KeyCorp Reports Record Fourth Quarter 2020 Net Income Of $549 Million, Or $.56 Per Diluted Common Share
01/21/2021 - 06:30 AM
CLEVELAND , Jan. 21, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $549 million $.56 per diluted common share for the fourth quarter of 2020. This compared to $397 million $.41 per diluted common share, for the third quarter of 2020 and $439 million $.45 per diluted common share, for the fourth quarter of 2019.
Key's record fourth quarter results marked a great finish to the year. I was extremely proud of the way our dedicated and resilient team came together to support our clients when they needed us most , while concurrently delivering strong results across our company.
We achieved a record level of revenue for both the fourth quarter and the full year. Fee income was up 23% from the year-ago period, with growth coming from consumer mortgage and investment banking.
Credit quality remained strong this quarter, with net charge-offs of 53 basis points . Our provision for credit losses reflects our strong credit metrics and our outlook for the economy. We have continued to support our clients while maintaining our moderate risk profile through the business cycle.
We have maintained our discipline in managing our strong capital position. At the end of the quarter, our Common Equity Tier 1 ratio was 9.8% , which was above our targeted range. Last week, our Board of Directors approved a new share repurchase authorization of up to $900 million $.185 per common share.
While 2020 presented many challenges, we remained focused on serving our clients, growing our business, and maintaining strong risk practices. Our success is due to our dedicated team, the strength of our business model, and our targeted relationship strategy. We have positioned our company to succeed and I remain confident in our ability to grow and to deliver on our commitments .
- Chris Gorman , Chairman and CEO
Selected Financial Highlights
dollars in millions, except per share data
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Income (loss) from continuing operations attributable to Key common shareholders
$
549
$
397
$
439
38.3
%
25.1
%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution
.56
.41
.45
36.6
24.4
Return on average tangible common equity from continuing operations (a)
16.61
%
12.19
%
14.09
%
N/A
N/A
Return on average total assets from continuing operations
1.35
1.00
1.27
N/A
N/A
Common Equity Tier 1 ratio (b)
9.8
9.5
9.4
N/A
N/A
Book value at period end
$
16.53
$
16.25
$
15.54
1.7
%
6.4
%
Net interest margin (TE) from continuing operations
2.70
%
2.62
%
2.98
%
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) 12/31/20 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Net interest income (TE)
$
1,043
$
1,006
$
987
3.7
%
5.7
%
Noninterest income
802
681
651
17.8
23.2
Total revenue
$
1,845
$
1,687
$
1,638
9.4
%
12.6
%
Taxable-equivalent net interest income was $1.04 3 billion$987 million
Compared to the third quarter of 2020, taxable-equivalent net interest income increased by $37 million
Noninterest Income
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Trust and investment services income
$
123
$
128
$
120
(3.9)
%
2.5
%
Investment banking and debt placement fees
243
146
181
66.4
34.3
Service charges on deposit accounts
82
77
86
6.5
(4.7)
Operating lease income and other leasing gains
39
38
39
2.6
—
Corporate services income
63
51
65
23.5
(3.1)
Cards and payments income
97
114
67
(14.9)
44.8
Corporate-owned life insurance income
38
30
39
26.7
(2.6)
Consumer mortgage income
43
51
21
(15.7)
104.8
Commercial mortgage servicing fees
32
18
19
77.8
68.4
Other income
42
28
14
50.0
200.0
Total noninterest income
$
802
$
681
$
651
17.8
%
23.2
%
Compared to the fourth quarter of 2019, noninterest income increased by $151 million $62 million $30 million $22 million $13 million
Compared to the third quarter of 2020, noninterest income increased by $121 million $97 million $14 million $12 million $17 million $8 million
Noninterest Expense
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Personnel expense
$
661
$
588
$
551
12.4
%
20.0
%
Nonpersonnel expense
467
449
429
4.0
8.9
Total noninterest expense
$
1,128
$
1,037
$
980
8.8
%
15.1
%
Key's noninterest expense was $1.12 8 billion$148 million $110 million
Compared to the third quarter of 2020, noninterest expense increased $91 million
BALANCE SHEET HIGHLIGHTS
Average Loans
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Commercial and industrial (a)
$
53,562
$
57,067
$
48,345
(6.1)
%
10.8
%
Other commercial loans
19,174
19,677
19,312
(2.6)
(.7)
Total consumer loans
28,974
28,175
25,950
2.8
11.7
Total loans
$
101,710
$
104,919
$
93,607
(3.1)
%
8.7
%
(a)
Commercial and industrial average loan balances include $129 million , $129 million , and $146 million of assets from commercial credit cards at December 31, 2020, September 30, 2020, and December 31, 2019, respectively.
Average loans were $101.7 billion $8.1 billion $5.1 billion $3.0 billion
Compared to the third quarter of 2020, average loans decreased by $3.2 billion
Average Deposits
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Non-time deposits
$
129,529
$
127,347
$
100,518
1.7
%
28.9
%
Certificates of deposit ($100,000 or more)
2,983
3,862
6,899
(22.8)
(56.8)
Other time deposits
3,209
3,735
5,187
(14.1)
(38.1)
Total deposits
$
135,721
$
134,944
$
112,604
.6
%
20.5
%
Cost of total deposits
.08
%
.16
%
.71
%
N/A
N/A
Average deposits totaled $135.7 billion $23.1 billion
Compared to the third quarter of 2020, average deposits increased by $777 million
ASSET QUALITY
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Net loan charge-offs
$
135
$
128
$
99
5.5
%
36.4
%
Net loan charge-offs to average total loans
.53
%
.49
%
.42
%
N/A
N/A
Nonperforming loans at period end
$
785
$
834
$
577
(5.9)
36.0
Nonperforming assets at period end
937
1,003
715
(6.6)
31.0
Allowance for loan and lease losses
1,626
1,730
900
(6.0)
80.7
Allowance for credit losses
1,823
1,938
968
(5.9)
88.3
Allowance for loan and lease losses to nonperforming loans
207.1
%
207.4
%
156.0
%
N/A
N/A
Allowance for credit losses to nonperforming loans
232.2
232.4
167.8
N/A
N/A
Provision for credit losses
$
20
$
160
$
109
(87.5)
%
(81.7)
%
Key's provision for credit losses was $20 million $109 million $160 million
Net loan charge-offs for the fourth quarter of 2020 totaled $135 million 53% of average total loans. These results compare to $99 million 42% , for the fourth quarter of 2019 and $128 million 49% , for the third quarter of 2020. Key's allowance for credit losses was $1.8 billion 1.80% of total period-end loans at December 31, 2020, compared to 1.02% at December 31, 2019, and 1.88% at September 30, 2020.
At December 31, 2020, Key's nonperforming loans totaled $785 million 78% of period-end portfolio loans. These results compare to .61% at December 31, 2019, and .81% at September 30, 2020. Nonperforming assets at December 31, 2020, totaled $937 million 92% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .75% at December 31, 2019, and .97% at September 30, 2020.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2020.
Capital Ratios
12/31/2020
9/30/2020
12/31/2019
Common Equity Tier 1 (a)
9.8
%
9.5
%
9.4
%
Tier 1 risk-based capital (a)
11.1
10.9
10.9
Total risk based capital (a)
13.4
13.3
12.8
Tangible common equity to tangible assets (b)
7.9
7.8
8.6
Leverage (a)
8.9
8.7
9.9
(a)
12/31/2020 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
(b)
The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
Key's capital position remained strong in the fourth quarter of 2020. As shown in the preceding table, at December 31, 2020, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.8% and 11.1% , respectively. Key's tangible common equity ratio was 7.9% at December 31, 2020.
Key has elected the CECL phase-in option provided by regulatory guidance which delays for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by 29 basis points.
Summary of Changes in Common Shares Outstanding
in thousands
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Shares outstanding at beginning of period
976,205
975,947
988,538
—
(1.2)
%
Open market repurchases and return of shares under employee compensation plans
(1,092)
(1)
(12,968)
N/M
(91.6)
Shares issued under employee compensation plans (net of cancellations)
660
259
1,619
154.8
%
(59.2)
Shares outstanding at end of period
975,773
976,205
977,189
—
(.1)
%
Consistent with Key's 2020 Capital Plan, during the fourth quarter of 2020, Key declared a dividend of $.185 per common share. Key announced a new share repurchase authorization program of up to $900 million September 30, 2021 .
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
Major Business Segments
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Revenue from continuing operations (TE)
Consumer Bank
$
905
$
871
$
825
3.9
%
9.7
%
Commercial Bank
913
804
771
13.6
18.4
Other (a)
27
12
42
125.0
(35.7)
Total
$
1,845
$
1,687
$
1,638
9.4
%
12.6
%
Income (loss) from continuing operations attributable to Key
Consumer Bank
$
228
$
241
$
168
(5.4)
%
35.7
%
Commercial Bank
308
160
311
92.5
(1.0)
Other (a)
39
23
(13)
69.6
N/M
Total
$
575
$
424
$
466
35.6
%
23.4
%
(a)
Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.
TE = Taxable Equivalent, N/M = Not Meaningful
Consumer Bank
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Summary of operations
Net interest income (TE)
$
645
$
604
$
587
6.8
%
9.9
%
Noninterest income
260
267
238
(2.6)
9.2
Total revenue (TE)
905
871
825
3.9
9.7
Provision for credit losses
(4)
(16)
55
(75.0)
(129.1)
Noninterest expense
611
571
550
7.0
11.1
Income (loss) before income taxes (TE)
298
316
220
(5.7)
35.5
Allocated income taxes (benefit) and TE adjustments
70
75
52
(6.7)
34.6
Net income (loss) attributable to Key
$
228
$
241
$
168
(5.4)
%
35.7
%
Average balances
Loans and leases
$
41,137
$
41,471
$
34,148
(.8)
%
20.5
%
Total assets
44,357
44,888
37,709
(1.2)
17.6
Deposits
83,171
83,175
73,561
—
13.1
Assets under management at period end
$
44,140
$
41,312
$
40,833
6.8
%
8.1
%
Additional Consumer Bank Data
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Noninterest income
Trust and investment services income
$
95
$
100
$
91
(5.0)
%
4.4
%
Service charges on deposit accounts
50
44
58
13.6
(13.8)
Cards and payments income
54
55
53
(1.8)
1.9
Consumer mortgage income
43
51
20
(15.7)
115.0
Other noninterest income
18
17
16
5.9
12.5
Total noninterest income
$
260
$
267
$
238
(2.6)
%
9.2
%
Average deposit balances
NOW and money market deposit accounts
$
53,055
$
52,550
$
44,765
1.0
%
18.5
%
Savings deposits
5,408
5,169
4,332
4.6
24.8
Certificates of deposit ($100,000 or more)
2,801
3,550
6,065
(21.1)
(53.8)
Other time deposits
3,187
3,701
5,164
(13.9)
(38.3)
Noninterest-bearing deposits
18,720
18,205
13,235
2.8
41.4
Total deposits
$
83,171
$
83,175
$
73,561
—
13.1
%
Home equity loans
Average balance
$
9,360
$
9,528
$
10,295
Combined weighted-average loan-to-value ratio (at date of origination)
69
%
70
%
70
%
Percent first lien positions
66
64
61
Other data
Branches
1,073
1,077
1,098
Automated teller machines
1,386
1,388
1,420
Consumer Bank Summary of Operations (4Q20 vs. 4Q19)
Net income attributable to Key of $228 million $168 million Taxable-equivalent net interest income increased by $58 million 9.9% , compared to the fourth quarter of 2019, driven by strong balance sheet growth and fees related to PPP loans, partially offset by the lower interest rate environment Average loans and leases increased $7.0 billion 20.5% , driven by benefit from the PPP, as well as growth from Laurel Road and consumer mortgage Average deposits increased $9.6 billion 13.1% , from the fourth quarter of 2019. This was driven by consumer stimulus payments, lower spend activity, and relationship growth Provision for credit losses decreased $59 million Noninterest income increased $22 million 9.2% , from the year ago quarter, driven by strength in consumer mortgage income and higher trust and investment services income Noninterest expense increased $61 million 11.1% , from the year ago quarter driven by higher variable compensation from strong revenue growth and higher variable expenses related to higher loan volumes
Commercial Bank
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Summary of operations
Net interest income (TE)
$
413
$
421
$
416
(1.9)
%
(.7)
%
Noninterest income
500
383
355
30.5
40.8
Total revenue (TE)
913
804
771
13.6
18.4
Provision for credit losses
42
163
38
(74.2)
10.5
Noninterest expense
494
443
393
11.5
25.7
Income (loss) before income taxes (TE)
377
198
340
90.4
10.9
Allocated income taxes and TE adjustments
69
38
29
81.6
137.9
Net income (loss) attributable to Key
$
308
$
160
$
311
92.5
%
(1.0)
%
Average balances
Loans and leases
$
59,992
$
62,925
$
58,535
(4.7)
%
2.5
%
Loans held for sale
1,285
1,383
1,465
(7.1)
(12.3)
Total assets
69,277
72,613
67,135
(4.6)
3.2
Deposits
52,163
51,238
38,224
1.8
%
36.5
%
TE = Taxable Equivalent, N/M = Not Meaningful
Additional Commercial Bank Data
dollars in millions
Change 4Q20 vs.
4Q20
3Q20
4Q19
3Q20
4Q19
Noninterest income
Trust and investment services income
$
28
$
27
$
29
3.7
%
(3.4)
Investment banking and debt placement fees
243
146
179
66.4
35.8
%
Operating lease income and other leasing gains
39
38
39
2.6
—
Corporate services income
55
44
58
25.0
(5.2)
Service charges on deposit accounts
31
32
27
(3.1)
14.8
Cards and payments income
43
60
15
(28.3)
186.7
Payments and services income
129
136
100
(5.1)
29.0
Commercial mortgage servicing fees
32
18
19
77.8
68.4
Other noninterest income
29
18
(11)
61.1
N/M
Total noninterest income
$
500
$
383
$
355
30.5
%
40.8
%
Commercial Bank Summary of Operations (4Q20 vs. 4Q19)
Net income attributable to Key of $308 million $311 million Taxable-equivalent net interest income decreased by $3.0 million Average loan and lease balances increased $1.5 billion 2.5% , compared to the fourth quarter of 2019 as PPP loans offset lower utilization Average deposit balances increased $14 billion 36.5% , compared to the fourth quarter of 2019, driven by growth in targeted relationships and the impact of government programs Provision for credit losses increased $4.0 million Noninterest income increased $145 million Noninterest expense increased by $101 million 25.7% , from the fourth quarter of 2019, driven by elevated variable expenses related to prepaid card and higher variable compensation from strong revenue growth *******************************************
KeyCorp's roots trace back 190 years to Albany, New York . Headquartered in Cleveland, Ohio , Key is one of the nation's largest bank-based financial services companies, with assets of approximately $170.3 billion
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.
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 10:00 a.m. ET , on Thursday, January 21, 2021 . A replay of the call will be available through January 30, 2021 .
*****
KeyCorp
Fourth Quarter 2020
Financial Supplement
Page
14
Financial Highlights
16
GAAP to Non-GAAP Reconciliation
18
Consolidated Balance Sheets
19
Consolidated Statements of Income
20
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
22
Noninterest Expense
22
Personnel Expense
23
Loan Composition
23
Loans Held for Sale Composition
23
Summary of Changes in Loans Held for Sale
24
Summary of Loan and Lease Loss Experience From Continuing Operations
25
Asset Quality Statistics From Continuing Operations
25
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
25
Summary of Changes in Nonperforming Loans From Continuing Operations
26
Line of Business Results
Financial Highlights
(dollars in millions, except per share amounts)
Three months ended
12/31/2020
9/30/2020
12/31/2019
Summary of operations
Net interest income (TE)
$
1,043
$
1,006
$
987
Noninterest income
802
681
651
Total revenue (TE)
1,845
1,687
1,638
Provision for credit losses
20
160
109
Noninterest expense
1,128
1,037
980
Income (loss) from continuing operations attributable to Key
575
424
466
Income (loss) from discontinued operations, net of taxes
7
4
3
Net income (loss) attributable to Key
582
428
469
Income (loss) from continuing operations attributable to Key common shareholders
549
397
439
Income (loss) from discontinued operations, net of taxes
7
4
3
Net income (loss) attributable to Key common shareholders
556
401
442
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$
.57
$
.41
$
.45
Income (loss) from discontinued operations, net of taxes
.01
—
—
Net income (loss) attributable to Key common shareholders (a)
.57
.41
.45
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.56
.41
.45
Income (loss) from discontinued operations, net of taxes — assuming dilution
.01
—
—
Net income (loss) attributable to Key common shareholders — assuming dilution (a)
.57
.41
.45
Cash dividends declared
.185
.185
.185
Book value at period end
16.53
16.25
15.54
Tangible book value at period end
13.61
13.32
12.56
Market price at period end
16.41
11.93
20.24
Performance ratios
From continuing operations:
Return on average total assets
1.35
%
1.00
%
1.27
%
Return on average common equity
13.65
9.98
11.40
Return on average tangible common equity (b)
16.61
12.19
14.09
Net interest margin (TE)
2.70
2.62
2.98
Cash efficiency ratio (b)
60.3
60.6
58.7
From consolidated operations:
Return on average total assets
1.36
%
1.00
%
1.27
%
Return on average common equity
13.82
10.08
11.48
Return on average tangible common equity (b)
16.82
12.31
14.19
Net interest margin (TE)
2.69
2.62
2.97
Loan to deposit (c)
76.5
77.2
86.6
Capital ratios at period end
Key shareholders' equity to assets
10.6
%
10.4
%
11.8
%
Key common shareholders' equity to assets
9.5
9.3
10.5
Tangible common equity to tangible assets (b)
7.9
7.8
8.6
Common Equity Tier 1 (d)
9.8
9.5
9.4
Tier 1 risk-based capital (d)
11.1
10.9
10.9
Total risk-based capital (d)
13.4
13.3
12.8
Leverage (d)
8.9
8.7
9.9
Asset quality — from continuing operations
Net loan charge-offs
$
135
$
128
$
99
Net loan charge-offs to average loans
.53
%
.49
%
.42
%
Allowance for loan and lease losses
$
1,626
$
1,730
$
900
Allowance for credit losses
1,823
1,938
968
Allowance for loan and lease losses to period-end loans
1.61
%
1.68
%
.95
%
Allowance for credit losses to period-end loans
1.80
1.88
1.02
Allowance for loan and lease losses to nonperforming loans (e)
207.1
207.4
156.0
Allowance for credit losses to nonperforming loans (e)
232.2
232.4
167.8
Nonperforming loans at period-end (e)
$
785
$
834
$
577
Nonperforming assets at period-end (e)
937
1,003
715
Nonperforming loans to period-end portfolio loans (e)
.78
%
.81
%
.61
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (e)
.92
.97
.75
Trust assets
Assets under management
$
44,140
$
41,312
$
40,833
Other data
Average full-time equivalent employees
17,029
17,097
16,537
Branches
1,073
1,077
1,098
Taxable-equivalent adjustment
$
8
$
6
$
8
Financial Highlights (continued)
(dollars in millions, except per share amounts)
Twelve months ended
12/31/2020
12/31/2019
Summary of operations
Net interest income (TE)
$
4,063
$
3,941
Noninterest income
2,652
2,459
Total revenue (TE)
6,715
6,400
Provision for credit losses
1,021
445
Noninterest expense
4,109
3,901
Income (loss) from continuing operations attributable to Key
1,329
1,708
Income (loss) from discontinued operations, net of taxes
14
9
Net income (loss) attributable to Key
1,343
1,717
Income (loss) from continuing operations attributable to Key common shareholders
$
1,223
$
1,611
Income (loss) from discontinued operations, net of taxes
14
9
Net income (loss) attributable to Key common shareholders
1,237
1,620
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$
1.26
$
1.62
Income (loss) from discontinued operations, net of taxes
.01
.01
Net income (loss) attributable to Key common shareholders (a)
1.28
1.63
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
1.26
1.61
Income (loss) from discontinued operations, net of taxes — assuming dilution
.01
.01
Net income (loss) attributable to Key common shareholders — assuming dilution (a)
1.27
1.62
Cash dividends paid
.74
.71
Performance ratios
From continuing operations:
Return on average total assets
.82
%
1.19
%
Return on average common equity
7.77
10.83
Return on average tangible common equity (b)
9.51
13.46
Net interest margin (TE)
2.77
3.04
Cash efficiency ratio (b)
60.2
59.6
From consolidated operations:
Return on average total assets
.82
%
1.19
%
Return on average common equity
7.86
10.89
Return on average tangible common equity (b)
9.62
13.53
Net interest margin (TE)
2.76
3.03
Asset quality — from continuing operations
Net loan charge-offs
$
443
$
424
Net loan charge-offs to average total loans
.43
%
.46
%
Other data
Average full-time equivalent employees
16,826
17,045
Taxable-equivalent adjustment
29
32
(a)
Earnings per share may not foot due to rounding.
(b)
The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(c)
Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(d)
December 31, 2020, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
GAAP to Non-GAAP Reconciliations
(dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "pre-provision net revenue," and "cash efficiency ratio" and certain ratios 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.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)
$
17,981
$
17,722
$
17,038
Less: Intangible assets (a)
2,848
2,862
2,910
Preferred Stock (b)
1,856
1,856
1,856
Tangible common equity (non-GAAP)
$
13,277
$
13,004
$
12,272
Total assets (GAAP)
$
170,336
$
170,540
$
144,988
Less: Intangible assets (a)
2,848
2,862
2,910
Tangible assets (non-GAAP)
$
167,488
$
167,678
$
142,078
Tangible common equity to tangible assets ratio (non-GAAP)
7.9
%
7.8
%
8.6
%
Pre-provision net revenue
Net interest income (GAAP)
$
1,035
$
1,000
$
979
$
4,034
$
3,909
Plus: Taxable-equivalent adjustment
8
6
8
29
32
Noninterest income
802
681
651
2,652
2,459
Less: Noninterest expense
1,128
1,037
980
4,109
3,901
Pre-provision net revenue from continuing operations (non-GAAP)
$
717
$
650
$
658
$
2,606
$
2,499
Average tangible common equity
Average Key shareholders' equity (GAAP)
$
17,905
$
17,730
$
17,178
$
17,636
$
16,636
Less: Intangible assets (average) (c)
2,855
2,870
2,919
2,878
2,909
Preferred stock (average)
1,900
1,900
1,900
1,900
1,755
Average tangible common equity (non-GAAP)
$
13,150
$
12,960
$
12,359
$
12,858
$
11,972
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
549
$
397
$
439
$
1,223
$
1,611
Plus: Notable items, after tax (d)
—
—
29
—
183
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)
$
549
$
397
$
468
$
1,223
$
1,794
Average tangible common equity (non-GAAP)
13,150
12,960
12,359
12,858
11,972
Return on average tangible common equity from continuing operations (non-GAAP)
16.61
%
12.19
%
14.09
%
9.51
%
13.46
%
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)
16.61
%
12.19
%
15.02
%
9.51
%
14.98
%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$
556
$
401
$
442
$
1,237
$
1,620
Average tangible common equity (non-GAAP)
13,150
12,960
12,359
12,858
11,972
Return on average tangible common equity consolidated (non-GAAP)
16.82
%
12.31
%
14.19
%
9.62
%
13.53
%
GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Cash efficiency ratio
Noninterest expense (GAAP)
$
1,128
$
1,037
$
980
$
4,109
$
3,901
Less: Intangible asset amortization
15
15
19
65
89
Adjusted noninterest expense (non-GAAP)
$
1,113
$
1,022
$
961
$
4,044
$
3,812
Less: Notable items (d)
—
—
22
—
100
Adjusted noninterest expense excluding notable items (non-GAAP)
$
1,113
$
1,022
$
939
$
4,044
$
3,712
Net interest income (GAAP)
$
1,035
$
1,000
$
979
$
4,034
$
3,909
Plus: Taxable-equivalent adjustment
8
6
8
29
32
Noninterest income
802
681
651
2,652
2,459
Total taxable-equivalent revenue (non-GAAP)
$
1,845
$
1,687
$
1,638
$
6,715
$
6,400
Cash efficiency ratio (non-GAAP)
60.3
%
60.6
%
58.7
%
60.2
%
59.6
%
Cash efficiency ratio excluding notable items (non-GAAP)
60.3
%
60.6
%
57.3
%
60.2
%
58.0
%
(a)
For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, intangible assets exclude $4 million , $5 million , and $7 million , respectively, of period-end purchased credit card receivables.
(b)
Net of capital surplus.
(c)
For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, average intangible assets exclude $5 million , $5 million , and $8 million , respectively, of average purchased credit card receivables. For the twelve months ended December 31, 2020, and December 31, 2019, average intangible assets exclude $6 million and $10 million , respectively, of average purchase credit card receivables.
(d)
Additional detail provided in Notable Items table on page 24 of this release.
GAAP = U.S. generally accepted accounting principles
Consolidated Balance Sheets
(dollars in millions)
12/31/2020
9/30/2020
12/31/2019
Assets
Loans
$
101,185
$
103,081
$
94,646
Loans held for sale
1,583
1,724
1,334
Securities available for sale
27,556
26,895
21,843
Held-to-maturity securities
7,595
8,384
10,067
Trading account assets
735
733
1,040
Short-term investments
16,194
14,148
1,272
Other investments
621
620
605
Total earning assets
155,469
155,585
130,807
Allowance for loan and lease losses
(1,626)
(1,730)
(900)
Cash and due from banks
1,091
956
732
Premises and equipment
753
765
814
Goodwill
2,664
2,664
2,664
Other intangible assets
188
203
253
Corporate-owned life insurance
4,286
4,274
4,233
Accrued income and other assets
6,812
7,084
5,494
Discontinued assets
699
739
891
Total assets
$
170,336
170,540
144,988
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts
$
80,427
$
80,791
$
66,714
Savings deposits
5,913
5,585
4,651
Certificates of deposit ($100,000 or more)
2,733
3,345
6,598
Other time deposits
3,010
3,450
5,054
Total interest-bearing deposits
92,083
93,171
83,017
Noninterest-bearing deposits
43,199
43,575
28,853
Total deposits
135,282
136,746
111,870
Federal funds purchased and securities sold under repurchase agreements
220
213
387
Bank notes and other short-term borrowings
759
818
705
Accrued expense and other liabilities
2,385
2,356
2,540
Long-term debt
13,709
12,685
12,448
Total liabilities
152,355
152,818
127,950
Equity
Preferred stock
1,900
1,900
1,900
Common shares
1,257
1,257
1,257
Capital surplus
6,281
6,263
6,295
Retained earnings
12,751
12,375
12,469
Treasury stock, at cost
(4,946)
(4,940)
(4,909)
Accumulated other comprehensive income (loss)
738
867
26
Key shareholders' equity
17,981
17,722
17,038
Noncontrolling interests
—
—
—
Total equity
17,981
17,722
17,038
Total liabilities and equity
$
170,336
$
170,540
$
144,988
Common shares outstanding (000)
975,773
976,205
977,189
Consolidated Statements of Income
(dollars in millions, except per share amounts)
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Interest income
Loans
$
933
$
927
$
1,046
$
3,866
$
4,267
Loans held for sale
11
18
17
69
63
Securities available for sale
119
115
137
484
537
Held-to-maturity securities
51
53
63
222
262
Trading account assets
4
3
8
20
32
Short-term investments
4
1
12
18
61
Other investments
3
2
2
6
13
Total interest income
1,125
1,119
1,285
4,685
5,235
Interest expense
Deposits
28
54
201
347
853
Federal funds purchased and securities sold under repurchase agreements
—
—
1
6
2
Bank notes and other short-term borrowings
1
1
4
12
17
Long-term debt
61
64
100
286
454
Total interest expense
90
119
306
651
1326
Net interest income
1,035
1,000
979
4,034
3,909
Provision for credit losses
20
160
109
1,021
445
Net interest income after provision for credit losses
1015
840
870
3,013
3,464
Noninterest income
Trust and investment services income
123
128
120
507
475
Investment banking and debt placement fees
243
146
181
661
630
Service charges on deposit accounts
82
77
86
311
337
Operating lease income and other leasing gains
39
38
39
167
162
Corporate services income
63
51
65
228
236
Cards and payments income
97
114
67
368
275
Corporate-owned life insurance income
38
30
39
139
136
Consumer mortgage income
43
51
21
176
63
Commercial mortgage servicing fees
32
18
19
80
77
Other income
42
28
14
15
68
Total noninterest income
802
681
651
2,652
2,459
Noninterest expense
Personnel
661
588
551
2,336
2,250
Net occupancy
75
76
76
298
293
Computer processing
62
59
51
232
214
Business services and professional fees
54
49
54
196
186
Equipment
26
25
25
100
100
Operating lease expense
35
33
32
138
123
Marketing
30
22
27
97
96
FDIC assessment
9
6
8
32
31
Intangible asset amortization
15
15
19
65
89
OREO expense, net
—
(1)
3
8
13
Other expense
161
165
134
607
506
Total noninterest expense
1,128
1,037
980
4,109
3,901
Income (loss) from continuing operations before income taxes
689
484
541
1,556
2,022
Income taxes
114
60
75
227
314
Income (loss) from continuing operations
575
424
466
1,329
1,708
Income (loss) from discontinued operations, net of taxes
7
4
3
14
9
Net income (loss)
582
428
469
1,343
1,717
Less: Net income (loss) attributable to noncontrolling interests
—
—
—
—
—
Net income (loss) attributable to Key
$
582
$
428
$
469
$
1,343
$
1,717
Income (loss) from continuing operations attributable to Key common shareholders
$
549
$
397
$
439
$
1,223
$
1,611
Net income (loss) attributable to Key common shareholders
556
401
442
1,237
1,620
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$
.57
$
.41
$
.45
$
1.26
$
1.62
Income (loss) from discontinued operations, net of taxes
0.01
—
—
.01
.01
Net income (loss) attributable to Key common shareholders (a)
.57
.41
.45
1.28
1.63
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders
$
.56
$
.41
$
.45
$
1.26
$
1.61
Income (loss) from discontinued operations, net of taxes
0.01
—
—
.01
.01
Net income (loss) attributable to Key common shareholders (a)
.57
.41
.45
1.27
1.62
Cash dividends declared per common share
$
.185
$
.185
$
.185
$
.740
$
.710
Weighted-average common shares outstanding (000)
967,987
967,804
973,450
967,783
992,091
Effect of common share options and other stock awards
8,473
6,184
10,911
7,024
10,163
Weighted-average common shares and potential common shares outstanding (000) (b)
976,460
973,988
984,361
974,807
1,002,254
(a)
Earnings per share may not foot due to rounding.
(b)
Assumes conversion of common share options and other stock awards, as applicable.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Fourth Quarter 2020
Third Quarter 2020
Fourth Quarter 2019
Average
Yield/
Average
Yield/
Average
Yield/
Balance
Interest (a)
Rate (a)
Balance
Interest (a)
Rate (a)
Balance
Interest (a)
Rate (a)
Assets
Loans: (b), (c)
Commercial and industrial (d)
$
53,562
$
477
3.54
%
$
57,067
$
474
3.31
%
$
48,345
$
522
4.28
%
Real estate — commercial mortgage
12,862
121
3.74
13,202
117
3.54
13,335
159
4.71
Real estate — construction
1,959
19
3.79
1,987
18
3.57
1,495
18
4.87
Commercial lease financing
4,353
32
2.92
4,488
35
3.10
4,482
39
3.52
Total commercial loans
72,736
649
3.55
76,744
644
3.34
67,657
738
4.33
Real estate — residential mortgage
8,968
74
3.29
8,398
73
3.46
6,777
65
3.83
Home equity loans
9,410
91
3.81
9,580
91
3.82
10,362
122
4.69
Consumer direct loans
4,583
56
4.93
4,403
56
5.07
3,125
51
6.45
Credit cards
973
26
10.57
967
25
10.24
1,103
32
11.38
Consumer indirect loans
5,040
45
3.56
4,827
44
3.66
4,583
46
3.99
Total consumer loans
28,974
292
4.01
28,175
289
4.10
25,950
316
4.84
Total loans
101,710
941
3.68
104,919
933
3.55
93,607
1,054
4.47
Loans held for sale
1,621
11
2.76
1,924
17
3.61
1,653
17
4.11
Securities available for sale (b), (e)
28,046
119
1.75
24,941
115
1.90
22,262
137
2.49
Held-to-maturity securities (b)
7,939
51
2.56
8,677
53
2.44
10,264
63
2.43
Trading account assets
744
4
2.21
686
4
2.08
1,103
8
3.08
Short-term investments
14,111
4
.14
12,525
1
0.04
2,716
12
1.73
Other investments (e)
615
3
1.31
640
2
1.49
603
2
1.82
Total earning assets
154,786
1,133
2.93
154,312
1,125
2.93
132,208
1,293
3.90
Allowance for loan and lease losses
(1,715)
(1,696)
(882)
Accrued income and other assets
15,861
16,195
14,402
Discontinued assets
717
752
908
Total assets
$
169,649
$
169,563
$
146,636
Liabilities
NOW and money market deposit accounts
$
80,636
12
.06
$
80,175
26
.13
$
66,412
135
.81
Savings deposits
5,737
—
.03
5,478
1
.04
4,660
1
.07
Certificates of deposit ($100,000 or more)
2,983
9
1.20
3,862
16
1.60
6,899
40
2.31
Other time deposits
3,209
7
.80
3,735
11
1.17
5,187
25
1.92
Total interest-bearing deposits
92,565
28
.12
93,250
54
.23
83,158
201
.96
Federal funds purchased and securities sold under repurchase agreements
220
—
.04
225
—
.05
267
1
.75
Bank notes and other short-term borrowings
791
1
.73
761
1
.68
801
4
2.02
Long-term debt (f), (g)
12,118
61
2.05
12,801
64
2.12
12,531
100
3.22
Total interest-bearing liabilities
105,694
90
.34
107,037
119
.45
96,757
306
1.25
Noninterest-bearing deposits
43,156
41,694
29,446
Accrued expense and other liabilities
2,177
2,350
2,347
Discontinued liabilities (g)
717
752
908
Total liabilities
151,744
151,833
129,458
Equity
Key shareholders' equity
17,905
17,730
17,178
Noncontrolling interests
—
—
—
Total equity
17,905
17,730
17,178
Total liabilities and equity
$
169,649
$
169,563
$
146,636
Interest rate spread (TE)
2.59
%
2.48
%
2.65
%
Net interest income (TE) and net interest margin (TE)
1,043
2.70
%
1,006
2.62
%
987
2.98
%
TE adjustment (b)
8
6
8
Net interest income, GAAP basis
$
1,035
$
1,000
$
979
(a)
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019.
(c)
For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)
Commercial and industrial average balances include $129 million , $129 million , and $146 million of assets from commercial credit cards for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively.
(e)
Yield is calculated on the basis of amortized cost.
(f)
Rate calculation excludes basis adjustments related to fair value hedges.
(g)
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
Twelve months ended December 31, 2020
Twelve months ended December 31, 2019
Average
Yield/
Average
Yield/
Balance
Interest (a)
Rate (a)
Balance
Interest (a)
Rate (a)
Assets
Loans: (b), (c)
Commercial and industrial (d)
$
55,145
$
1,977
3.59
%
$
47,482
$
2,144
4.51
%
Real estate — commercial mortgage
13,279
521
3.92
13,641
676
4.95
Real estate — construction
1,843
74
3.99
1,485
78
5.24
Commercial lease financing
4,497
139
3.09
4,488
163
3.63
Total commercial loans
74,764
2,711
3.63
67,096
3,061
4.56
Real estate — residential mortgage
8,094
284
3.50
6,095
241
3.95
Home equity loans
9,772
392
4.01
10,634
526
4.95
Consumer direct loans
4,213
221
5.26
2,475
176
7.11
Credit cards
1,001
107
10.65
1,100
127
11.51
Consumer indirect loans
4,845
180
3.72
4,111
168
4.09
Total consumer loans
27,925
1,184
4.24
24,415
1,238
5.07
Total loans
102,689
3,895
3.79
91,511
4,299
4.70
Loans held for sale
1,972
69
3.49
1,411
63
4.48
Securities available for sale (b), (e)
23,742
484
2.10
21,362
537
2.51
Held-to-maturity securities (b)
8,938
222
2.49
10,841
262
2.41
Trading account assets
814
20
2.47
1017
32
3.18
Short-term investments
9,096
18
.20
2,876
61
2.11
Other investments (e)
635
6
.87
630
13
2.09
Total earning assets
147,886
4,714
3.20
129,648
5,267
4.06
Allowance for loan and lease losses
(1481)
(880)
Accrued income and other assets
15,650
14,411
Discontinued assets
775
984
Total assets
$
162,830
$
144,163
Liabilities
NOW and money market deposit accounts
$
75,733
206
.27
$
63,731
566
.89
Savings deposits
5,252
2
.04
4,740
4
.09
Certificates of deposit ($100,000 or more)
4,520
83
1.83
7,757
180
2.32
Other time deposits
4,041
56
1.38
5,426
103
1.90
Total interest-bearing deposits
89,546
347
.39
81,654
853
1.04
Federal funds purchased and securities sold under repurchase agreements
670
6
.88
264
2
.66
Bank notes and other short-term borrowings
1,452
12
.85
730
17
2.31
Long-term debt (f), (g)
12,578
286
2.36
13,062
454
3.52
Total interest-bearing liabilities
104,246
651
.63
95,710
1326
1.39
Noninterest-bearing deposits
37,740
28,376
Accrued expense and other liabilities
2,433
2,456
Discontinued liabilities (g)
775
984
Total liabilities
145,194
127,526
Equity
Key shareholders' equity
17,636
16,636
Noncontrolling interests
—
1
Total equity
17,636
16,637
Total liabilities and equity
$
162,830
$
144,163
Interest rate spread (TE)
2.57
%
2.67
%
Net interest income (TE) and net interest margin (TE)
4,063
2.77
%
3,941
3.04
%
TE adjustment (b)
29
32
Net interest income, GAAP basis
$
4,034
$
3,909
(a)
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the twelve months ended December 31, 2020, and December 31, 2019, respectively.
(c)
For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)
Commercial and industrial average balances include $135 million and $141 million of assets from commercial credit cards for the twelve months ended December 31, 2020, and December 31, 2019, respectively.
(e)
Yield is calculated on the basis of amortized cost.
(f)
Rate calculation excludes basis adjustments related to fair value hedges.
(g)
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
Noninterest Expense
(dollars in millions)
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Personnel (a)
$
661
$
588
$
551
$
2,336
$
2,250
Net occupancy
75
76
76
298
293
Computer processing
62
59
51
232
214
Business services and professional fees
54
49
54
196
186
Equipment
26
25
25
100
100
Operating lease expense
35
33
32
138
123
Marketing
30
22
27
97
96
FDIC assessment
9
6
8
32
31
Intangible asset amortization
15
15
19
65
89
OREO expense, net
—
(1)
3
8
13
Other expense
161
165
134
607
506
Total noninterest expense
$
1,128
$
1,037
$
980
$
4,109
$
3,901
Average full-time equivalent employees (b)
17,029
17,097
16,537
16,826
17,045
(a)
Additional detail provided in Personnel Expense table below.
(b)
The number of average full-time equivalent employees has not been adjusted for discontinued operations.
Personnel Expense
(in millions)
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Salaries and contract labor
$
342
$
339
$
312
$
1,329
$
1,268
Incentive and stock-based compensation
208
155
154
627
584
Employee benefits
89
93
85
350
348
Severance
22
1
—
30
50
Total personnel expense
$
661
$
588
$
551
$
2,336
$
2,250
Loan Composition
(dollars in millions)
Percent change 12/31/2020 vs
12/31/2020
9/30/2020
12/31/2019
9/30/2020
12/31/2019
Commercial and industrial (a)
$
52,907
$
55,025
$
48,295
(3.8)
%
9.5
%
Commercial real estate:
Commercial mortgage
12,687
13,059
13,491
(2.8)
(6.0)
Construction
1,987
1,947
1,558
2.1
27.5
Total commercial real estate loans
14,674
15,006
15,049
(2.2)
(2.5)
Commercial lease financing (b)
4,399
4,450
4,688
(1.1)
(6.2)
Total commercial loans
71,980
74,481
68,032
(3.4)
5.8
Residential — prime loans:
Real estate — residential mortgage
9,298
8,715
7,023
6.7
32.4
Home equity loans
9,360
9,488
10,274
(1.3)
(8.9)
Total residential — prime loans
18,658
18,203
17,297
2.5
7.9
Consumer direct loans
4,714
4,395
3,513
7.3
34.2
Credit cards
989
970
1,130
2.0
(12.5)
Consumer indirect loans
4,844
5,032
4,674
(3.7)
3.6
Total consumer loans
29,205
28,600
26,614
2.1
9.7
Total loans (c), (d)
$
101,185
$
103,081
$
94,646
(1.8)
%
6.9
%
(a)
Loan balances include $127 million , $128 million , and $144 million of commercial credit card balances at December 31, 2020, September 30, 2020, and December 31, 2019, respectively.
(b)
Commercial lease financing includes receivables held as collateral for a secured borrowing of $23 million , $18 million , and $15 million at December 31, 2020, September 30, 2020, and December 31, 2019, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)
Total loans exclude loans of $710 million at December 31, 2020, $743 million at September 30, 2020, and $865 million at December 31, 2019, related to the discontinued operations of the education lending business.
(d)
Accrued interest of $241 million , $235 million , and $244 million at December 31, 2020, September 30, 2020, and December 31, 2019, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.
Loans Held for Sale Composition
(dollars in millions)
Percent change 12/31/2020 vs
12/31/2020
9/30/2020
12/31/2019
9/30/2020
12/31/2019
Commercial and industrial
$
249
$
336
$
367
(25.9)
%
(32.2)
%
Real estate — commercial mortgage
1,014
1,031
772
(1.6)
31.3
Commercial lease financing
—
1
2
N/M
N/M
Real estate — residential mortgage
264
288
140
(8.3)
88.6
Consumer direct loans
56
68
53
(17.6)
5.7
Total loans held for sale (a)
$
1,583
$
1,724
$
1,334
(8.2)
%
18.7
%
(a)
Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $264 million at December 31, 2020, $288 million at September 30, 2020, and $140 million at December 31, 2019.
Summary of Changes in Loans Held for Sale
(in millions)
4Q20
3Q20
2Q20
1Q20
4Q19
Balance at beginning of period
$
1,724
$
2,007
$
2,143
$
1,334
$
1,598
New originations
3,835
3,282
3,621
3,333
3,659
Transfers from (to) held to maturity, net
(24)
75
(15)
200
26
Loan sales
(3,932)
(3,583)
(3,679)
(2,649)
(3,933)
Loan draws (payments), net
(19)
(57)
(61)
(77)
(18)
Valuation adjustments
—
—
(2)
2
2
Balance at end of period (a)
$
1,583
$
1,724
$
2,007
$
2,143
$
1,334
(a)
Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $264 million at December 31, 2020, $288 million at September 30, 2020, $250 million at June 30, 2020, $152 million at March 31, 2020, and $140 million at December 31, 2019.
Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Average loans outstanding
$
101,710
$
104,919
$
93,607
$
102,689
$
91,511
Allowance for loan and lease losses at the end of the prior period
$
1,730
$
1708
$
893
$
900
$
883
Cumulative effect from change in accounting principle (a)
—
—
—
204
—
Allowance for loan and lease losses at the beginning of the period
1,730
1,708
893
1,104
883
Loans charged off:
Commercial and industrial
119
101
77
351
319
Real estate — commercial mortgage
1
13
2
19
8
Real estate — construction
—
—
1
—
5
Total commercial real estate loans
1
13
3
19
13
Commercial lease financing
19
10
1
35
26
Total commercial loans
139
124
81
405
358
Real estate — residential mortgage
—
—
—
2
3
Home equity loans
1
4
3
11
19
Consumer direct loans
7
8
11
37
41
Credit cards
7
9
10
39
44
Consumer indirect loans
6
6
10
28
34
Total consumer loans
21
27
34
117
141
Total loans charged off
160
151
115
522
499
Recoveries:
Commercial and industrial
15
9
5
34
27
Real estate — commercial mortgage
—
2
—
3
2
Total commercial real estate loans
—
2
—
3
2
Commercial lease financing
—
—
1
1
5
Total commercial loans
15
11
6
38
34
Real estate — residential mortgage
—
1
1
1
2
Home equity loans
1
3
2
7
8
Consumer direct loans
1
2
2
7
7
Credit cards
2
2
1
8
7
Consumer indirect loans
6
4
4
18
17
Total consumer loans
10
12
10
41
41
Total recoveries
25
23
16
79
75
Net loan charge-offs
(135)
(128)
(99)
(443)
(424)
Provision (credit) for loan and lease losses
31
150
106
965
441
Allowance for loan and lease losses at end of period
$
1,626
$
1,730
$
900
$
1,626
$
900
Liability for credit losses on lending-related commitments at the end of the prior period
$
208
$
198
$
65
$
68
$
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
208
198
65
141
64
Provision (credit) for losses on lending-related commitments
(11)
10
3
56
4
Liability for credit losses on lending-related commitments at end of period (c)
$
197
$
208
$
68
$
197
$
68
Total allowance for credit losses at end of period
$
1,823
$
1,938
$
968
$
1,823
$
968
Net loan charge-offs to average total loans
.53
%
.49
%
.42
%
.43
%
.46
%
Allowance for loan and lease losses to period-end loans
1.61
1.68
.95
1.61
.95
Allowance for credit losses to period-end loans
1.80
1.88
1.02
1.80
1.02
Allowance for loan and lease losses to nonperforming loans
207.1
207.4
156.0
207.1
156.0
Allowance for credit losses to nonperforming loans
232.2
232.4
167.8
232.2
167.8
Discontinued operations — education lending business:
Loans charged off
$
1
—
$
3
$
5
$
12
Recoveries
2
—
2
5
5
Net loan charge-offs
$
1
—
$
(1)
—
$
(7)
(a)
The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.
(b)
The twelve months ended December 30, 2020, amount excludes $4 million related to the provision for other financial assets as a result of the change in accounting principle.
(c)
Included in "Accrued expense and other liabilities" on the balance sheet.
Asset Quality Statistics From Continuing Operations
(dollars in millions)
4Q20
3Q20
2Q20
1Q20
4Q19
Net loan charge-offs
$
135
$
128
$
96
$
84
$
99
Net loan charge-offs to average total loans
.53
%
.49
%
.36
%
.35
%
.42
%
Allowance for loan and lease losses
$
1,626
$
1,730
$
1,708
$
1,359
$
900
Allowance for credit losses (a)
1,823
1,938
1,906
1,520
968
Allowance for loan and lease losses to period-end loans
1.61
%
1.68
%
1.61
%
1.32
%
.95
%
Allowance for credit losses to period-end loans
1.80
1.88
1.80
1.47
1.02
Allowance for loan and lease losses to nonperforming loans
207.1
207.4
224.7
215.0
156.0
Allowance for credit losses to nonperforming loans
232.2
232.4
250.8
240.5
167.8
Nonperforming loans at period end
$
785
$
834
$
760
$
632
$
577
Nonperforming assets at period end
937
1,003
951
844
715
Nonperforming loans to period-end portfolio loans
.78
%
.81
%
.72
%
.61
%
.61
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
.92
.97
.89
.82
.75
(a)
Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
12/31/2020
9/30/2020
6/30/2020
3/31/2020
12/31/2019
Commercial and industrial
$
385
$
459
$
404
$
277
$
264
Real estate — commercial mortgage
104
104
91
87
83
Real estate — construction
—
1
1
2
2
Total commercial real estate loans
104
105
92
89
85
Commercial lease financing
8
6
9
5
6
Total commercial loans
497
570
505
371
355
Real estate — residential mortgage
110
96
89
89
48
Home equity loans
154
146
141
143
145
Consumer direct loans
5
3
3
4
4
Credit cards
2
2
2
3
3
Consumer indirect loans
17
17
20
22
22
Total consumer loans
288
264
255
261
222
Total nonperforming loans
785
834
760
632
577
OREO
100
105
112
119
35
Nonperforming loans held for sale
49
61
75
89
94
Other nonperforming assets
3
3
4
4
9
Total nonperforming assets
$
937
$
1,003
$
951
$
844
$
715
Accruing loans past due 90 days or more
86
73
87
128
97
Accruing loans past due 30 through 89 days
241
336
419
393
329
Restructured loans — accruing and nonaccruing (a)
363
306
310
340
347
Restructured loans included in nonperforming loans (a)
229
168
166
172
183
Nonperforming assets from discontinued operations — education lending business
5
6
7
7
7
Nonperforming loans to period-end portfolio loans
.78
%
.81
%
.72
%
.61
%
.61
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
.92
.97
.89
.82
.75
(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)
4Q20
3Q20
2Q20
1Q20
4Q19
Balance at beginning of period
$
834
$
760
$
632
$
577
$
585
Loans placed on nonaccrual status (a)
300
387
293
219
268
Charge-offs
(160)
(150)
(111)
(100)
(114)
Loans sold
(9)
(6)
(5)
(4)
(1)
Payments
(83)
(83)
(29)
(31)
(59)
Transfers to OREO
(3)
—
—
(3)
(3)
Transfers to nonperforming loans held for sale
—
—
—
—
(47)
Loans returned to accrual status
(94)
(74)
(20)
(26)
(52)
Balance at end of period
$
785
$
834
$
760
$
632
$
577
(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.
Line of Business Results
(dollars in millions)
Percentage change 4Q20 vs.
4Q20
3Q20
2Q20
1Q20
4Q19
3Q20
4Q19
Consumer Bank
Summary of operations
Total revenue (TE)
$
905
$
871
$
841
$
820
$
825
3.9
%
9.7
%
Provision for credit losses
(4)
(16)
167
140
55
N/M
N/M
Noninterest expense
611
571
555
542
550
7.0
11.1
Net income (loss) attributable to Key
228
241
91
105
168
(5.4)
35.7
Average loans and leases
41,137
41,471
39,197
35,197
34,148
(.8)
20.5
Average deposits
83,171
83,175
79,502
73,320
73,561
—
13.1
Net loan charge-offs
28
23
39
43
43
21.7
(34.9)
Net loan charge-offs to average total loans
.27
%
.22
%
.40
%
.49
%
.50
%
N/A
N/A
Nonperforming assets at period end
$
374
$
353
$
332
$
342
$
306
5.9
22.2
Return on average allocated equity
25.45
%
27.03
%
10.45
%
12.26
%
19.64
%
N/A
N/A
Commercial Bank
Summary of operations
Total revenue (TE)
$
913
$
804
$
857
$
630
$
771
13.6
%
18.4
%
Provision for credit losses
42
163
314
218
38
(74.2)
10.5
Noninterest expense
494
443
438
358
393
11.5
25.7
Net income (loss) attributable to Key
308
160
101
63
311
92.5
(1.0)
Average loans and leases
59,992
62,925
68,038
60,082
58,535
(4.7)
2.5
Average loans held for sale
1,285
1,383
2,012
1,607
1,465
(7.1)
(12.3)
Average deposits
52,163
51,238
47,685
36,256
38,224
1.8
36.5
Net loan charge-offs
108
104
57
40
39
3.8
176.9
Net loan charge-offs to average total loans
.72
%
.66
%
.34
%
.27
%
.26
%
N/A
N/A
Nonperforming assets at period end
$
558
$
645
$
616
$
407
$
402
(13.5)
38.8
Return on average allocated equity
24.04
%
12.57
%
8.41
%
5.40
%
26.40
%
N/A
N/A
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful
Notable Items
(in millions)
Three months ended
Twelve months ended
12/31/2020
9/30/2020
12/31/2019
12/31/2020
12/31/2019
Provision for credit losses
—
—
$
(16)
—
$
(139)
Professional fees related to fraud loss
—
—
(4)
—
(4)
Efficiency initiative expenses
—
—
—
—
(76)
Laurel Road acquisition expenses
—
—
—
—
(2)
Pension settlement charge
—
—
(18)
—
(18)
Total notable items
—
—
(38)
—
(239)
Income taxes
—
—
(9)
—
(56)
Total notable items, after tax
—
—
$
(29)
—
$
(183)
http://www.prnewswire.com/news-releases/keycorp-reports-record-fourth-quarter-2020-net-income-of-549-million-or-56-per-diluted-common-share-301212455.html
SOURCE KeyCorp
