Fourth quarter 2023 net income reflects $209 million of after-tax expenses, or $.22 per share, from the following items: FDIC special assessment, efficiency related expenses, and a pension settlement charge

Strong capital position: Common Equity Tier 1 of 10.0%(a), above targeted range

Exceeded 2023 full year balance sheet optimization goal: $14 billion reduction in risk-weighted assets(b) 

Solid credit quality: net charge-offs to average loans of 26 basis points

CLEVELAND, Jan. 18, 2024 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $30 million, or $.03 per diluted common share, for the fourth quarter of 2023. This compared to $266 million, or $.29 per diluted common share, for the third quarter of 2023 and $356 million, or $.38 per diluted common share, for the fourth quarter of 2022. Included in the fourth quarter of 2023 are $209 million, or $.22 per diluted common share, of charges related to a FDIC special assessment, efficiency related expenses, and a pension settlement charge(c).

Comments from Chairman and CEO, Chris Gorman

"Underlying performance in the quarter was solid. Net interest income stabilized, expenses were well-controlled, credit costs remained low, and our capital position continued to improve. We also continued to invest in our differentiated fee-based businesses which we anticipate will gain traction as conditions improve in the capital markets. 

I am proud of the work and dedication of our teammates in executing on our strategic priorities and steadfastly serving our clients while navigating a turbulent year. In 2023, we grew relationship deposits, improved balance sheet resiliency, exceeded our goal of reducing risk-weighted assets, maintained expense discipline, and benefited from our de-risked loan portfolio and distinctive underwrite-to-distribute model.

I am fully confident these actions will position Key to deliver sound, profitable growth, realize our  earnings potential, and drive substantive value for all of our stakeholders in the years ahead."

(a)

December 31, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)

December 31, 2023 figures are estimated.

(c)

See table on page 25 for more information on Selected Items Impacts to Earnings.

 

Selected Financial Highlights













Dollars in millions, except per share data



Change 4Q23 vs.


4Q23

3Q23

4Q22

3Q23

4Q22

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

$       30

$      266

$      356

(88.7) %

(91.6) %

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

.03

.29

.38

(89.7)

(92.1)

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

1.46 %

12.40 %

18.07 %

N/A

N/A

Return on average total assets from continuing operations

.14

.62

.83

N/A

N/A

Common Equity Tier 1 ratio (b)

10.0

9.8

9.1

N/A

N/A

Book value at period end

$   13.02

$   11.65

$   11.79

11.8

10.4

Net interest margin (TE) from continuing operations

2.07 %

2.01 %

2.73 %

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 "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.

(b)

December 31, 2023 ratio is estimated.

TE

= Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS












Revenue












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Net interest income (TE)

$        928

$        923

$      1,227

.5 %

(24.4) %

Noninterest income

610

643

671

(5.1)

(9.1)

Total revenue (TE)

$      1,538

$      1,566

$      1,898

(1.8) %

(19.0) %







TE = Taxable Equivalent

Taxable-equivalent net interest income was $928 million for the fourth quarter of 2023 and the net interest margin was 2.07%. Compared to the fourth quarter of 2022, net interest income decreased $299 million, and the net interest margin decreased by 66 basis points. The decrease in net interest income and the net interest margin reflect the impact of higher interest rates, partly offset by a favorable earning asset mix.  The higher interest rate environment drove the cost of interest-bearing deposits and borrowings higher, which outpaced the benefit from higher earning asset yields. Additionally, the balance sheet experienced a shift in funding mix from noninterest-bearing deposits to higher-cost interest-bearing deposits.  

Compared to the third quarter of 2023, taxable-equivalent net interest income increased by $5 million, and the net interest margin increased by six basis points. The increases in net interest income and the net interest margin were driven by actions taken to manage Key's interest rate risk, elevated levels of liquidity, and an improved funding mix. The increase was partly offset by higher interest-bearing deposit costs, which exceeded the benefit from higher earning asset yields, and a planned reduction in loan balances, which benefited Key's net interest margin.

Noninterest Income












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Trust and investment services income

$        132

$        130

$        126

1.5 %

4.8 %

Investment banking and debt placement fees

136

141

172

(3.5)

(20.9)

Cards and payments income

84

90

85

(6.7)

(1.2)

Service charges on deposit accounts

65

69

71

(5.8)

(8.5)

Corporate services income

67

73

89

(8.2)

(24.7)

Commercial mortgage servicing fees

48

46

42

4.3

14.3

Corporate-owned life insurance income

36

35

33

2.9

9.1

Consumer mortgage income

11

15

9

(26.7)

22.2

Operating lease income and other leasing gains

22

22

24

—

(8.3)

Other income

9

22

20

(59.1)

(55.0)

Total noninterest income

$        610

$        643

$        671

(5.1) %

(9.1) %







Compared to the fourth quarter of 2022, noninterest income decreased by $61 million. The decrease was driven by a $36 million decline in investment banking and debt placement fees, driven by lower syndication fees and merger and acquisition advisory fees. Corporate services income also declined by $22 million, driven by lower customer derivatives trading activity and related revenue.

Compared to the third quarter of 2023, noninterest income decreased by $33 million, reflective of a $13 million decline in other income primarily driven by a gain on a loan sale in the prior quarter. Cards and payments income declined by $6 million and corporate services income declined by $6 million, reflecting lower customer derivatives trading revenue. Additionally, investment banking and debt placement fees declined by $5 million.

Noninterest Expense












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Personnel expense

$        674

$        663

$        674

1.7 %

— %

Net occupancy

65

67

72

(3.0)

(9.7)

Computer processing

92

89

82

3.4

12.2

Business services and professional fees

44

38

60

15.8

(26.7)

Equipment

24

20

20

20.0

20.0

Operating lease expense

18

18

22

—

(18.2)

Marketing

31

28

31

10.7

—

Other expense

424

187

195

126.7

117.4

Total noninterest expense

$      1,372

$      1,110

$      1,156

23.6 %

18.7 %







Compared to the fourth quarter of 2022, noninterest expense increased $216 million. The increase in noninterest expense was driven by the following impacts in the fourth quarter of 2023: a $190 million charge related to the FDIC special assessment, $67 million from efficiency related expenses, and $18 million from a pension settlement charge. See the Selected Items Impact on Earnings table on page 25 for more information.

Compared to the third quarter of 2023, noninterest expense increased $262 million. The increase was driven by the FDIC special assessment, efficiency related expenses, and a pension settlement charge in the fourth quarter, which collectively totaled $275 million. See the Selected Items Impact on Earnings table on page 25 for more information. Personnel expense increased $11 million, primarily driven by an increase in severance as part of the previously discussed efficiency related expenses.

BALANCE SHEET HIGHLIGHTS












Average Loans












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Commercial and industrial (a)

$    56,664

$    59,187

$    58,212

(4.3) %

(2.7) %

Other commercial loans

21,942

22,371

22,720

(1.9)

(3.4)

Total consumer loans

35,342

36,069

36,770

(2.0)

(3.9)

Total loans

$  113,948

$  117,627

$  117,702

(3.1) %

(3.2) %







(a)

Commercial and industrial average loan balances include $210 million, $202 million, and $171 million of assets from commercial credit cards at December 31, 2023, September 30, 2023, and December 31, 2022, respectively.

Average loans were $113.9 billion for the fourth quarter of 2023, a decrease of $3.8 billion compared to the fourth quarter of 2022, reflecting Key's planned balance sheet optimization efforts. The decline in average loans was driven by commercial and industrial loans which decreased $1.5 billion. Average consumer loans also decreased $1.4 billion, driven by a decline in home equity and consumer direct loans.

Compared to the third quarter of 2023, average loans decreased by $3.7 billion, driven by Key's planned balance sheet optimization efforts. Average commercial loans declined by $3.0 billion, reflective of a $2.5 billion decrease in commercial and industrial loans. Additionally, average consumer loans declined $727 million, driven by lower consumer mortgage and home equity loan balances.

Average Deposits












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Non-time deposits

$  130,750

$  129,743

$  139,558

.8 %

(6.3) %

Certificates of deposit ($100,000 or more)

6,328

5,446

1,351

16.2

368.4

Other time deposits

7,998

9,636

4,757

(17.0)

68.1

Total deposits

$  145,076

$  144,825

$  145,666

.2 %

(.4) %







Cost of total deposits

2.06 %

1.88 %

.51 %

N/A

N/A








N/A = Not Applicable

Average deposits totaled $145.1 billion for the fourth quarter of 2023, a decrease of $590 million compared to the year-ago quarter. The decrease was driven by changing client behavior reflective of higher interest rates.

Compared to the third quarter of 2023, average deposits increased by $251 million, driven by a seasonal increase in 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 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Net loan charge-offs

$       76

$       71

$       41

7.0 %

85.4 %

Net loan charge-offs to average total loans

.26 %

.24 %

.14 %

N/A

N/A

Nonperforming loans at period end

$      574

$      455

$      387

26.2

48.3

Nonperforming assets at period end

591

471

420

25.5

40.7

Allowance for loan and lease losses

1,508

1,488

1,337

1.3

12.8

Allowance for credit losses

1,804

1,778

1,562

1.5

15.5

Provision for credit losses

102

81

265

25.9

(61.5)







Allowance for loan and lease losses to nonperforming loans

263 %

327 %

345 %

N/A

N/A

Allowance for credit losses to nonperforming loans

314

391

404

N/A

N/A








N/A = Not Applicable

Key's provision for credit losses was $102 million, compared to $265 million in the fourth quarter of 2022 and $81 million in the third quarter of 2023. The decline from the year-ago period reflects a more stable economic outlook and the impact of current balance sheet optimization efforts. The increase from the prior quarter reflects credit migration partially offset by lower loan balances.

Net loan charge-offs for the fourth quarter of 2023 totaled $76 million, or 0.26% of average total loans. These results compare to $41 million, or 0.14%, for the fourth quarter of 2022 and $71 million, or 0.24%, for the third quarter of 2023. Key's allowance for credit losses was $1.8 billion, or 1.60% of total period-end loans at December 31, 2023, compared to 1.31% at December 31, 2022, and 1.54% at September 30, 2023.

At December 31, 2023, Key's nonperforming loans totaled $574 million, which represented 0.51% of period-end portfolio loans. These results compare to 0.32% at December 31, 2022, and 0.39% at September 30, 2023. Nonperforming assets at December 31, 2023, totaled $591 million, and represented 0.52% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.35% at December 31, 2022, and 0.41% at September 30, 2023.

CAPITAL

Key's estimated risk-based capital ratios, included in the following table, continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2023.

Capital Ratios







12/31/2023

9/30/2023

12/31/2022

Common Equity Tier 1 (a)

10.0 %

9.8 %

9.1 %

Tier 1 risk-based capital (a)

11.7

11.4

10.6

Total risk-based capital (a)

14.1

13.8

12.8

Tangible common equity to tangible assets (b)

5.1

4.4

4.4

Leverage (a)

9.0

8.9

8.9




(a)

December 31, 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 regulatory capital position remained strong in the fourth quarter of 2023. As shown in the preceding table, at December 31, 2023, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.0% and 11.7%, respectively. Key's tangible common equity ratio was 5.1% at December 31, 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 nine basis points.

Summary of Changes in Common Shares Outstanding











In thousands



Change 4Q23 vs.


4Q23

3Q23

4Q22

3Q23

4Q22

Shares outstanding at beginning of period

936,161

935,733

932,938

— %

.3 %

Return of shares under employee compensation plans

(2)

(10)

(2)

80.0

—

Shares issued under employee compensation plans (net of cancellations)

405

438

389

(7.5)

4.1

Shares outstanding at end of period

936,564

936,161

933,325

— %

.3 %








 

Key declared a dividend of $.205 per common share for the first quarter of 2024.

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 4Q23 vs.


4Q23

3Q23

4Q22

3Q23

4Q22

Revenue from continuing operations (TE)





Consumer Bank

$         786

$         791

$         860

(.6) %

(8.6) %

Commercial Bank

794

790

894

.5

(11.2)

Other (a)

(42)

(15)

144

(180.0)

(129.2)

Total

$       1,538

$       1,566

$       1,898

(1.8) %

(19.0) %








Income (loss) from continuing operations attributable to Key





Consumer Bank

$             1

$           76

$           38

(98.7) %

(97.4) %

Commercial Bank

143

226

225

(36.7)

(36.4)

Other (a)

(79)

0

131

N/M

(160.3)

Total

$           65

$         302

$         394

(78.5) %

(83.5) %








(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 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Summary of operations





Net interest income (TE)

$         558

$         548

$         634

1.8 %

(12.0) %

Noninterest income

228

243

226

(6.2)

.9

Total revenue (TE)

786

791

860

(.6)

(8.6)

Provision for credit losses

5

14

105

(64.3)

(95.2)

Noninterest expense

780

677

705

15.2

10.6

Income (loss) before income taxes (TE)

1

100

50

(99.0)

(98.0)

Allocated income taxes (benefit) and TE adjustments

0

24

12

(100.0)

(100.0)

Net income (loss) attributable to Key

$             1

$           76

$           38

(98.7) %

(97.4) %







Average balances





Loans and leases

$     41,381

$     42,250

$     43,149

(2.1) %

(4.1) %

Total assets

44,178

45,078

46,235

(2.0)

(4.4)

Deposits

84,856

83,863

87,369

1.2

(2.9)







Assets under management at period end

$     54,859

$     52,516

$     51,282

4.5 %

7.0 %








TE = Taxable Equivalent

 

Additional Consumer Bank Data












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Noninterest income





Trust and investment services income

$       105

$       105

$        97

— %

8.2 %

Service charges on deposit accounts

37

40

40

(7.5)

(7.5)

Cards and payments income

62

66

62

(6.1)

—

Consumer mortgage income

11

16

9

(31.3)

22.2

Other noninterest income

13

16

18

(18.8)

(27.8)

Total noninterest income

$       228

$       243

$       226

(6.2) %

.9 %







Average deposit balances





Money market deposits

$  29,752

$  28,775

$  29,694

3.4 %

.2 %

Demand deposits

23,072

23,202

24,956

(.6)

(7.5)

Savings deposits

5,241

5,681

7,439

(7.7)

(29.5)

Certificates of deposit ($100,000 or more)

5,899

5,003

1,227

17.9

380.8

Other time deposits

4,366

3,751

1,762

16.4

147.8

Noninterest-bearing deposits

16,526

17,451

22,291

(5.3)

(25.9)

Total deposits

$  84,856

$  83,863

$  87,369

1.2 %

(2.9) %







Other data





Branches

959

959

972


Automated teller machines

1,217

1,249

1,265









 

Consumer Bank Summary of Operations (4Q23 vs. 4Q22)

  • Key's Consumer Bank recorded net income attributable to Key of $1 million for the fourth quarter of 2023, compared to $38 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $76 million, or 12.0%, compared to the fourth quarter of 2022, reflecting higher interest-bearing deposit costs
  • Average loans and leases decreased $1.8 billion, or 4.1%, from the fourth quarter of 2022, driven by lower home equity and consumer direct loans
  • Average deposits decreased $2.5 billion, or 2.9%, from the fourth quarter of 2022, reflecting changing client behavior due to higher interest rates
  • Provision for credit losses decreased $100 million compared to the fourth quarter of 2022, driven by planned balance sheet optimization efforts and a more stable economic outlook
  • Noninterest income increased $2 million from the year-ago quarter, driven by an increase in trust and investment services and consumer mortgage income
  • Noninterest expense increased $75 million from the year-ago quarter, primarily reflective of a FDIC special assessment charge

Commercial Bank












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Summary of operations





Net interest income (TE)

$         444

$         430

$         486

3.3 %

(8.6) %

Noninterest income

350

360

408

(2.8)

(14.2)

Total revenue (TE)

794

790

894

.5

(11.2)

Provision for credit losses

96

68

165

41.2

(41.8)

Noninterest expense

525

431

459

21.8

14.4

Income (loss) before income taxes (TE)

173

291

270

(40.5)

(35.9)

Allocated income taxes and TE adjustments

30

65

45

(53.8)

(33.3)

Net income (loss) attributable to Key

$         143

$         226

$         225

(36.7) %

(36.4) %







Average balances





Loans and leases

$     72,088

$     74,951

$     74,100

(3.8) %

(2.7) %

Loans held for sale

635

1,268

1,377

(49.9)

(53.9)

Total assets

81,393

85,274

84,615

(4.6)

(3.8)

Deposits

56,897

54,896

54,385

3.6 %

4.6 %








TE = Taxable Equivalent

 

Additional Commercial Bank Data












Dollars in millions



Change 4Q23 vs.

4Q23

3Q23

4Q22

3Q23

4Q22

Noninterest income





Trust and investment services income

$           27

$           24

$           30

12.5 %

(10.0) %

Investment banking and debt placement fees

135

141

172

(4.3)

(21.5)

Cards and payments income

19

17

19

11.8

—

Service charges on deposit accounts

27

28

30

(3.6)

(10.0)

Corporate services income

61

64

81

(4.7)

(24.7)

Commercial mortgage servicing fees

49

45

42

8.9

16.7

Operating lease income and other leasing gains

21

22

23

(4.5)

(8.7)

Other noninterest income

11

19

11

(42.1)

—

Total noninterest income

$         350

$         360

$         408

(2.8) %

(14.2) %







 

Commercial Bank Summary of Operations (4Q23 vs. 4Q22)

  • Key's Commercial Bank recorded net income attributable to Key of $143 million for the fourth quarter of 2023 compared to $225 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $42 million, or 8.6%, compared to the fourth 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, decreased $2.0 billion, or 2.7%, compared to the fourth quarter of 2022 driven by a decline in commercial and industrial loans as we de-emphasized non-relationship business
  • Average deposit balances increased $2.5 billion compared to the fourth quarter of 2022, driven by our focus on growing deposits across our commercial businesses
  • Provision for credit losses decreased $69 million compared to the fourth quarter of 2022, driven by planned balance sheet optimization efforts and a more stable economic outlook
  • Noninterest income decreased $58 million from the year-ago quarter, primarily driven by a decline in investment banking and debt placement fees, reflecting lower syndication and merger and acquisition advisory revenues, as well as a decline in corporate services income
  • Noninterest expense increased $66 million from the fourth quarter of 2022, primarily due to the FDIC special assessment charge

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 December 31, 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 1,200 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 9:00 a.m. ET, on January 18, 2024. A replay of the call will be available through January 28, 2024.

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
Fourth 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



12/31/2023

9/30/2023

12/31/2022

Summary of operations



Net interest income (TE)

$           928

$           923

$         1,227

Noninterest income

610

643

671


Total revenue (TE)

1,538

1,566

1,898

Provision for credit losses

102

81

265

Noninterest expense

1,372

1,110

1,156

Income (loss) from continuing operations attributable to Key

65

302

394

Income (loss) from discontinued operations, net of taxes

—

1

—

Net income (loss) attributable to Key

65

303

394







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

30

266

356

Income (loss) from discontinued operations, net of taxes

—

1

—

Net income (loss) attributable to Key common shareholders

30

267

356






Per common share



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

$            .03

$            .29

$            .38

Income (loss) from discontinued operations, net of taxes

—

—

—

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

.03

.29

.38







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

.03

.29

.38

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

—

—

—

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

.03

.29

.38







Cash dividends declared

.205

.205

.205

Book value at period end

13.02

11.65

11.79

Tangible book value at period end

10.02

8.65

8.75

Market price at period end

14.40

10.76

17.42






Performance ratios



From continuing operations:



Return on average total assets

.14 %

.62 %

.83 %

Return on average common equity

1.08

9.31

13.24

Return on average tangible common equity (b)

1.46

12.40

18.07

Net interest margin (TE)

2.07

2.01

2.73

Cash efficiency ratio (b)

88.6

70.3

60.3







From consolidated operations:



Return on average total assets

.14 %

.62 %

.82 %

Return on average common equity

1.08

9.35

13.24

Return on average tangible common equity (b)

1.46

12.45

18.07

Net interest margin (TE)

2.07

2.01

2.73

Loan to deposit (c)

77.9

80.8

84.7






Capital ratios at period end



Key shareholders' equity to assets

7.8 %

7.1 %

7.1 %

Key common shareholders' equity to assets

6.5

5.8

5.8

Tangible common equity to tangible assets (b)

5.1

4.4

4.4

Common Equity Tier 1 (d)

10.0

9.8

9.1

Tier 1 risk-based capital (d)

11.7

11.4

10.6

Total risk-based capital (d)

14.1

13.8

12.8

Leverage (d)

9.0

8.9

8.9






Asset quality — from continuing operations



Net loan charge-offs

$             76

$             71

$             41

Net loan charge-offs to average loans

.26 %

.24 %

.14 %

Allowance for loan and lease losses

$         1,508

$         1,488

$         1,337

Allowance for credit losses

1,804

1,778

1,562

Allowance for loan and lease losses to period-end loans

1.34 %

1.29 %

1.12 %

Allowance for credit losses to period-end loans

1.60

1.54

1.31

Allowance for loan and lease losses to nonperforming loans

263

327

345

Allowance for credit losses to nonperforming loans

314

391

404

Nonperforming loans at period-end

$           574

$           455

$           387

Nonperforming assets at period-end

591

471

420

Nonperforming loans to period-end portfolio loans

.51 %

.39 %

.32 %

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

.52

.41

.35






Trust assets



Assets under management

$       54,859

$       52,516

$       51,282

Other data



Average full-time equivalent employees

17,129

17,666

18,210

Branches

959

959

972

Taxable-equivalent adjustment

$              7

$              8

$              7

 


Financial Highlights (continued)

(Dollars in millions, except per share amounts)


Twelve months ended


12/31/2023

12/31/2022

Summary of operations


Net interest income (TE)

$                  3,943

$                  4,554

Noninterest income

2,470

2,718

Total revenue (TE)

6,413

7,272

Provision for credit losses

489

502

Noninterest expense

4,734

4,410

Income (loss) from continuing operations attributable to Key

964

1,911

Income (loss) from discontinued operations, net of taxes

3

6

Net income (loss) attributable to Key

967

1,917





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

821

1,793

Income (loss) from discontinued operations, net of taxes

3

6

Net income (loss) attributable to Key common shareholders

824

1,799




Per common share


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

$                     .88

$                    1.94

Income (loss) from discontinued operations, net of taxes

—

.01

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

.89

1.94





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

.88

1.92

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

—

.01

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

.88

1.93





Cash dividends paid

.82

.79




Performance ratios


From continuing operations:


Return on average total assets

.50 %

1.03 %

Return on average common equity

7.21

14.21

Return on average tangible common equity (b)

9.60

18.34

Net interest margin (TE)

2.17

2.64

Cash efficiency ratio (b)

73.2

67.5





From consolidated operations:


Return on average total assets

.50 %

1.03 %

Return on average common equity

7.24

14.26

Return on average tangible common equity (b)

9.63

18.40

Net interest margin (TE)

2.17

2.63




Asset quality — from continuing operations


Net loan charge-offs

$                     244

$                     161

Net loan charge-offs to average total loans

.21 %

.14 %




Other data


Average full-time equivalent employees

17,692

17,660




Taxable-equivalent adjustment

30

27

(a)

Earnings per share may not foot due to rounding.

(b)

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

(c)

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

(d)

December 31, 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

Twelve months ended

12/31/2023

9/30/2023

12/31/2022

12/31/2023

12/31/2022

Tangible common equity to tangible assets at period-end





Key shareholders' equity (GAAP)

$  14,637

$  13,356

$  13,454


Less: Intangible assets (a)

2,806

2,816

2,844


Preferred Stock (b)

2,446

2,446

2,446


Tangible common equity (non-GAAP)

$    9,385

$    8,094

$    8,164


Total assets (GAAP)

$ 188,281

$ 187,851

$ 189,813


Less: Intangible assets (a)

2,806

2,816

2,844


Tangible assets (non-GAAP)

$ 185,475

$ 185,035

$ 186,969


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

5.06 %

4.37 %

4.37 %


Pre-provision net revenue





Net interest income (GAAP)

$       921

$       915

$    1,220

$    3,913

$    4,527

Plus: Taxable-equivalent adjustment

7

8

7

30

27

Noninterest income

610

643

671

2,470

2,718

Less: Noninterest expense

1,372

1,110

1,156

4,734

4,410

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

$       166

$       456

$       742

$    1,679

$    2,862

Average tangible common equity





Average Key shareholders' equity (GAAP)

$  13,471

$  13,831

$  13,168

$  13,881

$  14,730

Less: Intangible assets (average) (c)

2,811

2,821

2,851

2,826

2,839

Preferred stock (average)

2,500

2,500

2,500

2,500

2,114

Average tangible common equity (non-GAAP)

$    8,160

$    8,510

$    7,817

$    8,555

$    9,777

Return on average tangible common equity from continuing operations





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

$        30

$       266

$       356

$       821

$    1,793

Average tangible common equity (non-GAAP)

8,160

8,510

7,817

8,555

9,777







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

1.46 %

12.40 %

18.07 %

9.60 %

18.34 %

Return on average tangible common equity consolidated





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

$        30

$       267

$       356

$       824

$    1,799

Average tangible common equity (non-GAAP)

8,160

8,510

7,817

8,555

9,777







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

1.46 %

12.45 %

18.07 %

9.63 %

18.40 %

 

GAAP to Non-GAAP Reconciliations (continued)

(Dollars in millions)

Three months ended

Twelve months ended

12/31/2023

9/30/2023

12/31/2022

12/31/2023

12/31/2022

Cash efficiency ratio





Noninterest expense (GAAP)

$    1,372

$    1,110

$    1,156

$    4,734

$    4,410

Less: Intangible asset amortization

10

9

12

39

47

Adjusted noninterest expense (non-GAAP)

$    1,362

$    1,101

$    1,144

$    4,695

$    4,363







Net interest income (GAAP)

$       921

$       915

$    1,220

$    3,913

$    4,527

Plus: Taxable-equivalent adjustment

7

8

7

30

27

Net interest income TE

928

923

1,227

3,943

4,554

Noninterest income

610

643

671

2,470

2,718

Total taxable-equivalent revenue (non-GAAP)

$    1,538

$    1,566

$    1,898

$    6,413

$    7,272







Cash efficiency ratio (non-GAAP)

88.6 %

70.3 %

60.3 %

73.2 %

60.0 %







(a)

For the three months ended December 31, 2023, September 30, 2023, and December 31, 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 December 31, 2023, September 30, 2023, and December 31, 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)









12/31/2023

9/30/2023

12/31/2022

Assets



Loans

$       112,606

$       115,544

$       119,394

Loans held for sale

483

730

963

Securities available for sale

37,185

35,839

39,117

Held-to-maturity securities

8,575

8,853

8,710

Trading account assets

1,142

1,325

829

Short-term investments

10,817

7,871

2,432

Other investments

1,244

1,356

1,308


Total earning assets

172,052

171,518

172,753

Allowance for loan and lease losses

(1,508)

(1,488)

(1,337)

Cash and due from banks

941

766

887

Premises and equipment

661

649

636

Goodwill

2,752

2,752

2,752

Other intangible assets

55

65

94

Corporate-owned life insurance

4,383

4,381

4,369

Accrued income and other assets

8,601

8,843

9,223

Discontinued assets

344

365

436


Total assets

$       188,281

$       187,851

$       189,813






Liabilities



Deposits in domestic offices:




Interest-bearing deposits

$       114,859

$       112,581

$       101,761


Noninterest-bearing deposits

30,728

31,710

40,834


Total deposits

145,587

144,291

142,595

Federal funds purchased and securities sold under repurchase agreements 

38

43

4,077

Bank notes and other short-term borrowings

3,053

3,470

5,386

Accrued expense and other liabilities

5,412

5,388

4,994

Long-term debt

19,554

21,303

19,307


Total liabilities

173,644

174,495

176,359






Equity



Preferred stock

2,500

2,500

2,500

Common shares

1,257

1,257

1,257

Capital surplus

6,281

6,254

6,286

Retained earnings

15,672

15,835

15,616

Treasury stock, at cost

(5,844)

(5,851)

(5,910)

Accumulated other comprehensive income (loss)

(5,229)

(6,639)

(6,295)


Key shareholders' equity

14,637

13,356

13,454

Total liabilities and equity

$       188,281

$       187,851

$       189,813






Common shares outstanding (000)

936,564

936,161

933,325

 

Consolidated Statements of Income

(Dollars in millions, except per share amounts)



Three months ended

Twelve months ended



12/31/2023

9/30/2023

12/31/2022

12/31/2023

12/31/2022

Interest income






Loans

$             1,574

$             1,593

$             1,347

$             6,219

$             4,241

Loans held for sale

12

19

20

61

56

Securities available for sale

213

192

195

793

752

Held-to-maturity securities

78

79

64

312

213

Trading account assets

13

15

10

55

31

Short-term investments

138

123

48

414

97

Other investments

22

22

11

73

22


Total interest income

2,050

2,043

1,695

7,927

5,412

Interest expense






Deposits

754

687

186

2,322

279

Federal funds purchased and securities sold under repurchase agreements

—

9

16

79

41

Bank notes and other short-term borrowings

45

81

54

308

90

Long-term debt

330

351

219

1,305

475


Total interest expense

1,129

1,128

475

4,014

885

Net interest income

921

915

1,220

3,913

4,527

Provision for credit losses

102

81

265

489

502

Net interest income after provision for credit losses

819

834

955

3,424

4,025

Noninterest income






Trust and investment services income

132

130

126

516

526

Investment banking and debt placement fees

136

141

172

542

638

Cards and payments income

84

90

85

340

341

Service charges on deposit accounts

65

69

71

270

350

Corporate services income

67

73

89

302

372

Commercial mortgage servicing fees

48

46

42

190

167

Corporate-owned life insurance income

36

35

33

132

132

Consumer mortgage income

11

15

9

51

58

Operating lease income and other leasing gains

22

22

24

92

103

Other income

9

22

20

35

31


Total noninterest income

610

643

671

2,470

2,718

Noninterest expense






Personnel

674

663

674

2,660

2,566

Net occupancy

65

67

72

267

295

Computer processing

92

89

82

368

314

Business services and professional fees

44

38

60

168

212

Equipment

24

20

20

88

92

Operating lease expense

18

18

22

77

101

Marketing

31

28

31

109

123

Other expense

424

187

195

997

707


Total noninterest expense

1,372

1,110

1,156

4,734

4,410

Income (loss) from continuing operations before income taxes

57

367

470

1,160

2,333

Income taxes

(8)

65

76

196

422

Income (loss) from continuing operations

65

302

394

964

1,911

Income (loss) from discontinued operations, net of taxes

—

1

—

3

6

Net income (loss)

65

303

394

967

1,917

Net income (loss) attributable to Key

$                  65

$                303

$                394

$                967

$             1,917









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

$                  30

$                266

$                356

$                821

$             1,793

Net income (loss) attributable to Key common shareholders

30

267

356

824

1,799

Per common share





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

$                 .03

$                 .29

$                 .38

$                 .88

$               1.94

Income (loss) from discontinued operations, net of taxes

—

—

—

—

.01

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

.03

.29

.38

.89

1.94

Per common share — assuming dilution





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

$                 .03

$                 .29

$                 .38

$                 .88

$               1.92

Income (loss) from discontinued operations, net of taxes

—

—

—

—

.01

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

.03

.29

.38

.88

1.93









Cash dividends declared per common share

$               .205

$               .205

$               .205

$               .820

$               .790









Weighted-average common shares outstanding (000)

927,517

927,131

924,974

927,217

924,363

Effect of common share options and other stock awards

6,529

4,613

8,750

5,542

8,696

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

934,046

931,744

933,724

932,759

933,059

(a)

Earnings per share may not foot due to rounding.

(b)

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

 

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

(Dollars in millions)


Fourth Quarter 2023

Third Quarter 2023

Fourth 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)

$       56,664

$              870

6.09 %

$       59,187

$              886

5.94 %

$       58,212

$              712

4.85 %

Real estate — commercial mortgage

15,346

234

6.05

15,844

238

5.97

16,445

208

5.01

Real estate — construction

3,028

54

7.05

2,820

48

6.77

2,450

35

5.70

Commercial lease financing

3,568

30

3.34

3,707

30

3.25

3,825

26

2.71

Total commercial loans

78,606

1,188

6.00

81,558

1,202

5.85

80,932

981

4.81

Real estate — residential mortgage

21,113

174

3.30

21,459

176

3.28

21,128

164

3.11

Home equity loans

7,227

108

5.93

7,418

110

5.87

7,890

103

5.18

Consumer direct loans

5,987

75

4.97

6,169

77

4.96

6,713

75

4.45

Credit cards

987

36

14.47

991

35

14.16

993

31

12.61

Consumer indirect loans

28

—

—

32

1

3.77

46

—

—

Total consumer loans

35,342

393

4.43

36,069

399

4.40

36,770

373

4.05

Total loans

113,948

1,581

5.51

117,627

1,601

5.41

117,702

1,354

4.57

Loans held for sale

695

12

6.85

1,356

19

5.73

1,421

20

5.63

Securities available for sale (b), (e)

35,576

213

1.99

37,271

192

1.76

39,149

195

1.70

Held-to-maturity securities (b)

8,714

78

3.56

9,020

79

3.50

8,278

64

3.07

Trading account assets

1,104

13

4.93

1,203

15

4.97

863

10

4.57

Short-term investments

9,571

138

5.72

8,416

123

5.79

3,159

48

6.02

Other investments (e)

1,297

22

6.91

1,395

22

6.35

1,294

11

3.15

Total earning assets

170,905

2,057

4.60

176,288

2,051

4.47

171,866

1,702

3.79

Allowance for loan and lease losses

(1,484)


(1,477)


(1,145)


Accrued income and other assets

17,471


17,530


18,421


Discontinued assets

351


374


447


Total assets

$    187,243


$    192,715


$    189,589

Liabilities











Money market deposits

$       36,648

$              251

2.72 %

$       35,243

$              213

2.40 %

$       34,921

$                35

.40 %

Demand deposits

56,963

348

2.42

55,837

315

2.24

50,877

119

.93

Savings deposits

5,492

1

.05

5,966

1

.05

7,795

1

.03

Certificates of deposit ($100,000 or more)

6,328

67

4.23

5,446

55

4.01

1,351

3

.93

Other time deposits

7,998

87

4.29

9,636

103

4.25

4,757

28

2.33

Total interest-bearing deposits

113,429

754

2.63

112,128

687

2.43

99,701

186

.74

Federal funds purchased and securities sold under repurchase agreements

56

—

2.29

710

9

5.04

1,752

16

3.52

Bank notes and other short-term borrowings

3,199

45

5.62

5,819

81

5.54

5,420

54

3.94

Long-term debt (f), (g)

19,921

330

6.64

21,584

351

6.50

18,351

219

4.77

Total interest-bearing liabilities

136,605

1,129

3.29

140,241

1,128

3.20

125,224

475

1.50

Noninterest-bearing deposits

31,647


32,697


45,965


Accrued expense and other liabilities

5,169


5,572


4,785


Discontinued liabilities (g)

351


374


447


Total liabilities

$    173,772


$    178,884


$    176,421

Equity











Key shareholders' equity

$       13,471


$       13,831


$       13,168


Noncontrolling interests

—


—


—


Total equity

13,471


13,831


13,168


Total liabilities and equity

$    187,243


$    192,715


$    189,589

Interest rate spread (TE)

1.31 %


1.27 %


2.28 %

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

$              928

2.07 %

$              923

2.01 %

$           1,227

2.73 %

TE adjustment (b)

7


8


7

Net interest income, GAAP basis

$              921


$              915


$           1,220

(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 December 31, 2023, September 30, 2023, and December 31, 2022.   

(c)

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

(d)

Commercial and industrial average balances include $210 million, $202 million, and $171 million of assets from commercial credit cards for the three months ended December 31, 2023, September 30, 2023, and December 31, 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)


Twelve months ended December 31, 2023

Twelve months ended December 31, 2022


Average

Yield/

Average

Yield/


Balance

Interest (a)

Rate (a)

Balance

Interest (a)

Rate (a)

Assets







Loans: (b), (c)







Commercial and industrial (d)

$           59,379

$             3,444

5.80 %

$           54,970

$             2,148

3.91 %

Real estate — commercial mortgage

15,968

931

5.83

15,572

633

4.07

Real estate — construction

2,755

185

6.71

2,229

99

4.44

Commercial lease financing

3,703

116

3.13

3,869

98

2.54

Total commercial loans

81,805

4,676

5.72

76,640

2,978

3.89

Real estate — residential mortgage

21,428

699

3.26

19,036

559

2.94

Home equity loans

7,522

433

5.76

8,115

347

4.28

Consumer direct loans

6,228

304

4.88

6,490

277

4.27

Credit cards

986

136

13.88

959

107

11.23

Consumer indirect loans

35

1

0.71

62

—

—

Total consumer loans

36,199

1,573

4.35

34,662

1,290

3.72

Total loans

118,004

6,249

5.30

111,302

4,268

3.84

Loans held for sale

1,012

61

6.06

1,278

56

4.41

Securities available for sale (b), (e)

37,718

793

1.80

42,325

752

1.62

Held-to-maturity securities (b)

9,008

312

3.46

7,676

213

2.77

Trading account assets

1,138

55

4.85

850

31

3.61

Short-term investments

7,349

414

5.63

4,264

97

2.28

Other investments (e)

1,392

73

5.28

952

22

2.26

Total earning assets

175,621

7,957

4.37

168,647

5,439

3.15

Allowance for loan and lease losses

(1,419)


(1,101)


Accrued income and other assets

17,425


18,340


Discontinued assets

384


492


Total assets

$         192,011


$         186,378

Liabilities







Money market deposits

$           34,539

$                 666

1.93 %

$           35,966

$                   52

.14 %

Other demand deposits

54,711

1,102

2.01

49,707

182

.37

Savings deposits

6,343

3

.04

7,798

1

.01

Certificates of deposit ($100,000 or more)

4,517

171

3.79

1,455

8

.56

Other time deposits

9,277

380

4.10

2,892

36

1.25

Total interest-bearing deposits

109,387

2,322

2.12

97,818

279

.29

Federal funds purchased and securities sold under repurchase agreements

1,647

79

4.81

2,107

41

1.93

Bank notes and other short-term borrowings

5,890

308

5.24

2,963

90

3.02

Long-term debt (f), (g)

20,983

1,305

6.22

14,915

475

3.19

Total interest-bearing liabilities

137,907

4,014

2.91

117,803

885

.75

Noninterest-bearing deposits

34,672


49,044


Accrued expense and other liabilities

5,167


4,309


Discontinued liabilities (g)

384


492


Total liabilities

$         178,130


$         171,648

Equity







Key shareholders' equity

$           13,881


$           14,730


Noncontrolling interests

—


—


Total equity

13,881


14,730


Total liabilities and equity

$         192,011


$         186,378

Interest rate spread (TE)

1.46 %


2.40 %

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

$             3,943

2.17 %

$             4,554

2.64 %

TE adjustment (b)

30


27

Net interest income, GAAP basis

$             3,913


$             4,527









(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 twelve months ended December 31, 2023, and December 31, 2022, respectively.  

(c)

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

(d)

Commercial and industrial average balances include $196 million and $157 million of assets from commercial credit cards for the twelve months ended December 31, 2023, and December 31, 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

Twelve months ended

12/31/2023

9/30/2023

12/31/2022

12/31/2023

12/31/2022

Personnel (a)

$            674

$            663

$            674

$         2,660

$         2,566

Net occupancy

65

67

72

267

295

Computer processing

92

89

82

368

314

Business services and professional fees

44

38

60

168

212

Equipment

24

20

20

88

92

Operating lease expense

18

18

22

77

101

Marketing

31

28

31

109

123

Other expense

424

187

195

997

707

Total noninterest expense

$         1,372

$         1,110

$         1,156

$         4,734

$         4,410

Average full-time equivalent employees (b)

17,129

17,666

18,210

17,692

17,660

(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

Twelve months ended

12/31/2023

9/30/2023

12/31/2022

12/31/2023

12/31/2022

Salaries and contract labor

$            399

$            415

$           407

$         1,649

$         1,500

Incentive and stock-based compensation

139

141

171

525

693

Employee benefits

97

106

94

405

363

Severance

39

1

2

81

10

Total personnel expense

$            674

$            663

$           674

$         2,660

$         2,566

 

Loan Composition

(Dollars in millions)










Change 12/31/2023 vs.

12/31/2023

9/30/2023

12/31/2022

9/30/2023

12/31/2022

Commercial and industrial (a)

$        55,815

$        57,606

$        59,647

(3.1) %

(6.4) %

Commercial real estate:





Commercial mortgage

15,187

15,549

16,352

(2.3)

(7.1)

Construction

3,066

2,982

2,530

2.8

21.2

Total commercial real estate loans

18,253

18,531

18,882

(1.5)

(3.3)

Commercial lease financing (b)

3,523

3,681

3,936

(4.3)

(10.5)

Total commercial loans

77,591

79,818

82,465

(2.8)

(5.9)

Residential — prime loans:





Real estate — residential mortgage

20,958

21,309

21,401

(1.6)

(2.1)

Home equity loans

7,139

7,324

7,951

(2.5)

(10.2)

Total residential — prime loans

28,097

28,633

29,352

(1.9)

(4.3)

Consumer direct loans

5,890

6,074

6,508

(3.0)

(9.5)

Credit cards

1,002

988

1,026

1.4

(2.3)

Consumer indirect loans

26

31

43

(16.1)

(39.5)

Total consumer loans

35,015

35,726

36,929

(2.0)

(5.2)

Total loans (c), (d)

$      112,606

$      115,544

$      119,394

(2.5) %

(5.7) %

(a)

Loan balances include $207 million, $207 million, and $172 million of commercial credit card balances at December 31, 2023, September 30, 2023, and December 31, 2022, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $7 million, $4 million, and $8 million at December 31, 2023, September 30, 2023, and December 31, 2022, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)

Total loans exclude loans of $339 million at December 31, 2023, $360 million at September 30, 2023, and $434 million at December 31, 2022, related to the discontinued operations of the education lending business.

(d)

Accrued interest of $522 million, $519 million, and $417 million at December 31, 2023, September 30, 2023, and December 31, 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 12/31/2023 vs.

12/31/2023

9/30/2023

12/31/2022

9/30/2023

12/31/2022

Commercial and industrial

$              50

$              47

$            477

6.4 %

(89.5) %

Real estate — commercial mortgage

382

571

427

(33.1)

(10.5)

Commercial lease financing

—

—

35

—

(100.0)

Real estate — residential mortgage

51

112

24

(54.5)

112.5

Total loans held for sale

$            483

$            730

$            963

(33.8) %

(49.8) %








N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(Dollars in millions)







4Q23

3Q23

2Q23

1Q23

4Q22

Balance at beginning of period

$            730

$         1,130

$         1,211

$            963

$         1,048

New originations

1,879

3,035

1,798

1,779

3,158

Transfers from (to) held to maturity, net

(31)

(94)

(52)

(13)

(48)

Loan sales

(2,095)

(3,312)

(1,798)

(1,518)

(3,124)

Loan draws (payments), net

—

(29)

(28)

—

(71)

Valuation and other adjustments

—

—

(1)

—

—

Balance at end of period

$            483

$            730

$         1,130

$         1,211

$            963

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(Dollars in millions)








Three months ended

Twelve months ended

12/31/2023

9/30/2023

12/31/2022

12/31/2023

12/31/2022

Average loans outstanding

$ 113,948

$ 117,627

$ 117,702

$ 118,004

$ 111,302

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

1,488

1,480

1,144

1,337

1,061

Loans charged off:





Commercial and industrial

49

62

35

188

153







Real estate — commercial mortgage

24

1

13

39

23

Real estate — construction

—

—

—

—

—

Total commercial real estate loans

24

1

13

39

23

Commercial lease financing

—

—

—

—

2

Total commercial loans

73

63

48

227

178

Real estate — residential mortgage

—

—

—

1

(2)

Home equity loans

(2)

1

—

2

1

Consumer direct loans

14

14

9

50

34

Credit cards

10

9

8

37

30

Consumer indirect loans

—

—

2

1

4

Total consumer loans

22

24

19

91

67

Total loans charged off

95

87

67

318

245

Recoveries:





Commercial and industrial

11

10

18

44

50







Real estate — commercial mortgage

1

—

1

2

5

Real estate — construction

1

—

—

1

1

Total commercial real estate loans

2

—

1

3

6

Commercial lease financing

1

1

2

5

4

Total commercial loans

14

11

21

52

60

Real estate — residential mortgage

1

1

3

4

5

Home equity loans

—

1

—

3

3

Consumer direct loans

1

2

1

7

8

Credit cards

3

1

1

7

6

Consumer indirect loans

—

—

—

1

2

Total consumer loans

5

5

5

22

24

Total recoveries

19

16

26

74

84

Net loan charge-offs

(76)

(71)

(41)

(244)

(161)

Provision (credit) for loan and lease losses

96

79

234

415

437

Allowance for loan and lease losses at end of period

$    1,508

$    1,488

$    1,337

$    1,508

$    1,337







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

$       290

$       291

$       194

$       225

$       160

Provision (credit) for losses on lending-related commitments

6

2

31

74

65

Other

—

(3)

—

(3)

—

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

$       296

$       290

$       225

$       296

$       225







Total allowance for credit losses at end of period

$    1,804

$    1,778

$    1,562

$    1,804

$    1,562







Net loan charge-offs to average total loans

.26 %

.24 %

.14 %

.21 %

.14 %

Allowance for loan and lease losses to period-end loans

1.34

1.29

1.12

1.34

1.12

Allowance for credit losses to period-end loans

1.60

1.54

1.31

1.60

1.31

Allowance for loan and lease losses to nonperforming loans

263

327

345

263

346

Allowance for credit losses to nonperforming loans

314

391

404

314

404







Discontinued operations — education lending business:





Loans charged off

$          1

$         —

$          2

$          4

$          6

Recoveries

—

—

—

1

2

Net loan charge-offs

$         (1)

$         —

$         (2)

$         (3)

$         (4)

(a)

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

 

Asset Quality Statistics From Continuing Operations

(Dollars in millions)

4Q23

3Q23

2Q23

1Q23

4Q22

Net loan charge-offs

$         76

$         71

$         52

$         45

$         41

Net loan charge-offs to average total loans

.26 %

.24 %

.17 %

.15 %

.14 %

Allowance for loan and lease losses

$    1,508

$    1,488

$    1,480

$    1,380

$    1,337

Allowance for credit losses (a)

1,804

1,778

1,771

1,656

1,562

Allowance for loan and lease losses to period-end loans

1.34 %

1.29 %

1.24 %

1.15 %

1.12 %

Allowance for credit losses to period-end loans

1.60

1.54

1.49

1.38

1.31

Allowance for loan and lease losses to nonperforming loans

263

327

343

332

345

Allowance for credit losses to nonperforming loans

314

391

411

398

404

Nonperforming loans at period end

$       574

$       455

$       431

$       416

$       387

Nonperforming assets at period end

591

471

462

447

420

Nonperforming loans to period-end portfolio loans

.51 %

.39 %

.36 %

.35 %

.32 %

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

.52

.41

.39

.37

.35


(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)

12/31/2023

9/30/2023

6/30/2023

3/31/2023

12/31/2022

Commercial and industrial

$       297

$       214

$       188

$       170

$       174






Real estate — commercial mortgage

100

63

65

59

21

Real estate — construction

—

—

—

—

—

Total commercial real estate loans

100

63

65

59

21

Commercial lease financing

—

1

1

1

1

Total commercial loans

397

278

254

230

196

Real estate — residential mortgage

71

72

73

75

77

Home equity loans

97

97

97

104

107

Consumer direct loans

3

3

3

3

3

Credit cards

5

4

3

3

3

Consumer indirect loans

1

1

1

1

1

Total consumer loans

177

177

177

186

191

Total nonperforming loans (a)

574

455

431

416

387

OREO

17

16

15

13

13

Nonperforming loans held for sale

—

—

16

18

20

Other nonperforming assets

—

—

—

—

—

Total nonperforming assets

$       591

$       471

$       462

$       447

$       420

Accruing loans past due 90 days or more

107

52

73

55

60

Accruing loans past due 30 through 89 days

222

178

139

164

180

Nonperforming assets from discontinued operations — education lending business 

3

2

2

3

3

Nonperforming loans to period-end portfolio loans

.51 %

.39 %

.36 %

.35 %

.32 %

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

.52

.41

.39

.37

.35


(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)

4Q23

3Q23

2Q23

1Q23

4Q22

Balance at beginning of period

$          455

$          431

$          416

$          387

$          390

Loans placed on nonaccrual status

297

159

169

143

113

Charge-offs

(95)

(87)

(76)

(60)

(67)

Loans sold

(9)

(4)

(23)

(2)

(4)

Payments

(56)

(25)

(20)

(31)

(22)

Transfers to OREO

(2)

(3)

(2)

(2)

(1)

Loans returned to accrual status

(16)

(16)

(33)

(19)

(22)

Balance at end of period

$          574

$          455

$          431

$          416

$          387

 

Line of Business Results

(Dollars in millions)
















Change 4Q23 vs.

4Q23

3Q23

2Q23

1Q23

4Q22

3Q23

4Q22

Consumer Bank







Summary of operations







Total revenue (TE)

$             786

$             791

$             803

$             840

$             860

(.6) %

(8.6) %

Provision for credit losses

5

14

32

60

105

(64.3)

(95.2)

Noninterest expense

780

677

663

663

705

15.2

10.6

Net income (loss) attributable to Key

1

76

82

89

38

(98.7)

(97.4)

Average loans and leases

41,381

42,250

42,934

43,086

43,149

(2.1)

(4.1)

Average deposits

84,856

83,863

82,498

84,637

87,369

1.2

(2.9)

Net loan charge-offs

40

36

32

24

21

11.1

90.5

Net loan charge-offs to average total loans

.38 %

.34 %

.30 %

.23 %

.19 %

11.8

100.0

Nonperforming assets at period end

$             190

$             190

$             193

$             196

$             202

—

(5.9)

Return on average allocated equity

0.11 %

8.48 %

9.04 %

9.87 %

4.51 %

(98.7)

(97.6)









Commercial Bank







Summary of operations







Total revenue (TE)

$             794

$             790

$             805

$             844

$             894

.5 %

(11.2) %

Provision for credit losses

96

68

134

80

165

41.2

(41.8)

Noninterest expense

525

431

405

442

459

21.8

14.4

Net income (loss) attributable to Key

143

226

214

255

225

(36.7)

(36.4)

Average loans and leases

72,088

74,951

77,277

76,306

74,100

(3.8)

(2.7)

Average loans held for sale

635

1,268

1,014

876

1,377

(49.9)

(53.9)

Average deposits

56,897

54,896

51,420

52,219

54,385

3.6

4.6

Net loan charge-offs

35

35

20

21

25

—

40.0

Net loan charge-offs to average total loans

.19 %

.19 %

.10 %

.11 %

.13 %

—

46.2

Nonperforming assets at period end

$             401

$             281

$             269

$             251

$             218

42.7

83.9

Return on average allocated equity

5.64 %

8.64 %

8.17 %

10.04 %

9.36 %

(34.7)

(39.7)



TE = Taxable Equivalent


 

Selected Items Impact on Earnings(a)

(Dollars in millions, except per share amounts)

Pretax(b)

After-tax at marginal rate(b)

Quarter to date results

Amount

Net Income

EPS(c)

Three months ended December 31, 2023



Efficiency related expenses(d)

$                (67)

$                (51)

$             (0.05)

Pension settlement (other expense)

(18)

(14)

(0.02)

FDIC special assessment (other expense)

(190)

(144)

(0.15)

Total selected items

(275)

(209)

(0.22)

Three months ended September 30, 2023



None

—

—

—

Three months ended June 30, 2023



None

—

—

—

Three months ended March 31, 2023



Efficiency related expenses(e)

(64)

(49)

(0.05)





Year to date results



Twelve months ended December 31, 2023



Efficiency related expenses

(131)

(100)

(0.10)

Pension settlement (other expense)

(18)

(14)

(0.02)

FDIC special assessment (other expense)

(190)

(144)

(0.15)

Total selected items

$              (339)

$              (258)

$             (0.27)





(a)

Includes items impacting results or trends during the period but are not considered non-GAAP adjustments.

(b)

Favorable (unfavorable) impact

(c)

Impact to EPS reflected on a fully diluted basis

(d)

Efficiency related expenses for the three months ended December 31, 2023, consist primarily of $39 million of severance recorded in personnel expense and $24 million of corporate real estate related rationalization and other contract termination or renegotiation costs recorded in other expense.

(e)

Efficiency related expenses for the three months ended March 31, 2023, consist primarily of $31 million of severance recorded in personnel expense and $28 million of corporate real estate related rationalization and other contract termination or renegotiation costs recorded in other expense.

 

(PRNewsfoto/KeyCorp)

 

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