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KEYCORP REPORTS FOURTH QUARTER 2021 NET INCOME OF $601 MILLION, OR $.64 PER DILUTED COMMON SHARE

01/20/2022
Record revenue for the fourth quarter and full year
Record pre-provision net revenue for the fourth quarter and full year
Positive operating leverage for the fourth quarter and full year
Strong credit quality: net charge-offs to average loans of 8 basis points
Significant capital return: 75% of net income returned to shareholders in 2021

CLEVELAND, Jan. 20, 2022 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $601 million, or $.64 per diluted common share for the fourth quarter of 2021. This compared to $616 million, or $.65 per diluted common share, for the third quarter of 2021 and $549 million, or $.56 per diluted common share, for the fourth quarter of 2020.

Our fourth quarter results marked a strong finish to a record year for Key. Leveraging our distinctive business model, we continue to add and deepen relationships with clients across both our consumer and commercial businesses. We are also seeing significant momentum from recent investments we have made in teammates, niche businesses, and digital capabilities .

Our team generated record revenue for both the quarter and the year. We delivered broad-based growth across each of our businesses. Our consumer business produced both record household growth and record consumer loan originations. In our commercial businesses, we raised over $100 billion for the benefit of our clients.

Our collective focus on sound, profitable growth is evidenced by our strong credit quality. We remain committed to our capital priorities and maximizing shareholder value. In 2021, we returned 75% of our net income to shareholders, in the form of dividends and share repurchases.

I am very proud of all that we accomplished this year. I want to thank our teammates for their dedication and commitment to serving our clients, our communities, and our shareholders, while growing our business.

     -  Chris Gorman, Chairman and CEO

Selected Financial Highlights















Dollars in millions, except per share data





Change 4Q21 vs.



4Q21

3Q21

4Q20


3Q21

4Q20

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

$     601


$     616


$     549



(2.4)

%

9.5

%

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

.64


.65


.56



(1.5)


14.3


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

18.69

%

18.55

%

16.61

%


N/A


N/A


Return on average total assets from continuing operations

1.34


1.41


1.35



N/A


N/A


Common Equity Tier 1 ratio (b)

9.4


9.6


9.7



N/A


N/A


Book value at period end

$   16.76


$   16.82


$   16.53



(.4)


1.4


Net interest margin (TE) from continuing operations

2.44

%

2.47

%

2.70

%


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)    

December 31, 2021 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

 

INCOME STATEMENT HIGHLIGHTS














Revenue














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Net interest income (TE)

$      1,038

$      1,025

$      1,043


1.3

%

(.5)

%

Noninterest income

909

797

802


14.1


13.3


Total revenue

$      1,947

$      1,822

$      1,845


6.9

%

5.5

%








TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the fourth quarter of 2021 and the net interest margin was 2.44%. Compared to the fourth quarter of 2020, net interest income decreased $5 million, while the net interest margin decreased by 26 basis points. Both net interest income and the net interest margin reflect the impact of lower reinvestment yields and the exit of the indirect auto loan portfolio, largely offset by a favorable earning asset mix. The net interest margin was also impacted by elevated levels of liquidity as we continued to experience higher levels of deposit inflows in 2021.

Compared to the third quarter of 2021, taxable-equivalent net interest income increased by $13 million and the net interest margin decreased by 3 basis points. The increase in net interest income was driven by balance sheet growth and a favorable mix of earning assets, as well as higher loan fees from the PPP forgiveness and core portfolio growth. Additionally, both net interest income and the net interest margin were impacted by lower reinvestment yields and the exit of the indirect auto loan portfolio.

Noninterest Income














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Trust and investment services income

$        135

$        129

$        123


4.7

%

9.8

%

Investment banking and debt placement fees

323

235

243


37.4


32.9


Service charges on deposit accounts

90

91

82


(1.1)


9.8


Operating lease income and other leasing gains

37

37

39



(5.1)


Corporate services income

73

69

63


5.8


15.9


Cards and payments income

86

111

97


(22.5)


(11.3)


Corporate-owned life insurance income

34

33

38


3.0


(10.5)


Consumer mortgage income

25

33

43


(24.2)


(41.9)


Commercial mortgage servicing fees

48

34

32


41.2


50.0


Other income

58

25

42


132.0


38.1


Total noninterest income

$        909

$        797

$        802


14.1

%

13.3

%








Compared to the fourth quarter of 2020, noninterest income increased by $107 million. The increase was primarily driven by investment banking and debt placement fees, up $80 million. Additionally, commercial mortgage servicing fees and other income both increased $16 million. Partially offsetting the increase was a $18 million decrease in consumer mortgage income, driven by higher balance sheet retention and lower gain on sale margins.

Compared to the third quarter of 2021, noninterest income increased by $112 million. The primary driver was investment banking and debt placement fees, which increased $88 million. Additionally, commercial mortgage servicing fees increased $14 million and other income increased $33 million, reflecting market related gains. Partially offsetting the increase was a $25 million decrease in cards and payments income, driven by lower prepaid card revenue.

Noninterest Expense














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Personnel expense

$        674

$        640

$        661


5.3

%

2.0

%

Nonpersonnel expense

496

472

467


5.1


6.2


Total noninterest expense

$      1,170

$      1,112

$      1,128


5.2

%

3.7

%








Key's noninterest expense was $1.2 billion for the fourth quarter of 2021, an increase of $42 million from the year-ago period. The increase in nonpersonnel expense was primarily driven by higher business services and professional fees and computer processing fees. The increase in personnel expense reflects higher incentive and stock-based compensation from strong fee production, partially offset by lower severance.

Compared to the third quarter of 2021, noninterest expense increased $58 million. The increase was largely related to personnel expense, reflecting higher incentive and stock-based compensation. The increase in nonpersonnel expense was driven by higher business services and professional fees.

BALANCE SHEET HIGHLIGHTS














Average Loans














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Commercial and industrial (a)

$    49,510

$    49,868

$    53,562


(.7)

%

(7.6)

%

Other commercial loans

19,743

19,362

19,174


2.0


3.0


Total consumer loans

30,144

30,908

28,974


(2.5)


4.0


Total loans

$    99,397

$  100,138

$  101,710


(.7)

%

(2.3)

%








(a)    

Commercial and industrial average loan balances include $141 million, $137 million, and $129 million of assets from commercial credit cards at December 31, 2021, September 30, 2021, and December 31, 2020, respectively.

Average loans were $99.4 billion for the fourth quarter of 2021, a decrease of $2.3 billion compared to the fourth quarter of 2020. Commercial loans decreased by $3.5 billion, reflecting a decline in PPP balances. Total PPP loan forgiveness was $8.0 billion for 2021. Partly offsetting the decrease was core growth in commercial and industrial and commercial real estate loans. Consumer loans increased $1.2 billion, reflecting strength from Key's consumer mortgage business and Laurel Road, partly offset by the sale of the indirect auto loan portfolio.

Compared to the third quarter of 2021, average loans decreased by $741 million. Commercial loans were relatively unchanged from the prior quarter as declines in PPP balances were largely offset by core growth in commercial and industrial and commercial real estate loans. Consumer loans decreased $764 million, reflecting the sale of the indirect auto loan portfolio, which reduced average loans by $2.7 billion. In addition, we continued to experience strength from Key's consumer mortgage business and Laurel Road.

Average Deposits














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Non-time deposits

$  146,979

$  142,537

$  129,529


3.1

%

13.5

%

Certificates of deposit ($100,000 or more)

1,793

1,975

2,983


(9.2)


(39.9)


Other time deposits

2,233

2,404

3,209


(7.1)


(30.4)


Total deposits

$  151,005

$  146,916

$  135,721


2.8

%

11.3

%








Cost of total deposits

.04      %

.04      %

.08      %


N/A


N/A









N/A = Not Applicable

Average deposits totaled $151.0 billion for the fourth quarter of 2021, an increase of $15.3 billion compared to the year-ago quarter. The increase reflects growth from consumer and commercial relationships, including higher commercial escrow and retail deposits, partially offset by a decline in time deposits.

Compared to the third quarter of 2021, average deposits increased by $4.1 billion, primarily driven by higher commercial escrow balances and retail deposits.

ASSET QUALITY














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21


4Q20


Net loan charge-offs

$       19


$       29


$      135



(34.5)

%

(85.9)

%

Net loan charge-offs to average total loans

.08

%

.11

%

.53

%


N/A


N/A


Nonperforming loans at period end

$      454


$      554


$      785



(18.1)


(42.2)


Nonperforming assets at period end

489


599


937



(18.4)


(47.8)


Allowance for loan and lease losses

1,061


1,084


1,626



(2.1)


(34.7)


Allowance for credit losses

1,221


1,236


1,823



(1.2)


(33.0)


Provision for credit losses

4


(107)


20



(103.7)


(80.0)









Allowance for loan and lease losses to nonperforming loans

233.7

%

195.7

%

207.1

%


N/A


N/A


Allowance for credit losses to nonperforming loans

268.9


223.1


232.2



N/A


N/A









N/A = Not Applicable

Key's provision for credit losses was $4 million, compared to $20 million in the fourth quarter of 2020 and a net benefit of $107 million in the third quarter of 2021.

Net loan charge-offs for the fourth quarter of 2021 totaled $19 million, or .08% of average total loans. These results compare to $135 million, or .53%, for the fourth quarter of 2020 and $29 million, or .11%, for the third quarter of 2021. Key's allowance for credit losses was $1.2 billion, or 1.20% of total period-end loans at December 31, 2021, compared to 1.80% at December 31, 2020, and 1.25% at September 30, 2021.

At December 31, 2021, Key's nonperforming loans totaled $454 million, which represented .45% of period-end portfolio loans. These results compare to .78% at December 31, 2020, and .56% at September 30, 2021. Nonperforming assets at December 31, 2021, totaled $489 million, and represented .48% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .92% at December 31, 2020, and .61% at September 30, 2021.

CAPITAL

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

Capital Ratios









12/31/2021

9/30/2021

12/31/2020

Common Equity Tier 1 (a)

9.4

%

9.6

%

9.7

%

Tier 1 risk-based capital (a)

10.7


10.9


11.1


Total risk based capital (a)

12.4


12.7


13.4


Tangible common equity to tangible assets (b)

6.9


7.0


7.9


Leverage (a)

8.4


8.4


8.9






(a)    

December 31, 2021 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)    

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

Key's capital position remained strong in the fourth quarter of 2021. As shown in the preceding table, at December 31, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.4% and 10.7%, respectively. Key's tangible common equity ratio was 6.9% at December 31, 2021.

Key has elected the CECL phase-in option provided by regulatory guidance which delays for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by 17 basis points.

Summary of Changes in Common Shares Outstanding













In thousands





Change 4Q21 vs.



4Q21

3Q21

4Q20


3Q21

4Q20

Shares outstanding at beginning of period

930,544

960,276

976,205


(3.1)

%

(4.7)

%

Open market repurchases, repurchases under the accelerated repurchase 
  program, and return of shares under employee compensation plans

(2,482)

(29,923)

(1,092)


(91.7)


127.3


Shares issued under employee compensation plans (net of cancellations)

788

191

660


312.6


19.4



Shares outstanding at end of period

928,850

930,544

975,773


(.2)

%

(4.8)

%









N/M = Not Meaningful

During the fourth quarter of 2021, Key declared a dividend of $.195 per common share, representing a 5% increase from the prior quarter. The reduction in share count was driven by the final settlement of 2.5 million shares related to the accelerated share repurchase program disclosed in the third quarter of 2021. There were no additional open market share repurchases in the fourth quarter.

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 4Q21 vs.



4Q21

3Q21

4Q20


3Q21

4Q20

Revenue from continuing operations (TE)







Consumer Bank

$         839

$         870

$         896


(3.6)

%

(6.4)

%

Commercial Bank

1,028

886

922


16.0


11.5


Other (a)

80

66

27


21.2


196.3



Total

$       1,947

$       1,822

$       1,845


6.9

%

5.5

%









Income (loss) from continuing operations attributable to Key







Consumer Bank

$         161

$         241

$         225


(33.2)

%

(28.4)

%

Commercial Bank

449

381

310


17.8


44.8


Other (a)

17

21

40


(19.0)


(57.5)



Total

$         627

$         643

$         575


(2.5)

%

9.0

%









(a)    

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

TE = Taxable Equivalent, N/M = Not Meaningful

 

Consumer Bank





















Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Summary of operations







Net interest income (TE)

$         569

$         582

$         638


(2.2)

%

(10.8)

%

Noninterest income

270

288

258


(6.3)


4.7


Total revenue (TE)

839

870

896


(3.6)


(6.4)


Provision for credit losses

13

(38)

(5)


134.2


(360.0)


Noninterest expense

614

591

606


3.9


1.3


Income (loss) before income taxes (TE)

212

317

295


(33.1)


(28.1)


Allocated income taxes (benefit) and TE adjustments

51

76

70


(32.9)


(27.1)


Net income (loss) attributable to Key

$         161

$         241

$         225


(33.2)

%

(28.4)

%








Average balances







Loans and leases

$     37,792

$     39,796

$     39,448


(5.0)

%

(4.2)

%

Total assets

41,024

42,981

42,666


(4.6)


(3.8)


Deposits

90,271

89,156

82,845


1.3


9.0









Assets under management at period end

$     55,806

$     52,867

$     47,086


5.6

%

18.5

%








TE = Taxable Equivalent

 

Additional Consumer Bank Data














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Noninterest income







Trust and investment services income

$       106

$       105

$        95


1.0

%

11.6

%

Service charges on deposit accounts

55

56

49


(1.8)


12.2


Cards and payments income

64

62

54


3.2


18.5


Consumer mortgage income

25

33

43


(24.2)


(41.9)


Other noninterest income

20

32

17


(37.5)


17.6


Total noninterest income

$       270

$       288

$       258


(6.3)

%

4.7

%








Average deposit balances







NOW and money market deposit accounts

$  57,197

$  56,353

$  53,045


1.5

%

7.8

%

Savings deposits

6,951

6,749

5,407


3.0


28.6


Certificates of deposit ($100,000 or more)

1,669

1,846

2,801


(9.6)


(40.4)


Other time deposits

2,227

2,398

3,186


(7.1)


(30.1)


Noninterest-bearing deposits

22,227

21,810

18,406


1.9


20.8


Total deposits

$  90,271

$  89,156

$  82,845


1.3

%

9.0

%








Other data







Branches

999

1,000

1,073




Automated teller machines

1,317

1,316

1,386











Consumer Bank Summary of Operations (4Q21 vs. 4Q20)

  • Net income attributable to Key of $161 million for the fourth quarter of 2021, compared to $225 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $69 million, compared to the fourth quarter of 2020, related to the sale of the indirect auto portfolio, partially offset by strong consumer mortgage balance sheet growth and fees related to PPP loans
  • Average loans and leases decreased $1.7 billion, or 4.2%, from the fourth quarter of 2020, driven by the sale of the indirect auto loan portfolio, partially offset by growth in residential mortgage and Laurel Road
  • Average deposits increased $7.4 billion, or 9.0%, from the fourth quarter of 2020, driven by consumer retention of stimulus payments and relationship growth
  • Provision for credit losses increased $18 million, compared to the fourth quarter of 2020, driven by expectations of a more stable economic outlook and portfolio growth
  • Noninterest income increased $12 million, or 4.7%, from the year ago quarter, driven by higher cards and payments income and trust and investment services income. Partially offsetting the increase was consumer mortgage income, reflecting higher balance sheet retention and lower gain on sale margins
  • Noninterest expense increased $8 million, or 1.3%, from the year ago quarter, driven by higher production-related incentives and increased marketing expense related to Laurel Road

Commercial Bank





















Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Summary of operations







Net interest income (TE)

$         417

$         410

$         420


1.7

%

(.7)

%

Noninterest income

611

476

502


28.4


21.7


Total revenue (TE)

1,028

886

922


16.0


11.5


Provision for credit losses

(12)

(69)

44


(82.6)


(127.3)


Noninterest expense

501

470

499


6.6


.4


Income (loss) before income taxes (TE)

539

485

379


11.1


42.2


Allocated income taxes and TE adjustments

90

104

69


(13.5)


30.4


Net income (loss) attributable to Key

$         449

$         381

$         310


17.8

%

44.8

%








Average balances







Loans and leases

$     61,127

$     59,914

$     62,016


2.0

%

(1.4)

%

Loans held for sale

1,962

1,190

1,285


64.9


52.7


Total assets

71,642

69,285

71,303


3.4


0.5


Deposits

59,537

56,522

52,489


5.3

%

13.4

%








TE = Taxable Equivalent, N/M = Not Meaningful

 

Additional Commercial Bank Data














Dollars in millions





Change 4Q21 vs.


4Q21

3Q21

4Q20


3Q21

4Q20

Noninterest income







Trust and investment services income

$           29

$           24

$           28


20.8

%

3.6

%

Investment banking and debt placement fees

323

234

243


38.0


32.9


Operating lease income and other leasing gains

36

37

39


(2.7)


(7.7)









Corporate services income

65

63

55


3.2


18.2


Service charges on deposit accounts

34

34

32



6.3


Cards and payments income

26

44

44


(40.9)


(40.9)


Payments and services income

125

141

131


(11.3)


(4.6)









Commercial mortgage servicing fees

47

34

32


38.2


46.9


Other noninterest income

51

6

29


750.0


75.9


Total noninterest income

$         611

$         476

$         502


28.4

%

21.7

%








N/M = Not Meaningful

Commercial Bank Summary of Operations (4Q21 vs. 4Q20)

  • Net income attributable to Key of $449 million for the fourth quarter of 2021, compared to $310 million for the year-ago quarter
  • Taxable-equivalent net interest income decreased by $3 million, compared to the fourth quarter of 2020, as lower average loan balances offset fees related to PPP loans
  • Average loan and lease balances decreased $889 million, compared to the fourth quarter of 2020, reflecting a decline in PPP balances, partly offset by core growth in commercial and industrial and commercial real estate loans
  • Average deposit balances increased $7.0 billion, or 13.4%, compared to the fourth quarter of 2020, driven by growth in targeted relationships and higher commercial escrow deposits
  • Provision for credit losses decreased $56 million, compared to the fourth quarter of 2020. The provision for credit losses was a net benefit, driven by lower net loan charge-offs and improved asset quality
  • Noninterest income increased $109 million from the year-ago quarter, driven by elevated investment banking client activity and corporate services income, partially offset by lower cards and payments income
  • Noninterest expense increased by $2 million, or 0.4%, from the fourth quarter of 2020, driven by higher production-related incentives related to strong investment banking and debt placement fees

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

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 $186.3 billion at December 31, 2021.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of 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.


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www.key.com/ir

www.key.com/newsroom

 

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts.  Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2020, as well as in KeyCorp's subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the "SEC") and are or will be available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov). These factors may include, among others, deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, and the impact of the COVID-19 global pandemic on us, our clients, our third-party service providers, and the markets. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 8:00 a.m. ET, on January 20, 2022. A replay of the call will be available through January 29, 2022.

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 2021

Financial Supplement


Page


12

Financial Highlights

14

GAAP to Non-GAAP Reconciliation

16

Consolidated Balance Sheets

17

Consolidated Statements of Income

18

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

20

Noninterest Expense

20

Personnel Expense

21

Loan Composition

21

Loans Held for Sale Composition

21

Summary of Changes in Loans Held for Sale

21

Summary of Loan and Lease Loss Experience From Continuing Operations

23

Asset Quality Statistics From Continuing Operations

23

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

23

Summary of Changes in Nonperforming Loans From Continuing Operations

24

Line of Business Results

 

Financial Highlights


(Dollars in millions, except per share amounts)





Three months ended





12/31/2021

9/30/2021

12/31/2020

Summary of operations






Net interest income (TE)

$         1,038


$         1,025


$         1,043




Noninterest income

909


797


802





Total revenue (TE)

1,947


1,822


1,845




Provision for credit losses

4


(107)


20




Noninterest expense

1,170


1,112


1,128




Income (loss) from continuing operations attributable to Key

627


643


575




Income (loss) from discontinued operations, net of taxes

2


2


7




Net income (loss) attributable to Key

629


645


582










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

601


616


549



Income (loss) from discontinued operations, net of taxes

2


2


7



Net income (loss) attributable to Key common shareholders

603


618


556








Per common share





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

$            .65


$            .65


$            .57



Income (loss) from discontinued operations, net of taxes



.01



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

.65


.66


.57










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

.64


.65


.56



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



.01



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

.64


.65


.57









Cash dividends declared

.195


.185


.185



Book value at period end

16.76


16.82


16.53



Tangible book value at period end

13.72


13.80


13.61



Market price at period end

23.13


21.62


16.41








Performance ratios





From continuing operations:





Return on average total assets

1.34

%

1.41

%

1.35

%


Return on average common equity

15.31


15.28


13.65



Return on average tangible common equity (b)

18.69


18.55


16.61



Net interest margin (TE)

2.44


2.47


2.70



Cash efficiency ratio (b)

59.4


60.2


60.3









From consolidated operations:





Return on average total assets

1.35

%

1.41

%

1.36

%


Return on average common equity

15.36


15.33


13.82



Return on average tangible common equity (b)

18.75


18.61


16.82



Net interest margin (TE)

2.44


2.46


2.69



Loan to deposit (c)

68.9


66.5


76.5








Capital ratios at period end





Key shareholders' equity to assets

9.4

%

9.4

%

10.6

%


Key common shareholders' equity to assets

8.4


8.4


9.5



Tangible common equity to tangible assets (b)

6.9


7.0


7.9



Common Equity Tier 1 (d)

9.4


9.6


9.7



Tier 1 risk-based capital (d)

10.7


10.9


11.1



Total risk-based capital (d)

12.4


12.7


13.4



Leverage (d)

8.4


8.4


8.9








Asset quality — from continuing operations





Net loan charge-offs

$             19


$             29


$           135



Net loan charge-offs to average loans

.08

%

.11

%

.53

%


Allowance for loan and lease losses

$         1,061


$         1,084


$         1,626



Allowance for credit losses

1,221


1,236


1,823



Allowance for loan and lease losses to period-end loans

1.04

%

1.10

%

1.61

%


Allowance for credit losses to period-end loans

1.20


1.25


1.80



Allowance for loan and lease losses to nonperforming loans

233.7


195.7


207.1



Allowance for credit losses to nonperforming loans

268.9


223.1


232.2



Nonperforming loans at period-end

$           454


$           554


$           785



Nonperforming assets at period-end

489


599


937



Nonperforming loans to period-end portfolio loans

.45

%

.56

%

.78

%


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

.48


.61


.92








Trust assets





Assets under management

$       55,806


$       52,867


$       47,086








Other data





Average full-time equivalent employees

16,797


17,009


17,029



Branches

999


1,000


1,073



Taxable-equivalent adjustment

$              5


$              9


$              8


 





Financial Highlights (continued)

(Dollars in millions, except per share amounts)



Twelve months ended



12/31/2021

12/31/2020

Summary of operations




Net interest income (TE)

$                  4,098


$                  4,063



Noninterest income

3,194


2,652



Total revenue (TE)

7,292


6,715



Provision for credit losses

(418)


1,021



Noninterest expense

4,429


4,109



Income (loss) from continuing operations attributable to Key

2,612


1,329



Income (loss) from discontinued operations, net of taxes

13


14



Net income (loss) attributable to Key

2,625


1,343







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

2,506


1,223



Income (loss) from discontinued operations, net of taxes

13


14



Net income (loss) attributable to Key common shareholders

2,519


1,237






Per common share




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

$                    2.64


$                    1.26



Income (loss) from discontinued operations, net of taxes

.01


.01



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

2.65


1.28








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

2.62


1.26



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

.01


.01



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

2.63


1.27







Cash dividends paid

.75


.74






Performance ratios




From continuing operations:




Return on average total assets

1.46

%

.82

%


Return on average common equity

15.90


7.77



Return on average tangible common equity (b)

19.37


9.51



Net interest margin (TE)

2.50


2.77



Cash efficiency ratio (b)

59.9


60.2







From consolidated operations:




Return on average total assets

1.46

%

.82

%


Return on average common equity

15.98


7.86



Return on average tangible common equity (b)

19.47


9.62



Net interest margin (TE)

2.50


2.76






Asset quality — from continuing operations




Net loan charge-offs

$                     184


$                     443



Net loan charge-offs to average total loans

.18

%

.43

%





Other data




Average full-time equivalent employees

16,974


16,826






Taxable-equivalent adjustment

27


29




(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, 2021, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

 

GAAP to Non-GAAP Reconciliations

(Dollars in millions)

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


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

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


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


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

 


Three months ended


Twelve months ended


12/31/2021

9/30/2021

12/31/2020


12/31/2021

12/31/2020

Tangible common equity to tangible assets at period-end







Key shareholders' equity (GAAP)

$  17,423


$  17,510


$  17,981





Less: Intangible assets (a)

2,820


2,814


2,848





Preferred Stock (b)

1,856


1,856


1,856





Tangible common equity (non-GAAP)

$   12,747


$   12,840


$    13,277





Total assets (GAAP)

$ 186,346


$ 187,035


$ 170,336





Less: Intangible assets (a)

2,820


2,814


2,848





Tangible assets (non-GAAP)

$ 183,526


$ 184,221


$ 167,488





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

6.95

%

6.97

%

7.93

%




Pre-provision net revenue







Net interest income (GAAP)

$      1,033


$    1,016


$    1,035



$    4,071


$    4,034


Plus: Taxable-equivalent adjustment

5


9


8



27


29


Noninterest income

909


797


802



3,194


2,652


Less: Noninterest expense

1,170


1,112


1,128



4,429


4,109


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

$       777


$       710


$       717



$    2,863


$    2,606


Average tangible common equity








Average Key shareholders' equity (GAAP)

$  17,471


$  17,899


$  17,905



$  17,665


$  17,636


Less: Intangible assets (average) (c)

2,814


2,823


2,855



2,829


2,878


Preferred stock (average)

1,900


1,900


1,900



1,900


1,900


Average tangible common equity (non-GAAP)

$  12,757


$  13,176


$  13,150



$  12,936


$  12,858


Return on average tangible common equity from continuing operations







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

$       601


$       616


$       549



$    2,506


$    1,223


Average tangible common equity (non-GAAP)

12,757


13,176


13,150



12,936


12,858









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

18.69

%

18.55

%

16.61

%


19.37

%

9.51

%

Return on average tangible common equity consolidated







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

$       603


$       618


$       556



$    2,519


$    1,237


Average tangible common equity (non-GAAP)

12,757


13,176


13,150



12,936


12,858









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

18.75

%

18.61

%

16.82

%


19.47

%

9.62

%

 

GAAP to Non-GAAP Reconciliations (continued)

(Dollars in millions)


Three months ended


Twelve months ended


12/31/2021

9/30/2021

12/31/2020


12/31/2021

12/31/2020

Cash efficiency ratio







Noninterest expense (GAAP)

$    1,170


$    1,112


$    1,128



$    4,429


$    4,109


Less: Intangible asset amortization

14


15


15



58


65


Adjusted noninterest expense (non-GAAP)

$    1,156


$    1,097


$    1,113



$    4,371


$    4,044









Net interest income (GAAP)

$    1,033


$    1,016


$    1,035



$    4,071


$    4,034


Plus: Taxable-equivalent adjustment

5


9


8



27


29


Noninterest income

909


797


802



3,194


2,652


Total taxable-equivalent revenue (non-GAAP)

$    1,947


$    1,822


$    1,845



$    7,292


$    6,715









Cash efficiency ratio (non-GAAP)

59.4

%

60.2

%

60.3

%


59.9

%

60.2

%










(a)    

For the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, intangible assets exclude $3 million, $3 million, and $4 million, respectively, of period-end purchased credit card receivables. 

(b)    

Net of capital surplus.

(c)    

For the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, average intangible assets exclude $3 million, $3 million, and $5 million, respectively, of average purchased credit card receivables. For the twelve months ended months ended December 31, 2021, and December 31, 2020, average intangible assets exclude $4 million and $6 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(Dollars in millions)










12/31/2021

9/30/2021

12/31/2020

Assets





Loans

$       101,854

$         98,609

$       101,185


Loans held for sale

2,729

1,805

1,583


Securities available for sale

45,364

40,594

27,556


Held-to-maturity securities

7,539

8,423

7,595


Trading account assets

701

902

735


Short-term investments

11,010

19,608

16,194


Other investments

639

607

621



Total earning assets

169,836

170,548

155,469


Allowance for loan and lease losses

(1,061)

(1,084)

(1,626)


Cash and due from banks

913

763

1,091


Premises and equipment

681

678

753


Goodwill

2,693

2,673

2,664


Other intangible assets

130

144

188


Corporate-owned life insurance

4,327

4,312

4,286


Accrued income and other assets

8,265

8,404

6,812


Discontinued assets

562

597

699



Total assets

$       186,346

187,035

170,336







Liabilities





Deposits in domestic offices:






NOW and money market deposit accounts

$         89,207

$         87,242

$         80,427



Savings deposits

7,503

7,259

5,913



Certificates of deposit ($100,000 or more)

1,705

1,890

2,733



Other time deposits

2,153

2,315

3,010



Total interest-bearing deposits

100,568

98,706

92,083



Noninterest-bearing deposits

52,004

53,225

43,199



Total deposits

152,572

151,931

135,282


Federal funds purchased and securities sold under repurchase agreements 

173

228

220


Bank notes and other short-term borrowings

588

767

759


Accrued expense and other liabilities

3,548

3,434

2,385


Long-term debt

12,042

13,165

13,709



Total liabilities

168,923

169,525

152,355







Equity





Preferred stock

1,900

1,900

1,900


Common shares

1,257

1,257

1,257


Capital surplus

6,278

6,141

6,281


Retained earnings

14,553

14,133

12,751


Treasury stock, at cost

(5,979)

(5,876)

(4,946)


Accumulated other comprehensive income (loss)

(586)

(45)

738



Key shareholders' equity

17,423

17,510

17,981

Total liabilities and equity

$       186,346

$       187,035

$       170,336







Common shares outstanding (000)

928,850

930,544

975,773

 

Consolidated Statements of Income

(Dollars in millions, except per share amounts)




Three months ended


Twelve months ended




12/31/2021

9/30/2021

12/31/2020


12/31/2021

12/31/2020

Interest income








Loans

$                873

$                882

$                933


$            3,532

$            3,866


Loans held for sale

15

13

11


50

69


Securities available for sale

148

135

119


546

484


Held-to-maturity securities

52

43

51


185

222


Trading account assets

5

4

4


19

20


Short-term investments

8

9

4


28

18


Other investments

2

1

3


7

6



Total interest income

1,103

1,087

1,125


4,367

4,685

Interest expense








Deposits

15

15

28


67

347


Federal funds purchased and securities sold under repurchase agreements


6


Bank notes and other short-term borrowings

2

2

1


8

12


Long-term debt

53

54

61


221

286



Total interest expense

70

71

90


296

651

Net interest income

1,033

1,016

1,035


4,071

4,034

Provision for credit losses

4

(107)

20


(418)

1,021

Net interest income after provision for credit losses

1,029

1,123

1,015


4,489

3,013

Noninterest income








Trust and investment services income

135

129

123


530

507


Investment banking and debt placement fees

323

235

243


937

661


Service charges on deposit accounts

90

91

82


337

311


Operating lease income and other leasing gains

37

37

39


148

167


Corporate services income

73

69

63


261

228


Cards and payments income

86

111

97


415

368


Corporate-owned life insurance income

34

33

38


128

139


Consumer mortgage income

25

33

43


131

176


Commercial mortgage servicing fees

48

34

32


160

80


Other income

58

25

42


147

15



Total noninterest income

909

797

802


3,194

2,652

Noninterest expense








Personnel

674

640

661


2,561

2,336


Net occupancy

75

74

75


300

298


Computer processing

73

67

62


284

232


Business services and professional fees

70

56

54


227

196


Equipment

25

25

26


100

100


Operating lease expense

31

30

35


126

138


Marketing

37

32

30


126

97


Intangible asset amortization

14

15

15


58

65


Other expense

171

173

170


647

647



Total noninterest expense

1,170

1,112

1,128


4,429

4,109

Income (loss) from continuing operations before income taxes

768

808

689


3,254

1,556


Income taxes

141

165

114


642

227

Income (loss) from continuing operations

627

643

575


2,612

1,329


Income (loss) from discontinued operations, net of taxes

2

2

7


13

14

Net income (loss)

629

645

582


2,625

1,343


Less:  Net income (loss) attributable to noncontrolling interests


Net income (loss) attributable to Key

$                629

$                645

$                582


$            2,625

$            1,343










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

$                601

$                616

$                549


$            2,506

$            1,223

Net income (loss) attributable to Key common shareholders

603

618

556


2,519

1,237

Per common share







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

$                 .65

$                 .65

$                 .57


$              2.64

$              1.26

Income (loss) from discontinued operations, net of taxes

0.01


.01

.01

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

.65

.66

.57


2.65

1.28

Per common share — assuming dilution







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

$                 .64

$                 .65

$                 .56


$              2.62

$              1.26

Income (loss) from discontinued operations, net of taxes


.01

.01

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

.64

.65

.57


2.63

1.27










Cash dividends declared per common share

$              .195

$              .185

$              .185


$              .750

$              .740










Weighted-average common shares outstanding (000)

922,970

942,446

967,987


947,065

967,783


Effect of common share options and other stock awards

11,758

10,077

8,473


10,349

7,024

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

934,729

952,523

976,460


957,414

974,807



(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 2021


Third Quarter 2021


Fourth Quarter 2020



Average


Yield/


Average


Yield/


Average


Yield/



Balance

Interest (a)

Rate (a)


Balance

Interest (a)

Rate (a)


Balance

Interest (a)

Rate (a)

Assets













Loans: (b), (c)













Commercial and industrial (d)

$       49,510

$              447

3.58

%

$       49,868

$              445

3.54

%

$       53,562

$              477

3.54

%


Real estate — commercial mortgage

13,671

121

3.51


13,306

120

3.56


12,862

121

3.74



Real estate — construction

2,119

19

3.50


2,134

19

3.53


1,959

19

3.79



Commercial lease financing

3,953

26

2.57


3,922

27

2.80


4,353

32

2.92



Total commercial loans

69,253

613

3.51


69,230

611

3.50


72,736

649

3.55



Real estate — residential mortgage

15,017

102

2.72


13,168

92

2.78


8,968

74

3.29



Home equity loans

8,603

79

3.64


8,894

84

3.75


9,410

91

3.81



Consumer direct loans

5,509

60

4.33


5,175

59

4.55


4,583

56

4.93



Credit cards

941

24

10.13


917

23

10.07


973

26

10.57



Consumer indirect loans

74


2,754

22

3.15


5,040

45

3.56



Total consumer loans

30,144

265

3.49


30,908

280

3.60


28,974

292

4.01



Total loans

99,397

878

3.50


100,138

891

3.53


101,710

941

3.68



Loans held for sale

2,202

15

2.83


1,447

13

3.66


1,621

11

2.76



Securities available for sale (b), (e)

42,329

148

1.39


36,923

135

1.48


28,046

119

1.75



Held-to-maturity securities (b)

7,991

52

2.61


6,507

43

2.66


7,939

51

2.56



Trading account assets

853

5

2.48


743

4

2.19


744

4

2.21



Short-term investments

15,505

8

.20


19,274

9

.18


14,111

4

.14



Other investments (e)

634

2

1.15


614

1

.99


615

3

1.31



Total earning assets

168,911

1,108

2.60


165,646

1,096

2.64


154,786

1,133

2.93



Allowance for loan and lease losses

(1,081)




(1,222)




(1,715)




Accrued income and other assets

17,133




16,947




15,861




Discontinued assets

574




618




717




Total assets

$    185,537




$    181,989




$    169,649



Liabilities













NOW and money market deposit accounts

$       88,110

$                11

.05


$       85,333

$                10

.05


$       80,636

$                12

.06



Savings deposits

7,375

.01


7,117

.01


5,737

.03



Certificates of deposit ($100,000 or more)

1,793

2

.53


1,975

3

.59


2,983

9

1.20



Other time deposits

2,233

2

.21


2,404

2

.26


3,209

7

.80



Total interest-bearing deposits

99,511

15

.06


96,829

15

.06


92,565

28

.12



Federal funds purchased and securities sold
under repurchase agreements

230

.02


231

.02


220

.04



Bank notes and other short-term borrowings

789

2

1.45


671

2

1.11


791

1

.73



Long-term debt (f), (g)

12,159

53

1.74


12,601

54

1.73


12,118

61

2.05



Total interest-bearing liabilities

112,689

70

.25


110,332

71

.26


105,694

90

.34



Noninterest-bearing deposits

51,494




50,087




43,156




Accrued expense and other liabilities

3,309




3,053




2,177




Discontinued liabilities (g)

574




618




717




Total liabilities

$    168,066




$    164,090




$    151,744



Equity













Key shareholders' equity

$       17,471




$       17,899




$       17,905




Noncontrolling interests










Total equity

17,471




17,899




17,905




Total liabilities and equity

$    185,537




$    181,989




$    169,649



Interest rate spread (TE)



2.36

%



2.38

%



2.59

%

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


$           1,038

2.44

%


$           1,025

2.47

%


$           1,043

2.70

%

TE adjustment (b)


5




9




8



Net interest income, GAAP basis


$           1,033




$           1,016




$           1,035




(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, 2021, September 30, 2021, and December 31, 2020.   

(c)    

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

(d)    

Commercial and industrial average balances include $141 million, $137 million, and $129 million of assets from commercial credit cards for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively.

(e)    

Yield is calculated on the basis of amortized cost.

(f)     

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)    

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

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

 

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

(Dollars in millions)



Twelve months ended December 31, 2021



Twelve months ended December 31, 2020



Average


Yield/



Average


Yield/



Balance

Interest (a)

Rate (a)



Balance

Interest (a)

Rate (a)

Assets










Loans: (b), (c)










Commercial and industrial (d)

$           50,931

$             1,795

3.52

%


$      55,145

$             1,977

3.59

%


Real estate — commercial mortgage

13,118

472

3.60



13,279

521

3.92



Real estate — construction

2,113

77

3.61



1,843

74

3.99



Commercial lease financing

4,019

114

2.84



4,497

139

3.09



Total commercial loans

70,181

2,458

3.50



74,764

2,711

3.63



Real estate — residential mortgage

12,252

348

2.84



8,094

284

3.50



Home equity loans

8,967

336

3.74



9,772

392

4.01



Consumer direct loans

5,105

233

4.56



4,213

221

5.26



Credit cards

925

94

10.11



1,001

107

10.65



Consumer indirect loans

2,839

90

3.19



4,845

180

3.72



Total consumer loans

30,088

1,101

3.66



27,925

1,184

4.24



Total loans

100,269

3,559

3.55



102,689

3,895

3.79



Loans held for sale

1,700

50

2.96



1,972

69

3.49



Securities available for sale (b), (e)

35,765

546

1.53



23,742

484

2.10



Held-to-maturity securities (b)

7,035

185

2.63



8,938

222

2.49



Trading account assets

820

19

2.35



814

20

2.47



Short-term investments

17,529

28

.16



9,096

18

.20



Other investments (e)

621

7

1.14



635

6

.87



Total earning assets

163,739

4,394

2.69



147,886

4,714

3.20



Allowance for loan and lease losses

(1,340)





(1,481)




Accrued income and other assets

16,520





15,650




Discontinued assets

632





775




Total assets

$         179,551





$    162,830



Liabilities










NOW and money market deposit accounts

$           84,736

$                   41

.05



$      75,733

$                 206

.27



Savings deposits

6,893

1

.02



5,252

2

.04



Certificates of deposit ($100,000 or more)

2,135

16

.72



4,520

83

1.83



Other time deposits

2,540

9

.37



4,041

56

1.38



Total interest-bearing deposits

96,304

67

.07



89,546

347

.39



Federal funds purchased and securities sold
under repurchase agreements

239

.02



670

6

.88



Bank notes and other short-term borrowings

770

8

1.08



1,452

12

.85



Long-term debt (f), (g)

12,391

221

1.79



12,578

286

2.36



Total interest-bearing liabilities

109,704

296

.27



104,246

651

.63



Noninterest-bearing deposits

48,731





37,740




Accrued expense and other liabilities

2,819





2,433




Discontinued liabilities (g)

632





775




Total liabilities

$         161,886





$    145,194



Equity










Key shareholders' equity

$           17,665





$      17,636




Noncontrolling interests








Total equity

17,665





17,636




Total liabilities and equity

$         179,551





$    162,830



Interest rate spread (TE)



2.42

%




2.57

%

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


$             4,098

2.50

%



$             4,063

2.77

%

TE adjustment (b)


27





29



Net interest income, GAAP basis


$             4,071





$             4,034












(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 months ended December 31, 2021, and December 31, 2020, respectively.  

(c)    

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

(d)    

Commercial and industrial average balances include $134 million and $135 million of assets from commercial credit cards for the twelve months ended months ended December 31, 2021, and December 31, 2020, respectively.

(e)    

Yield is calculated on the basis of amortized cost.

(f)     

Rate calculation excludes basis adjustments related to fair value hedges. 

(g)    

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

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

 

Noninterest Expense

(Dollars in millions)









Three months ended


Twelve months ended


12/31/2021

9/30/2021

12/31/2020


12/31/2021

12/31/2020

Personnel (a)

$            674

$            640

$            661


$         2,561

$         2,336

Net occupancy

75

74

75


300

298

Computer processing

73

67

62


284

232

Business services and professional fees

70

56

54


227

196

Equipment

25

25

26


100

100

Operating lease expense

31

30

35


126

138

Marketing

37

32

30


126

97

Intangible asset amortization

14

15

15


58

65

Other expense

171

173

170


647

647

Total noninterest expense

$         1,170

$         1,112

$         1,128


$         4,429

$         4,109

Average full-time equivalent employees (b)

16,797

17,009

17,029


16,974

16,826



(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


12/31/2021

9/30/2021

12/31/2020


12/31/2021

12/31/2020

Salaries and contract labor

$           342

$           328

$           342


$        1,311

$        1,329

Incentive and stock-based compensation

243

212

208


861

627

Employee benefits

89

100

89


388

350

Severance

22


1

30

Total personnel expense

$           674

$           640

$           661


$        2,561

$        2,336

 

Loan Composition

(Dollars in millions)











Percent change 12/31/2021 vs


12/31/2021

9/30/2021

12/31/2020


9/30/2021

12/31/2020

Commercial and industrial (a)

$        50,525

$        49,553

$        52,907


2.0

%

(4.5)

%

Commercial real estate:







Commercial mortgage

14,244

13,674

12,687


4.2


12.3


Construction

1,996

2,120

1,987


(5.8)


.5


Total commercial real estate loans

16,240

15,794

14,674


2.8


10.7


Commercial lease financing (b)

4,071

3,982

4,399


2.2


(7.5)


Total commercial loans

70,836

69,329

71,980


2.2


(1.6)


Residential — prime loans:







Real estate — residential mortgage

15,756

14,204

9,298


10.9


69.5


Home equity loans

8,467

8,747

9,360


(3.2)


(9.5)


Total residential — prime loans

24,223

22,951

18,658


5.5


29.8


Consumer direct loans

5,753

5,324

4,714


8.1


22.0


Credit cards

972

928

989


4.7


(1.7)


Consumer indirect loans

70

77

4,844


(9.1)


(98.6)


Total consumer loans

31,018

29,280

29,205


5.9


6.2


Total loans (c), (d)

$      101,854

$        98,609

$      101,185


3.3

%

.7

%



(a)    

Loan balances include $139 million, $139 million, and $127 million of commercial credit card balances at December 31, 2021, September 30, 2021, and December 31, 2020, respectively.

(b)    

Commercial lease financing includes receivables held as collateral for a secured borrowing of $16 million, $16 million, and $23 million at December 31, 2021, September 30, 2021, and December 31, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c)    

Total loans exclude loans of $567 million at December 31, 2021, $602 million at September 30, 2021, and $710 million at December 31, 2020, related to the discontinued operations of the education lending business.

(d)    

Accrued interest of $198 million, $211 million, and $241 million at December 31, 2021, September 30, 2021, and December 31, 2020, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

 

Loans Held for Sale Composition

(Dollars in millions)













Percent change 12/31/2021 vs


12/31/2021

9/30/2021

12/31/2020


9/30/2021

12/31/2020

Commercial and industrial

$         1,438

$            122

$            249


N/M


477.5

%

Real estate — commercial mortgage

1,010

1,446

1,014


(30.2)


(0.4)


Real estate — residential mortgage

281

237

264


18.6


6.4


Consumer direct loans

56


N/M


N/M


Total loans held for sale

$         2,729

$         1,805

$         1,583


51.2

%

72.4

%








 N/M = Not Meaningful

 

Summary of Changes in Loans Held for Sale

(Dollars in millions)








4Q21

3Q21

2Q21

1Q21

4Q20

Balance at beginning of period

$          1,805

$         1,537

$         2,296

$         1,583

$         1,724

New originations

5,741

3,328

3,573

4,010

3,835

Transfers from (to) held to maturity, net

(1)

3,305

(71)

83

(24)

Loan sales

(4,779)

(6,405)

(4,195)

(3,303)

(3,932)

Loan draws (payments), net

(12)

8

(27)

(73)

(19)

Valuation and other adjustments

(25)

32

(39)

(4)

Balance at end of period

$          2,729

$         1,805

$         1,537

$         2,296

$         1,583

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(Dollars in millions)









Three months ended


Twelve months ended


12/31/2021

9/30/2021

12/31/2020


12/31/2021

12/31/2020

Average loans outstanding

$  99,397


$ 100,138


$ 101,710



$ 100,269


$ 102,689


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

$    1,084


$     1,220


$     1,730



$     1,626


$        900


Cumulative effect from change in accounting principle (a)






204


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

1,084


1,220


1,730



1,626


1,104


Loans charged off:









Commercial and industrial

33


27


119



174


351









Real estate — commercial mortgage

1



1



40


19


Real estate — construction







Total commercial real estate loans

1



1



40


19


Commercial lease financing

1


1


19



6


35


Total commercial loans

35


28


139



220


405


Real estate — residential mortgage

(1)


(2)




(2)


2


Home equity loans

2


1


1



9


11


Consumer direct loans

7


7


7



29


37


Credit cards

6


6


7



27


39


Consumer indirect loans

1


26


6



39


28


Total consumer loans

15


38


21



102


117


Total loans charged off

50


66


160



322


522


Recoveries:








Commercial and industrial

23


20


15



83


34









Real estate — commercial mortgage

1


1




9


3


Real estate — construction







Total commercial real estate loans

1


1




9


3


Commercial lease financing


6




7


1


Total commercial loans

24


27


15



99


38


Real estate — residential mortgage

1


1




3


1


Home equity loans

1


2


1



5


7


Consumer direct loans

2


2


1



8


7


Credit cards

2


1


2



8


8


Consumer indirect loans

1


4


6



15


18


Total consumer loans

7


10


10



39


41


Total recoveries

31


37


25



138


79


Net loan charge-offs

(19)


(29)


(135)



(184)


(443)


Provision (credit) for loan and lease losses

(4)


(107)


31



(381)


965


Allowance for loan and lease losses at end of period

$    1,061


$    1,084


$    1,626



$    1,061


$    1,626









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

$       152


$       152


$       208



$       197


$        68


Liability for credit losses on contingent guarantees at the end of the prior period






7


Cumulative effect from change in accounting principle (a), (b)






66


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

152


152


208



197


141


Provision (credit) for losses on lending-related commitments

8



(11)



(37)


56


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

$       160


$       152


$       197



$       160


$       197









Total allowance for credit losses at end of period

$    1,221


$    1,236


$    1,823



$    1,221


$    1,823









Net loan charge-offs to average total loans

.08

%

.11

%

.53

%


.18

%

.43

%

Allowance for loan and lease losses to period-end loans

1.04


1.10


1.61



1.04


1.61


Allowance for credit losses to period-end loans

1.20


1.25


1.80



1.20


1.80


Allowance for loan and lease losses to nonperforming loans

233.7


195.7


207.1



233.7


207.1


Allowance for credit losses to nonperforming loans

268.9


223.1


232.2



268.9


232.2









Discontinued operations — education lending business:







Loans charged off

$          1


1


$          1



$          4


$          5


Recoveries


1


2



2


5


Net loan charge-offs

$         (1)



$          1



$         (2)


$         —




(a)    

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

(b)    

Twelve months ended December 30, 2020, excludes $4 million related to the provision for other financial assets as a result of the change in accounting principle.

(c)    

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

 

Asset Quality Statistics From Continuing Operations

(Dollars in millions)


4Q21

3Q21

2Q21

1Q21

4Q20

Net loan charge-offs

$         19


$         29


$         22


$       114


$       135


Net loan charge-offs to average total loans

.08

%

.11

%

.09

%

.46

%

.53

%

Allowance for loan and lease losses

$    1,061


$    1,084


$    1,220


$    1,438


$    1,626


Allowance for credit losses (a)

1,221


1,236


1,372


1,616


1,823


Allowance for loan and lease losses to period-end loans

1.04

%

1.10

%

1.21

%

1.42

%

1.61

%

Allowance for credit losses to period-end loans

1.20


1.25


1.36


1.60


1.80


Allowance for loan and lease losses to nonperforming loans

233.7


195.7


175.8


197.5


207.1


Allowance for credit losses to nonperforming loans

268.9


223.1


197.7


222.0


232.2


Nonperforming loans at period end

$       454


$       554


$       694


$       728


$       785


Nonperforming assets at period end

489


599


738


790


937


Nonperforming loans to period-end portfolio loans

.45

%

.56

%

.69

%

.72

%

.78

%

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

.48


.61


.73


.78


.92




(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)


12/31/2021

9/30/2021

6/30/2021

3/31/2021

12/31/2020

Commercial and industrial

$       191


$       253


$       355


$       387


$       385













Real estate — commercial mortgage

44


49


66


66


104


Real estate — construction






Total commercial real estate loans

44


49


66


66


104


Commercial lease financing

4


5


7


8


8


Total commercial loans

239


307


428


461


497


Real estate — residential mortgage

72


93


99


95


110


Home equity loans

135


146


146


148


154


Consumer direct loans

4


4


4


5


5


Credit cards

3


3


3


3


2


Consumer indirect loans

1


1


14


16


17


Total consumer loans

215


247


266


267


288


Total nonperforming loans

454


554


694


728


785


OREO

8


8


9


12


100


Nonperforming loans held for sale

24


35


32


47


49


Other nonperforming assets

3


2


3


3


3


Total nonperforming assets

$       489


$       599


$       738


$       790


$       937


Accruing loans past due 90 days or more

68


82


74


92


86


Accruing loans past due 30 through 89 days

165


164


190


191


241


Restructured loans — accruing and nonaccruing (a)

220


270


334


376


363


Restructured loans included in nonperforming loans (a)

99


146


177


192


229


Nonperforming assets from discontinued operations — education lending business 

4


4


5


5


5


Nonperforming loans to period-end portfolio loans

.45

%

.56

%

.69

%

.72

%

.78

%

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

.48


.61


.73


.78


.92



(a)    

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

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(Dollars in millions)


4Q21

3Q21

2Q21

1Q21

4Q20

Balance at beginning of period

$          554

$          694

$          728

$          785

$          834

Loans placed on nonaccrual status

116

116

186

196

300

Charge-offs

(51)

(66)

(74)

(135)

(160)

Loans sold

(38)

(17)

(10)

(13)

(9)

Payments

(68)

(136)

(92)

(37)

(83)

Transfers to OREO

(1)

(1)

(3)

(3)

Transfers to nonperforming loans held for sale

Loans returned to accrual status

(58)

(36)

(44)

(65)

(94)

Balance at end of period

$          454

$          554

$          694

$          728

$          785

 

Line of Business Results

(Dollars in millions)





























Percentage change 4Q21 vs.


4Q21

3Q21

2Q21

1Q21

4Q20


3Q21

4Q20

Consumer Bank
















Summary of operations
















Total revenue (TE)

$             839


$             870


$             852


$             864


$             896



(3.6)

%

(6.4)

%

Provision for credit losses

13


(38)


(70)


(23)


(5)



134.2


360.0


Noninterest expense

614


591


584


601


606



3.9


1.3


Net income (loss) attributable to Key

161


241


257


217


225



(33.2)


(28.4)


Average loans and leases

37,792


39,796


40,598


39,249


39,448



(5.0)


(4.2)


Average deposits

90,271


89,156


88,412


85,033


82,845



1.3


9.0


Net loan charge-offs

22


35


34


36


28



(37.1)


(21.4)


Net loan charge-offs to average total loans

.23

%

.35

%

.34

%

.39

%

.29

%


(34.3)


(20.7)


Nonperforming assets at period end

$             222


$             254


$             274


$             276


$             300