PR Newswire | Jul 20, 2021 06:31AM EDT

Per Diluted Common Share

07/20 05:30 CDT

KeyCorp Reports Record Second Quarter 2021 Net Income Of $698 Million, Or $.72 Per Diluted Common ShareRecord second quarter revenue, driven by an 8% year-over-year increase in noninterest incomeInvestment banking and debt placement fees up 39% from year-ago periodStrong consumer originations: over $4.0 billion in consumer mortgage and Laurel Road originationsSuccessful launch of Laurel Road for DoctorsStrong credit quality: nonperforming loans down from the prior quarter and year-ago period and net charge-offs to average loans of 9 basis pointsAnnounced new common share repurchase authorization of up to $1.5 billion CLEVELAND, July 20, 2021

CLEVELAND, July 20, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $698 million, or $.72 per diluted common share for the second quarter of 2021. This compared to $591 million, or $.61 per diluted common share, for the first quarter of 2021 and $159 million, or $.16 per diluted common share, for the second quarter of 2020.

Our results this quarter reflect the success of our productive, client-centric team, strong risk management practices, and momentum from recent investments in both our teammates and digital capabilities.

We generated record second quarter revenue, driven by growth in both our commercial and consumer businesses, as we acquired and deepened relationships across our franchise. Our fee-based businesses reported another strong quarter, with noninterest income up 8% year-over-year. Our investment banking business generated record fees for the second quarter. Furthermore, our investment banking revenue in the second quarter represents the second-highest quarter in our history. With broad-based growth across our targeted industry verticals and continued investments in our teammates, our investment banking business has delivered a decade of consistent growth.

Credit quality remained strong this quarter, with lower nonperforming loans and net charge-offs as a percent of loans of 9 basis points. Our positive credit trends reflect our strong risk culture and disciplined underwriting practices. Our capital position also continues to be one of our strengths, with a Common Equity Tier 1 ratio of 9.9% at the end of the quarter. Earlier this month, our Board of Directors approved a new share repurchase authorization of up to $1.5 billion and will evaluate an increase to the common stock dividend in the fourth quarter 2021.

- Chris Gorman, Chairman and CEO

Selected Financial Highlights



dollars in millions, except per share data Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Income (loss) from continuing operations attributable to Key common $698 $591 $159 18.1%339.0 %shareholders

Income (loss) from continuing operations attributable to Key common shareholders per .72 .61 .16 18.0 350.0 common share - assuming dilution

Return on average tangible common equity from continuing operations ^(a) 22.34 %18.25 %4.96 %N/A N/A

Return on average total assets from continuing operations 1.63 1.44 .45 N/A N/A

Common Equity Tier 1 ratio ^(b) 9.9 9.9 9.1 N/A N/A

Book value at period end $16.75 $16.22 $16.07 3.3 %4.2 %

Net interest margin (TE) from continuing operations 2.52 %2.61 %2.76 %N/A N/A



The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial(a) 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) June 30, 2021 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS



Revenue



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Net interest income (TE) $1,023$1,012$1,0251.1 %(.2) %

Noninterest income 750 738 692 1.6 8.4

Total revenue $1,773$1,750$1,7171.3 %3.3 %



TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the second quarter of 2021, a decrease of $2 million from the second quarter of 2020. The decrease in net interest income reflects a decrease in the net interest margin, largely offset by higher earning asset balances. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity.

Compared to the first quarter of 2021, taxable-equivalent net interest income increased by $11 million, and the net interest margin decreased by 9 basis points. Both net interest income and the net interest margin were impacted by higher earning asset balances, including elevated levels of liquidity, lower interest-bearing deposit costs, and higher loan fees from the Paycheck Protection Program ("PPP") forgiveness, partially offset by lower earning asset yields. Net interest income also benefited from one additional day in the second quarter of 2021.

Noninterest Income



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Trust and investment services income $133$133$123- %8.1 %

Investment banking and debt placement fees 217 162 156 34.0 39.1

Service charges on deposit accounts 83 73 68 13.7 22.1

Operating lease income and other leasing gains36 38 60 (5.3) (40.0)

Corporate services income 55 64 52 (14.1) 5.8

Cards and payments income 113 105 91 7.6 24.2

Corporate-owned life insurance income 30 31 35 (3.2) (14.3)

Consumer mortgage income 26 47 62 (44.7) (58.1)

Commercial mortgage servicing fees 44 34 12 29.4 266.7

Other income 13 51 33 (74.5) (60.6)

Total noninterest income $750$738$6921.6 %8.4 %



Compared to the second quarter of 2020, noninterest income increased by $58 million, primarily driven by a $61 million increase in investment banking and debt placement fees. Commercial mortgage servicing fees increased $32 million. Additionally, cards and payments income increased $22 million, reflecting broad-based growth across credit, debit, and merchant product categories. Partially offsetting these increases were consumer mortgage income and other income, which decreased $36 million and $20 million, respectively.

Compared to the first quarter of 2021, noninterest income increased by $12 million. The largest driver of the quarter-over-quarter increase was a $55 million increase in investment banking and debt placement fees, reflecting broad-based growth in all areas. Commercial mortgage servicing fees and service charges on deposit accounts both increased $10 million. Partially offsetting these increases were a $38 million decrease in other income, reflecting market-related valuation adjustments, and a $21 million decrease in consumer mortgage income.

Noninterest Expense



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Personnel expense $623 $624 $572 (.2) %8.9%

Nonpersonnel expense 453 447 441 1.3 2.7

Total noninterest expense$1,076$1,071$1,013.5 %6.2%



Key's noninterest expense was $1.1 billion for the second quarter of 2021, an increase of $63 million from the year-ago period. The increase is primarily related to higher personnel costs of $51 million, reflecting higher incentive and stock-based compensation, attributed to an increase in revenue and stock performance and an increase in employee benefits. Additionally, other drivers for the year-over-year increase include higher computer processing expense and marketing expense.

Compared to the first quarter of 2021, noninterest expense increased $5 million. Incentive and stock-based compensation increased $14 million, reflecting Key's strong investment banking performance, offset by a $15 million decrease in employee benefits.

BALANCE SHEET HIGHLIGHTS



Average Loans



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Commercial and industrial ^(a)$51,808 $52,581 $60,480 (1.5)%(14.3)%

Other commercial loans 19,034 18,848 19,850 1.0 (4.1)

Total consumer loans 29,972 29,299 27,611 2.3 8.6

Total loans $100,814$100,728$107,941.1 %(6.6) %



Commercial and industrial average loan balances include $132 million, $126(a) million, and $135 million of assets from commercial credit cards at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

Average loans were $100.8 billion for the second quarter of 2021, a decrease of $7.1 billion compared to the second quarter of 2020. Commercial loans decreased $9.5 billion, reflecting decreased utilization versus the year-ago period, partly offset by growth in PPP loans. Consumer loans increased $2.4 billion, reflecting strength from Laurel Road and Key's consumer mortgage business, partly offset by Key's exit from the indirect auto lending business.

Compared to the first quarter of 2021, average loans increased by $86 million. Commercial loans declined due to lower commercial utilization rates, partly offset by growth in PPP loans. Consumer loans continue to reflect strength from Key's consumer mortgage business, partly offset by Key's exit from the indirect auto lending business.

Average Deposits



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Non-time deposits $139,480 $132,267 $118,694 5.5 %17.5 %

Certificates of deposit ($100,000 or more)2,212 2,571 4,950 (14.0) (55.3)

Other time deposits 2,630 2,902 4,333 (9.4) (39.3)

Total deposits $144,322 $137,740 $127,977 4.8 %12.8 %



Cost of total deposits .05 %.06 %.30 %N/A N/A



N/A = Not Applicable

Average deposits totaled $144.3 billion for the second quarter of 2021, an increase of $16.3 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits.

Compared to the first quarter of 2021, average deposits increased by $6.6 billion, primarily driven by broad-based commercial growth and higher consumer balances.

ASSET QUALITY



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Net loan charge-offs $22 $114 $96 (80.7)%(77.1) %

Net loan charge-offs to average total loans .09 %.46 %.36 %N/A N/A

Nonperforming loans at period end $694 $728 $760 (4.7) (8.7)

Nonperforming assets at period end 738 790 951 (6.6) (22.4)

Allowance for loan and lease losses 1,220 1,438 1,708 (15.2) (28.6)

Allowance for credit losses 1,372 1,616 1,906 (15.1) (28.0)

Allowance for loan and lease losses to nonperforming loans175.8 %197.5 %224.7%N/A N/A

Allowance for credit losses to nonperforming loans 197.7 222.0 250.8 N/A N/A

Provision for credit losses $(222) $(93) $482 138.7 %(146.1)%



N/A = Not Applicable

Key's provision for credit losses was a net benefit of $222 million, including a $244 million reserve release for the second quarter of 2021, compared to an expense of $482 million in the second quarter of 2020 and a net benefit of $93 million in the first quarter of 2021. The reserve release was largely driven by a continued improvement in the economic outlook.

Net loan charge-offs for the second quarter of 2021 totaled $22 million, or .09% of average total loans. These results compare to $96 million, or .36%, for the second quarter of 2020 and $114 million, or .46%, for the first quarter of 2021. Key's allowance for credit losses was $1.4 billion, or 1.36% of total period-end loans at June 30, 2021, compared to 1.80% at June 30, 2020, and 1.60% at March 31, 2021.

At June 30, 2021, Key's nonperforming loans totaled $694 million, which represented .69% of period-end portfolio loans. These results compare to .72% at June 30, 2020, and .72% at March 31, 2021. Nonperforming assets at June 30, 2021, totaled $738 million, and represented .73% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at June 30, 2020, and .78% at March 31, 2021.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2021.

Capital Ratios



6/30/20213/31/20216/30/2020

Common Equity Tier 1 ^(a) 9.9 %9.9 %9.1 %

Tier 1 risk-based capital ^(a) 11.3 11.3 10.5

Total risk based capital ^(a) 13.2 13.4 12.8

Tangible common equity to tangible assets ^(b)7.4 7.5 7.6

Leverage ^(a) 8.7 8.9 8.8



(a) June 30, 2021 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 second quarter of 2021. As shown in the preceding table, at June 30, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.9% and 11.3%, respectively. Key's tangible common equity ratio was 7.4% at June 30, 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 20 basis points.

Summary of Changes in Common Shares Outstanding



in thousands Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Shares outstanding at beginning of period 972,587 975,773975,319(.3) %(.3) %

Open market repurchases and return of shares under employee compensation(13,304)(9,277)(19) 43.4 N/M plans

Shares issued under employee compensation plans (net of cancellations) 993 6,091 647 (83.7) 53.5

Shares outstanding at end of period 960,276 972,587975,947(1.3) %(1.6)%



N/M = Not Meaningful

During the second quarter of 2021, Key declared a dividend of $.185 per common share and completed $300 million of common share repurchases. Capital distributions for the quarter were consistent with the regulatory capital distribution guidelines. In July of 2021, Key's Board of Directors approved a new share repurchase authorization program of up to $1.5 billion, applicable for the third quarter of 2021 through the third quarter of 2022, that supersedes the remaining capacity under the previous authorization. Additionally, Key will evaluate an increase to the per share common dividend in the fourth quarter of 2021, subject to Board approval.

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 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Revenue from continuing operations (TE)

Consumer Bank $854 $867 $835 (1.5)%2.3 %

Commercial Bank 874 859 879 1.7 (.6)

Other ^(a) 45 24 3 87.5 1,400.0

Total $1,773$1,750$1,7171.3 %3.3 %



Income (loss) from continuing operations attributable to Key

Consumer Bank $259 $220 $98 17.7 %164.3 %

Commercial Bank 434 384 106 13.0 309.4

Other ^(a) 31 14 (19) 121.4 N/M

Total $724 $618 $185 17.2 %291.4 %



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 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Summary of operations

Net interest income (TE) $600 $610 $589 (1.6) %1.9 %

Noninterest income 254 257 246 (1.2) 3.3

Total revenue (TE) 854 867 835 (1.5) 2.3

Provision for credit losses (70) (23) 155 (204.3) (145.2)

Noninterest expense 584 601 552 (2.8) 5.8

Income (loss) before income taxes (TE) 340 289 128 17.6 165.6

Allocated income taxes (benefit) and TE adjustments81 69 30 17.4 170.0

Net income (loss) attributable to Key $259 $220 $98 17.7 %164.3 %



Average balances

Loans and leases $40,598$39,249$37,3003.4 %8.8 %

Total assets 43,991 42,476 42,194 3.6 4.3

Deposits 88,412 85,033 79,235 4.0 11.6



Assets under management at period end $47,737$45,218$39,7225.6 %20.2 %



TE = Taxable Equivalent

Additional Consumer Bank Data



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Noninterest income

Trust and investment services income $104 $101 $87 3.0 %19.5 %

Service charges on deposit accounts 47 38 36 23.7 30.6

Cards and payments income 62 54 47 14.8 31.9

Consumer mortgage income 26 47 61 (44.7) (57.4)

Other noninterest income 15 17 15 (11.8) .0

Total noninterest income $254 $257 $246 (1.2) %3.3 %



Average deposit balances

NOW and money market deposit accounts $56,038 $54,685 $49,143 2.5 %14.0 %

Savings deposits 6,523 5,878 4,816 11.0 35.4

Certificates of deposit ($100,000 or more) 2,083 2,424 4,520 (14.1) (53.9)

Other time deposits 2,615 2,888 4,296 (9.5) (39.1)

Noninterest-bearing deposits 21,153 19,159 16,460 10.4 28.5

Total deposits $88,412 $85,033 $79,235 4.0 11.6 %



Home equity loans

Average balance $9,081 $9,234 $9,893

Combined weighted-average loan-to-value ratio (at date of origination)68 %69 %70 %

Percent first lien positions 70 68 63



Other data

Branches 1,014 1,068 1,077

Automated teller machines 1,329 1,368 1,394



Consumer Bank Summary of Operations (2Q21 vs. 2Q20)

* Net income attributable to Key of $259 million for the second quarter of 2021, compared to $98 million for the year-ago quarter * Taxable-equivalent net interest income increased by $11 million, or 1.9%, compared to the second quarter of 2020, driven by strong consumer mortgage balance sheet growth and fees related to PPP loans, partially offset by the lower interest rate environment * Average loans and leases increased $3.3 billion, or 8.8%, driven by growth in consumer mortgage and benefit from the PPP * Average deposits increased $9.2 billion, or 11.6%, from the second quarter of 2020, driven by retention of consumer stimulus payments and relationship growth * Provision for credit losses decreased $225 million, compared to the second quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions and continued strength in client credit quality * Noninterest income increased $8 million, or 3.3%, from the year ago quarter, driven by higher trust and investment services income and client spend activity, partially offset by lower consumer mortgage income, due to lower gain on sale volume * Noninterest expense increased $32 million, or 5.8%, from the year ago quarter, driven by higher variable compensation and support expenses related to higher loan volumes

Commercial Bank





dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Summary of operations

Net interest income (TE) $419 $413 $458 1.5 %(8.5) %

Noninterest income 455 446 421 2.0 8.1

Total revenue (TE) 874 859 879 1.7 (.6)

Provision for credit losses (131) (67) 326 95.5 (140.2)

Noninterest expense 451 443 441 1.8 2.3

Income (loss) before income taxes (TE) 554 483 112 14.7 394.6

Allocated income taxes and TE adjustments120 99 6 21.2 N/M

Net income (loss) attributable to Key $434 $384 $106 13.0 %309.4 %



Average balances

Loans and leases $59,953$61,221$70,336(2.1)%(14.8) %

Loans held for sale 1,341 1,237 2,012 8.4 (33.3)

Total assets 69,101 70,448 79,267 (1.9) (12.8)

Deposits 54,814 51,894 47,954 5.6 %14.3 %



TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data



dollars in millions Change 2Q21 vs.

2Q21 1Q21 2Q20 1Q21 2Q20

Noninterest income

Trust and investment services income $27 $32 $37 (15.6)%(27.0)

Investment banking and debt placement fees 215 162 156 32.7 37.8 %

Operating lease income and other leasing gains35 38 59 (7.9) (40.7)



Corporate services income 47 56 45 (16.1) 4.4

Service charges on deposit accounts 34 33 30 3.0 13.3

Cards and payments income 49 52 45 (5.8) 8.9

Payments and services income 130 141 120 (7.8) 8.3



Commercial mortgage servicing fees 44 34 12 29.4 266.7

Other noninterest income 4 39 37 (89.7) (89.2)

Total noninterest income $455$446$4212.0 %8.1 %



N/M = Not Meaningful

Commercial Bank Summary of Operations (2Q21 vs. 2Q20)

* Net income attributable to Key of $434 million for the second quarter of 2021, compared to $106 million for the year-ago quarter * Taxable-equivalent net interest income decreased by $39 million, compared to the second quarter of 2020, as lower average loan balances offset fees related to PPP loans * Average loan and lease balances decreased $10.4 billion, compared to the second quarter of 2020, driven by lower commercial and industrial line draws * Average deposit balances increased $6.9 billion, or 14.3%, compared to the second quarter of 2020, driven by growth in targeted relationships and the impact of government programs * Provision for credit losses decreased $457 million, compared to the second quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions * Noninterest income increased $34 million, from the year-ago quarter, driven by elevated investment banking client activity and commercial mortgage servicing fees, partially offset by favorable market-related adjustments to customer derivatives in the year-ago period * Noninterest expense increased by $10 million, or 2.3%, from the second quarter of 2020, driven by higher personnel-related costs

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

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 $181.1 billion at June 30, 2021.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,300 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.



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 thatcould 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 othershocks, the extensive regulation of the U.S. financial services industry, andthe 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 10:00 a.m. ET, on July 20, 2021. A replay of the call will be available through July 29, 2021.

*****

KeyCorp

Second 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

22 Summary of Loan and Lease Loss Experience From Continuing Operations

23 Asset Quality Statistics From Continuing Operations

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

23 Summary of Changes in Nonperforming Loans From Continuing Operations

24 Line of Business Results

Financial Highlights

(dollars in millions, except per share amounts)

Three months ended

6/30/2021 3/31/2021 6/30/2020

Summary of operations

Net interest income (TE) $1,023 $1,012 $1,025

Noninterest income 750 738 692

Total revenue (TE) 1,773 1,750 1,717

Provision for credit losses (222) (93) 482

Noninterest expense 1,076 1,071 1,013

Income (loss) from continuing operations attributable to Key 724 618 185

Income (loss) from discontinued operations, net of taxes 5 4 2

Net income (loss) attributable to Key 729 622 187



Income (loss) from continuing operations attributable to Key common 698 591 159 shareholders

Income (loss) from discontinued operations, net of taxes 5 4 2

Net income (loss) attributable to Key common shareholders 703 595 161



Per common share

Income (loss) from continuing operations attributable to Key common $.73 $.61 $.16 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) .73 .62 .17



Income (loss) from continuing operations attributable to Key common .72 .61 .16 shareholders - assuming dilution

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

Net income (loss) attributable to Key common shareholders - assuming dilution ^ .73 .61 .17 (a)



Cash dividends declared .185 .185 .185

Book value at period end 16.75 16.22 16.07

Tangible book value at period end 13.81 13.30 13.12

Market price at period end 20.65 19.98 12.18



Performance ratios

From continuing operations:

Return on average total assets 1.63 %1.44 %.45 %

Return on average common equity 18.21 14.98 4.05

Return on average tangible common equity ^(b) 22.34 18.25 4.96

Net interest margin (TE) 2.52 2.61 2.76

Cash efficiency ratio ^(b) 59.9 60.3 57.9



From consolidated operations:

Return on average total assets 1.64 %1.45 %.46 %

Return on average common equity 18.34 15.08 4.10

Return on average tangible common equity ^(b) 22.50 18.37 5.02

Net interest margin (TE) 2.55 2.60 2.76

Loan to deposit ^(c) 70.4 73.1 80.4



Capital ratios at period end

Key shareholders' equity to assets 9.9 %10.0 %10.2 %

Key common shareholders' equity to assets 8.9 9.0 9.2

Tangible common equity to tangible assets ^(b) 7.4 7.5 7.6

Common Equity Tier 1^ (d) 9.9 9.9 9.1

Tier 1 risk-based capital ^(d) 11.3 11.3 10.5

Total risk-based capital ^(d) 13.2 13.4 12.8

Leverage ^(d) 8.7 8.9 8.8



Asset quality - from continuing operations

Net loan charge-offs $22 $114 $96

Net loan charge-offs to average loans .09 %.46 %.36 %

Allowance for loan and lease losses $1,220 $1,438 $1,708

Allowance for credit losses 1,372 1,616 1,906

Allowance for loan and lease losses to period-end loans 1.21 %1.42 %1.61 %

Allowance for credit losses to period-end loans 1.36 1.60 1.80

Allowance for loan and lease losses to nonperforming loans 175.8 197.5 224.7

Allowance for credit losses to nonperforming loans 197.7 222.0 250.8

Nonperforming loans at period-end $694 $728 $760

Nonperforming assets at period-end 738 790 951

Nonperforming loans to period-end portfolio loans .69 %.72 %.72 %

Nonperforming assets to period-end portfolio loans plus OREO and other .73 .78 .89 nonperforming assets



Trust assets

Assets under management $47,737 $45,218 $39,722



Other data

Average full-time equivalent employees 17,157 17,086 16,646

Branches 1,014 1,068 1,077

Taxable-equivalent adjustment $6 $7 $7



Financial Highlights (continued)

(dollars in millions, except per share amounts)

Six months ended

6/30/20216/30/2020

Summary of operations

Net interest income (TE) $2,035 $2,014

Noninterest income 1,488 1,169

Total revenue (TE) 3,523 3,183

Provision for credit losses (315) 841

Noninterest expense 2,147 1,944

Income (loss) from continuing operations attributable to Key 1,342 330

Income (loss) from discontinued operations, net of taxes 9 3

Net income (loss) attributable to Key 1,351 333



Income (loss) from continuing operations attributable to Key common 1,289 277 shareholders

Income (loss) from discontinued operations, net of taxes 9 3

Net income (loss) attributable to Key common shareholders 1,298 280



Per common share

Income (loss) from continuing operations attributable to Key common $1.34 $.29 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) 1.35 .29



Income (loss) from continuing operations attributable to Key common 1.33 .28 shareholders - assuming dilution

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

Net income (loss) attributable to Key common shareholders - assuming dilution ^ 1.34 .29 (a)



Cash dividends paid .37 .37



Performance ratios

From continuing operations:

Return on average total assets 1.55 %.43 %

Return on average common equity 16.64 3.58

Return on average tangible common equity ^(b) 20.34 4.40

Net interest margin (TE) 2.56 2.88

Cash efficiency ratio ^(b) 60.1 60.0



From consolidated operations:

Return on average total assets 1.55 %.43 %

Return on average common equity 16.76 3.62

Return on average tangible common equity ^(b) 20.48 4.45

Net interest margin (TE) 2.57 2.87



Asset quality - from continuing operations

Net loan charge-offs $136 $180

Net loan charge-offs to average total loans .27 %.35 %



Other data

Average full-time equivalent employees 17,122 16,587



Taxable-equivalent adjustment 13 15

(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) June 30, 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 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 Six months ended

6/30/2021 3/31/2021 6/30/2020 6/30/2021 6/30/2020

Tangible common equity to tangible assets at period-end

Key shareholders' equity (GAAP) $17,941 $17,634 $17,542

Less: Intangible assets ^(a) 2,828 2,842 2,877

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

Tangible common equity (non-GAAP) $13,257 $12,936 $12,809

Total assets (GAAP) $181,115 $176,203 $171,192

Less: Intangible assets ^(a) 2,828 2,842 2,877

Tangible assets (non-GAAP) $178,287 $173,361 $168,315

Tangible common equity to tangible assets ratio (non-GAAP) 7.44 %7.46 %7.61 %

Pre-provision net revenue

Net interest income (GAAP) $1,017 $1,005 $1,018 $2,022 $1,999

Plus: Taxable-equivalent adjustment 6 7 7 13 15

Noninterest income 750 738 692 1,488 1,169

Less: Noninterest expense 1,076 1,071 1,013 2,147 1,944

Pre-provision net revenue from continuing operations (non-GAAP) $697 $679 $704 $1,376 $1,239

Average tangible common equity

Average Key shareholders' equity (GAAP) $17,271 $17,769 $17,688 $17,519 $17,452

Less: Intangible assets (average) ^(c) 2,840 2,844 2,886 2,840 2,894

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

Average tangible common equity (non-GAAP) $12,531 $13,025 $12,902 $12,779 $12,658

Return on average tangible common equity from continuing operations

Net income (loss) from continuing operations attributable to Key common $698 $591 $159 $1,289 $277 shareholders (GAAP)

Average tangible common equity (non-GAAP) 12,531 13,025 12,902 12,779 12,658



Return on average tangible common equity from continuing operations (non-22.34 %18.25 %4.96 %20.34 %4.40 %GAAP)

Return on average tangible common equity consolidated

Net income (loss) attributable to Key common shareholders (GAAP) $703 $595 $161 $1,298 $280

Average tangible common equity (non-GAAP) 12,531 13,025 12,902 12,779 12,658



Return on average tangible common equity consolidated (non-GAAP) 22.50 %18.37 %5.02 %20.48 %4.45 %

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Three months ended Six months ended

6/30/20213/31/20216/30/20206/30/20216/30/2020

Cash efficiency ratio

Noninterest expense (GAAP) $1,076 $1,071 $1,013 $2,147 $1,944

Less: Intangible asset amortization 14 15 18 29 35

Adjusted noninterest expense (non-GAAP) $1,062 $1,056 $995 $2,118 $1,909



Net interest income (GAAP) $1,017 $1,005 $1,018 $2,022 $1,999

Plus: Taxable-equivalent adjustment 6 7 7 13 15

Noninterest income 750 738 692 1,488 1,169

Total taxable-equivalent revenue (non-GAAP)$1,773 $1,750 $1,717 $3,523 $3,183



Cash efficiency ratio (non-GAAP) 59.9 %60.3 %57.9 %60.1 %60.0 %



For the three months ended June 30, 2021, March 31, 2021, and June 30,(a) 2020, intangible assets exclude $4 million, $4 million, and $5 million, respectively, of period-end purchased credit card receivables.

(b) Net of capital surplus.

For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, average intangible assets exclude $4 million, $4 million, and $6(c) million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2021, and June 30, 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)



6/30/2021 3/31/2021 6/30/2020

Assets

Loans $100,730$100,926$106,159

Loans held for sale 1,537 2,296 2,007

Securities available for sale 34,638 33,923 23,600

Held-to-maturity securities 6,175 6,857 9,075

Trading account assets 851 811 645

Short-term investments 20,460 15,376 14,036

Other investments 635 621 655

Total earning assets 165,026 160,810 156,177

Allowance for loan and lease losses (1,220) (1,438) (1,708)

Cash and due from banks 792 938 1,059

Premises and equipment 785 737 776

Goodwill 2,673 2,673 2,664

Other intangible assets 159 173 218

Corporate-owned life insurance 4,304 4,296 4,251

Accrued income and other assets 7,966 7,347 6,976

Discontinued assets 630 667 779

Total assets $181,115176,203 171,192



Liabilities

Deposits in domestic offices:

NOW and money market deposit accounts $85,242 $82,777 $78,853

Savings deposits 6,993 6,655 5,371

Certificates of deposit ($100,000 or more) 2,064 2,437 4,476

Other time deposits 2,493 2,782 4,011

Total interest-bearing deposits 96,792 94,651 92,711

Noninterest-bearing deposits 49,280 47,532 42,802

Total deposits 146,072 142,183 135,513

Federal funds purchased and securities sold under repurchase agreements 211 281 267

Bank notes and other short-term borrowings 723 744 1,716

Accrued expense and other liabilities 2,957 2,862 2,420

Long-term debt 13,211 12,499 13,734

Total liabilities 163,174 158,569 153,650



Equity

Preferred stock 1,900 1,900 1,900

Common shares 1,257 1,257 1,257

Capital surplus 6,232 6,213 6,240

Retained earnings 13,689 13,166 12,154

Treasury stock, at cost (5,287) (5,005) (4,945)

Accumulated other comprehensive income (loss) 150 103 936

Key shareholders' equity 17,941 17,634 17,542

Noncontrolling interests - - -

Total equity 17,941 17,634 17,542

Total liabilities and equity $181,115$176,203$171,192



Common shares outstanding (000) 960,276 972,587 975,947

Consolidated Statements of Income

(dollars in millions, except per share amounts)

Three months ended Six months ended

6/30/20213/31/20216/30/20206/30/20216/30/2020

Interest income

Loans $888 $889 $980 $1,777 $2,006

Loans held for sale 11 11 21 22 40

Securities available for sale 133 130 121 263 250

Held-to-maturity securities 45 45 56 90 118

Trading account assets 5 5 5 10 13

Short-term investments 6 5 7 11 13

Other investments 2 2 - 4 1

Total interest income 1,090 1,087 1,190 2,177 2,441

Interest expense

Deposits 16 21 96 37 265

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

Bank notes and other short-term borrowings 3 1 5 4 10

Long-term debt 54 60 71 114 161

Total interest expense 73 82 172 155 442

Net interest income 1,017 1,005 1,018 2,022 1,999

Provision for credit losses (222) (93) 482 (315) 841

Net interest income after provision for credit losses 1,239 1,098 536 2,337 1,158

Noninterest income

Trust and investment services income 133 133 123 266 256

Investment banking and debt placement fees 217 162 156 379 272

Service charges on deposit accounts 83 73 68 156 152

Operating lease income and other leasing gains 36 38 60 74 90

Corporate services income 55 64 52 119 114

Cards and payments income 113 105 91 218 157

Corporate-owned life insurance income 30 31 35 61 71

Consumer mortgage income 26 47 62 73 82

Commercial mortgage servicing fees 44 34 12 78 30

Other income 13 51 33 64 (55)

Total noninterest income 750 738 692 1,488 1,169

Noninterest expense

Personnel 623 624 572 1,247 1,087

Net occupancy 75 76 71 151 147

Computer processing 71 73 56 144 111

Business services and professional fees 51 50 49 101 93

Equipment 25 25 25 50 49

Operating lease expense 31 34 34 65 70

Marketing 31 26 24 57 45

Intangible asset amortization 14 15 18 29 35

Other expense 155 148 164 303 307

Total noninterest expense 1,076 1,071 1,013 2,147 1,944

Income (loss) from continuing operations before income taxes 913 765 215 1,678 383

Income taxes 189 147 30 336 53

Income (loss) from continuing operations 724 618 185 1,342 330

Income (loss) from discontinued operations, net of taxes 5 4 2 9 3

Net income (loss) 729 622 187 1,351 333

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

Net income (loss) attributable to Key $729 $622 $187 $1,351 $333



Income (loss) from continuing operations attributable to Key common $698 $591 $159 $1,289 $277 shareholders

Net income (loss) attributable to Key common shareholders 703 595 161 1,298 280

Per common share

Income (loss) from continuing operations attributable to Key common $.73 $.61 $.16 $1.34 $.29 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) .73 .62 .17 1.35 .29

Per common share - assuming dilution

Income (loss) from continuing operations attributable to Key common $.72 $.61 $.16 $1.33 $.28 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) .73 .61 .17 1.34 .29



Cash dividends declared per common share $.185 $.185 $.185 $.370 $.370



Weighted-average common shares outstanding (000) 961,292 964,878 967,147 957,423 967,380

Effect of common share options and other stock awards 9,514 9,419 4,994 9,740 6,892

Weighted-average common shares and potential common shares outstanding (000) ^ 970,806 974,297 972,141 967,163 974,272 (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)

Second Quarter 2021 First Quarter 2021 Second 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) $51,808 $ 450 3.52 $52,581 $ 453 3.48 $60,480 $ 518 3.44

Real estate - commercial mortgage 12,825 117 3.67 12,658 114 3.67 13,510 128 3.80

Real estate - construction $2,149 $ 20 3.68 $2,048 $ 19 3.75 $1,756 $ 17 3.97

Commercial lease financing 4,060 30 2.98 4,142 31 2.99 4,584 33 2.96

Total commercial loans $70,842 $ 617 3.53 $71,429 $ 617 3.50 $80,330 $ 696 3.49

Real estate - residential mortgage 11,055 81 2.92 9,699 76 3.12 7,783 69 3.57

Home equity loans $9,089 $ 85 3.76 $9,282 $ 85 3.73 $9,949 $ 97 3.89

Consumer direct loans 4,910 57 4.69 4,817 56 4.72 4,152 55 5.24

Credit cards $908 $ 22 9.79 $933 $ 24 10.45 $983 $ 25 10.22

Consumer indirect loans 4,010 32 3.23 4,568 37 3.30 4,744 45 3.82

Total consumer loans $29,972 $ 277 3.74 $29,299 $ 278 3.84 $27,611 $ 291 4.22

Total loans 100,814 894 3.59 100,728 895 3.60 107,941 987 3.67

Loans held for sale $1,616 $ 11 2.60 $1,531 $ 11 2.89 $2,463 $ 21 3.50

Securities available for sale ^(b), (e) 33,623 133 3.13 30,039 130 1.76 20,749 121 2.43

Held-to-maturity securities ^(b) $6,452 $ 45 2.75 $7,188 $ 46 2.53 $9,331 $ 56 2.43

Trading account assets 837 5 2.56 848 5 2.15 760 5 2.43

Short-term investments $18,817 $ 6 0.13 $16,510 $ 5 0.13 $7,892 $ 7 0.31

Other investments ^(e) 622 2 1.02 614 2 1.40 672 - 0.29

Total earning assets $162,781$ 1,096 2.72 $157,458$ 1,094 2.81 $149,808$ 1,197 3.22

Allowance for loan and lease losses (1,442) (1,623) (1,413)

Accrued income and other assets $16,531 $16,398 $15,704

Discontinued assets 650 686 793

Total assets $178,520 $172,919 $164,892

Liabilities

NOW and money market deposit accounts $83,981 $ 9 .05 $81,439 $ 10 .05 $75,297 $ 56 .30

Savings deposits 6,859 1 .03 6,203 1 .03 5,130 - .04

Certificates of deposit ($100,000 or more) $2,212 $ 4 .72 $2,571 $ 6 .96 $4,950 $ 24 1.93

Other time deposits 2,630 2 .38 2,902 4 .57 4,333 16 1.52

Total interest-bearing deposits $95,682 $ 16 .07 $93,115 $ 21 .09 $89,710 $ 96 .43

Federal funds purchased and securities sold under repurchase agreements251 - .02 243 - .04 242 - .03

Bank notes and other short-term borrowings $744 $ 3 1.19 $878 $ 1 .64 $2,869 $ 5 .57

Long-term debt ^(f), (g) 11,978 54 1.83 12,831 60 1.93 12,954 71 2.30

Total interest-bearing liabilities $108,655$ 73 .27 $107,067$ 82 .31 $105,775$ 172 .66

Noninterest-bearing deposits 48,640 44,625 38,267

Accrued expense and other liabilities $3,304 $2,772 $2,369

Discontinued liabilities ^(g) 650 686 793

Total liabilities $161,249 $155,150 $147,204

Equity

Key shareholders' equity $17,271 $17,769 $17,688

Noncontrolling interests - - -

Total equity $17,271 $17,769 $17,688

Total liabilities and equity $178,520 $172,919 $164,892

Interest rate spread (TE) 2.45 % 2.50 % 2.56 %

Net interest income (TE) and net interest margin (TE) 1,023 2.52 % 1,012 2.61 % 1,025 2.76 %

TE adjustment ^(b) 6 7 7

Net interest income, GAAP basis $ 1,017 $ 1,005 $ 1,018

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 three months ended June 30, 2021, March 31, 2021, and June 30, 2020.

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

Commercial and industrial average balances include $132 million, $126(d) million, and $135 million of assets from commercial credit cards for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

(e) Yield is calculated on the basis of amortized cost.

(f) Rate calculation excludes basis adjustments related to fair value hedges.

A portion of long-term debt and the related interest expense is allocated(g) 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)

Six months ended June 30, 2021 Six months ended June 30, 2020

Average Yield/ Average Yield/

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

Assets

Loans: ^(b), (c)

Commercial and industrial ^(d) $52,194 $ 902 3.48 % $54,973 $ 1,026 3.75 %

Real estate - commercial mortgage 12,742 232 3.67 13,529 283 4.20

Real estate - construction 2,099 39 3.71 1,711 37 4.35

Commercial lease financing 4,101 61 2.99 4,575 72 3.17

Total commercial loans 71,136 1,234 3.49 74,788 1,418 3.81

Real estate - residential mortgage 10,380 154 2.97 7,500 137 3.66

Home equity loans 9,189 173 3.79 10,052 210 4.19

Consumer direct loans 4,864 113 4.70 3,930 109 5.56

Credit cards 920 46 10.12 1,032 56 10.89

Consumer indirect loans 4,288 69 3.25 4,756 91 3.84

Total consumer loans 29,641 555 3.77 27,270 603 4.44

Total loans 100,777 1,789 3.58 102,058 2,021 3.98

Loans held for sale 1,574 22 2.74 2,174 40 3.71

Securities available for sale ^(b), (e) 31,841 263 1.66 20,960 250 2.46

Held-to-maturity securities ^(b) 6,818 90 2.63 9,575 118 2.47

Trading account assets 842 10 2.35 913 13 2.73

Short-term investments 17,670 11 0.13 4,828 13 0.52

Other investments ^(e) 618 4 1.21 643 1 0.34

Total earning assets 160,140 2,189 2.75 141,151 2,456 3.51

Allowance for loan and lease losses (1532) (1255)

Accrued income and other assets 16,463 15,268

Discontinued assets 668 815

Total assets $175,739 $155,979

Liabilities

NOW and money market deposit accounts $82,717 20 .05 $71,009 168 .47

Savings deposits 6,533 1 .03 4,893 1 .04

Certificates of deposit ($100,000 or more) 2,390 10 .85 5,630 58 2.08

Other time deposits 2,766 6 .48 4,617 38 1.67

Total interest-bearing deposits 94,406 37 .08 86,149 265 .62

Federal funds purchased and securities sold under repurchase agreements247 - .03 1,122 6 1.05

Bank notes and other short-term borrowings 811 4 .89 2,135 10 .90

Long-term debt ^(f), (g) 12,402 114 1.87 12,698 161 2.62

Total interest-bearing liabilities 107,866 155 .29 102,104 442 .87

Noninterest-bearing deposits 46,638 33,004

Accrued expense and other liabilities 3,048 2,604

Discontinued liabilities ^(g) 668 815

Total liabilities 158,220 138,527

Equity

Key shareholders' equity 17,519 17,452

Noncontrolling interests - -

Total equity 17,519 17,452

Total liabilities and equity $175,739 $155,979

Interest rate spread (TE) 2.46 % 2.64 %

Net interest income (TE) and net interest margin (TE) 2,035 2.56 % 2,014 2.88 %

TE adjustment ^(b) 13 15

Net interest income, GAAP basis $ 2,022 $ 1,999



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 six months ended June 30, 2021, and June 30, 2020, respectively.

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

Commercial and industrial average balances include $129 million and $140(d) million of assets from commercial credit cards for the six months ended June 30, 2021, and June 30, 2020, respectively.

(e) Yield is calculated on the basis of amortized cost.

(f) Rate calculation excludes basis adjustments related to fair value hedges.

A portion of long-term debt and the related interest expense is allocated(g) 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 Six months ended

6/30/20213/31/20216/30/20206/30/20216/30/2020

Personnel ^(a) $623 $624 $572 $1,247 $1,087

Net occupancy 75 76 71 151 147

Computer processing 71 73 56 144 111

Business services and professional fees 51 50 49 101 93

Equipment 25 25 25 50 49

Operating lease expense 31 34 34 65 70

Marketing 31 26 24 57 45

Intangible asset amortization 14 15 18 29 35

Other expense 155 148 164 303 307

Total noninterest expense $1,076 $1,071 $1,013 $2,147 $1,944

Average full-time equivalent employees ^(b)17,157 17,086 16,646 17,122 16,587

(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 Six months ended

6/30/20213/31/20216/30/20206/30/20216/30/2020

Salaries and contract labor $ 321 $ 320 $ 332 $ 641 $ 648

Incentive and stock-based compensation210 196 162 406 264

Employee benefits 92 107 76 199 168

Severance - 1 2 1 7

Total personnel expense $ 623 $ 624 $ 572 $ 1,247$ 1,087

Loan Composition

(dollars in millions)



Percent change 6/30/2021 vs

6/30/2021 3/31/2021 6/30/2020 3/31/2021 6/30/2020

Commercial and industrial ^(a) $50,672 $52,486 $58,297 (3.5) %(13.1) %

Commercial real estate:

Commercial mortgage 12,965 12,702 13,465 2.1 (3.7)

Construction 2,132 2,122 1,919 .5 11.1

Total commercial real estate loans15,097 14,824 15,384 1.8 (1.9)

Commercial lease financing ^(b) 4,061 4,104 4,524 (1.0) (10.2)

Total commercial loans 69,830 71,414 78,205 (2.2) (10.7)

Residential - prime loans:

Real estate - residential mortgage 12,131 10,300 8,149 17.8 48.9

Home equity loans 9,047 9,158 9,782 (1.2) (7.5)

Total residential - prime loans 21,178 19,458 17,931 8.8 18.1

Consumer direct loans 5,049 4,862 4,327 3.8 16.7

Credit cards 923 909 974 1.5 (5.2)

Consumer indirect loans 3,750 4,283 4,722 (12.4) (20.6)

Total consumer loans 30,900 29,512 27,954 4.7 10.5

Total loans ^(c), (d) $100,730$100,926$106,159(.2) %(5.1) %

Loan balances include $135 million, $126 million, and $132 million of(a) commercial credit card balances at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

Commercial lease financing includes receivables held as collateral for a(b) secured borrowing of $19 million, $21 million, and $18 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.

Total loans exclude loans of $636 million at June 30, 2021, $675 million at(c) March 31, 2021, and $780 million at June 30, 2020, related to the discontinued operations of the education lending business.

Accrued interest of $225 million, $241 million, and $225 million at(d) June 30, 2021, March 31, 2021, and June 30, 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 6/30/2021 vs

6/30/20213/31/20216/30/20203/31/2021 6/30/2020

Commercial and industrial $233 $1,175 $419 (80.2) % (44.4) %

Real estate - commercial mortgage 1,073 837 1,107 28.2 (3.1)

Commercial lease financing - - - N/M N/M

Real estate - residential mortgage 231 236 250 (2.1) (7.6)

Consumer direct loans - 48 231 N/M N/M

Total loans held for sale $1,537 $2,296 $2,007 (33.1) % (23.4) %

N/M = Not Meaningful

Summary of Changes in Loans Held for Sale

(in millions)



2Q21 1Q21 4Q20 3Q20 2Q20

Balance at beginning of period $2,296$1,583$1,724$2,007$2,143

New originations 3,573 4,010 3,835 3,282 3,621

Transfers from (to) held to maturity, net(71) 83 (24) 75 (15)

Loan sales (4,195)(3,303)(3,932)(3,583)(3,679)

Loan draws (payments), net (27) (73) (19) (57) (61)

Valuation and other adjustments (39) (4) - - (2)

Balance at end of period $1,537$2,296$1,583$1,724$2,007

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)



Three months ended Six months ended

6/30/2021 3/31/2021 6/30/2020 6/30/2021 6/30/2020

Average loans outstanding $100,814 $100,728 $107,941 $100,777 $102,058

Allowance for loan and lease losses at the end of the prior period $1,438 $1,626 $1359 $1,626 $900

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

Allowance for loan and lease losses at the beginning of the period 1,438 1,626 1,359 1,626 1,104

Loans charged off:

Commercial and industrial 41 73 71 114 351



Real estate - commercial mortgage 4 35 2 39 19

Real estate - construction - - - - -

Total commercial real estate loans 4 35 2 39 19

Commercial lease financing - 4 4 4 35

Total commercial loans 45 112 77 157 405

Real estate - residential mortgage 1 - 2 1 2

Home equity loans 4 2 2 6 11

Consumer direct loans 7 8 10 15 37

Credit cards 9 6 12 15 39

Consumer indirect loans 5 7 7 12 28

Total consumer loans 26 23 33 49 117

Total loans charged off 71 135 110 206 522

Recoveries:

Commercial and industrial 32 8 5 40 34



Real estate - commercial mortgage 6 1 - 7 3

Real estate - construction - - - - -

Total commercial real estate loans 6 1 - 7 3

Commercial lease financing - 1 1 1 1

Total commercial loans 38 10 6 48 38

Real estate - residential mortgage - 1 - 1 1

Home equity loans 1 1 1 2 7

Consumer direct loans 2 2 2 4 7

Credit cards 3 2 2 5 8

Consumer indirect loans 5 5 3 10 18

Total consumer loans 11 11 8 22 41

Total recoveries 49 21 14 70 78

Net loan charge-offs (22) (114) (96) (136) (443)

Provision (credit) for loan and lease losses (196) (74) 445 (270) 965

Allowance for loan and lease losses at end of period $1,220 $1,438 $1,708 $1,220 $1,626



Liability for credit losses on lending-related commitments at the end of the prior $178 $197 $161 $197 $68 period

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

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

Liability for credit losses on lending-related commitments at beginning of 178 197 161 197 141 period

Provision (credit) for losses on lending-related commitments (26) (19) 37 (45) 56

Liability for credit losses on lending-related commitments at end of period ^ $152 $178 $198 $152 $197 (c)



Total allowance for credit losses at end of period $1,372 $1,616 $1,906 $1,372 $1,823



Net loan charge-offs to average total loans .09 %.46 %.36 %.27 %.35 %

Allowance for loan and lease losses to period-end loans 1.21 1.42 1.61 1.21 1.61

Allowance for credit losses to period-end loans 1.36 1.60 1.80 1.36 1.80

Allowance for loan and lease losses to nonperforming loans 175.8 197.5 224.7 175.8 224.7

Allowance for credit losses to nonperforming loans 197.7 222.0 250.8 197.7 250.8



Discontinued operations - education lending business:

Loans charged off $1 1 $2 $2 $5

Recoveries - 1 2 1 5

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

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

Six months ended June 30, 2020, excludes $4 million related to the(b) 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)

2Q21 1Q21 4Q20 3Q20 2Q20

Net loan charge-offs $22 $114 $135 $128 $96

Net loan charge-offs to average total loans .09 %.46 %.53 %.49 %.36 %

Allowance for loan and lease losses $1,220 $1,438 $1,626 $1,730 $1,708

Allowance for credit losses ^(a) 1,372 1,616 1,823 1,938 1,906

Allowance for loan and lease losses to period-end loans 1.21 %1.42 %1.61 %1.68 %1.61 %

Allowance for credit losses to period-end loans 1.36 1.60 1.80 1.88 1.80

Allowance for loan and lease losses to nonperforming loans 175.8 197.5 207.1 207.4 224.7

Allowance for credit losses to nonperforming loans 197.7 222.0 232.2 232.4 250.8

Nonperforming loans at period end $694 $728 $785 $834 $760

Nonperforming assets at period end 738 790 937 1,003 951

Nonperforming loans to period-end portfolio loans .69 %.72 %.78 %.81 %.72 %

Nonperforming assets to period-end portfolio loans plus OREO and other.73 .78 .92 .97 .89 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)

6/30/20213/31/202112/31/20209/30/20206/30/2020

Commercial and industrial $355 $387 $ 385 $459 $404



Real estate - commercial mortgage 66 66 104 104 91

Real estate - construction - - - 1 1

Total commercial real estate loans 66 66 104 105 92

Commercial lease financing 7 8 8 6 9

Total commercial loans 428 461 497 570 505

Real estate - residential mortgage 99 95 110 96 89

Home equity loans 146 148 154 146 141

Consumer direct loans 4 5 5 3 3

Credit cards 3 3 2 2 2

Consumer indirect loans 14 16 17 17 20

Total consumer loans 266 267 288 264 255

Total nonperforming loans 694 728 785 834 760

OREO 9 12 100 105 112

Nonperforming loans held for sale 32 47 49 61 75

Other nonperforming assets 3 3 3 3 4

Total nonperforming assets $738 $790 $ 937 $1,003 $951

Accruing loans past due 90 days or more 74 92 86 73 87

Accruing loans past due 30 through 89 days 190 191 241 336 419

Restructured loans - accruing and nonaccruing ^(a) 334 376 363 306 310

Restructured loans included in nonperforming loans ^(a) 177 192 229 168 166

Nonperforming assets from discontinued operations - education lending business 5 5 5 6 7

Nonperforming loans to period-end portfolio loans .69 % .72 % .78 % .81 %.72 %

Nonperforming assets to period-end portfolio loans plus OREO and other .73 .78 .92 .97 .89 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)

2Q21 1Q21 4Q20 3Q20 2Q20

Balance at beginning of period $728$785$834$760$632

Loans placed on nonaccrual status 186 196 300 387 293

Charge-offs (74) (135)(160)(150)(111)

Loans sold (10) (13) (9) (6) (5)

Payments (92) (37) (83) (83) (29)

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

Transfers to nonperforming loans held for sale- - - - -

Loans returned to accrual status (44) (65) (94) (74) (20)

Balance at end of period $694$728$785$834$760

Line of Business Results

(dollars in millions)



Percentage change 2Q21 vs.

2Q21 1Q21 4Q20 3Q20 2Q20 1Q21 2Q20

Consumer Bank

Summary of operations

Total revenue (TE) $ 854 $ 867 $ 899 $ 866 $ 835 (1.5) % 2.3 %

Provision for credit losses (70) (23) (5) (3) 155 (204.3) 145.2

Noninterest expense 584 601 606 567 552 (2.8) 5.8

Net income (loss) attributable to Key 259 220 228 231 98 17.7 164.3

Average loans and leases 40,598 39,249 39,455 38,476 37,300 3.4 8.8

Average deposits 88,412 85,033 82,854 82,836 79,235 4.0 11.6

Net loan charge-offs 34 36 28 23 40 (5.6) (15.0)

Net loan charge-offs to average total loans.34 %.37 %.28 %.24 %.43 %(8.1) (20.9)

Nonperforming assets at period end $ 274 $ 345 $ 374 $ 353 $ 332 (20.6) (17.5)

Return on average allocated equity 28.74 %26.10 %25.95 %26.44 %11.50 %10.1 149.9



Commercial Bank

Summary of operations

Total revenue (TE) $ 874 $ 859 $ 923 $ 813 $ 879 1.7 % (.6) %

Provision for credit losses (131) (67) 44 150 326 95.5 (120.6)

Noninterest expense 451 443 498 447 441 1.8 2.3

Net income (loss) attributable to Key 434 384 311 174 106 13.0 309.4

Average loans and leases 59,953 61,221 62,016 66,264 70,336 (2.1) (14.8)

Average loans held for sale 1,341 1,237 1,285 1,383 2,012 8.4 (33.3)

Average deposits 54,814 51,894 52,489 51,585 47,954 5.6 14.3

Net loan charge-offs 9 78 108 103 57 (88.5) (84.2)

Net loan charge-offs to average total loans.06 %.52 %.69 %.62 %.33 %N/A N/A

Nonperforming assets at period end $ 464 $ 441 $ 558 $ 645 $ 616 5.2 (24.7)

Return on average allocated equity 20.79 %17.45 %23.87 %13.43 %8.66 %N/A N/A

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

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SOURCE KeyCorp