PR Newswire | Jan 21, 2021 06:31AM EST

Per Diluted Common Share

01/21 05:30 CST

KeyCorp Reports Record Fourth Quarter 2020 Net Income Of $549 Million, Or $.56 Per Diluted Common ShareRecord revenue for the fourth quarter and full year 2020All-time high level of investment banking and debt placement fees for the fourth quarter and full yearStrong credit quality: net charge-offs to average loans of 53 basis pointsReturn on average tangible common equity of 16.6%, up 440 basis points from the prior quarterStrong capital position with Common Equity Tier 1 Capital of 9.8%, above targeted rangeAnnounced new common share repurchase authorization of up to $900 million CLEVELAND, Jan. 21, 2021

CLEVELAND, Jan. 21, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $549 million, or $.56 per diluted common share for the fourth quarter of 2020. This compared to $397 million, or $.41 per diluted common share, for the third quarter of 2020 and $439 million, or $.45 per diluted common share, for the fourth quarter of 2019.

Key's record fourth quarter results marked a great finish to the year. I was extremely proud of the way our dedicated and resilient team came together to support our clients when they needed us most,while concurrently delivering strong results across our company.

We achieved a record level of revenue for both the fourth quarter and the full year. Fee income was up 23% from the year-ago period, with growth coming from consumer mortgage and investment banking.

Credit quality remained strong this quarter, with net charge-offs of 53 basis points. Our provision for credit losses reflects our strong credit metrics and our outlook for the economy. We have continued to support our clients while maintaining our moderate risk profile through the business cycle.

We have maintained our discipline in managing our strong capital position. At the end of the quarter, our Common Equity Tier 1 ratio was 9.8%, which was above our targeted range. Last week, our Board of Directors approved a new share repurchase authorization of up to $900 million and announced our first quarter dividend of $.185 per common share.

While 2020presented many challenges, we remained focused on serving our clients, growing our business, and maintaining strong risk practices. Our success is due to our dedicated team, the strength of our business model, and our targeted relationship strategy. We have positioned our company to succeed and I remain confident in our ability to grow and to deliver on our commitments.

- Chris Gorman, Chairman and CEO

Selected Financial Highlights



dollars in millions, except per Change 4Q20 share data vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Income (loss) from continuing operations attributable to Key $549 $397 $439 38.3%25.1%common shareholders

Income (loss) from continuing operations attributable to Key .56 .41 .45 36.6 24.4 common shareholders per common share - assuming dilution

Return on average tangible common equity from continuing operations16.61 %12.19 %14.09 %N/A N/A ^(a)

Return on average total assets 1.35 1.00 1.27 N/A N/A from continuing operations

Common Equity Tier 1 ratio ^(b) 9.8 9.5 9.4 N/A N/A

Book value at period end $16.53 $16.25 $15.54 1.7 %6.4 %

Net interest margin (TE) from 2.70 %2.62 %2.98 %N/A N/A continuing operations



(a) The table entitled "GAAP to Non-GAAP Reconciliations" in the attachedfinancial supplement presents the computations of certain financial measuresrelated to "Return on average tangible common equity from continuingoperations." The table reconciles the GAAP performance measures to thecorresponding non-GAAP measures, which provides a basis for period-to-periodcomparisons.

(b) 12/31/20 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS



Revenue



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Net interest income (TE) $1,043$1,006$987 3.7 % 5.7 %

Noninterest income 802 681 651 17.8 23.2

Total revenue $1,845$1,687$1,6389.4 % 12.6%



TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.043 billion for the fourth quarter of 2020, compared to taxable-equivalent net interest income of $987 million for the fourth quarter of 2019. The increase in net interest income reflects higher earning asset balances and loan fees, partially offset by a lower net interest margin. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity and Key's participation in the Paycheck Protection Program ("PPP").

Compared to the third quarter of 2020, taxable-equivalent net interest income increased by $37 million and the net interest margin increased by 8 basis points. The increase in both net interest income and the net interest margin reflects lower interest-bearing deposit costs and higher loan fees related to PPP, partly offset by elevated levels of liquidity.

Noninterest Income



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Trust and investment services income $123$128$120(3.9) %2.5 %

Investment banking and debt placement 243 146 181 66.4 34.3 fees

Service charges on deposit accounts 82 77 86 6.5 (4.7)

Operating lease income and other leasing39 38 39 2.6 - gains

Corporate services income 63 51 65 23.5 (3.1)

Cards and payments income 97 114 67 (14.9) 44.8

Corporate-owned life insurance income 38 30 39 26.7 (2.6)

Consumer mortgage income 43 51 21 (15.7) 104.8

Commercial mortgage servicing fees 32 18 19 77.8 68.4

Other income 42 28 14 50.0 200.0

Total noninterest income $802$681$65117.8 %23.2 %



Compared to the fourth quarter of 2019, noninterest income increased by $151 million, primarily driven by a $62 million increase in investment banking and debt placement fees. The record fourth quarter of 2020 for investment banking and debt placement fees was largely related to strong M&A activity. Cards and payments income increased $30 million from the year-ago period, driven by higher prepaid card activity. Additionally, investments made in Key's mortgage business continue to drive consumer mortgage income and commercial mortgage servicing fees, which increased $22 million and $13 million, respectively, from the year-ago quarter.

Compared to the third quarter of 2020, noninterest income increased by $121 million. The largest driver of the quarter-over-quarter increase was a $97 million increase in investment banking and debt placement fees, largely driven by strong M&A activity and higher loan syndication. Commercial mortgage servicing fees were also strong, up $14 million compared to prior quarter and corporate services income increased $12 million, primarily driven by higher derivatives income. Partially offsetting these increases were a $17 million decrease in cards and payments income related to lower prepaid card activity and a $8 million decrease in consumer mortgage income.

Noninterest Expense



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Personnel expense $661 $588 $55112.4 % 20.0%

Nonpersonnel expense 467 449 429 4.0 8.9

Total noninterest expense$1,128$1,037$9808.8 % 15.1%



Key's noninterest expense was $1.128 billion for the fourth quarter of 2020, an increase of $148 million from the year-ago period. The increase is primarily related to higher personnel costs of $110 million, reflecting higher production-related incentives and higher salaries due to merit increases. Other drivers for the year-over-year increases include payments-related expenses from prepaid card activity incurred in the current period, as well as COVID-19-related costs related to steps that Key has taken to ensure the health and safety of teammates.

Compared to the third quarter of 2020, noninterest expense increased $91 million. The increase was largely due to incentive-related costs following a strong quarter for investment banking revenue, higher severance, as well as higher related stock-based compensation which drove the increase in personnel costs quarter-over-quarter.

BALANCE SHEET HIGHLIGHTS



Average Loans



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Commercial and industrial ^ $53,562 $57,067 $48,345(6.1)%10.8%(a)

Other commercial loans 19,174 19,677 19,312 (2.6) (.7)

Total consumer loans 28,974 28,175 25,950 2.8 11.7

Total loans $101,710$104,919$93,607(3.1)%8.7 %



Commercial and industrial average loan balances include $129 million, $129(a) million, and $146 million of assets from commercial credit cards at December 31, 2020, September 30, 2020, and December 31, 2019, respectively.

Average loans were $101.7 billion for the fourth quarter of 2020, an increase of $8.1 billion compared to the fourth quarter of 2019. Commercial loans increased $5.1 billion, reflecting Key's participation in the PPP, partially offset by decreased utilization versus the year-ago period. Consumer loans increased $3.0 billion, driven by strength from Laurel Road and Key's consumer mortgage business.

Compared to the third quarter of 2020, average loans decreased by $3.2 billion. Commercial loans declined as clients paid down elevated line draws from earlier in the year. Consumer loans continue to reflect strength from Laurel Road, as well as Key's consumer mortgage business.

Average Deposits



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Non-time deposits $129,529 $127,347 $100,518 1.7 %28.9 %

Certificates of deposit ($100,000 or 2,983 3,862 6,899 (22.8) (56.8) more)

Other time deposits 3,209 3,735 5,187 (14.1) (38.1)

Total deposits $135,721 $134,944 $112,604 .6 %20.5 %



Cost of total deposits.08 %.16 %.71 %N/A N/A



N/A = Not Applicable

Average deposits totaled $135.7 billion for the fourth quarter of 2020, an increase of $23.1 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits as a result of lower interest rates.

Compared to the third quarter of 2020, average deposits increased by $777 million, primarily driven by broad-based commercial growth and higher consumer balances. This growth was offset by a continued decline in time deposits.

ASSET QUALITY



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Net loan charge-offs $135 $128 $99 5.5 %36.4 %

Net loan charge-offs to average .53 %.49 %.42 %N/A N/A total loans

Nonperforming loans at period end $785 $834 $577 (5.9) 36.0

Nonperforming assets at period end937 1,003 715 (6.6) 31.0

Allowance for loan and lease 1,626 1,730 900 (6.0) 80.7 losses

Allowance for credit losses 1,823 1,938 968 (5.9) 88.3

Allowance for loan and lease 207.1%207.4%156.0%N/A N/A losses to nonperforming loans

Allowance for credit losses to 232.2 232.4 167.8 N/A N/A nonperforming loans

Provision for credit losses $20 $160 $109 (87.5)%(81.7)%



N/A = Not Applicable

Key's provision for credit losses was $20 million for the fourth quarter of 2020, compared to $109 million for the fourth quarter of 2019 and $160 million for the third quarter of 2020. The provision for credit losses reflects the adoption of the accounting standard, often referred to as Current Expected Credit Losses ("CECL"), beginning in the first quarter of 2020. This framework requires that management estimate credit losses over the full remaining expected life and consider expected future changes in macroeconomic conditions.

Net loan charge-offs for the fourth quarter of 2020 totaled $135 million, or .53% of average total loans. These results compare to $99 million, or .42%, for the fourth quarter of 2019 and $128 million, or .49%, for the third quarter of 2020. Key's allowance for credit losses was $1.8 billion, or 1.80% of total period-end loans at December 31, 2020, compared to 1.02% at December 31, 2019, and 1.88% at September 30, 2020.

At December 31, 2020, Key's nonperforming loans totaled $785 million, which represented .78% of period-end portfolio loans. These results compare to .61% at December 31, 2019, and .81% at September 30, 2020. Nonperforming assets at December 31, 2020, totaled $937 million, and represented .92% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .75% at December 31, 2019, and .97% at September 30, 2020.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2020.

Capital Ratios



12/31/20209/30/202012/31/2019

Common Equity Tier 1 ^(a) 9.8 %9.5 %9.4 %

Tier 1 risk-based capital ^(a) 11.1 10.9 10.9

Total risk based capital ^(a) 13.4 13.3 12.8

Tangible common equity to tangible assets ^ 7.9 7.8 8.6 (b)

Leverage ^(a) 8.9 8.7 9.9



(a) 12/31/2020 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial(b) 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 2020. As shown in the preceding table, at December 31, 2020, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.8% and 11.1%, respectively. Key's tangible common equity ratio was 7.9% at December 31, 2020.

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 29 basis points.

Summary of Changes in Common Shares Outstanding



in thousands Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Shares outstanding at beginning976,205975,947988,538 - (1.2) %of period

Open market repurchases and return of shares under employee(1,092)(1) (12,968)N/M (91.6) compensation plans

Shares issued under employee compensation plans (net of 660 259 1,619 154.8%(59.2) cancellations)

Shares outstanding at end of 975,773976,205977,189 - (.1) %period



N/M = Not Meaningful

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

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 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Revenue from continuing operations (TE)

Consumer Bank $905 $871 $825 3.9 %9.7 %

Commercial Bank 913 804 771 13.6 18.4

Other ^(a) 27 12 42 125.0 (35.7)

Total $1,845$1,687$1,6389.4 %12.6 %



Income (loss) from continuing operations attributable to Key

Consumer Bank $228 $241 $168 (5.4)%35.7 %

Commercial Bank 308 160 311 92.5 (1.0)

Other ^(a) 39 23 (13) 69.6 N/M

Total $575 $424 $466 35.6 %23.4 %



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(a) 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 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Summary of operations

Net interest income (TE) $645 $604 $587 6.8 %9.9 %

Noninterest income 260 267 238 (2.6) 9.2

Total revenue (TE) 905 871 825 3.9 9.7

Provision for credit losses(4) (16) 55 (75.0) (129.1)

Noninterest expense 611 571 550 7.0 11.1

Income (loss) before income298 316 220 (5.7) 35.5 taxes (TE)

Allocated income taxes (benefit) and TE 70 75 52 (6.7) 34.6 adjustments

Net income (loss) $228 $241 $168 (5.4) %35.7 %attributable to Key



Average balances

Loans and leases $41,137$41,471$34,148(.8) %20.5 %

Total assets 44,357 44,888 37,709 (1.2) 17.6

Deposits 83,171 83,175 73,561 - 13.1



Assets under management at $44,140$41,312$40,8336.8 %8.1 %period end



TE = Taxable Equivalent

Additional Consumer Bank Data



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Noninterest income

Trust and investment $95 $100 $91 (5.0) %4.4 %services income

Service charges on 50 44 58 13.6 (13.8) deposit accounts

Cards and payments income54 55 53 (1.8) 1.9

Consumer mortgage income 43 51 20 (15.7) 115.0

Other noninterest income 18 17 16 5.9 12.5

Total noninterest income $260 $267 $238 (2.6) %9.2 %



Average deposit balances

NOW and money market $53,055 $52,550 $44,765 1.0 %18.5 %deposit accounts

Savings deposits 5,408 5,169 4,332 4.6 24.8

Certificates of deposit 2,801 3,550 6,065 (21.1) (53.8) ($100,000 or more)

Other time deposits 3,187 3,701 5,164 (13.9) (38.3)

Noninterest-bearing 18,720 18,205 13,235 2.8 41.4 deposits

Total deposits $83,171 $83,175 $73,561 - 13.1 %



Home equity loans

Average balance $9,360 $9,528 $10,295

Combined weighted-average loan-to-value ratio (at 69 %70 %70 % date of origination)

Percent first lien 66 64 61 positions



Other data

Branches 1,073 1,077 1,098

Automated teller machines1,386 1,388 1,420



Consumer Bank Summary of Operations (4Q20 vs. 4Q19)

* Net income attributable to Key of $228 million for the fourth quarter of 2020, compared to $168 million for the year-ago quarter * Taxable-equivalent net interest income increased by $58 million, or 9.9%, compared to the fourth quarter of 2019, driven by strong balance sheet growth and fees related to PPP loans, partially offset by the lower interest rate environment * Average loans and leases increased $7.0 billion, or 20.5%, driven by benefit from the PPP, as well as growth from Laurel Road and consumer mortgage * Average deposits increased $9.6 billion, or 13.1%, from the fourth quarter of 2019. This was driven by consumer stimulus payments, lower spend activity, and relationship growth * Provision for credit losses decreased $59 million compared to the fourth quarter of 2019. The decrease in provision for credit losses is attributable to lower net charge-offs and a reduced allowance from the third quarter of 2020, driven by continued strength in client credit quality * Noninterest income increased $22 million, or 9.2%, from the year ago quarter, driven by strength in consumer mortgage income and higher trust and investment services income * Noninterest expense increased $61 million, or 11.1%, from the year ago quarter driven by higher variable compensation from strong revenue growth and higher variable expenses related to higher loan volumes

Commercial Bank





dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Summary of operations

Net interest income (TE) $413 $421 $416 (1.9) %(.7) %

Noninterest income 500 383 355 30.5 40.8

Total revenue (TE) 913 804 771 13.6 18.4

Provision for credit losses 42 163 38 (74.2) 10.5

Noninterest expense 494 443 393 11.5 25.7

Income (loss) before income 377 198 340 90.4 10.9 taxes (TE)

Allocated income taxes and TE 69 38 29 81.6 137.9 adjustments

Net income (loss) attributable $308 $160 $311 92.5 %(1.0) %to Key



Average balances

Loans and leases $59,992$62,925$58,535(4.7) %2.5 %

Loans held for sale 1,285 1,383 1,465 (7.1) (12.3)

Total assets 69,277 72,613 67,135 (4.6) 3.2

Deposits 52,163 51,238 38,224 1.8 %36.5 %



TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data



dollars in millions Change 4Q20 vs.

4Q20 3Q20 4Q19 3Q20 4Q19

Noninterest income

Trust and investment services income $28 $27 $29 3.7 %(3.4)

Investment banking and debt placement 243 146 179 66.4 35.8 %fees

Operating lease income and other leasing39 38 39 2.6 - gains



Corporate services income 55 44 58 25.0 (5.2)

Service charges on deposit accounts 31 32 27 (3.1) 14.8

Cards and payments income 43 60 15 (28.3) 186.7

Payments and services income 129 136 100 (5.1) 29.0



Commercial mortgage servicing fees 32 18 19 77.8 68.4

Other noninterest income 29 18 (11) 61.1 N/M

Total noninterest income $500$383$35530.5 %40.8 %



N/M = Not Meaningful

Commercial Bank Summary of Operations (4Q20 vs. 4Q19)

* Net income attributable to Key of $308 million for the fourth quarter of 2020, compared to $311 million for the year-ago quarter * Taxable-equivalent net interest income decreased by $3.0 million, compared to the fourth quarter of 2019, as the lower interest rate environment offset balance sheet growth and fees related to PPP loans * Average loan and lease balances increased $1.5 billion, or 2.5%, compared to the fourth quarter of 2019 as PPP loans offset lower utilization * Average deposit balances increased $14 billion, or 36.5%, compared to the fourth quarter of 2019, driven by growth in targeted relationships and the impact of government programs * Provision for credit losses increased $4.0 million compared to the fourth quarter of 2019 * Noninterest income increased $145 million, from the fourth quarter of 2019, driven by a record quarter in investment banking income, benefit from market-related adjustments to customer derivatives, and higher cards and payments income related to prepaid card revenue * Noninterest expense increased by $101 million, or 25.7%, from the fourth quarter of 2019, driven by elevated variable expenses related to prepaid card and higher variable compensation from strong revenue growth

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

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $170.3 billion at December 31, 2020.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,400 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

INVESTOR RELATIONS: KEY MEDIA NEWSROOM:

www.key.com/ir www.key.com/newsroom

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance thatany 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, 2019, 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 reversal of the U.S. economic recovery due to financial, political,or other shocks, and the extensive regulation of the U.S. financial services industry. In addition to the aforementioned factors, the COVID-19 global pandemic is adversely affecting us, our clients, and third-party service providers, among others, and its impact may adversely affect our business andresults of operations over a period of time. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we donot undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 10:00 a.m. ET, on Thursday, January 21, 2021. A replay of the call will be available through January 30, 2021.

*****

KeyCorp

Fourth Quarter 2020

Financial Supplement

Page

14 Financial Highlights

16 GAAP to Non-GAAP Reconciliation

18 Consolidated Balance Sheets

19 Consolidated Statements of Income

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

22 Noninterest Expense

22 Personnel Expense

23 Loan Composition

23 Loans Held for Sale Composition

23 Summary of Changes in Loans Held for Sale

24 Summary of Loan and Lease Loss Experience From Continuing Operations

25 Asset Quality Statistics From Continuing Operations

25 Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

25 Summary of Changes in Nonperforming Loans From Continuing Operations

26 Line of Business Results

Financial Highlights

(dollars in millions, except per share amounts)

Three months ended

12/31/20209/30/2020 12/31/2019

Summary of operations

Net interest income (TE) $1,043 $1,006 $987

Noninterest income 802 681 651

Total revenue (TE) 1,845 1,687 1,638

Provision for credit losses 20 160 109

Noninterest expense 1,128 1,037 980

Income (loss) from continuing operations 575 424 466 attributable to Key

Income (loss) from discontinued operations, 7 4 3 net of taxes

Net income (loss) attributable to Key 582 428 469



Income (loss) from continuing operations 549 397 439 attributable to Key common shareholders

Income (loss) from discontinued operations, 7 4 3 net of taxes

Net income (loss) attributable to Key common 556 401 442 shareholders



Per common share

Income (loss) from continuing operations $.57 $.41 $.45 attributable to Key common shareholders

Income (loss) from discontinued operations, .01 - - net of taxes

Net income (loss) attributable to Key common .57 .41 .45 shareholders ^(a)



Income (loss) from continuing operations attributable to Key common shareholders - .56 .41 .45 assuming dilution

Income (loss) from discontinued operations, .01 - - net of taxes - assuming dilution

Net income (loss) attributable to Key common .57 .41 .45 shareholders - assuming dilution ^(a)



Cash dividends declared .185 .185 .185

Book value at period end 16.53 16.25 15.54

Tangible book value at period end 13.61 13.32 12.56

Market price at period end 16.41 11.93 20.24



Performance ratios

From continuing operations:

Return on average total assets 1.35 %1.00 %1.27 %

Return on average common equity 13.65 9.98 11.40

Return on average tangible common equity ^(b)16.61 12.19 14.09

Net interest margin (TE) 2.70 2.62 2.98

Cash efficiency ratio ^(b) 60.3 60.6 58.7



From consolidated operations:

Return on average total assets 1.36 %1.00 %1.27 %

Return on average common equity 13.82 10.08 11.48

Return on average tangible common equity ^(b)16.82 12.31 14.19

Net interest margin (TE) 2.69 2.62 2.97

Loan to deposit ^(c) 76.5 77.2 86.6



Capital ratios at period end

Key shareholders' equity to assets 10.6 %10.4 %11.8 %

Key common shareholders' equity to assets 9.5 9.3 10.5

Tangible common equity to tangible assets ^ 7.9 7.8 8.6 (b)

Common Equity Tier 1^ (d) 9.8 9.5 9.4

Tier 1 risk-based capital ^(d) 11.1 10.9 10.9

Total risk-based capital ^(d) 13.4 13.3 12.8

Leverage ^(d) 8.9 8.7 9.9



Asset quality - from continuing operations

Net loan charge-offs $135 $128 $99

Net loan charge-offs to average loans .53 %.49 %.42 %

Allowance for loan and lease losses $1,626 $1,730 $900

Allowance for credit losses 1,823 1,938 968

Allowance for loan and lease losses to 1.61 %1.68 %.95 %period-end loans

Allowance for credit losses to period-end 1.80 1.88 1.02 loans

Allowance for loan and lease losses to 207.1 207.4 156.0 nonperforming loans ^(e)

Allowance for credit losses to nonperforming 232.2 232.4 167.8 loans ^(e)

Nonperforming loans at period-end ^(e) $785 $834 $577

Nonperforming assets at period-end ^(e) 937 1,003 715

Nonperforming loans to period-end portfolio .78 %.81 %.61 %loans ^(e)

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming .92 .97 .75 assets ^(e)



Trust assets

Assets under management $44,140 $41,312 $40,833



Other data

Average full-time equivalent employees 17,029 17,097 16,537

Branches 1,073 1,077 1,098



Taxable-equivalent adjustment $8 $6 $8



Financial Highlights (continued)

(dollars in millions, except per share amounts)

Twelve months ended

12/31/ 12/31/ 2020 2019

Summary of operations

Net interest income (TE) $4,063 $3,941

Noninterest income 2,652 2,459

Total revenue (TE) 6,715 6,400

Provision for credit losses 1,021 445

Noninterest expense 4,109 3,901

Income (loss) from continuing operations attributable to1,329 1,708 Key

Income (loss) from discontinued operations, net of taxes14 9

Net income (loss) attributable to Key 1,343 1,717



Income (loss) from continuing operations attributable to$1,223 $1,611 Key common shareholders

Income (loss) from discontinued operations, net of taxes14 9

Net income (loss) attributable to Key common 1,237 1,620 shareholders



Per common share

Income (loss) from continuing operations attributable to$1.26 $1.62 Key common shareholders

Income (loss) from discontinued operations, net of taxes.01 .01

Net income (loss) attributable to Key common 1.28 1.63 shareholders ^(a)



Income (loss) from continuing operations attributable to1.26 1.61 Key common shareholders - assuming dilution

Income (loss) from discontinued operations, net of taxes.01 .01 - assuming dilution

Net income (loss) attributable to Key common 1.27 1.62 shareholders - assuming dilution ^(a)



Cash dividends paid .74 .71



Performance ratios

From continuing operations:

Return on average total assets .82 %1.19 %

Return on average common equity 7.77 10.83

Return on average tangible common equity ^(b) 9.51 13.46

Net interest margin (TE) 2.77 3.04

Cash efficiency ratio ^(b) 60.2 59.6



From consolidated operations:

Return on average total assets .82 %1.19 %

Return on average common equity 7.86 10.89

Return on average tangible common equity ^(b) 9.62 13.53

Net interest margin (TE) 2.76 3.03



Asset quality - from continuing operations

Net loan charge-offs $443 $424

Net loan charge-offs to average total loans .43 %.46 %



Other data

Average full-time equivalent employees 16,826 17,045



Taxable-equivalent adjustment 29 32

(a) Earnings per share may not foot due to rounding.

The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common(b) 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, 2020, 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" and certain ratiosexcluding notable items.



Notable items include certain revenue or expense items that may occur in areporting period which management does not consider indicative of ongoingfinancial performance. Management believes it is useful to consider certainfinancial metrics with and without notable items, in order to enable a betterunderstanding of company results, increase comparability of period-to-periodresults, and to evaluate and forecast those results.



The tangible common equity ratio and the return on average tangible commonequity ratio have been a focus for some investors, and management believesthese ratios may assist investors in analyzing Key's capital position withoutregard to the effects of intangible assets and preferred stock.



The table also shows the computation for pre-provision net revenue, which isnot formally defined by GAAP. Management believes that eliminating the effectsof the provision for credit losses makes it easier to analyze the results bypresenting them on a more comparable basis.



The cash efficiency ratio is a ratio of two non-GAAP performance measures. Assuch, there is no directly comparable GAAP performance measure. The cashefficiency ratio performance measure removes the impact of Key's intangibleasset amortization from the calculation. Management believes this ratio providegreater consistency and comparability between Key's results and those of itspeer banks. Additionally, this ratio is used by analysts and investors as theydevelop earnings forecasts and peer bank analysis.



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

Three months ended Twelve months ended

12/31/2020 9/30/2020 12/31/2019 12/31/202012/31/2019

Tangible common equity to tangible assets at period-end

Key shareholders' $17,981 $17,722 $17,038 equity (GAAP)

Less: Intangible 2,848 2,862 2,910 assets ^(a)

Preferred Stock ^ 1,856 1,856 1,856 (b)

Tangible common $13,277 $13,004 $12,272 equity (non-GAAP)

Total assets $170,336 $170,540 $144,988 (GAAP)

Less: Intangible 2,848 2,862 2,910 assets ^(a)

Tangible assets $167,488 $167,678 $142,078 (non-GAAP)

Tangible common equity to tangible7.9 %7.8 %8.6 % assets ratio (non-GAAP)

Pre-provision net revenue

Net interest $1,035 $1,000 $979 $4,034 $3,909 income (GAAP)

Plus: Taxable-equivalent8 6 8 29 32 adjustment

Noninterest income802 681 651 2,652 2,459

Less: Noninterest 1,128 1,037 980 4,109 3,901 expense

Pre-provision net revenue from continuing $717 $650 $658 $2,606 $2,499 operations (non-GAAP)

Average tangible common equity

Average Key shareholders' $17,905 $17,730 $17,178 $17,636 $16,636 equity (GAAP)

Less: Intangible assets (average) ^2,855 2,870 2,919 2,878 2,909 (c)

Preferred stock 1,900 1,900 1,900 1,900 1,755 (average)

Average tangible common equity $13,150 $12,960 $12,359 $12,858 $11,972 (non-GAAP)

Return on average tangible common equity from continuing operations

Net income (loss) from continuing operations attributable to $549 $397 $439 $1,223 $1,611 Key common shareholders (GAAP)

Plus: Notable items, after tax ^- - 29 - 183 (d)

Net income (loss) from continuing operations attributable to $549 $397 $468 $1,223 $1,794 Key common shareholders excluding notable items (non-GAAP)

Average tangible common equity 13,150 12,960 12,359 12,858 11,972 (non-GAAP)



Return on average tangible common equity from 16.61 %12.19 %14.09 %9.51 %13.46 %continuing operations (non-GAAP)

Return on average tangible common equity from continuing 16.61 %12.19 %15.02 %9.51 %14.98 %operations excluding notable items (non-GAAP)

Return on average tangible common equity consolidated

Net income (loss) attributable to Key common $556 $401 $442 $1,237 $1,620 shareholders (GAAP)

Average tangible common equity 13,150 12,960 12,359 12,858 11,972 (non-GAAP)



Return on average tangible common equity 16.82 %12.31 %14.19 %9.62 %13.53 %consolidated (non-GAAP)

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Three months ended Twelve months ended

12/31/ 9/30/202012/31/ 12/31/ 12/31/ 2020 2019 2020 2019

Cash efficiency ratio

Noninterest expense (GAAP)$1,128 $1,037 $980 $4,109 $3,901

Less: Intangible asset 15 15 19 65 89 amortization

Adjusted noninterest $1,113 $1,022 $961 $4,044 $3,812 expense (non-GAAP)

Less: Notable items ^(d) - - 22 - 100

Adjusted noninterest expense excluding notable $1,113 $1,022 $939 $4,044 $3,712 items (non-GAAP)



Net interest income (GAAP)$1,035 $1,000 $979 $4,034 $3,909

Plus: Taxable-equivalent 8 6 8 29 32 adjustment

Noninterest income 802 681 651 2,652 2,459

Total taxable-equivalent $1,845 $1,687 $1,638 $6,715 $6,400 revenue (non-GAAP)



Cash efficiency ratio 60.3 %60.6 %58.7 %60.2 %59.6 %(non-GAAP)



Cash efficiency ratio excluding notable items 60.3 %60.6 %57.3 %60.2 %58.0 %(non-GAAP)

For the three months ended December 31, 2020, September 30, 2020, and(a) December 31, 2019, intangible assets exclude $4 million, $5 million, and $7 million, respectively, of period-end purchased credit card receivables.

(b) Net of capital surplus.

For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, average intangible assets exclude $5 million, $5(c) million, and $8 million, respectively, of average purchased credit card receivables. For the twelve months ended December 31, 2020, and December 31, 2019, average intangible assets exclude $6 million and $10 million, respectively, of average purchase credit card receivables.

(d) Additional detail provided in Notable Items table on page 24 of this release.

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets

(dollars in millions)



12/31/20209/30/2020 12/31/2019

Assets

Loans $101,185$103,081$94,646

Loans held for sale 1,583 1,724 1,334

Securities available for sale 27,556 26,895 21,843

Held-to-maturity securities 7,595 8,384 10,067

Trading account assets 735 733 1,040

Short-term investments 16,194 14,148 1,272

Other investments 621 620 605

Total earning assets 155,469 155,585 130,807

Allowance for loan and lease losses (1,626) (1,730) (900)

Cash and due from banks 1,091 956 732

Premises and equipment 753 765 814

Goodwill 2,664 2,664 2,664

Other intangible assets 188 203 253

Corporate-owned life insurance 4,286 4,274 4,233

Accrued income and other assets 6,812 7,084 5,494

Discontinued assets 699 739 891

Total assets $170,336170,540 144,988



Liabilities

Deposits in domestic offices:

NOW and money market deposit accounts $80,427 $80,791 $66,714

Savings deposits 5,913 5,585 4,651

Certificates of deposit ($100,000 or more) 2,733 3,345 6,598

Other time deposits 3,010 3,450 5,054

Total interest-bearing deposits 92,083 93,171 83,017

Noninterest-bearing deposits 43,199 43,575 28,853

Total deposits 135,282 136,746 111,870

Federal funds purchased and securities sold 220 213 387 under repurchase agreements

Bank notes and other short-term borrowings 759 818 705

Accrued expense and other liabilities 2,385 2,356 2,540

Long-term debt 13,709 12,685 12,448

Total liabilities 152,355 152,818 127,950



Equity

Preferred stock 1,900 1,900 1,900

Common shares 1,257 1,257 1,257

Capital surplus 6,281 6,263 6,295

Retained earnings 12,751 12,375 12,469

Treasury stock, at cost (4,946) (4,940) (4,909)

Accumulated other comprehensive income (loss)738 867 26

Key shareholders' equity 17,981 17,722 17,038

Noncontrolling interests - - -

Total equity 17,981 17,722 17,038

Total liabilities and equity $170,336$170,540$144,988



Common shares outstanding (000) 975,773 976,205 977,189

Consolidated Statements of Income

(dollars in millions, except per share amounts)

Three months ended Twelve months ended

12/31/ 9/30/ 12/31/ 12/31/ 12/31/2019 2020 2020 2019 2020

Interest income

Loans $933 $927 $1,046$3,866$4,267

Loans held for sale 11 18 17 69 63

Securities available for 119 115 137 484 537 sale

Held-to-maturity securities 51 53 63 222 262

Trading account assets 4 3 8 20 32

Short-term investments 4 1 12 18 61

Other investments 3 2 2 6 13

Total interest income 1,125 1,119 1,285 4,685 5,235

Interest expense

Deposits 28 54 201 347 853

Federal funds purchased and securities sold under - - 1 6 2 repurchase agreements

Bank notes and other 1 1 4 12 17 short-term borrowings

Long-term debt 61 64 100 286 454

Total interest expense 90 119 306 651 1326

Net interest income 1,035 1,000 979 4,034 3,909

Provision for credit losses 20 160 109 1,021 445

Net interest income after 1015 840 870 3,013 3,464 provision for credit losses

Noninterest income

Trust and investment 123 128 120 507 475 services income

Investment banking and debt 243 146 181 661 630 placement fees

Service charges on deposit 82 77 86 311 337 accounts

Operating lease income and 39 38 39 167 162 other leasing gains

Corporate services income 63 51 65 228 236

Cards and payments income 97 114 67 368 275

Corporate-owned life 38 30 39 139 136 insurance income

Consumer mortgage income 43 51 21 176 63

Commercial mortgage 32 18 19 80 77 servicing fees

Other income 42 28 14 15 68

Total noninterest income 802 681 651 2,652 2,459

Noninterest expense

Personnel 661 588 551 2,336 2,250

Net occupancy 75 76 76 298 293

Computer processing 62 59 51 232 214

Business services and 54 49 54 196 186 professional fees

Equipment 26 25 25 100 100

Operating lease expense 35 33 32 138 123

Marketing 30 22 27 97 96

FDIC assessment 9 6 8 32 31

Intangible asset 15 15 19 65 89 amortization

OREO expense, net - (1) 3 8 13

Other expense 161 165 134 607 506

Total noninterest expense 1,128 1,037 980 4,109 3,901

Income (loss) from continuing operations before income 689 484 541 1,556 2,022 taxes

Income taxes 114 60 75 227 314

Income (loss) from continuing575 424 466 1,329 1,708 operations

Income (loss) from discontinued operations, net7 4 3 14 9 of taxes

Net income (loss) 582 428 469 1,343 1,717

Less: Net income (loss) attributable to - - - - - noncontrolling interests

Net income (loss) $582 $428 $469 $1,343$1,717 attributable to Key



Income (loss) from continuing operations attributable to $549 $397 $439 $1,223$1,611 Key common shareholders

Net income (loss) attributable to Key common 556 401 442 1,237 1,620 shareholders

Per common share

Income (loss) from continuing operations attributable to $.57 $.41 $.45 $1.26 $1.62 Key common shareholders

Income (loss) from discontinued operations, net 0.01 - - .01 .01 of taxes

Net income (loss) attributable to Key common .57 .41 .45 1.28 1.63 shareholders ^(a)

Per common share - assuming dilution

Income (loss) from continuing operations attributable to $.56 $.41 $.45 $1.26 $1.61 Key common shareholders

Income (loss) from discontinued operations, net 0.01 - - .01 .01 of taxes

Net income (loss) attributable to Key common .57 .41 .45 1.27 1.62 shareholders ^(a)



Cash dividends declared per $.185 $.185 $.185 $.740 $.710 common share



Weighted-average common 967,987967,804973,450967,783992,091 shares outstanding (000)

Effect of common share options and other stock 8,473 6,184 10,911 7,024 10,163 awards

Weighted-average common shares and potential common 976,460973,988984,361974,8071,002,254shares outstanding (000) ^(b)

(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 2020 Third Quarter 2020 Fourth Quarter 2019

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 $53,562 $ 477 3.54 %$57,067 $ 474 3.31 %$48,345 $ 522 4.28 %industrial ^(d)

Real estate - 12,862 121 3.74 13,202 117 3.54 13,335 159 4.71 commercial mortgage

Real estate - 1,959 19 3.79 1,987 18 3.57 1,495 18 4.87 construction

Commercial lease 4,353 32 2.92 4,488 35 3.10 4,482 39 3.52 financing

Total commercial 72,736 649 3.55 76,744 644 3.34 67,657 738 4.33 loans

Real estate - 8,968 74 3.29 8,398 73 3.46 6,777 65 3.83 residential mortgage

Home equity loans 9,410 91 3.81 9,580 91 3.82 10,362 122 4.69

Consumer direct loans4,583 56 4.93 4,403 56 5.07 3,125 51 6.45

Credit cards 973 26 10.57 967 25 10.24 1,103 32 11.38

Consumer indirect 5,040 45 3.56 4,827 44 3.66 4,583 46 3.99 loans

Total consumer loans 28,974 292 4.01 28,175 289 4.10 25,950 316 4.84

Total loans 101,710 941 3.68 104,919 933 3.55 93,607 1,054 4.47

Loans held for sale 1,621 11 2.76 1,924 17 3.61 1,653 17 4.11

Securities available 28,046 119 1.75 24,941 115 1.90 22,262 137 2.49 for sale ^(b), (e)

Held-to-maturity 7,939 51 2.56 8,677 53 2.44 10,264 63 2.43 securities ^(b)

Trading account 744 4 2.21 686 4 2.08 1,103 8 3.08 assets

Short-term 14,111 4 .14 12,525 1 0.04 2,716 12 1.73 investments

Other investments ^ 615 3 1.31 640 2 1.49 603 2 1.82 (e)

Total earning assets 154,786 1,133 2.93 154,312 1,125 2.93 132,208 1,293 3.90

Allowance for loan (1,715) (1,696) (882) and lease losses

Accrued income and 15,861 16,195 14,402 other assets

Discontinued assets 717 752 908

Total assets $169,649 $169,563 $146,636

Liabilities

NOW and money market $80,636 12 .06 $80,175 26 .13 $66,412 135 .81 deposit accounts

Savings deposits 5,737 - .03 5,478 1 .04 4,660 1 .07

Certificates of deposit ($100,000 or 2,983 9 1.20 3,862 16 1.60 6,899 40 2.31 more)

Other time deposits 3,209 7 .80 3,735 11 1.17 5,187 25 1.92

Total interest-bearing 92,565 28 .12 93,250 54 .23 83,158 201 .96 deposits

Federal funds purchased and 220 - .04 225 - .05 267 1 .75 securities sold under repurchase agreements

Bank notes and other 791 1 .73 761 1 .68 801 4 2.02 short-term borrowings

Long-term debt ^(f), 12,118 61 2.05 12,801 64 2.12 12,531 100 3.22 (g)

Total interest-bearing 105,694 90 .34 107,037 119 .45 96,757 306 1.25 liabilities

Noninterest-bearing 43,156 41,694 29,446 deposits

Accrued expense and 2,177 2,350 2,347 other liabilities

Discontinued 717 752 908 liabilities ^(g)

Total liabilities 151,744 151,833 129,458

Equity

Key shareholders' 17,905 17,730 17,178 equity

Noncontrolling - - - interests

Total equity 17,905 17,730 17,178

Total liabilities and$169,649 $169,563 $146,636 equity

Interest rate spread 2.59 % 2.48 % 2.65 %(TE)

Net interest income (TE) and net interest 1,043 2.70 % 1,006 2.62 % 987 2.98 %margin (TE)

TE adjustment ^(b) 8 6 8

Net interest income, $ 1,035 $ 1,000 $ 979 GAAP basis

(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.

Interest income on tax-exempt securities and loans has been adjusted to a(b) taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019.

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

Commercial and industrial average balances include $129 million, $129(d) million, and $146 million of assets from commercial credit cards for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, 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, 2020Twelve months ended December 31, 2019

Average Yield/ Average Yield/

Balance Interest ^ Rate ^(a)Balance Interest ^ Rate ^(a) (a) (a)

Assets

Loans: ^(b), (c)

Commercial and $55,145 $1,977 3.59 % $47,482 $2,144 4.51 % industrial ^(d)

Real estate - 13,279 521 3.92 13,641 676 4.95 commercial mortgage

Real estate - 1,843 74 3.99 1,485 78 5.24 construction

Commercial lease 4,497 139 3.09 4,488 163 3.63 financing

Total commercial 74,764 2,711 3.63 67,096 3,061 4.56 loans

Real estate - residential 8,094 284 3.50 6,095 241 3.95 mortgage

Home equity loans 9,772 392 4.01 10,634 526 4.95

Consumer direct 4,213 221 5.26 2,475 176 7.11 loans

Credit cards 1,001 107 10.65 1,100 127 11.51

Consumer indirect 4,845 180 3.72 4,111 168 4.09 loans

Total consumer 27,925 1,184 4.24 24,415 1,238 5.07 loans

Total loans 102,689 3,895 3.79 91,511 4,299 4.70

Loans held for sale1,972 69 3.49 1,411 63 4.48

Securities available for sale 23,742 484 2.10 21,362 537 2.51 ^(b), (e)

Held-to-maturity 8,938 222 2.49 10,841 262 2.41 securities ^(b)

Trading account 814 20 2.47 1017 32 3.18 assets

Short-term 9,096 18 .20 2,876 61 2.11 investments

Other investments ^635 6 .87 630 13 2.09 (e)

Total earning 147,886 4,714 3.20 129,648 5,267 4.06 assets

Allowance for loan (1481) (880) and lease losses

Accrued income and 15,650 14,411 other assets

Discontinued assets775 984

Total assets $162,830 $144,163

Liabilities

NOW and money market deposit $75,733 206 .27 $63,731 566 .89 accounts

Savings deposits 5,252 2 .04 4,740 4 .09

Certificates of deposit ($100,000 4,520 83 1.83 7,757 180 2.32 or more)

Other time deposits4,041 56 1.38 5,426 103 1.90

Total interest-bearing 89,546 347 .39 81,654 853 1.04 deposits

Federal funds purchased and securities sold 670 6 .88 264 2 .66 under repurchase agreements

Bank notes and other short-term 1,452 12 .85 730 17 2.31 borrowings

Long-term debt ^ 12,578 286 2.36 13,062 454 3.52 (f), (g)

Total interest-bearing 104,246 651 .63 95,710 1326 1.39 liabilities

Noninterest-bearing37,740 28,376 deposits

Accrued expense and2,433 2,456 other liabilities

Discontinued 775 984 liabilities ^(g)

Total liabilities 145,194 127,526

Equity

Key shareholders' 17,636 16,636 equity

Noncontrolling - 1 interests

Total equity 17,636 16,637

Total liabilities $162,830 $144,163 and equity

Interest rate spread 2.57 % 2.67 % (TE)

Net interest income (TE) and net 4,063 2.77 % 3,941 3.04 % interest margin (TE)

TE adjustment ^(b) 29 32

Net interest $4,034 $3,909 income, GAAP basis

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

Interest income on tax-exempt securities and loans has been adjusted to a(b) taxable-equivalent basis using the statutory federal income tax rate of 21% for the twelve months ended December 31, 2020, and December 31, 2019, respectively.

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

(d) Commercial and industrial average balances include $135 million and $141 million of assets from commercial credit cards for the twelve months ended December 31, 2020, and December 31, 2019, 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/ 9/30/ 12/31/ 12/31/ 12/31/ 2020 2020 2019 2020 2019

Personnel ^(a) $661 $588 $ 551$2,336$2,250

Net occupancy 75 76 76 298 293

Computer processing 62 59 51 232 214

Business services and 54 49 54 196 186 professional fees

Equipment 26 25 25 100 100

Operating lease expense 35 33 32 138 123

Marketing 30 22 27 97 96

FDIC assessment 9 6 8 32 31

Intangible asset amortization 15 15 19 65 89

OREO expense, net - (1) 3 8 13

Other expense 161 165 134 607 506

Total noninterest expense $1,128$1,037$ 980$4,109$3,901

Average full-time equivalent 17,029 17,097 16,53716,826 17,045 employees ^(b)

(a) Additional detail provided in Personnel Expense table below.

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

Personnel Expense

(in millions)



Three months ended Twelve months ended

12/31/ 9/30/ 12/31/ 12/31/ 12/31/ 2020 2020 2019 2020 2019

Salaries and contract labor $342 $339 $312 $1,329$1,268

Incentive and stock-based 208 155 154 627 584 compensation

Employee benefits 89 93 85 350 348

Severance 22 1 - 30 50

Total personnel expense $661 $588 $551 $2,336$2,250

Loan Composition

(dollars in millions)



Percent change 12/ 31/2020 vs

12/31/20209/30/2020 12/31/ 9/30/ 12/31/ 2019 2020 2019

Commercial and industrial$52,907 $55,025 $48,295(3.8) %9.5 %^(a)

Commercial real estate:

Commercial mortgage 12,687 13,059 13,491 (2.8) (6.0)

Construction 1,987 1,947 1,558 2.1 27.5

Total commercial real 14,674 15,006 15,049 (2.2) (2.5) estate loans

Commercial lease 4,399 4,450 4,688 (1.1) (6.2) financing ^(b)

Total commercial loans 71,980 74,481 68,032 (3.4) 5.8

Residential - prime loans:

Real estate - residential9,298 8,715 7,023 6.7 32.4 mortgage

Home equity loans 9,360 9,488 10,274 (1.3) (8.9)

Total residential - prime18,658 18,203 17,297 2.5 7.9 loans

Consumer direct loans 4,714 4,395 3,513 7.3 34.2

Credit cards 989 970 1,130 2.0 (12.5)

Consumer indirect loans 4,844 5,032 4,674 (3.7) 3.6

Total consumer loans 29,205 28,600 26,614 2.1 9.7

Total loans ^(c), (d) $101,185$103,081$94,646(1.8) %6.9 %

Loan balances include $127 million, $128 million, and $144 million of(a) commercial credit card balances at December 31, 2020, September 30, 2020, and December 31, 2019, respectively.

Commercial lease financing includes receivables held as collateral for a secured borrowing of $23 million, $18 million, and $15 million at(b) December 31, 2020, September 30, 2020, and December 31, 2019, respectively. Principal reductions are based on the cash payments received from these related receivables.

Total loans exclude loans of $710 million at December 31, 2020, $743(c) million at September 30, 2020, and $865 million at December 31, 2019, related to the discontinued operations of the education lending business.

Accrued interest of $241 million, $235 million, and $244 million at(d) December 31, 2020, September 30, 2020, and December 31, 2019, 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 /2020 vs

12/31/ 9/30/ 12/31/ 9/30/202012/31/2019 2020 2020 2019

Commercial and industrial $249 $336 $367 (25.9) %(32.2) %

Real estate - commercial 1,014 1,031 772 (1.6) 31.3 mortgage

Commercial lease financing - 1 2 N/M N/M

Real estate - residential 264 288 140 (8.3) 88.6 mortgage

Consumer direct loans 56 68 53 (17.6) 5.7

Total loans held for sale ^ $1,583$1,724$1,334(8.2) %18.7 %(a)

Total loans held for sale include Real estate - residential mortgage loans(a) held for sale at fair value of $264 million at December 31, 2020, $288 million at September 30, 2020, and $140 million at December 31, 2019.

Summary of Changes in Loans Held for Sale

(in millions)



4Q20 3Q20 2Q20 1Q20 4Q19

Balance at beginning of period $1,724$2,007$2,143$1,334$1,598

New originations 3,835 3,282 3,621 3,333 3,659

Transfers from (to) held to (24) 75 (15) 200 26 maturity, net

Loan sales (3,932)(3,583)(3,679)(2,649)(3,933)

Loan draws (payments), net (19) (57) (61) (77) (18)

Valuation adjustments - - (2) 2 2

Balance at end of period ^(a) $1,583$1,724$2,007$2,143$1,334

Total loans held for sale include Real estate - residential mortgage loans(a) held for sale at fair value of $264 million at December 31, 2020, $288 million at September 30, 2020, $250 million at June 30, 2020, $152 million at March 31, 2020, and $140 million at December 31, 2019.

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)



Three months ended Twelve months ended

12/31/2020 9/30/2020 12/31/201912/31/2020 12/31/2019

Average loans $101,710 $104,919 $93,607 $102,689 $91,511 outstanding

Allowance for loan and lease losses $1,730 $1708 $893 $900 $883 at the end of the prior period

Cumulative effect from change in - - - 204 - accounting principle ^(a)

Allowance for loan and lease losses 1,730 1,708 893 1,104 883 at the beginning of the period

Loans charged off:

Commercial and 119 101 77 351 319 industrial



Real estate - commercial 1 13 2 19 8 mortgage

Real estate - - - 1 - 5 construction

Total commercial 1 13 3 19 13 real estate loans

Commercial lease 19 10 1 35 26 financing

Total commercial 139 124 81 405 358 loans

Real estate - residential - - - 2 3 mortgage

Home equity loans 1 4 3 11 19

Consumer direct 7 8 11 37 41 loans

Credit cards 7 9 10 39 44

Consumer indirect 6 6 10 28 34 loans

Total consumer 21 27 34 117 141 loans

Total loans 160 151 115 522 499 charged off

Recoveries:

Commercial and 15 9 5 34 27 industrial



Real estate - commercial - 2 - 3 2 mortgage

Total commercial - 2 - 3 2 real estate loans

Commercial lease - - 1 1 5 financing

Total commercial 15 11 6 38 34 loans

Real estate - residential - 1 1 1 2 mortgage

Home equity loans 1 3 2 7 8

Consumer direct 1 2 2 7 7 loans

Credit cards 2 2 1 8 7

Consumer indirect 6 4 4 18 17 loans

Total consumer 10 12 10 41 41 loans

Total recoveries 25 23 16 79 75

Net loan (135) (128) (99) (443) (424) charge-offs

Provision (credit) for loan and lease31 150 106 965 441 losses

Allowance for loan and lease losses $1,626 $1,730 $900 $1,626 $900 at end of period



Liability for credit losses on lending-related $208 $198 $65 $68 $64 commitments at the end of the prior period

Liability for credit losses on contingent - - - 7 - guarantees at the end of the prior period

Cumulative effect from change in accounting - - - 66 - principle ^(a), (b)

Liability for credit losses on lending-related 208 198 65 141 64 commitments at beginning of period

Provision (credit) for losses on (11) 10 3 56 4 lending-related commitments

Liability for credit losses on lending-related $197 $208 $68 $197 $68 commitments at end of period ^(c)



Total allowance for credit losses $1,823 $1,938 $968 $1,823 $968 at end of period



Net loan charge-offs to .53 %.49 %.42 %.43 %.46 %average total loans

Allowance for loan and lease losses 1.61 1.68 .95 1.61 .95 to period-end loans

Allowance for credit losses to 1.80 1.88 1.02 1.80 1.02 period-end loans

Allowance for loan and lease losses 207.1 207.4 156.0 207.1 156.0 to nonperforming loans

Allowance for credit losses to 232.2 232.4 167.8 232.2 167.8 nonperforming loans



Discontinued operations - education lending business:

Loans charged off $1 - $3 $5 $12

Recoveries 2 - 2 5 5

Net loan $1 - $(1) - $(7) charge-offs

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

(b) The twelve months ended December 30, 2020, amount 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)

4Q20 3Q20 2Q20 1Q20 4Q19

Net loan charge-offs $135 $128 $96 $84 $99

Net loan charge-offs to .53 %.49 %.36 %.35 %.42 %average total loans

Allowance for loan and lease $1,626 $1,730 $1,708 $1,359 $900 losses

Allowance for credit losses ^1,823 1,938 1,906 1,520 968 (a)

Allowance for loan and lease 1.61 %1.68 %1.61 %1.32 %.95 %losses to period-end loans

Allowance for credit losses 1.80 1.88 1.80 1.47 1.02 to period-end loans

Allowance for loan and lease 207.1 207.4 224.7 215.0 156.0 losses to nonperforming loans

Allowance for credit losses 232.2 232.4 250.8 240.5 167.8 to nonperforming loans

Nonperforming loans at period$785 $834 $760 $632 $577 end

Nonperforming assets at 937 1,003 951 844 715 period end

Nonperforming loans to .78 %.81 %.72 %.61 %.61 %period-end portfolio loans

Nonperforming assets to period-end portfolio loans .92 .97 .89 .82 .75 plus OREO and other nonperforming assets

(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/ 9/30/20206/30/ 3/31/ 12/31/ 2020 2020 2020 2019

Commercial and industrial $385 $459 $404 $277 $264



Real estate - commercial mortgage 104 104 91 87 83

Real estate - construction - 1 1 2 2

Total commercial real estate loans 104 105 92 89 85

Commercial lease financing 8 6 9 5 6

Total commercial loans 497 570 505 371 355

Real estate - residential mortgage 110 96 89 89 48

Home equity loans 154 146 141 143 145

Consumer direct loans 5 3 3 4 4

Credit cards 2 2 2 3 3

Consumer indirect loans 17 17 20 22 22

Total consumer loans 288 264 255 261 222

Total nonperforming loans 785 834 760 632 577

OREO 100 105 112 119 35

Nonperforming loans held for sale 49 61 75 89 94

Other nonperforming assets 3 3 4 4 9

Total nonperforming assets $937 $1,003 $951 $844 $715

Accruing loans past due 90 days or 86 73 87 128 97 more

Accruing loans past due 30 through 241 336 419 393 329 89 days

Restructured loans - accruing and 363 306 310 340 347 nonaccruing ^(a)

Restructured loans included in 229 168 166 172 183 nonperforming loans ^(a)

Nonperforming assets from discontinued operations - education5 6 7 7 7 lending business

Nonperforming loans to period-end .78 %.81 %.72 %.61 %.61 %portfolio loans

Nonperforming assets to period-end portfolio loans plus OREO and other.92 .97 .89 .82 .75 nonperforming assets

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

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

4Q20 3Q20 2Q20 1Q20 4Q19

Balance at beginning of period $834$760$632$577$585

Loans placed on nonaccrual status ^(a) 300 387 293 219 268

Charge-offs (160)(150)(111)(100)(114)

Loans sold (9) (6) (5) (4) (1)

Payments (83) (83) (29) (31) (59)

Transfers to OREO (3) - - (3) (3)

Transfers to nonperforming loans held for - - - - (47) sale

Loans returned to accrual status (94) (74) (20) (26) (52)

Balance at end of period $785$834$760$632$577

Purchase credit impaired (PCI) loans meeting nonperforming criteria were historically excluded from Key's nonperforming disclosures. As a result of(a) CECL implementation on January 1, 2020, PCI loans became purchased credit deteriorated (PCD) loans. PCD loans that met the definition of nonperforming are now included in nonperforming disclosures, resulting in a $45 million increase in nonperforming loans in the first quarter of 2020.

Line of Business Results

(dollars in millions)



Percentage change 4Q20 vs.

4Q20 3Q20 2Q20 1Q20 4Q19 3Q20 4Q19

Consumer Bank

Summary of operations

Total revenue$905 $871 $841 $820 $825 3.9 %9.7 %(TE)

Provision for(4) (16) 167 140 55 N/M N/M credit losses

Noninterest 611 571 555 542 550 7.0 11.1 expense

Net income (loss) 228 241 91 105 168 (5.4) 35.7 attributable to Key

Average loans41,137 41,471 39,197 35,197 34,148 (.8) 20.5 and leases

Average 83,171 83,175 79,502 73,320 73,561 - 13.1 deposits

Net loan 28 23 39 43 43 21.7 (34.9) charge-offs

Net loan charge-offs .27 %.22 %.40 %.49 %.50 %N/A N/A to average total loans

Nonperforming assets at $374 $353 $332 $342 $306 5.9 22.2 period end

Return on average 25.45 %27.03 %10.45 %12.26 %19.64 %N/A N/A allocated equity



Commercial Bank

Summary of operations

Total revenue$913 $804 $857 $630 $771 13.6 %18.4 %(TE)

Provision for42 163 314 218 38 (74.2) 10.5 credit losses

Noninterest 494 443 438 358 393 11.5 25.7 expense

Net income (loss) 308 160 101 63 311 92.5 (1.0) attributable to Key

Average loans59,992 62,925 68,038 60,082 58,535 (4.7) 2.5 and leases

Average loans1,285 1,383 2,012 1,607 1,465 (7.1) (12.3) held for sale

Average 52,163 51,238 47,685 36,256 38,224 1.8 36.5 deposits

Net loan 108 104 57 40 39 3.8 176.9 charge-offs

Net loan charge-offs .72 %.66 %.34 %.27 %.26 %N/A N/A to average total loans

Nonperforming assets at $558 $645 $616 $407 $402 (13.5) 38.8 period end

Return on average 24.04 %12.57 %8.41 %5.40 %26.40 %N/A N/A allocated equity

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

Notable Items

(in millions)



Three months ended Twelve months ended

12/31/9/30/ 12/31/ 12/31/ 12/31/ 2020 2020 2019 2020 2019

Provision for credit losses - - $(16)- $(139)



Professional fees related to fraud- - (4) - (4) loss

Efficiency initiative expenses - - - - (76)

Laurel Road acquisition expenses - - - - (2)

Pension settlement charge - - (18) - (18)

Total notable items - - (38) - (239)

Income taxes - - (9) - (56)

Total notable items, after tax - - $(29)- $(183)

View original content to download multimedia: http://www.prnewswire.com/news-releases/keycorp-reports-record-fourth-quarter-2020-net-income-of-549-million-or-56-per-diluted-common-share-301212455.html

SOURCE KeyCorp