PR Newswire | Oct 21, 2021 06:35AM EDT

Diluted Common Share

10/21 05:33 CDT

KeyCorp Reports Third Quarter 2021 Net Income Of $616 Million, Or $.65 Per Diluted Common SharePositive operating leverage compared to the year-ago periodRecord third quarter revenue, up 8% from the year-ago periodRecord third quarter noninterest income, up 17% from the year-ago periodStrong credit quality: net charge-offs to average loans of 11 basis pointsEntered into accelerated share repurchase program: aided by capital relief from sale of indirect auto loan portfolio CLEVELAND, Oct. 21, 2021

CLEVELAND, Oct. 21, 2021/PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $616 million, or $.65 per diluted common share for the third quarter of 2021. This compared to $698 million, or $.72 per diluted common share, for the second quarter of 2021 and $397 million, or $.41 per diluted common share, for the third quarter of 2020.

Our results this quarter continue to reflect the strength of our distinctive business model, strong risk management practices, and significant momentum from recent investments in teammates and digital capabilities.

We delivered positive operating leverage with record third quarter revenue, reflecting broad-based growth across our businesses. We continue to add and deepen relationships in both our consumer and commercial businesses. Importantly, we achieved record consumer loan originations and record investment banking results for the quarter.

Our strong risk culture and disciplined underwriting practices continue to result in positive credit trends. Credit quality remained strong this quarter, with lower nonperforming loans and net charge-offs as a percent of loans of 11 basis points. In the third quarter, we entered into an accelerated share repurchase program which was supported by capital relief generated from the sale of our nonstrategic indirect auto loan portfolio. We remain committed to our capital priorities and maximizing stakeholder value.

- Chris Gorman, Chairman and CEO

Selected Financial Highlights



dollars in millions, except per share data Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Income (loss) from continuing operations attributable to Key common $616 $698 $397 (11.7)%55.2%shareholders

Income (loss) from continuing operations attributable to Key common shareholders per .65 .72 .41 (9.7) 58.5 common share - assuming dilution

Return on average tangible common equity from continuing operations ^(a) 18.55 %21.34 %12.19 %N/A N/A

Return on average total assets from continuing operations 1.41 1.63 1.00 N/A N/A

Common Equity Tier 1 ratio ^(b) 9.6 9.9 9.5 N/A N/A

Book value at period end $16.82 $16.75 $16.25 .4 %3.5 %

Net interest margin (TE) from continuing operations 2.47 %2.52 %2.62 %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) September 30, 2021 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS



Revenue



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Net interest income (TE)$1,025$1,023$1,006.2 %1.9 %

Noninterest income 797 750 681 6.3 17.0

Total revenue $1,822$1,773$1,6872.8 %8.0 %



TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the third quarter of 2021, an increase of $19 million from the third quarter of 2020. The increase in net interest income reflects higher earning asset balances and lower interest-bearing deposit costs, 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, partly offset by higher loan fees from the Paycheck Protection Program ("PPP") forgiveness.

Compared to the second quarter of 2021, taxable-equivalent net interest income increased by $2 million, and the net interest margin decreased by 5 basis points. Both net interest income and the net interest margin were impacted by higher earning asset balances, including elevated levels of liquidity, partially offset by lower earning asset yields. Net interest income also benefited from one additional business day in the third quarter of 2021.

Noninterest Income



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Trust and investment services income $129$133$128(3.0) %.8 %

Investment banking and debt placement fees 235 217 146 8.3 61.0

Service charges on deposit accounts 91 83 77 9.6 18.2

Operating lease income and other leasing gains37 36 38 2.8 (2.6)

Corporate services income 69 55 51 25.5 35.3

Cards and payments income 111 113 114 (1.8) (2.6)

Corporate-owned life insurance income 33 30 30 10.0 10.0

Consumer mortgage income 33 26 51 26.9 (35.3)

Commercial mortgage servicing fees 34 44 18 (22.7) 88.9

Other income 25 13 28 92.3 (10.7)

Total noninterest income $797$750$6816.3 %17.0 %



Compared to the third quarter of 2020, noninterest income increased by $116 million, primarily driven by an $89 million increase in investment banking and debt placement fees, driven by higher volumes in equity underwriting and advisory transactions. Corporate services income and commercial mortgage servicing fees increased $18 million and $16 million, respectively. Partially offsetting these increases was consumer mortgage income, which decreased $18 million, due to lower gain on sale margins.

Compared to the second quarter of 2021, noninterest income increased by $47 million, reflecting broad-based growth in our fee-based businesses. Notable drivers of the quarter-over-quarter increase were investment banking and debt placement fees and corporate services income, which increased $18 million and $14 million, respectively. Partially offsetting these increases was a $10 million decrease in commercial mortgage servicing fees, reflecting lower activity-related fees.

Noninterest Expense



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Personnel expense $640 $623 $588 2.7 % 8.8 %

Nonpersonnel expense 472 453 449 4.2 5.1

Total noninterest expense$1,112$1,076$1,0373.3 % 7.2 %



Key's noninterest expense was $1.1 billion for the third quarter of 2021, an increase of $75 million from the year-ago period. The increase is primarily related to higher personnel costs of $52 million, reflecting higher incentive and stock-based compensation, attributed to an increase in fee production and Key's increased stock price. Additionally, other drivers for the year-over-year increase include higher business services and professional fees and marketing expense.

Compared to the second quarter of 2021, noninterest expense increased $36 million. The increase is primarily related to other expense, which is up $18 million reflecting elevated charitable contributions and a pension settlement charge. Additionally, personnel expense increased $17 million, mostly driven by an $8 million increase in employee benefits and a $7 million increase in salaries and contract labor due to one additional day in the quarter.

BALANCE SHEET HIGHLIGHTS



Average Loans



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Commercial and industrial ^(a)$49,868 $51,808 $57,067 (3.7)%(12.6)%

Other commercial loans 19,362 19,034 19,677 1.7 (1.6)

Total consumer loans 30,908 29,972 28,175 3.1 9.7

Total loans $100,138$100,814$104,919(.7) %(4.6) %



Commercial and industrial average loan balances include $137 million, $132(a) million, and $129 million of assets from commercial credit cards at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

Average loans were $100.1 billion for the third quarter of 2021, a decrease of $4.8 billion compared to the third quarter of 2020. Commercial loans decreased $7.5 billion, reflecting decreased utilization versus the year-ago period and a decline in PPP balances. Consumer loans increased $2.7 billion, reflecting strength from Key's consumer mortgage business and Laurel Road, partly offset by the sale of the indirect auto loan portfolio.

Compared to the second quarter of 2021, average loans decreased by $676 million. Commercial loans decreased $1.6 billion, driven by a $3.3 billion decline in PPP loan balances, partially offset by core portfolio growth in commercial and industrial loans and commercial real estate loans. Consumer loans continue to reflect strength from Key's consumer mortgage business, partly offset by the sale of the indirect auto loan portfolio, which reduced average loans by $763 million.

Average Deposits



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Non-time deposits $142,537 $139,480 $127,347 2.2 %11.9 %

Certificates of deposit ($100,000 or more)1,975 2,212 3,862 (10.7) (48.9)

Other time deposits 2,404 2,630 3,735 (8.6) (35.6)

Total deposits $146,916 $144,322 $134,944 1.8 %8.9 %



Cost of total deposits .04 %.05 %.16 %N/A N/A



N/A = Not Applicable

Average deposits totaled $146.9 billion for the third quarter of 2021, an increase of $12.0 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, including higher commercial escrow deposits, partially offset by a decline in time deposits.

Compared to the second quarter of 2021, average deposits increased by $2.6 billion, primarily driven by commercial growth.

ASSET QUALITY



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Net loan charge-offs $29 $22 $128 31.8 %(77.3) %

Net loan charge-offs to average total loans .11 %.09 %.49 %N/A N/A

Nonperforming loans at period end $554 $694 $834 (20.2) (33.6)

Nonperforming assets at period end 599 738 1,003 (18.8) (40.3)

Allowance for loan and lease losses 1,084 1,220 1,730 (11.1) (37.3)

Allowance for credit losses 1,236 1,372 1,938 (9.9) (36.2)

Allowance for loan and lease losses to nonperforming loans195.7 %175.8 %207.4%N/A N/A

Allowance for credit losses to nonperforming loans 223.1 197.7 232.4 N/A N/A

Provision for credit losses $(107) $(222) $160 (51.8)%(166.9)%



N/A = Not Applicable

Key's provision for credit losses was a net benefit of $107 million, including a $136 million reserve release for the third quarter of 2021, compared to an expense of $160 million in the third quarter of 2020 and a net benefit of $222 million in the second quarter of 2021. The reserve release was largely driven by a continued improvement in the economic outlook.

Net loan charge-offs for the third quarter of 2021 totaled $29 million, or .11% of average total loans. These results compare to $128 million, or .49%, for the third quarter of 2020 and $22 million, or .09%, for the second quarter of 2021. Net charge-offs in the current quarter included $22 million related to the sale of the indirect auto loan portfolio. Key's allowance for credit losses was $1.2 billion, or 1.25% of total period-end loans at September 30, 2021, compared to 1.88% at September 30, 2020, and 1.36% at June 30, 2021.

At September 30, 2021, Key's nonperforming loans totaled $554 million, which represented .56% of period-end portfolio loans. These results compare to .81% at September 30, 2020, and .69% at June 30, 2021. Nonperforming assets at September 30, 2021, totaled $599 million, and represented .61% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .97% at September 30, 2020, and .73% at June 30, 2021.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2021. On September 10, Key entered into an accelerated share repurchase program.

Capital Ratios



9/30/20216/30/20219/30/2020

Common Equity Tier 1 ^(a) 9.6 %9.9 %9.5 %

Tier 1 risk-based capital ^(a) 10.9 11.3 10.9

Total risk based capital ^(a) 12.7 13.2 13.3

Tangible common equity to tangible assets ^(b)7.0 7.4 7.8

Leverage ^(a) 8.4 8.7 8.7



(a) September 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(b) financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

Key's capital position remained strong in the third quarter of 2021. As shown in the preceding table, at September 30, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.6% and 10.9%, respectively. Key's tangible common equity ratio was 7.0% at September 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 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Shares outstanding at beginning of period 960,276 972,587 975,947(1.3) %(1.6) %

Open market repurchases, repurchases under the accelerated repurchase (29,923)(13,304)(1) 124.9 N/M program, and return of shares under employee compensation plans

Shares issued under employee compensation plans (net of cancellations)191 993 259 (80.8) (26.3)

Shares outstanding at end of period 930,544 960,276 976,205(3.1) %(4.7) %



N/M = Not Meaningful

During the third quarter of 2021, Key declared a dividend of $.185 per common share and completed $593 million of common share repurchases. Of the $593 million total common shares repurchased in the third quarter of 2021, $468 million were related to the initial settlement of the accelerated share repurchase program and $125 million were purchased in the open market.

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 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Revenue from continuing operations (TE)

Consumer Bank $870 $852 $864 2.1 %.7 %

Commercial Bank 891 873 811 2.1 9.9

Other ^(a) 61 48 12 27.1 N/M

Total $1,822$1,773$1,6872.8 %8.0 %



Income (loss) from continuing operations attributable to Key

Consumer Bank $241 $257 $229 (6.2) %5.2 %

Commercial Bank 384 433 173 (11.3) 122.0

Other ^(a) 18 34 22 (47.1) (18.2)

Total $643 $724 $424 (11.2)%51.7 %



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 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Summary of operations

Net interest income (TE) $582 $599 $598 (2.8)%(2.7)%

Noninterest income 288 253 266 13.8 8.3

Total revenue (TE) 870 852 864 2.1 .7

Provision for credit losses (38) (70) (3) 45.7 N/M

Noninterest expense 591 584 567 1.2 4.2

Income (loss) before income taxes (TE) 317 338 300 (6.2) 5.7

Allocated income taxes (benefit) and TE adjustments76 81 71 (6.2) 7.0

Net income (loss) attributable to Key $241 $257 $229 (6.2)%5.2 %



Average balances

Loans and leases $39,796$40,598$38,354(2.0)%3.8 %

Total assets 42,981 43,818 43,304 (1.9) (.7)

Deposits 89,156 88,412 82,829 .8 7.6



Assets under management at period end $52,867$51,013$43,9493.6 %20.3 %



TE = Taxable Equivalent

Additional Consumer Bank Data



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Noninterest income

Trust and investment services income $105 $104 $100 1.0 %5.0 %

Service charges on deposit accounts 56 48 44 16.7 27.3

Cards and payments income 62 62 55 - 12.7

Consumer mortgage income 33 26 51 26.9 (35.3)

Other noninterest income 32 13 16 146.2 100.0

Total noninterest income $288 $253 $266 13.8 %8.3 %



Average deposit balances

NOW and money market deposit accounts $56,353$56,038$52,539.6 %7.3 %

Savings deposits 6,749 6,523 5,168 3.5 30.6

Certificates of deposit ($100,000 or more)1,846 2,083 3,550 (11.4) (48.0)

Other time deposits 2,398 2,616 3,701 (8.3) (35.2)

Noninterest-bearing deposits 21,810 21,152 17,872 3.1 22.0

Total deposits $89,156$88,412$82,830.8 %7.6 %



Other data

Branches 1,000 1,014 1,077

Automated teller machines 1,316 1,329 1,388



Consumer Bank Summary of Operations (3Q21 vs. 3Q20)

* Net income attributable to Key of $241 million for the third quarter of 2021, compared to $229 million for the year-ago quarter * Taxable-equivalent net interest income decreased by $16 million, compared to the third quarter of 2020, driven by the lower interest rate environment, partially offset by strong consumer mortgage balance sheet growth and fees related to PPP loans * Average loans and leases increased $1.4 billion, or 3.8%, from the third quarter of 2020, driven by growth in consumer mortgage, partially offset by the sale of the indirect auto loan portfolio * Average deposits increased $6.3 billion, or 7.6%, from the third quarter of 2020, driven by retention of consumer stimulus payments and relationship growth * Provision for credit losses decreased $35 million, compared to the third quarter of 2020. The provision for credit losses was a net benefit and was driven by improvements in expected economic conditions and continued strength in client credit quality * Noninterest income increased $22 million, or 8.3%, from the year ago quarter, driven by higher service charges on deposit accounts and cards and payments income, partially offset by lower consumer mortgage income, due to lower gain on sale margins * Noninterest expense increased $24 million, or 4.2%, from the year ago quarter, driven by higher production-related incentives and support expenses related to higher loan volumes

Commercial Bank





dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Summary of operations

Net interest income (TE) $414 $418 $427 (1.0) %(3.0) %

Noninterest income 477 455 384 4.8 24.2

Total revenue (TE) 891 873 811 2.1 9.9

Provision for credit losses (69) (131) 150 (47.3) (146.0)

Noninterest expense 470 451 447 4.2 5.1

Income (loss) before income taxes (TE) 490 553 214 (11.4) 129.0

Allocated income taxes and TE adjustments106 120 41 (11.7) 158.5

Net income (loss) attributable to Key $384 $433 $173 (11.3)%122.0 %



Average balances

Loans and leases $59,914$59,953$66,378(.1) %(9.7) %

Loans held for sale 1,190 1,341 1,383 (11.3) (14.0)

Total assets 69,285 69,101 74,530 0.3 (7.0)

Deposits 56,546 54,814 51,585 3.2 %9.6 %



TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data



dollars in millions Change 3Q21 vs.

3Q21 2Q21 3Q20 2Q21 3Q20

Noninterest income

Trust and investment services income $24 $27 $28 (11.1)%(14.3)

Investment banking and debt placement fees 234 215 146 8.8 60.3 %

Operating lease income and other leasing gains37 35 38 5.7 (2.6)



Corporate services income 63 47 44 34.0 43.2

Service charges on deposit accounts 34 34 33 - 3.0

Cards and payments income 44 49 60 (10.2) (26.7)

Payments and services income 141 130 137 8.5 2.9



Commercial mortgage servicing fees 34 44 18 (22.7) 88.9

Other noninterest income 7 4 17 75.0 (58.8)

Total noninterest income $477$455$3844.8 %24.2 %



N/M = Not Meaningful

Commercial Bank Summary of Operations (3Q21 vs. 3Q20)

* Net income attributable to Key of $384 million for the third quarter of 2021, compared to $173 million for the year-ago quarter * Taxable-equivalent net interest income decreased by $13 million, compared to the third quarter of 2020, as lower average loan balances offset fees related to PPP loans * Average loan and lease balances decreased $6.5 billion, compared to the third quarter of 2020, driven by lower commercial and industrial line draws and PPP loan forgiveness * Average deposit balances increased $5.0 billion, or 9.6%, compared to the third quarter of 2020, driven by growth in targeted relationships and the impact of government programs * Provision for credit losses decreased $219 million, compared to the third quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions * Noninterest income increased $93 million, from the year-ago quarter, driven by elevated investment banking client activity and commercial mortgage servicing fees, partially offset by lower cards and payments income as individuals roll off unemployment benefits * Noninterest expense increased by $23 million, or 5.1%, from the third quarter of 2020, driven by higher production-related incentives related to strong revenue production

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

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 $187.0 billion at September 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 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 that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2020, as well as in KeyCorp's subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the "SEC") and are or will be available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov). These factors may include, among others, deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, and the impact of the COVID-19 global pandemic on us, our clients, our third-party service providers, and the markets. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

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

*****

KeyCorp Third 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

9/30/2021 6/30/2021 9/30/2020

Summary of operations

Net interest income (TE) $1,025 $1,023 $1,006

Noninterest income 797 750 681

Total revenue (TE) 1,822 1,773 1,687

Provision for credit losses (107) (222) 160

Noninterest expense 1,112 1,076 1,037

Income (loss) from continuing operations attributable to Key 643 724 424

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

Net income (loss) attributable to Key 645 729 428



Income (loss) from continuing operations attributable to Key common 616 698 397 shareholders

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

Net income (loss) attributable to Key common shareholders 618 703 401



Per common share

Income (loss) from continuing operations attributable to Key common $.65 $.73 $.41 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) .66 .73 .41



Income (loss) from continuing operations attributable to Key common .65 .72 .41 shareholders - assuming dilution

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

Net income (loss) attributable to Key common shareholders - assuming dilution ^ .65 .73 .41 (a)



Cash dividends declared .185 .185 .185

Book value at period end 16.82 16.75 16.25

Tangible book value at period end 13.80 13.81 13.32

Market price at period end 21.62 20.65 11.93



Performance ratios

From continuing operations:

Return on average total assets 1.41 %1.63 %1.00 %

Return on average common equity 15.28 %17.54 9.98

Return on average tangible common equity ^(b) 18.55 21.34 12.19

Net interest margin (TE) 2.47 2.52 2.62

Cash efficiency ratio ^(b) 60.2 59.9 60.6



From consolidated operations:

Return on average total assets 1.41 1.64 %1.00 %

Return on average common equity 15.33 17.67 10.08

Return on average tangible common equity ^(b) 18.61 21.49 12.31

Net interest margin (TE) 2.46 2.55 2.62

Loan to deposit ^(c) 66.5 70.4 77.2



Capital ratios at period end

Key shareholders' equity to assets 9.4 %9.9 %10.4 %

Key common shareholders' equity to assets 8.4 8.9 9.3

Tangible common equity to tangible assets ^(b) 7.0 7.4 7.8

Common Equity Tier 1^ (d) 9.6 9.9 9.5

Tier 1 risk-based capital ^(d) 10.9 11.3 10.9

Total risk-based capital ^(d) 12.7 13.2 13.3

Leverage ^(d) 8.4 8.7 8.7



Asset quality - from continuing operations

Net loan charge-offs $29 $22 $128

Net loan charge-offs to average loans .11 %.09 %.49 %

Allowance for loan and lease losses $1,084 $1,220 $1,730

Allowance for credit losses 1,236 1,372 1,938

Allowance for loan and lease losses to period-end loans 1.10 %1.21 %1.68 %

Allowance for credit losses to period-end loans 1.25 1.36 1.88

Allowance for loan and lease losses to nonperforming loans 195.7 175.8 207.4

Allowance for credit losses to nonperforming loans 223.1 197.7 232.4

Nonperforming loans at period-end $554 $694 $834

Nonperforming assets at period-end 599 738 1,003

Nonperforming loans to period-end portfolio loans .56 %.69 %.81 %

Nonperforming assets to period-end portfolio loans plus OREO and other .61 .73 .97 nonperforming assets



Trust assets

Assets under management $52,867 $51,013 $43,949



Other data

Average full-time equivalent employees 17,009 17,003 17,097

Branches 1,000 1,014 1,077

Taxable-equivalent adjustment $9 $6 $6



Financial Highlights (continued)

(dollars in millions, except per share amounts)

Nine months ended

9/30/20219/30/2020

Summary of operations

Net interest income (TE) $3,060 $3,020

Noninterest income 2,285 1,850

Total revenue (TE) 5,345 4,870

Provision for credit losses (422) 1,001

Noninterest expense 3,259 2,981

Income (loss) from continuing operations attributable to Key 1,985 754

Income (loss) from discontinued operations, net of taxes 11 7

Net income (loss) attributable to Key 1,996 761



Income (loss) from continuing operations attributable to Key common 1,905 674 shareholders

Income (loss) from discontinued operations, net of taxes 11 7

Net income (loss) attributable to Key common shareholders 1,916 681



Per common share

Income (loss) from continuing operations attributable to Key common $1.99 $.70 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) 2.00 .70



Income (loss) from continuing operations attributable to Key common 1.98 .69 shareholders - assuming dilution

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

Net income (loss) attributable to Key common shareholders - assuming dilution ^ 1.99 .70 (a)



Cash dividends paid .56 .56



Performance ratios

From continuing operations:

Return on average total assets 1.50 %.63 %

Return on average common equity 15.98 5.75

Return on average tangible common equity ^(b) 19.43 7.06

Net interest margin (TE) 2.53 2.78

Cash efficiency ratio ^(b) 60.1 60.2



From consolidated operations:

Return on average total assets 1.50 %.63 %

Return on average common equity 16.07 5.81

Return on average tangible common equity ^(b) 19.54 7.13

Net interest margin (TE) 2.52 2.78



Asset quality - from continuing operations

Net loan charge-offs $165 $308

Net loan charge-offs to average total loans .22 %.40 %



Other data

Average full-time equivalent employees 17,034 16,758



Taxable-equivalent adjustment 22 21

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

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

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

(d) September 30, 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 Nine months ended

9/30/2021 6/30/2021 9/30/2020 9/30/2021 9/30/2020

Tangible common equity to tangible assets at period-end

Key shareholders' equity (GAAP) $17,510 $17,941 $17,722

Less: Intangible assets ^(a) 2,814 2,828 2,862

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

Tangible common equity (non-GAAP) $12,840 $13,257 $13,004

Total assets (GAAP) $187,035 $181,115 $170,540

Less: Intangible assets ^(a) 2,814 2,828 2,862

Tangible assets (non-GAAP) $184,221 $178,287 $167,678

Tangible common equity to tangible assets ratio (non-GAAP) 6.97 %7.44 %7.76 %

Pre-provision net revenue

Net interest income (GAAP) $1,016 $1,017 $1,000 $3,038 $2,999

Plus: Taxable-equivalent adjustment 9 6 6 22 21

Noninterest income 797 750 681 2,285 1,850

Less: Noninterest expense 1,112 1,076 1,037 3,259 2,981

Pre-provision net revenue from continuing operations (non-GAAP) $710 $697 $650 $2,086 $1,889

Average tangible common equity

Average Key shareholders' equity (GAAP) $17,899 $17,859 $17,730 $17,843 $17,545

Less: Intangible assets (average) ^(c) 2,823 2,840 2,870 2,834 2,886

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

Average tangible common equity (non-GAAP) $13,176 $13,119 $12,960 $13,109 $12,759

Return on average tangible common equity from continuing operations

Net income (loss) from continuing operations attributable to Key $616 $698 $397 $1,905 $674 common shareholders (GAAP)

Average tangible common equity (non-GAAP) 13,176 13,119 12,960 13,109 12,759



Return on average tangible common equity from continuing operations 18.55 %21.34 %12.19 %19.43 %7.06 %(non-GAAP)

Return on average tangible common equity consolidated

Net income (loss) attributable to Key common shareholders (GAAP) $618 $703 $401 $1,916 $681

Average tangible common equity (non-GAAP) 13,176 13,119 12,960 13,109 12,759



Return on average tangible common equity consolidated (non-GAAP) 18.61 %21.49 %12.31 %19.54 %7.13 %

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Three months ended Nine months ended

9/30/20216/30/20219/30/20209/30/20219/30/2020

Cash efficiency ratio

Noninterest expense (GAAP) $1,112 $1,076 $1,037 $3,259 $2,981

Less: Intangible asset amortization 15 14 15 44 50

Adjusted noninterest expense (non-GAAP) $1,097 $1,062 $1,022 $3,215 $2,931



Net interest income (GAAP) $1,016 $1,017 $1,000 $3,038 $2,999

Plus: Taxable-equivalent adjustment 9 6 6 22 21

Noninterest income 797 750 681 2,285 1,850

Total taxable-equivalent revenue (non-GAAP)$1,822 $1,773 $1,687 $5,345 $4,870



Cash efficiency ratio (non-GAAP) 60.2 %59.9 %60.6 %60.1 %60.2 %



For the three months ended September 30, 2021, June 30, 2021, and(a) September 30, 2020, intangible assets exclude $3 million, $4 million, and $5 million, respectively, of period-end purchased credit card receivables.

(b) Net of capital surplus.

For the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, average intangible assets exclude $3 million, $4(c) million, and $5 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2021, and September 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)



9/30/2021 6/30/2021 9/30/2020

Assets

Loans $98,609 $100,730$103,081

Loans held for sale 1,805 1,537 1,724

Securities available for sale 40,594 34,638 26,895

Held-to-maturity securities 8,423 6,175 8,384

Trading account assets 902 851 733

Short-term investments 19,608 20,460 14,148

Other investments 607 635 620

Total earning assets 170,548 165,026 155,585

Allowance for loan and lease losses (1,084) (1,220) (1,730)

Cash and due from banks 763 792 956

Premises and equipment 678 785 765

Goodwill 2,673 2,673 2,664

Other intangible assets 144 159 203

Corporate-owned life insurance 4,312 4,304 4,274

Accrued income and other assets 8,404 7,966 7,084

Discontinued assets 597 630 739

Total assets $187,035181,115 170,540



Liabilities

Deposits in domestic offices:

NOW and money market deposit accounts $87,242 $85,242 $80,791

Savings deposits 7,259 6,993 5,585

Certificates of deposit ($100,000 or more) 1,890 2,064 3,345

Other time deposits 2,315 2,493 3,450

Total interest-bearing deposits 98,706 96,792 93,171

Noninterest-bearing deposits 53,225 49,280 43,575

Total deposits 151,931 146,072 136,746

Federal funds purchased and securities sold under repurchase agreements 228 211 213

Bank notes and other short-term borrowings 767 723 818

Accrued expense and other liabilities 3,434 2,957 2,356

Long-term debt 13,165 13,211 12,685

Total liabilities 169,525 163,174 152,818



Equity

Preferred stock 1,900 1,900 1,900

Common shares 1,257 1,257 1,257

Capital surplus 6,141 6,232 6,263

Retained earnings 14,133 13,689 12,375

Treasury stock, at cost (5,876) (5,287) (4,940)

Accumulated other comprehensive income (loss) (45) 150 867

Key shareholders' equity 17,510 17,941 17,722

Noncontrolling interests - - -

Total equity 17,510 17,941 17,722

Total liabilities and equity $187,035$181,115$170,540



Common shares outstanding (000) 930,544 960,276 976,205

Consolidated Statements of Income

(dollars in millions, except per share amounts)

Three months ended Nine months ended

9/30/20216/30/20219/30/20209/30/20219/30/2020

Interest income

Loans $882 $888 $927 $2,659 $2,933

Loans held for sale 13 11 18 35 58

Securities available for sale 135 133 115 398 365

Held-to-maturity securities 43 45 53 133 171

Trading account assets 4 5 3 14 16

Short-term investments 9 6 1 20 14

Other investments 1 2 2 5 3

Total interest income 1,087 1,090 1,119 3,264 3,560

Interest expense

Deposits 15 16 54 52 319

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

Bank notes and other short-term borrowings 2 3 1 6 11

Long-term debt 54 54 64 168 225

Total interest expense 71 73 119 226 561

Net interest income 1,016 1,017 1,000 3,038 2,999

Provision for credit losses (107) (222) 160 (422) 1,001

Net interest income after provision for credit losses 1,123 1,239 840 3,460 1,998

Noninterest income

Trust and investment services income 129 133 128 395 384

Investment banking and debt placement fees 235 217 146 614 418

Service charges on deposit accounts 91 83 77 247 229

Operating lease income and other leasing gains 37 36 38 111 128

Corporate services income 69 55 51 188 165

Cards and payments income 111 113 114 329 271

Corporate-owned life insurance income 33 30 30 94 101

Consumer mortgage income 33 26 51 106 133

Commercial mortgage servicing fees 34 44 18 112 48

Other income 25 13 28 89 (27)

Total noninterest income 797 750 681 2,285 1,850

Noninterest expense

Personnel 640 623 588 1,887 1,675

Net occupancy 74 75 76 225 223

Computer processing 67 71 59 211 170

Business services and professional fees 56 51 49 157 142

Equipment 25 25 25 75 74

Operating lease expense 30 31 33 95 103

Marketing 32 31 22 89 67

Intangible asset amortization 15 14 15 44 50

Other expense 173 155 170 476 477

Total noninterest expense 1,112 1,076 1,037 3,259 2,981

Income (loss) from continuing operations before income taxes 808 913 484 2,486 867

Income taxes 165 189 60 501 113

Income (loss) from continuing operations 643 724 424 1,985 754

Income (loss) from discontinued operations, net of taxes 2 5 4 11 7

Net income (loss) 645 729 428 1,996 761

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

Net income (loss) attributable to Key $645 $729 $428 $1,996 $761



Income (loss) from continuing operations attributable to Key common $616 $698 $397 $1,905 $674 shareholders

Net income (loss) attributable to Key common shareholders 618 703 401 1,916 681

Per common share

Income (loss) from continuing operations attributable to Key common $.65 $.73 $.41 $1.99 $.70 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) .66 .73 .41 2.00 .70

Per common share - assuming dilution

Income (loss) from continuing operations attributable to Key common $.65 $.72 $.41 $1.98 $.69 shareholders

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

Net income (loss) attributable to Key common shareholders ^(a) .65 .73 .41 1.99 .70



Cash dividends declared per common share $.185 $.185 $.185 $.555 $.555



Weighted-average common shares outstanding (000) 942,446 957,423 967,804 955,069 967,632

Effect of common share options and other stock awards 10,077 9,740 6,184 9,712 6,648

Weighted-average common shares and potential common shares outstanding (000) ^ 952,523 967,163 973,988 964,781 974,280 (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)

Third Quarter 2021 Second Quarter 2021 Third Quarter 2020

Average Yield/ Average Yield/ Average Yield/

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

Assets

Loans: ^(b), (c)

Commercial and industrial ^(d) $49,868 $ 445 3.54 $51,808 $ 450 3.48 $57,067 $ 474 3.31

Real estate - commercial mortgage 13,306 120 3.56 12,825 117 3.67 13,202 117 3.54

Real estate - construction 2,134 19 3.53 2,149 20 3.68 1,987 18 3.57

Commercial lease financing 3,922 27 2.80 4,060 30 2.98 4,488 35 3.10

Total commercial loans 69,230 611 3.50 70,842 617 3.49 76,744 644 3.34

Real estate - residential mortgage 13,168 92 2.78 11,055 81 2.92 8,398 73 3.46

Home equity loans 8,894 84 3.75 9,089 85 3.76 9,580 91 3.82

Consumer direct loans 5,175 59 4.55 4,910 57 4.69 4,403 56 5.07

Credit cards 917 23 10.07 908 22 9.79 967 25 10.24

Consumer indirect loans 2,754 22 3.15 4,010 32 3.19 4,827 44 3.66

Total consumer loans 30,908 280 3.60 29,972 277 3.71 28,175 289 4.10

Total loans 100,138 891 3.53 100,814 894 3.56 104,919 933 3.55

Loans held for sale 1,447 13 3.66 1,616 11 2.60 1,924 18 3.61

Securities available for sale ^(b), (e) 36,923 135 1.48 33,623 133 1.57 24,941 115 1.90

Held-to-maturity securities ^(b) 6,507 43 2.66 6,452 45 2.75 8,677 53 2.44

Trading account assets 743 4 2.19 837 5 2.56 686 3 2.08

Short-term investments 19,274 9 .18 18,817 6 .13 12,525 1 .04

Other investments ^(e) 614 1 .99 622 2 1.02 640 2 1.49

Total earning assets 165,646 1,096 2.64 162,781 1,096 2.70 154,312 1,125 2.93

Allowance for loan and lease losses (1,222) (1,442) (1,696)

Accrued income and other assets 16,947 16,531 16,195

Discontinued assets 618 650 752

Total assets $181,989 $178,520 $169,563

Liabilities

NOW and money market deposit accounts $85,333 $ 10 .05 $83,981 $ 9 .05 $80,175 $ 26 .13

Savings deposits 7,117 - .01 6,859 1 .03 5,478 1 .04

Certificates of deposit ($100,000 or more) 1,975 3 .59 2,212 4 .72 3,862 16 1.60

Other time deposits 2,404 2 .26 2,630 2 .38 3,735 11 1.17

Total interest-bearing deposits 96,829 15 .06 95,682 16 .07 93,250 54 .23

Federal funds purchased and securities sold under 231 - .02 251 - .02 225 - .05 repurchase agreements

Bank notes and other short-term borrowings 671 2 1.11 744 3 1.19 761 1 .68

Long-term debt ^(f), (g) 12,601 54 1.73 11,978 54 1.79 12,801 64 2.12

Total interest-bearing liabilities 110,332 71 .26 108,655 73 .27 107,037 119 .45

Noninterest-bearing deposits 50,087 48,640 41,694

Accrued expense and other liabilities 3,053 2,716 2,350

Discontinued liabilities ^(g) 618 650 752

Total liabilities $164,090 $160,661 $151,833

Equity

Key shareholders' equity $17,899 $17,859 $17,730

Noncontrolling interests - - -

Total equity 17,899 17,859 17,730

Total liabilities and equity $181,989 $178,520 $169,563

Interest rate spread (TE) 2.38 % 2.43 % 2.48 %

Net interest income (TE) and net interest margin (TE) $ 1,025 2.47 % $ 1,023 2.52 % $ 1,006 2.62 %

TE adjustment ^(b) 9 6 6

Net interest income, GAAP basis $ 1,016 $ 1,017 $ 1,000

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 September 30, 2021, June 30, 2021, and September 30, 2020.

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

Commercial and industrial average balances include $137 million, $132(d) million, and $129 million of assets from commercial credit cards for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

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

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

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

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

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

(dollars in millions)

Nine months ended September 30, 2021Nine months ended September 30, 2020

Average Yield/ Average Yield/

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

Assets

Loans: ^(b), (c)

Commercial and industrial ^(d) $51,410 $ 1,347 3.50 % $55,676 $ 1,500 3.60 %

Real estate - commercial mortgage 12,932 351 3.63 13,419 400 3.98

Real estate - construction 2,111 58 3.65 1,804 55 4.06

Commercial lease financing 4,041 89 2.93 4,546 107 3.15

Total commercial loans 70,494 1,845 3.50 75,445 2,062 3.65

Real estate - residential mortgage 11,320 246 2.89 7,801 210 3.59

Home equity loans 9,089 257 3.78 9,894 301 4.07

Consumer direct loans 4,969 173 4.65 4,089 165 5.38

Credit cards 919 69 10.10 1,010 81 10.68

Consumer indirect loans 3,771 91 3.22 4,779 135 3.78

Total consumer loans 30,068 836 3.71 27,573 892 4.32

Total loans 100,562 2,681 3.56 103,018 2,954 3.83

Loans held for sale 1,531 35 3.03 2,090 58 3.68

Securities available for sale ^(b), (e) 33,553 398 1.60 22,297 365 2.25

Held-to-maturity securities ^(b) 6,713 133 2.64 9,274 171 2.46

Trading account assets 809 14 2.30 837 16 2.55

Short-term investments 18,211 20 .15 7,412 14 .24

Other investments ^(e) 616 5 1.14 642 3 .72

Total earning assets 161,995 3,286 2.71 145,570 3,581 3.30

Allowance for loan and lease losses (1,427) (1,403)

Accrued income and other assets 16,626 15,579

Discontinued assets 651 794

Total assets $177,845 $160,540

Liabilities

NOW and money market deposit accounts $83,599 $ 30 .05 $74,087 $ 194 .35

Savings deposits 6,730 1 .02 5,089 2 .04

Certificates of deposit ($100,000 or more) 2,250 13 .77 5,036 74 1.96

Other time deposits 2,644 8 .41 4,321 49 1.53

Total interest-bearing deposits 95,223 52 .07 88,533 319 .48

Federal funds purchased and securities sold under repurchase agreements242 - .03 821 6 .95

Bank notes and other short-term borrowings 764 6 .96 1,674 11 .87

Long-term debt ^(f), (g) 12,469 168 1.80 12,733 225 2.45

Total interest-bearing liabilities 108,698 226 .28 103,761 561 .73

Noninterest-bearing deposits 47,800 35,922

Accrued expense and other liabilities 2,853 2,518

Discontinued liabilities ^(g) 651 794

Total liabilities $160,002 $142,995

Equity

Key shareholders' equity $17,843 $17,545

Noncontrolling interests - -

Total equity 17,843 17,545

Total liabilities and equity $177,845 $160,540

Interest rate spread (TE) 2.44 % 2.57 %

Net interest income (TE) and net interest margin (TE) $ 3,060 2.53 % $ 3,020 2.78 %

TE adjustment ^(b) 22 21

Net interest income, GAAP basis $ 3,038 $ 2,999



(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 nine months ended September 30, 2021, and September 30, 2020, respectively.

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

(d) Commercial and industrial average balances include $131 million and $137 million of assets from commercial credit cards for the nine months ended September 30, 2021, and September 30, 2020, respectively.

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

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

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

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

Noninterest Expense

(dollars in millions)



Three months ended Nine months ended

9/30/20216/30/20219/30/20209/30/20219/30/2020

Personnel ^(a) $640 $623 $588 $1,887 $1,675

Net occupancy 74 75 76 225 223

Computer processing 67 71 59 211 170

Business services and professional fees 56 51 49 157 142

Equipment 25 25 25 75 74

Operating lease expense 30 31 33 95 103

Marketing 32 31 22 89 67

Intangible asset amortization 15 14 15 44 50

Other expense 173 155 170 476 477

Total noninterest expense $1,112 $1,076 $1,037 $3,259 $2,981

Average full-time equivalent employees ^(b)17,009 17,003 17,097 17,034 16,758

(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 Nine months ended

9/30/20216/30/20219/30/20209/30/20219/30/2020

Salaries and contract labor $ 328 $ 321 $ 339 $ 969 $ 987

Incentive and stock-based compensation212 210 155 618 419

Employee benefits 100 92 93 299 261

Severance - - 1 1 8

Total personnel expense $ 640 $ 623 $ 588 $ 1,887$ 1,675

Loan Composition

(dollars in millions)



Percent change 9/30/2021 vs

9/30/20216/30/2021 9/30/2020 6/30/2021 9/30/2020

Commercial and industrial ^(a) $49,553$50,672 $55,025 (2.2) %(9.9) %

Commercial real estate:

Commercial mortgage 13,674 12,965 13,059 5.5 4.7

Construction 2,120 2,132 1,947 (.6) 8.9

Total commercial real estate loans15,794 15,097 15,006 4.6 5.3

Commercial lease financing ^(b) 3,982 4,061 4,450 (1.9) (10.5)

Total commercial loans 69,329 69,830 74,481 (.7) (6.9)

Residential - prime loans:

Real estate - residential mortgage14,204 12,131 8,715 17.1 63.0

Home equity loans 8,747 9,047 9,488 (3.3) (7.8)

Total residential - prime loans 22,951 21,178 18,203 8.4 26.1

Consumer direct loans 5,324 5,049 4,395 5.4 21.1

Credit cards 928 923 970 .5 (4.3)

Consumer indirect loans 77 3,750 5,032 (97.9) (98.5)

Total consumer loans 29,280 30,900 28,600 (5.2) 2.4

Total loans ^(c), (d) $98,609$100,730$103,081(2.1) %(4.3) %

(a) Loan balances include $139 million, $135 million, and $128 million of commercial credit card balances at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

Commercial lease financing includes receivables held as collateral for a(b) secured borrowing of $16 million, $19 million, and $18 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c) Total loans exclude loans of $602 million at September 30, 2021, $636 million at June 30, 2021, and $743 million at September 30, 2020, related to the discontinued operations of the education lending business.

Accrued interest of$211 million, $225 million, and $235 million at(d) September 30, 2021, June 30, 2021, and September 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 9/30/2021 vs

9/30/20216/30/20219/30/20206/30/2021 9/30/2020

Commercial and industrial $122 $233 $336 (47.6) % (63.7) %

Real estate - commercial mortgage 1,446 1,073 1,031 34.8 40.3

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

Real estate - residential mortgage 237 231 288 2.6 (17.7)

Consumer direct loans - - 68 N/M N/M

Total loans held for sale $1,805 $1,537 $1,724 17.4 % 4.7 %



N/M = Not Meaningful

Summary of Changes in Loans Held for Sale

(in millions)



3Q21 2Q21 1Q21 4Q20 3Q20

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

New originations 3,328 3,573 4,010 3,835 3,282

Transfers from (to) held to maturity, net3,305 (71) 83 (24) 75

Loan sales (6,405)(4,195)(3,303)(3,932)(3,583)

Loan draws (payments), net 8 (27) (73) (19) (57)

Valuation and other adjustments 32 (39) (4) - -

Balance at end of period $1,805$1,537$2,296$1,583$1,724

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)



Three months ended Nine months ended

9/30/2021 6/30/2021 9/30/2020 9/30/2021 9/30/2020

Average loans outstanding $100,138 $100,814 $104,919 $100,562 $103,018

Allowance for loan and lease losses at the end of the prior period $1,220 $1,438 $1,708 $1,626 $900

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

Allowance for loan and lease losses at the beginning of the period 1,220 1,438 1,708 1,626 1,104

Loans charged off:

Commercial and industrial 27 41 101 141 232



Real estate - commercial mortgage - 4 13 39 18

Real estate - construction - - - - -

Total commercial real estate loans - 4 13 39 18

Commercial lease financing 1 - 10 5 16

Total commercial loans 28 45 124 185 266

Real estate - residential mortgage (2) 1 - (1) 2

Home equity loans 1 4 4 7 10

Consumer direct loans 7 7 8 22 30

Credit cards 6 9 9 21 32

Consumer indirect loans 26 5 6 38 22

Total consumer loans 38 26 27 87 96

Total loans charged off 66 71 151 272 362

Recoveries:

Commercial and industrial 20 32 9 60 19



Real estate - commercial mortgage 1 6 2 8 3

Real estate - construction - - - - -

Total commercial real estate loans 1 6 2 8 3

Commercial lease financing 6 - - 7 1

Total commercial loans 27 38 11 75 23

Real estate - residential mortgage 1 - 1 2 1

Home equity loans 2 1 3 4 6

Consumer direct loans 2 2 2 6 6

Credit cards 1 3 2 6 6

Consumer indirect loans 4 5 4 14 12

Total consumer loans 10 11 12 32 31

Total recoveries 37 49 23 107 54

Net loan charge-offs (29) (22) (128) (165) (308)

Provision (credit) for loan and lease losses (107) (196) 150 (377) 934

Allowance for loan and lease losses at end of period $1,084 $1,220 $1,730 $1,084 $1,730



Liability for credit losses on lending-related commitments at the end of the $152 $178 $198 $197 $68 prior 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 152 178 198 197 141 period

Provision (credit) for losses on lending-related commitments - (26) 10 (45) 67

Liability for credit losses on lending-related commitments at end of period ^ $152 $152 $208 $152 $208 (c)



Total allowance for credit losses at end of period $1,236 $1,372 $1,938 $1,236 $1,938



Net loan charge-offs to average total loans .11 %.09 %.49 %.22 %.40 %

Allowance for loan and lease losses to period-end loans 1.10 1.21 1.68 1.10 1.68

Allowance for credit losses to period-end loans 1.25 1.36 1.88 1.25 1.88

Allowance for loan and lease losses to nonperforming loans 195.7 175.8 207.4 195.7 207.4

Allowance for credit losses to nonperforming loans 223.1 197.7 232.4 223.1 232.4



Discontinued operations - education lending business:

Loans charged off $1 1 $- $3 $4

Recoveries 1 - - 2 3

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.

(b) Nine months ended September 30, 2020, excludes $4 million related to the provision for other financial assets as a result of the change in accounting principle.

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

Asset Quality Statistics From Continuing Operations

(dollars in millions)

3Q21 2Q21 1Q21 4Q20 3Q20

Net loan charge-offs $29 $22 $114 $135 $128

Net loan charge-offs to average total loans .11 %.09 %.46 %.53 %.49 %

Allowance for loan and lease losses $1,084 $1,220 $1,438 $1,626 $1,730

Allowance for credit losses ^(a) 1,236 1,372 1,616 1,823 1,938

Allowance for loan and lease losses to period-end loans 1.10 %1.21 %1.42 %1.61 %1.68 %

Allowance for credit losses to period-end loans 1.25 1.36 1.60 1.80 1.88

Allowance for loan and lease losses to nonperforming loans 195.7 175.8 197.5 207.1 207.4

Allowance for credit losses to nonperforming loans 223.1 197.7 222.0 232.2 232.4

Nonperforming loans at period end $554 $694 $728 $785 $834

Nonperforming assets at period end 599 738 790 937 1,003

Nonperforming loans to period-end portfolio loans .56 %.69 %.72 %.78 %.81 %

Nonperforming assets to period-end portfolio loans plus OREO and other.61 .73 .78 .92 .97 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)

9/30/2021 6/30/2021 3/31/2021 12/31/20209/30/2020

Commercial and industrial $ 253 $ 355 $ 387 $ 385 $459



Real estate - commercial mortgage 49 66 66 104 104

Real estate - construction - - - - 1

Total commercial real estate loans 49 66 66 104 105

Commercial lease financing 5 7 8 8 6

Total commercial loans 307 428 461 497 570

Real estate - residential mortgage 93 99 95 110 96

Home equity loans 146 146 148 154 146

Consumer direct loans 4 4 5 5 3

Credit cards 3 3 3 2 2

Consumer indirect loans 1 14 16 17 17

Total consumer loans 247 266 267 288 264

Total nonperforming loans 554 694 728 785 834

OREO 8 9 12 100 105

Nonperforming loans held for sale 35 32 47 49 61

Other nonperforming assets 2 3 3 3 3

Total nonperforming assets $ 599 $ 738 $ 790 $ 937 $1,003

Accruing loans past due 90 days or more 82 74 92 86 73

Accruing loans past due 30 through 89 days 164 190 191 241 336

Restructured loans - accruing and nonaccruing ^(a) 270 334 376 363 306

Restructured loans included in nonperforming loans ^(a) 146 177 192 229 168

Nonperforming assets from discontinued operations - education lending business 4 5 5 5 6

Nonperforming loans to period-end portfolio loans .56 % .69 % .72 % .78 % .81 %

Nonperforming assets to period-end portfolio loans plus OREO and other .61 .73 .78 .92 .97 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)

3Q21 2Q21 1Q21 4Q20 3Q20

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

Loans placed on nonaccrual status 116 186 196 300 387

Charge-offs (66) (74) (135)(160)(150)

Loans sold (17) (10) (13) (9) (6)

Payments (136)(92) (37) (83) (83)

Transfers to OREO (1) - (3) (3) -

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

Loans returned to accrual status (36) (44) (65) (94) (74)

Balance at end of period $554$694$728$785$834

Line of Business Results

(dollars in millions)



Percentage change 3Q21 vs.

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

Consumer Bank

Summary of operations

Total revenue (TE) $ 870 $ 852 $ 864 $ 896 $ 864 2.1 % .7 %

Provision for credit losses (38) (70) (23) (5) (3) 45.7 N/M

Noninterest expense 591 584 601 606 567 1.2 4.2

Net income (loss) attributable to Key 241 257 217 225 229 (6.2) 5.2

Average loans and leases 39,796 40,598 39,249 38,033 38,354 (2.0) 3.8

Average deposits 89,156 88,412 85,033 82,845 82,829 .8 7.6

Net loan charge-offs 35 34 36 28 23 2.9 52.2

Net loan charge-offs to average total loans.35 %.34 %.37 %.29 %.24 %2.9 45.8

Nonperforming assets at period end $ 254 $ 274 $ 277 $ 300 $ 281 (7.3) (9.6)

Return on average allocated equity 25.81 %28.53 %25.74 %25.60 %26.21 %(9.5) (1.5)



Commercial Bank

Summary of operations

Total revenue (TE) $ 891 $ 873 $ 858 $ 922 $ 811 2.1 % 9.9 %

Provision for credit losses (69) (131) (67) 44 150 (47.3) (187.3)

Noninterest expense 470 451 443 499 447 4.2 5.1

Net income (loss) attributable to Key 384 433 383 310 173 (11.3) 122.0

Average loans and leases 59,914 59,953 61,221 63,432 66,378 (.1) (9.7)

Average loans held for sale 1,190 1,341 1,237 1,285 1,383 (11.3) (14.0)

Average deposits 56,546 54,814 51,894 52,489 51,585 3.2 9.6

Net loan charge-offs (6) 9 78 108 103 N/M N/M

Net loan charge-offs to average total loans(.04) %.06 %.52 %.68 %.62 %N/M N/M

Nonperforming assets at period end $ 345 $ 464 $ 514 $ 637 $ 722 (25.6) (52.2)

Return on average allocated equity 18.68 %20.74 %17.41 %23.79 %13.35 %(9.9) 39.9

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

View original content to download multimedia: https://www.prnewswire.com/news-releases/keycorp-reports-third-quarter-2021-net-income-of-616-million-or-65-per-diluted-common-share-301405581.html

SOURCE KeyCorp