KeyCorp Reports Third Quarter 2020 Net Income Of $397 Million, Or $.41 Per Diluted Common Share
CLEVELAND, Oct. 21, 2020 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $397 million, or $.41 per diluted common share for the third quarter of 2020. This compared to $159 million, or $.16 per diluted common share, for the second quarter of 2020 and $383 million, or $.38 per diluted common share, for the third quarter of 2019, which included $.10 per diluted common share related to notable items.
Key's third quarter results reflect continued momentum in our businesses, strong credit discipline and investments we have made to strengthen our franchise. Our success also demonstrates the resiliency and dedication of our team in serving our clients and supporting our communities.
In the third quarter, revenue increased 3% from the prior year, driven by strong balance sheet growth and higher fee income. Average loans and deposits were both up double-digits from the same period last year, reflecting the impact from the Paycheck Protection Program, as well as strong loan originations from consumer mortgage and Laurel Road. Noninterest income benefitted from higher cards and payments activity and growth in consumer mortgage fees.
During the quarter, expense levels reflected higher variable costs from production-related incentives and cards and payments activity, as well as elevated pandemic-related costs associated with keeping our teammates and clients safe. Through our continuous improvement efforts, we are maintaining our focus on expenses – improving our efficiency while continuing to invest for growth, including our digital capabilities across our franchise.
Importantly, we remain committed to strong risk management practices and being disciplined with our capital. Our Common Equity Tier 1 ratio ended the quarter at 9.5%, up 40 basis points from the prior quarter, and at the upper end of our targeted range.
Despite the challenges presented by the pandemic, low interest rates and economic uncertainty, we are confident that Key is well-positioned to navigate the current environment while concurrently assisting in the recovery phase and investing in our bright future.
- Chris Gorman, Chairman and CEO
Selected Financial Highlights | |||||||||||||||
dollars in millions, except per share data | Change 3Q20 vs. | ||||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 397 | $ | 159 | $ | 383 | 149.7 | % | 3.7 | % | |||||
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution | .41 | .16 | .38 | 156.3 | 7.9 | ||||||||||
Return on average tangible common equity from continuing operations (a) | 12.19 | % | 4.96 | % | 12.38 | % | N/A | N/A | |||||||
Return on average total assets from continuing operations | 1.00 | .45 | 1.14 | N/A | N/A | ||||||||||
Common Equity Tier 1 ratio (b) | 9.5 | 9.1 | 9.5 | N/A | N/A | ||||||||||
Book value at period end | $ | 16.25 | $ | 16.07 | $ | 15.44 | 1.1 | % | 5.2 | % | |||||
Net interest margin (TE) from continuing operations | 2.62 | % | 2.76 | % | 3.00 | % | 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) | 9/30/20 ratio is estimated. |
TE = Taxable Equivalent, N/A = Not Applicable | |
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||
Revenue | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Net interest income (TE) | $ | 1,006 | $ | 1,025 | $ | 980 | (1.9) | % | 2.7 | % | ||||
Noninterest income | 681 | 692 | 650 | (1.6) | 4.8 | |||||||||
Total revenue | $ | 1,687 | $ | 1,717 | $ | 1,630 | (1.7) | % | 3.5 | % | ||||
TE = Taxable Equivalent | ||||||||||||||
Taxable-equivalent net interest income was $1.0 billion for the third quarter of 2020, compared to taxable-equivalent net interest income of $980 million for the third quarter of 2019. The increase in net interest income reflects higher earning asset balances partially offset by a lower net interest margin. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity and Key's participation in the Paycheck Protection Program ("PPP").
Compared to the second quarter of 2020, taxable-equivalent net interest income decreased by $19 million, primarily reflecting lower loan balances. The lower net interest margin was driven by a shift in balance sheet mix, reflecting continued elevated levels of liquidity.
Noninterest Income | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Trust and investment services income | $ | 128 | $ | 123 | $ | 118 | 4.1 | % | 8.5 | % | ||||
Investment banking and debt placement fees | 146 | 156 | 176 | (6.4) | (17.0) | |||||||||
Service charges on deposit accounts | 77 | 68 | 86 | 13.2 | (10.5) | |||||||||
Operating lease income and other leasing gains | 38 | 60 | 42 | (36.7) | (9.5) | |||||||||
Corporate services income | 51 | 52 | 63 | (1.9) | (19.0) | |||||||||
Cards and payments income | 114 | 91 | 69 | 25.3 | 65.2 | |||||||||
Corporate-owned life insurance income | 30 | 35 | 32 | (14.3) | (6.3) | |||||||||
Consumer mortgage income | 51 | 62 | 16 | (17.7) | 218.8 | |||||||||
Commercial mortgage servicing fees | 18 | 12 | 21 | 50.0 | (14.3) | |||||||||
Other income | 28 | 33 | 27 | (15.2) | 3.7 | |||||||||
Total noninterest income | $ | 681 | $ | 692 | $ | 650 | (1.6) | % | 4.8 | % | ||||
Compared to the third quarter of 2019, noninterest income increased by $31 million, primarily driven by a $45 million increase in cards and payments income related to higher prepaid card activity. Additionally, consumer mortgage income increased $35 million from the year-ago period, driven by strong loan originations and related fees. These increases were partially offset by a $30 million decline in investment banking and debt placement fees, primarily driven by lower loan syndication and M&A fees.
Compared to the second quarter of 2020, noninterest income decreased by $11 million. The largest driver of the quarterly decrease was a $22 million decline in operating lease income, related to gains on the sale of leveraged leases in the prior quarter. Investment banking and debt placement fees and consumer mortgage income delivered solid results, but both declined versus the prior quarter. Partially offsetting these declines was a $23 million increase in cards and payments income related to higher prepaid card activity and a $9 million increase in service charges on deposit accounts.
Noninterest Expense | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Personnel expense | $ | 588 | $ | 572 | $ | 547 | 2.8 | % | 7.5 | % | ||||
Nonpersonnel expense | 449 | 441 | 392 | 1.8 | 14.5 | |||||||||
Total noninterest expense | $ | 1,037 | $ | 1,013 | $ | 939 | 2.4 | % | 10.4 | % | ||||
Key's noninterest expense was $1.0 billion for the third quarter of 2020, an increase of $98 million from the year-ago period. The increase is primarily related to higher payments-related expenses from prepaid card activity incurred in the current period, as well as COVID-19-related costs related to steps that the company has taken to ensure the health and safety of teammates. Personnel costs increased by $41 million, reflecting higher production-related incentives, merit increases and employee benefits costs.
Compared to the second quarter of 2020, noninterest expense increased $24 million. The increase was largely due to payments-related costs (in other expense), as well as higher employee benefits costs, which drove an increase in personnel costs quarter over quarter.
BALANCE SHEET HIGHLIGHTS | ||||||||||||||
Average Loans | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Commercial and industrial (a) | $ | 57,067 | $ | 60,480 | $ | 48,322 | (5.6) | % | 18.1 | % | ||||
Other commercial loans | 19,677 | 19,850 | 19,016 | (.9) | 3.5 | |||||||||
Total consumer loans | 28,175 | 27,611 | 24,618 | 2.0 | 14.4 | |||||||||
Total loans | $ | 104,919 | $ | 107,941 | $ | 91,956 | (2.8) | % | 14.1 | % | ||||
(a) | Commercial and industrial average loan balances include $129 million, $135 million, and $144 million of assets from commercial credit cards at September 30, 2020, June 30, 2020, and September 30, 2019, respectively. |
Average loans were $104.9 billion for the third quarter of 2020, an increase of $13.0 billion compared to the third quarter of 2019. Commercial loans increased $9.4 billion, reflecting growth from PPP, as well as core broad-based growth in commercial and industrial loans and increased utilization versus the year-ago period. Consumer loans increased $3.6 billion, driven by strength from Laurel Road and Key's consumer mortgage business.
Compared to the second quarter of 2020, average loans decreased by $3.0 billion. Commercial loans declined as clients paid down elevated line draws from earlier in the year, partly offset by growth in PPP average balances. Consumer loans continue to reflect strength from Laurel Road, as well as Key's consumer mortgage business.
Average Deposits | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Non-time deposits | $ | 127,347 | $ | 118,694 | $ | 97,205 | 7.3 | % | 31.0 | % | ||||
Certificates of deposit ($100,000 or more) | 3,862 | 4,950 | 7,625 | (22.0) | (49.4) | |||||||||
Other time deposits | 3,735 | 4,333 | 5,449 | (13.8) | (31.5) | |||||||||
Total deposits | $ | 134,944 | $ | 127,977 | $ | 110,279 | 5.4 | % | 22.4 | % | ||||
Cost of total deposits | .16 | % | .30 | % | .82 | % | N/A | N/A | ||||||
N/A = Not Applicable | ||||||||||||||
Average deposits totaled $134.9 billion for the third quarter of 2020, an increase of $24.7 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits as a result of lower interest rates.
Compared to the second quarter of 2020, average deposits increased by $7.0 billion, primarily driven by broad-based commercial growth as well as growth from consumer stimulus payments and lower consumer spending. This growth was offset by a continued decline in time deposits.
ASSET QUALITY | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Net loan charge-offs | $ | 128 | $ | 96 | $ | 196 | 33.3 | % | (34.7) | % | ||||
Net loan charge-offs to average total loans | .49 | % | .36 | % | .85 | % | N/A | N/A | ||||||
Nonperforming loans at period end | $ | 834 | $ | 760 | $ | 585 | 9.7 | 42.6 | ||||||
Nonperforming assets at period end | 1,003 | 951 | 711 | 5.5 | 41.1 | |||||||||
Allowance for loan and lease losses | 1,730 | 1,708 | 893 | 1.3 | 93.7 | |||||||||
Allowance for credit losses | 1,938 | 1,906 | 958 | 1.7 | 102.3 | |||||||||
Allowance for loan and lease losses to nonperforming loans | 207.4 | % | 224.7 | % | 152.6 | % | N/A | N/A | ||||||
Allowance for credit losses to nonperforming loans | 232.4 | 250.8 | 163.8 | N/A | N/A | |||||||||
Provision for credit losses | $ | 160 | $ | 482 | $ | 200 | (66.8) | % | (20.0) | % | ||||
N/A = Not Applicable | ||||||||||||||
Key's provision for credit losses was $160 million for the third quarter of 2020, compared to $200 million for the third quarter of 2019 (which included $123 million related to a previously-disclosed fraud loss), and $482 million for the second quarter of 2020. The provision for credit losses reflects the adoption of a new accounting standard, often referred to as Current Expected Credit Losses ("CECL"), beginning in the first quarter of 2020. This framework requires that management estimate credit losses over the full remaining expected life and consider expected future changes in macroeconomic conditions.
The provision for credit losses exceeded net charge-offs by $32 million. Net loan charge-offs for the third quarter of 2020 totaled $128 million, or .49% of average total loans. These results compare to $196 million, or .85%, for the third quarter of 2019 (which included $123 million related to a previously-disclosed fraud loss) and $96 million, or .36%, for the second quarter of 2020. Key's allowance for credit losses was $1.9 billion, or 1.88% of total period-end loans at September 30, 2020, compared to 1.03% at September 30, 2019, and 1.80% at June 30, 2020.
At September 30, 2020, Key's nonperforming loans totaled $834 million, which represented .81% of period-end portfolio loans. These results compare to .63% at September 30, 2019, and .72% at June 30, 2020. Nonperforming assets at September 30, 2020, totaled $1.0 billion, and represented .97% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .77% at September 30, 2019, and .89% at June 30, 2020.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at September 30, 2020.
Capital Ratios | ||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | ||||
Common Equity Tier 1 (a) | 9.5 | % | 9.1 | % | 9.5 | % |
Tier 1 risk-based capital (a) | 10.9 | 10.5 | 10.9 | |||
Total risk based capital (a) | 13.3 | 12.8 | 12.9 | |||
Tangible common equity to tangible assets (b) | 7.8 | 7.6 | 8.6 | |||
Leverage (a) | 8.7 | 8.8 | 9.9 | |||
(a) | 9/30/2020 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 third quarter of 2020. As shown in the preceding table, at September 30, 2020, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.5% and 10.9%, respectively. Key's tangible common equity ratio was 7.8% at September 30, 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 31 basis points.
Summary of Changes in Common Shares Outstanding | ||||||||||||
in thousands | Change 3Q20 vs. | |||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||
Shares outstanding at beginning of period | 975,947 | 975,319 | 1,003,114 | .1 | % | (2.7) | % | |||||
Open market repurchases and return of shares under employee compensation plans | (1) | (19) | (15,076) | (94.7) | (100.0) | |||||||
Shares issued under employee compensation plans (net of cancellations) | 259 | 647 | 500 | (60.0) | (48.2) | |||||||
Shares outstanding at end of period | 976,205 | 975,947 | 988,538 | — | (1.2) | % | ||||||
Consistent with Key's 2020 Capital Plan, during the third quarter of 2020, Key declared a dividend of $.185 per common share. Per Key's announcement on March 17, 2020, share repurchase activity has been temporarily suspended 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.
Major Business Segments | |||||||||||||||
dollars in millions | Change 3Q20 vs. | ||||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | |||||||||||
Revenue from continuing operations (TE) | |||||||||||||||
Consumer Bank | $ | 871 | $ | 841 | $ | 833 | 3.6 | % | 4.6 | % | |||||
Commercial Bank | 804 | 857 | 780 | (6.2) | 3.1 | ||||||||||
Other (a) | 12 | 19 | 17 | (36.8) | (29.4) | ||||||||||
Total | $ | 1,687 | $ | 1,717 | $ | 1,630 | (1.7) | % | 3.5 | % | |||||
Income (loss) from continuing operations attributable to Key | |||||||||||||||
Consumer Bank | $ | 241 | $ | 91 | $ | 196 | 164.8 | % | 23.0 | % | |||||
Commercial Bank | 160 | 101 | 301 | 58.4 | (46.8) | ||||||||||
Other (a) | 23 | (7) | (84) | N/M | N/M | ||||||||||
Total | $ | 424 | $ | 185 | $ | 413 | 129.2 | % | 2.7 | % | |||||
(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 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Summary of operations | ||||||||||||||
Net interest income (TE) | $ | 604 | $ | 594 | $ | 595 | 1.7 | % | 1.5 | % | ||||
Noninterest income | 267 | 247 | 238 | 8.1 | 12.2 | |||||||||
Total revenue (TE) | 871 | 841 | 833 | 3.6 | 4.6 | |||||||||
Provision for credit losses | (16) | 167 | 48 | N/M | N/M | |||||||||
Noninterest expense | 571 | 555 | 529 | 2.9 | 7.9 | |||||||||
Income (loss) before income taxes (TE) | 316 | 119 | 256 | 165.5 | 23.4 | |||||||||
Allocated income taxes (benefit) and TE adjustments | 75 | 28 | 60 | 167.9 | 25.0 | |||||||||
Net income (loss) attributable to Key | $ | 241 | $ | 91 | $ | 196 | 164.8 | % | 23.0 | % | ||||
Average balances | ||||||||||||||
Loans and leases | $ | 41,471 | $ | 39,197 | $ | 32,760 | 5.8 | % | 26.6 | % | ||||
Total assets | 44,888 | 44,088 | 36,397 | 1.8 | 23.3 | |||||||||
Deposits | 83,175 | 79,502 | 72,995 | 4.6 | 13.9 | |||||||||
Assets under management at period end | $ | 41,312 | $ | 39,722 | $ | 39,416 | 4.0 | % | 4.8 | % | ||||
TE = Taxable Equivalent | ||||||||||||||
Additional Consumer Bank Data | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Noninterest income | ||||||||||||||
Trust and investment services income | $ | 100 | $ | 87 | $ | 90 | 14.9 | % | 11.1 | % | ||||
Service charges on deposit accounts | 44 | 38 | 58 | 15.8 | (24.1) | |||||||||
Cards and payments income | 55 | 47 | 52 | 17.0 | 5.8 | |||||||||
Consumer mortgage income | 51 | 62 | 16 | (17.7) | 218.8 | |||||||||
Other noninterest income | 17 | 13 | 22 | 30.8 | (22.7) | |||||||||
Total noninterest income | $ | 267 | $ | 247 | $ | 238 | 8.1 | % | 12.2 | % | ||||
Average deposit balances | ||||||||||||||
NOW and money market deposit accounts | $ | 52,550 | $ | 49,152 | $ | 43,638 | 6.9 | % | 20.4 | % | ||||
Savings deposits | 5,169 | 4,817 | 4,406 | 7.3 | 17.3 | |||||||||
Certificates of deposit ($100,000 or more) | 3,550 | 4,520 | 6,488 | (21.5) | (45.3) | |||||||||
Other time deposits | 3,701 | 4,296 | 5,430 | (13.9) | (31.8) | |||||||||
Noninterest-bearing deposits | 18,205 | 16,717 | 13,033 | 8.9 | 39.7 | |||||||||
Total deposits | $ | 83,175 | $ | 79,502 | $ | 72,995 | 4.6 | % | 13.9 | % | ||||
Home equity loans | ||||||||||||||
Average balance | $ | 9,528 | $ | 9,893 | $ | 10,413 | ||||||||
Combined weighted-average loan-to-value ratio (at date of origination) | 70 | % | 70 | % | 70 | % | ||||||||
Percent first lien positions | 64 | 63 | 60 | |||||||||||
Other data | ||||||||||||||
Branches | 1,077 | 1,077 | 1,101 | |||||||||||
Automated teller machines | 1,388 | 1,394 | 1,422 | |||||||||||
Consumer Bank Summary of Operations (3Q20 vs. 3Q19)
- Net income attributable to Key of $241 million for the third quarter of 2020, compared to $196 million for the year-ago quarter
- Taxable-equivalent net interest income increased by $9 million, or 1.5%, compared to the third quarter of 2019, as a result of strong balance sheet growth, partially offset by the lower interest rate environment
- Average loans and leases increased $8.7 billion, or 26.6%, driven by benefit from the PPP, as well as growth from consumer mortgage and Laurel Road
- Average deposits increased $10.2 billion, or 13.9%, from the third quarter of 2019, driven by consumer stimulus payments and relationship growth
- Provision for credit losses decreased $64 million compared to the third quarter of 2019, due to lower net charge-offs and a reduced allowance, driven by improved macroeconomic factors and continued strength in client credit quality
- Noninterest income increased $29 million, or 12.2%, from the year ago quarter, driven by strength in consumer mortgage income and higher trust and investment services income, partially offset by lower consumer spend activity
- Noninterest expense increased $42 million, or 7.9%, from the year ago quarter driven by higher variable expenses from production-related incentives and higher loan volumes
Commercial Bank | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Summary of operations | ||||||||||||||
Net interest income (TE) | $ | 421 | $ | 452 | $ | 399 | (6.9) | % | 5.5 | % | ||||
Noninterest income | 383 | 405 | 381 | (5.4) | .5 | |||||||||
Total revenue (TE) | 804 | 857 | 780 | (6.2) | 3.1 | |||||||||
Provision for credit losses | 163 | 314 | 32 | (48.1) | 409.4 | |||||||||
Noninterest expense | 443 | 438 | 378 | 1.1 | 17.2 | |||||||||
Income (loss) before income taxes (TE) | 198 | 105 | 370 | 88.6 | (46.5) | |||||||||
Allocated income taxes and TE adjustments | 38 | 4 | 69 | 850.0 | (44.9) | |||||||||
Net income (loss) attributable to Key | $ | 160 | $ | 101 | $ | 301 | 58.4 | % | (46.8) | % | ||||
Average balances | ||||||||||||||
Loans and leases | $ | 62,925 | $ | 68,038 | $ | 58,215 | (7.5) | % | 8.1 | % | ||||
Loans held for sale | 1,383 | 2,012 | 1,325 | (31.3) | 4.4 | |||||||||
Total assets | 72,613 | 76,974 | 66,549 | (5.7) | 9.1 | |||||||||
Deposits | 51,238 | 47,685 | 36,204 | 7.5 | % | 41.5 | % | |||||||
TE = Taxable Equivalent, N/M = Not Meaningful | ||||||||||||||
Additional Commercial Bank Data | ||||||||||||||
dollars in millions | Change 3Q20 vs. | |||||||||||||
3Q20 | 2Q20 | 3Q19 | 2Q20 | 3Q19 | ||||||||||
Noninterest income | ||||||||||||||
Trust and investment services income | $ | 28 | $ | 36 | $ | 28 | (22.2) | % | — | |||||
Investment banking and debt placement fees | 146 | 156 | 176 | (6.4) | (17.0) | % | ||||||||
Operating lease income and other leasing gains | 38 | 46 | 40 | (17.4) | (5.0) | |||||||||
Corporate services income | 44 | 45 | 56 | (2.2) | (21.4) | |||||||||
Service charges on deposit accounts | 32 | 30 | 27 | 6.7 | 18.5 | |||||||||
Cards and payments income | 59 | 44 | 16 | 34.1 | 268.8 | |||||||||
Payments and services income | 135 | 119 | 99 | 13.4 | 36.4 | |||||||||
Commercial mortgage servicing fees | 18 | 12 | 20 | 50.0 | (10.0) | |||||||||
Other noninterest income | 18 | 36 | 18 | (50.0) | — | |||||||||
Total noninterest income | $ | 383 | $ | 405 | $ | 381 | (5.4) | % | .5 | % | ||||
N/M = Not Meaningful | ||||||||||||||
Commercial Bank Summary of Operations (3Q20 vs. 3Q19)
- Net income attributable to Key of $160 million for the third quarter of 2020, compared to $301 million for the year-ago quarter
- Taxable-equivalent net interest income increased by $22 million, or 5.5%, compared to the third quarter of 2019, with balance sheet growth partially offset by the lower interest rate environment
- Average loan and lease balances increased $4.7 billion, or 8.1%, compared to the third quarter of 2019 driven by growth in commercial and industrial loans from line draws and PPP loans
- Average deposit balances increased $15 billion, or 41.5%, compared to the third quarter of 2019, driven by growth in targeted relationships and the impact of government programs
- Provision for credit losses increased $131 million compared to the third quarter of 2019, driven by an increase in net charge-offs and higher reserve levels
- Noninterest income increased $2 million, from the third quarter of 2019, as higher cards and payments income related to prepaid card revenue was partially offset by declines in investment banking and corporate services income
- Noninterest expense increased by $65 million, or 17.2%, from the third quarter of 2019 driven by elevated variable expenses related to prepaid card
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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 $170.5 billion at September 30, 2020.
Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,400 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
INVESTOR RELATIONS: | KEY MEDIA NEWSROOM: |
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 Wednesday, October 21, 2020. A replay of the call will be available through November 4, 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 Third Quarter 2020 Financial Supplement | |
Page | |
13 | Financial Highlights |
14 | GAAP to Non-GAAP Reconciliation |
16 | Consolidated Balance Sheets |
17 | Consolidated Statements of Income |
18 | Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
20 | Noninterest Expense |
20 | Personnel Expense |
21 | Loan Composition |
21 | Loans Held for Sale Composition |
21 | Summary of Changes in Loans Held for Sale |
22 | Summary of Loan and Lease Loss Experience From Continuing Operations |
23 | Asset Quality Statistics From Continuing Operations |
23 | Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
23 | Summary of Changes in Nonperforming Loans From Continuing Operations |
24 | Line of Business Results |
Financial Highlights | ||||||||||
(dollars in millions, except per share amounts) | ||||||||||
Three months ended | ||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | ||||||||
Summary of operations | ||||||||||
Net interest income (TE) | $ | 1,006 | $ | 1,025 | $ | 980 | ||||
Noninterest income | 681 | 692 | 650 | |||||||
Total revenue (TE) | 1,687 | 1,717 | 1,630 | |||||||
Provision for credit losses | 160 | 482 | 200 | |||||||
Noninterest expense | 1,037 | 1,013 | 939 | |||||||
Income (loss) from continuing operations attributable to Key | 424 | 185 | 413 | |||||||
Income (loss) from discontinued operations, net of taxes | 4 | 2 | 3 | |||||||
Net income (loss) attributable to Key | 428 | 187 | 416 | |||||||
Income (loss) from continuing operations attributable to Key common shareholders | 397 | 159 | 383 | |||||||
Income (loss) from discontinued operations, net of taxes | 4 | 2 | 3 | |||||||
Net income (loss) attributable to Key common shareholders | 401 | 161 | 386 | |||||||
Per common share | ||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .41 | $ | .16 | $ | .39 | ||||
Income (loss) from discontinued operations, net of taxes | — | — | — | |||||||
Net income (loss) attributable to Key common shareholders (a) | .41 | .17 | .39 | |||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | .41 | .16 | .38 | |||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution | — | — | — | |||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (a) | .41 | .17 | .39 | |||||||
Cash dividends declared | .185 | .185 | .185 | |||||||
Book value at period end | 16.25 | 16.07 | 15.44 | |||||||
Tangible book value at period end | 13.32 | 13.12 | 12.48 | |||||||
Market price at period end | 11.93 | 12.18 | 17.84 | |||||||
Performance ratios | ||||||||||
From continuing operations: | ||||||||||
Return on average total assets | 1.00 | % | .45 | % | 1.14 | % | ||||
Return on average common equity | 9.98 | 4.05 | 9.99 | |||||||
Return on average tangible common equity (b) | 12.19 | 4.96 | 12.38 | |||||||
Net interest margin (TE) | 2.62 | 2.76 | 3.00 | |||||||
Cash efficiency ratio (b) | 60.6 | 57.9 | 56.0 | |||||||
From consolidated operations: | ||||||||||
Return on average total assets | 1.00 | % | .46 | % | 1.14 | % | ||||
Return on average common equity | 10.08 | 4.10 | 10.07 | |||||||
Return on average tangible common equity (b) | 12.31 | 5.02 | 12.48 | |||||||
Net interest margin (TE) | 2.62 | 2.76 | 2.98 | |||||||
Loan to deposit (c) | 77.2 | 80.4 | 85.3 | |||||||
Capital ratios at period end | ||||||||||
Key shareholders' equity to assets | 10.4 | % | 10.2 | % | 11.7 | % | ||||
Key common shareholders' equity to assets | 9.3 | 9.2 | 10.4 | |||||||
Tangible common equity to tangible assets (b) | 7.8 | 7.6 | 8.6 | |||||||
Common Equity Tier 1 (d) | 9.5 | 9.1 | 9.5 | |||||||
Tier 1 risk-based capital (d) | 10.9 | 10.5 | 10.9 | |||||||
Total risk-based capital (d) | 13.3 | 12.8 | 12.9 | |||||||
Leverage (d) | 8.7 | 8.8 | 9.9 | |||||||
Asset quality — from continuing operations | ||||||||||
Net loan charge-offs | $ | 128 | $ | 96 | $ | 196 | ||||
Net loan charge-offs to average loans | .49 | % | .36 | % | .85 | % | ||||
Allowance for loan and lease losses | $ | 1,730 | $ | 1,708 | $ | 893 | ||||
Allowance for credit losses | 1,938 | 1,906 | 958 | |||||||
Allowance for loan and lease losses to period-end loans | 1.68 | % | 1.61 | % | .96 | % | ||||
Allowance for credit losses to period-end loans | 1.88 | 1.80 | 1.03 | |||||||
Allowance for loan and lease losses to nonperforming loans (e) | 207.4 | 224.7 | 152.6 | |||||||
Allowance for credit losses to nonperforming loans (e) | 232.4 | 250.8 | 163.8 | |||||||
Nonperforming loans at period-end (e) | $ | 834 | $ | 760 | $ | 585 | ||||
Nonperforming assets at period-end (e) | 1,003 | 951 | 711 | |||||||
Nonperforming loans to period-end portfolio loans (e) | .81 | % | .72 | % | .63 | % | ||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (e) | .97 | .89 | .77 | |||||||
Trust assets | ||||||||||
Assets under management | $ | 41,312 | $ | 39,722 | $ | 39,416 | ||||
Other data | ||||||||||
Average full-time equivalent employees | 17,097 | 16,646 | 16,898 | |||||||
Branches | 1,077 | 1,077 | 1,101 | |||||||
Taxable-equivalent adjustment | $ | 6 | $ | 7 | $ | 8 | ||||
Financial Highlights (continued) | ||||||||||
(dollars in millions, except per share amounts) | ||||||||||
Nine months ended | ||||||||||
9/30/2020 | 9/30/2019 | |||||||||
Summary of operations | ||||||||||
Net interest income (TE) | $ | 3,020 | $ | 2,954 | ||||||
Noninterest income | 1,850 | 1,808 | ||||||||
Total revenue (TE) | 4,870 | 4,762 | ||||||||
Provision for credit losses | 1,001 | 336 | ||||||||
Noninterest expense | 2,981 | 2,921 | ||||||||
Income (loss) from continuing operations attributable to Key | 754 | 1,242 | ||||||||
Income (loss) from discontinued operations, net of taxes | 7 | 6 | ||||||||
Net income (loss) attributable to Key | 761 | 1,248 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 674 | $ | 1,172 | ||||||
Income (loss) from discontinued operations, net of taxes | 7 | 6 | ||||||||
Net income (loss) attributable to Key common shareholders | 681 | 1,178 | ||||||||
Per common share | ||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .70 | $ | 1.17 | ||||||
Income (loss) from discontinued operations, net of taxes | .01 | .01 | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .70 | 1.18 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | .69 | 1.16 | ||||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution | .01 | .01 | ||||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (a) | .70 | 1.17 | ||||||||
Cash dividends paid | .555 | .525 | ||||||||
Performance ratios | ||||||||||
From continuing operations: | ||||||||||
Return on average total assets | .63 | % | 1.17 | % | ||||||
Return on average common equity | 5.75 | 10.62 | ||||||||
Return on average tangible common equity (b) | 7.06 | 13.23 | ||||||||
Net interest margin (TE) | 2.78 | 3.06 | ||||||||
Cash efficiency ratio (b) | 60.2 | 59.9 | ||||||||
From consolidated operations: | ||||||||||
Return on average total assets | .63 | % | 1.16 | % | ||||||
Return on average common equity | 5.81 | 10.68 | ||||||||
Return on average tangible common equity (b) | 7.13 | 13.30 | ||||||||
Net interest margin (TE) | 2.78 | 3.05 | ||||||||
Asset quality — from continuing operations | ||||||||||
Net loan charge-offs | $ | 308 | $ | 325 | ||||||
Net loan charge-offs to average total loans | .40 | % | .48 | % | ||||||
Other data | ||||||||||
Average full-time equivalent employees | 16,758 | 17,217 | ||||||||
Taxable-equivalent adjustment | 21 | 24 | ||||||||
(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) | September 30, 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 | Nine months ended | |||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
Tangible common equity to tangible assets at period-end | ||||||||||||||||
Key shareholders' equity (GAAP) | $ | 17,722 | $ | 17,542 | $ | 17,116 | ||||||||||
Less: Intangible assets (a) | 2,862 | 2,877 | 2,928 | |||||||||||||
Preferred Stock (b) | 1,856 | 1,856 | 1,856 | |||||||||||||
Tangible common equity (non-GAAP) | $ | 13,004 | $ | 12,809 | $ | 12,332 | ||||||||||
Total assets (GAAP) | $ | 170,540 | $ | 171,192 | $ | 146,691 | ||||||||||
Less: Intangible assets (a) | 2,862 | 2,877 | 2,928 | |||||||||||||
Tangible assets (non-GAAP) | $ | 167,678 | $ | 168,315 | $ | 143,763 | ||||||||||
Tangible common equity to tangible assets ratio (non-GAAP) | 7.8 | % | 7.6 | % | 8.6 | % | ||||||||||
Pre-provision net revenue | ||||||||||||||||
Net interest income (GAAP) | $ | 1,000 | $ | 1,018 | $ | 972 | $ | 2,999 | $ | 2,930 | ||||||
Plus: Taxable-equivalent adjustment | 6 | 7 | 8 | 21 | 24 | |||||||||||
Noninterest income | 681 | 692 | 650 | 1,850 | 1,808 | |||||||||||
Less: Noninterest expense | 1,037 | 1,013 | 939 | 2,981 | 2,921 | |||||||||||
Pre-provision net revenue from continuing operations (non-GAAP) | $ | 650 | $ | 704 | $ | 691 | $ | 1,889 | $ | 1,841 | ||||||
Average tangible common equity | ||||||||||||||||
Average Key shareholders' equity (GAAP) | $ | 17,730 | $ | 17,688 | $ | 17,113 | $ | 17,545 | $ | 16,454 | ||||||
Less: Intangible assets (average) (c) | 2,870 | 2,886 | 2,942 | 2,886 | 2,905 | |||||||||||
Preferred stock (average) | 1,900 | 1,900 | 1,900 | 1,900 | 1,705 | |||||||||||
Average tangible common equity (non-GAAP) | $ | 12,960 | $ | 12,902 | $ | 12,271 | $ | 12,759 | $ | 11,844 | ||||||
Return on average tangible common equity from continuing operations | ||||||||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) | $ | 397 | $ | 159 | $ | 383 | $ | 674 | $ | 1,172 | ||||||
Plus: Notable items, after tax (d) | — | — | 94 | — | 154 | |||||||||||
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP) | $ | 397 | $ | 159 | $ | 477 | $ | 674 | $ | 1,326 | ||||||
Average tangible common equity (non-GAAP) | 12,960 | 12,902 | 12,271 | 12,759 | 11,844 | |||||||||||
Return on average tangible common equity from continuing operations (non- GAAP) | 12.19 | % | 4.96 | % | 12.38 | % | 7.06 | % | 13.23 | % | ||||||
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP) | 12.19 | % | 4.96 | % | 15.42 | % | 7.06 | % | 14.97 | % | ||||||
Return on average tangible common equity consolidated | ||||||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) | $ | 401 | $ | 161 | $ | 386 | $ | 681 | $ | 1,178 | ||||||
Average tangible common equity (non-GAAP) | 12,960 | 12,902 | 12,271 | 12,759 | 11,844 | |||||||||||
Return on average tangible common equity consolidated (non-GAAP) | 12.31 | % | 5.02 | % | 12.48 | % | 7.13 | % | 13.30 | % | ||||||
GAAP to Non-GAAP Reconciliations (continued) | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
Cash efficiency ratio | ||||||||||||||||
Noninterest expense (GAAP) | $ | 1,037 | $ | 1,013 | $ | 939 | $ | 2,981 | $ | 2,921 | ||||||
Less: Intangible asset amortization | 15 | 18 | 26 | 50 | 70 | |||||||||||
Adjusted noninterest expense (non-GAAP) | $ | 1,022 | $ | 995 | $ | 913 | $ | 2,931 | $ | 2,851 | ||||||
Less: Notable items (d) | — | — | — | — | 78 | |||||||||||
Adjusted noninterest expense excluding notable items (non-GAAP) | $ | 1,022 | $ | 995 | $ | 913 | $ | 2,931 | $ | 2,773 | ||||||
Net interest income (GAAP) | $ | 1,000 | $ | 1,018 | $ | 972 | $ | 2,999 | $ | 2,930 | ||||||
Plus: Taxable-equivalent adjustment | 6 | 7 | 8 | 21 | 24 | |||||||||||
Noninterest income | 681 | 692 | 650 | 1,850 | 1,808 | |||||||||||
Total taxable-equivalent revenue (non-GAAP) | $ | 1,687 | $ | 1,717 | $ | 1,630 | $ | 4,870 | $ | 4,762 | ||||||
Cash efficiency ratio (non-GAAP) | 60.6 | % | 57.9 | % | 56.0 | % | 60.2 | % | 59.9 | % | ||||||
Cash efficiency ratio excluding notable items (non-GAAP) | 60.6 | % | 57.9 | % | 56.0 | % | 60.2 | % | 58.2 | % | ||||||
(a) | For the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, intangible assets exclude $5 million, $5 million, and $9 million, respectively, of period-end purchased credit card receivables. |
(b) | Net of capital surplus. |
(c) | For the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, average intangible assets exclude $5 million, $6 million, and $9 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2020, and September 30, 2019, average intangible assets exclude $6 million and $11 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) | |||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | |||||||||
Assets | |||||||||||
Loans | $ | 103,081 | $ | 106,159 | $ | 92,760 | |||||
Loans held for sale | 1,724 | 2,007 | 1,598 | ||||||||
Securities available for sale | 26,895 | 23,600 | 22,378 | ||||||||
Held-to-maturity securities | 8,384 | 9,075 | 10,490 | ||||||||
Trading account assets | 733 | 645 | 963 | ||||||||
Short-term investments | 14,148 | 14,036 | 3,351 | ||||||||
Other investments | 620 | 655 | 620 | ||||||||
Total earning assets | 155,585 | 156,177 | 132,160 | ||||||||
Allowance for loan and lease losses | (1,730) | (1,708) | (893) | ||||||||
Cash and due from banks | 956 | 1,059 | 636 | ||||||||
Premises and equipment | 765 | 776 | 815 | ||||||||
Goodwill | 2,664 | 2,664 | 2,664 | ||||||||
Other intangible assets | 203 | 218 | 272 | ||||||||
Corporate-owned life insurance | 4,274 | 4,251 | 4,216 | ||||||||
Accrued income and other assets | 7,084 | 6,976 | 5,881 | ||||||||
Discontinued assets | 739 | 779 | 940 | ||||||||
Total assets | $ | 170,540 | 171,192 | 146,691 | |||||||
Liabilities | |||||||||||
Deposits in domestic offices: | |||||||||||
NOW and money market deposit accounts | $ | 80,791 | $ | 78,853 | $ | 65,604 | |||||
Savings deposits | 5,585 | 5,371 | 4,668 | ||||||||
Certificates of deposit ($100,000 or more) | 3,345 | 4,476 | 7,194 | ||||||||
Other time deposits | 3,450 | 4,011 | 5,300 | ||||||||
Total interest-bearing deposits | 93,171 | 92,711 | 82,766 | ||||||||
Noninterest-bearing deposits | 43,575 | 42,802 | 28,883 | ||||||||
Total deposits | 136,746 | 135,513 | 111,649 | ||||||||
Federal funds purchased and securities sold under repurchase agreements | 213 | 267 | 182 | ||||||||
Bank notes and other short-term borrowings | 818 | 1,716 | 700 | ||||||||
Accrued expense and other liabilities | 2,356 | 2,420 | 2,574 | ||||||||
Long-term debt | 12,685 | 13,734 | 14,470 | ||||||||
Total liabilities | 152,818 | 153,650 | 129,575 | ||||||||
Equity | |||||||||||
Preferred stock | 1,900 | 1,900 | 1,900 | ||||||||
Common shares | 1,257 | 1,257 | 1,257 | ||||||||
Capital surplus | 6,263 | 6,240 | 6,287 | ||||||||
Retained earnings | 12,375 | 12,154 | 12,209 | ||||||||
Treasury stock, at cost | (4,940) | (4,945) | (4,696) | ||||||||
Accumulated other comprehensive income (loss) | 867 | 936 | 159 | ||||||||
Key shareholders' equity | 17,722 | 17,542 | 17,116 | ||||||||
Noncontrolling interests | — | — | — | ||||||||
Total equity | 17,722 | 17,542 | 17,116 | ||||||||
Total liabilities and equity | $ | 170,540 | $ | 171,192 | $ | 146,691 | |||||
Common shares outstanding (000) | 976,205 | 975,947 | 988,538 | ||||||||
Consolidated Statements of Income | ||||||||||||||||||
(dollars in millions, except per share amounts) | ||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||||
Interest income | ||||||||||||||||||
Loans | $ | 927 | $ | 980 | $ | 1,073 | $ | 2,933 | $ | 3,221 | ||||||||
Loans held for sale | 18 | 21 | 18 | 58 | 46 | |||||||||||||
Securities available for sale | 115 | 121 | 136 | 365 | 400 | |||||||||||||
Held-to-maturity securities | 53 | 56 | 64 | 171 | 199 | |||||||||||||
Trading account assets | 3 | 5 | 7 | 16 | 24 | |||||||||||||
Short-term investments | 1 | 7 | 16 | 14 | 49 | |||||||||||||
Other investments | 2 | — | 3 | 3 | 11 | |||||||||||||
Total interest income | 1,119 | 1,190 | 1,317 | 3,560 | 3,950 | |||||||||||||
Interest expense | ||||||||||||||||||
Deposits | 54 | 96 | 227 | 319 | 652 | |||||||||||||
Federal funds purchased and securities sold under repurchase agreements | — | — | — | 6 | 1 | |||||||||||||
Bank notes and other short-term borrowings | 1 | 5 | 4 | 11 | 13 | |||||||||||||
Long-term debt | 64 | 71 | 114 | 225 | 354 | |||||||||||||
Total interest expense | 119 | 172 | 345 | 561 | 1020 | |||||||||||||
Net interest income | 1,000 | 1,018 | 972 | 2,999 | 2,930 | |||||||||||||
Provision for credit losses | 160 | 482 | 200 | 1,001 | 336 | |||||||||||||
Net interest income after provision for credit losses | 840 | 536 | 772 | 1,998 | 2,594 | |||||||||||||
Noninterest income | ||||||||||||||||||
Trust and investment services income | 128 | 123 | 118 | 384 | 355 | |||||||||||||
Investment banking and debt placement fees | 146 | 156 | 176 | 418 | 449 | |||||||||||||
Service charges on deposit accounts | 77 | 68 | 86 | 229 | 251 | |||||||||||||
Operating lease income and other leasing gains | 38 | 60 | 42 | 128 | 123 | |||||||||||||
Corporate services income | 51 | 52 | 63 | 165 | 171 | |||||||||||||
Cards and payments income | 114 | 91 | 69 | 271 | 208 | |||||||||||||
Corporate-owned life insurance income | 30 | 35 | 32 | 101 | 97 | |||||||||||||
Consumer mortgage income | 51 | 62 | 16 | 133 | 42 | |||||||||||||
Commercial mortgage servicing fees | 18 | 12 | 21 | 48 | 58 | |||||||||||||
Other income | 28 | 33 | 27 | (27) | 54 | |||||||||||||
Total noninterest income | 681 | 692 | 650 | 1,850 | 1,808 | |||||||||||||
Noninterest expense | ||||||||||||||||||
Personnel | 588 | 572 | 547 | 1,675 | 1,699 | |||||||||||||
Net occupancy | 76 | 71 | 72 | 223 | 217 | |||||||||||||
Computer processing | 59 | 56 | 53 | 170 | 163 | |||||||||||||
Business services and professional fees | 49 | 49 | 43 | 142 | 132 | |||||||||||||
Equipment | 25 | 25 | 27 | 74 | 75 | |||||||||||||
Operating lease expense | 33 | 34 | 33 | 103 | 91 | |||||||||||||
Marketing | 22 | 24 | 26 | 67 | 69 | |||||||||||||
FDIC assessment | 6 | 8 | 7 | 23 | 23 | |||||||||||||
Intangible asset amortization | 15 | 18 | 26 | 50 | 70 | |||||||||||||
OREO expense, net | (1) | 6 | 3 | 8 | 10 | |||||||||||||
Other expense | 165 | 150 | 102 | 446 | 372 | |||||||||||||
Total noninterest expense | 1,037 | 1,013 | 939 | 2,981 | 2,921 | |||||||||||||
Income (loss) from continuing operations before income taxes | 484 | 215 | 483 | 867 | 1,481 | |||||||||||||
Income taxes | 60 | 30 | 70 | 113 | 239 | |||||||||||||
Income (loss) from continuing operations | 424 | 185 | 413 | 754 | 1,242 | |||||||||||||
Income (loss) from discontinued operations, net of taxes | 4 | 2 | 3 | 7 | 6 | |||||||||||||
Net income (loss) | 428 | 187 | 416 | 761 | 1,248 | |||||||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | — | — | — | |||||||||||||
Net income (loss) attributable to Key | $ | 428 | $ | 187 | $ | 416 | $ | 761 | $ | 1,248 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 397 | $ | 159 | $ | 383 | $ | 674 | $ | 1,172 | ||||||||
Net income (loss) attributable to Key common shareholders | 401 | 161 | 386 | 681 | 1,178 | |||||||||||||
Per common share | ||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .41 | $ | .16 | $ | .39 | $ | .70 | $ | 1.17 | ||||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | .01 | .01 | |||||||||||||
Net income (loss) attributable to Key common shareholders (a) | .41 | .17 | .39 | .70 | 1.18 | |||||||||||||
Per common share — assuming dilution | ||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .41 | $ | .16 | $ | .38 | $ | .69 | $ | 1.16 | ||||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | .01 | .01 | |||||||||||||
Net income (loss) attributable to Key common shareholders (a) | .41 | .17 | .39 | .70 | 1.17 | |||||||||||||
Cash dividends declared per common share | $ | .185 | $ | .185 | $ | .185 | $ | .555 | $ | .525 | ||||||||
Weighted-average common shares outstanding (000) | 967,804 | 967,147 | 988,319 | 967,632 | 998,268 | |||||||||||||
Effect of common share options and other stock awards | 6,184 | 4,994 | 10,009 | 6,648 | 9,632 | |||||||||||||
Weighted-average common shares and potential common shares outstanding (000) (b) | 973,988 | 972,141 | 998,328 | 974,280 | 1,007,900 | |||||||||||||
(a) | Earnings per share may not foot due to rounding. |
(b) | Assumes conversion of common share options and other stock awards, as applicable. |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations | |||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||
Third Quarter 2020 | Second Quarter 2020 | Third 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) | $ | 57,067 | $ | 474 | 3.31 | % | $ | 60,480 | $ | 518 | 3.44 | % | $ | 48,322 | $ | 543 | 4.46 | % | |||||||||
Real estate — commercial mortgage | 13,202 | 117 | 3.54 | 13,510 | 128 | 3.80 | 13,056 | 163 | 4.95 | ||||||||||||||||||
Real estate — construction | 1,987 | 18 | 3.57 | 1,756 | 17 | 3.97 | 1,463 | 19 | 5.22 | ||||||||||||||||||
Commercial lease financing | 4,488 | 35 | 3.10 | 4,584 | 33 | 2.96 | 4,497 | 42 | 3.68 | ||||||||||||||||||
Total commercial loans | 76,744 | 644 | 3.34 | 80,330 | 696 | 3.49 | 67,338 | 767 | 4.52 | ||||||||||||||||||
Real estate — residential mortgage | 8,398 | 73 | 3.46 | 7,783 | 69 | 3.57 | 6,256 | 62 | 3.97 | ||||||||||||||||||
Home equity loans | 9,580 | 91 | 3.82 | 9,949 | 97 | 3.89 | 10,488 | 132 | 4.97 | ||||||||||||||||||
Consumer direct loans | 4,403 | 56 | 5.07 | 4,152 | 55 | 5.24 | 2,548 | 45 | 6.99 | ||||||||||||||||||
Credit cards | 967 | 25 | 10.24 | 983 | 25 | 10.22 | 1,100 | 32 | 11.59 | ||||||||||||||||||
Consumer indirect loans | 4,827 | 44 | 3.66 | 4,744 | 45 | 3.82 | 4,226 | 43 | 4.10 | ||||||||||||||||||
Total consumer loans | 28,175 | 289 | 4.10 | 27,611 | 291 | 4.22 | 24,618 | 314 | 5.07 | ||||||||||||||||||
Total loans | 104,919 | 933 | 3.55 | 107,941 | 987 | 3.67 | 91,956 | 1,081 | 4.67 | ||||||||||||||||||
Loans held for sale | 1,924 | 18 | 3.61 | 2,463 | 21 | 3.50 | 1,558 | 18 | 4.65 | ||||||||||||||||||
Securities available for sale (b), (e) | 24,941 | 115 | 1.90 | 20,749 | 121 | 2.43 | 21,867 | 136 | 2.52 | ||||||||||||||||||
Held-to-maturity securities (b) | 8,677 | 53 | 2.44 | 9,331 | 56 | 2.43 | 10,684 | 64 | 2.41 | ||||||||||||||||||
Trading account assets | 686 | 3 | 2.08 | 760 | 5 | 2.43 | 884 | 7 | 3.00 | ||||||||||||||||||
Short-term investments | 12,525 | 1 | .04 | 7,892 | 7 | 0.31 | 2,861 | 16 | 2.19 | ||||||||||||||||||
Other investments (e) | 640 | 2 | 1.49 | 672 | — | .29 | 624 | 3 | 1.82 | ||||||||||||||||||
Total earning assets | 154,312 | 1,125 | 2.93 | 149,808 | 1,197 | 3.22 | 130,434 | 1,325 | 4.05 | ||||||||||||||||||
Allowance for loan and lease losses | (1,696) | (1,413) | (881) | ||||||||||||||||||||||||
Accrued income and other assets | 16,195 | 15,704 | 14,605 | ||||||||||||||||||||||||
Discontinued assets | 752 | 793 | 957 | ||||||||||||||||||||||||
Total assets | $ | 169,563 | $ | 164,892 | $ | 145,115 | |||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||
NOW and money market deposit accounts | $ | 80,175 | 26 | .13 | $ | 75,297 | 56 | .30 | $ | 64,595 | 154 | .94 | |||||||||||||||
Savings deposits | 5,478 | 1 | .04 | 5,130 | — | .04 | 4,709 | 1 | .10 | ||||||||||||||||||
Certificates of deposit ($100,000 or more) | 3,862 | 16 | 1.60 | 4,950 | 24 | 1.93 | 7,625 | 45 | 2.37 | ||||||||||||||||||
Other time deposits | 3,735 | 11 | 1.17 | 4,333 | 16 | 1.52 | 5,449 | 27 | 1.96 | ||||||||||||||||||
Total interest-bearing deposits | 93,250 | 54 | .23 | 89,710 | 96 | .43 | 82,378 | 227 | 1.09 | ||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 225 | — | .05 | 242 | — | .03 | 187 | — | .50 | ||||||||||||||||||
Bank notes and other short-term borrowings | 761 | 1 | .68 | 2,869 | 5 | .57 | 626 | 4 | 2.04 | ||||||||||||||||||
Long-term debt (f), (g) | 12,801 | 64 | 2.12 | 12,954 | 71 | 2.30 | 13,347 | 114 | 3.51 | ||||||||||||||||||
Total interest-bearing liabilities | 107,037 | 119 | .45 | 105,775 | 172 | .66 | 96,538 | 345 | 1.42 | ||||||||||||||||||
Noninterest-bearing deposits | 41,694 | 38,267 | 27,901 | ||||||||||||||||||||||||
Accrued expense and other liabilities | 2,350 | 2,369 | 2,605 | ||||||||||||||||||||||||
Discontinued liabilities (g) | 752 | 793 | 957 | ||||||||||||||||||||||||
Total liabilities | 151,833 | 147,204 | 128,001 | ||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||
Key shareholders' equity | 17,730 | 17,688 | 17,113 | ||||||||||||||||||||||||
Noncontrolling interests | — | — | 1 | ||||||||||||||||||||||||
Total equity | 17,730 | 17,688 | 17,114 | ||||||||||||||||||||||||
Total liabilities and equity | $ | 169,563 | $ | 164,892 | $ | 145,115 | |||||||||||||||||||||
Interest rate spread (TE) | 2.48 | % | 2.56 | % | 2.63 | % | |||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) | 1,006 | 2.62 | % | 1,025 | 2.76 | % | 980 | 3.00 | % | ||||||||||||||||||
TE adjustment (b) | 6 | 7 | 8 | ||||||||||||||||||||||||
Net interest income, GAAP basis | $ | 1,000 | $ | 1,018 | $ | 972 | |||||||||||||||||||||
(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 September 30, 2020, June 30, 2020, and September 30, 2019. |
(c) | For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) | Commercial and industrial average balances include $129 million, $135 million, and $144 million of assets from commercial credit cards for the three months ended September 30, 2020, June 30, 2020, and September 30, 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) | ||||||||||||||||||
Nine months ended September 30, 2020 | Nine months ended September 30, 2019 | |||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||
Balance | Interest (a) | Rate (a) | Balance | Interest (a) | Rate (a) | |||||||||||||
Assets | ||||||||||||||||||
Loans: (b), (c) | ||||||||||||||||||
Commercial and industrial (d) | $ | 55,676 | $ | 1,500 | 3.60 | % | $ | 47,191 | $ | 1,622 | 4.59 | % | ||||||
Real estate — commercial mortgage | 13,419 | 400 | 3.98 | 13,744 | 517 | 5.03 | ||||||||||||
Real estate — construction | 1,804 | 55 | 4.06 | 1,482 | 60 | 5.37 | ||||||||||||
Commercial lease financing | 4,546 | 107 | 3.15 | 4,490 | 124 | 3.66 | ||||||||||||
Total commercial loans | 75,445 | 2,062 | 3.65 | 66,907 | 2,323 | 4.64 | ||||||||||||
Real estate — residential mortgage | 7,801 | 210 | 3.59 | 5,866 | 176 | 4.00 | ||||||||||||
Home equity loans | 9,894 | 301 | 4.07 | 10,726 | 404 | 5.03 | ||||||||||||
Consumer direct loans | 4,089 | 165 | 5.38 | 2,256 | 125 | 7.42 | ||||||||||||
Credit cards | 1,010 | 81 | 10.68 | 1,099 | 95 | 11.55 | ||||||||||||
Consumer indirect loans | 4,779 | 135 | 3.78 | 3,951 | 122 | 4.13 | ||||||||||||
Total consumer loans | 27,573 | 892 | 4.32 | 23,898 | 922 | 5.15 | ||||||||||||
Total loans | 103,018 | 2,954 | 3.83 | 90,805 | 3,245 | 4.77 | ||||||||||||
Loans held for sale | 2,090 | 58 | 3.68 | 1,329 | 46 | 4.64 | ||||||||||||
Securities available for sale (b), (e) | 22,297 | 365 | 2.25 | 21,059 | 400 | 2.52 | ||||||||||||
Held-to-maturity securities (b) | 9,274 | 171 | 2.46 | 11,035 | 199 | 2.41 | ||||||||||||
Trading account assets | 837 | 16 | 2.55 | 988 | 24 | 3.22 | ||||||||||||
Short-term investments | 7,412 | 14 | .24 | 2,930 | 49 | 2.23 | ||||||||||||
Other investments (e) | 642 | 3 | .72 | 639 | 11 | 2.18 | ||||||||||||
Total earning assets | 145,570 | 3,581 | 3.30 | 128,785 | 3,974 | 4.12 | ||||||||||||
Allowance for loan and lease losses | (1403) | (880) | ||||||||||||||||
Accrued income and other assets | 15,579 | 14,414 | ||||||||||||||||
Discontinued assets | 794 | 1,010 | ||||||||||||||||
Total assets | $ | 160,540 | $ | 143,329 | ||||||||||||||
Liabilities | ||||||||||||||||||
NOW and money market deposit accounts | $ | 74,087 | 194 | .35 | $ | 62,827 | 431 | .92 | ||||||||||
Savings deposits | 5,089 | 2 | .04 | 4,767 | 3 | .09 | ||||||||||||
Certificates of deposit ($100,000 or more) | 5,036 | 74 | 1.96 | 8,046 | 140 | 2.33 | ||||||||||||
Other time deposits | 4,321 | 49 | 1.53 | 5,506 | 78 | 1.90 | ||||||||||||
Total interest-bearing deposits | 88,533 | 319 | .48 | 81,146 | 652 | 1.07 | ||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 821 | 6 | .95 | 262 | 1 | .63 | ||||||||||||
Bank notes and other short-term borrowings | 1,674 | 11 | .87 | 706 | 13 | 2.43 | ||||||||||||
Long-term debt (f), (g) | 12,733 | 225 | 2.45 | 13,241 | 354 | 3.62 | ||||||||||||
Total interest-bearing liabilities | 103,761 | 561 | .73 | 95,355 | 1020 | 1.43 | ||||||||||||
Noninterest-bearing deposits | 35,922 | 28,016 | ||||||||||||||||
Accrued expense and other liabilities | 2,518 | 2,493 | ||||||||||||||||
Discontinued liabilities (g) | 794 | 1,010 | ||||||||||||||||
Total liabilities | 142,995 | 126,874 | ||||||||||||||||
Equity | ||||||||||||||||||
Key shareholders' equity | 17,545 | 16,454 | ||||||||||||||||
Noncontrolling interests | — | 1 | ||||||||||||||||
Total equity | 17,545 | 16,455 | ||||||||||||||||
Total liabilities and equity | $ | 160,540 | $ | 143,329 | ||||||||||||||
Interest rate spread (TE) | 2.57 | % | 2.69 | % | ||||||||||||||
Net interest income (TE) and net interest margin (TE) | 3,020 | 2.78 | % | 2,954 | 3.06 | % | ||||||||||||
TE adjustment (b) | 21 | 24 | ||||||||||||||||
Net interest income, GAAP basis | $ | 2,999 | $ | 2,930 | ||||||||||||||
(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 nine months ended September 30, 2020, and September 30, 2019, respectively. |
(c) | For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) | Commercial and industrial average balances include $137 million and $139 million of assets from commercial credit cards for the nine months ended September 30, 2020, and September 30, 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 | Nine months ended | |||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
Personnel (a) | $ | 588 | $ | 572 | $ | 547 | $ | 1,675 | $ | 1,699 | ||||||
Net occupancy | 76 | 71 | 72 | 223 | 217 | |||||||||||
Computer processing | 59 | 56 | 53 | 170 | 163 | |||||||||||
Business services and professional fees | 49 | 49 | 43 | 142 | 132 | |||||||||||
Equipment | 25 | 25 | 27 | 74 | 75 | |||||||||||
Operating lease expense | 33 | 34 | 33 | 103 | 91 | |||||||||||
Marketing | 22 | 24 | 26 | 67 | 69 | |||||||||||
FDIC assessment | 6 | 8 | 7 | 23 | 23 | |||||||||||
Intangible asset amortization | 15 | 18 | 26 | 50 | 70 | |||||||||||
OREO expense, net | (1) | 6 | 3 | 8 | 10 | |||||||||||
Other expense | 165 | 150 | 102 | 446 | 372 | |||||||||||
Total noninterest expense | $ | 1,037 | $ | 1,013 | $ | 939 | $ | 2,981 | $ | 2,921 | ||||||
Average full-time equivalent employees (b) | 17,097 | 16,646 | 16,898 | 16,758 | 17,217 | |||||||||||
(a) | Additional detail provided in Personnel Expense table below. |
(b) | The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
Personnel Expense | ||||||||||||||||
(in millions) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
Salaries and contract labor | $ | 339 | $ | 332 | $ | 314 | $ | 987 | $ | 956 | ||||||
Incentive and stock-based compensation | 155 | 162 | 143 | 419 | 430 | |||||||||||
Employee benefits | 93 | 76 | 87 | 261 | 263 | |||||||||||
Severance | 1 | 2 | 3 | 8 | 50 | |||||||||||
Total personnel expense | $ | 588 | $ | 572 | $ | 547 | $ | 1,675 | $ | 1,699 | ||||||
Loan Composition | ||||||||||||||
(dollars in millions) | ||||||||||||||
Percent change 9/30/2020 vs | ||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 6/30/2020 | 9/30/2019 | ||||||||||
Commercial and industrial (a) | $ | 55,025 | $ | 58,297 | $ | 48,362 | (5.6) | % | 13.8 | % | ||||
Commercial real estate: | ||||||||||||||
Commercial mortgage | 13,059 | 13,465 | 13,167 | (3.0) | (.8) | |||||||||
Construction | 1,947 | 1,919 | 1,480 | 1.5 | 31.6 | |||||||||
Total commercial real estate loans | 15,006 | 15,384 | 14,647 | (2.5) | 2.5 | |||||||||
Commercial lease financing (b) | 4,450 | 4,524 | 4,470 | (1.6) | (.4) | |||||||||
Total commercial loans | 74,481 | 78,205 | 67,479 | (4.8) | 10.4 | |||||||||
Residential — prime loans: | ||||||||||||||
Real estate — residential mortgage | 8,715 | 8,149 | 6,527 | 6.9 | 33.5 | |||||||||
Home equity loans | 9,488 | 9,782 | 10,456 | (3.0) | (9.3) | |||||||||
Total residential — prime loans | 18,203 | 17,931 | 16,983 | 1.5 | 7.2 | |||||||||
Consumer direct loans | 4,395 | 4,327 | 2,789 | 1.6 | 57.6 | |||||||||
Credit cards | 970 | 974 | 1,105 | (.4) | (12.2) | |||||||||
Consumer indirect loans | 5,032 | 4,722 | 4,404 | 6.6 | 14.3 | |||||||||
Total consumer loans | 28,600 | 27,954 | 25,281 | 2.3 | 13.1 | |||||||||
Total loans (c), (d) | $ | 103,081 | $ | 106,159 | $ | 92,760 | (2.9) | % | 11.1 | % | ||||
(a) | Loan balances include $128 million, $132 million, and $147 million of commercial credit card balances at September 30, 2020, June 30, 2020, and September 30, 2019, respectively. |
(b) | Commercial lease financing includes receivables held as collateral for a secured borrowing of $18 million, $18 million, and $10 million at September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Principal reductions are based on the cash payments received from these related receivables. |
(c) | Total loans exclude loans of $743 million at September 30, 2020, $780 million at June 30, 2020, and $915 million at September 30, 2019, related to the discontinued operations of the education lending business. |
(d) | Accrued interest of $235 million, $225 million, and $257 million at September 30, 2020, June 30, 2020, and September 30, 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 9/30/2020 vs | ||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 6/30/2020 | 9/30/2019 | ||||||||||
Commercial and industrial | $ | 336 | $ | 419 | $ | 195 | (19.8) | % | 72.3 | % | ||||
Real estate — commercial mortgage | 1,031 | 1,107 | 1,123 | (6.9) | (8.2) | |||||||||
Commercial lease financing | 1 | — | 100 | N/M | (99.0) | |||||||||
Real estate — residential mortgage | 288 | 250 | 120 | 15.2 | 140.0 | |||||||||
Consumer direct loans | 68 | 231 | 60 | (70.6) | 13.3 | |||||||||
Total loans held for sale (a) | $ | 1,724 | $ | 2,007 | $ | 1,598 | (14.1) | % | 7.9 | % | ||||
(a) | Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $288 million at September 30, 2020, $250 million at June 30, 2020, and $120 million at September 30, 2019. |
Summary of Changes in Loans Held for Sale | |||||||||||||||
(in millions) | |||||||||||||||
3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q19 | |||||||||||
Balance at beginning of period | $ | 2,007 | $ | 2,143 | $ | 1,334 | $ | 1,598 | $ | 1,790 | |||||
New originations | 3,282 | 3,621 | 3,333 | 3,659 | 3,222 | ||||||||||
Transfers from (to) held to maturity, net | 75 | (15) | 200 | 26 | 237 | ||||||||||
Loan sales | (3,583) | (3,679) | (2,649) | (3,933) | (3,602) | ||||||||||
Loan draws (payments), net | (57) | (61) | (77) | (18) | (49) | ||||||||||
Valuation adjustments | — | (2) | 2 | 2 | — | ||||||||||
Balance at end of period (a) | $ | 1,724 | $ | 2,007 | $ | 2,143 | $ | 1,334 | $ | 1,598 | |||||
(a) | Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $288 million at September 30, 2020, $250 million at June 30, 2020, $152 million at March 31, 2020, $140 million at December 31, 2019, and $120 million at September 30, 2019. |
Summary of Loan and Lease Loss Experience From Continuing Operations | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
Average loans outstanding | $ | 104,919 | $ | 107,941 | $ | 91,956 | $ | 103,018 | $ | 90,805 | ||||||
Allowance for loan and lease losses at the end of the prior period | $ | 1,708 | $ | 1359 | $ | 890 | $ | 900 | $ | 883 | ||||||
Cumulative effect from change in accounting principle (a) | — | — | — | 204 | — | |||||||||||
Allowance for loan and lease losses at the beginning of the period | 1,708 | 1,359 | 890 | 1,104 | 883 | |||||||||||
Loans charged off: | ||||||||||||||||
Commercial and industrial | 101 | 71 | 176 | 232 | 242 | |||||||||||
Real estate — commercial mortgage | 13 | 2 | — | 18 | 6 | |||||||||||
Real estate — construction | — | — | — | — | 4 | |||||||||||
Total commercial real estate loans | 13 | 2 | — | 18 | 10 | |||||||||||
Commercial lease financing | 10 | 4 | 1 | 16 | 25 | |||||||||||
Total commercial loans | 124 | 77 | 177 | 266 | 277 | |||||||||||
Real estate — residential mortgage | — | 2 | 1 | 2 | 3 | |||||||||||
Home equity loans | 4 | 2 | 6 | 10 | 16 | |||||||||||
Consumer direct loans | 8 | 10 | 10 | 30 | 30 | |||||||||||
Credit cards | 9 | 12 | 11 | 32 | 34 | |||||||||||
Consumer indirect loans | 6 | 7 | 8 | 22 | 24 | |||||||||||
Total consumer loans | 27 | 33 | 36 | 96 | 107 | |||||||||||
Total loans charged off | 151 | 110 | 213 | 362 | 384 | |||||||||||
Recoveries: | ||||||||||||||||
Commercial and industrial | 9 | 5 | 6 | 19 | 22 | |||||||||||
Real estate — commercial mortgage | 2 | — | — | 3 | 2 | |||||||||||
Total commercial real estate loans | 2 | — | — | 3 | 2 | |||||||||||
Commercial lease financing | — | 1 | 1 | 1 | 4 | |||||||||||
Total commercial loans | 11 | 6 | 7 | 23 | 28 | |||||||||||
Real estate — residential mortgage | 1 | — | — | 1 | 1 | |||||||||||
Home equity loans | 3 | 1 | 2 | 6 | 6 | |||||||||||
Consumer direct loans | 2 | 2 | 2 | 6 | 5 | |||||||||||
Credit cards | 2 | 2 | 2 | 6 | 6 | |||||||||||
Consumer indirect loans | 4 | 3 | 4 | 12 | 13 | |||||||||||
Total consumer loans | 12 | 8 | 10 | 31 | 31 | |||||||||||
Total recoveries | 23 | 14 | 17 | 54 | 59 | |||||||||||
Net loan charge-offs | (128) | (96) | (196) | (308) | (325) | |||||||||||
Provision (credit) for loan and lease losses | 150 | 445 | 199 | 934 | 335 | |||||||||||
Allowance for loan and lease losses at end of period | $ | 1,730 | $ | 1,708 | $ | 893 | $ | 1,730 | $ | 893 | ||||||
Liability for credit losses on lending-related commitments at the end of the prior period | $ | 198 | $ | 161 | $ | 64 | $ | 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 | 198 | 161 | 64 | 141 | 64 | |||||||||||
Provision (credit) for losses on lending-related commitments | 10 | 37 | 1 | 67 | 1 | |||||||||||
Liability for credit losses on lending-related commitments at end of period (c) | $ | 208 | $ | 198 | $ | 65 | $ | 208 | $ | 65 | ||||||
Total allowance for credit losses at end of period | $ | 1,938 | $ | 1,906 | $ | 958 | $ | 1,938 | $ | 958 | ||||||
Net loan charge-offs to average total loans | .49 | % | .36 | % | .85 | % | .40 | % | .48 | % | ||||||
Allowance for loan and lease losses to period-end loans | 1.68 | 1.61 | .96 | 1.68 | .96 | |||||||||||
Allowance for credit losses to period-end loans | 1.88 | 1.80 | 1.03 | 1.88 | 1.03 | |||||||||||
Allowance for loan and lease losses to nonperforming loans | 207.4 | 224.7 | 152.6 | 207.4 | 152.6 | |||||||||||
Allowance for credit losses to nonperforming loans | 232.4 | 250.8 | 163.8 | 232.4 | 163.8 | |||||||||||
Discontinued operations — education lending business: | ||||||||||||||||
Loans charged off | — | $ | 2 | $ | 1 | $ | 4 | $ | 9 | |||||||
Recoveries | — | 2 | 1 | 3 | 3 | |||||||||||
Net loan charge-offs | — | — | — | $ | (1) | $ | (6) | |||||||||
(a) | The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13. |
(b) | The nine months ended September 30, 2020, amount excludes $4 million related to the provision for other financial assets. |
(c) | Included in "Accrued expense and other liabilities" on the balance sheet. |
Asset Quality Statistics From Continuing Operations | |||||||||||||||
(dollars in millions) | |||||||||||||||
3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q19 | |||||||||||
Net loan charge-offs | $ | 128 | $ | 96 | $ | 84 | $ | 99 | $ | 196 | |||||
Net loan charge-offs to average total loans | .49 | % | .36 | % | .35 | % | .42 | % | .85 | % | |||||
Allowance for loan and lease losses | $ | 1,730 | $ | 1,708 | $ | 1,359 | $ | 900 | $ | 893 | |||||
Allowance for credit losses (a) | 1,938 | 1,906 | 1,520 | 968 | 958 | ||||||||||
Allowance for loan and lease losses to period-end loans | 1.68 | % | 1.61 | % | 1.32 | % | .95 | % | .96 | % | |||||
Allowance for credit losses to period-end loans | 1.88 | 1.80 | 1.47 | 1.02 | 1.03 | ||||||||||
Allowance for loan and lease losses to nonperforming loans | 207.4 | 224.7 | 215.0 | 156.0 | 152.6 | ||||||||||
Allowance for credit losses to nonperforming loans | 232.4 | 250.8 | 240.5 | 167.8 | 163.8 | ||||||||||
Nonperforming loans at period end | $ | 834 | $ | 760 | $ | 632 | $ | 577 | $ | 585 | |||||
Nonperforming assets at period end | 1,003 | 951 | 844 | 715 | 711 | ||||||||||
Nonperforming loans to period-end portfolio loans | .81 | % | .72 | % | .61 | % | .61 | % | .63 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .97 | .89 | .82 | .75 | .77 | ||||||||||
(a) | Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments. |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations | |||||||||||||||
(dollars in millions) | |||||||||||||||
9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | |||||||||||
Commercial and industrial | $ | 459 | $ | 404 | $ | 277 | $ | 264 | $ | 238 | |||||
Real estate — commercial mortgage | 104 | 91 | 87 | 83 | 92 | ||||||||||
Real estate — construction | 1 | 1 | 2 | 2 | 2 | ||||||||||
Total commercial real estate loans | 105 | 92 | 89 | 85 | 94 | ||||||||||
Commercial lease financing | 6 | 9 | 5 | 6 | 7 | ||||||||||
Total commercial loans | 570 | 505 | 371 | 355 | 339 | ||||||||||
Real estate — residential mortgage | 96 | 89 | 89 | 48 | 42 | ||||||||||
Home equity loans | 146 | 141 | 143 | 145 | 179 | ||||||||||
Consumer direct loans | 3 | 3 | 4 | 4 | 3 | ||||||||||
Credit cards | 2 | 2 | 3 | 3 | 2 | ||||||||||
Consumer indirect loans | 17 | 20 | 22 | 22 | 20 | ||||||||||
Total consumer loans | 264 | 255 | 261 | 222 | 246 | ||||||||||
Total nonperforming loans | 834 | 760 | 632 | 577 | 585 | ||||||||||
OREO | 105 | 112 | 119 | 35 | 39 | ||||||||||
Nonperforming loans held for sale | 61 | 75 | 89 | 94 | 78 | ||||||||||
Other nonperforming assets | 3 | 4 | 4 | 9 | 9 | ||||||||||
Total nonperforming assets | $ | 1,003 | $ | 951 | $ | 844 | $ | 715 | $ | 711 | |||||
Accruing loans past due 90 days or more | 73 | 87 | 128 | 97 | 54 | ||||||||||
Accruing loans past due 30 through 89 days | 336 | 419 | 393 | 329 | 366 | ||||||||||
Restructured loans — accruing and nonaccruing (a) | 306 | 310 | 340 | 347 | 347 | ||||||||||
Restructured loans included in nonperforming loans (a) | 168 | 166 | 172 | 183 | 176 | ||||||||||
Nonperforming assets from discontinued operations — education lending business | 6 | 7 | 7 | 7 | 7 | ||||||||||
Nonperforming loans to period-end portfolio loans | .81 | % | .72 | % | .61 | % | .61 | % | .63 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .97 | .89 | .82 | .75 | .77 | ||||||||||
(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) | |||||||||||||||
3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q19 | |||||||||||
Balance at beginning of period | $ | 760 | $ | 632 | $ | 577 | $ | 585 | $ | 561 | |||||
Loans placed on nonaccrual status (a) | 387 | 293 | 219 | 268 | 271 | ||||||||||
Charge-offs | (150) | (111) | (100) | (114) | (91) | ||||||||||
Loans sold | (6) | (5) | (4) | (1) | — | ||||||||||
Payments | (83) | (29) | (31) | (59) | (37) | ||||||||||
Transfers to OREO | — | — | (3) | (3) | (4) | ||||||||||
Transfers to nonperforming loans held for sale | — | — | — | (47) | (78) | ||||||||||
Loans returned to accrual status | (74) | (20) | (26) | (52) | (37) | ||||||||||
Balance at end of period | $ | 834 | $ | 760 | $ | 632 | $ | 577 | $ | 585 | |||||
(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 3Q20 vs. | ||||||||||||||||||||
3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q19 | 2Q20 | 3Q19 | ||||||||||||||
Consumer Bank | ||||||||||||||||||||
Summary of operations | ||||||||||||||||||||
Total revenue (TE) | $ | 871 | $ | 841 | $ | 820 | $ | 825 | $ | 833 | 3.6 | % | 4.6 | % | ||||||
Provision for credit losses | (16) | 167 | 140 | 55 | 48 | N/M | N/M | |||||||||||||
Noninterest expense | 571 | 555 | 542 | 550 | 529 | 2.9 | 7.9 | |||||||||||||
Net income (loss) attributable to Key | 241 | 91 | 105 | 168 | 196 | 164.8 | 23.0 | |||||||||||||
Average loans and leases | 41,471 | 39,197 | 35,197 | 34,148 | 32,760 | 5.8 | 26.6 | |||||||||||||
Average deposits | 83,175 | 79,502 | 73,320 | 73,561 | 72,995 | 4.6 | 13.9 | |||||||||||||
Net loan charge-offs | 23 | 39 | 43 | 43 | 40 | (41.0) | (42.5) | |||||||||||||
Net loan charge-offs to average total loans | .22 | % | .40 | % | .49 | % | .50 | % | .48 | % | N/A | N/A | ||||||||
Nonperforming assets at period end | $ | 332 | $ | 342 | $ | 306 | $ | 354 | $ | 354 | (2.9) | (6.2) | ||||||||
Return on average allocated equity | 27.03 | % | 10.45 | % | 12.26 | % | 19.64 | % | 23.22 | % | N/A | N/A | ||||||||
Commercial Bank | ||||||||||||||||||||
Summary of operations | ||||||||||||||||||||
Total revenue (TE) | $ | 804 | $ | 857 | $ | 630 | $ | 771 | $ | 780 | (6.2) | % | 3.1 | % | ||||||
Provision for credit losses | 163 | 314 | 218 | 38 | 32 | (48.1) | 409.4 | |||||||||||||
Noninterest expense | 443 | 438 | 358 | 393 | 378 | 1.1 | 17.2 | |||||||||||||
Net income (loss) attributable to Key | 160 | 101 | 63 | 311 | 301 | 58.4 | (46.8) | |||||||||||||
Average loans and leases | 62,925 | 68,038 | 60,082 | 58,535 | 58,215 | (7.5) | 8.1 | |||||||||||||
Average loans held for sale | 1,383 | 2,012 | 1,607 | 1,465 | 1,325 | (31.3) | 4.4 | |||||||||||||
Average deposits | 51,238 | 47,685 | 36,256 | 38,224 | 36,204 | 7.5 | 41.5 | |||||||||||||
Net loan charge-offs | 104 | 57 | 40 | 39 | 35 | 82.5 | 197.1 | |||||||||||||
Net loan charge-offs to average total loans | .66 | % | .34 | % | .27 | % | .26 | % | .24 | % | N/A | N/A | ||||||||
Nonperforming assets at period end | $ | 616 | $ | 407 | $ | 402 | $ | 351 | $ | 351 | 51.4 | 75.5 | ||||||||
Return on average allocated equity | 12.57 | % | 8.41 | % | 5.40 | % | 26.40 | % | 26.18 | % | N/A | N/A | ||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful | ||||||||||||||||||||
Notable Items | |||||||||||||
(in millions) | |||||||||||||
Three months ended | Nine months ended | ||||||||||||
9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||||
Provision for credit losses | — | — | $ | (123) | — | $ | (123) | ||||||
Efficiency initiative expenses | — | — | — | — | (76) | ||||||||
Laurel Road acquisition expenses | — | — | — | — | (2) | ||||||||
Total notable items | — | — | (123) | — | (201) | ||||||||
Income taxes | — | — | (29) | — | (47) | ||||||||
Total notable items, after tax | — | — | $ | (94) | — | $ | (154) | ||||||
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SOURCE KeyCorp