KEY 8-K
Keycorp /New/ (KEY)
8-K
2020-04-16
For: 2020-04-16
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Added on
April 10, 2026
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Date of Report (Date of earliest event reported): April 16, 2020
(Exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization: | Commission File Number | I.R.S. Employer Identification Number: | ||
Address of principal executive offices: | Zip Code: | |||
(216 ) 689-3000
Registrant’s telephone number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 | Results of Operations and Financial Condition. |
On April 16, 2020, KeyCorp issued a press release announcing its financial results for the three-month period ended March 31, 2020 (the “Press Release”), and posted on its website its first quarter 2020 Supplemental Information Package (the “Supplemental Information Package”). The Press Release and Supplemental Information Package are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively.
The information in the preceding paragraph, as well as Exhibit 99.1 and Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”).
KeyCorp’s Consolidated Balance Sheets and Consolidated Statements of Income (collectively, the “Financial Statements”), included as part of the Press Release, are filed as Exhibit 99.3 to this report. Exhibit 99.3 is deemed “filed” for purposes of Section 18 of the Exchange Act and, therefore, may be incorporated by reference in filings under the Securities Act.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits |
The following exhibits are furnished, or filed in the case of Exhibit 99.3, herewith:
99.1 |
99.2 |
99.3 |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | ||
KEYCORP | ||
(Registrant) | ||
Date: April 16, 2020 | /s/ Douglas M. Schosser | |
By: Douglas M. Schosser | ||
Chief Accounting Officer | ||
KEYCORP REPORTS FIRST QUARTER 2020 NET INCOME OF $118 MILLION,
OR $.12 PER DILUTED COMMON SHARE
1Q20 results reflect the Current Expected Credit Losses accounting methodology;
provision for credit losses exceeded net charge-offs by $275 million, or $.23 per share
$92 million, or $.08 per share, impact from market-related valuation adjustments
Capital and liquidity positioned to weather adverse operating environments
Strong risk profile with disciplined underwriting standards
Performing critical role in providing capital and assistance to our clients;
over 38,000 applications being processed for Paycheck Protection Program
CLEVELAND, April 16, 2020 - KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $118 million, or $.12 per diluted common share for the first quarter of 2020, compared to $439 million, or $.45 per diluted common share, for the fourth quarter of 2019 and $386 million, or $.38 per diluted common share, for the first quarter of 2019. Key's results in the first quarter of 2020 reflect the Current Expected Credit Losses ("CECL") accounting methodology, as well as the impact of COVID-19 and market-related valuation adjustments.
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 2
Selected Financial Highlights | |||||||||||||||
dollars in millions, except per share data | Change 1Q20 vs. | ||||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 118 | $ | 439 | $ | 386 | (73.1 | )% | (69.4 | )% | |||||
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution | .12 | .45 | .38 | (73.3 | ) | (68.4 | ) | ||||||||
Return on average tangible common equity from continuing operations (a) | 3.82 | % | 14.09 | % | 13.69 | % | N/A | N/A | |||||||
Return on average total assets from continuing operations | .40 | 1.27 | 1.18 | N/A | N/A | ||||||||||
Common Equity Tier 1 ratio (b) | 8.95 | 9.44 | 9.81 | N/A | N/A | ||||||||||
Book value at period end | $ | 15.95 | $ | 15.54 | $ | 14.31 | 2.6 | % | 11.5 | % | |||||
Net interest margin (TE) from continuing operations | 3.01 | % | 2.98 | % | 3.13 | % | N/A | N/A | |||||||
(a) | The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Return on average tangible common equity from continuing operations.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
(b) | 3/31/20 ratio is estimated. |
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||
Revenue | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Net interest income (TE) | $ | 989 | $ | 987 | $ | 985 | .2 | % | .4 | % | ||||
Noninterest income | 477 | 651 | 536 | (26.7 | ) | (11.0 | ) | |||||||
Total revenue | $ | 1,466 | $ | 1,638 | $ | 1,521 | (10.5 | )% | (3.6 | )% | ||||
TE = Taxable Equivalent
Taxable-equivalent net interest income was $989 million for the first quarter of 2020, compared to taxable-equivalent net interest income of $985 million for the first quarter of 2019. The increase in net interest income reflects higher earning asset balances, which was partially offset by a lower net interest margin. The net interest margin was impacted by a lag in deposit pricing as interest rates declined.
Compared to the fourth quarter of 2019, taxable-equivalent net interest income increased by $2 million, reflecting a higher net interest margin, partially offset by one less day in the first quarter of 2020. The net interest margin benefited from lower interest-bearing deposit costs and a favorable mix of earning asset balances, partially offset by lower earning asset yields.
Noninterest Income | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Trust and investment services income | $ | 133 | $ | 120 | $ | 115 | 10.8 | % | 15.7 | % | ||||
Investment banking and debt placement fees | 116 | 181 | 110 | (35.9 | ) | 5.5 | ||||||||
Service charges on deposit accounts | 84 | 86 | 82 | (2.3 | ) | 2.4 | ||||||||
Operating lease income and other leasing gains | 30 | 39 | 37 | (23.1 | ) | (18.9 | ) | |||||||
Corporate services income | 62 | 65 | 55 | (4.6 | ) | 12.7 | ||||||||
Cards and payments income | 66 | 67 | 66 | (1.5 | ) | — | ||||||||
Corporate-owned life insurance income | 36 | 39 | 32 | (7.7 | ) | 12.5 | ||||||||
Consumer mortgage income | 20 | 21 | 11 | (4.8 | ) | 81.8 | ||||||||
Commercial mortgage servicing fees | 18 | 19 | 18 | (5.3 | ) | — | ||||||||
Other income | (88 | ) | 14 | 10 | N/M | N/M | ||||||||
Total noninterest income | $ | 477 | $ | 651 | $ | 536 | (26.7 | )% | (11.0 | )% | ||||
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 3
Key’s noninterest income was $477 million for the first quarter of 2020, compared to $536 million for the year-ago quarter and $651 million in the prior quarter. In the first quarter of 2020, other income was impacted by market-related valuation adjustments totaling $92 million, comprised of $73 million from customer derivatives and $19 million related to trading losses. Both were negatively impacted by wider credit spreads in the quarter.
Compared to the first quarter of 2019, noninterest income decreased by $59 million, due to a decline in other income, as well as lower operating lease income. The decrease was partially offset by growth in several fee categories: trust and investment services income, investment banking and debt placement fees, consumer mortgage income, and corporate services income.
Compared to the fourth quarter of 2019, noninterest income decreased by $174 million, due to a decline in other income, as well as lower investment banking and debt placement fees, due to a disruption in the capital markets related to COVID-19 and increased market volatility. The decrease was partially offset by higher trust and investment services income.
Noninterest Expense | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Personnel expense | $ | 515 | $ | 551 | $ | 563 | (6.5 | )% | (8.5 | )% | ||||
Nonpersonnel expense | 416 | 429 | 400 | (3.0 | ) | 4.0 | ||||||||
Total noninterest expense | $ | 931 | $ | 980 | $ | 963 | (5.0 | )% | (3.3 | )% | ||||
Key’s noninterest expense was $931 million for the first quarter of 2020, compared to $963 million in the year-ago quarter and $980 million in the prior quarter. There were no notable items in the first quarter of 2020. The year-ago period included notable items of $26 million, which were efficiency-related expenses, while the prior period included notable items of $22 million, which consisted of a pension settlement charge and professional fees related to a previously disclosed fraud loss.
Excluding notable items in the year-ago period, noninterest expense decreased $6 million, reflecting the successful implementation of Key's expense initiatives, which drove personnel expenses lower, including lower incentive compensation expense, as well as a decline in intangible asset amortization. These expenses were partially offset by additional expenses from Laurel Road, which was acquired in April 2019.
Excluding notable items in the prior period, noninterest expense decreased $27 million. The decrease was primarily driven by a decline in personnel expenses, including lower incentive compensation expense, as well as a seasonal decline in marketing costs. These expenses were partially offset by an increase in employee benefits and higher operating lease expense.
BALANCE SHEET HIGHLIGHTS | ||||||||||||||
Average Loans | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Commercial and industrial (a) | $ | 49,466 | $ | 48,345 | $ | 45,998 | 2.3 | % | 7.5 | % | ||||
Other commercial loans | 19,779 | 19,312 | 20,383 | 2.4 | (3.0 | ) | ||||||||
Total consumer loans | 26,929 | 25,950 | 23,268 | 3.8 | 15.7 | |||||||||
Total loans | $ | 96,174 | $ | 93,607 | $ | 89,649 | 2.7 | % | 7.3 | % | ||||
(a) | Commercial and industrial average loan balances include $145 million, $146 million, and $133 million of assets from commercial credit cards at March 31, 2020, December 31, 2019, and March 31, 2019, respectively. |
Average loans were $96.2 billion for the first quarter of 2020, an increase of $6.5 billion compared to the first quarter of 2019. Commercial loans increased $2.9 billion, reflecting broad-based growth in
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 4
commercial and industrial loans, partially offset by declines in commercial mortgage. Consumer loans increased $3.7 billion, driven by solid growth from Laurel Road, residential mortgage loans, and indirect auto lending.
Compared to the fourth quarter of 2019, average loans increased by $2.6 billion. Commercial loans increased $1.6 billion, reflecting an increase in commercial and industrial utilization rates. Consumer loans increased $979 million, driven by growth from Laurel Road, residential mortgage, and indirect auto loans. On a period-end basis, total loans increased $8.6 billion compared to the linked quarter, largely the result of a $7.7 billion increase in commercial and industrial loans, due to higher utilization rates in March.
Average Deposits | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Non-time deposits | $ | 99,117 | $ | 100,518 | $ | 93,699 | (1.4 | )% | 5.8 | % | ||||
Certificates of deposit ($100,000 or more) | 6,310 | 6,899 | 8,376 | (8.5 | ) | (24.7 | ) | |||||||
Other time deposits | 4,901 | 5,187 | 5,501 | (5.5 | ) | (10.9 | ) | |||||||
Total deposits | $ | 110,328 | $ | 112,604 | $ | 107,576 | (2.0 | )% | 2.6 | % | ||||
Cost of total deposits | .62 | % | .71 | % | .76 | % | N/A | N/A | ||||||
N/A = Not Applicable
Average deposits totaled $110.3 billion for the first quarter of 2020, an increase of $2.8 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 fourth quarter of 2019, average deposits decreased by $2.3 billion, primarily driven by short-term and seasonal deposit outflows, which more than offset growth from the penetration of existing retail and commercial relationships. On a period-end basis, deposit inflows in March were commensurate to loan growth.
ASSET QUALITY | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Net loan charge-offs | $ | 84 | $ | 99 | $ | 64 | (15.2 | )% | 31.3 | % | ||||
Net loan charge-offs to average total loans | .35 | % | .42 | % | .29 | % | N/A | N/A | ||||||
Nonperforming loans at period end | $ | 632 | $ | 577 | $ | 548 | 9.5 | 15.3 | ||||||
Nonperforming assets at period end | 844 | 715 | 597 | 18.0 | 41.4 | |||||||||
Allowance for loan and lease losses | 1,359 | 900 | 883 | 51.0 | 53.9 | |||||||||
Allowance for loan and lease losses to nonperforming loans | 215.0 | % | 156.0 | % | 161.1 | % | N/A | N/A | ||||||
Provision for credit losses | $ | 359 | $ | 109 | $ | 62 | 229.4 | % | 479.0 | % | ||||
N/A = Not Applicable
On January 1, 2020, Key adopted a new accounting standard, often referred to as Current Expected Credit Losses ("CECL"), which establishes a single allowance framework for all financial assets carried at amortized cost and certain off-balance sheet exposures. This framework requires that management estimate credit losses over the full remaining expected life and consider expected future changes in macroeconomic conditions.
Upon adoption, Key's ALLL from continuing operations increased by $204 million, or 23%, and the reserve for off-balance sheet exposures increased by $66 million, or 88%, as compared to December 31, 2019. The increase in the total allowance for credit losses resulted in a $230 million decrease to retained earnings, net of deferred tax balances.
Net loan charge-offs for the first quarter of 2020 totaled $84 million, or .35% of average total loans. These results compare to $64 million, or .29%, for the first quarter of 2019, and $83 million, excluding the
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 5
fraud loss, or .35%, for the fourth quarter of 2019. In the fourth quarter of 2019, Key realized pre-tax losses related to a previously disclosed fraud incident of $16 million.
Key’s provision for credit losses was $359 million for the first quarter of 2020. These results compare to $62 million for the first quarter of 2019 and $93 million, excluding the fraud loss, for the fourth quarter of 2019. The increase in provision for credit losses is mainly attributable to the significant change in the economic scenario from the COVID-19 pandemic. Key’s allowance for loan and lease losses was $1.4 billion, or 1.32% of total period-end loans at March 31, 2020, compared to .98% at March 31, 2019, and .95% at December 31, 2019.
At March 31, 2020, Key’s nonperforming loans totaled $632 million, which represented .61% of period-end portfolio loans. These results compare to .61% at March 31, 2019, and .61% at December 31, 2019. Purchased credit impaired ("PCI") loans and leases meeting nonperforming criteria were historically excluded from Key’s nonperforming disclosures. As a result of CECL implementation on January 1, 2020, PCI loans became purchased credit deteriorated ("PCD") loans. PCD loans that meet the definition of nonperforming are now included in nonperforming disclosures, resulting in a $45 million increase in NPLs in the first quarter of 2020.
Nonperforming assets at March 31, 2020, totaled $844 million, and represented .82% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .66% at March 31, 2019, and .75% at December 31, 2019.
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 6
CAPITAL
Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at March 31, 2020.
Capital Ratios | ||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | ||||
Common Equity Tier 1 (a) | 8.95 | % | 9.44 | % | 9.81 | % |
Common Equity Tier 1 CECL fully phased-in (b) | 8.75 | — | — | |||
Tier 1 risk-based capital (a) | 10.31 | 10.86 | 10.94 | |||
Total risk based capital (a) | 12.34 | 12.79 | 12.98 | |||
Tangible common equity to tangible assets (c) | 8.26 | 8.64 | 8.43 | |||
Leverage (a) | 9.75 | 9.88 | 9.89 | |||
(a) | 3/31/2020 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. |
(b) | 3/31/2020 ratio is estimated and is calculated to reflect the full impact of CECL and excludes the benefit of phase–ins. |
(c) | The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “tangible common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. See below for further information on the Regulatory Capital Rules. |
Key's capital position remained strong in the first quarter of 2020. As shown in the preceding table, at March 31, 2020, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 8.95% and 10.31%, respectively. Key's tangible common equity ratio was 8.26% at March 31, 2020.
As a “standardized approach” banking organization, Key’s mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”) began on January 1, 2015, subject to transitional provisions. Key’s estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 8.84% at March 31, 2020. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.
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 1Q20 vs. | |||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||
Shares outstanding at beginning of period | 977,189 | 988,538 | 1,019,503 | (1.1 | )% | (4.2 | )% | |||||
Open market repurchases and return of shares under employee compensation plans | (7,862 | ) | (12,968 | ) | (11,791 | ) | (39.4 | ) | (33.3 | ) | ||
Shares issued under employee compensation plans (net of cancellations) | 5,992 | 1,619 | 5,474 | 270.1 | 9.5 | |||||||
Shares outstanding at end of period | 975,319 | 977,189 | 1,013,186 | (.2 | )% | (3.7 | )% | |||||
Consistent with Key's 2019 Capital Plan, during the first quarter of 2020, Key declared a dividend of $.185 per common share. Key also completed $120 million of common share repurchases. These repurchases included $117 million of common share repurchases in the open market and $3 million of share repurchases related to employee equity compensation programs. These repurchases were completed prior to Key's announcement on March 17, 2020 to temporarily suspend share repurchase activity in response to the COVID-19 pandemic.
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.
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
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Major Business Segments | |||||||||||||||
dollars in millions | Change 1Q20 vs. | ||||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | |||||||||||
Revenue from continuing operations (TE) | |||||||||||||||
Consumer Bank | $ | 820 | $ | 825 | $ | 805 | (.6 | )% | 1.9 | % | |||||
Commercial Bank | 629 | 771 | 702 | (18.4 | ) | (10.4 | ) | ||||||||
Other (a) | 17 | 42 | 14 | (59.5 | ) | 21.4 | % | ||||||||
Total | $ | 1,466 | $ | 1,638 | $ | 1,521 | (10.5 | )% | (3.6 | )% | |||||
Income (loss) from continuing operations attributable to Key | |||||||||||||||
Consumer Bank | $ | 105 | $ | 166 | $ | 168 | (36.7 | )% | (37.5 | )% | |||||
Commercial Bank | 70 | 315 | 250 | (77.8 | ) | (72.0 | ) | ||||||||
Other (a), (b) | (29 | ) | (12 | ) | (11 | ) | N/M | N/M | |||||||
Total | $ | 146 | $ | 469 | $ | 407 | (68.9 | )% | (64.1 | )% | |||||
(a) | Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations. |
(b) | Other segments included $12 million, after tax, of notable items related to a previously disclosed fraud loss for the fourth quarter of 2019; additional detail can be found on page 24 of this release. |
TE = Taxable Equivalent, N/M = Not Meaningful
Consumer Bank | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Summary of operations | ||||||||||||||
Net interest income (TE) | $ | 590 | $ | 586 | $ | 591 | .7 | % | (.2 | )% | ||||
Noninterest income | 230 | 239 | 214 | (3.8 | ) | 7.5 | ||||||||
Total revenue (TE) | 820 | 825 | 805 | (.6 | ) | 1.9 | ||||||||
Provision for credit losses | 140 | 55 | 45 | 154.5 | 211.1 | |||||||||
Noninterest expense | 543 | 552 | 540 | (1.6 | ) | .6 | ||||||||
Income (loss) before income taxes (TE) | 137 | 218 | 220 | (37.2 | ) | (37.7 | ) | |||||||
Allocated income taxes (benefit) and TE adjustments | 32 | 52 | 52 | (38.5 | ) | (38.5 | ) | |||||||
Net income (loss) attributable to Key | $ | 105 | $ | 166 | $ | 168 | (36.7 | )% | (37.5 | )% | ||||
Average balances | ||||||||||||||
Loans and leases | $ | 35,197 | $ | 34,148 | $ | 31,321 | 3.1 | % | 12.4 | % | ||||
Total assets | 38,460 | 37,729 | 34,732 | 1.9 | 10.7 | |||||||||
Deposits | 73,320 | 73,561 | 71,288 | (.3 | ) | 2.9 | ||||||||
Assets under management at period end | $ | 36,189 | $ | 40,833 | $ | 38,742 | (11.4 | )% | (6.6 | )% | ||||
TE = Taxable Equivalent
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
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Additional Consumer Bank Data | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Noninterest income | ||||||||||||||
Trust and investment services income | $ | 93 | $ | 91 | $ | 85 | 2.2 | % | 9.4 | |||||
Service charges on deposit accounts | 55 | 58 | 53 | (5.2 | ) | 3.8 | % | |||||||
Cards and payments income | 49 | 52 | 48 | (5.8 | ) | 2.1 | ||||||||
Other noninterest income | 33 | 38 | 28 | (13.2 | ) | 17.9 | ||||||||
Total noninterest income | $ | 230 | $ | 239 | $ | 214 | (3.8 | )% | 7.5 | % | ||||
Average deposit balances | ||||||||||||||
NOW and money market deposit accounts | $ | 45,583 | $ | 44,765 | $ | 42,261 | 1.8 | % | 7.9 | % | ||||
Savings deposits | 4,345 | 4,332 | 4,524 | .3 | (4.0 | ) | ||||||||
Certificates of deposit ($100,000 or more) | 5,587 | 6,065 | 6,393 | (7.9 | ) | (12.6 | ) | |||||||
Other time deposits | 4,869 | 5,164 | 5,484 | (5.7 | ) | (11.2 | ) | |||||||
Noninterest-bearing deposits | 12,936 | 13,235 | 12,626 | (2.3 | ) | 2.5 | ||||||||
Total deposits | $ | 73,320 | $ | 73,561 | $ | 71,288 | (.3 | )% | 2.9 | % | ||||
Home equity loans | ||||||||||||||
Average balance | $ | 10,093 | $ | 10,295 | $ | 10,905 | ||||||||
Combined weighted-average loan-to-value ratio (at date of origination) | 70 | % | 70 | % | 70 | % | ||||||||
Percent first lien positions | 62 | 61 | 60 | |||||||||||
Other data | ||||||||||||||
Branches | 1,082 | 1,098 | 1,177 | |||||||||||
Automated teller machines | 1,398 | 1,420 | 1,502 | |||||||||||
Consumer Bank Summary of Operations (1Q20 vs. 1Q19)
• | Net income attributable to Key of $105 million for the first quarter of 2020, compared to $168 million for the year-ago quarter |
• | Taxable equivalent net interest income decreased by $1 million from the first quarter of 2019, with balance sheet growth offset by lower loan fees and a lower interest rate environment |
• | Average loans and leases increased $3.9 billion, or 12.4%. This was driven by strong loan growth in Laurel Road, residential mortgage, and indirect auto lending |
• | Average deposits increased $2 billion, or 2.9%, from the first quarter of 2019. This was driven by growth in money market deposits, partially offset by a decrease in time deposits |
• | Provision for credit losses increased $95 million compared to the first quarter of 2019. The increase in provision for credit losses is mainly attributable to the significant change in the economic scenario from the COVID-19 pandemic, as well as balance sheet growth |
• | Noninterest income increased $16 million, or 7.5%, from the year ago quarter, driven by growth in trust and investment services income and consumer mortgage income |
• | Noninterest expense increased $3 million, or 0.6%, from the year ago quarter. The increase reflects the addition of Laurel Road, partially offset by strong expense management |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 9
Commercial Bank | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Summary of operations | ||||||||||||||
Net interest income (TE) | $ | 410 | $ | 416 | $ | 402 | (1.4 | )% | 2.0 | % | ||||
Noninterest income | 219 | 355 | 300 | (38.3 | ) | (27.0 | ) | |||||||
Total revenue (TE) | 629 | 771 | 702 | (18.4 | ) | (10.4 | ) | |||||||
Provision for credit losses | 214 | 38 | 16 | 463.2 | N/M | |||||||||
Noninterest expense | 353 | 388 | 373 | (9.0 | ) | (5.4 | ) | |||||||
Income (loss) before income taxes (TE) | 62 | 345 | 313 | (82.0 | ) | (80.2 | ) | |||||||
Allocated income taxes and TE adjustments | (8 | ) | 30 | 63 | N/M | N/M | ||||||||
Net income (loss) attributable to Key | $ | 70 | $ | 315 | $ | 250 | (77.8 | )% | (72.0 | )% | ||||
Average balances | ||||||||||||||
Loans and leases | $ | 60,082 | $ | 58,535 | $ | 57,267 | 2.6 | % | 4.9 | % | ||||
Loans held for sale | 1,607 | 1,465 | 1,066 | 9.7 | 50.8 | |||||||||
Total assets | 69,383 | 67,135 | 64,873 | 3.3 | 7.0 | |||||||||
Deposits | 36,058 | 38,224 | 34,417 | (5.7 | )% | 4.8 | % | |||||||
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Commercial Bank Data | ||||||||||||||
dollars in millions | Change 1Q20 vs. | |||||||||||||
1Q20 | 4Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||
Noninterest income | ||||||||||||||
Trust and investment services income | $ | 39 | $ | 29 | $ | 30 | 34.5 | % | 30.0 | % | ||||
Investment banking and debt placement fees | 116 | 179 | 110 | (35.2 | ) | 5.5 | ||||||||
Operating lease income and other leasing gains | 30 | 39 | 37 | (23.1 | ) | (18.9 | ) | |||||||
Corporate services income | 57 | 58 | 48 | (1.7 | ) | 18.8 | ||||||||
Service charges on deposit accounts | 28 | 27 | 27 | 3.7 | 3.7 | |||||||||
Cards and payments income | 17 | 15 | 18 | 13.3 | (5.6 | ) | ||||||||
Payments and services income | 102 | 100 | 93 | 2.0 | 9.7 | |||||||||
Commercial mortgage servicing fees | 18 | 19 | 17 | (5.3 | ) | 5.9 | ||||||||
Other noninterest income | (86 | ) | (11 | ) | 13 | N/M | N/M | |||||||
Total noninterest income | $ | 219 | $ | 355 | $ | 300 | (38.3 | )% | (27.0 | )% | ||||
N/M = Not Meaningful
Commercial Bank Summary of Operations (1Q20 vs. 1Q19)
• | Net income attributable to Key of $70 million for the first quarter of 2020, compared to $250 million for the year-ago quarter |
• | Taxable-equivalent net interest income increased by $8 million, compared to the first quarter of 2019, with balance sheet growth partially offset by a lower interest rate environment |
• | Average loan and lease balances increased $2.8 billion, or 4.9%, compared to the first quarter of 2019, driven by broad-based growth in commercial and industrial loans and partially offset by a decline in commercial mortgage balances due to disciplined risk management |
• | Average deposit balances increased $1.6 billion, or 4.8%, compared to the first quarter of 2019, driven by growth in core deposits |
• | Provision for credit losses increased $198 million compared to the first quarter of 2019. The increase in provision for credit losses is mainly attributable to the significant change in the economic scenario from the COVID-19 pandemic, as well as balance sheet growth |
• | Noninterest income decreased $81 million from the prior year, driven by market-related valuation adjustments of customer derivatives, as well as fixed income trading losses |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 10
• | Noninterest expense decreased $20 million, or 5.4%, from the first quarter of 2019. The decline reflects the continued benefit of efficiency initiatives undertaken throughout 2019, as well as strong expense discipline |
*******************************************
KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $156.2 billion at March 31, 2020.
Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,400 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 11
CONTACTS: | |
ANALYSTS | MEDIA |
Vernon L. Patterson | Susan Donlan |
216.689.0520 | 216.471.3133 |
Emily J. Mills | Tracy Pesho |
216.689.7781 | 216.471.2825 |
Melanie S. Kaiser | Twitter: @keybank |
216.689.4545 | |
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, 2019, as well as in KeyCorp’s subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the “SEC”) and are or will be available on Key’s website (www.key.com/ir) and on the SEC’s website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive regulation of the U.S. financial services industry. In addition to the aforementioned factors, the COVID–19 global pandemic is adversely affecting us, our clients, and third–party service providers, among others, and its impact may adversely affect our business and results of operations over a period of time. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances. |
Notes to Editors:
A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, April 16, 2020. An audio replay of the call will be available through April 26, 2020.
For up-to-date company information, media contacts, and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
*****
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 12
KeyCorp
First Quarter 2020
Financial Supplement
Page | |
Financial Highlights | |
GAAP to Non-GAAP Reconciliation | |
Consolidated Balance Sheets | |
Consolidated Statements of Income | |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations | |
Noninterest Expense | |
Personnel Expense | |
Loan Composition | |
Loans Held for Sale Composition | |
Summary of Changes in Loans Held for Sale | |
Summary of Loan and Lease Loss Experience From Continuing Operations | |
Asset Quality Statistics From Continuing Operations | |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations | |
Summary of Changes in Nonperforming Loans From Continuing Operations | |
Line of Business Results | |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 13
Financial Highlights | |||||||||||
(dollars in millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||||
Summary of operations | |||||||||||
Net interest income (TE) | $ | 989 | $ | 987 | $ | 985 | |||||
Noninterest income | 477 | 651 | 536 | ||||||||
Total revenue (TE) | 1,466 | 1,638 | 1,521 | ||||||||
Provision for credit losses | 359 | 109 | 62 | ||||||||
Noninterest expense | 931 | 980 | 963 | ||||||||
Income (loss) from continuing operations attributable to Key | 145 | 466 | 406 | ||||||||
Income (loss) from discontinued operations, net of taxes | 1 | 3 | 1 | ||||||||
Net income (loss) attributable to Key | 146 | 469 | 407 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders | 118 | 439 | 386 | ||||||||
Income (loss) from discontinued operations, net of taxes | 1 | 3 | 1 | ||||||||
Net income (loss) attributable to Key common shareholders | 119 | 442 | 387 | ||||||||
Per common share | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .12 | $ | .45 | $ | .38 | |||||
Income (loss) from discontinued operations, net of taxes | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .12 | .45 | .38 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | .12 | .45 | .38 | ||||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (a) | .12 | .45 | .38 | ||||||||
Cash dividends declared | .185 | .185 | .17 | ||||||||
Book value at period end | 15.95 | 15.54 | 14.31 | ||||||||
Tangible book value at period end | 12.98 | 12.56 | 11.55 | ||||||||
Market price at period end | 10.37 | 20.24 | 15.75 | ||||||||
Performance ratios | |||||||||||
From continuing operations: | |||||||||||
Return on average total assets | .40 | % | 1.27 | % | 1.18 | % | |||||
Return on average common equity | 3.10 | 11.40 | 10.98 | ||||||||
Return on average tangible common equity (b) | 3.82 | 14.09 | 13.69 | ||||||||
Net interest margin (TE) | 3.01 | 2.98 | 3.13 | ||||||||
Cash efficiency ratio (b) | 62.3 | 58.7 | 61.9 | ||||||||
From consolidated operations: | |||||||||||
Return on average total assets | .40 | % | 1.27 | % | 1.17 | % | |||||
Return on average common equity | 3.12 | 11.48 | 11.01 | ||||||||
Return on average tangible common equity (b) | 3.86 | 14.19 | 13.72 | ||||||||
Net interest margin (TE) | 3.00 | 2.97 | 3.12 | ||||||||
Loan to deposit (c) | 92.1 | 86.6 | 85.1 | ||||||||
Capital ratios at period end | |||||||||||
Key shareholders’ equity to assets | 11.15 | % | 11.75 | % | 11.25 | % | |||||
Key common shareholders’ equity to assets | 9.96 | 10.47 | 10.25 | ||||||||
Tangible common equity to tangible assets (b) | 8.26 | 8.64 | 8.43 | ||||||||
Common Equity Tier 1 (d) | 8.95 | 9.44 | 9.81 | ||||||||
Tier 1 risk-based capital (d) | 10.31 | 10.86 | 10.94 | ||||||||
Total risk-based capital (d) | 12.34 | 12.79 | 12.98 | ||||||||
Leverage (d) | 9.75 | 9.88 | 9.89 | ||||||||
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 14
Financial Highlights (continued) | |||||||||||
(dollars in millions) | |||||||||||
Three months ended | |||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||||
Asset quality — from continuing operations | |||||||||||
Net loan charge-offs | $ | 84 | $ | 99 | $ | 64 | |||||
Net loan charge-offs to average loans | .35 | % | .42 | % | .29 | % | |||||
Allowance for loan and lease losses | $ | 1,359 | $ | 900 | $ | 883 | |||||
Allowance for credit losses | 1,520 | 968 | 945 | ||||||||
Allowance for loan and lease losses to period-end loans | 1.32 | % | .95 | % | .98 | % | |||||
Allowance for credit losses to period-end loans | 1.47 | 1.02 | 1.05 | ||||||||
Allowance for loan and lease losses to nonperforming loans | 215.0 | 156.0 | 161.1 | ||||||||
Allowance for credit losses to nonperforming loans | 240.5 | 167.8 | 172.4 | ||||||||
Nonperforming loans at period end | $ | 632 | $ | 577 | $ | 548 | |||||
Nonperforming assets at period end | 844 | 715 | 597 | ||||||||
Nonperforming loans to period-end portfolio loans | .61 | % | .61 | % | .61 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .82 | .75 | .66 | ||||||||
Trust assets | |||||||||||
Assets under management | $ | 36,189 | $ | 40,833 | $ | 38,742 | |||||
Other data | |||||||||||
Average full-time equivalent employees | 16,529 | 16,537 | 17,554 | ||||||||
Branches | 1,082 | 1,098 | 1,158 | ||||||||
Taxable-equivalent adjustment | $ | 8 | $ | 8 | $ | 8 | |||||
(a) | Earnings per share may not foot due to rounding. |
(b) | The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of this release. |
(c) | Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits. |
(d) | March 31, 2020, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 15
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,” “Common Equity Tier 1,” “pre-provision net revenue," “cash efficiency ratio," "net loan charge-offs to average loans excluding notable items," and "provision for credit losses excluding notable items."
Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without notable items, in order to enable a better understanding of company results, increase comparability of period-to-period results, and to evaluate and forecast those results.
The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, “Common Equity Tier 1,” a non-GAAP financial measure. The mandatory compliance date for Key as a “standardized approach” banking organization began on January 1, 2015, subject to transitional provisions.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key’s intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key’s results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
Three months ended | |||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
Tangible common equity to tangible assets at period-end | |||||||||
Key shareholders’ equity (GAAP) | $ | 17,411 | $ | 17,038 | $ | 15,924 | |||
Less: Intangible assets (a) | 2,894 | 2,910 | 2,804 | ||||||
Preferred Stock (b) | 1,856 | 1,856 | 1,421 | ||||||
Tangible common equity (non-GAAP) | $ | 12,661 | $ | 12,272 | $ | 11,699 | |||
Total assets (GAAP) | $ | 156,197 | $ | 144,988 | $ | 141,515 | |||
Less: Intangible assets (a) | 2,894 | 2,910 | 2,804 | ||||||
Tangible assets (non-GAAP) | $ | 153,303 | $ | 142,078 | $ | 138,711 | |||
Tangible common equity to tangible assets ratio (non-GAAP) | 8.26 | % | 8.64 | % | 8.43 | % | |||
Pre-provision net revenue | |||||||||
Net interest income (GAAP) | $ | 981 | $ | 979 | $ | 977 | |||
Plus: Taxable-equivalent adjustment | 8 | 8 | 8 | ||||||
Noninterest income | 477 | 651 | 536 | ||||||
Less: Noninterest expense | 931 | 980 | 963 | ||||||
Pre-provision net revenue from continuing operations (non-GAAP) | $ | 535 | $ | 658 | $ | 558 | |||
Average tangible common equity | |||||||||
Average Key shareholders' equity (GAAP) | $ | 17,216 | $ | 17,178 | $ | 15,702 | |||
Less: Intangible assets (average) (c) | 2,902 | 2,919 | 2,813 | ||||||
Preferred stock (average) | 1,900 | 1,900 | 1,450 | ||||||
Average tangible common equity (non-GAAP) | $ | 12,414 | $ | 12,359 | $ | 11,439 | |||
Return on average tangible common equity from continuing operations | |||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) | $ | 118 | $ | 439 | $ | 386 | |||
Plus: Notable items, after tax (d) | — | 29 | 20 | ||||||
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP) | $ | 118 | $ | 468 | $ | 406 | |||
Average tangible common equity (non-GAAP) | 12,414 | 12,359 | 11,439 | ||||||
Return on average tangible common equity from continuing operations (non-GAAP) | 3.82 | % | 14.09 | % | 13.69 | % | |||
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP) | 3.82 | % | 15.02 | % | 14.39 | % | |||
Return on average tangible common equity consolidated | |||||||||
Net income (loss) attributable to Key common shareholders (GAAP) | $ | 119 | $ | 442 | $ | 387 | |||
Average tangible common equity (non-GAAP) | 12,414 | 12,359 | 11,439 | ||||||
Return on average tangible common equity consolidated (non-GAAP) | 3.86 | % | 14.19 | % | 13.72 | % | |||
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 16
GAAP to Non-GAAP Reconciliations (continued) | |||||||||
(dollars in millions) | |||||||||
Three months ended | |||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
Cash efficiency ratio | |||||||||
Noninterest expense (GAAP) | $ | 931 | $ | 980 | $ | 963 | |||
Less: Intangible asset amortization | 17 | 19 | 22 | ||||||
Adjusted noninterest expense (non-GAAP) | $ | 914 | $ | 961 | $ | 941 | |||
Less: Notable items (d) | — | 22 | 26 | ||||||
Adjusted noninterest expense excluding notable items (non-GAAP) | $ | 914 | $ | 939 | $ | 915 | |||
Net interest income (GAAP) | $ | 981 | $ | 979 | $ | 977 | |||
Plus: Taxable-equivalent adjustment | 8 | 8 | 8 | ||||||
Noninterest income | 477 | 651 | 536 | ||||||
Total taxable-equivalent revenue (non-GAAP) | $ | 1,466 | $ | 1,638 | $ | 1,521 | |||
Cash efficiency ratio (non-GAAP) | 62.3 | % | 58.7 | % | 61.9 | % | |||
Cash efficiency ratio excluding notable items (non-GAAP) | 62.3 | % | 57.3 | % | 60.2 | % | |||
Net loan charge-offs to average total loans excluding notable items | |||||||||
Net loan charge-offs (GAAP) | $ | 84 | $ | 99 | $ | 64 | |||
Less: Notable items | — | 16 | — | ||||||
Net loan charge-offs excluding notable items (non-GAAP) | $ | 84 | $ | 83 | $ | 64 | |||
Average loans outstanding | $ | 96,174 | $ | 93,607 | $ | 89,649 | |||
Net loan charge-offs to average total loans excluding notable items (non-GAAP) | .35 | % | .35 | % | .29 | % | |||
Provision for credit losses excluding notable items | |||||||||
Provision for credit losses (GAAP) | $ | 359 | $ | 109 | $ | 62 | |||
Less: Notable Items | — | 16 | — | ||||||
Provision for credit loses excluding notable items (non-GAAP) | $ | 359 | $ | 93 | $ | 62 | |||
Three months ended | |||||
3/31/2020 | |||||
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates) | |||||
Common Equity Tier 1 under current RCR (e) | 12,259 | ||||
Adjustments from current RCR to the fully phased-in RCR: | |||||
Deferred tax assets and other intangible assets (f) | — | ||||
Common Equity Tier 1 anticipated under the fully phased-in RCR (g) | $ | 12,259 | |||
Net risk-weighted assets under current RCR (e) | 136,929 | ||||
Adjustments from current RCR to the fully phased-in RCR: | |||||
Mortgage servicing assets (h) | 1,458 | ||||
Deferred tax assets | 285 | ||||
All other assets | — | ||||
Total risk-weighted assets anticipated under the fully phased-in RCR (g) | $ | 138,672 | |||
Common Equity Tier 1 ratio under the fully phased-in RCR (h) | 8.84 | % | |||
(a) | For the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, intangible assets exclude $6 million, $7 million, and $12 million, respectively, of period-end purchased credit card receivables. |
(b) | Net of capital surplus. |
(c) | For the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, average intangible assets exclude $7 million, $8 million, and $13 million, respectively, of average purchased credit card receivables. |
(d) | Additional detail provided in Notable Items table on page 24 of this release. |
(e) | The March 31, 2020, amounts reflect Key's election to adopt the CECL optional transition provision. |
(f) | Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule. |
(g) | The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies’ Regulatory Capital Rules (fully phased-in); Key is subject to the Regulatory Capital Rules under the “standardized approach.” |
(h) | Item is included in the 25% exceptions bucket calculation and is risk-weighted at 250%. |
GAAP = U.S. generally accepted accounting principles
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 17
Consolidated Balance Sheets | |||||||||||
(dollars in millions) | |||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||||
Assets | |||||||||||
Loans | $ | 103,198 | $ | 94,646 | $ | 90,178 | |||||
Loans held for sale | 2,143 | 1,334 | 894 | ||||||||
Securities available for sale | 20,807 | 21,843 | 20,854 | ||||||||
Held-to-maturity securities | 9,638 | 10,067 | 11,234 | ||||||||
Trading account assets | 795 | 1,040 | 979 | ||||||||
Short-term investments | 4,073 | 1,272 | 2,511 | ||||||||
Other investments | 679 | 605 | 646 | ||||||||
Total earning assets | 141,333 | 130,807 | 127,296 | ||||||||
Allowance for loan and lease losses | (1,359 | ) | (900 | ) | (883 | ) | |||||
Cash and due from banks | 865 | 732 | 611 | ||||||||
Premises and equipment | 791 | 814 | 849 | ||||||||
Goodwill | 2,664 | 2,664 | 2,516 | ||||||||
Other intangible assets | 236 | 253 | 300 | ||||||||
Corporate-owned life insurance | 4,243 | 4,233 | 4,184 | ||||||||
Accrued income and other assets | 6,604 | 5,494 | 5,596 | ||||||||
Discontinued assets | 820 | 891 | 1,046 | ||||||||
Total assets | $ | 156,197 | 144,988 | 141,515 | |||||||
Liabilities | |||||||||||
Deposits in domestic offices: | |||||||||||
NOW and money market deposit accounts | $ | 71,005 | $ | 66,714 | $ | 61,380 | |||||
Savings deposits | 4,753 | 4,651 | 4,839 | ||||||||
Certificates of deposit ($100,000 or more) | 5,630 | 6,598 | 8,396 | ||||||||
Other time deposits | 4,623 | 5,054 | 5,573 | ||||||||
Total interest-bearing deposits | 86,011 | 83,017 | 80,188 | ||||||||
Noninterest-bearing deposits | 29,293 | 28,853 | 27,987 | ||||||||
Total deposits | 115,304 | 111,870 | 108,175 | ||||||||
Federal funds purchased and securities sold under repurchase agreements | 2,444 | 387 | 266 | ||||||||
Bank notes and other short-term borrowings | 4,606 | 705 | 679 | ||||||||
Accrued expense and other liabilities | 2,700 | 2,540 | 2,301 | ||||||||
Long-term debt | 13,732 | 12,448 | 14,168 | ||||||||
Total liabilities | 138,786 | 127,950 | 125,589 | ||||||||
Equity | |||||||||||
Preferred stock | 1,900 | 1,900 | 1,450 | ||||||||
Common shares | 1,257 | 1,257 | 1,257 | ||||||||
Capital surplus | 6,222 | 6,295 | 6,259 | ||||||||
Retained earnings | 12,174 | 12,469 | 11,771 | ||||||||
Treasury stock, at cost | (4,956 | ) | (4,909 | ) | (4,283 | ) | |||||
Accumulated other comprehensive income (loss) | 814 | 26 | (530 | ) | |||||||
Key shareholders’ equity | 17,411 | 17,038 | 15,924 | ||||||||
Noncontrolling interests | — | — | 2 | ||||||||
Total equity | 17,411 | 17,038 | 15,926 | ||||||||
Total liabilities and equity | $ | 156,197 | $ | 144,988 | $ | 141,515 | |||||
Common shares outstanding (000) | 975,319 | 977,189 | 1,013,186 | ||||||||
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 18
Consolidated Statements of Income | |||||||||||
(dollars in millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||||
Interest income | |||||||||||
Loans | $ | 1,026 | $ | 1,046 | $ | 1,066 | |||||
Loans held for sale | 19 | 17 | 13 | ||||||||
Securities available for sale | 129 | 137 | 129 | ||||||||
Held-to-maturity securities | 62 | 63 | 68 | ||||||||
Trading account assets | 8 | 8 | 8 | ||||||||
Short-term investments | 6 | 12 | 16 | ||||||||
Other investments | 1 | 2 | 4 | ||||||||
Total interest income | 1,251 | 1,285 | 1,304 | ||||||||
Interest expense | |||||||||||
Deposits | 169 | 201 | 202 | ||||||||
Federal funds purchased and securities sold under repurchase agreements | 6 | 1 | 1 | ||||||||
Bank notes and other short-term borrowings | 5 | 4 | 4 | ||||||||
Long-term debt | 90 | 100 | 120 | ||||||||
Total interest expense | 270 | 306 | 327 | ||||||||
Net interest income | 981 | 979 | 977 | ||||||||
Provision for credit losses | 359 | 109 | 62 | ||||||||
Net interest income after provision for credit losses | 622 | 870 | 915 | ||||||||
Noninterest income | |||||||||||
Trust and investment services income | 133 | 120 | 115 | ||||||||
Investment banking and debt placement fees | 116 | 181 | 110 | ||||||||
Service charges on deposit accounts | 84 | 86 | 82 | ||||||||
Operating lease income and other leasing gains | 30 | 39 | 37 | ||||||||
Corporate services income | 62 | 65 | 55 | ||||||||
Cards and payments income | 66 | 67 | 66 | ||||||||
Corporate-owned life insurance income | 36 | 39 | 32 | ||||||||
Consumer mortgage income | 20 | 21 | 11 | ||||||||
Commercial mortgage servicing fees | 18 | 19 | 18 | ||||||||
Other income | (88 | ) | 14 | 10 | |||||||
Total noninterest income | 477 | 651 | 536 | ||||||||
Noninterest expense | |||||||||||
Personnel | 515 | 551 | 563 | ||||||||
Net occupancy | 76 | 76 | 72 | ||||||||
Computer processing | 55 | 51 | 54 | ||||||||
Business services and professional fees | 44 | 54 | 44 | ||||||||
Equipment | 24 | 25 | 24 | ||||||||
Operating lease expense | 36 | 32 | 26 | ||||||||
Marketing | 21 | 27 | 19 | ||||||||
FDIC assessment | 9 | 8 | 7 | ||||||||
Intangible asset amortization | 17 | 19 | 22 | ||||||||
OREO expense, net | 3 | 3 | 3 | ||||||||
Other expense | 131 | 134 | 129 | ||||||||
Total noninterest expense | 931 | 980 | 963 | ||||||||
Income (loss) from continuing operations before income taxes | 168 | 541 | 488 | ||||||||
Income taxes | 23 | 75 | 82 | ||||||||
Income (loss) from continuing operations | 145 | 466 | 406 | ||||||||
Income (loss) from discontinued operations, net of taxes | 1 | 3 | 1 | ||||||||
Net income (loss) | 146 | 469 | 407 | ||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | — | ||||||||
Net income (loss) attributable to Key | $ | 146 | $ | 469 | $ | 407 | |||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 118 | $ | 439 | $ | 386 | |||||
Net income (loss) attributable to Key common shareholders | 119 | 442 | 387 | ||||||||
Per common share | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .12 | $ | .45 | $ | .38 | |||||
Income (loss) from discontinued operations, net of taxes | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .12 | .45 | .38 | ||||||||
Per common share — assuming dilution | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .12 | $ | .45 | $ | .38 | |||||
Income (loss) from discontinued operations, net of taxes | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .12 | .45 | .38 | ||||||||
Cash dividends declared per common share | $ | .185 | $ | .185 | $ | .17 | |||||
Weighted-average common shares outstanding (000) | 967,446 | 973,450 | 1,006,717 | ||||||||
Effect of common share options and other stock awards | 8,664 | 10,911 | 9,787 | ||||||||
Weighted-average common shares and potential common shares outstanding (000) (b) | 976,110 | 984,361 | 1,016,504 | ||||||||
(a) | Earnings per share may not foot due to rounding. |
(b) | Assumes conversion of common share options and other stock awards, as applicable. |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 19
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations | |||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||
First Quarter 2020 | Fourth Quarter 2019 | First Quarter 2019 | |||||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||||||||||||||||||
Balance | Interest (a) | Rate (a) | Balance | Interest (a) | Rate (a) | Balance | Interest (a) | Rate (a) | |||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Loans: (b), (c) | |||||||||||||||||||||||||||
Commercial and industrial (d) | $ | 49,466 | $ | 508 | 4.13 | % | $ | 48,345 | $ | 522 | 4.28 | % | $ | 45,998 | $ | 532 | 4.68 | % | |||||||||
Real estate — commercial mortgage | 13,548 | 155 | 4.60 | 13,335 | 159 | 4.71 | 14,325 | 179 | 5.07 | ||||||||||||||||||
Real estate — construction | 1,666 | 20 | 4.75 | 1,495 | 18 | 4.87 | 1,561 | 21 | 5.48 | ||||||||||||||||||
Commercial lease financing | 4,565 | 39 | 3.39 | 4,482 | 39 | 3.52 | 4,497 | 41 | 3.66 | ||||||||||||||||||
Total commercial loans | 69,245 | 722 | 4.19 | 67,657 | 738 | 4.33 | 66,381 | 773 | 4.71 | ||||||||||||||||||
Real estate — residential mortgage | 7,215 | 68 | 3.75 | 6,777 | 65 | 3.83 | 5,543 | 56 | 4.02 | ||||||||||||||||||
Home equity loans | 10,155 | 113 | 4.49 | 10,362 | 122 | 4.69 | 10,995 | 137 | 5.07 | ||||||||||||||||||
Consumer direct loans | 3,709 | 54 | 5.91 | 3,125 | 51 | 6.45 | 1,862 | 37 | 8.06 | ||||||||||||||||||
Credit cards | 1,082 | 31 | 11.50 | 1,103 | 32 | 11.38 | 1,105 | 32 | 11.80 | ||||||||||||||||||
Consumer indirect loans | 4,768 | 46 | 3.86 | 4,583 | 46 | 3.99 | 3,763 | 39 | 4.13 | ||||||||||||||||||
Total consumer loans | 26,929 | 312 | 4.66 | 25,950 | 316 | 4.84 | 23,268 | 301 | 5.23 | ||||||||||||||||||
Total loans | 96,174 | 1,034 | 4.32 | 93,607 | 1,054 | 4.47 | 89,649 | 1,074 | 4.85 | ||||||||||||||||||
Loans held for sale | 1,885 | 19 | 3.99 | 1,653 | 17 | 4.11 | 1,121 | 13 | 4.74 | ||||||||||||||||||
Securities available for sale (b), (e) | 21,172 | 129 | 2.49 | 22,262 | 137 | 2.49 | 20,206 | 129 | 2.51 | ||||||||||||||||||
Held-to-maturity securities (b) | 9,820 | 62 | 2.51 | 10,264 | 63 | 2.43 | 11,369 | 68 | 2.41 | ||||||||||||||||||
Trading account assets | 1,065 | 8 | 2.95 | 1,103 | 8 | 3.08 | 957 | 8 | 3.36 | ||||||||||||||||||
Short-term investments | 1,764 | 6 | 1.42 | 2,716 | 12 | 1.73 | 2,728 | 16 | 2.28 | ||||||||||||||||||
Other investments (e) | 614 | 1 | 0.40 | 603 | 2 | 1.82 | 654 | 4 | 2.69 | ||||||||||||||||||
Total earning assets | 132,494 | 1,259 | 3.82 | 132,208 | 1,293 | 3.90 | 126,684 | 1,312 | 4.17 | ||||||||||||||||||
Allowance for loan and lease losses | (1,097 | ) | (882 | ) | (878 | ) | |||||||||||||||||||||
Accrued income and other assets | 14,831 | 14,402 | 14,314 | ||||||||||||||||||||||||
Discontinued assets | 838 | 908 | 1,066 | ||||||||||||||||||||||||
Total assets | $ | 147,066 | $ | 146,636 | $ | 141,186 | |||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||
NOW and money market deposit accounts | $ | 66,721 | 112 | .67 | $ | 66,412 | 135 | .81 | $ | 60,773 | 130 | .87 | |||||||||||||||
Savings deposits | 4,655 | 1 | .05 | 4,660 | 1 | .07 | 4,811 | 1 | .08 | ||||||||||||||||||
Certificates of deposit ($100,000 or more) | 6,310 | 34 | 2.20 | 6,899 | 40 | 2.31 | 8,376 | 47 | 2.25 | ||||||||||||||||||
Other time deposits | 4,901 | 22 | 1.81 | 5,187 | 25 | 1.92 | 5,501 | 24 | 1.79 | ||||||||||||||||||
Total interest-bearing deposits | 82,587 | 169 | .82 | 83,158 | 201 | .96 | 79,461 | 202 | 1.03 | ||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 2,002 | 6 | 1.17 | 267 | 1 | .75 | 409 | 1 | .89 | ||||||||||||||||||
Bank notes and other short-term borrowings | 1,401 | 5 | 1.58 | 801 | 4 | 2.02 | 649 | 4 | 2.75 | ||||||||||||||||||
Long-term debt (f), (g) | 12,443 | 90 | 2.96 | 12,531 | 100 | 3.22 | 13,160 | 120 | 3.67 | ||||||||||||||||||
Total interest-bearing liabilities | 98,433 | 270 | 1.10 | 96,757 | 306 | 1.25 | 93,679 | 327 | 1.42 | ||||||||||||||||||
Noninterest-bearing deposits | 27,741 | 29,446 | 28,115 | ||||||||||||||||||||||||
Accrued expense and other liabilities | 2,838 | 2,347 | 2,622 | ||||||||||||||||||||||||
Discontinued liabilities (g) | 838 | 908 | 1,066 | ||||||||||||||||||||||||
Total liabilities | 129,850 | 129,458 | 125,482 | ||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||
Key shareholders’ equity | 17,216 | 17,178 | 15,702 | ||||||||||||||||||||||||
Noncontrolling interests | — | — | 2 | ||||||||||||||||||||||||
Total equity | 17,216 | 17,178 | 15,704 | ||||||||||||||||||||||||
Total liabilities and equity | $ | 147,066 | $ | 146,636 | $ | 141,186 | |||||||||||||||||||||
Interest rate spread (TE) | 2.72 | % | 2.65 | % | 2.75 | % | |||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) | 989 | 3.01 | % | 987 | 2.98 | % | 985 | 3.13 | % | ||||||||||||||||||
TE adjustment (b) | 8 | 8 | 8 | ||||||||||||||||||||||||
Net interest income, GAAP basis | $ | 981 | $ | 979 | $ | 977 | |||||||||||||||||||||
(a) | Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) | Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended March 31, 2020, December 31, 2019, and March 31, 2019. |
(c) | For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) | Commercial and industrial average balances include $145 million, $146 million, and $133 million of assets from commercial credit cards for the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, respectively. |
(e) | Yield is calculated on the basis of amortized cost. |
(f) | Rate calculation excludes basis adjustments related to fair value hedges. |
(g) | A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 20
Noninterest Expense | |||||||||
(dollars in millions) | |||||||||
Three months ended | |||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
Personnel (a) | $ | 515 | $ | 551 | $ | 563 | |||
Net occupancy | 76 | 76 | 72 | ||||||
Computer processing | 55 | 51 | 54 | ||||||
Business services and professional fees | 44 | 54 | 44 | ||||||
Equipment | 24 | 25 | 24 | ||||||
Operating lease expense | 36 | 32 | 26 | ||||||
Marketing | 21 | 27 | 19 | ||||||
FDIC assessment | 9 | 8 | 7 | ||||||
Intangible asset amortization | 17 | 19 | 22 | ||||||
OREO expense, net | 3 | 3 | 3 | ||||||
Other expense | 131 | 134 | 129 | ||||||
Total noninterest expense | $ | 931 | $ | 980 | $ | 963 | |||
Average full-time equivalent employees (b) | 16,529 | 16,537 | 17,554 | ||||||
(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 | |||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
Salaries and contract labor | $ | 316 | $ | 312 | $ | 320 | |||
Incentive and stock-based compensation | 102 | 154 | 132 | ||||||
Employee benefits | 92 | 85 | 93 | ||||||
Severance | 5 | — | 18 | ||||||
Total personnel expense | $ | 515 | $ | 551 | $ | 563 | |||
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 21
Loan Composition | ||||||||||||||
(dollars in millions) | ||||||||||||||
Percent change 3/31/2020 vs | ||||||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | 12/31/2019 | 3/31/2019 | ||||||||||
Commercial and industrial (a) | $ | 55,983 | $ | 48,295 | $ | 46,474 | 15.9 | % | 20.5 | % | ||||
Commercial real estate: | ||||||||||||||
Commercial mortgage | 13,548 | 13,491 | 14,344 | .4 | (5.5 | ) | ||||||||
Construction | 1,710 | 1,558 | 1,420 | 9.8 | 20.4 | |||||||||
Total commercial real estate loans | 15,258 | 15,049 | 15,764 | 1.4 | (3.2 | ) | ||||||||
Commercial lease financing (b) | 4,677 | 4,688 | 4,507 | (.2 | ) | 3.8 | ||||||||
Total commercial loans | 75,918 | 68,032 | 66,745 | 11.6 | 13.7 | |||||||||
Residential — prime loans: | ||||||||||||||
Real estate — residential mortgage | 7,498 | 7,023 | 5,615 | 6.8 | 33.5 | |||||||||
Home equity loans | 10,103 | 10,274 | 10,846 | (1.7 | ) | (6.9 | ) | |||||||
Total residential — prime loans | 17,601 | 17,297 | 16,461 | 1.8 | 6.9 | |||||||||
Consumer direct loans | 3,833 | 3,513 | 2,165 | 9.1 | 77.0 | |||||||||
Credit cards | 1,041 | 1,130 | 1,086 | (7.9 | ) | (4.1 | ) | |||||||
Consumer indirect loans | 4,805 | 4,674 | 3,721 | 2.8 | 29.1 | |||||||||
Total consumer loans | 27,280 | 26,614 | 23,433 | 2.5 | 16.4 | |||||||||
Total loans (c), (d) | $ | 103,198 | $ | 94,646 | $ | 90,178 | 9.0 | % | 14.4 | % | ||||
(a) | Loan balances include $143 million, $144 million, and $135 million of commercial credit card balances at March 31, 2020, December 31, 2019, and March 31, 2019, respectively. |
(b) | Commercial lease financing includes receivables held as collateral for a secured borrowing of $14 million, $15 million, and $12 million at March 31, 2020, December 31, 2019, and March 31, 2019, respectively. Principal reductions are based on the cash payments received from these related receivables. |
(c) | Total loans exclude loans of $821 million at March 31, 2020, $865 million at December 31, 2019, and $1.0 billion at March 31, 2019, related to the discontinued operations of the education lending business. |
(d) | Accrued interest of $241 million, $244 million, and $279 million at March 31, 2020, December 31, 2019, and March 31, 2019, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table. |
Loans Held for Sale Composition | ||||||||||||||
(dollars in millions) | ||||||||||||||
Percent change 3/31/2020 vs | ||||||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | 12/31/2019 | 3/31/2019 | ||||||||||
Commercial and industrial | $ | 446 | $ | 367 | $ | 99 | 21.5 | % | 350.5 | % | ||||
Real estate — commercial mortgage | 1,284 | 772 | 724 | 66.3 | 77.3 | |||||||||
Commercial lease financing | 8 | 2 | — | 300.0 | N/M | |||||||||
Real estate — residential mortgage | 152 | 140 | 71 | 8.6 | 114.1 | |||||||||
Consumer direct loans | 253 | 53 | — | 377.4 | N/M | |||||||||
Total loans held for sale (a) | $ | 2,143 | $ | 1,334 | $ | 894 | 60.6 | % | 139.7 | % | ||||
(a) | Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $152 million at March 31, 2020, $140 million at December 31, 2019, and $71 million at March 31, 2019. |
Summary of Changes in Loans Held for Sale | |||||||||||||||
(in millions) | |||||||||||||||
1Q20 | 4Q19 | 3Q19 | 2Q19 | 1Q19 | |||||||||||
Balance at beginning of period | $ | 1,334 | $ | 1,598 | $ | 1,790 | $ | 894 | $ | 1,227 | |||||
New originations | 3,333 | 3,659 | 3,222 | 3,218 | 1,676 | ||||||||||
Transfers from (to) held to maturity, net | 200 | 26 | 237 | 42 | 6 | ||||||||||
Loan sales | (2,649 | ) | (3,933 | ) | (3,602 | ) | (2,358 | ) | (2,017 | ) | |||||
Loan draws (payments), net | (77 | ) | (18 | ) | (49 | ) | (6 | ) | 2 | ||||||
Valuation adjustments | 2 | 2 | — | — | — | ||||||||||
Balance at end of period (a) | $ | 2,143 | $ | 1,334 | $ | 1,598 | $ | 1,790 | $ | 894 | |||||
(a) | Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $152 million at March 31, 2020, $140 million at December 31, 2019, $120 million at September 30, 2019, $164 million at June 30, 2019, and $71 million at March 31, 2019. |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 22
Summary of Loan and Lease Loss Experience From Continuing Operations | |||||||||
(dollars in millions) | |||||||||
Three months ended | |||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
Average loans outstanding | $ | 96,174 | $ | 93,607 | $ | 89,649 | |||
Allowance for loan and lease losses at the end of the prior period | $ | 900 | $ | 893 | $ | 883 | |||
Cumulative effect from change in accounting principle (a) | 204 | — | — | ||||||
Allowance for loan and lease losses at the beginning of the period | 1,104 | 893 | 883 | ||||||
Loans charged off: | |||||||||
Commercial and industrial | 60 | 77 | 36 | ||||||
Real estate — commercial mortgage | 3 | 2 | 5 | ||||||
Real estate — construction | — | 1 | 4 | ||||||
Total commercial real estate loans | 3 | 3 | 9 | ||||||
Commercial lease financing | 2 | 1 | 8 | ||||||
Total commercial loans | 65 | 81 | 53 | ||||||
Real estate — residential mortgage | — | — | 1 | ||||||
Home equity loans | 4 | 3 | 4 | ||||||
Consumer direct loans | 12 | 11 | 10 | ||||||
Credit cards | 11 | 10 | 11 | ||||||
Consumer indirect loans | 9 | 10 | 8 | ||||||
Total consumer loans | 36 | 34 | 34 | ||||||
Total loans charged off | 101 | 115 | 87 | ||||||
Recoveries: | |||||||||
Commercial and industrial | 5 | 5 | 10 | ||||||
Real estate — commercial mortgage | 1 | — | 1 | ||||||
Total commercial real estate loans | 1 | — | 1 | ||||||
Commercial lease financing | — | 1 | 1 | ||||||
Total commercial loans | 6 | 6 | 12 | ||||||
Real estate — residential mortgage | — | 1 | 1 | ||||||
Home equity loans | 2 | 2 | 2 | ||||||
Consumer direct loans | 2 | 2 | 1 | ||||||
Credit cards | 2 | 1 | 2 | ||||||
Consumer indirect loans | 5 | 4 | 5 | ||||||
Total consumer loans | 11 | 10 | 11 | ||||||
Total recoveries | 17 | 16 | 23 | ||||||
Net loan charge-offs | (84 | ) | (99 | ) | (64 | ) | |||
Provision (credit) for loan and lease losses | 339 | 106 | 64 | ||||||
Allowance for loan and lease losses at end of period | $ | 1,359 | $ | 900 | $ | 883 | |||
Liability for credit losses on lending-related commitments at the end of the prior period | $ | 68 | $ | 65 | $ | 64 | |||
Liability for credit losses on contingent guarantees at the end of the prior period | 7 | — | — | ||||||
Cumulative effect from change in accounting principle (a), (b) | 66 | — | — | ||||||
Liability for credit losses on lending-related commitments at beginning of period | 141 | 65 | 64 | ||||||
Provision (credit) for losses on lending-related commitments | 20 | 3 | (2 | ) | |||||
Liability for credit losses on lending-related commitments at end of period (c) | $ | 161 | $ | 68 | $ | 62 | |||
Total allowance for credit losses at end of period | $ | 1,520 | $ | 968 | $ | 945 | |||
Net loan charge-offs to average total loans | .35 | % | .42 | % | .29 | % | |||
Allowance for loan and lease losses to period-end loans | 1.32 | .95 | .98 | ||||||
Allowance for credit losses to period-end loans | 1.47 | 1.02 | 1.05 | ||||||
Allowance for loan and lease losses to nonperforming loans | 215.0 | 156.0 | 161.1 | ||||||
Allowance for credit losses to nonperforming loans | 240.5 | 167.8 | 172.4 | ||||||
Discontinued operations — education lending business: | |||||||||
Loans charged off | $ | 2 | $ | 3 | $ | 4 | |||
Recoveries | 1 | 2 | 1 | ||||||
Net loan charge-offs | $ | (1 | ) | (1 | ) | $ | (3 | ) | |
(a) | The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13. |
(b) | Excludes $4 million related to the provision for other financial assets. |
(c) | Included in "Accrued expense and other liabilities" on the balance sheet. |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 23
Asset Quality Statistics From Continuing Operations | |||||||||||||||
(dollars in millions) | |||||||||||||||
1Q20 | 4Q19 | 3Q19 | 2Q19 | 1Q19 | |||||||||||
Net loan charge-offs | $ | 84 | $ | 99 | $ | 196 | $ | 65 | $ | 64 | |||||
Net loan charge-offs to average total loans | .35 | % | .42 | % | .85 | % | .29 | % | .29 | % | |||||
Allowance for loan and lease losses | $ | 1,359 | $ | 900 | $ | 893 | $ | 890 | $ | 883 | |||||
Allowance for credit losses (a) | 1,520 | 968 | 958 | 954 | 945 | ||||||||||
Allowance for loan and lease losses to period-end loans | 1.32 | % | .95 | % | .96 | % | .97 | % | .98 | % | |||||
Allowance for credit losses to period-end loans | 1.47 | 1.02 | 1.03 | 1.04 | 1.05 | ||||||||||
Allowance for loan and lease losses to nonperforming loans | 215.0 | 156.0 | 152.6 | 158.6 | 161.1 | ||||||||||
Allowance for credit losses to nonperforming loans | 240.5 | 167.8 | 163.8 | 170.1 | 172.4 | ||||||||||
Nonperforming loans at period end | $ | 632 | $ | 577 | $ | 585 | $ | 561 | $ | 548 | |||||
Nonperforming assets at period end | 844 | 715 | 711 | 608 | 597 | ||||||||||
Nonperforming loans to period-end portfolio loans | .61 | % | .61 | % | .63 | % | .61 | % | .61 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .82 | .75 | .77 | .66 | .66 | ||||||||||
(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) | |||||||||||||||
3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||
Commercial and industrial | $ | 277 | $ | 264 | $ | 238 | $ | 189 | $ | 170 | |||||
Real estate — commercial mortgage | 87 | 83 | 92 | 85 | 82 | ||||||||||
Real estate — construction | 2 | 2 | 2 | 2 | 2 | ||||||||||
Total commercial real estate loans | 89 | 85 | 94 | 87 | 84 | ||||||||||
Commercial lease financing | 5 | 6 | 7 | 7 | 9 | ||||||||||
Total commercial loans | 371 | 355 | 339 | 283 | 263 | ||||||||||
Real estate — residential mortgage | 89 | 48 | 42 | 62 | 64 | ||||||||||
Home equity loans | 143 | 145 | 179 | 191 | 195 | ||||||||||
Consumer direct loans | 4 | 4 | 3 | 3 | 3 | ||||||||||
Credit cards | 3 | 3 | 2 | 2 | 3 | ||||||||||
Consumer indirect loans | 22 | 22 | 20 | 20 | 20 | ||||||||||
Total consumer loans | 261 | 222 | 246 | 278 | 285 | ||||||||||
Total nonperforming loans | 632 | 577 | 585 | 561 | 548 | ||||||||||
OREO | 119 | 35 | 39 | 38 | 40 | ||||||||||
Nonperforming loans held for sale | 89 | 94 | 78 | — | — | ||||||||||
Other nonperforming assets | 4 | 9 | 9 | 9 | 9 | ||||||||||
Total nonperforming assets | $ | 844 | $ | 715 | $ | 711 | $ | 608 | $ | 597 | |||||
Accruing loans past due 90 days or more | 128 | 97 | 54 | 74 | 118 | ||||||||||
Accruing loans past due 30 through 89 days | 393 | 329 | 366 | 299 | 290 | ||||||||||
Restructured loans — accruing and nonaccruing (a) | 340 | 347 | 347 | 395 | 365 | ||||||||||
Restructured loans included in nonperforming loans (a) | 172 | 183 | 176 | 228 | 198 | ||||||||||
Nonperforming assets from discontinued operations — education lending business | 7 | 7 | 7 | 7 | 7 | ||||||||||
Nonperforming loans to period-end portfolio loans | .61 | % | .61 | % | .63 | % | .61 | % | .61 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .82 | .75 | .77 | .66 | .66 | ||||||||||
(a) | Restructured loans (i.e., troubled debt restructuring) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance. |
Summary of Changes in Nonperforming Loans From Continuing Operations | |||||||||||||||
(in millions) | |||||||||||||||
1Q20 | 4Q19 | 3Q19 | 2Q19 | 1Q19 | |||||||||||
Balance at beginning of period | $ | 577 | $ | 585 | $ | 561 | $ | 548 | $ | 542 | |||||
Loans placed on nonaccrual status (a) | 219 | 268 | 271 | 189 | 196 | ||||||||||
Charge-offs | (100 | ) | (114 | ) | (91 | ) | (84 | ) | (91 | ) | |||||
Loans sold | (4 | ) | (1 | ) | — | (38 | ) | (18 | ) | ||||||
Payments | (31 | ) | (59 | ) | (37 | ) | (23 | ) | (22 | ) | |||||
Transfers to OREO | (3 | ) | (3 | ) | (4 | ) | (4 | ) | (8 | ) | |||||
Transfers to nonperforming loans held for sale | — | (47 | ) | (78 | ) | — | — | ||||||||
Transfers to other nonperforming assets | — | — | — | — | (13 | ) | |||||||||
Loans returned to accrual status | (26 | ) | (52 | ) | (37 | ) | (27 | ) | (38 | ) | |||||
Balance at end of period | $ | 632 | $ | 577 | $ | 585 | $ | 561 | $ | 548 | |||||
(a) | Purchase credit impaired (PCI) loans meeting nonperforming criteria were historically excluded from Key's nonperforming disclosures. As a result of CECL implementation on January 1, 2020, PCI loans became purchased credit deteriorated (PCD) loans. PCD loans that met the definition of nonperforming are now included in nonperforming disclosures, resulting in a $45 million increase in nonperforming loans in the first quarter of 2020. |
KeyCorp Reports First Quarter 2020 Profit
April 16, 2020
Page 24
Line of Business Results | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Percentage change 1Q20 vs. | ||||||||||||||||||||
1Q20 | 4Q19 | 3Q19 | 2Q19 | 1Q19 | 4Q19 | 1Q19 | ||||||||||||||
Consumer Bank | ||||||||||||||||||||
Summary of operations | ||||||||||||||||||||
Total revenue (TE) | $ | 820 | $ | 825 | $ | 833 | $ | 825 | $ | 805 | (.6 | )% | 1.9 | % | ||||||
Provision for credit losses | 140 | 55 | 48 | 40 | 45 | 154.5 | 211.1 | |||||||||||||
Noninterest expense | 543 | 552 | 531 | 552 | 540 | (1.6 | ) | .6 | ||||||||||||
Net income (loss) attributable to Key | 105 | 166 | 194 | 177 | 168 | (36.7 | ) | (37.5 | ) | |||||||||||
Average loans and leases | 35,197 | 34,148 | 32,760 | 31,881 | 31,321 | 3.1 | 12.4 | |||||||||||||
Average deposits | 73,320 | 73,561 | 72,995 | 72,303 | 71,288 | (.3 | ) | 2.9 | ||||||||||||
Net loan charge-offs | 43 | 43 | 40 | 40 | 34 | — | 26.5 | |||||||||||||
Net loan charge-offs to average total loans | .49 | % | .50 | % | .48 | % | .50 | % | .44 | % | N/A | N/A | ||||||||
Nonperforming assets at period end | $ | 342 | $ | 306 | $ | 354 | $ | 366 | $ | 365 | 11.8 | (6.3 | ) | |||||||
Return on average allocated equity | 12.18 | % | 19.27 | % | 22.82 | % | 21.75 | % | 21.27 | % | N/A | N/A | ||||||||
Commercial Bank | ||||||||||||||||||||
Summary of operations | ||||||||||||||||||||
Total revenue (TE) | $ | 629 | $ | 771 | $ | 779 | $ | 760 | $ | 702 | (18.4 | )% | (10.4 | )% | ||||||
Provision for credit losses | 214 | 38 | 32 | 33 | 16 | 463.2 | N/M | |||||||||||||
Noninterest expense | 353 | 388 | 372 | 389 | 373 | (9.0 | ) | (5.4 | ) | |||||||||||
Net income (loss) attributable to Key | 70 | 315 | 304 | 277 | 250 | (77.8 | ) | (72.0 | ) | |||||||||||
Average loans and leases | 60,082 | 58,535 | 58,215 | 57,918 | 57,267 | 2.6 | 4.9 | |||||||||||||
Average loans held for sale | 1,607 | 1,465 | 1,325 | 1,168 | 1,066 | 9.7 | 50.8 | |||||||||||||
Average deposits | 36,058 | 38,224 | 36,204 | 35,960 | 34,417 | (5.7 | ) | 4.8 | ||||||||||||
Net loan charge-offs | 40 | 39 | 35 | 23 | 30 | 2.6 | 33.3 | |||||||||||||
Net loan charge-offs to average total loans | .27 | % | .26 | % | .24 | % | .16 | % | .21 | % | N/A | N/A | ||||||||
Nonperforming assets at period end | $ | 407 | $ | 402 | $ | 351 | $ | 235 | $ | 225 | 1.2 | 80.9 | ||||||||
Return on average allocated equity | 6.00 | % | 26.69 | % | 26.37 | % | 24.09 | % | 22.60 | % | N/A | N/A | ||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
Notable Items | ||||||||
(in millions) | ||||||||
Three months ended | ||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | ||||||
Provision for credit losses | — | $ | (16 | ) | — | |||
Professional fees related to fraud loss | — | (4 | ) | — | ||||
Efficiency initiative expenses | — | — | $ | (26 | ) | |||
Pension settlement charge | — | (18 | ) | — | ||||
Total notable items | — | $ | (38 | ) | $ | (26 | ) | |
Income taxes | — | (9 | ) | (6 | ) | |||
Total notable items, after tax | — | $ | (29 | ) | $ | (20 | ) | |
KeyCorp First Quarter 2020 Earnings Review April 16, 2020 Beth E. Mooney Chris Gorman Chairman and President and Chief Executive Officer Chief Operating Officer Don Kimble Vice Chairman and Chief Financial Officer
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “seek,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible,” “potential,” “strategy,” “opportunities,” or “trends,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are based on assumptions that involve risks and uncertainties, which are subject to change based on various important factors (some of which are beyond KeyCorp’s control.) Actual results may differ materially from current projections. Actual outcomes may differ materially from those expressed or implied as a result of the factors described under “Forward-looking Statements” and “Risk Factors” in KeyCorp’s Annual Report on Form 10-K for the year ended December 31, 2019 (“Form 10-K”) and in other filings of KeyCorp with the Securities and Exchange Commission (the “SEC”). In addition to the aforementioned factors, the COVID-19 global pandemic is adversely affecting us, our clients, and our third-party service providers, among others, and its impact may adversely affect our business and results of operations over a period of time. Such forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward- looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding KeyCorp, please refer to our SEC filings available at www.key.com/ir . Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. This presentation also includes certain non-GAAP financial measures related to “tangible common equity,” “cash efficiency ratio,” and certain financial measures excluding notable items. Notable items include certain revenue or expense items that may occur in a reporting period in which management does not consider indicative of ongoing financial performance. Management believes it is useful for the investment community to consider financial metrics with and without notable items in order to enable a better understanding of company results, facilitate comparability of period-to-period financial results, and to evaluate and forecast those results. Although Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of results under GAAP. For more information on these calculations and to view the reconciliations to the most comparable GAAP measures, please refer to the appendix of this presentation, or page 80 of our Form 10-K dated December 31, 2019. GAAP: Generally Accepted Accounting Principles 2
Key’s Strong Response Business Resiliency . Executed business resiliency plans: operational effectiveness across the franchise . Dedicated team: highly engaged workforce − >11,000 team members working from home − ~85% of branches remain open for drive-thru service and appointments . Client outreach and support: playing a critical role in providing capital and assistance to clients − Offering forbearance options and temporary assistance loans for consumers − Processed over 38,000 applications for PPP small business loans . Distinctive strategy and business model: positioned to perform through adverse environments and capitalize on opportunities through recovery phase PPP= Paycheck Protection Program 3
Investor Themes . 1Q20 earnings: reflects the impact of the COVID-19 pandemic on reserves and market-based revenue Financial . Balanced interest rate positioning: hedging strategies began in 3Q18 to reduce exposure to declining rates . Strong balance sheet: relationship-oriented lending franchise coupled with strong deposit base . Moderate risk profile: significant improvement to risk profile over the past decade . Strong credit discipline: consistent underwriting standards and risk tolerances Credit Quality . Established pandemic watchlist: monitoring clients potentially impacted by COVID-19 . Implemented CECL: reflects significant change to economic scenario due to pandemic . Strong capital and liquidity: positioned to weather adverse operating environments Capital and . Stress scenarios: government-mandated and internal stress tests demonstrate Key would Liquidity remain well-capitalized through periods of significant stress . Significant liquidity and well-designed contingency funding plans: contingent liquidity of over $50 billion (liquid assets + unused borrowing capacity) to support clients 4
Financial Review 5
Financial Highlights Continuing operations, unless otherwise noted 1Q20 4Q19 1Q19 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .12 $ .45 $ .38 (73) % (68) % Cash efficiency ratio (a) 62.3 % 58.7 % 61.9 % 368 bps 48 bps (a) Profitability Return on average tangible common equity 3.8 14.1 13.7 N/A (987) Return on average total assets .40 1.27 1.18 (87) (78) Net interest margin 3.01 2.98 3.13 3 (12) Common Equity Tier 1 (b) 8.95 % 9.44 % 9.81 % (49) bps (86) bps Capital Tier 1 risk-based capital (b) 10.31 10.86 10.94 (55) (63) Tangible common equity to tangible assets (a) 8.26 8.64 8.43 (38) (17) NCOs to average loans .35 % .42 % .29 % (7) bps 6 bps Asset NPLs to EOP portfolio loans .61 .61 .61 - - Quality Allowance for loan and lease losses to EOP loans 1.32 .95 .98 37 34 EOP = End of Period (a) Non-GAAP measure: see Appendix for reconciliations 6 (b) 3/31/20 ratios are estimated
Loans Total Average Loans Highlights $ in billions vs. Prior Year $100 6.00% $96 . Average loans up 7% from 1Q19 $95 5.50% − Commercial balances reflect strong C&I growth $90 $90 (+8%) driven by broad-based growth with 5.00% middle-market clients, partially offset by a $85 decline in commercial real estate 4.85% 4.32% 4.50% − Consumer loan growth (+16%) driven by $80 momentum from Laurel Road, residential mortgage, and indirect auto $75 4.00% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Total average loans Loan yield vs. Prior Quarter Portfolio Detail . Average loans up 3% from 4Q19 $ in billions − Driven by $7 B of commercial loan growth in C&I Consumer March, reflecting the impact of the pandemic $49 $27 − Consumer loans up 4% reflecting: $600 MM Laurel Road originations in 1Q20 $46 $23 Record $1.3 B funded residential mortgage volume 1Q19 1Q20 1Q19 1Q20 7
Deposits Average Deposits Highlights $ in billions $120 $110 1.40% . Interest-bearing deposit costs down 14 bps from $108 4Q19, reflecting impact of lower interest rates $100 1.20% . Strong and stable deposit base 1.00% .82% $80 1.03% − 25% noninterest-bearing (a) 34% 0.80% $60 − ~65% stable retail and low-cost escrow .76% 0.60% (b) .62% − 92% loan to deposit ratio $40 0.40% vs. Prior Year $20 0.20% . Average deposits up 3% from 1Q19 $0 0.00% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 − Growth from consumer and commercial relationships Commercial Cost of total deposits Consumer x Cost of total interest-bearing deposits − Partially offset by decline in time deposits as a result of lower interest rates 1Q20 Average Deposit Mix $ in billions vs. Prior Quarter $11.2 . Average deposit balances down 2% from 4Q19 $4.7 $27.7 Noninterest-bearing − Short-term and seasonal deposit outflows NOW and MMDA − Decline in time deposits as a result of lower Savings CDs and other time deposits interest rates $66.7 . Since February, deposit growth has funded loan growth (a) Based on period-end balances 8 (b) Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations vs. Prior Year $985 $989 $1,000 4.0% . Net interest income up $4 MM (+.4%) from 1Q19 $900 − Largely driven by higher earning asset 3.5% balances $800 3.13% − Partially offset by lower earning asset yields 3.01% $700 vs. Prior Quarter 3.0% $600 . Net interest income up $2 MM (+.2%) from 4Q19 $500 2.5% − Largely driven by higher earning asset 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 balances Net interest income (TE)x Net Interest Margin (TE) − Partially offset by lower earning asset yields and one less day in the quarter NIM Change vs. Prior Quarter 4Q19: 2.98% Balance sheet mix .06 Interest rates (.03) Total change .03 1Q20: 3.01% TE = Taxable equivalent 9
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 1Q20 vs. 1Q19 vs. 4Q19 . Noninterest income down $59 MM (-11%) from Trust and investment services income $ 133 $ 18 $ 13 1Q19 Investment banking and debt 116 6 (65) placement fees − Other income down (-$98 MM), largely driven Service charges on deposit accounts 84 2 (2) by market-related valuation adjustments for Operating lease income and other 30 (7) (9) customer derivatives and trading losses leasing gains − Partially offset by increases in trust and Corporate services income 62 7 (3) investment services income (+$18 MM) Cards and payments income 66 - (1) − Continued strength in consumer mortgage Corporate-owned life insurance 36 4 (3) income (+$9 MM) Consumer mortgage income 20 9 (1) Commercial mortgage servicing fees 18 - (1) vs. Prior Quarter Other income (88) (98) (102) Total noninterest income $ 477 $ (59) $ (174) . Noninterest income down $174 MM (-27%) from 4Q19 − Other income down (-$102 MM), largely driven by market-related valuation adjustments for customer derivatives and trading losses − Lower investment banking and debt placement fees (-$65 MM) related to seasonal flows and COVID-19 impacts − Partially offset by higher trust and investment services income (+$13 MM) 10
Noninterest Expense Noninterest Expense Highlights $ in millions favorable / (unfavorable) 1Q20 vs. 1Q19 vs. 4Q19 vs. Prior Year Personnel $ 515 $ 48 $ 36 . Noninterest expense down $32 MM (-3%) from Net occupancy 76 (4) - 1Q19 Computer processing 55 (1) (4) − Excluding notable items down $6 MM (-.6%) (a) Business services, professional fees 44 - 10 Equipment 24 - 1 . Reflects the successful implementation of expense initiatives, partially offset by expenses Operating lease expense 36 (10) (4) related to Key’s acquisition of Laurel Road in Marketing 21 (2) 6 April 2019 FDIC assessment 9 (2) (1) Intangible asset amortization 17 5 2 vs. Prior Quarter OREO expense, net 3 - - Other expense 131 (2) 3 . Noninterest expense down $49 MM (-5%) from Total noninterest expense $ 931 $ 32 $ 49 4Q19 Notable Items: − Excluding notable items down $27 MM (-3%) (a) Pension settlement charge - - 18 . Decrease from prior quarter reflects: Professional fees related to fraud loss - - 4 − Lower incentive compensation related to Efficiency initiative expenses - 26 - operating results Total noninterest expense, excl. $ 931 $ 6 $ 27 (a) notable items − Lower business services and professional fees and seasonally lower marketing expense 11 (a) Non-GAAP measure and excludes notable items: see Appendix for detail
Current Expected Credit Loss (CECL) Day 1 Implementation Day 2 . January 1, 2020 impact (a) : . Provision exceeded net charge-offs by $275 MM − $204 MM (23%) increase of Allowance for Loan . Reasonable and supportable period: 2 years and Lease Losses (ALLL) from continuing operations Qualitative Adjustment Methodology: − The overall increase in the ALLL is driven by . Base case assumptions adjusted to our longer duration consumer portfolio incorporate estimated impact from the − $57 MM increase in Reserve for Unfunded Loan pandemic, including: Commitments (RULC) − A severe downturn in economic activity, with − All former purchased credit impaired (PCI) a partial recovery later in the year loans became purchased credit deteriorated − Increased reserves were provided for certain (b) (PCD) loans customers reflecting greater impact from the As a result of CECL, PCD loans that pandemic meet the definition of nonperforming are − Reserves reflected the impact of loan now included in nonperforming migration and growth through 3/31/20 disclosures (b) ¢ resulted in $45 MM increase in NPLs in 1Q20 . Regulatory Capital implications: − Elected to delay the impact of the transition for 2 years (phased in over 3 years beginning in 2022) (a) Resulted in $230 MM decrease of retained earnings, net of deferred taxes ($71 MM) 12 (b) PCI loans and leases meeting nonperforming criteria were historically excluded from Key’s nonperforming disclosures
Credit Quality Net Charge-offs & Provision for Credit Losses $ in millions CECL Implementation $400 1.00% $359 .80% $300 4Q19 and 3Q19 reflect $16 MM and $123 MM, respectively, from previously disclosed fraud loss .60% $200 .35% .40% .29% $100 $84 $64 $62 .20% $0 .00% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 NCOs Provision for credit losses NCOs to avg loans NCOs to avg loans excl. fraud loss (a) Nonperforming Loans (b) Allowance for Loan and Lease Losses $ in millions $ in millions 1Q20 allowance for loan losses to $1,359 $800 2.00% $1,400 period-end loans of 1.32% 250% $632 1.60% 200% $600 $548 $1,200 161% 215% 1.20% 150% $400 $1,000 .61% .61% .80% $883 100% $200 .40% $800 50% $0 .00% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 $600 0% NPLs NPLs to period-end loans 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Allowance for loan Allowance for loan and NCO = Net charge-off and lease losses lease losses to NPLs (a) Excludes fraud loss in 4Q19 and 3Q19; see reconciliation in Appendix (b) Purchased credit impaired (PCI) loans and leases meeting nonperforming criteria were historically excluded from Key’s nonperforming disclosures. As a result of CECL implementation on 1/1/20, PCI loans became purchased credit deteriorated (PCD) loans. PCD loans that meet the definition of nonperforming are 13 now included in nonperforming disclosures, resulting in a $45 million increase in NPLs in 1Q20
Select Commercial Portfolio Focus Areas Active Portfolio Surveillance Portfolios in Focus . Ongoing portfolio reviews Outstandings % Total Loans . Monitoring ratings Consumer • Restaurants ($480 MM), sports, entertainment/ leisure, services, Behavior migration education, etc. $5.3 B 5.1% . Central reporting on enterprise-wide relief initiatives Travel/ • Diversified portfolio including hotels, Tourism/ tours, air/ water/ rail leasing $3.1 B 3.0% . Established pandemic watchlist and ongoing review of commercial clients at risk • All exposure has total debt/EBITDA > 4.0x − Evaluate business Leveraged or senior debt/EBITDA > 3.0x and meets the purpose test (the new debt finances a Lending $2.7 B 2.6% position as well as buyout, acquisition, or capital distribution) potential COVID • Diversified portfolio in multiple industries implications − Deferral requests automatically added • Primarily focused upstream; reserve-based Oil & Gas • Comprised of ½ oil, ½ gas $2.7 B 2.6% • Stress-tested at various price points Portfolios reviewed on a frequent and ongoing basis 14
Capital Common Equity Tier 1 (a) Highlights 11.00% . Strong capital position: CET1 ratio of 8.95% (a) at 3/31/2020 10.00% 9.81% . Capital positioned to weather adverse operating 8.95% 9.00% environments . Disciplined capital management, including 8.00% meaningful shareholder return in 1Q20: 7.00% − Quarterly common share dividend of $.185 − Completed $120 MM (c) of common share 6.00% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 repurchases Tangible Common Equity to Tangible Assets (b) Quarterly Common Share Dividend $0.20 10.00% $.185 $.17 9.00% 8.43% $0.16 8.26% 8.00% $0.12 7.00% 6.00% $0.08 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 (a) 3/31/20 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision (b) Non-GAAP measure: see Appendix for reconciliation 15 (c) Common share repurchase amount includes repurchases to offset issuances of common shares under our employee compensation plans
Second Quarter 2020 Trends & Long-term Targets Second Quarter 2020 Trend (vs. First Quarter 2020) . Average Loans: continued strong growth reflecting starting point (EOP balance) and PPP . Deposits: up linked-quarter, supporting loan growth . Net interest income: higher NII reflecting loan growth and lower NIM due to PPP . Noninterest income: − No meaningful market-related valuation adjustments expected − Non-market related fee income should be down slightly, reflecting lower activity levels − Too early to predict market-related revenues . Noninterest expense: relatively stable . Net charge-offs: expected to be at the lower end of 40-60 bps range Note: Given our inability to estimate the impact of COVID-19 on our business and operations in 2020, we are withdrawing the Company’s financial outlook for full-year 2020 that was issued on January 23, 2020. Long-term Targets Positive operating Moderate risk profile: ROTCE: Cash efficiency ratio: Net charge-offs to avg. loans leverage targeted range of 40-60 bps 16% - 19% 54% - 56% PPP= Paycheck Protection Program 16
Appendix 17
Loan Portfolio Detail, at 3/31/2020 Total Loans Commercial Loans $ in billions 3/31/20 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Automotive Utilities Commercial and industrial $ 56.0 54 Business Products Transportation Commercial real estate 15.3 15 Business Services C&I CRE Technology Media And Telecom Chemicals Commercial lease financing$40 4.7$18 5 Construction Total Commercial $ 75.9 74% Consumer Discretionary Residential mortgage 7.5 7 Real Estate Home equity 10.1 10 Consumer Services Consumer direct 3.8 4 Credit card 1.0 1 Equipment Public Sector Consumer indirect 4.8 5 Other Finance Total Consumer $ 27.3 26% Oil And Gas Materials/ Metals And Mining Extraction Home Equity Commercial Real Estate 2008/ Outstanding Average Average prior Balances Loan Size FICO Construction vintage . Focused on relationships with CRE owners First lien $ 6,218 62 % $ 72,368 776 13 % Second lien 3,885 38 46,123 776 24 . Aligned with targeted industry verticals Total home equity $ 10,103 . Primarily commercial mortgage; selective approach to construction . Combined weighted-average LTV at Commercial mortgage origination: 70% Fixed . Criticized non-accruals: 0.6% of period- 72% 89% Variable 50% end balances (a) 50% . $557 million in lines outstanding (9% of the home equity lines) come to end of draw period by 1Q22 3/31/2010 3/31/2020 Tables may not foot due to rounding 18 (a) Loan and lease outstandings
Investment Portfolio Average Total Investment Securities Highlights $ in billions $31.6 $31.0 . Portfolio used for funding and liquidity $32.0 2.75% management: 2.47% 2.51% ‒ Portfolio composed primarily of Fixed Rate GNMA and $24.0 2.50% GSE-backed MBS and CMOs ‒ GNMA 45% of 1Q20 average balance $16.0 2.25% ‒ Reinvestments continue to be in High Quality Liquid Assets $8.0 2.00% . Mortgage securities cash flows were not $0.0 1.75% reinvested in 1Q20, rather excess stored liquidity 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 was used to fund loan growth Average AFS securities Average yield (a) − Yields on current reinvestment opportunities would be Average HTM securities ~100bps lower than runoff yields Securities Cash Flows (b) as a % of Total Securities . Strategically positioned the portfolio to provide greater yield stability in a lower interest rate 40.0% 5.0% environment: 3.8% ‒ Grew allocation to bullet-like or locked-out securities 3.5% 4.0% 30.0% 3.5% backed by commercial mortgages by ~15% 3.0% ‒ Focused on investing in securities backed by residential mortgage collateral with lower prepayment risks 20.0% 19% 29% 2.0% ‒ Reduced exposure to net unamortized premiums on 27% mortgage securities 10.0% 1.0% ‒ Annualized cash flows ~10% lower compared to when mortgage rates were at similar levels in 2016 0.0% 0.0% . Portfolio average life of 4.2 years and duration of 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 Securities cash flows as a % of total Mortgage rate (c) 3.6 years at 3/31/2020 securities (b) (a) Yield is calculated on the basis of amortized cost 19 (b) Quarterly cash flows annualized (c) Average 30-year Freddie Mac fixed mortgage rate
Asset & Liability Management Positioning Active hedging moderates interest rate risk, protecting and enhancing net interest income 1Q20 Balance Sheet Highlights (a) Actively Managing Interest Rate Risk Position . Exposure to declining rates increased in 1Q20, driven Loan Composition Deposit Mix by market dislocation and widening of LIBOR/ Fed Funds spread Prime Noninterest- − Elevated 1M LIBOR rate benefits near term earnings, while Fixed 12% bearing 33% 25% increasing forward declining rate risk when measured 1 month Interest- against unchanged rates LIBOR bearing − NII decline of ~4% for a ramped 100 bps decrease from Other 42% 75% 6% current rates over 12 months (subject to 25 bps floor) 3 month LIBOR . Total Hedge portfolio of $25.2 B at 3/31/2020 7% − Executed $1.0 B swaps in 1Q20 . Attractive business model with relationship-oriented − Terminated $4.2 B of swaps with 2020 maturities and lending franchise $3.9 B of interest rate floors to lock in gains − Distinctive commercial capabilities drive C&I growth and 1Q20 ~67% floating-rate loan mix $17.6 B $7.3 B $.3 B − Laurel Road and residential mortgage enhances fixed rate loan volumes with attractive client profile A/LM Swaps Debt Swaps Floors . Strong, low-cost deposit base . Hedging beginning in 3Q18 significantly reduced impact − ~65% stable retail and low-cost escrow of recent rate movements (~$22 B in executions through 1Q20) − >85% from markets where Key maintains top-5 deposit or branch share . Evaluating opportunities to protect and enhance NII through new hedging and/or modifying existing positions . $30 B securities portfolio structured to provide greater yield stability in a lower rate environment ‒ Current swap curve limits benefit of additional near term hedging ‒ Zero floors on LIBOR in significant portions of floating rate loan book reduces exposure to negative short term rates 20 (a) Loan, deposit and securities portfolio statistics based on 3/31/2020 ending balances
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings (a) to Period-end Total Loans Continuing operations Continuing operations .80% 6.0% .60% 4.0% .38% 2.9% .40% .32% 2.7% 2.0% .20% .13% .12% .00% .0% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 30 – 89 days delinquent 90+ days delinquent Metric (b) 1Q20 4Q19 3Q19 2Q19 1Q19 Delinquencies to EOP total loans: 30-89 days .38 % .35 % .39 % .33 % .32 % Delinquencies to EOP total loans: 90+ days .12 .10 .06 .08 .13 NPLs to EOP portfolio loans .61 .61 .63 .61 .61 NPAs to EOP portfolio loans + OREO + Other NPAs .82 .75 .77 .66 .66 Allowance for loan losses to period-end loans 1.32 .95 .96 .97 .98 Allowance for loan losses to NPLs 215.0 156.0 152.6 158.6 161.1 (a) Loan and lease outstandings 21 (b) From continuing operations
Credit Quality Credit Quality by Portfolio Net loan Net loan Allowance / Allowance / Period- Average charge-offs (b) / Nonperforming Ending charge- period-end NPLs end loans loans average loans loans allowance offs loans (%) (%) $ in millions (%) 3/31/20 1Q20 1Q20 1Q20 3/31/20 3/31/20 3/31/20 3/31/20 Commercial and industrial (a) $ 55,983 $ 49,466 $ 55 .45% $ 277 $ 542 .97% 195.67% Commercial real estate: Commercial Mortgage 13,548 13,548 2 .06 87 207 1.53 237.93 Construction 1,710 1,666 - - 2 25 1.46 N/M Commercial lease financing (c) 4,677 4,565 2 .18 5 44 .94 880.00 Real estate – residential mortgage 7,498 7.215 - - 89 89 1.19 100.00 Home equity 10,103 10,155 2 .08 143 184 1.82 128.67 Consumer direct loans 3,833 3,709 10 1.08 4 116 3.03 N/M Credit cards 1,041 1,082 9 3.35 3 104 9.99 N/M Consumer indirect loans 4,805 4,768 4 .34 22 48 1.00 218.18 Continuing total $ 103,198 $ 96,174 $ 84 .35% $ 632 $ 1,359 1.32% 215.03% Discontinued operations 821 838 1 .48 7 43 5.24 614.29 Consolidated total $ 104,019 $ 97,012 $ 85 .35% $ 639 $ 1,402 1.35% 219.41% N/M = Not meaningful (a) Commercial and industrial ending loan balances include $143 million of commercial credit card balances at March 31, 2020; commercial and industrial average balances include $145 million of assets from commercial credit cards for the three months ended March 31, 2020 (b) Net loan charge-off amounts are annualized in calculation (c) Commercial lease financing includes receivables held as collateral for a secured borrowing of $14 million at March 31, 2020. Principal reductions are based on 22 the cash payments received from these related receivables
CECL Implementation 1Q20 CECL ALLL Impact by Portfolio Pre-ASC 326 Impact of As Reported Ending ALLL Adoption ASC 326 Under ASC 326 Provision Charge-offs Recoveries March 31, 2020 $ in millions ALLL Adoption ALLL 12/31/19 1/1/20 1/1/20 3/31/20 3/31/20 3/31/20 3/31/20 Commercial Commercial and industrial $ 551 $ (141) $ 410 $ 187 $ (60) $ 5 $ 542 Real estate – commercial mortgage 143 16 159 50 (3) 1 207 Real estate – construction 22 (7) 15 10 -- 25 Commercial lease financing 35 8 43 3 (2) - 44 Total commercial loans $ 751 $ (124) $ 627 $ 250 $ (65) $ 6 $ 818 Consumer Real estate – residential mortgage 7 77 84 5 -- 89 Home equity loans 31 147 178 8 (4) 2 184 Consumer direct loans 34 63 97 29 (12) 2 116 Credit cards 47 35 82 31 (11) 2 104 Consumer indirect loans 30 6 36 16 (9) 5 48 Total consumer loans $ 149 $ 328 $ 477 $ 89 $ (36) $ 11 $ 541 Total ALLL – continuing operations 900 204 1,104 339 (101) 17 1,359 Discontinued operations 10 31 41 3 (2) 1 43 Total ALLL $ 910 $ 235 $ 1,145 $ 342 $ (103) $ 18 $ 1,402 Note: Tables may not foot due to rounding 23
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 3/31/2020 12/31/2019 3/31/2019 Notable Items Provision for credit losses -$ (16) - - Professional fees related to fraud loss - (4) - Efficiency initiative expenses - -$ (26) Pension settlement charge - (18) - Total notable items -$ (38) $ (26) Income taxes - (9) (6) Total notable items after tax -$ (29) $ (20) Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $ 17,411 $ 17,038 $ 15,924 Less: Intangible assets (a) 2,894 2,910 2,804 Preferred Stock (b) 1,856 1,856 1,421 Tangible common equity (non-GAAP) $ 12,661 $ 12,272 $ 11,699 Total assets (GAAP) $ 156,197 $ 144,988 $ 141,515 Less: Intangible assets (a) 2,894 2,910 2,804 Tangible assets (non-GAAP) $ 153,303 $ 142,078 $ 138,711 Tangible common equity to tangible assets ratio (non-GAAP) 8.26% 8.64% 8.43% Pre-provision net revenue Net interest income (GAAP) $ 981 $ 979 $ 977 Plus: Taxable-equivalent adjustment 8 8 8 Noninterest income 477 651 536 Less: Noninterest expense 931 980 963 Pre-provision net revenue from continuing operations (non-GAAP) $ 535 $ 658 $ 558 Average tangible common equity Average Key shareholders' equity (GAAP) $ 17,216 $ 17,178 $ 15,702 Less: Intangible assets (average) (c) 2,902 2,919 2,813 Preferred Stock (average) 1,900 1,900 1,450 Average tangible common equity (non-GAAP) $ 12,414 $ 12,359 $ 11,439 Return on average tangible common equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 118 $ 439 $ 386 Plus: Notable items, after tax - 29 20 Net income (loss) from continuing operations attributable to Key common shareholders excl. notable items $ 118 $ 468 $ 406 Average tangible common equity (non-GAAP) 12,414 12,359 11,439 Return on average tangible common equity from continuing operations (non-GAAP) 3.82% 14.09% 13.69% Return on average tangible common equity from continuing operations excl. notable items (non-GAAP) 3.82% 15.02% 14.39% (a) For the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, intangible assets exclude $6 million, $7 million, and $12 million, respectively, of period-end purchased credit card receivables (b) Net of capital surplus (c) For the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, intangible assets exclude $7 million, $8 million, and $13 million, 24 respectively, of average purchased credit card receivables
GAAP to Non-GAAP Reconciliation PAGE TWO: Three months ended $ in millions 3/31/2020 12/31/2019 3/31/2019 Net loan charge-offs to average total loans excluding notable items Net loan charge-offs (GAAP) $ 84 $ 99 $ 64 Less: Notable items - 16 - Net loan charge-offs excluding notable items (non-GAAP) $ 84 $ 83 $ 64 Average loans outstanding $ 96,174 $ 93,607 $ 89,649 Net loan charge-offs to average loans excluding notable items (non-GAAP) .35% .35% .29% Provision for credit losses excluding notable items Provision for credit losses (GAAP) $ 359 $ 109 $ 62 Less: Notable items -$ 16 - Provision for credit losses excluding notable items (non-GAAP) $ 359 $ 93 $ 62 Cash efficiency ratio Noninterest expense (GAAP) $ 931 $ 980 $ 963 Less: Intangible asset amortization 17 19 22 Adjusted noninterest expense (non-GAAP) $ 914 $ 961 $ 941 Less: Notable items - 22 26 Adjusted noninterest expense (non-GAAP) $ 914 $ 939 $ 915 Net interest income (GAAP) $ 981 $ 979 $ 977 Plus: Taxable-equivalent adjustment 8 8 8 Noninterest income 477 651 536 Total taxable-equivalent revenue (non-GAAP) $ 1,466 $ 1,638 $ 1,521 Cash efficiency ratio (non-GAAP) 62.3% 58.7% 61.9% Cash efficiency ratio excluding notable items (non-GAAP) 62.3% 57.3% 60.2% 25
Exhibit 99.3
Consolidated Balance Sheets | |||||||||||
(dollars in millions) | |||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||||
Assets | |||||||||||
Loans | $ | 103,198 | $ | 94,646 | $ | 90,178 | |||||
Loans held for sale | 2,143 | 1,334 | 894 | ||||||||
Securities available for sale | 20,807 | 21,843 | 20,854 | ||||||||
Held-to-maturity securities | 9,638 | 10,067 | 11,234 | ||||||||
Trading account assets | 795 | 1,040 | 979 | ||||||||
Short-term investments | 4,073 | 1,272 | 2,511 | ||||||||
Other investments | 679 | 605 | 646 | ||||||||
Total earning assets | 141,333 | 130,807 | 127,296 | ||||||||
Allowance for loan and lease losses | (1,359 | ) | (900 | ) | (883 | ) | |||||
Cash and due from banks | 865 | 732 | 611 | ||||||||
Premises and equipment | 791 | 814 | 849 | ||||||||
Goodwill | 2,664 | 2,664 | 2,516 | ||||||||
Other intangible assets | 236 | 253 | 300 | ||||||||
Corporate-owned life insurance | 4,243 | 4,233 | 4,184 | ||||||||
Accrued income and other assets | 6,604 | 5,494 | 5,596 | ||||||||
Discontinued assets | 820 | 891 | 1,046 | ||||||||
Total assets | $ | 156,197 | $ | 144,988 | $ | 141,515 | |||||
Liabilities | |||||||||||
Deposits in domestic offices: | |||||||||||
NOW and money market deposit accounts | $ | 71,005 | $ | 66,714 | $ | 61,380 | |||||
Savings deposits | 4,753 | 4,651 | 4,839 | ||||||||
Certificates of deposit ($100,000 or more) | 5,630 | 6,598 | 8,396 | ||||||||
Other time deposits | 4,623 | 5,054 | 5,573 | ||||||||
Total interest-bearing deposits | 86,011 | 83,017 | 80,188 | ||||||||
Noninterest-bearing deposits | 29,293 | 28,853 | 27,987 | ||||||||
Total deposits | 115,304 | 111,870 | 108,175 | ||||||||
Federal funds purchased and securities sold under repurchase agreements | 2,444 | 387 | 266 | ||||||||
Bank notes and other short-term borrowings | 4,606 | 705 | 679 | ||||||||
Accrued expense and other liabilities | 2,700 | 2,540 | 2,301 | ||||||||
Long-term debt | 13,732 | 12,448 | 14,168 | ||||||||
Total liabilities | 138,786 | 127,950 | 125,589 | ||||||||
Equity | |||||||||||
Preferred stock | 1,900 | 1,900 | 1,450 | ||||||||
Common shares | 1,257 | 1,257 | 1,257 | ||||||||
Capital surplus | 6,222 | 6,295 | 6,259 | ||||||||
Retained earnings | 12,174 | 12,469 | 11,771 | ||||||||
Treasury stock, at cost | (4,956 | ) | (4,909 | ) | (4,283 | ) | |||||
Accumulated other comprehensive income (loss) | 814 | 26 | (530 | ) | |||||||
Key shareholders’ equity | 17,411 | 17,038 | 15,924 | ||||||||
Noncontrolling interests | — | — | 2 | ||||||||
Total equity | 17,411 | 17,038 | 15,926 | ||||||||
Total liabilities and equity | $ | 156,197 | $ | 144,988 | $ | 141,515 | |||||
Common shares outstanding (000) | 975,319 | 977,189 | 1,013,186 | ||||||||
Consolidated Statements of Income | |||||||||||
(dollars in millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||||
Interest income | |||||||||||
Loans | $ | 1,026 | $ | 1,046 | $ | 1,066 | |||||
Loans held for sale | 19 | 17 | 13 | ||||||||
Securities available for sale | 129 | 137 | 129 | ||||||||
Held-to-maturity securities | 62 | 63 | 68 | ||||||||
Trading account assets | 8 | 8 | 8 | ||||||||
Short-term investments | 6 | 12 | 16 | ||||||||
Other investments | 1 | 2 | 4 | ||||||||
Total interest income | 1,251 | 1,285 | 1,304 | ||||||||
Interest expense | |||||||||||
Deposits | 169 | 201 | 202 | ||||||||
Federal funds purchased and securities sold under repurchase agreements | 6 | 1 | 1 | ||||||||
Bank notes and other short-term borrowings | 5 | 4 | 4 | ||||||||
Long-term debt | 90 | 100 | 120 | ||||||||
Total interest expense | 270 | 306 | 327 | ||||||||
Net interest income | 981 | 979 | 977 | ||||||||
Provision for credit losses | 359 | 109 | 62 | ||||||||
Net interest income after provision for credit losses | 622 | 870 | 915 | ||||||||
Noninterest income | |||||||||||
Trust and investment services income | 133 | 120 | 115 | ||||||||
Investment banking and debt placement fees | 116 | 181 | 110 | ||||||||
Service charges on deposit accounts | 84 | 86 | 82 | ||||||||
Operating lease income and other leasing gains | 30 | 39 | 37 | ||||||||
Corporate services income | 62 | 65 | 55 | ||||||||
Cards and payments income | 66 | 67 | 66 | ||||||||
Corporate-owned life insurance income | 36 | 39 | 32 | ||||||||
Consumer mortgage income | 20 | 21 | 11 | ||||||||
Commercial mortgage servicing fees | 18 | 19 | 18 | ||||||||
Other income | (88 | ) | 14 | 10 | |||||||
Total noninterest income | 477 | 651 | 536 | ||||||||
Noninterest expense | |||||||||||
Personnel | 515 | 551 | 563 | ||||||||
Net occupancy | 76 | 76 | 72 | ||||||||
Computer processing | 55 | 51 | 54 | ||||||||
Business services and professional fees | 44 | 54 | 44 | ||||||||
Equipment | 24 | 25 | 24 | ||||||||
Operating lease expense | 36 | 32 | 26 | ||||||||
Marketing | 21 | 27 | 19 | ||||||||
FDIC assessment | 9 | 8 | 7 | ||||||||
Intangible asset amortization | 17 | 19 | 22 | ||||||||
OREO expense, net | 3 | 3 | 3 | ||||||||
Other expense | 131 | 134 | 129 | ||||||||
Total noninterest expense | 931 | 980 | 963 | ||||||||
Income (loss) from continuing operations before income taxes | 168 | 541 | 488 | ||||||||
Income taxes | 23 | 75 | 82 | ||||||||
Income (loss) from continuing operations | 145 | 466 | 406 | ||||||||
Income (loss) from discontinued operations, net of taxes | 1 | 3 | 1 | ||||||||
Net income (loss) | 146 | 469 | 407 | ||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | — | ||||||||
Net income (loss) attributable to Key | $ | 146 | $ | 469 | $ | 407 | |||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 118 | $ | 439 | $ | 386 | |||||
Net income (loss) attributable to Key common shareholders | 119 | 442 | 387 | ||||||||
Per common share | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .12 | $ | .45 | $ | .38 | |||||
Income (loss) from discontinued operations, net of taxes | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .12 | .45 | .38 | ||||||||
Per common share — assuming dilution | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .12 | $ | .45 | $ | .38 | |||||
Income (loss) from discontinued operations, net of taxes | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .12 | .45 | .38 | ||||||||
Cash dividends declared per common share | $ | .185 | $ | .185 | $ | .17 | |||||
Weighted-average common shares outstanding (000) | 967,446 | 973,450 | 1,006,717 | ||||||||
Effect of common share options and other stock awards | 8,664 | 10,911 | 9,787 | ||||||||
Weighted-average common shares and potential common shares outstanding (000) (b) | 976,110 | 984,361 | 1,016,504 | ||||||||
(a) | Earnings per share may not foot due to rounding. |
(b) | Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable. |