KeyCorp Reports Second Quarter 2020 Net Income Of $159 Million, Or $.16 Per Diluted Common Share

Results reflect provision for credit losses of $482 million, which exceeded net charge-offs by $386 million, or $.34 per share

Positive operating leverage relative to prior year with record pre-provision net revenue

Record revenue up 17% from prior quarter, driven by strength in fees: positive momentum in capital markets businesses, payments and consumer mortgage

Continued to support clients with over $8 billion of Paycheck Protection Program funding

Committed to maintaining strong risk management practices: net charge-offs to average loans of 36 basis points

Strong capital position: Common Equity Tier 1 of 9.1%, within targeted range

News provided by

KeyCorp

Jul 22, 2020, 06:30 ET

CLEVELAND, July 22, 2020 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $159 million, or $.16 per diluted common share for the second quarter of 2020, compared to $118 million, or $.12 per diluted common share, for the first quarter of 2020 and $403 million, or $.40 per diluted common share, for the second quarter of 2019. Key's results in the first and second quarters of 2020 reflect the Current Expected Credit Losses ("CECL") accounting methodology, as well as the impact of the COVID-19 pandemic.

We are pleased with Key's second quarter results, which demonstrated the resiliency of our team and business, the strength of our balance sheet, and our strong risk management practices. Our results also reflected a significant build in our allowance for loan and lease losses, with our provision for credit losses exceeding net charge-offs by $386 million.

Importantly, we generated positive operating leverage versus the year-ago quarter and a record level of pre-provision net revenue. Our results included strong balance sheet trends, with double-digit growth in both loans and deposits. Our fee businesses also benefitted from broad-based growth, driven by strength in capital markets related income, cards and payments and consumer mortgage. Expenses this quarter reflected higher production-related variable costs, expenses related to our payments business, and COVID-19 related expenses, including steps that we continue to take to ensure the health and safety of our teammates.

We have also supported our clients by offering payment deferrals, hardship support, borrower assistance programs, and forbearance options to help provide a bridge for individuals and businesses through these uncertain times. We were very active in the Paycheck Protection Program, processing more than 40,000 loans, and providing over $8 billion of funding to help our clients.

We have positioned the company to perform through various operating environments and play a role in helping to revitalize our economy. Key remains well-capitalized, highly liquid, and committed to maintaining our moderate risk profile. I remain confident about the future of our company and our ability to create value for all our stakeholders.

- Chris Gorman, Chairman and CEO

Selected Financial Highlights

dollars in millions, except per share data										Change 2Q20 vs.
	2Q20			1Q20			2Q19			1Q20		2Q19
Income (loss) from continuing operations attributable to Key common shareholders	$	159		$	118		$	403		34.7	%	(60.5)	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution	.16			.12			.40			33.3		(60.0)
Return on average tangible common equity from continuing operations ^(a)	4.96		%	3.82		%	13.69		%	N/A		N/A
Return on average total assets from continuing operations	.45			.40			1.19			N/A		N/A
Common Equity Tier 1 ratio ^(b)	9.1			8.9			9.6			N/A		N/A
Book value at period end	$	16.07		$	15.95		$	15.07		.8	%	6.6	%
Net interest margin (TE) from continuing operations	2.76		%	3.01		%	3.06		%	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)	6/30/20 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Net interest income (TE)	$	1,025	$	989	$	989	3.6	%	3.6	%
Noninterest income	692		477		622		45.1		11.3
Total revenue	$	1,717	$	1,466	$	1,611	17.1	%	6.6	%


TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the second quarter of 2020, compared to taxable-equivalent net interest income of $989 million for the second 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, a lag in deposit pricing as interest rates declined, and a change in balance sheet mix, including elevated levels of liquidity and Key's participation in the Paycheck Protection Program.

Compared to the first quarter of 2020, taxable-equivalent net interest income increased by $36 million, reflecting higher earning asset balances, partially offset by a lower net interest margin. The lower net interest margin reflects elevated levels of liquidity, the impact of lower interest rates, and Key's participation in the Paycheck Protection Program.

Noninterest Income

dollars in millions							Change 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Trust and investment services income	$	123	$	133	$	122	(7.5)	%	.8	%
Investment banking and debt placement fees	156		116		163		34.5		(4.3)
Service charges on deposit accounts	68		84		83		(19.0)		(18.1)
Operating lease income and other leasing gains	60		30		44		100.0		36.4
Corporate services income	52		62		53		(16.1)		(1.9)
Cards and payments income	91		66		73		37.9		24.7
Corporate-owned life insurance income	35		36		33		(2.8)		6.1
Consumer mortgage income	62		20		15		210.0		313.3
Commercial mortgage servicing fees	12		18		19		(33.3)		(36.8)
Other income	33		(88)		17		N/M		94.1
Total noninterest income	$	692	$	477	$	622	45.1	%	11.3	%

Compared to the second quarter of 2019, noninterest income increased by $70 million, primarily driven by a $47 million increase in consumer mortgage income, driven by a record level of loan originations and related fees in the second quarter of 2020. Additionally, cards and payments income increased $18 million related to prepaid card activity and operating lease income increased $16 million driven by gains from the sale of leveraged leases. These benefits were partially offset by a decline of $15 million in service charges on deposit accounts.

Compared to the first quarter of 2020, noninterest income increased by $215 million. The largest driver of the quarterly increase was a $121 million improvement in other income, primarily driven by $92 million of market-related valuation adjustments in the first quarter of 2020. Other significant drivers for the quarter-over-quarter increase include $42 million of higher consumer mortgage income, and a $40 million increase in investment banking and debt placement fees related to strong commercial mortgage and debt capital markets activity. Operating lease income and cards and payments income also increased, $30 million and $25 million, respectively.

Noninterest Expense

dollars in millions							Change 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Personnel expense	$	572	$	515	$	589	11.1	%	(2.9)	%
Nonpersonnel expense	441		416		430		6.0		2.6
Total noninterest expense	$	1,013	$	931	$	1,019	8.8	%	(.6)	%

Key's noninterest expense was $1.0 billion for the second quarter of 2020, a decrease of $6 million from the year-ago period. The second quarter of 2019 included notable items of $52 million, primarily personnel-related from Key's efficiency initiatives. Excluding notable items in the year-ago period, expenses increased $46 million. The increase is primarily related to higher other expense, from $25 million of payments-related expenses 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.

Compared to the first quarter of 2020, noninterest expense increased $82 million. The increase was largely due to higher incentive and stock-based compensation from strong revenue production in Key's investment banking and consumer mortgage businesses. Other drivers for the linked quarter increase include $25 million of payments-related costs (in other expense), as well as other COVID-19 related expenses.

BALANCE SHEET HIGHLIGHTS

Average Loans

dollars in millions							Change 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Commercial and industrial ^(a)	$	60,480	$	49,466	$	47,227	22.3	%	28.1	%
Other commercial loans	19,850		19,779		19,765		.4		.4
Total consumer loans	27,611		26,929		23,793		2.5		16.0
Total loans	$	107,941	$	96,174	$	90,785	12.2	%	18.9	%

(a)	Commercial and industrial average loan balances include $135 million, $145 million, and $141 million of assets from commercial credit cards at June 30, 2020, March 31, 2020, and June 30, 2019, respectively.

Average loans were $107.9 billion for the second quarter of 2020, an increase of $17.2 billion compared to the second quarter of 2019. Commercial loans increased $13.3 billion, reflecting growth from participation in the Paycheck Protection Program during the current quarter, as well as core broad-based growth in commercial and industrial loans and increased utilization versus the year-ago period. Consumer loans increased $3.8 billion, driven by strength from Laurel Road and Key's consumer mortgage business.

Compared to the first quarter of 2020, average loans increased by $11.8 billion. The second quarter of 2020 included over $8 billion of loans related to the Paycheck Protection Program, which, in addition to the increase in commercial and industrial utilization rates in March 2020, drove the majority of commercial loan growth from the prior quarter. Consumer loan growth continued to be driven by strength from Laurel Road, as well as a record quarter in Key's consumer mortgage business.

Average Deposits

dollars in millions										Change 2Q20 vs.
	2Q20			1Q20			2Q19			1Q20		2Q19
Non-time deposits	$	118,694		$	99,117		$	95,885		19.8	%	23.8	%
Certificates of deposit ($100,000 or more)	4,950			6,310			8,147			(21.6)		(39.2)
Other time deposits	4,333			4,901			5,569			(11.6)		(22.2)
Total deposits	$	127,977		$	110,328		$	109,601		16.0	%	16.8	%

Cost of total deposits	.30		%	.62		%	.82		%	N/A		N/A


N/A = Not Applicable

Average deposits totaled $128.0 billion for the second quarter of 2020, an increase of $18.4 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits.

Compared to the first quarter of 2020, average deposits increased by $17.6 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 decline in time deposits, primarily related to lower interest rates.

ASSET QUALITY

dollars in millions										Change 2Q20 vs.
	2Q20			1Q20			2Q19			1Q20		2Q19
Net loan charge-offs	$	96		$	84		$	65		14.3	%	47.7	%
Net loan charge-offs to average total loans	.36		%	.35		%	.29		%	N/A		N/A
Nonperforming loans at period end	$	760		$	632		$	561		20.3		35.5
Nonperforming assets at period end	951			844			608			12.7		56.4
Allowance for loan and lease losses	1,708			1,359			890			25.7		91.9
Allowance for loan and lease losses to nonperforming loans	224.7		%	215.0		%	158.6		%	N/A		N/A
Provision for credit losses	$	482		$	359		$	74		34.3	%	551.4	%


N/A = Not Applicable

Key's provision for credit losses was $482 million for the second quarter of 2020, compared to $74 million for the second quarter of 2019, and $359 million for the first 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 $386 million. Net loan charge-offs for the second quarter of 2020 totaled $96 million, or .36% of average total loans. These results compare to $65 million, or .29%, for the second quarter of 2019, and $84 million, or .35%, for the first quarter of 2020. Key's allowance for loan and lease losses was $1.7 billion, or 1.61% of total period-end loans at June 30, 2020, compared to .97% at June 30, 2019, and 1.32% at March 31, 2020.

At June 30, 2020, Key's nonperforming loans totaled $760 million, which represented .72% of period-end portfolio loans. These results compare to .61% at June 30, 2019, and .61% at March 31, 2020.

Nonperforming assets at June 30, 2020, totaled $951 million, and represented .89% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .66% at June 30, 2019, and .82% at March 31, 2020.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2020.

Capital Ratios

	6/30/2020		3/31/2020		6/30/2019
Common Equity Tier 1 ^(a)	9.1	%	8.9	%	9.6	%
Tier 1 risk-based capital ^(a)	10.4		10.2		11.0
Total risk based capital ^(a)	12.8		12.2		13.0
Tangible common equity to tangible assets ^(b)	7.6		8.3		8.6
Leverage ^(a)	8.8		9.8		10.0

(a)	6/30/2020 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 second quarter of 2020. As shown in the preceding table, at June 30, 2020, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.1% and 10.4%, respectively. Key's tangible common equity ratio was 7.6% at June 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 29 basis points.

Summary of Changes in Common Shares Outstanding

in thousands					Change 2Q20 vs.
		2Q20	1Q20	2Q19	1Q20		2Q19
Shares outstanding at beginning of period		975,319	977,189	1,013,186	(.2)	%	(3.7)	%
Open market repurchases and return of shares under employee compensation plans		(19)	(7,862)	(10,412)	(99.8)		(99.8)
Shares issued under employee compensation plans (net of cancellations)		647	5,992	340	(89.2)		90.3
	Shares outstanding at end of period	975,947	975,319	1,003,114	.1	%	(2.7)	%

Consistent with Key's 2019 Capital Plan, during the second 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 2Q20 vs.
		2Q20		1Q20		2Q19		1Q20		2Q19
Revenue from continuing operations (TE)
Consumer Bank		$	841	$	820	$	825	2.6	%	1.9	%
Commercial Bank		847		629		760		34.7		11.4
Other ^(a)		29		17		26		70.6		11.5
	Total	$	1,717	$	1,466	$	1,611	17.1	%	6.6	%

Income (loss) from continuing operations attributable to Key
Consumer Bank		$	91	$	105	$	177	(13.3)	%	(48.6)	%
Commercial Bank		120		70		277		71.4		(56.7)
Other ^(a)		(24)		(29)		(29)		N/M		N/M
	Total	$	187	$	146	$	425	28.1	%	(56.0)	%

(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 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Summary of operations
Net interest income (TE)	$	594	$	590	$	594	.7	%	—
Noninterest income	247		230		231		7.4		6.9	%
Total revenue (TE)	841		820		825		2.6		1.9
Provision for credit losses	167		140		40		19.3		317.5
Noninterest expense	555		543		552		2.2		.5
Income (loss) before income taxes (TE)	119		137		233		(13.1)		(48.9)
Allocated income taxes (benefit) and TE adjustments	28		32		56		(12.5)		(50.0)
Net income (loss) attributable to Key	$	91	$	105	$	177	(13.3)	%	(48.6)	%

Average balances
Loans and leases	$	39,197	$	35,197	$	31,881	11.4	%	22.9	%
Total assets	44,106		38,460		35,469		14.7		24.4
Deposits	79,502		73,320		72,303		8.4		10.0

Assets under management at period end	$	39,722	$	36,189	$	38,942	9.8	%	2.0	%


TE = Taxable Equivalent

Additional Consumer Bank Data

dollars in millions										Change 2Q20 vs.
	2Q20			1Q20			2Q19			1Q20		2Q19
Noninterest income
Trust and investment services income	$	87		$	93		$	91		(6.5)	%	(4.4)	%
Service charges on deposit accounts	38			55			56			(30.9)		(32.1)
Cards and payments income	46			49			54			(6.1)		(14.8)
Other noninterest income	76			33			30			130.3		153.3
Total noninterest income	$	247		$	230		$	231		7.4	%	6.9	%

Average deposit balances
NOW and money market deposit accounts	$	49,152		$	45,583		$	42,800		7.8	%	14.8	%
Savings deposits	4,817			4,345			4,506			10.9		6.9
Certificates of deposit ($100,000 or more)	4,520			5,587			6,644			(19.1)		(32.0)
Other time deposits	4,296			4,869			5,549			(11.8)		(22.6)
Noninterest-bearing deposits	16,717			12,936			12,804			29.2		30.6
Total deposits	$	79,502		$	73,320		$	72,303		8.4	%	10.0	%

Home equity loans
Average balance	$	9,893		$	10,093		$	10,618
Combined weighted-average loan-to-value ratio (at date of origination)	70		%	70		%	70		%
Percent first lien positions	63			62			60

Other data
Branches	1,077			1,082			1,102
Automated teller machines	1,394			1,398			1,430

Consumer Bank Summary of Operations (2Q20 vs. 2Q19)

Net income attributable to Key of $91 million for the second quarter of 2020, compared to $177 million for the year-ago quarter
Taxable equivalent net interest income was flat compared to the second quarter of 2019 as the lower interest rate environment offset balance sheet growth
Average loans and leases increased $7.3 billion, or 22.9%, driven by loan production related to the Paycheck Protection Program, as well as growth from Laurel Road and consumer mortgage
Average deposits increased $7.2 billion, or 10.0%, from the second quarter of 2019. This was driven by consumer stimulus payments and lower consumer spend activity
Provision for credit losses increased $127 million compared to the second quarter of 2019. The increase in provision for credit losses is mainly attributable to the change in the economic scenario under the CECL accounting methodology, as well as balance sheet growth
Noninterest income increased $16 million, or 6.9%, from the year-ago quarter, driven by a record quarter in consumer mortgage income partially offset by lower consumer spend activity
Noninterest expense increased $3 million, or .5%, from the year ago quarter

Commercial Bank


dollars in millions							Change 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Summary of operations
Net interest income (TE)	$	442	$	410	$	405	7.8	%	9.1	%
Noninterest income	405		219		355		84.9		14.1
Total revenue (TE)	847		629		760		34.7		11.4
Provision for credit losses	314		214		33		46.7		851.5
Noninterest expense	403		353		389		14.2		3.6
Income (loss) before income taxes (TE)	130		62		338		109.7		(61.5)
Allocated income taxes and TE adjustments	10		(8)		61		N/M		(83.6)
Net income (loss) attributable to Key	$	120	$	70	$	277	71.4	%	(56.7)	%

Average balances
Loans and leases	$	68,038	$	60,082	$	57,918	13.2	%	17.5	%
Loans held for sale	2,012		1,607		1,168		25.2		72.3
Total assets	76,974		69,383		65,901		10.9		16.8
Deposits	46,099		36,058		35,960		27.8	%	28.2	%


TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data

dollars in millions							Change 2Q20 vs.
	2Q20		1Q20		2Q19		1Q20		2Q19
Noninterest income
Trust and investment services income	$	36	$	39	$	31	(7.7)	%	16.1	%
Investment banking and debt placement fees	156		116		162		34.5		(3.7)
Operating lease income and other leasing gains	46		30		43		53.3		7.0

Corporate services income	45		57		50		(21.1)		(10.0)
Service charges on deposit accounts	30		28		27		7.1		11.1
Cards and payments income	44		17		17		158.8		158.8
Payments and services income	119		102		94		16.7		26.6

Commercial mortgage servicing fees	12		18		20		(33.3)		(40.0)
Other noninterest income	36		(86)		5		N/M		620.0
Total noninterest income	$	405	$	219	$	355	84.9	%	14.1	%


N/M = Not Meaningful

Commercial Bank Summary of Operations (2Q20 vs. 2Q19)

Net income attributable to Key of $120 million for the second quarter of 2020, compared to $277 million for the year-ago quarter
Taxable-equivalent net interest income increased by $37 million, compared to the second quarter of 2019, with balance sheet growth partially offset by lower interest rate environment
Average loan and lease balances increased $10.1 billion, or 17.5%, compared to the second quarter of 2019 driven by growth in commercial and industrial loans from line draws and Paycheck Protection Program loans
Average deposit balances increased $10.1 billion, or 28.2%, compared to the second quarter of 2019, driven by growth in targeted relationships and the impact of government programs
Provision for credit losses increased $281 million compared to the second quarter of 2019. The increase in provision for credit losses is mainly attributable to the change in the economic scenario under the CECL accounting methodology, but also impacted by line draws on commercial credits
Noninterest income increased $50 million, or 14.1%, from the second quarter of 2019, driven by higher cards and payments income related to prepaid card revenue, as well as higher other income
Noninterest expense increased by $14 million, or 3.6%, from the second quarter of 2019 driven by higher incentives related to strong revenue production

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

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 $171.2 billion at June 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.

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, July 22, 2020. A replay of the call will be available through August 5, 2020.

Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			6/30/2020			3/31/2020			6/30/2019
Summary of operations
	Net interest income (TE)		$	1,025		$	989		$	989
	Noninterest income		692			477			622
		Total revenue (TE)	1,717			1,466			1,611
	Provision for credit losses		482			359			74
	Noninterest expense		1,013			931			1,019
	Income (loss) from continuing operations attributable to Key		185			145			423
	Income (loss) from discontinued operations, net of taxes		2			1			2
	Net income (loss) attributable to Key		187			146			425

	Income (loss) from continuing operations attributable to Key common shareholders		159			118			403
	Income (loss) from discontinued operations, net of taxes		2			1			2
	Net income (loss) attributable to Key common shareholders		161			119			405

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.16		$	.12		$	.40
	Income (loss) from discontinued operations, net of taxes		—			—			—
	Net income (loss) attributable to Key common shareholders ^(a)		.17			.12			.40

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.16			.12			.40
	Income (loss) from discontinued operations, net of taxes — assuming dilution		—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(a)		.17			.12			.40

	Cash dividends declared		.185			.185			.17
	Book value at period end		16.07			15.95			15.07
	Tangible book value at period end		13.12			12.98			12.12
	Market price at period end		12.18			10.37			17.75

Performance ratios
	From continuing operations:
	Return on average total assets		.45		%	.40		%	1.19		%
	Return on average common equity		4.05			3.10			10.94
	Return on average tangible common equity ^(b)		4.96			3.82			13.69
	Net interest margin (TE)		2.76			3.01			3.06
	Cash efficiency ratio ^(b)		57.9			62.3			61.9

	From consolidated operations:
	Return on average total assets		.46		%	.40		%	1.19		%
	Return on average common equity		4.10			3.12			11.00
	Return on average tangible common equity ^(b)		5.02			3.86			13.75
	Net interest margin (TE)		2.76			3.00			3.05
	Loan to deposit ^(c)		80.4			92.1			86.1

Capital ratios at period end
	Key shareholders' equity to assets		10.2		%	11.1		%	11.7		%
	Key common shareholders' equity to assets		9.2			10.0			10.5
	Tangible common equity to tangible assets ^(b)		7.6			8.3			8.6
	Common Equity Tier 1^(d)		9.1			8.9			9.6
	Tier 1 risk-based capital ^(d)		10.4			10.2			11.0
	Total risk-based capital ^(d)		12.8			12.2			13.0
	Leverage ^(d)		8.8			9.8			10.0

Asset quality — from continuing operations
	Net loan charge-offs		$	96		$	84		$	65
	Net loan charge-offs to average loans		.36		%	.35		%	.29		%
	Allowance for loan and lease losses		$	1,708		$	1,359		$	890
	Allowance for credit losses		1,906			1,520			954
	Allowance for loan and lease losses to period-end loans		1.61		%	1.32		%	.97		%
	Allowance for credit losses to period-end loans		1.80			1.47			1.04
	Allowance for loan and lease losses to nonperforming loans ^(e)		224.7			215.0			158.6
	Allowance for credit losses to nonperforming loans ^(e)		250.8			240.5			170.1
	Nonperforming loans at period-end ^(e)		$	760		$	632		$	561
	Nonperforming assets at period-end ^(e)		951			844			608
	Nonperforming loans to period-end portfolio loans ^(e)		.72		%	.61		%	.61		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(e)		.89			.82			.66

Trust assets
	Assets under management		$	39,722		$	36,189		$	38,942

Other data
	Average full-time equivalent employees		16,646			16,529			17,206
	Branches		1,077			1,082			1,102

Taxable-equivalent adjustment			$	7		$	8		$	8

Financial Highlights (continued)
(dollars in millions, except per share amounts)
		Six months ended
		6/30/2020			6/30/2019
Summary of operations
	Net interest income (TE)	$	2,014		$	1,974
	Noninterest income	1,169			1,158
	Total revenue (TE)	3,183			3,132
	Provision for credit losses	841			136
	Noninterest expense	1,944			1,982
	Income (loss) from continuing operations attributable to Key	330			829
	Income (loss) from discontinued operations, net of taxes	3			3
	Net income (loss) attributable to Key	333			832

	Income (loss) from continuing operations attributable to Key common shareholders	$	277		$	789
	Income (loss) from discontinued operations, net of taxes	3			3
	Net income (loss) attributable to Key common shareholders	280			792

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	.29		$	.79
	Income (loss) from discontinued operations, net of taxes	—			—
	Net income (loss) attributable to Key common shareholders ^(a)	.29			.79

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	.28			.78
	Income (loss) from discontinued operations, net of taxes — assuming dilution	—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(a)	.29			.78

	Cash dividends paid	.37			.34

Performance ratios
	From continuing operations:
	Return on average total assets	.43		%	1.18		%
	Return on average common equity	3.58			10.96
	Return on average tangible common equity ^(b)	4.40			13.69
	Net interest margin (TE)	2.88			3.10
	Cash efficiency ratio ^(b)	60.0			61.9

	From consolidated operations:
	Return on average total assets	.43		%	1.18		%
	Return on average common equity	3.62			11.01
	Return on average tangible common equity ^(b)	4.45			13.74
	Net interest margin (TE)	2.87			3.08

Asset quality — from continuing operations
	Net loan charge-offs	$	180		$	129
	Net loan charge-offs to average total loans	.35		%	.29		%

Other data
	Average full-time equivalent employees	16,587			17,379

Taxable-equivalent adjustment		15			16

(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)	June 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									Six months ended
	6/30/2020			3/31/2020			6/30/2019			6/30/2020			6/30/2019
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)	$	17,542		$	17,411		$	16,969
Less: Intangible assets ^(a)	2,877			2,894			2,952
Preferred Stock ^(b)	1,856			1,856			1,856
Tangible common equity (non-GAAP)	$	12,809		$	12,661		$	12,161
Total assets (GAAP)	$	171,192		$	156,197		$	144,545
Less: Intangible assets ^(a)	2,877			2,894			2,952
Tangible assets (non-GAAP)	$	168,315		$	153,303		$	141,593
Tangible common equity to tangible assets ratio (non-GAAP)	7.6		%	8.3		%	8.6		%
Pre-provision net revenue
Net interest income (GAAP)	$	1,018		$	981		$	981		$	1,999		$	1,958
Plus: Taxable-equivalent adjustment	7			8			8			15			16
Noninterest income	692			477			622			1,169			1,158
Less: Noninterest expense	1,013			931			1,019			1,944			1,982
Pre-provision net revenue from continuing operations (non-GAAP)	$	704		$	535		$	592		$	1,239		$	1,150
Average tangible common equity
Average Key shareholders' equity (GAAP)	$	17,688		$	17,216		$	16,531		$	17,452		$	16,119
Less: Intangible assets (average) ^(c)	2,886			2,902			2,959			2,894			2,886
Preferred stock (average)	1,900			1,900			1,762			1,900			1,607
Average tangible common equity (non-GAAP)	$	12,902		$	12,414		$	11,810		$	12,658		$	11,626
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)	$	159		$	118		$	403		$	277		$	789
Plus: Notable items, after tax ^(d)	—			—			40			—			60
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)	$	159		$	118		$	443		$	277		$	849
Average tangible common equity (non-GAAP)	12,902			12,414			11,810			12,658			11,626

Return on average tangible common equity from continuing operations (non-GAAP)	4.96		%	3.82		%	13.69		%	4.40		%	13.69		%
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)	4.96		%	3.82		%	15.05		%	4.40		%	14.73		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)	$	161		$	119		$	405		$	280		$	792
Average tangible common equity (non-GAAP)	12,902			12,414			11,810			12,658			11,626

Return on average tangible common equity consolidated (non-GAAP)	5.02		%	3.86		%	13.75		%	4.45		%	13.74		%

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
	Three months ended									Six months ended
	6/30/2020			3/31/2020			6/30/2019			6/30/2020			6/30/2019
Cash efficiency ratio
Noninterest expense (GAAP)	$	1,013		$	931		$	1,019		$	1,944		$	1,982
Less: Intangible asset amortization	18			17			22			35			44
Adjusted noninterest expense (non-GAAP)	$	995		$	914		$	997		$	1,909		$	1,938
Less: Notable items ^(d)	—			—			52			—			78
Adjusted noninterest expense excluding notable items (non-GAAP)	$	995		$	914		$	945		$	1,909		$	1,860

Net interest income (GAAP)	$	1,018		$	981		$	981		$	1,999		$	1,958
Plus: Taxable-equivalent adjustment	7			8			8			15			16
Noninterest income	692			477			622			1,169			1,158
Total taxable-equivalent revenue (non-GAAP)	$	1,717		$	1,466		$	1,611		$	3,183		$	3,132

Cash efficiency ratio (non-GAAP)	57.9		%	62.3		%	61.9		%	60.0		%	61.9		%

Cash efficiency ratio excluding notable items (non-GAAP)	57.9		%	62.3		%	58.7		%	60.0		%	59.4		%

(a)	For the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, intangible assets exclude $5 million, $6 million, and $10 million, respectively, of period-end purchased credit card receivables.
(b)	Net of capital surplus.
(c)	For the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, average intangible assets exclude $6 million, $7 million, and $11 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2020, and June 30, 2019, average intangible assets exclude $6 million and $12 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)

			6/30/2020		3/31/2020		6/30/2019
Assets
	Loans		$	106,159	$	103,198	$	91,937
	Loans held for sale		2,007		2,143		1,790
	Securities available for sale		23,600		20,807		21,528
	Held-to-maturity securities		9,075		9,638		10,878
	Trading account assets		645		795		1,005
	Short-term investments		14,036		4,073		2,443
	Other investments		655		679		632
		Total earning assets	156,177		141,333		130,213
	Allowance for loan and lease losses		(1,708)		(1,359)		(890)
	Cash and due from banks		1,059		865		607
	Premises and equipment		776		791		829
	Goodwill		2,664		2,664		2,664
	Other intangible assets		218		236		298
	Corporate-owned life insurance		4,251		4,243		4,201
	Accrued income and other assets		6,976		6,604		5,633
	Discontinued assets		779		820		990
		Total assets	$	171,192	156,197		144,545

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	78,853	$	71,005	$	63,619
		Savings deposits	5,371		4,753		4,747
		Certificates of deposit ($100,000 or more)	4,476		5,630		8,084
		Other time deposits	4,011		4,623		5,524
		Total interest-bearing deposits	92,711		86,011		81,974
		Noninterest-bearing deposits	42,802		29,293		27,972
		Total deposits	135,513		115,304		109,946
	Federal funds purchased and securities sold under repurchase agreements		267		2,444		161
	Bank notes and other short-term borrowings		1,716		4,606		720
	Accrued expense and other liabilities		2,420		2,700		2,435
	Long-term debt		13,734		13,732		14,312
		Total liabilities	153,650		138,786		127,574

Equity
	Preferred stock		1,900		1,900		1,900
	Common shares		1,257		1,257		1,257
	Capital surplus		6,240		6,222		6,266
	Retained earnings		12,154		12,174		12,005
	Treasury stock, at cost		(4,945)		(4,956)		(4,457)
	Accumulated other comprehensive income (loss)		936		814		(2)
		Key shareholders' equity	17,542		17,411		16,969
	Noncontrolling interests		—		—		2
		Total equity	17,542		17,411		16,971
Total liabilities and equity			$	171,192	$	156,197	$	144,545

Common shares outstanding (000)			975,947		975,319		1,003,114

Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended						Six months ended
			6/30/2020		3/31/2020		6/30/2019		6/30/2020		6/30/2019
Interest income
	Loans		$	980	$	1,026	$	1,082	$	2,006	$	2,148
	Loans held for sale		21		19		15		40		28
	Securities available for sale		121		129		135		250		264
	Held-to-maturity securities		56		62		67		118		135
	Trading account assets		5		8		9		13		17
	Short-term investments		7		6		17		13		33
	Other investments		—		1		4		1		8
		Total interest income	1,190		1,251		1,329		2,441		2,633
Interest expense
	Deposits		96		169		223		265		425
	Federal funds purchased and securities sold under repurchase agreements		—		6		—		6		1
	Bank notes and other short-term borrowings		5		5		5		10		9
	Long-term debt		71		90		120		161		240
		Total interest expense	172		270		348		442		675
Net interest income			1,018		981		981		1,999		1,958
Provision for credit losses			482		359		74		841		136
Net interest income after provision for credit losses			536		622		907		1,158		1,822
Noninterest income
	Trust and investment services income		123		133		122		256		237
	Investment banking and debt placement fees		156		116		163		272		273
	Service charges on deposit accounts		68		84		83		152		165
	Operating lease income and other leasing gains		60		30		44		90		81
	Corporate services income		52		62		53		114		108
	Cards and payments income		91		66		73		157		139
	Corporate-owned life insurance income		35		36		33		71		65
	Consumer mortgage income		62		20		15		82		26
	Commercial mortgage servicing fees		12		18		19		30		37
	Other income		33		(88)		17		(55)		27
		Total noninterest income	692		477		622		1,169		1,158
Noninterest expense
	Personnel		572		515		589		1,087		1,152
	Net occupancy		71		76		73		147		145
	Computer processing		56		55		56		111		110
	Business services and professional fees		49		44		45		93		89
	Equipment		25		24		24		49		48
	Operating lease expense		34		36		32		70		58
	Marketing		24		21		24		45		43
	FDIC assessment		8		9		9		17		16
	Intangible asset amortization		18		17		22		35		44
	OREO expense, net		6		3		4		9		7
	Other expense		150		131		141		281		270
		Total noninterest expense	1,013		931		1,019		1,944		1,982
Income (loss) from continuing operations before income taxes			215		168		510		383		998
	Income taxes		30		23		87		53		169
Income (loss) from continuing operations			185		145		423		330		829
	Income (loss) from discontinued operations, net of taxes		2		1		2		3		3
Net income (loss)			187		146		425		333		832
	Less: Net income (loss) attributable to noncontrolling interests		—		—		—		—		—
Net income (loss) attributable to Key			$	187	$	146	$	425	$	333	$	832

Income (loss) from continuing operations attributable to Key common shareholders			$	159	$	118	$	403	$	277	$	789
Net income (loss) attributable to Key common shareholders			161		119		405		280		792
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.16	$	.12	$	.40	$	.29	$	.79
Income (loss) from discontinued operations, net of taxes			—		—		—		—		—
Net income (loss) attributable to Key common shareholders ^(a)			.17		.12		.40		.29		.79
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.16	$	.12	$	.40	$	.28	$	.78
Income (loss) from discontinued operations, net of taxes			—		—		—		—		—
Net income (loss) attributable to Key common shareholders ^(a)			.17		.12		.40		.29		.78

Cash dividends declared per common share			$	.185	$	.185	$	.17	$	.37	$	.34

Weighted-average common shares outstanding (000)			967,147		967,446		999,163		967,380		1,003,047
	Effect of common share options and other stock awards		4,994		8,664		8,801		6,892		9,318
Weighted-average common shares and potential common shares outstanding (000) ^(b)			972,141		976,110		1,007,964		974,272		1,012,365

(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)
		Second Quarter 2020						First Quarter 2020						Second 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)	$	60,480	$	518	3.44	%	$	49,466	$	508	4.13	%	$	47,227	$	547	4.65	%
	Real estate — commercial mortgage	13,510		128		3.80		13,548		155		4.60		13,866		175		5.06
	Real estate — construction	1,756		17		3.97		1,666		20		4.75		1,423		20		5.41
	Commercial lease financing	4,584		33		2.96		4,565		39		3.39		4,476		41		3.65
	Total commercial loans	80,330		696		3.49		69,245		722		4.19		66,992		783		4.69
	Real estate — residential mortgage	7,783		69		3.57		7,215		68		3.75		5,790		58		4.03
	Home equity loans	9,949		97		3.89		10,155		113		4.49		10,701		135		5.05
	Consumer direct loans	4,152		55		5.24		3,709		54		5.91		2,352		43		7.39
	Credit cards	983		25		10.22		1,082		31		11.50		1,091		31		11.26
	Consumer indirect loans	4,744		45		3.82		4,768		46		3.86		3,859		40		4.15
	Total consumer loans	27,611		291		4.22		26,929		312		4.66		23,793		307		5.17
	Total loans	107,941		987		3.67		96,174		1,034		4.32		90,785		1,090		4.81
	Loans held for sale	2,463		21		3.50		1,885		19		3.99		1,302		15		4.56
	Securities available for sale ^{(b), (e)}	20,749		121		2.43		21,172		129		2.49		21,086		135		2.54
	Held-to-maturity securities ^(b)	9,331		56		2.43		9,820		62		2.51		11,058		67		2.41
	Trading account assets	760		5		2.43		1,065		8		2.95		1,124		9		3.28
	Short-term investments	7,892		7		.31		1,764		6		1.42		3,200		17		2.23
	Other investments ^(e)	672		—		.29		614		1		.40		640		4		2.00
	Total earning assets	149,808		1,197		3.22		132,494		1,259		3.82		129,195		1,337		4.14
	Allowance for loan and lease losses	(1,413)						(1,097)						(881)
	Accrued income and other assets	15,704						14,831						14,321
	Discontinued assets	793						838						1,009
	Total assets	$	164,892					$	147,066					$	143,644
Liabilities
	NOW and money market deposit accounts	$	75,297	56		.30		$	66,721	112		.67		$	63,071	147		.93
	Savings deposits	5,130		—		.04		4,655		1		.05		4,781		1		.09
	Certificates of deposit ($100,000 or more)	4,950		24		1.93		6,310		34		2.20		8,147		48		2.37
	Other time deposits	4,333		16		1.52		4,901		22		1.81		5,569		27		1.93
	Total interest-bearing deposits	89,710		96		.43		82,587		169		.82		81,568		223		1.10
	Federal funds purchased and securities sold under repurchase agreements	242		—		.03		2,002		6		1.17		194		—		.20
	Bank notes and other short-term borrowings	2,869		5		.57		1,401		5		1.58		842		5		2.46
	Long-term debt ^{(f), (g)}	12,954		71		2.30		12,443		90		2.96		13,213		120		3.67
	Total interest-bearing liabilities	105,775		172		.66		98,433		270		1.10		95,817		348		1.46
	Noninterest-bearing deposits	38,267						27,741						28,033
	Accrued expense and other liabilities	2,369						2,838						2,253
	Discontinued liabilities ^(g)	793						838						1,009
	Total liabilities	147,204						129,850						127,112
Equity
	Key shareholders' equity	17,688						17,216						16,531
	Noncontrolling interests	—						—						1
	Total equity	17,688						17,216						16,532
	Total liabilities and equity	$	164,892					$	147,066					$	143,644
Interest rate spread (TE)						2.56	%					2.72	%					2.68	%
Net interest income (TE) and net interest margin (TE)				1,025		2.76	%			989		3.01	%			989		3.06	%
TE adjustment ^(b)				7						8						8
	Net interest income, GAAP basis			$	1,018					$	981					$	981

(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, 2020, March 31, 2020, and June 30, 2019.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $135 million, $145 million, and $141 million of assets from commercial credit cards for the three months ended June 30, 2020, March 31, 2020, and June 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)
		Six months ended June 30, 2020						Six months ended June 30, 2019
		Average				Yield/		Average				Yield/
		Balance		Interest ^(a)		Rate ^(a)		Balance		Interest ^(a)		Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	54,973	$	1,026	3.75	%	$	46,616	$	1,079	4.67	%
	Real estate — commercial mortgage	13,529		283		4.20		14,094		354		5.07
	Real estate — construction	1,711		37		4.35		1,492		41		5.45
	Commercial lease financing	4,575		72		3.17		4,486		82		3.66
	Total commercial loans	74,788		1,418		3.81		66,688		1,556		4.70
	Real estate — residential mortgage	7,500		137		3.66		5,667		114		4.02
	Home equity loans	10,052		210		4.19		10,847		272		5.06
	Consumer direct loans	3,930		109		5.56		2,109		80		7.68
	Credit cards	1,032		56		10.89		1,098		63		11.53
	Consumer indirect loans	4,756		91		3.84		3,811		79		4.14
	Total consumer loans	27,270		603		4.44		23,532		608		5.20
	Total loans	102,058		2,021		3.98		90,220		2,164		4.83
	Loans held for sale	2,174		40		3.71		1,212		28		4.64
	Securities available for sale ^{(b), (e)}	20,960		250		2.46		20,649		264		2.52
	Held-to-maturity securities ^(b)	9,575		118		2.47		11,213		135		2.41
	Trading account assets	913		13		2.73		1041		17		3.31
	Short-term investments	4,828		13		.52		2,965		33		2.25
	Other investments ^(e)	643		1		.34		647		8		2.35
	Total earning assets	141,151		2,456		3.51		127,947		2,649		4.16
	Allowance for loan and lease losses	(1255)						(879)
	Accrued income and other assets	15,268						14,317
	Discontinued assets	815						1,037
	Total assets	$	155,979					$	142,422
Liabilities
	NOW and money market deposit accounts	$	71,009	168		.47		$	61,928	277		.90
	Savings deposits	4,893		1		.04		4,796		2		.08
	Certificates of deposit ($100,000 or more)	5,630		58		2.08		8,261		95		2.31
	Other time deposits	4,617		38		1.67		5,535		51		1.86
	Total interest-bearing deposits	86,149		265		.62		80,520		425		1.06
	Federal funds purchased and securities sold under repurchase agreements	1,122		6		1.05		301		1		.67
	Bank notes and other short-term borrowings	2,135		10		.90		746		9		2.59
	Long-term debt ^{(f), (g)}	12,698		161		2.62		13,187		240		3.67
	Total interest-bearing liabilities	102,104		442		.87		94,754		675		1.44
	Noninterest-bearing deposits	33,004						28,074
	Accrued expense and other liabilities	2,604						2,437
	Discontinued liabilities ^(g)	815						1,037
	Total liabilities	138,527						126,302
Equity
	Key shareholders' equity	17,452						16,119
	Noncontrolling interests	—						1
	Total equity	17,452						16,120
	Total liabilities and equity	$	155,979					$	142,422
Interest rate spread (TE)						2.64	%					2.72	%
Net interest income (TE) and net interest margin (TE)				2,014		2.88	%			1,974		3.10	%
TE adjustment ^(b)				15						16
	Net interest income, GAAP basis			$	1,999					$	1,958

(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 six months ended June 30, 2020, and June 30, 2019, respectively.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $140 million and $137 million of assets from commercial credit cards for the six months ended June 30, 2020, and June 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						Six months ended
	6/30/2020		3/31/2020		6/30/2019		6/30/2020		6/30/2019
Personnel ^(a)	$	572	$	515	$	589	$	1,087	$	1,152
Net occupancy	71		76		73		147		145
Computer processing	56		55		56		111		110
Business services and professional fees	49		44		45		93		89
Equipment	25		24		24		49		48
Operating lease expense	34		36		32		70		58
Marketing	24		21		24		45		43
FDIC assessment	8		9		9		17		16
Intangible asset amortization	18		17		22		35		44
OREO expense, net	6		3		4		9		7
Other expense	150		131		141		281		270
Total noninterest expense	$	1,013	$	931	$	1,019	$	1,944	$	1,982
Average full-time equivalent employees ^(b)	16,646		16,529		17,206		16,587		17,379

(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
	6/30/2020		3/31/2020		6/30/2019		6/30/2020		6/30/2019
Salaries and contract labor	$	332	$	316	$	322	$	648	$	642
Incentive and stock-based compensation	162		102		155		264		287
Employee benefits	76		92		83		168		176
Severance	2		5		29		7		47
Total personnel expense	$	572	$	515	$	589	$	1,087	$	1,152

Loan Composition
(dollars in millions)

							Percent change 6/30/2020 vs
	6/30/2020		3/31/2020		6/30/2019		3/31/2020		6/30/2019
Commercial and industrial ^(a)	$	58,297	$	55,983	$	48,544	4.1	%	20.1	%
Commercial real estate:
Commercial mortgage	13,465		13,548		13,299		(.6)		1.2
Construction	1,919		1,710		1,439		12.2		33.4
Total commercial real estate loans	15,384		15,258		14,738		.8		4.4
Commercial lease financing ^(b)	4,524		4,677		4,578		(3.3)		(1.2)
Total commercial loans	78,205		75,918		67,860		3.0		15.2
Residential — prime loans:
Real estate — residential mortgage	8,149		7,498		6,053		8.7		34.6
Home equity loans	9,782		10,103		10,575		(3.2)		(7.5)
Total residential — prime loans	17,931		17,601		16,628		1.9		7.8
Consumer direct loans	4,327		3,833		2,350		12.9		84.1
Credit cards	974		1,041		1,096		(6.4)		(11.1)
Consumer indirect loans	4,722		4,805		4,003		(1.7)		18.0
Total consumer loans	27,954		27,280		24,077		2.5		16.1
Total loans ^{(c), (d)}	$	106,159	$	103,198	$	91,937	2.9	%	15.5	%

(a)	Loan balances include $132 million, $143 million, and $143 million of commercial credit card balances at June 30, 2020, March 31, 2020, and June 30, 2019, respectively.
(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $18 million, $14 million, and $11 million at June 30, 2020, March 31, 2020, and June 30, 2019, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)	Total loans exclude loans of $780 million at June 30, 2020, $821 million at March 31, 2020, and $964 million at June 30, 2019, related to the discontinued operations of the education lending business.
(d)	Accrued interest of $225 million, $241 million, and $272 million at June 30, 2020, March 31, 2020, and June 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 6/30/2020 vs
	6/30/2020		3/31/2020		6/30/2019		3/31/2020		6/30/2019
Commercial and industrial	$	419	$	446	$	255	(6.1)	%	64.3	%
Real estate — commercial mortgage	1,107		1,284		1,123		(13.8)		(1.4)
Commercial lease financing	—		8		—		N/M		N/M
Real estate — residential mortgage	250		152		164		64.5		52.4
Consumer direct loans	231		253		248		(8.7)		(6.9)
Total loans held for sale ^(a)	$	2,007	$	2,143	$	1,790	(6.3)	%	12.1	%

(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $250 million at June 30, 2020, $152 million at March 31, 2020, and $164 million at June 30, 2019.

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

	2Q20		1Q20		4Q19		3Q19		2Q19
Balance at beginning of period	$	2,143	$	1,334	$	1,598	$	1,790	$	894
New originations	3,621		3,333		3,659		3,222		3,218
Transfers from (to) held to maturity, net	(15)		200		26		237		42
Loan sales	(3,679)		(2,649)		(3,933)		(3,602)		(2,358)
Loan draws (payments), net	(61)		(77)		(18)		(49)		(6)
Valuation adjustments	(2)		2		2		—		—
Balance at end of period ^(a)	$	2,007	$	2,143	$	1,334	$	1,598	$	1,790

(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $250 million at June 30, 2020, $152 million at March 31, 2020, $140 million at December 31, 2019, $120 million at September 30, 2019, and $164 million at June 30, 2019.

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

	Three months ended									Six months ended
	6/30/2020			3/31/2020			6/30/2019			6/30/2020			6/30/2019
Average loans outstanding	$	107,941		$	96,174		$	90,785		$	102,058		$	90,220
Allowance for loan and lease losses at the end of the prior period	$	1,359		$	900		$	883		$	900		$	883
Cumulative effect from change in accounting principle ^(a)	—			204			—			204			—
Allowance for loan and lease losses at the beginning of the period	1,359			1,104			883			1,104			883
Loans charged off:
Commercial and industrial	71			60			30			131			66

Real estate — commercial mortgage	2			3			1			5			6
Real estate — construction	—			—			—			—			4
Total commercial real estate loans	2			3			1			5			10
Commercial lease financing	4			2			16			6			24
Total commercial loans	77			65			47			142			100
Real estate — residential mortgage	2			—			1			2			2
Home equity loans	2			4			6			6			10
Consumer direct loans	10			12			10			22			20
Credit cards	12			11			12			23			23
Consumer indirect loans	7			9			8			16			16
Total consumer loans	33			36			37			69			71
Total loans charged off	110			101			84			211			171
Recoveries:
Commercial and industrial	5			5			6			10			16

Real estate — commercial mortgage	—			1			1			1			2
Total commercial real estate loans	—			1			1			1			2
Commercial lease financing	1			—			2			1			3
Total commercial loans	6			6			9			12			21
Real estate — residential mortgage	—			—			—			—			1
Home equity loans	1			2			2			3			4
Consumer direct loans	2			2			2			4			3
Credit cards	2			2			2			4			4
Consumer indirect loans	3			5			4			8			9
Total consumer loans	8			11			10			19			21
Total recoveries	14			17			19			31			42
Net loan charge-offs	(96)			(84)			(65)			(180)			(129)
Provision (credit) for loan and lease losses	445			339			72			784			136
Allowance for loan and lease losses at end of period	$	1,708		$	1,359		$	890		$	1,708		$	890

Liability for credit losses on lending-related commitments at the end of the prior period	$	161		$	68		$	62		$	68		$	64
Liability for credit losses on contingent guarantees at the end of the prior period	—			7			—			7			—
Cumulative effect from change in accounting principle ^{(a), (b)}	—			66			—			66			—
Liability for credit losses on lending-related commitments at beginning of period	161			141			62			141			64
Provision (credit) for losses on lending-related commitments	37			20			2			57			—
Liability for credit losses on lending-related commitments at end of period ^(c)	$	198		$	161		$	64		$	198		$	64

Total allowance for credit losses at end of period	$	1,906		$	1,520		$	954		$	1,906		$	954

Net loan charge-offs to average total loans	.36		%	.35		%	.29		%	.35		%	.29		%
Allowance for loan and lease losses to period-end loans	1.61			1.32			.97			1.61			.97
Allowance for credit losses to period-end loans	1.80			1.47			1.04			1.80			1.04
Allowance for loan and lease losses to nonperforming loans	224.7			215.0			158.6			224.7			158.6
Allowance for credit losses to nonperforming loans	250.8			240.5			170.1			250.8			170.1

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

(a)	The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.
(b)	March 31, 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)
	2Q20			1Q20			4Q19			3Q19			2Q19
Net loan charge-offs	$	96		$	84		$	99		$	196		$	65
Net loan charge-offs to average total loans	.36		%	.35		%	.42		%	.85		%	.29		%
Allowance for loan and lease losses	$	1,708		$	1,359		$	900		$	893		$	890
Allowance for credit losses ^(a)	1,906			1,520			968			958			954
Allowance for loan and lease losses to period-end loans	1.61		%	1.32		%	.95		%	.96		%	.97		%
Allowance for credit losses to period-end loans	1.80			1.47			1.02			1.03			1.04
Allowance for loan and lease losses to nonperforming loans	224.7			215.0			156.0			152.6			158.6
Allowance for credit losses to nonperforming loans	250.8			240.5			167.8			163.8			170.1
Nonperforming loans at period end	$	760		$	632		$	577		$	585		$	561
Nonperforming assets at period end	951			844			715			711			608
Nonperforming loans to period-end portfolio loans	.72		%	.61		%	.61		%	.63		%	.61		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets	.89			.82			.75			.77			.66

(a)	Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	6/30/2020			3/31/2020			12/31/2019			9/30/2019			6/30/2019
Commercial and industrial	$	404		$	277		$	264		$	238		$	189

Real estate — commercial mortgage	91			87			83			92			85
Real estate — construction	1			2			2			2			2
Total commercial real estate loans	92			89			85			94			87
Commercial lease financing	9			5			6			7			7
Total commercial loans	505			371			355			339			283
Real estate — residential mortgage	89			89			48			42			62
Home equity loans	141			143			145			179			191
Consumer direct loans	3			4			4			3			3
Credit cards	2			3			3			2			2
Consumer indirect loans	20			22			22			20			20
Total consumer loans	255			261			222			246			278
Total nonperforming loans	760			632			577			585			561
OREO	112			119			35			39			38
Nonperforming loans held for sale	75			89			94			78			—
Other nonperforming assets	4			4			9			9			9
Total nonperforming assets	$	951		$	844		$	715		$	711		$	608
Accruing loans past due 90 days or more	87			128			97			54			74
Accruing loans past due 30 through 89 days	419			393			329			366			299
Restructured loans — accruing and nonaccruing ^(a)	310			340			347			347			395
Restructured loans included in nonperforming loans ^(a)	166			172			183			176			228
Nonperforming assets from discontinued operations — education lending business	7			7			7			7			7
Nonperforming loans to period-end portfolio loans	.72		%	.61		%	.61		%	.63		%	.61		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets	.89			.82			.75			.77			.66

(a)

Restructured loans (i.e., troubled debt restructuring) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
	2Q20		1Q20		4Q19		3Q19		2Q19
Balance at beginning of period	$	632	$	577	$	585	$	561	$	548
Loans placed on nonaccrual status ^(a)	293		219		268		271		189
Charge-offs	(111)		(100)		(114)		(91)		(84)
Loans sold	(5)		(4)		(1)		—		(38)
Payments	(29)		(31)		(59)		(37)		(23)
Transfers to OREO	—		(3)		(3)		(4)		(4)
Transfers to nonperforming loans held for sale	—		—		(47)		(78)		—
Loans returned to accrual status	(20)		(26)		(52)		(37)		(27)
Balance at end of period	$	760	$	632	$	577	$	585	$	561

(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 2Q20 vs.
	2Q20			1Q20			4Q19			3Q19			2Q19			1Q20		2Q19
Consumer Bank
Summary of operations
Total revenue (TE)	$	841		$	820		$	825		$	833		$	825		2.6	%	1.9	%
Provision for credit losses	167			140			55			48			40			19.3		317.5
Noninterest expense	555			543			552			531			552			2.2		.5
Net income (loss) attributable to Key	91			105			166			194			177			(13.3)		(48.6)
Average loans and leases	39,197			35,197			34,148			32,760			31,881			11.4		22.9
Average deposits	79,502			73,320			73,561			72,995			72,303			8.4		10.0
Net loan charge-offs	39			43			43			40			40			(9.3)		(2.5)
Net loan charge-offs to average total loans	.40		%	.49		%	.50		%	.48		%	.50		%	N/A		N/A
Nonperforming assets at period end	$	332		$	342		$	306		$	354		$	366		(2.9)		(9.3)
Return on average allocated equity	10.38		%	12.18		%	19.27		%	22.82		%	21.75		%	N/A		N/A

Commercial Bank
Summary of operations
Total revenue (TE)	$	847		$	629		$	771		$	779		$	760		34.7	%	11.4	%
Provision for credit losses	314			214			38			32			33			46.7		851.5
Noninterest expense	403			353			388			372			389			14.2		3.6
Net income (loss) attributable to Key	120			70			315			304			277			71.4		(56.7)
Average loans and leases	68,038			60,082			58,535			58,215			57,918			13.2		17.5
Average loans held for sale	2,012			1,607			1,465			1,325			1,168			25.2		72.3
Average deposits	46,099			36,058			38,224			36,204			35,960			27.8		28.2
Net loan charge-offs	57			40			39			35			23			42.5		147.8
Net loan charge-offs to average total loans	.34		%	.27		%	.26		%	.24		%	.16		%	N/A		N/A
Nonperforming assets at period end	$	616		$	407		$	402		$	351		$	235		51.4		162.1
Return on average allocated equity	10.00		%	6.00		%	26.69		%	26.37		%	24.09		%	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
	6/30/2020	3/31/2020	6/30/2019		6/30/2020	6/30/2019
Efficiency initiative expenses	—	—	$	(50)	—	$	(76)
Laurel Road acquisition expenses	—	—	(2)		—	(2)
Total notable items	—	—	$	(52)	—	$	(78)
Income taxes	—	—	(12)		—	(18)
Total notable items, after tax	—	—	$	(40)	—	$	(60)