KeyCorp Reports Second Quarter 2019 Net Income Of $403 Million, Or $.40 Per Common Share

2Q19 results included a net impact of $.04 per common share from notable items, primarily related to efficiency initiative expenses

Positive trends in core businesses: solid balance sheet growth and momentum in fee-based businesses

Disciplined expense management with cash efficiency ratio of 61.9%, excluding notable items 58.7%

Strong credit quality: net loan charge-offs to average total loans of .29%

News provided by

KeyCorp

Jul 23, 2019, 06:30 ET

CLEVELAND, July 23, 2019 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $403 million, or $.40 per common share for the second quarter of 2019, compared to $386 million, or $.38 per common share, for the first quarter of 2019 and $464 million, or $.44 per common share, for the second quarter of 2018. Key's second quarter 2019 results included $.04 per common share of notable items, primarily related to efficiency initiative expenses. Key's results in the first quarter of 2019 and the second quarter of 2018 also included notable items; additional detail can be found on page 24 of this release.

Our second quarter results were driven by broad-based growth in our commercial and consumer businesses, along with disciplined expense management and strong credit quality. Revenue trends reflect growth in both loans and deposits, along with positive momentum in our fee-based businesses, including investment banking and debt placement and cards and payments. In addition to strong organic growth, we are also benefiting from the investments we continue to make across our franchise. Our recent acquisition of Laurel Road and the investments we have made in our residential mortgage business contributed to our top line results this quarter and position us well for the future.

Expenses this quarter were well-managed, as we continued to execute on our continuous improvement plans. We made meaningful progress toward our cash efficiency ratio target of 54% to 56%, which we expect to achieve in the second half of 2019. Maintaining our moderate risk profile through disciplined underwriting continues to be a priority. Credit quality and capital remain strong and position us to continue to deliver on our commitments of profitable growth and improved returns.

- Beth Mooney, Chairman and CEO

Selected Financial Highlights

dollars in millions, except per share data										Change 2Q19 vs.
	2Q19			1Q19			2Q18			1Q19		2Q18
Income (loss) from continuing operations attributable to Key common shareholders	$	403		$	386		$	464		4.4	%	(13.1)	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution	.40			.38			.44			5.3		(9.1)
Return on average tangible common equity from continuing operations ^(a)	13.69		%	13.69		%	16.73		%	N/A		N/A
Return on average total assets from continuing operations	1.19			1.18			1.41			N/A		N/A
Common Equity Tier 1 ratio ^(b)	9.60			9.81			10.13			N/A		N/A
Book value at period end	$	15.07		$	14.31		$	13.29		5.3	%	13.4	%
Net interest margin (TE) from continuing operations	3.06		%	3.13		%	3.19		%	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)	6/30/19 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Net interest income (TE)	$	989	$	985	$	987	.4	%	.2	%
Noninterest income	622		536		660		16.0		(5.8)
Total revenue	$	1,611	$	1,521	$	1,647	5.9	%	(2.2)	%


TE = Taxable Equivalent

Taxable-equivalent net interest income was $989 million for the second quarter of 2019, compared to taxable-equivalent net interest income of $987 million for the second quarter of 2018. The increase in net interest income reflects the benefit from higher earning asset balances and higher interest rates, partially offset by a lower net interest margin, driven by an elevated level of liquidity, higher interest-bearing deposit costs, lower loan fees, and a continued decline in purchase accounting accretion. Second quarter 2019 net interest income included $17 million of purchase accounting accretion, a decline of $11 million from the second quarter of 2018.

Compared to the first quarter of 2019, taxable-equivalent net interest income increased by $4 million. The increase was driven by higher earning asset balances and one additional day in the quarter. These benefits were partially offset by a decline in net interest margin, driven by an elevated level of liquidity, reflecting higher short-term deposits and higher interest-bearing deposit costs, as well as a decline in purchase accounting accretion of $5 million from the first quarter.

Noninterest Income

dollars in millions							Change 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Trust and investment services income	$	122	$	115	$	128	6.1	%	(4.7)	%
Investment banking and debt placement fees	163		110		155		48.2		5.2
Service charges on deposit accounts	83		82		91		1.2		(8.8)
Operating lease income and other leasing gains	44		37		(6)		18.9		N/M
Corporate services income	53		55		61		(3.6)		(13.1)
Cards and payments income	73		66		71		10.6		2.8
Corporate-owned life insurance income	33		32		32		3.1		3.1
Consumer mortgage income	10		8		7		25.0		42.9
Mortgage servicing fees	24		21		22		14.3		9.1
Other income	17		10		99		70.0		(82.8)
Total noninterest income	$	622	$	536	$	660	16.0	%	(5.8)	%

Key's noninterest income was $622 million for the second quarter of 2019, compared to $660 million for the year-ago quarter and $536 million in the prior quarter. The year-ago quarter included notable items with a net impact of $36 million from the sale of Key Insurance and Benefit Services, included in other income, and a residual loss on an operating lease. There were no notable noninterest income items in the current and prior quarters.

Excluding notable items, noninterest income declined $2 million from the year-ago period. The decline reflects the sale of Key Insurance and Benefit Services, which resulted in a year-over-year reduction in trust and investment services income. Offsetting the decline was growth in investment banking and debt placement fees of $8 million and higher consumer mortgage income.

Compared to the first quarter of 2019, noninterest income increased by $86 million, due to growth in investment banking and debt placement fees, trust and investment services income, operating lease income, and cards and payments. Consumer mortgage and mortgage servicing fees increased from the prior quarter, primarily related to the growth in our residential mortgage business.

Noninterest Expense

dollars in millions							Change 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Personnel expense	$	589	$	563	$	586	4.6	%	.5	%
Nonpersonnel expense	430		400		407		7.5		5.7
Total noninterest expense	$	1,019	$	963	$	993	5.8	%	2.6	%

Key's noninterest expense was $1.0 billion for the second quarter of 2019, compared to $993 million in the year-ago quarter and $963 million in the prior quarter. The second quarter of 2019 included notable items of $52 million, which were efficiency-related expenses, primarily personnel related. The year-ago quarter and prior quarter both included notable items, primarily efficiency-related expenses, which were $27 million and $26 million, respectively.

Excluding notable items, noninterest expense increased by $1 million from the year-ago period, reflecting the impact of Key's acquisition of Laurel Road in April 2019, offset by the successful implementation of Key's expense initiatives. The change also reflected an increase in charitable contributions and volume-driven expenses, which were partially offset by the elimination of the FDIC surcharge.

Excluding notable items, noninterest expense increased $30 million from the prior quarter, due to an increase in salaries and incentive compensation, a higher operating lease expense, and seasonally higher marketing costs; many of the increases reflected the impact of the Laurel Road acquisition. These expenses were partially offset by a seasonal decline in employee benefits expense.

BALANCE SHEET HIGHLIGHTS

Average Loans

dollars in millions							Change 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Commercial and industrial ^(a)	$	47,227	$	45,998	$	45,030	2.7	%	4.9	%
Other commercial loans	19,765		20,383		20,394		(3.0)		(3.1)
Total consumer loans	23,793		23,268		23,220		2.3		2.5
Total loans	$	90,785	$	89,649	$	88,644	1.3	%	2.4	%


(a)	Commercial and industrial average loan balances include $141 million, $133 million, and $126 million of assets from commercial credit cards at June 30, 2019, March 31, 2019, and June 30, 2018, respectively.

Average loans were $90.8 billion for the second quarter of 2019, an increase of $2.1 billion compared to the second quarter of 2018. Commercial loans increased $1.6 billion, reflecting broad-based growth in commercial and industrial loans, partially offset by declines in commercial mortgage and construction loans. Consumer loans increased $573 million, driven by solid growth from Laurel Road, residential mortgage loans, and indirect auto lending. Home equity loans declined $900 million, largely the result of continued paydowns in home equity lines of credit.

Compared to the first quarter of 2019, average loans increased by $1.1 billion, driven by solid growth in commercial and industrial loans, partly offset by declines in commercial mortgage and construction loans. Consumer loans increased $525 million from the prior quarter, as growth from Laurel Road and residential mortgage loans more than offset the decline in home equity loans. Laurel Road loan originations were over $400 million for the quarter.

Average Deposits

dollars in millions										Change 2Q19 vs.
	2Q19			1Q19			2Q18			1Q19		2Q18
Non-time deposits	$	95,885		$	93,699		$	91,538		2.3	%	4.7	%
Certificates of deposit ($100,000 or more)	8,147			8,376			7,516			(2.7)		8.4
Other time deposits	5,569			5,501			4,949			1.2		12.5
Total deposits	$	109,601		$	107,576		$	104,003		1.9	%	5.4	%

Cost of total deposits	.82		%	.76		%	.43		%	N/A		N/A


N/A = Not Applicable

Average deposits totaled $109.6 billion for the second quarter of 2019, an increase of $5.6 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships.

Compared to the first quarter of 2019, average deposits increased by $2 billion, primarily driven by continued growth from consumer and commercial relationships, as well as short-term deposits.

ASSET QUALITY

dollars in millions										Change 2Q19 vs.
	2Q19			1Q19			2Q18			1Q19		2Q18
Net loan charge-offs	$	65		$	64		$	60		1.6	%	8.3	%
Net loan charge-offs to average total loans	.29		%	.29		%	.27		%	N/A		N/A
Nonperforming loans at period end ^(a)	$	561		$	548		$	545		2.4		2.9
Nonperforming assets at period end ^(a)	608			597			571			1.8		6.5
Allowance for loan and lease losses	890			883			887			.8		.3
Allowance for loan and lease losses to nonperforming loans ^(a)	158.6		%	161.1		%	162.8		%	N/A		N/A
Provision for credit losses	$	74		$	62		$	64		19.4	%	15.6	%


(a)	Nonperforming loan balances exclude $518 million, $551 million, and $629 million of purchased credit impaired loans at June 30, 2019, March 31, 2019, and June 30, 2018, respectively.
N/A = Not Applicable

Key's provision for credit losses was $74 million for the second quarter of 2019, compared to $64 million for the second quarter of 2018 and $62 million for the first quarter of 2019. Key's allowance for loan and lease losses was $890 million, or .97% of total period-end loans at June 30, 2019, compared to 1.01% at June 30, 2018, and .98% at March 31, 2019.

Net loan charge-offs for the second quarter of 2019 totaled $65 million, or .29% of average total loans. These results compare to $60 million, or .27%, for the second quarter of 2018, and $64 million, or .29%, for the first quarter of 2019.

At June 30, 2019, Key's nonperforming loans totaled $561 million, which represented .61% of period-end portfolio loans. These results compare to .62% at June 30, 2018, and .61% at March 31, 2019. Nonperforming assets at June 30, 2019, totaled $608 million, and represented .66% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .65% at June 30, 2018, and .66% at March 31, 2019.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2019.

Capital Ratios

	6/30/2019		3/31/2019		6/30/2018
Common Equity Tier 1 ^(a)	9.60	%	9.81	%	10.13	%
Tier 1 risk-based capital ^(a)	11.05		10.94		10.95
Total risk based capital ^(a)	13.07		12.98		12.83
Tangible common equity to tangible assets ^(b)	8.59		8.43		8.32
Leverage ^(a)	10.02		9.89		9.87


(a)	6/30/2019 ratio is estimated.
(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. See below for further information on the Regulatory Capital Rules.

Key's capital position remained strong in the second quarter of 2019. As shown in the preceding table, at June 30, 2019, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.60% and 11.05%, respectively. Key's tangible common equity ratio was 8.59% at June 30, 2019.

As a "standardized approach" banking organization, Key's mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules") began on January 1, 2015, subject to transitional provisions. Key's estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 9.53% at June 30, 2019. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.

Summary of Changes in Common Shares Outstanding

in thousands				Change 2Q19 vs.
	2Q19	1Q19	2Q18	1Q19		2Q18
Shares outstanding at beginning of period	1,013,186	1,019,503	1,064,939	(.6)	%	(4.9)	%
Open market repurchases and return of shares under employee compensation plans	(10,412)	(11,791)	(6,259)	(11.7)		66.4
Shares issued under employee compensation plans (net of cancellations)	340	5,474	264	(93.8)		28.8
Shares outstanding at end of period	1,003,114	1,013,186	1,058,944	(1.0)	%	(5.3)	%

Consistent with Key's 2018 Capital Plan, during the second quarter of 2019, Key declared a dividend of $.17 per common share and completed $180 million of common share repurchases. These repurchases included $179 million of common share repurchases in the open market and $1 million of share repurchases related to employee equity compensation programs.

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 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Revenue from continuing operations (TE)
Consumer Bank	$	825	$	805	$	810	2.5	%	1.9	%
Commercial Bank	759		701		721		8.3		5.3
Other ^(a)	27		15		116		80.0		(76.7)	%
Total	$	1,611	$	1,521	$	1,647	5.9	%	(2.2)	%

Income (loss) from continuing operations attributable to Key
Consumer Bank	$	172	$	161	$	155	6.8	%	11.0	%
Commercial Bank	283		257		256		10.1		10.5
Other ^(a)	(30)		(11)		71		N/M		N/M
Total	$	425	$	407	$	482	4.4	%	(11.8)	%


(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 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Summary of operations
Net interest income (TE)	$	594	$	591	$	574	.5	%	3.5	%
Noninterest income	231		214		236		7.9		(2.1)
Total revenue (TE)	825		805		810		2.5		1.9
Provision for credit losses	40		45		39		(11.1)		2.6
Noninterest expense	560		548		569		2.2		(1.6)
Income (loss) before income taxes (TE)	225		212		202		6.1		11.4
Allocated income taxes (benefit) and TE adjustments	53		51		47		3.9		12.8
Net income (loss) attributable to Key	$	172	$	161	$	155	6.8	%	11.0	%

Average balances
Loans and leases	$	31,881	$	31,321	$	31,276	1.8	%	1.9	%
Total assets	35,469		34,732		34,495		2.1		2.8
Deposits	72,303		71,288		68,279		1.4		5.9

Assets under management at period end	$	38,942	$	38,742	$	39,663	.5	%	(1.8)	%


TE = Taxable Equivalent

Additional Consumer Bank Data

dollars in millions										Change 2Q19 vs.
	2Q19			1Q19			2Q18			1Q19		2Q18
Noninterest income
Trust and investment services income	$	91		$	85		$	91		7.1	%	—
Service charges on deposit accounts	56			53			62			5.7		(9.7)	%
Cards and payments income	54			48			52			12.5		3.8
Other noninterest income	30			28			31			7.1		(3.2)
Total noninterest income	$	231		$	214		$	236		7.9	%	(2.1)	%

Average deposit balances
NOW and money market deposit accounts	$	42,800		$	42,261		$	40,231		1.3	%	6.4	%
Savings deposits	4,506			4,524			4,883			(.4)		(7.7)
Certificates of deposit ($100,000 or more)	6,644			6,393			5,026			3.9		32.2
Other time deposits	5,549			5,484			4,929			1.2		12.6
Noninterest-bearing deposits	12,804			12,626			13,210			1.4		(3.1)
Total deposits	$	72,303		$	71,288		$	68,279		1.4	%	5.9	%

Home equity loans
Average balance	$	10,618		$	10,905		$	11,496
Combined weighted-average loan-to-value ratio (at date of origination)	70		%	70		%	70		%
Percent first lien positions	60			60			60

Other data
Branches	1,102			1,158			1,177
Automated teller machines	1,430			1,502			1,537

Consumer Bank Summary of Operations (2Q19 vs. 2Q18)

Net income of $172 million for the second quarter of 2019, compared to $155 million for the year-ago quarter
Taxable-equivalent net interest income increased by $20 million, or 3.5%, from the second quarter of 2018. The increase in net interest income was primarily driven by balance sheet growth
Average loans and leases increased $605 million, or 1.9%. This was driven by Laurel Road and strength in residential mortgage and indirect auto lending. This growth was partially offset by an $878 million, or 7.6%, decrease in home equity balances
Average deposits increased $4.0 billion, or 5.9%, from the second quarter of 2018. This was driven by growth in money market and certificates of deposit, reflecting Key's relationship strategy
Provision for credit losses increased $1 million compared to the second quarter of 2018, as credit quality remained stable
Noninterest income decreased $5 million, or 2.1%, from the year-ago quarter driven by lower service charges on deposit accounts
Noninterest expense decreased $9 million, or 1.6%, from the year-ago quarter. The decline reflects the benefit of efficiency initiatives, strong expense discipline, and the elimination of the FDIC quarterly surcharge. The decline in expense was partially offset by expenses related to the acquisition of Laurel Road

Commercial Bank


dollars in millions							Change 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Summary of operations
Net interest income (TE)	$	405	$	402	$	418	.7	%	(3.1)	%
Noninterest income	354		299		303		18.4		16.8
Total revenue (TE)	759		701		721		8.3		5.3
Provision for credit losses	33		16		25		106.3		32.0
Noninterest expense	381		364		391		4.7		(2.6)
Income (loss) before income taxes (TE)	345		321		305		7.5		13.1
Allocated income taxes and TE adjustments	62		64		49		(3.1)		26.5
Net income (loss) attributable to Key	$	283	$	257	$	256	10.1	%	10.5	%

Average balances
Loans and leases	$	57,924	$	57,292	$	56,175	1.1	%	3.1	%
Loans held for sale	1,168		1,066		1,301		9.6		(10.2)
Total assets	65,907		64,898		63,948		1.6		3.1
Deposits	35,961		34,418		33,169		4.5	%	8.4	%


TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data

dollars in millions							Change 2Q19 vs.
	2Q19		1Q19		2Q18		1Q19		2Q18
Noninterest income
Trust and investment services income	$	31	$	30	$	30	3.3	%	3.3	%
Investment banking and debt placement fees	163		111		155		46.8		5.2
Operating lease income and other leasing gains	43		37		(8)		16.2		(637.5)

Corporate services income	50		48		53		4.2		(5.7)
Service charges on deposit accounts	27		27		28		—		(3.6)
Cards and payments income	17		18		16		(5.6)		6.3
Payments and services income	94		93		97		1.1		(3.1)

Mortgage servicing fees	20		17		19		17.6		5.3
Other noninterest income	4		12		10		(66.7)		(60.0)
Total noninterest income	$	355	$	300	$	303	18.3	%	17.2	%


N/M = Not Meaningful

Commercial Bank Summary of Operations (2Q19 vs. 2Q18)

Net income attributable to Key of $283 million for the second quarter of 2019, compared to $256 million for the year-ago quarter
Taxable-equivalent net interest income decreased by $13 million, or 3.1%, compared to the second quarter of 2018, driven by lower purchase accounting accretion and loan spread compression
Average loan and lease balances increased $1.7 billion, or 3.1%, compared to the second quarter of 2018 driven by broad-based growth in commercial and industrial loans
Average deposit balances increased $2.8 billion, or 8.4%, compared to the second quarter of 2018, driven by growth in core deposits and short-term transactional deposits
Provision for credit losses increased $8 million compared to the second quarter of 2018, driven by loan growth. Credit quality remained stable compared to the second quarter of 2018
Noninterest income increased $51 million, or 16.8%, from the prior year. The year-ago quarter included a notable item of $42 million related to a residual loss on an operating lease. Investment banking and debt placement fees increased $8 million, or 5.2%, from the prior year, primarily related to strength in loan syndication fees
Noninterest expense decreased by $10 million, or 2.6%, from the second quarter of 2018. The decline reflects the benefit of efficiency initiatives, strong expense discipline, and the elimination of the FDIC quarterly surcharge

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 $144.5 billion at June 30, 2019.

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 over 1,100 branches and more than 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, 2018, 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. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 10:00 a.m. ET, on Tuesday, July 23, 2019. An audio replay of the call will be available through August 2, 2019.

KeyCorp
Second Quarter 2019
Financial Supplement

Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			6/30/2019			3/31/2019			6/30/2018
Summary of operations
	Net interest income (TE)		$	989		$	985		$	987
	Noninterest income		622			536			660
		Total revenue (TE)	1,611			1,521			1,647
	Provision for credit losses		74			62			64
	Noninterest expense		1,019			963			993
	Income (loss) from continuing operations attributable to Key		423			406			479
	Income (loss) from discontinued operations, net of taxes ^(a)		2			1			3
	Net income (loss) attributable to Key		425			407			482

	Income (loss) from continuing operations attributable to Key common shareholders		403			386			464
	Income (loss) from discontinued operations, net of taxes ^(a)		2			1			3
	Net income (loss) attributable to Key common shareholders		405			387			467

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.40		$	.38		$	.44
	Income (loss) from discontinued operations, net of taxes ^(a)		—			—			—
	Net income (loss) attributable to Key common shareholders ^(b)		.40			.38			.44

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.40			.38			.44
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)		—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)		.40			.38			.44

	Cash dividends declared		.17			.17			.12
	Book value at period end		15.07			14.31			13.29
	Tangible book value at period end		12.12			11.55			10.59
	Market price at period end		17.75			15.75			19.54

Performance ratios
	From continuing operations:
	Return on average total assets		1.19		%	1.18		%	1.41		%
	Return on average common equity		10.94			10.98			13.29
	Return on average tangible common equity ^(c)		13.69			13.69			16.73
	Net interest margin (TE)		3.06			3.13			3.19
	Cash efficiency ratio ^(c)		61.9			61.9			58.8

	From consolidated operations:
	Return on average total assets		1.19		%	1.17		%	1.40		%
	Return on average common equity		11.00			11.01			13.37
	Return on average tangible common equity ^(c)		13.75			13.72			16.84
	Net interest margin (TE)		3.05			3.12			3.17
	Loan to deposit ^(d)		86.1			85.1			86.9

Capital ratios at period end
	Key shareholders' equity to assets		11.74		%	11.25		%	10.96		%
	Key common shareholders' equity to assets		10.46			10.25			10.21
	Tangible common equity to tangible assets ^(c)		8.59			8.43			8.32
	Common Equity Tier 1^(e)		9.60			9.81			10.13
	Tier 1 risk-based capital ^(e)		11.05			10.94			10.95
	Total risk-based capital ^(e)		13.07			12.98			12.83
	Leverage ^(e)		10.02			9.89			9.87

Asset quality — from continuing operations
	Net loan charge-offs		$	65		$	64		$	60
	Net loan charge-offs to average loans		.29		%	.29		%	.27		%
	Allowance for loan and lease losses		$	890		$	883		$	887
	Allowance for credit losses		954			945			945
	Allowance for loan and lease losses to period-end loans		.97		%	.98		%	1.01		%
	Allowance for credit losses to period-end loans		1.04			1.05			1.07
	Allowance for loan and lease losses to nonperforming loans ^(f)		158.6			161.1			162.8
	Allowance for credit losses to nonperforming loans ^(f)		170.1			172.4			173.4
	Nonperforming loans at period-end ^(f)		$	561		$	548		$	545
	Nonperforming assets at period-end ^(f)		608			597			571
	Nonperforming loans to period-end portfolio loans ^(f)		.61		%	.61		%	.62		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(f)		.66			.66			.65

Trust assets
	Assets under management		$	38,942		$	38,742		$	39,663

Other data
	Average full-time equivalent employees		17,206			17,554			18,376
	Branches		1,102			1,158			1,177

Taxable-equivalent adjustment			$	8		$	8		$	8

Financial Highlights (continued)
(dollars in millions, except per share amounts)
		Six months ended
		6/30/2019			6/30/2018
Summary of operations
	Net interest income (TE)	$	1,974		$	1,939
	Noninterest income	1,158			1,261
	Total revenue (TE)	3,132			3,200
	Provision for credit losses	136			125
	Noninterest expense	1,982			1,999
	Income (loss) from continuing operations attributable to Key	829			895
	Income (loss) from discontinued operations, net of taxes ^(a)	3			5
	Net income (loss) attributable to Key	832			900

	Income (loss) from continuing operations attributable to Key common shareholders	$	789		$	866
	Income (loss) from discontinued operations, net of taxes ^(a)	3			5
	Net income (loss) attributable to Key common shareholders	792			871

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	.79		$	.82
	Income (loss) from discontinued operations, net of taxes ^(a)	—			—
	Net income (loss) attributable to Key common shareholders ^(b)	.79			.82

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	.78			.81
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)	—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)	.78			.81

	Cash dividends paid	.34			.225

Performance ratios
	From continuing operations:
	Return on average total assets	1.18		%	1.33		%
	Return on average common equity	10.96			12.53
	Return on average tangible common equity ^(c)	13.69			15.82
	Net interest margin (TE)	3.10			3.17
	Cash efficiency ratio ^(c)	61.9			60.8

	From consolidated operations:
	Return on average total assets	1.18		%	1.33		%
	Return on average common equity	11.01			12.60
	Return on average tangible common equity ^(c)	13.74			15.91
	Net interest margin (TE)	3.08			3.15

Asset quality — from continuing operations
	Net loan charge-offs	$	129		$	114
	Net loan charge-offs to average total loans	.29		%	.26		%

Other data
	Average full-time equivalent employees	17,379			18,458

Taxable-equivalent adjustment		16			16


(a)	In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.
(b)	Earnings per share may not foot due to rounding.
(c)	The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the "Capital" section of this release.
(d)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(e)	June 30, 2019, ratio is estimated.
(f)	Nonperforming loan balances exclude $518 million, $551 million, and $629 million of purchased credit impaired loans at June 30, 2019, March 31, 2019, and June 30, 2018, respectively.

GAAP to Non-GAAP Reconciliations
(dollars in millions)

The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "Common Equity Tier 1," "pre-provision net revenue," "cash efficiency ratio" and "cash efficiency ratio 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, including the impact of tax reform and related actions, in order to enable a better understanding of company results, increase comparability of period-to-period results, and to evaluate and forecast those results.

The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, "Common Equity Tier 1," a non-GAAP financial measure. The mandatory compliance date for Key as a "standardized approach" banking organization began on January 1, 2015, subject to transitional provisions.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

	Three months ended									Six months ended
	6/30/2019			3/31/2019			6/30/2018			6/30/2019			6/30/2018
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)	$	16,969		$	15,924		$	15,100
Less: Intangible assets ^(a)	2,952			2,804			2,858
Preferred Stock ^(b)	1,856			1,421			1,009
Tangible common equity (non-GAAP)	$	12,161		$	11,699		$	11,233
Total assets (GAAP)	$	144,545		$	141,515		$	137,792
Less: Intangible assets ^(a)	2,952			2,804			2,858
Tangible assets (non-GAAP)	$	141,593		$	138,711		$	134,934
Tangible common equity to tangible assets ratio (non-GAAP)	8.59		%	8.43		%	8.32		%
Pre-provision net revenue
Net interest income (GAAP)	$	981		$	977		$	979		$	1,958		$	1,923
Plus: Taxable-equivalent adjustment	8			8			8			16			16
Noninterest income	622			536			660			1,158			1,261
Less: Noninterest expense	1,019			963			993			1,982			1,999
Pre-provision net revenue from continuing operations (non-GAAP)	$	592		$	558		$	654		$	1,150		$	1,201
Average tangible common equity
Average Key shareholders' equity (GAAP)	$	16,531		$	15,702		$	15,032		$	16,119		$	14,961
Less: Intangible assets (average) ^(c)	2,959			2,813			2,883			2,886			2,899
Preferred stock (average)	1,762			1,450			1,025			1,607			1,025
Average tangible common equity (non-GAAP)	$	11,810		$	11,439		$	11,124		$	11,626		$	11,037
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)	$	403		$	386		$	464		$	789		$	866
Average tangible common equity (non-GAAP)	11,810			11,439			11,124			11,626			11,037

Return on average tangible common equity from continuing operations (non-GAAP)	13.69		%	13.69		%	16.73		%	13.69		%	15.82		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)	$	405		$	387		$	467		$	792		$	871
Average tangible common equity (non-GAAP)	11,810			11,439			11,124			11,626			11,037

Return on average tangible common equity consolidated (non-GAAP)	13.75		%	13.72		%	16.84		%	13.74		%	15.91		%
Cash efficiency ratio
Noninterest expense (GAAP)	$	1,019		$	963		$	993		$	1,982		$	1,999
Less: Intangible asset amortization	22			22			25			44			54
Adjusted noninterest expense (non-GAAP)	$	997		$	941		$	968		$	1,938		$	1,945
Less: Notable items ^(d)	52			26			27			78			27
Adjusted noninterest expense excluding notable items (non-GAAP)	$	945		$	915		$	941		$	1,860		$	1,918

Net interest income (GAAP)	$	981		$	977		$	979		$	1,958		$	1,923
Plus: Taxable-equivalent adjustment	8			8			8			16			16
Noninterest income	622			536			660			1,158			1,261
Total taxable-equivalent revenue (non-GAAP)	$	1,611		$	1,521		$	1,647		$	3,132		$	3,200
Plus: Notable items ^(d)	—			—			(36)			—			(36)
Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP)	$	1,611		$	1,521		$	1,611		$	3,132		$	3,164

Cash efficiency ratio (non-GAAP)	61.9		%	61.9		%	58.8		%	61.9		%	60.8		%

Cash efficiency ratio excluding notable items (non-GAAP)	58.7		%	60.2		%	58.4		%	59.4		%	60.6		%

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			6/30/2019
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates)
	Common Equity Tier 1 under current RCR		$	12,283
	Adjustments from current RCR to the fully phased-in RCR:
		Deferred tax assets and other intangible assets ^(e)	—
		Common Equity Tier 1 anticipated under the fully phased-in RCR ^(f)	$	12,283

	Net risk-weighted assets under current RCR		$	127,912
	Adjustments from current RCR to the fully phased-in RCR:
		Mortgage servicing assets ^(g)	822
		Deferred tax assets	165
		All other assets	—
		Total risk-weighted assets anticipated under the fully phased-in RCR ^(f)	$	128,899

	Common Equity Tier 1 ratio under the fully phased-in RCR ^(f)		9.53		%


(a)	For the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, intangible assets exclude $10 million, $12 million, and $20 million, respectively, of period-end purchased credit card receivables.
(b)	Net of capital surplus.
(c)	For the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, average intangible assets exclude $11 million, $13 million, and $21 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2019, and June 30, 2018, average intangible assets exclude $12 million and $23 million, respectively, of average purchase credit card receivables.
(d)	Additional detail provided in Notable Items table on page 24 of this release.
(e)	Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule.
(f)	The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies' Regulatory Capital Rules (fully phased-in); Key is subject to the Regulatory Capital Rules under the "standardized approach."
(g)	Item is included in the 25% exceptions bucket calculation and is risk-weighted at 250%.
GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(dollars in millions)

			6/30/2019		3/31/2019		6/30/2018
Assets
	Loans		$	91,937	$	90,178	$	88,222
	Loans held for sale		1,790		894		1,418
	Securities available for sale		21,528		20,854		17,367
	Held-to-maturity securities		10,878		11,234		12,277
	Trading account assets		1,005		979		833
	Short-term investments		2,443		2,511		2,646
	Other investments		632		646		709
		Total earning assets	130,213		127,296		123,472
	Allowance for loan and lease losses		(890)		(883)		(887)
	Cash and due from banks		607		611		784
	Premises and equipment		829		849		892
	Goodwill		2,664		2,516		2,516
	Other intangible assets		298		300		361
	Corporate-owned life insurance		4,201		4,184		4,147
	Accrued income and other assets		5,633		5,596		5,285
	Discontinued assets		990		1,046		1,222
		Total assets	$	144,545	141,515		137,792

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	63,619	$	61,380	$	55,059
		Savings deposits	4,747		4,839		6,199
		Certificates of deposit ($100,000 or more)	8,084		8,396		7,547
		Other time deposits	5,524		5,573		4,943
		Total interest-bearing deposits	81,974		80,188		73,748
		Noninterest-bearing deposits	27,972		27,987		30,800
		Total deposits	109,946		108,175		104,548
	Federal funds purchased and securities sold under repurchase agreements		161		266		1,667
	Bank notes and other short-term borrowings		720		679		639
	Accrued expense and other liabilities		2,435		2,301		1,983
	Long-term debt		14,312		14,168		13,853
		Total liabilities	127,574		125,589		122,690

Equity
	Preferred stock		1,900		1,450		1,025
	Common shares		1,257		1,257		1,257
	Capital surplus		6,266		6,259		6,315
	Retained earnings		12,005		11,771		10,970
	Treasury stock, at cost		(4,457)		(4,283)		(3,382)
	Accumulated other comprehensive income (loss)		(2)		(530)		(1,085)
		Key shareholders' equity	16,969		15,924		15,100
	Noncontrolling interests		2		2		2
		Total equity	16,971		15,926		15,102
Total liabilities and equity			$	144,545	$	141,515	$	137,792

Common shares outstanding (000)			1,003,114		1,013,186		1,058,944

Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended						Six months ended
			6/30/2019		3/31/2019		6/30/2018		6/30/2019		6/30/2018
Interest income
	Loans		$	1,082	$	1,066	$	1,000	$	2,148	$	1,940
	Loans held for sale		15		13		16		28		28
	Securities available for sale		135		129		97		264		192
	Held-to-maturity securities		67		68		72		135		141
	Trading account assets		9		8		7		17		14
	Short-term investments		17		16		8		33		16
	Other investments		4		4		5		8		11
		Total interest income	1,329		1,304		1,205		2,633		2,342
Interest expense
	Deposits		223		202		112		425		203
	Federal funds purchased and securities sold under repurchase agreements		—		1		5		1		9
	Bank notes and other short-term borrowings		5		4		7		9		13
	Long-term debt		120		120		102		240		194
		Total interest expense	348		327		226		675		419
Net interest income			981		977		979		1,958		1,923
Provision for credit losses			74		62		64		136		125
Net interest income after provision for credit losses			907		915		915		1,822		1,798
Noninterest income
	Trust and investment services income		122		115		128		237		261
	Investment banking and debt placement fees		163		110		155		273		298
	Service charges on deposit accounts		83		82		91		165		180
	Operating lease income and other leasing gains		44		37		(6)		81		26
	Corporate services income		53		55		61		108		123
	Cards and payments income		73		66		71		139		133
	Corporate-owned life insurance income		33		32		32		65		64
	Consumer mortgage income		10		8		7		18		14
	Mortgage servicing fees		24		21		22		45		42
	Other income ^(a)		17		10		99		27		120
		Total noninterest income	622		536		660		1,158		1,261
Noninterest expense
	Personnel		589		563		586		1,152		1,180
	Net occupancy		73		72		79		145		157
	Computer processing		56		54		51		110		103
	Business services and professional fees		45		44		51		89		92
	Equipment		24		24		26		48		52
	Operating lease expense		32		26		30		58		57
	Marketing		24		19		26		43		51
	FDIC assessment		9		7		21		16		42
	Intangible asset amortization		22		22		25		44		54
	OREO expense, net		4		3		—		7		2
	Other expense		141		129		98		270		209
		Total noninterest expense	1,019		963		993		1,982		1,999
Income (loss) from continuing operations before income taxes			510		488		582		998		1,060
	Income taxes		87		82		103		169		165
Income (loss) from continuing operations			423		406		479		829		895
	Income (loss) from discontinued operations, net of taxes		2		1		3		3		5
Net income (loss)			425		407		482		832		900
	Less: Net income (loss) attributable to noncontrolling interests		—		—		—		—		—
Net income (loss) attributable to Key			$	425	$	407	$	482	$	832	$	900

Income (loss) from continuing operations attributable to Key common shareholders			$	403	$	386	$	464	$	789	$	866
Net income (loss) attributable to Key common shareholders			405		387		467		792		871
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.40	$	.38	$	.44	$	.79	$	.82
Income (loss) from discontinued operations, net of taxes			—		—		—		—		—
Net income (loss) attributable to Key common shareholders ^(b)			.40		.38		.44		.79		.82
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.40	$	.38	$	.44	$	.78	$	.81
Income (loss) from discontinued operations, net of taxes			—		—		—		—		—
Net income (loss) attributable to Key common shareholders ^(b)			.40		.38		.44		.78		.81

Cash dividends declared per common share			$	.17	$	.17	$	.12	$	.34	$	.225

Weighted-average common shares outstanding (000)			999,163		1,006,717		1,052,652,000		1,003,047,000		1,054,378,000
	Effect of common share options and other stock awards		8,801		9,787		13,141,000		9,318,000		14,561,000
Weighted-average common shares and potential common shares outstanding (000) ^(c)			1,007,964		1,016,504		1,065,793,000		1,012,365,000		1,068,939,000


(a)	For the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, and the six months ended June 30, 2019 and June 30, 2018, net securities gains (losses) totaled less than $1 million. For the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, and the six months ended June 30, 2019 and June 30, 2018, Key did not have any impairment losses related to securities.
(b)	Earnings per share may not foot due to rounding.
(c)	Assumes conversion of common share options and other stock awards, as applicable.

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
		Second Quarter 2019						First Quarter 2019						Second Quarter 2018
		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)	$	47,227	$	547	4.65	%	$	45,998	$	532	4.68	%	$	45,030	$	485	4.32	%
	Real estate — commercial mortgage	13,866		175		5.06		14,325		179		5.07		14,055		172		4.89
	Real estate — construction	1,423		20		5.41		1,561		21		5.48		1,789		23		4.97
	Commercial lease financing	4,476		41		3.65		4,497		41		3.66		4,550		41		3.61
	Total commercial loans	66,992		783		4.69		66,381		773		4.71		65,424		721		4.41
	Real estate — residential mortgage	5,790		58		4.03		5,543		56		4.02		5,451		54		3.97
	Home equity loans	10,701		135		5.05		10,995		137		5.07		11,601		135		4.67
	Consumer direct loans	2,352		43		7.39		1,862		37		8.06		1,768		33		7.54
	Credit cards	1,091		31		11.26		1,105		32		11.80		1,080		30		11.21
	Consumer indirect loans	3,859		40		4.15		3,763		39		4.13		3,320		35		4.26
	Total consumer loans	23,793		307		5.17		23,268		301		5.23		23,220		287		4.97
	Total loans	90,785		1,090		4.81		89,649		1,074		4.85		88,644		1,008		4.56
	Loans held for sale	1,302		15		4.56		1,121		13		4.74		1,375		16		4.50
	Securities available for sale ^{(b), (e)}	21,086		135		2.54		20,206		129		2.51		17,443		97		2.13
	Held-to-maturity securities ^(b)	11,058		67		2.41		11,369		68		2.41		12,226		72		2.36
	Trading account assets	1,124		9		3.28		957		8		3.36		943		7		3.21
	Short-term investments	3,200		17		2.23		2,728		16		2.28		2,015		8		1.76
	Other investments ^(e)	640		4		2.00		654		4		2.69		710		5		3.08
	Total earning assets	129,195		1,337		4.14		126,684		1,312		4.17		123,356		1,213		3.92
	Allowance for loan and lease losses	(881)						(878)						(875)
	Accrued income and other assets	14,321						14,314						13,897
	Discontinued assets	1,009						1,066						1,241
	Total assets	$	143,644					$	141,186					$	137,619
Liabilities
	NOW and money market deposit accounts	$	63,071	147		.93		$	60,773	130		.87		$	54,749	59		.44
	Savings deposits	4,781		1		.09		4,811		1		.08		6,276		5		.35
	Certificates of deposit ($100,000 or more)	8,147		48		2.37		8,376		47		2.25		7,516		32		1.70
	Other time deposits	5,569		27		1.93		5,501		24		1.79		4,949		16		1.22
	Total interest-bearing deposits	81,568		223		1.10		79,461		202		1.03		73,490		112		.61
	Federal funds purchased and securities sold under repurchase agreements	194		—		.20		409		1		.89		1,475		5		1.41
	Bank notes and other short-term borrowings	842		5		2.46		649		4		2.75		1,116		7		2.27
	Long-term debt ^{(f), (g)}	13,213		120		3.67		13,160		120		3.67		12,748		102		3.20
	Total interest-bearing liabilities	95,817		348		1.46		93,679		327		1.42		88,829		226		1.02
	Noninterest-bearing deposits	28,033						28,115						30,513
	Accrued expense and other liabilities	2,253						2,622						2,002
	Discontinued liabilities ^(g)	1,009						1,066						1,241
	Total liabilities	127,112						125,482						122,585
Equity
	Key shareholders' equity	16,531						15,702						15,032
	Noncontrolling interests	1						2						2
	Total equity	16,532						15,704						15,034
	Total liabilities and equity	$	143,644					$	141,186					$	137,619
Interest rate spread (TE)						2.68	%					2.75	%					2.90	%
Net interest income (TE) and net interest margin (TE)				989		3.06	%			985		3.13	%			987		3.19	%
TE adjustment ^(b)				8						8						8
	Net interest income, GAAP basis			$	981					$	977					$	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 June 30, 2019, March 31, 2019, and June 30, 2018.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $141 million, $133 million, and $126 million of assets from commercial credit cards for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, 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)
		Six months ended June 30, 2019						Six months ended June 30, 2018
		Average				Yield/		Average				Yield/
		Balance		Interest ^(a)		Rate ^(a)		Balance		Interest ^(a)		Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	46,616	$	1,079	4.67	%	$	43,888	$	919	4.22	%
	Real estate — commercial mortgage	14,094		354		5.07		14,070		337		4.83
	Real estate — construction	1,492		41		5.45		1,872		45		4.80
	Commercial lease financing	4,486		82		3.66		4,607		82		3.57
	Total commercial loans	66,688		1,556		4.70		64,437		1,383		4.32
	Real estate — residential mortgage	5,667		114		4.02		5,465		108		3.96
	Home equity loans	10,847		272		5.06		11,738		269		4.61
	Consumer direct loans	2,109		80		7.68		1,767		66		7.53
	Credit cards	1,098		63		11.53		1,080		60		11.27
	Consumer indirect loans	3,811		79		4.14		3,303		70		4.28
	Total consumer loans	23,532		608		5.20		23,353		573		4.94
	Total loans	90,220		2,164		4.83		87,790		1,956		4.49
	Loans held for sale	1,212		28		4.64		1,282		28		4.31
	Securities available for sale ^{(b), (e)}	20,649		264		2.52		17,665		192		2.09
	Held-to-maturity securities ^(b)	11,213		135		2.41		12,134		141		2.33
	Trading account assets	1041		17		3.31		925		14		3.11
	Short-term investments	2,965		33		2.25		2,032		16		1.64
	Other investments ^(e)	647		8		2.35		716		11		3.02
	Total earning assets	127,947		2,649		4.16		122,544		2,358		3.85
	Allowance for loan and lease losses	(879)						(875)
	Accrued income and other assets	14,317						13,982
	Discontinued assets	1,037						1,272
	Total assets	$	142,422					$	136,923
Liabilities
	NOW and money market deposit accounts	$	61,928	277		.90		$	54,129	105		.39
	Savings deposits	4,796		2		.08		6,254		10		.32
	Certificates of deposit ($100,000 or more)	8,261		95		2.31		7,246		59		1.64
	Other time deposits	5,535		51		1.86		4,907		29		1.17
	Total interest-bearing deposits	80,520		425		1.06		72,536		203		.56
	Federal funds purchased and securities sold under repurchase agreements	301		1		.67		1448		9		1.26
	Bank notes and other short-term borrowings	746		9		2.59		1,228		13		2.05
	Long-term debt ^{(f), (g)}	13,187		240		3.67		12,608		194		3.08
	Total interest-bearing liabilities	94,754		675		1.44		87,820		419		.96
	Noninterest-bearing deposits	28,074						30,747
	Accrued expense and other liabilities	2,437						2,121
	Discontinued liabilities ^(g)	1,037						1,272
	Total liabilities	126,302						121,960
Equity
	Key shareholders' equity	16,119						14,961
	Noncontrolling interests	1						2
	Total equity	16,120						14,963
	Total liabilities and equity	$	142,422					$	136,923
Interest rate spread (TE)						2.72	%					2.89	%
Net interest income (TE) and net interest margin (TE)				1,974		3.10	%			1,939		3.17	%
TE adjustment ^(b)				16						16
	Net interest income, GAAP basis			$	1,958					$	1,923


(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% and 35% for the six months ended June 30, 2019, and June 30, 2018, 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 $123 million of assets from commercial credit cards for the six months ended June 30, 2019, and June 30, 2018, 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						Six months ended
	6/30/2019		3/31/2019		6/30/2018		6/30/2019		6/30/2018
Personnel ^(a)	$	589	$	563	$	586	$	1,152	$	1,180
Net occupancy	73		72		79		145		157
Computer processing	56		54		51		110		103
Business services and professional fees	45		44		51		89		92
Equipment	24		24		26		48		52
Operating lease expense	32		26		30		58		57
Marketing	24		19		26		43		51
FDIC assessment	9		7		21		16		42
Intangible asset amortization	22		22		25		44		54
OREO expense, net	4		3		—		7		2
Other expense	141		129		98		270		209
Total noninterest expense	$	1,019	$	963	$	993	$	1,982	$	1,999
Average full-time equivalent employees ^(b)	17,206		17,554		18,376		17,379		18,458


(a)	Additional detail provided in Personnel Expense table below.
(b)	The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Personnel Expense
(in millions)

	Three months ended						Six months ended
	6/30/2019		3/31/2019		6/30/2018		6/30/2019		6/30/2018
Salaries and contract labor	$	322	$	320	$	341	$	642	$	680
Incentive and stock-based compensation	155		132		147		287		292
Employee benefits	83		93		82		176		187
Severance	29		18		16		47		21
Total personnel expense	$	589	$	563	$	586	$	1,152	$	1,180

Loan Composition
(dollars in millions)

							Percent change 6/30/2019 vs
	6/30/2019		3/31/2019		6/30/2018		3/31/2019		6/30/2018
Commercial and industrial ^(a)	$	48,544	$	46,474	$	44,569	4.5	%	8.9	%
Commercial real estate:
Commercial mortgage	13,299		14,344		14,162		(7.3)		(6.1)
Construction	1,439		1,420		1,736		1.3		(17.1)
Total commercial real estate loans	14,738		15,764		15,898		(6.5)		(7.3)
Commercial lease financing ^(b)	4,578		4,507		4,509		1.6		1.5
Total commercial loans	67,860		66,745		64,976		1.7		4.4
Residential — prime loans:
Real estate — residential mortgage	6,053		5,615		5,452		7.8		11.0
Home equity loans	10,575		10,846		11,519		(2.5)		(8.2)
Total residential — prime loans	16,628		16,461		16,971		1.0		(2.0)
Consumer direct loans	2,350		2,165		1,785		8.5		31.7
Credit cards	1,096		1,086		1,094		.9		.2
Consumer indirect loans	4,003		3,721		3,396		7.6		17.9
Total consumer loans	24,077		23,433		23,246		2.7		3.6
Total loans ^(c)	$	91,937	$	90,178	$	88,222	2.0	%	4.2	%


(a)	Loan balances include $143 million, $133 million, and $126 million of commercial credit card balances at June 30, 2019, March 31, 2019, and June 30, 2018, respectively.
(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $11 million, $12 million, and $16 million at June 30, 2019, March 31, 2019, and June 30, 2018, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)	Total loans exclude loans of $964 million at June 30, 2019, $1.0 billion at March 31, 2019, and $1.2 billion at June 30, 2018, related to the discontinued operations of the education lending business.

Loans Held for Sale Composition
(dollars in millions)

							Percent change 6/30/2019 vs
	6/30/2019		3/31/2019		6/30/2018		3/31/2019		6/30/2018
Commercial and industrial	$	255	$	99	$	217	157.6	%	17.5	%
Real estate — commercial mortgage	1,123		724		1,139		55.1		(1.4)
Commercial lease financing	—		—		4		N/M		N/M
Real estate — residential mortgage	164		71		58		131.0		182.8
Consumer direct loans	248		—		—		N/M		N/M
Total loans held for sale ^(a)	$	1,790	$	894	$	1,418	100.2	%	26.2	%


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $164 million at June 30, 2019, $71 million at March 31, 2019, and $58 million at June 30, 2018.

Summary of Changes in Loans Held for Sale
(in millions)

	2Q19		1Q19		4Q18		3Q18		2Q18
Balance at beginning of period	$	894	$	1,227	$	1,618	$	1,418	$	1,667
New originations	3,218		1,676		5,057		2,976		2,665
Transfers from (to) held to maturity, net	42		6		24		4		(4)
Loan sales	(2,358)		(2,017)		(5,448)		(2,491)		(2,909)
Loan draws (payments), net	(6)		2		(24)		(289)		(1)
Balance at end of period ^(a)	$	1,790	$	894	$	1,227	$	1,618	$	1,418


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $164 million at June 30, 2019, $71 million at March 31, 2019, $54 million at December 31, 2018, $87 million at September 30, 2018, and $58 million at June 30, 2018.

Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)

	Three months ended									Six months ended
	6/30/2019			3/31/2019			6/30/2018			6/30/2019			6/30/2018
Average loans outstanding	$	90,785		$	89,649		$	88,644		$	90,220		$	87,790
Allowance for loan and lease losses at beginning of period	$	883		$	883		$	881		$	883		$	877
Loans charged off:
Commercial and industrial	30			36			39			66			76

Real estate — commercial mortgage	1			5			2			6			3
Real estate — construction	—			4			—			4			—
Total commercial real estate loans	1			9			2			10			3
Commercial lease financing	16			8			4			24			5
Total commercial loans	47			53			45			100			84
Real estate — residential mortgage	1			1			—			2			1
Home equity loans	6			4			6			10			10
Consumer direct loans	10			10			9			20			17
Credit cards	12			11			12			23			24
Consumer indirect loans	8			8			7			16			15
Total consumer loans	37			34			34			71			67
Total loans charged off	84			87			79			171			151
Recoveries:
Commercial and industrial	6			10			7			16			13

Real estate — commercial mortgage	1			1			1			2			1
Real estate — construction	—			—			—			—			1
Total commercial real estate loans	1			1			1			2			2
Commercial lease financing	2			1			—			3			1
Total commercial loans	9			12			8			21			16
Real estate — residential mortgage	—			1			—			1			—
Home equity loans	2			2			3			4			6
Consumer direct loans	2			1			2			3			4
Credit cards	2			2			2			4			3
Consumer indirect loans	4			5			4			9			8
Total consumer loans	10			11			11			21			21
Total recoveries	19			23			19			42			37
Net loan charge-offs	(65)			(64)			(60)			(129)			(114)
Provision (credit) for loan and lease losses	72			64			66			136			124
Allowance for loan and lease losses at end of period	$	890		$	883		$	887		$	890		$	887

Liability for credit losses on lending-related commitments at beginning of period	$	62		$	64		$	60		$	64		$	57
Provision (credit) for losses on lending-related commitments	2			(2)			(2)			—			1
Liability for credit losses on lending-related commitments at end of period ^(a)	$	64		$	62		$	58		$	64		$	58

Total allowance for credit losses at end of period	$	954		$	945		$	945		$	954		$	945

Net loan charge-offs to average total loans	.29		%	.29		%	.27		%	.29		%	.26		%
Allowance for loan and lease losses to period-end loans	.97			.98			1.01			.97			1.01
Allowance for credit losses to period-end loans	1.04			1.05			1.07			1.04			1.07
Allowance for loan and lease losses to nonperforming loans	158.6			161.1			162.8			158.6			162.8
Allowance for credit losses to nonperforming loans	170.1			172.4			173.4			170.1			173.4

Discontinued operations — education lending business:
Loans charged off	$	4		$	4		$	3		$	8		$	7
Recoveries	1			1			1			2			3
Net loan charge-offs	$	(3)		$	(3)		$	(2)		$	(6)		$	(4)


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

Asset Quality Statistics From Continuing Operations
(dollars in millions)
	2Q19			1Q19			4Q18			3Q18			2Q18
Net loan charge-offs	$	65		$	64		$	60		$	60		$	60
Net loan charge-offs to average total loans	.29		%	.29		%	.27		%	.27		%	.27		%
Allowance for loan and lease losses	$	890		$	883		$	883		$	887		$	887
Allowance for credit losses ^(a)	954			945			946			947			945
Allowance for loan and lease losses to period-end loans	.97		%	.98		%	.99		%	.99		%	1.01		%
Allowance for credit losses to period-end loans	1.04			1.05			1.06			1.06			1.07
Allowance for loan and lease losses to nonperforming loans ^(b)	158.6			161.1			162.9			137.5			162.8
Allowance for credit losses to nonperforming loans ^(b)	170.1			172.4			174.5			146.8			173.4
Nonperforming loans at period end ^(b)	$	561		$	548		$	542		$	645		$	545
Nonperforming assets at period end ^(b)	608			597			577			674			571
Nonperforming loans to period-end portfolio loans ^(b)	.61		%	.61		%	.61		%	.72		%	.62		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(b)	.66			.66			.64			.75			.65


(a)	Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related unfunded commitments.
(b)	Nonperforming loan balances exclude $518 million, $551 million, $575 million, $606 million, and $629 million of purchased credit impaired loans at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively.

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	6/30/2019			3/31/2019			12/31/2018			9/30/2018			6/30/2018
Commercial and industrial	$	189		$	170		$	152		$	227		$	178

Real estate — commercial mortgage	85			82			81			98			42
Real estate — construction	2			2			2			2			2
Total commercial real estate loans	87			84			83			100			44
Commercial lease financing	7			9			9			10			21
Total commercial loans	283			263			244			337			243
Real estate — residential mortgage	62			64			62			62			55
Home equity loans	191			195			210			221			222
Consumer direct loans	3			3			4			4			4
Credit cards	2			3			2			2			2
Consumer indirect loans	20			20			20			19			19
Total consumer loans	278			285			298			308			302
Total nonperforming loans ^(a)	561			548			542			645			545
OREO	38			40			35			28			26
Other nonperforming assets	9			9			—			1			—
Total nonperforming assets ^(a)	$	608		$	597		$	577		$	674		$	571
Accruing loans past due 90 days or more	74			118			112			87			103
Accruing loans past due 30 through 89 days	299			290			312			368			429
Restructured loans — accruing and nonaccruing ^(b)	395			365			399			366			347
Restructured loans included in nonperforming loans ^(b)	228			198			247			211			184
Nonperforming assets from discontinued operations — education lending business	7			7			8			6			6
Nonperforming loans to period-end portfolio loans ^(a)	.61		%	.61		%	.61		%	.72		%	.62		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(a)	.66			.66			.64			.75			.65


(a)	Nonperforming loan balances exclude $518 million, $551 million, $575 million, $606 million, and $629 million of purchased credit impaired loans at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively.
(b)	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)
	2Q19		1Q19		4Q18		3Q18		2Q18
Balance at beginning of period	$	548	$	542	$	645	$	545	$	541
Loans placed on nonaccrual status	189		196		103		263		175
Charge-offs	(84)		(91)		(92)		(81)		(78)
Loans sold	(38)		(18)		(16)		—		(1)
Payments	(23)		(22)		(53)		(57)		(33)
Transfers to OREO	(4)		(8)		(10)		(5)		(5)
Transfers to other nonperforming assets	—		(13)		—		—		—
Loans returned to accrual status	(27)		(38)		(35)		(20)		(54)
Balance at end of period ^(a)	$	561	$	548	$	542	$	645	$	545


(a)	Nonperforming loan balances exclude $518 million, $551 million, $575 million, $606 million, and $629 million of purchased credit impaired loans at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively.

Line of Business Results
(dollars in millions)

																Percentage change 2Q19 vs.
	2Q19			1Q19			4Q18			3Q18			2Q18			1Q19		2Q18
Consumer Bank
Summary of operations
Total revenue (TE)	$	825		$	805		$	829		$	809		$	810		2.5	%	1.9	%
Provision for credit losses	40			45			43			32			39			(11.1)		2.6
Noninterest expense	560			548			561			563			569			2.2		(1.6)
Net income (loss) attributable to Key	172			161			172			163			155			6.8		11.0
Average loans and leases	31,881			31,321			31,241			31,172			31,276			1.8		1.9
Average deposits	72,303			71,288			70,426			69,124			68,279			1.4		5.9
Net loan charge-offs	40			34			40			36			39			17.6		2.6
Net loan charge-offs to average total loans	.50		%	.44		%	.51		%	.46		%	.50		%	N/A		N/A
Nonperforming assets at period end	$	366		$	365		$	364		$	380		$	371		.3		(1.3)
Return on average allocated equity	21.12		%	20.38		%	20.90		%	19.78		%	18.88		%	N/A		N/A

Commercial Bank
Summary of operations
Total revenue (TE)	$	759		$	701		$	771		$	753		$	721		8.3	%	5.3	%
Provision for credit losses	33			16			17			31			25			106.3		32.0
Noninterest expense	381			364			395			379			391			4.7		(2.6)
Net income (loss) attributable to Key	283			257			307			279			256			10.1		10.5
Average loans and leases	57,924			57,292			56,915			56,135			56,175			1.1		3.1
Average loans held for sale	1,168			1,066			2,250			1,042			1,301			9.6		(10.2)
Average deposits	35,961			34,418			35,113			33,603			33,169			4.5		8.4
Net loan charge-offs	23			30			19			26			22			(23.3)		4.5
Net loan charge-offs to average total loans	.16		%	.21		%	.13		%	.18		%	.16		%	N/A		N/A
Nonperforming assets at period end	$	235		$	225		$	205		$	280		$	187		4.4		25.7
Return on average allocated equity	24.57		%	23.26		%	27.10		%	24.89		%	22.99		%	N/A		N/A

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

Notable Items
(in millions)

	Three months ended						Six months ended
	6/30/2019		3/31/2019		6/30/2018		6/30/2019		6/30/2018
Gain on sale of Key Insurance and Benefits Services	—		—		$	78	—		$	78
Expenses related to the sale of Key Insurance and Benefits Services	—		—		5		—		5
Net gain on sale of Key Insurance and Benefits Services	—		—		73		—		73

Efficiency initiative expenses	$	(50)	$	(26)	(22)		$	(76)	(22)
Laurel Road acquisition expenses	(2)		—		—		(2)		—
Lease residual loss	—		—		(42)		—		(42)
Total notable items	$	(52)	$	(26)	$	9	$	(78)	$	9
Income taxes	(12)		(6)		7		(18)		7
Total notable items, after tax	$	(40)	$	(20)	$	2	$	(60)	$	2