 %

18.49 %

 

GAAP to Non-GAAP Reconciliations (continued)

(Dollars in millions)

Three months ended

Nine months ended

9/30/2023

6/30/2023

9/30/2022

9/30/2023

9/30/2022

Cash efficiency ratio





  Noninterest expense (GAAP)

$    1,110

$    1,076

$    1,106

$    3,362

$    3,254

  Less: Intangible asset amortization

9

10

12

29

35

Adjusted noninterest expense (non-GAAP)

$    1,101

$    1,066

$    1,094

$    3,333

$    3,219







  Net interest income (GAAP)

$       915

$       978

$    1,196

$    2,992

$    3,307

  Plus: Taxable-equivalent adjustment

8

8

7

23

20

Noninterest income

643

609

683

1,860

2,047

Total taxable-equivalent revenue (non-GAAP)

$    1,566

$    1,595

$    1,886

$    4,875

$    5,374







  Cash efficiency ratio (non-GAAP)

70.3 %

66.8 %

58.0 %

68.4 %

59.9 %







(a)

For the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, intangible assets exclude $1 million, $1 million, and $2 million, respectively, of period-end purchased credit card receivables. 

(b)

Net of capital surplus.

(c)

For the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, average intangible assets exclude $1 million, $1 million, and $2 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(Dollars in millions)









9/30/2023

6/30/2023

9/30/2022

Assets



Loans

$       115,544

$       119,011

$       116,191

Loans held for sale

730

1,130

1,048

Securities available for sale

35,839

37,908

40,000

Held-to-maturity securities

8,853

9,189

8,163

Trading account assets

1,325

1,177

1,068

Short-term investments

7,871

8,959

4,896

Other investments

1,356

1,474

1,272


Total earning assets

171,518

178,848

172,638

Allowance for loan and lease losses

(1,488)

(1,480)

(1,144)

Cash and due from banks

766

758

717

Premises and equipment

649

652

629

Goodwill

2,752

2,752

2,752

Other intangible assets

65

75

106

Corporate-owned life insurance

4,381

4,378

4,351

Accrued income and other assets

8,843

8,668

9,535

Discontinued assets

365

386

467


Total assets

$       187,851

$       195,037

$       190,051






Liabilities



Deposits in domestic offices:




Interest-bearing deposits

$       112,581

$       111,766

$         97,875


Noninterest-bearing deposits

31,710

33,366

46,980


Total deposits

144,291

145,132

144,855

Federal funds purchased and securities sold under repurchase agreements 

43

1,702

4,224

Bank notes and other short-term borrowings

3,470

6,949

4,576

Accrued expense and other liabilities

5,388

5,339

4,849

Long-term debt

21,303

22,071

18,257


Total liabilities

174,495

181,193

176,761






Equity



Preferred stock

2,500

2,500

2,500

Common shares

1,257

1,257

1,257

Capital surplus

6,254

6,231

6,257

Retained earnings

15,835

15,759

15,450

Treasury stock, at cost

(5,851)

(5,859)

(5,917)

Accumulated other comprehensive income (loss)

(6,639)

(6,044)

(6,257)


Key shareholders' equity

13,356

13,844

13,290

Total liabilities and equity

$       187,851

$       195,037

$       190,051






Common shares outstanding (000)

936,161

935,733

932,938

 

Consolidated Statements of Income

(Dollars in millions, except per share amounts)



Three months ended

Nine months ended



9/30/2023

6/30/2023

9/30/2022

9/30/2023

9/30/2022

Interest income






Loans

$             1,593

$             1,576

$             1,134

$             4,645

$             2,894

Loans held for sale

19

17

14

49

36

Securities available for sale

192

194

196

580

557

Held-to-maturity securities

79

81

55

234

149

Trading account assets

15

15

8

42

21

Short-term investments

123

111

32

276

49

Other investments

22

16

5

51

11


Total interest income

2,043

2,010

1,444

5,877

3,717

Interest expense






Deposits

687

531

59

1568

93

Federal funds purchased and securities sold under repurchase agreements

9

48

19

79

25

Bank notes and other short-term borrowings

81

104

24

263

36

Long-term debt

351

349

146

975

256


Total interest expense

1,128

1,032

248

2,885

410

Net interest income

915

978

1,196

2,992

3,307

Provision for credit losses

81

167

109

387

237

Net interest income after provision for credit losses

834

811

1,087

2,605

3,070

Noninterest income






Trust and investment services income

130

126

127

384

400

Investment banking and debt placement fees

141

120

154

406

466

Cards and payments income

90

85

91

256

256

Service charges on deposit accounts

69

69

92

205

279

Corporate services income

73

86

96

235

283

Commercial mortgage servicing fees

46

50

44

142

125

Corporate-owned life insurance income

35

32

33

96

99

Consumer mortgage income

15

14

14

40

49

Operating lease income and other leasing gains

22

23

19

70

79

Other income

22

4

13

26

11


Total noninterest income

643

609

683

1,860

2,047

Noninterest expense






Personnel

663

622

655

1,986

1,892

Net occupancy

67

65

72

202

223

Computer processing

89

95

77

276

232

Business services and professional fees

38

41

47

124

152

Equipment

20

22

23

64

72

Operating lease expense

18

21

24

59

79

Marketing

28

29

30

78

92

Other expense

187

181

178

573

512


Total noninterest expense

1,110

1,076

1,106

3,362

3,254

Income (loss) from continuing operations before income taxes

367

344

664

1,103

1,863

Income taxes

65

58

124

204

346

Income (loss) from continuing operations

302

286

540

899

1,517

Income (loss) from discontinued operations, net of taxes

1

1

2

3

6

Net income (loss)

303

287

542

902

1,523

Net income (loss) attributable to Key

$                303

$                287

$                542

$                902

1,523









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

$                266

$                250

$                513

$                791

$             1,437

Net income (loss) attributable to Key common shareholders

267

251

515

794

$             1,443

Per common share





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

$                 .29

$                 .27

$                 .55

$                 .85

$               1.55

Income (loss) from discontinued operations, net of taxes

—

—

—

—

.01

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

.29

.27

.55

.86

1.56

Per common share — assuming dilution





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

$                 .29

$                 .27

$                 .55

$                 .85

$               1.54

Income (loss) from discontinued operations, net of taxes

—

—

—

—

.01

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

.29

.27

.55

.85

1.55









Cash dividends declared per common share

$               .205

$               .205

$               .195

$               .615

$               .585









Weighted-average common shares outstanding (000)

927,131

926,741

924,594

927,019

924,085

Effect of common share options and other stock awards

4,613

3,713

7,861

5,213

8,679

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

931,744

930,454

932,455

932,232

932,764

(a)

Earnings per share may not foot due to rounding.

(b)

Assumes conversion of common share options and other stock awards, as applicable.

 

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

(Dollars in millions)


Third Quarter 2023

Second Quarter 2023

Third Quarter 2022


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)

$       59,187

$              886

5.94 %

$       61,426

$              881

5.76 %

$       56,151

$              578

4.09 %

Real estate — commercial mortgage

15,844

238

5.97

16,226

235

5.80

16,002

168

4.18

Real estate — construction

2,820

48

6.77

2,641

44

6.64

2,306

27

4.58

Commercial lease financing

3,707

30

3.25

3,756

29

3.07

3,892

25

2.58

  Total commercial loans

81,558

1,202

5.85

84,049

1,189

5.67

78,351

798

4.05

Real estate — residential mortgage

21,459

176

3.28

21,659

176

3.25

20,256

152

3.00

Home equity loans

7,418

110

5.87

7,620

109

5.75

8,024

91

4.51

Consumer direct loans

6,169

77

4.96

6,323

77

4.89

6,766

72

4.25

Credit cards

991

35

14.16

984

33

13.49

969

28

11.63

Consumer indirect loans

32

1

3.77

37

—

—

52

—

—

  Total consumer loans

36,069

399

4.40

36,623

395

4.33

36,067

343

3.80

    Total loans

117,627

1,601

5.41

120,672

1,584

5.26

114,418

1,141

3.97

Loans held for sale

1,356

19

5.73

1,087

17

6.16

1,102

14

5.22

Securities available for sale (b), (e)

37,271

192

1.76

38,899

194

1.74

42,271

196

1.69

Held-to-maturity securities (b)

9,020

79

3.50

9,371

81

3.47

7,933

55

2.79

Trading account assets

1,203

15

4.97

1,244

15

4.64

841

8

3.65

Short-term investments

8,416

123

5.79

7,798

111

5.73

3,043

32

4.13

Other investments (e)

1,395

22

6.35

1,566

16

4.03

1054

5

1.78

  Total earning assets

176,288

2,051

4.47

180,637

2,018

4.34

170,662

1,451

3.30

Allowance for loan and lease losses

(1,477)


(1,379)


(1,099)


Accrued income and other assets

17,530


17,202


18,629


Discontinued assets

374


394


478


  Total assets

$    192,715


$    196,854


$    188,670

Liabilities











Money market deposits

$       35,243

$              213

2.40 %

$       32,419

$              123

1.53 %

$       35,379

$                  8

.10 %

Demand deposits

55,837

315

2.24

53,569

256

1.91

47,671

42

.35

Savings deposits

5,966

1

.05

6,592

1

.04

7,904

—

.01

Certificates of deposit ($100,000 or more)

5,446

55

4.01

3,851

33

3.48

1,347

2

.47

Other time deposits

9,636

103

4.25

11,365

118

4.17

2,713

7

.97

  Total interest-bearing deposits

112,128

687

2.43

107,796

531

1.98

95,014

59

.25

Federal funds purchased and securities sold under repurchase agreements

710

9

5.04

3,767

48

5.07

3,562

19

2.10

Bank notes and other short-term borrowings

5,819

81

5.54

7,982

104

5.22

3,725

24

2.53

Long-term debt (f), (g)

21,584

351

6.50

22,284

349

6.26

17,704

146

3.32

  Total interest-bearing liabilities

140,241

1,128

3.20

141,829

1,032

2.91

120,005

248

.82

Noninterest-bearing deposits

32,697


35,107


49,215


Accrued expense and other liabilities

5,572


5,112


4,358


Discontinued liabilities (g)

374


394


478


  Total liabilities

$    178,884


$    182,442


$    174,056

Equity











Key shareholders' equity

$       13,831


$       14,412


$       14,614


Noncontrolling interests

—


—


—


  Total equity

13,831


14,412


14,614


  Total liabilities and equity

$    192,715


$    196,854


$    188,670

Interest rate spread (TE)

1.27 %


1.43 %


2.48 %

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

$              923

2.01 %

$              986

2.12 %

$           1,203

2.74 %

TE adjustment (b)

8


8


7

Net interest income, GAAP basis

$              915


$              978


$           1,196


(a)

Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022.   

(c)

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

(d)

Commercial and industrial average balances include $202 million, $194 million, and $162 million of assets from commercial credit cards for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.

(e)

Yield is calculated on the basis of amortized cost.

(f)

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.

 TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

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

(Dollars in millions)


Nine months ended September 30, 2023

Nine months ended September 30, 2022


Average

Yield/

Average

Yield/


Balance

Interest (a)

Rate (a)

Balance

Interest (a)

Rate (a)

Assets







Loans: (b), (c)







Commercial and industrial (d)

$           60,294

$             2,574

5.71 %

$           53,878

$             1,437

3.57 %

Real estate — commercial mortgage

16,178

697

5.76

15,278

425

3.72

Real estate — construction

2,663

131

6.58

2,154

64

3.95

Commercial lease financing

3,749

86

3.06

3,883

72

2.48

  Total commercial loans

82,884

3,488

5.63

75,193

1,998

3.55

Real estate — residential mortgage

21,534

524

3.25

18,331

395

2.87

Home equity loans

7,621

325

5.71

8,191

244

3.98

Consumer direct loans

6,309

229

4.86

6,414

201

4.20

Credit cards

986

101

13.68

948

76

10.75

Consumer indirect loans

37

1

1.54

67

—

—

  Total consumer loans

36,487

1,180

4.32

33,951

916

3.60

    Total loans

119,371

4,668

5.23

109,144

2,914

3.57

Loans held for sale

1,118

49

5.90

1,230

36

3.94

Securities available for sale (b), (e)

38,440

580

1.74

43,396

557

1.60

Held-to-maturity securities (b)

9,108

234

3.43

7,473

149

2.66

Trading account assets

1150

42

4.82

846

21

3.28

Short-term investments

6,600

276

5.59

4,636

49

1.42

Other investments (e)

1,423

51

4.78

836

11

1.80

  Total earning assets

177,210

5,900

4.30

167,561

3,737

2.92

Allowance for loan and lease losses

(1,398)


(1,087)


Accrued income and other assets

17,411


18,315


Discontinued assets

395


507


  Total assets

$         193,618


$         185,296

Liabilities







Money market deposits

$           33,829

$                 414

1.64 %

$           36,318

$                   17

.06 %

Other demand deposits

53,951

754

1.87

49,314

62

.17

Savings deposits

6,630

2

.04

7,799

1

.01

Certificates of deposit ($100,000 or more)

3,907

104

3.56

1,490

5

.45

Other time deposits

9,708

294

4.04

2,263

8

.48

  Total interest-bearing deposits

108,025

1,568

1.94

97,184

93

.13

Federal funds purchased and securities sold under repurchase agreements

2,183

79

4.84

2,226

25

1.51

Bank notes and other short-term borrowings

6,797

263

5.17

2,135

36

2.24

Long-term debt (f), (g)

21,341

975

6.09

13,757

256

2.49

  Total interest-bearing liabilities

138,346

2,885

2.79

115,302

410

.48

Noninterest-bearing deposits

35,691


50,082


Accrued expense and other liabilities

5,166


4,149


Discontinued liabilities (g)

395


507


  Total liabilities

$         179,598


$         170,040

Equity







Key shareholders' equity

$           14,020


$           15,256


Noncontrolling interests

—


—


  Total equity

14,020


15,256


  Total liabilities and equity

$         193,618


$         185,296

Interest rate spread (TE)

1.52 %


2.45 %

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

$             3,015

2.20 %

$             3,327

2.60 %

TE adjustment (b)

23


20

Net interest income, GAAP basis

$             2,992


$             3,307









(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)

Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the nine months ended September 30, 2023, and September 30, 2022, respectively.  

(c)

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

(d)

Commercial and industrial average balances include $192 million and $152 million of assets from commercial credit cards for the nine months ended September 30, 2023, and September 30, 2022, respectively.

(e)

Yield is calculated on the basis of amortized cost.

(f)

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)

A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

 

Noninterest Expense

(Dollars in millions)








Three months ended

Nine months ended

9/30/2023

6/30/2023

9/30/2022

9/30/2023

9/30/2022

Personnel (a)

$            663

$            622

$            655

$         1,986

$         1,892

Net occupancy

67

65

72

202

223

Computer processing

89

95

77

276

232

Business services and professional fees

38

41

47

124

152

Equipment

20

22

23

64

72

Operating lease expense

18

21

24

59

79

Marketing

28

29

30

78

92

Other expense

187

181

178

573

512

Total noninterest expense

$         1,110

$         1,076

$         1,106

$         3,362

$         3,254

Average full-time equivalent employees (b)

17,666

17,754

17,907

17,880

17,477


(a)

Additional detail provided in Personnel Expense table below.

(b)

The number of average full-time equivalent employees has not been adjusted for discontinued operations.

 

Personnel Expense

(Dollars in millions)









Three months ended

Nine months ended

9/30/2023

6/30/2023

9/30/2022

9/30/2023

9/30/2022

Salaries and contract labor

$            415

$            416

$           388

$         1,250

$         1,093

Incentive and stock-based compensation

141

93

176

386

522

Employee benefits

106

103

89

308

269

Severance

1

10

2

42

8

Total personnel expense

$            663

$            622

$           655

$         1,986

$         1,892

 

Loan Composition

(Dollars in millions)










Change 9/30/2023 vs.

9/30/2023

6/30/2023

9/30/2022

6/30/2023

9/30/2022

Commercial and industrial (a)

$        57,606

$        60,059

$        56,971

(4.1) %

1.1 %

Commercial real estate:





Commercial mortgage

15,549

16,048

16,400

(3.1)

(5.2)

Construction

2,982

2,646

2,349

12.7

26.9

 Total commercial real estate loans

18,531

18,694

18,749

(.9)

(1.2)

Commercial lease financing (b)

3,681

3,801

3,877

(3.2)

(5.1)

 Total commercial loans

79,818

82,554

79,597

(3.3)

.3

Residential — prime loans:





Real estate — residential mortgage

21,309

21,637

20,838

(1.5)

2.3

Home equity loans

7,324

7,529

7,926

(2.7)

(7.6)

 Total residential — prime loans

28,633

29,166

28,764

(1.8)

(.5)

Consumer direct loans

6,074

6,257

6,803

(2.9)

(10.7)

Credit cards

988

1,001

977

(1.3)

1.1

Consumer indirect loans

31

33

50

(6.1)

(38.0)

 Total consumer loans

35,726

36,457

36,594

(2.0)

(2.4)

 Total loans (c), (d)

$      115,544

$      119,011

$      116,191

(2.9) %

(.6) %


(a)

Loan balances include $207 million, $200 million, and $166 million of commercial credit card balances at September 30, 2023, June 30, 2023, and September 30, 2022, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $4 million, $5 million, and $10 million at September 30, 2023, June 30, 2023, and September 30, 2022, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

Total loans exclude loans of $360 million at September 30, 2023, $381 million at June 30, 2023, and $467 million at September 30, 2022, related to the discontinued operations of the education lending business.

(d)

Accrued interest of $520 million, $500 million, and $274 million at September 30, 2023, June 30, 2023, and September 30, 2022, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

 

Loans Held for Sale Composition

(Dollars in millions)












Change 9/30/2023 vs.

9/30/2023

6/30/2023

9/30/2022

6/30/2023

9/30/2022

Commercial and industrial

$              47

$            221

$            292

(78.7) %

(83.9) %

Real estate — commercial mortgage

571

829

693

(31.1)

(17.6)

Commercial lease financing

—

13

2

(100.0)

(100.0)

Real estate — residential mortgage

112

67

61

67.2

83.6

Total loans held for sale

$            730

$         1,130

$         1,048

(35.4) %

(30.3) %







 N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(Dollars in millions)







3Q23

2Q23

1Q23

4Q22

3Q22

Balance at beginning of period

$          1,130

$         1,211

$            963

$         1,048

$         1,306

New originations

3,035

1,798

1,779

3,158

2,157

Transfers from (to) held to maturity, net

(94)

(52)

(13)

(48)

—

Loan sales

(3,312)

(1,798)

(1,518)

(3,124)

(2,446)

Loan draws (payments), net

(29)

(28)

—

(71)

26

Valuation and other adjustments

—

(1)

—

—

5

Balance at end of period

$            730

$         1,130

$         1,211

$            963

$         1,048

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(Dollars in millions)








Three months ended

Nine months ended

9/30/2023

6/30/2023

9/30/2022

9/30/2023

9/30/2022

Average loans outstanding

$ 117,627

$ 120,672

$ 114,418

$ 119,371

$ 109,144

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

1,480

1,380

1,099

1,337

1,061

Loans charged off:





Commercial and industrial

62

42

49

139

118







Real estate — commercial mortgage

1

9

3

15

10

Real estate — construction

—

—

—

—

—

Total commercial real estate loans

1

9

3

15

10

Commercial lease financing

—

1

—

—

2

Total commercial loans

63

52

52

154

130

Real estate — residential mortgage

—

1

1

1

(2)

Home equity loans

1

2

—

4

1

Consumer direct loans

14

11

8

36

25

Credit cards

9

9

7

27

22

Consumer indirect loans

—

1

—

1

2

Total consumer loans

24

24

16

69

48

Total loans charged off

87

76

68

223

178

Recoveries:





Commercial and industrial

10

15

13

33

32







Real estate — commercial mortgage

—

1

2

1

4

Real estate — construction

—

—

—

—

1

Total commercial real estate loans

—

1

2

1

5

Commercial lease financing

1

2

1

4

2

Total commercial loans

11

18

16

38

39

Real estate — residential mortgage

1

1

1

3

2

Home equity loans

1

1

1

3

3

Consumer direct loans

2

2

4

6

7

Credit cards

1

2

2

4

5

Consumer indirect loans

—

—

1

1

2

Total consumer loans

5

6

9

17

19

Total recoveries

16

24

25

55

58

Net loan charge-offs

(71)

(52)

(43)

(168)

(120)

Provision (credit) for loan and lease losses

79

152

88

319

203

Allowance for loan and lease losses at end of period

$    1,488

$    1,480

$    1,144

$    1,488

$    1,144







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

$       291

$       276

$       173

$       225

$       160

Provision (credit) for losses on lending-related commitments

2

15

21

68

34

Other

(3)

—

—

(3)

—

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

$       290

$       291

$       194

$       290

$       194







Total allowance for credit losses at end of period

$    1,778

$    1,771

$    1,338

$    1,778

$    1,338







Net loan charge-offs to average total loans

.24 %

.17 %

.15 %

.19 %

.15 %

Allowance for loan and lease losses to period-end loans

1.29

1.24

.98

1.29

.98

Allowance for credit losses to period-end loans

1.54

1.49

1.15

1.54

1.15

Allowance for loan and lease losses to nonperforming loans

327

343

293

327

293

Allowance for credit losses to nonperforming loans

391

411

343

391

343







Discontinued operations — education lending business:





Loans charged off

$         —

$          2

$          1

$          3

$          4

Recoveries

—

1

1

1

2

Net loan charge-offs

$         —

$         (1)

$         —

$         (2)

$         (2)


(a)

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

     

Asset Quality Statistics From Continuing Operations

(Dollars in millions)

3Q23

2Q23

1Q23

4Q22

3Q22

Net loan charge-offs

$         71

$         52

$         45

$         41

$         43

Net loan charge-offs to average total loans

.24 %

.17 %

.15 %

.14 %

.15 %

Allowance for loan and lease losses

$    1,488

$    1,480

$    1,380

$    1,337

$    1,144

Allowance for credit losses (a)

1,778

1,771

1,656

1,562

1,338

Allowance for loan and lease losses to period-end loans

1.29 %

1.24 %

1.15 %

1.12 %

.98 %

Allowance for credit losses to period-end loans

1.54

1.49

1.38

1.31

1.15

Allowance for loan and lease losses to nonperforming loans

327

343

332

346

293

Allowance for credit losses to nonperforming loans

391

411

398

404

343

Nonperforming loans at period end

$       455

$       431

$       416

$       387

$       390

Nonperforming assets at period end

471

462

447

420

419

Nonperforming loans to period-end portfolio loans

.39 %

.36 %

.35 %

.32 %

.34 %

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

.41

.39

.37

.35

.36


(a)

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

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(Dollars in millions)

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

Commercial and industrial

$       214

$       188

$       170

$       174

$       169






Real estate — commercial mortgage

63

65

59

21

34

Real estate — construction

—

—

—

—

—

Total commercial real estate loans

63

65

59

21

34

Commercial lease financing

1

1

1

1

2

Total commercial loans

278

254

230

196

205

Real estate — residential mortgage

72

73

75

77

66

Home equity loans

97

97

104

107

112

Consumer direct loans

3

3

3

3

3

Credit cards

4

3

3

3

3

Consumer indirect loans

1

1

1

1

1

Total consumer loans

177

177

186

191

185

  Total nonperforming loans (a)

455

431

416

387

390

OREO

16

15

13

13

12

Nonperforming loans held for sale

—

16

18

20

17

Other nonperforming assets

—

—

—

—

—

Total nonperforming assets

$       471

$       462

$       447

$       420

$       419

Accruing loans past due 90 days or more

52

73

55

60

47

Accruing loans past due 30 through 89 days

178

139

164

180

187

Nonperforming assets from discontinued operations — education lending business 

2

2

3

3

3

Nonperforming loans to period-end portfolio loans

.39 %

.36 %

.35 %

.32 %

.34 %

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

.41

.39

.37

.35

.36


(a)

On January 1, 2023, Key adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. In connection with the adoption of this guidance, nonperforming loans for periods after January 1, 2023, include certain loans which were modified for borrowers experiencing financial difficulty. Amounts prior to January 1, 2023, include nonperforming troubled debt restructurings (TDRs), for which accounting guidance was eliminated upon adoption of ASU 2022-02.

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(Dollars in millions)

3Q23

2Q23

1Q23

4Q22

3Q22

Balance at beginning of period

$          431

$          416

$          387

$          390

$          429

Loans placed on nonaccrual status

159

169

143

113

80

Charge-offs

(87)

(76)

(60)

(67)

(68)

Loans sold

(4)

(23)

(2)

(4)

(3)

Payments

(25)

(20)

(31)

(22)

(29)

Transfers to OREO

(3)

(2)

(2)

(1)

(1)

Loans returned to accrual status

(16)

(33)

(19)

(22)

(18)

Balance at end of period

$          455

$          431

$          416

$          387

$          390

 

Line of Business Results

(Dollars in millions)
















Change 3Q23 vs.

3Q23

2Q23

1Q23

4Q22

3Q22

2Q23

3Q22

Consumer Bank







Summary of operations







Total revenue (TE)

$             791

$             803

$             840

$             860

$             877

(1.5) %

(9.8) %

Provision for credit losses

14

32

60

105

37

(56.3)

(62.2)

Noninterest expense

677

663

663

705

675

2.1

.3

Net income (loss) attributable to Key

76

82

89

38

125

(7.3)

(39.2)

Average loans and leases

42,250

42,934

43,086

43,149

42,568

(1.6)

(.7)

Average deposits

83,863

82,498

84,637

87,370

90,170

1.7

(7.0)

Net loan charge-offs

36

32

24

21

17

12.5

111.8

Net loan charge-offs to average total loans

.34 %

.30 %

.23 %

.19 %

.16 %

13.3

112.5

Nonperforming assets at period end

$             190

$             193

$             196

$             202

$             195

(1.6)

(2.6)

Return on average allocated equity

8.48 %

9.04 %

9.87 %

4.51 %

14.26 %

(6.2)

(40.5)









Commercial Bank







Summary of operations







Total revenue (TE)

$             790

$             805

$             844

$             894

$             878

(1.9) %

(10.0) %

Provision for credit losses

68

134

80

165

74

(49.3)

(8.1)

Noninterest expense

431

405

442

459

451

6.4

(4.4)

Net income (loss) attributable to Key

226

214

255

225

287

5.6

(21.3)

Average loans and leases

74,951

77,277

76,306

74,100

71,464

(3.0)

4.9

Average loans held for sale

1,268

1,014

876

1,377

1,036

25.0

22.4

Average deposits

54,896

51,420

52,219

54,385

52,272

6.8

5.0

Net loan charge-offs

35

20

21

25

27

75.0

29.6

Net loan charge-offs to average total loans

0.19 %

.10 %

.11 %

.13 %

.15 %

90.0

26.7

Nonperforming assets at period end

$             281

$             269

$             251

$             218

$             224

4.5

25.4

Return on average allocated equity

8.64 %

8.17 %

10.04 %

9.36 %

12.29 %

5.8

(29.7)

TE = Taxable Equivalent

 

(PRNewsfoto/KeyCorp)

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/keycorp-reports-third-quarter-2023-net-income-of-266-million-or-29-per-diluted-common-share-301961865.html

SOURCE KeyCorp

Copyright 2023 PR Newswire

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