KeyCorp Reports Third Quarter 2019 Net Income Of $383 Million, Or $.38 Per Diluted Common Share

Diluted earnings per common share of $.48(a), excluding $.10 per diluted common share from a previously disclosed fraud loss

Reached targeted cash efficiency ratio range: 56.0%(a) in 3Q19

Positive operating leverage compared to the prior year and prior quarter

Revenue momentum continues: solid balance sheet growth and strength in fee income

News provided by

KeyCorp

Oct 17, 2019, 06:30 ET

CLEVELAND, Oct. 17, 2019 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $383 million, or $.38 per diluted common share for the third quarter of 2019, compared to $403 million, or $.40 per diluted common share, for the second quarter of 2019 and $468 million, or $.45 per diluted common share, for the third quarter of 2018. Key's third quarter 2019 diluted earnings per share was $.48^(a), excluding $.10 per diluted common share related to a previously disclosed fraud loss. Key's results in the second quarter of 2019 included notable items; additional detail can be found on page 24 of this release.

"Our results this quarter reflect positive revenue momentum and strong expense management that drove our cash efficiency ratio to its lowest level in over a decade. This places us within our targeted cash efficiency ratio range of 54% to 56% and reflects the successful execution of our cost initiatives and ongoing commitment to continuous improvement. While expenses declined 3% from the year-ago period, we have continued to invest a portion of our cost savings back in to the business to drive future growth.

We generated positive operating leverage compared to the prior year and previous quarter, supported by strong balance sheet growth, as well as continued momentum in our fee-based businesses, including record third quarter investment banking and debt placement fees. We produced another quarter of strong, broad-based growth in commercial and industrial loans and saw higher consumer loan balances, driven by Laurel Road and residential mortgage lending.

We have remained disciplined with credit underwriting and managing our strong capital position. In the third quarter, we increased our quarterly common stock dividend by 9% − from $.17 to $.185. We remain committed to delivering results for our shareholders, while maintaining our moderate risk profile as we move through different parts of the business cycle."

- Beth Mooney, Chairman and CEO

(a) Non-GAAP measure; please refer to page 14 of this release for additional detail and reconciliation

Selected Financial Highlights

dollars in millions, except per share data										Change 3Q19 vs.
	3Q19			2Q19			3Q18			2Q19		3Q18
Income (loss) from continuing operations attributable to Key common shareholders	$	383		$	403		$	468		(5.0)	%	(18.2)	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution	.38			.40			.45			(5.0)		(15.6)
Return on average tangible common equity from continuing operations ^(a)	12.38		%	13.69		%	16.81		%	N/A		N/A
Return on average total assets from continuing operations	1.14			1.19			1.40			N/A		N/A
Common Equity Tier 1 ratio ^(b)	9.52			9.57			9.95			N/A		N/A
Book value at period end	$	15.44		$	15.07		$	13.33		2.5	%	15.8	%
Net interest margin (TE) from continuing operations	3.00		%	3.06		%	3.18		%	N/A		N/A

(a)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Return on average tangible common equity from continuing operations." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(b)

9/30/19 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Net interest income (TE)	$	980	$	989	$	993	(.9)	%	(1.3)	%
Noninterest income	650		622		609		4.5		6.7
Total revenue	$	1,630	$	1,611	$	1,602	1.2	%	1.7	%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $980 million for the third quarter of 2019, compared to taxable-equivalent net interest income of $993 million for the third quarter of 2018. The decrease in net interest income reflects a lower net interest margin, driven by higher interest-bearing deposit costs, and lower loan fees. Additionally, purchase accounting accretion declined $9 million. These declines were partially offset by higher earning asset balances.

Compared to the second quarter of 2019, taxable-equivalent net interest income decreased by $9 million. The decrease was driven by a lower net interest margin, resulting from a decline in interest rates, and lower loan fees. These declines were partially offset by higher earning asset balances, driven by solid consumer and commercial loan growth, and one additional day in the quarter.

Noninterest Income

dollars in millions							Change 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Trust and investment services income	$	118	$	122	$	117	(3.3)	%	.9	%
Investment banking and debt placement fees	176		163		166		8.0		6.0
Service charges on deposit accounts	86		83		85		3.6		1.2
Operating lease income and other leasing gains	42		44		35		(4.5)		20.0
Corporate services income	63		53		52		18.9		21.2
Cards and payments income	69		73		69		(5.5)		—
Corporate-owned life insurance income	32		33		34		(3.0)		(5.9)
Consumer mortgage income	14		10		9		40.0		55.6
Mortgage servicing fees	23		24		19		(4.2)		21.1
Other income	27		17		23		58.8		17.4
Total noninterest income	$	650	$	622	$	609	4.5	%	6.7	%

Key's noninterest income was $650 million for the third quarter of 2019, compared to $609 million for the year-ago quarter. The increase reflects growth in investment banking and debt placement fees, which reached a record third quarter level, as well as growth in corporate services income, due to higher derivatives income. Investments made in Key's mortgage business continue to drive consumer mortgage income and mortgage servicing fees.

Compared to the second quarter of 2019, noninterest income increased by $28 million, due to growth in investment banking and debt placement fees and corporate services income, due to higher derivatives income, as well as consumer mortgage income.

Noninterest Expense

dollars in millions							Change 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Personnel expense	$	547	$	589	$	553	(7.1)	%	(1.1)	%
Nonpersonnel expense	392		430		411		(8.8)		(4.6)
Total noninterest expense	$	939	$	1,019	$	964	(7.9)	%	(2.6)	%

Key's noninterest expense was $939 million for the third quarter of 2019, compared to $964 million in the year-ago quarter and $1.0 billion in the prior quarter. The prior quarter included notable items of $52 million, primarily efficiency-related expenses, while no notable items were reported in the current quarter or the year-ago period.

Noninterest expense decreased by $25 million from the year-ago period, reflecting the successful implementation of Key's expense initiatives and the elimination of the FDIC surcharge. These expenses were partially offset by Laurel Road acquisition expenses.

Excluding notable items, noninterest expense decreased $28 million from the prior quarter, reflecting the successful implementation of Key's expense initiatives, which drove lower salaries and declines across most non-personnel expenses.

BALANCE SHEET HIGHLIGHTS

Average Loans

dollars in millions							Change 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Commercial and industrial ^(a)	$	48,322	$	47,227	$	44,749	2.3	%	8.0	%
Other commercial loans	19,016		19,765		20,471		(3.8)		(7.1)
Total consumer loans	24,618		23,793		23,247		3.5		5.9
Total loans	$	91,956	$	90,785	$	88,467	1.3	%	3.9	%

(a)	Commercial and industrial average loan balances include $144 million, $141 million, and $128 million of assets from commercial credit cards at September 30, 2019, June 30, 2019, and September 30, 2018, respectively.

Average loans were $92.0 billion for the third quarter of 2019, an increase of $3.5 billion compared to the third quarter of 2018. Commercial loans increased $2.1 billion, reflecting broad-based growth in commercial and industrial loans, partially offset by declines in commercial mortgage and construction loans. Consumer loans increased $1.4 billion, driven by solid growth from Laurel Road, residential mortgage loans, and indirect auto lending. Home equity loans declined $927 million, largely the result of continued paydowns in home equity lines of credit.

Compared to the second quarter of 2019, average loans increased by $1.2 billion, driven by solid growth in commercial and industrial loans, partially offset by a decline in commercial mortgage loans. Consumer loans increased $825 million from the prior quarter, as growth from Laurel Road, residential mortgage, and indirect auto more than offset the decline in home equity loans. Laurel Road originations were $500 million in the current quarter.

Average Deposits

dollars in millions										Change 3Q19 vs.
	3Q19			2Q19			3Q18			2Q19		3Q18
Non-time deposits	$	97,205		$	95,885		$	92,414		1.4	%	5.2	%
Certificates of deposit ($100,000 or more)	7,625			8,147			8,186			(6.4)		(6.9)
Other time deposits	5,449			5,569			5,026			(2.2)		8.4
Total deposits	$	110,279		$	109,601		$	105,626		.6	%	4.4	%

Cost of total deposits	.82		%	.82		%	.53		%	N/A		N/A

N/A = Not Applicable

Average deposits totaled $110.3 billion for the third quarter of 2019, an increase of $4.7 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships.

Compared to the second quarter of 2019, average deposits increased by $678 million, primarily driven by continued growth from consumer relationships, as well as short-term commercial deposits.

ASSET QUALITY

dollars in millions										Change 3Q19 vs.
	3Q19			2Q19			3Q18			2Q19		3Q18
Net loan charge-offs	$	196		$	65		$	60		201.5	%	226.7	%
Net loan charge-offs to average total loans	.85		%	.29		%	.27		%	N/A		N/A
Nonperforming loans at period end ^(a)	$	585		$	561		$	645		4.3		(9.3)
Nonperforming assets at period end ^(a)	711			608			674			16.9		5.5
Allowance for loan and lease losses	893			890			887			.3		.7
Allowance for loan and lease losses to nonperforming loans ^(a)	152.6		%	158.6		%	137.5		%	N/A		N/A
Provision for credit losses	$	200		$	74		$	62		170.3	%	222.6	%

(a)	Nonperforming loan balances exclude $497 million, $518 million, and $606 million of purchased credit impaired loans at September 30, 2019, June 30, 2019, and September 30, 2018, respectively.
N/A = Not Applicable

In the third quarter of 2019, Key realized a $123 million pre-tax loss related to a previously disclosed fraud incident. Excluding the fraud loss, Key's provision for credit losses was $77 million for the third quarter of 2019, compared to $62 million for the third quarter of 2018 and $74 million for the second quarter of 2019. Key's allowance for loan and lease losses was $893 million, or .96% of total period-end loans at September 30, 2019, compared to .99% at September 30, 2018, and .97% at June 30, 2019.

Excluding the fraud loss, net loan charge-offs for the third quarter of 2019 totaled $73 million, or .31% of average total loans. These results compare to $60 million, or .27%, for the third quarter of 2018, and $65 million, or .29%, for the second quarter of 2019.

At September 30, 2019, Key's nonperforming loans totaled $585 million, which represented .63% of period-end portfolio loans. These results compare to .72% at September 30, 2018, and .61% at June 30, 2019. Nonperforming assets at September 30, 2019, totaled $711 million, and represented .77% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .75% at September 30, 2018, and .66% at June 30, 2019.

CAPITAL

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

Capital Ratios

	9/30/2019		6/30/2019		9/30/2018
Common Equity Tier 1 ^(a)	9.52	%	9.57	%	9.95	%
Tier 1 risk-based capital ^(a)	10.96		11.01		11.11
Total risk based capital ^(a)	12.96		13.03		12.99
Tangible common equity to tangible assets ^(b)	8.58		8.59		8.05
Leverage ^(a)	9.92		10.00		10.03

(a)	9/30/2019 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 third quarter of 2019. As shown in the preceding table, at September 30, 2019, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.52% and 10.96%, respectively. Key's tangible common equity ratio was 8.58% at September 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 9.44% at September 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 3Q19 vs.
	3Q19	2Q19	3Q18	2Q19		3Q18
Shares outstanding at beginning of period	1,003,114	1,013,186	1,058,944	(1.0)	%	(5.3)	%
Open market repurchases and return of shares under employee compensation plans	(15,076)	(10,412)	(25,418)	44.8		(40.7)
Shares issued under employee compensation plans (net of cancellations)	500	340	761	47.1		(34.3)
Shares outstanding at end of period	988,538	1,003,114	1,034,287	(1.5)	%	(4.4)	%

Consistent with Key's 2019 Capital Plan, during the third quarter of 2019, Key declared a dividend of $.185 per common share, representing a 9% increase from the prior quarter. Key also completed $248 million of common share repurchases during the quarter.

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 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Revenue from continuing operations (TE)
Consumer Bank	$	833	$	825	$	809	1.0	%	3.0	%
Commercial Bank	779		760		753		2.5		3.5
Other ^(a)	18		26		40		(30.8)		(55.0)	%
Total	$	1,630	$	1,611	$	1,602	1.2	%	1.7	%

Income (loss) from continuing operations attributable to Key
Consumer Bank	$	194	$	177	$	168	9.6	%	15.5	%
Commercial Bank	304		277		274		9.7		10.9
Other ^{(a), (b)}	(82)		(29)		40		N/M		N/M
Total	$	416	$	425	$	482	(2.1)	%	(13.7)	%

(a)

Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

(b)

Other segments included $94 million, after tax, of notable items related to a previously disclosed fraud loss for the third quarter of 2019; additional detail can be found on page 24 of this release.

TE = Taxable Equivalent, N/M = Not Meaningful

Consumer Bank


dollars in millions							Change 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Summary of operations
Net interest income (TE)	$	595	$	594	$	583	.2	%	2.1	%
Noninterest income	238		231		226		3.0		5.3
Total revenue (TE)	833		825		809		1.0		3.0
Provision for credit losses	48		40		32		20.0		50.0
Noninterest expense	531		552		557		(3.8)		(4.7)
Income (loss) before income taxes (TE)	254		233		220		9.0		15.5
Allocated income taxes (benefit) and TE adjustments	60		56		52		7.1		15.4
Net income (loss) attributable to Key	$	194	$	177	$	168	9.6	%	15.5	%

Average balances
Loans and leases	$	32,760	$	31,881	$	31,172	2.8	%	5.1	%
Total assets	36,417		35,469		34,368		2.7		6.0
Deposits	72,995		72,303		69,124		1.0		5.6

Assets under management at period end	$	39,416	$	38,942	$	40,575	1.2	%	(2.9)	%

TE = Taxable Equivalent

Additional Consumer Bank Data

dollars in millions										Change 3Q19 vs.
	3Q19			2Q19			3Q18			2Q19		3Q18
Noninterest income
Trust and investment services income	$	90		$	91		$	89		(1.1)	%	1.1
Service charges on deposit accounts	58			56			57			3.6		1.8	%
Cards and payments income	52			54			52			(3.7)		.0
Other noninterest income	38			30			28			26.7		35.7
Total noninterest income	$	238		$	231		$	226		3.0	%	5.3	%

Average deposit balances
NOW and money market deposit accounts	$	43,638		$	42,800		$	40,540		2.0	%	7.6	%
Savings deposits	4,406			4,506			4,749			(2.2)		(7.2)
Certificates of deposit ($100,000 or more)	6,488			6,644			5,384			(2.3)		20.5
Other time deposits	5,430			5,549			5,014			(2.1)		8.3
Noninterest-bearing deposits	13,033			12,804			13,437			1.8		(3.0)
Total deposits	$	72,995		$	72,303		$	69,124		1.0	%	5.6	%

Home equity loans
Average balance	$	10,413		$	10,618		$	11,317
Combined weighted-average loan-to-value ratio (at date of origination)	70		%	70		%	70		%
Percent first lien positions	60			60			60

Other data
Branches	1,101			1,102			1,166
Automated teller machines	1,422			1,430			1,518

Consumer Bank Summary of Operations (3Q19 vs. 3Q18)

Net income attributable to Key of $194 million for the third quarter of 2019, compared to $168 million for the year-ago quarter
Taxable equivalent net interest income increased by $12 million, or 2.1%, from the third quarter of 2018. The increase in net interest income was primarily driven by balance sheet growth
Average loans and leases increased $1.6 billion, or 5.1%. This was driven by Laurel Road along with strength in residential mortgage and indirect auto lending. This growth was partially offset by a $904 million, or 8.0%, decrease in home equity balances
Average deposits increased $3.9 billion, or 5.6%, from the third 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 $16 million compared to the third quarter of 2018, driven by balance sheet growth. Credit quality remained stable to the year-ago quarter
Noninterest income increased $12 million, or 5.3%, from the year ago quarter. This was primarily driven by growth in consumer mortgage income which increased $5 million, or 55.6%
Noninterest expense decreased $26 million, or 4.7%, 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 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Summary of operations
Net interest income (TE)	$	399	$	405	$	415	(1.5)	%	(3.9)	%
Noninterest income	380		355		338		7.0		12.4
Total revenue (TE)	779		760		753		2.5		3.5
Provision for credit losses	32		33		31		(3.0)		3.2
Noninterest expense	372		389		385		(4.4)		(3.4)
Income (loss) before income taxes (TE)	375		338		337		10.9		11.3
Allocated income taxes and TE adjustments	71		61		63		16.4		12.7
Net income (loss) attributable to Key	$	304	$	277	$	274	9.7	%	10.9	%

Average balances
Loans and leases	$	58,215	$	57,918	$	56,096	.5	%	3.8	%
Loans held for sale	1,325		1,168		1,042		13.4		27.2
Total assets	66,549		65,901		63,488		1.0		4.8
Deposits	36,204		35,960		33,603		0.7	%	7.7	%

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data


dollars in millions							Change 3Q19 vs.
	3Q19		2Q19		3Q18		2Q19		3Q18
Noninterest income
Trust and investment services income	$	28	$	31	$	28	(9.7)	%	—	%
Investment banking and debt placement fees	176		163		165		8.0		6.7
Operating lease income and other leasing gains	40		43		36		(7.0)		11.1

Corporate services income	56		50		46		12.0		21.7
Service charges on deposit accounts	27		27		28		—		(3.6)
Cards and payments income	16		17		17		(5.9)		(5.9)
Payments and services income	99		94		91		5.3		8.8

Mortgage servicing fees	20		20		15		—		33.3
Other noninterest income	17		4		3		325.0		466.7
Total noninterest income	$	380	$	355	$	338	7.0	%	12.4	%

N/M = Not Meaningful

Commercial Bank Summary of Operations (3Q19 vs. 3Q18)

Net income attributable to Key of $304 million for the third quarter of 2019, compared to $274 million for the year-ago quarter
Taxable-equivalent net interest income decreased by $16 million, or 3.9%, compared to the third quarter of 2018, driven by lower purchase accounting accretion and loan spread compression
Average loan and lease balances increased $2.1 billion, or 3.8%, compared to the third quarter of 2018 driven by broad-based growth in commercial and industrial loans
Average deposit balances increased $2.6 billion, or 7.7%, compared to the third quarter of 2018, driven by growth in core deposits
Provision for credit losses increased $1 million compared to the third quarter of 2018. Credit quality remained relatively stable compared to the third quarter of 2018
Noninterest income increased $42 million, or 12.4%, from the prior year. Investment banking and debt placement fees increased $11 million, or 6.7%, from the prior year, primarily related to strength in commercial mortgage fees. Corporate services income increased $10 million, or 21.7%, driven by increased client activity related to derivatives
Noninterest expense decreased by $13 million, or 3.4%, from the third 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 $146.7 billion at September 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 9:00 a.m. ET, on Thursday, October 17, 2019. An audio replay of the call will be available through October 27, 2019.

KeyCorp
Third Quarter 2019
Financial Supplement

Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			9/30/2019			6/30/2019			9/30/2018
Summary of operations
	Net interest income (TE)		$	980		$	989		$	993
	Noninterest income		650			622			609
		Total revenue (TE)	1,630			1,611			1,602
	Provision for credit losses		200			74			62
	Noninterest expense		939			1,019			964
	Income (loss) from continuing operations attributable to Key		413			423			482
	Income (loss) from discontinued operations, net of taxes		3			2			—
	Net income (loss) attributable to Key		416			425			482

	Income (loss) from continuing operations attributable to Key common shareholders		383			403			468
	Income (loss) from discontinued operations, net of taxes		3			2			—
	Net income (loss) attributable to Key common shareholders		386			405			468

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.39		$	.40		$	.45
	Income (loss) from discontinued operations, net of taxes		—			—			—
	Net income (loss) attributable to Key common shareholders ^(a)		.39			.40			.45

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.38			.40			.45
	Income (loss) from discontinued operations, net of taxes — assuming dilution		—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(a)		.39			.40			.45

	Cash dividends declared		.185			.17			.17
	Book value at period end		15.44			15.07			13.33
	Tangible book value at period end		12.48			12.12			10.59
	Market price at period end		17.84			17.75			19.89

Performance ratios
	From continuing operations:
	Return on average total assets		1.14		%	1.19		%	1.40		%
	Return on average common equity		9.99			10.94			13.36
	Return on average tangible common equity ^(b)		12.38			13.69			16.81
	Net interest margin (TE)		3.00			3.06			3.18
	Cash efficiency ratio ^(b)		56.0			61.9			58.7

	From consolidated operations:
	Return on average total assets		1.14		%	1.19		%	1.39		%
	Return on average common equity		10.07			11.00			13.36
	Return on average tangible common equity ^(b)		12.48			13.75			16.81
	Net interest margin (TE)		2.98			3.05			3.16
	Loan to deposit ^(c)		85.3			86.1			87.0

Capital ratios at period end
	Key shareholders' equity to assets		11.67		%	11.74		%	10.96		%
	Key common shareholders' equity to assets		10.40			10.46			9.93
	Tangible common equity to tangible assets ^(b)		8.58			8.59			8.05
	Common Equity Tier 1^(d)		9.52			9.57			9.95
	Tier 1 risk-based capital ^(d)		10.96			11.01			11.11
	Total risk-based capital ^(d)		12.96			13.03			12.99
	Leverage ^(d)		9.92			10.00			10.03

Asset quality — from continuing operations
	Net loan charge-offs		$	196		$	65		$	60
	Net loan charge-offs to average loans		.85		%	.29		%	.27		%
	Allowance for loan and lease losses		$	893		$	890		$	887
	Allowance for credit losses		958			954			947
	Allowance for loan and lease losses to period-end loans		.96		%	.97		%	0.99		%
	Allowance for credit losses to period-end loans		1.03			1.04			1.06
	Allowance for loan and lease losses to nonperforming loans ^(e)		152.6			158.6			137.5
	Allowance for credit losses to nonperforming loans ^(e)		163.8			170.1			146.8
	Nonperforming loans at period-end ^(e)		$	585		$	561		$	645
	Nonperforming assets at period-end ^(e)		711			608			674
	Nonperforming loans to period-end portfolio loans ^(e)		.63		%	.61		%	.72		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(e)		.77			.66			.75

Trust assets
	Assets under management		$	39,416		$	38,942		$	40,575

Other data
	Average full-time equivalent employees		16,898			17,206			18,150
	Branches		1,101			1,102			1,166

Taxable-equivalent adjustment			$	8		$	8		$	7

Financial Highlights (continued)
(dollars in millions, except per share amounts)
		Nine months ended
		9/30/2019			9/30/2018
Summary of operations
	Net interest income (TE)	$	2,954		$	2,932
	Noninterest income	1,808			1,870
	Total revenue (TE)	4,762			4,802
	Provision for credit losses	336			187
	Noninterest expense	2,921			2,963
	Income (loss) from continuing operations attributable to Key	1,242			1,377
	Income (loss) from discontinued operations, net of taxes	6			5
	Net income (loss) attributable to Key	1,248			1,382

	Income (loss) from continuing operations attributable to Key common shareholders	$	1,172		$	1,334
	Income (loss) from discontinued operations, net of taxes	6			5
	Net income (loss) attributable to Key common shareholders	1,178			1,339

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	1.17		$	1.27
	Income (loss) from discontinued operations, net of taxes	.01			.01
	Net income (loss) attributable to Key common shareholders ^(a)	1.18			1.28

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	1.16			1.26
	Income (loss) from discontinued operations, net of taxes — assuming dilution	.01			.01
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(a)	1.17			1.26

	Cash dividends paid	.525			.395

Performance ratios
	From continuing operations:
	Return on average total assets	1.17		%	1.35		%
	Return on average common equity	10.62			12.81
	Return on average tangible common equity ^(b)	13.23			16.16
	Net interest margin (TE)	3.06			3.17
	Cash efficiency ratio ^(b)	59.9			60.1

	From consolidated operations:
	Return on average total assets	1.16		%	1.35		%
	Return on average common equity	10.68			12.86
	Return on average tangible common equity ^(b)	13.30			16.22
	Net interest margin (TE)	3.05			3.15

Asset quality — from continuing operations
	Net loan charge-offs	$	325		$	174
	Net loan charge-offs to average total loans	.48		%	.26		%

Other data
	Average full-time equivalent employees	17,217			18,354

Taxable-equivalent adjustment		24			23


(a)	Earnings per share may not foot due to rounding.
(b)	The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the "Capital" section of this release.
(c)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(d)	September 30, 2019, ratio is estimated.
(e)	Nonperforming loan balances exclude $497 million, $518 million, and $606 million of purchased credit impaired loans at September 30, 2019, June 30, 2019, and September 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," "earnings per common share excluding notable items," "net loan charge-offs to average loans excluding notable items," and "provision for credit losses excluding notable items."

Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without notable items, in order to enable a better understanding of company results, increase comparability of period-to-period results, and to evaluate and forecast those results.

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

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

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

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

	Three months ended									Nine months ended
	9/30/2019			6/30/2019			9/30/2018			9/30/2019			9/30/2018
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)	$	17,116		$	16,969		$	15,208
Less: Intangible assets ^(a)	2,928			2,952			2,838
Preferred Stock ^(b)	1,856			1,856			1,421
Tangible common equity (non-GAAP)	$	12,332		$	12,161		$	10,949
Total assets (GAAP)	$	146,691		$	144,545		$	138,805
Less: Intangible assets ^(a)	2,928			2,952			2,838
Tangible assets (non-GAAP)	$	143,763		$	141,593		$	135,967
Tangible common equity to tangible assets ratio (non-GAAP)	8.58		%	8.59		%	8.05		%
Earnings per common share (EPS) excluding notable items
EPS from continuing operations attributable to Key common shareholders — assuming dilution (GAAP)	$	.38		$	.40		$	.45
Plus: EPS impact of notable items	.10			.04			—
EPS from continuing operations attributable to Key common shareholders — assuming dilution excluding notable items (non-GAAP)	$	.48		$	.44		$	.45
Pre-provision net revenue
Net interest income (GAAP)	$	972		$	981		$	986		$	2,930		$	2,909
Plus: Taxable-equivalent adjustment	8			8			7			24			23
Noninterest income	650			622			609			1,808			1,870
Less: Noninterest expense	939			1,019			964			2,921			2,963
Pre-provision net revenue from continuing operations (non-GAAP)	$	691		$	592		$	638		$	1,841		$	1,839
Average tangible common equity
Average Key shareholders' equity (GAAP)	$	17,113		$	16,531		$	15,210		$	16,454		$	15,045
Less: Intangible assets (average) ^(c)	2,942			2,959			2,848			2,905			2,882
Preferred stock (average)	1,900			1,762			1,316			1,705			1,123
Average tangible common equity (non-GAAP)	$	12,271		$	11,810		$	11,046		$	11,844		$	11,040
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)	$	383		$	403		$	468		$	1,172		$	1,334
Average tangible common equity (non-GAAP)	12,271			11,810			11,046			11,844			11,040

Return on average tangible common equity from continuing operations (non-GAAP)	12.38		%	13.69		%	16.81		%	13.23		%	16.16		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)	$	386		$	405		$	468		$	1,178		$	1,339
Average tangible common equity (non-GAAP)	12,271			11,810			11,046			11,844			11,040

Return on average tangible common equity consolidated (non-GAAP)	12.48		%	13.75		%	16.81		%	13.30		%	16.22		%

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)

	Three months ended									Nine months ended
	9/30/2019			6/30/2019			9/30/2018			9/30/2019			9/30/2018
Cash efficiency ratio
Noninterest expense (GAAP)	$	939		$	1,019		$	964		$	2,921		$	2,963
Less: Intangible asset amortization	26			22			23			70			77
Adjusted noninterest expense (non-GAAP)	$	913		$	997		$	941		$	2,851		$	2,886

Net interest income (GAAP)	$	972		$	981		$	986		$	2,930		$	2,909
Plus: Taxable-equivalent adjustment	8			8			7			24			23
Noninterest income	650			622			609			1,808			1,870
Total taxable-equivalent revenue (non-GAAP)	$	1,630		$	1,611		$	1,602		$	4,762		$	4,802

Cash efficiency ratio (non-GAAP)	56.0		%	61.9		%	58.7		%	59.9		%	60.1		%
Net loan charge-offs to average total loans excluding notable items
Net loan charge-offs (GAAP)	$	196		$	65		$	60		$	325		$	174
Less: Notable items	123			—			—			123			—
Net loan charge-offs excluding notable items (non-GAAP)	$	73		$	65		$	60		$	202		$	174

Average loans outstanding	$	91,956		$	90,785		$	88,467		$	90,805		$	88,018

Net loan charge-offs to average total loans excluding notable items (non-GAAP)	.31		%	.29		%	.27		%	.30		%	.26		%
Provision for credit losses excluding notable items
Provision for credit losses (GAAP)	$	200		$	74		$	62		$	336		$	187
Less: Notable Items	123			—			—			123			—
Provision for credit loses excluding notable items (non-GAAP)	$	77		$	74		$	62		$	213		$	187

			Three months ended
			9/30/2019
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates)
	Common Equity Tier 1 under current RCR		$	12,288
	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)	$	12,288

	Net risk-weighted assets under current RCR		$	129,099
	Adjustments from current RCR to the fully phased-in RCR:
		Mortgage servicing assets ^(g)	838
		Deferred tax assets	201
		All other assets	—
		Total risk-weighted assets anticipated under the fully phased-in RCR ^(f)	$	130,138

	Common Equity Tier 1 ratio under the fully phased-in RCR ^(f)		9.44		%

(a)	For the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, intangible assets exclude $9 million, $10 million, and $17 million, respectively, of period-end purchased credit card receivables.
(b)	Net of capital surplus.
(c)	For the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, average intangible assets exclude $9 million, $11 million, and $18 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2019, and September 30, 2018, average intangible assets exclude $11 million and $21 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)

			9/30/2019		6/30/2019		9/30/2018
Assets
	Loans		$	92,760	$	91,937	$	89,268
	Loans held for sale		1,598		1,790		1,618
	Securities available for sale		22,378		21,528		18,341
	Held-to-maturity securities		10,490		10,878		11,869
	Trading account assets		963		1,005		958
	Short-term investments		3,351		2,443		2,272
	Other investments		620		632		681
		Total earning assets	132,160		130,213		125,007
	Allowance for loan and lease losses		(893)		(890)		(887)
	Cash and due from banks		636		607		319
	Premises and equipment		815		829		891
	Goodwill		2,664		2,664		2,516
	Other intangible assets		272		298		338
	Corporate-owned life insurance		4,216		4,201		4,156
	Accrued income and other assets		5,881		5,633		5,308
	Discontinued assets		940		990		1,157
		Total assets	$	146,691	144,545		138,805

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	65,604	$	63,619	$	57,219
		Savings deposits	4,668		4,747		4,948
		Certificates of deposit ($100,000 or more)	7,194		8,084		8,453
		Other time deposits	5,300		5,524		5,130
		Total interest-bearing deposits	82,766		81,974		75,750
		Noninterest-bearing deposits	28,883		27,972		30,030
		Total deposits	111,649		109,946		105,780
	Federal funds purchased and securities sold under repurchase agreements		182		161		1,285
	Bank notes and other short-term borrowings		700		720		637
	Accrued expense and other liabilities		2,574		2,435		2,044
	Long-term debt		14,470		14,312		13,849
		Total liabilities	129,575		127,574		123,595

Equity
	Preferred stock		1,900		1,900		1,450
	Common shares		1,257		1,257		1,257
	Capital surplus		6,287		6,266		6,315
	Retained earnings		12,209		12,005		11,262
	Treasury stock, at cost		(4,696)		(4,457)		(3,910)
	Accumulated other comprehensive income (loss)		159		(2)		(1,166)
		Key shareholders' equity	17,116		16,969		15,208
	Noncontrolling interests		—		2		2
		Total equity	17,116		16,971		15,210
Total liabilities and equity			$	146,691	$	144,545	$	138,805

Common shares outstanding (000)			988,538		1,003,114		1,034,287

Consolidated Statements of Income
(dollars in millions, except per share amounts)

			Three months ended						Nine months ended
			9/30/2019		6/30/2019		9/30/2018		9/30/2019		9/30/2018
Interest income
	Loans		$	1,073	$	1,082	$	1,025	$	3,221	$	2,965
	Loans held for sale		18		15		12		46		40
	Securities available for sale		136		135		102		400		294
	Held-to-maturity securities		64		67		72		199		213
	Trading account assets		7		9		7		24		21
	Short-term investments		16		17		15		49		31
	Other investments		3		4		6		11		17
		Total interest income	1,317		1,329		1,239		3,950		3,581
Interest expense
	Deposits		227		223		140		652		343
	Federal funds purchased and securities sold under repurchase agreements		—		—		1		1		10
	Bank notes and other short-term borrowings		4		5		4		13		17
	Long-term debt		114		120		108		354		302
		Total interest expense	345		348		253		1,020		672
Net interest income			972		981		986		2,930		2,909
Provision for credit losses			200		74		62		336		187
Net interest income after provision for credit losses			772		907		924		2,594		2,722
Noninterest income
	Trust and investment services income		118		122		117		355		378
	Investment banking and debt placement fees		176		163		166		449		464
	Service charges on deposit accounts		86		83		85		251		265
	Operating lease income and other leasing gains		42		44		35		123		61
	Corporate services income		63		53		52		171		175
	Cards and payments income		69		73		69		208		202
	Corporate-owned life insurance income		32		33		34		97		98
	Consumer mortgage income		14		10		9		32		23
	Mortgage servicing fees		23		24		19		68		61
	Other income ^(a)		27		17		23		54		143
		Total noninterest income	650		622		609		1,808		1,870
Noninterest expense
	Personnel		547		589		553		1,699		1,733
	Net occupancy		72		73		76		217		233
	Computer processing		53		56		52		163		155
	Business services and professional fees		43		45		43		132		135
	Equipment		27		24		27		75		79
	Operating lease expense		33		32		31		91		88
	Marketing		26		24		26		69		77
	FDIC assessment		7		9		21		23		63
	Intangible asset amortization		26		22		23		70		77
	OREO expense, net		3		4		3		10		5
	Other expense		102		141		109		372		318
		Total noninterest expense	939		1,019		964		2,921		2,963
Income (loss) from continuing operations before income taxes			483		510		569		1,481		1,629
	Income taxes		70		87		87		239		252
Income (loss) from continuing operations			413		423		482		1,242		1,377
	Income (loss) from discontinued operations, net of taxes		3		2		—		6		5
Net income (loss)			416		425		482		1,248		1,382
	Less: Net income (loss) attributable to noncontrolling interests		—		—		—		—		—
Net income (loss) attributable to Key			$	416	$	425	$	482	$	1,248	$	1,382

Income (loss) from continuing operations attributable to Key common shareholders			$	383	$	403	$	468	$	1,172	$	1,334
Net income (loss) attributable to Key common shareholders			386		405		468		1,178		1,339
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.39	$	.40	$	.45	$	1.17	$	1.27
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		.01
Net income (loss) attributable to Key common shareholders ^(b)			.39		.40		.45		1.18		1.28
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.38	$	.40	$	.45	$	1.16	$	1.26
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		.01
Net income (loss) attributable to Key common shareholders ^(b)			.39		.40		.45		1.17		1.26

Cash dividends declared per common share			$	.185	$	.17	$	.17	$	.525	$	.395

Weighted-average common shares outstanding (000)			988,319		999,163		1,036,479		998,268		1,048,397
	Effect of common share options and other stock awards		10,009		8,801		13,497		9,632		14,419
Weighted-average common shares and potential common shares outstanding (000) ^(c)			998,328		1,007,964		1,049,976		1,007,900		1,062,816

(a)	For the three and nine months ended September 30, 2019, net securities gains (losses) totaled $15 million. For the three months ended June 30, 2019, and September 30, 2018, and the nine months ended September 30, 2018, net securities gains (losses) totaled less than $1 million. For the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, and the nine months ended September 30, 2019 and September 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)

		Third Quarter 2019						Second Quarter 2019						Third 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)	$	48,322	$	543	4.46	%	$	47,227	$	547	4.65	%	$	44,749	$	495	4.39	%
	Real estate — commercial mortgage	13,056		163		4.95		13,866		175		5.06		14,268		176		4.89
	Real estate — construction	1,463		19		5.22		1,423		20		5.41		1,759		22		5.05
	Commercial lease financing	4,497		42		3.68		4,476		41		3.65		4,444		43		3.88
	Total commercial loans	67,338		767		4.52		66,992		783		4.69		65,220		736		4.49
	Real estate — residential mortgage	6,256		62		3.97		5,790		58		4.03		5,466		55		3.99
	Home equity loans	10,488		132		4.97		10,701		135		5.05		11,415		137		4.80
	Consumer direct loans	2,548		45		6.99		2,352		43		7.39		1,789		35		7.71
	Credit cards	1,100		32		11.59		1,091		31		11.26		1,095		32		11.43
	Consumer indirect loans	4,226		43		4.10		3,859		40		4.15		3,482		37		4.25
	Total consumer loans	24,618		314		5.07		23,793		307		5.17		23,247		296		5.06
	Total loans	91,956		1,081		4.67		90,785		1,090		4.81		88,467		1,032		4.64
	Loans held for sale	1,558		18		4.65		1,302		15		4.56		1,117		12		4.59
	Securities available for sale ^{(b), (e)}	21,867		136		2.52		21,086		135		2.54		17,631		102		2.22
	Held-to-maturity securities ^(b)	10,684		64		2.41		11,058		67		2.41		12,065		72		2.40
	Trading account assets	884		7		3.00		1,124		9		3.28		787		7		3.37
	Short-term investments	2,861		16		2.19		3,200		17		2.23		2,928		15		1.93
	Other investments ^(e)	624		3		1.82		640		4		2.00		685		6		3.27
	Total earning assets	130,434		1,325		4.05		129,195		1,337		4.14		123,680		1,246		3.98
	Allowance for loan and lease losses	(881)						(881)						(886)
	Accrued income and other assets	14,605						14,321						13,935
	Discontinued assets	957						1,009						1,186
	Total assets	$	145,115					$	143,644					$	137,915
Liabilities
	NOW and money market deposit accounts	$	64,595	154		.94		$	63,071	147		.93		$	56,391	82		.58
	Savings deposits	4,709		1		.10		4,781		1		.09		5,413		3		.20
	Certificates of deposit ($100,000 or more)	7,625		45		2.37		8,147		48		2.37		8,186		38		1.86
	Other time deposits	5,449		27		1.96		5,569		27		1.93		5,026		17		1.40
	Total interest-bearing deposits	82,378		227		1.09		81,568		223		1.10		75,016		140		.74
	Federal funds purchased and securities sold under repurchase agreements	187		—		.50		194		—		.20		552		1		1.00
	Bank notes and other short-term borrowings	626		4		2.04		842		5		2.46		596		4		2.76
	Long-term debt ^{(f), (g)}	13,347		114		3.51		13,213		120		3.67		12,678		108		3.34
	Total interest-bearing liabilities	96,538		345		1.42		95,817		348		1.46		88,842		253		1.13
	Noninterest-bearing deposits	27,901						28,033						30,610
	Accrued expense and other liabilities	2,605						2,253						2,065
	Discontinued liabilities ^(g)	957						1,009						1,186
	Total liabilities	128,001						127,112						122,703
Equity
	Key shareholders' equity	17,113						16,531						15,210
	Noncontrolling interests	1						1						2
	Total equity	17,114						16,532						15,212
	Total liabilities and equity	$	145,115					$	143,644					$	137,915
Interest rate spread (TE)						2.63	%					2.68	%					2.85	%
Net interest income (TE) and net interest margin (TE)				980		3.00	%			989		3.06	%			993		3.18	%
TE adjustment ^(b)				8						8						7
	Net interest income, GAAP basis			$	972					$	981					$	986

(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $144 million, $141 million, and $128 million of assets from commercial credit cards for the three months ended September 30, 2019, June 30, 2019, and September 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)

		Nine months ended September 30, 2019						Nine months ended September 30, 2018
		Average				Yield/		Average				Yield/
		Balance		Interest ^(a)		Rate ^(a)		Balance		Interest ^(a)		Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	47,191	$	1,622	4.59	%	$	44,178	$	1,414	4.28	%
	Real estate — commercial mortgage	13,744		517		5.03		14,137		513		4.85
	Real estate — construction	1,482		60		5.37		1,834		67		4.88
	Commercial lease financing	4,490		124		3.66		4,552		125		3.67
	Total commercial loans	66,907		2,323		4.64		64,701		2,119		4.38
	Real estate — residential mortgage	5,866		176		4.00		5,466		163		3.97
	Home equity loans	10,726		404		5.03		11,629		406		4.67
	Consumer direct loans	2,256		125		7.42		1,774		101		7.59
	Credit cards	1,099		95		11.55		1,085		92		11.32
	Consumer indirect loans	3,951		122		4.13		3,363		107		4.27
	Total consumer loans	23,898		922		5.15		23,317		869		4.98
	Total loans	90,805		3,245		4.77		88,018		2,988		4.54
	Loans held for sale	1,329		46		4.64		1,226		40		4.40
	Securities available for sale ^{(b), (e)}	21,059		400		2.52		17,653		294		2.14
	Held-to-maturity securities ^(b)	11,035		199		2.41		12,111		213		2.35
	Trading account assets	988		24		3.22		879		21		3.19
	Short-term investments	2,930		49		2.23		2,334		31		1.76
	Other investments ^(e)	639		11		2.18		706		17		3.10
	Total earning assets	128,785		3,974		4.12		122,927		3,604		3.90
	Allowance for loan and lease losses	(880)						(879)
	Accrued income and other assets	14,414						13,966
	Discontinued assets	1,010						1,243
	Total assets	$	143,329					$	137,257
Liabilities
	NOW and money market deposit accounts	$	62,827	431		.92		$	54,891	187		.46
	Savings deposits	4,767		3		.09		5,971		13		.28
	Certificates of deposit ($100,000 or more)	8,046		140		2.33		7,563		97		1.72
	Other time deposits	5,506		78		1.90		4,947		46		1.25
	Total interest-bearing deposits	81,146		652		1.07		73,372		343		.63
	Federal funds purchased and securities sold under repurchase agreements	262		1		.63		1,146		10		1.22
	Bank notes and other short-term borrowings	706		13		2.43		1,015		17		2.19
	Long-term debt ^{(f), (g)}	13,241		354		3.62		12,631		302		3.17
	Total interest-bearing liabilities	95,355		1,020		1.43		88,164		672		1.02
	Noninterest-bearing deposits	28,016						30,701
	Accrued expense and other liabilities	2,493						2,102
	Discontinued liabilities ^(g)	1,010						1,243
	Total liabilities	126,874						122,210
Equity
	Key shareholders' equity	16,454						15,045
	Noncontrolling interests	1						2
	Total equity	16,455						15,047
	Total liabilities and equity	$	143,329					$	137,257
Interest rate spread (TE)						2.69	%					2.88	%
Net interest income (TE) and net interest margin (TE)				2,954		3.06	%			2,932		3.17	%
TE adjustment ^(b)				24						23
	Net interest income, GAAP basis			$	2,930					$	2,909

(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% and 35% for the nine months ended September 30, 2019, and September 30, 2018, respectively.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $139 million and $125 million of assets from commercial credit cards for the nine months ended September 30, 2019, and September 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						Nine months ended
	9/30/2019		6/30/2019		9/30/2018		9/30/2019		9/30/2018
Personnel ^(a)	$	547	$	589	$	553	$	1,699	$	1,733
Net occupancy	72		73		76		217		233
Computer processing	53		56		52		163		155
Business services and professional fees	43		45		43		132		135
Equipment	27		24		27		75		79
Operating lease expense	33		32		31		91		88
Marketing	26		24		26		69		77
FDIC assessment	7		9		21		23		63
Intangible asset amortization	26		22		23		70		77
OREO expense, net	3		4		3		10		5
Other expense	102		141		109		372		318
Total noninterest expense	$	939	$	1,019	$	964	$	2,921	$	2,963
Average full-time equivalent employees ^(b)	16,898		17,206		18,150		17,217		18,354

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

Personnel Expense
(in millions)

	Three months ended						Nine months ended
	9/30/2019		6/30/2019		9/30/2018		9/30/2019		9/30/2018
Salaries and contract labor	$	314	$	322	$	335	$	956	$	1,015
Incentive and stock-based compensation	143		155		138		430		430
Employee benefits	87		83		79		263		266
Severance	3		29		1		50		22
Total personnel expense	$	547	$	589	$	553	$	1,699	$	1,733

Loan Composition
(dollars in millions)

							Percent change 9/30/2019 vs
	9/30/2019		6/30/2019		9/30/2018		6/30/2019		9/30/2018
Commercial and industrial ^(a)	$	48,362	$	48,544	$	45,023	(.4)	%	7.4	%
Commercial real estate:
Commercial mortgage	13,167		13,299		14,716		(1.0)		(10.5)
Construction	1,480		1,439		1,763		2.8		(16.1)
Total commercial real estate loans	14,647		14,738		16,479		(.6)		(11.1)
Commercial lease financing ^(b)	4,470		4,578		4,470		(2.4)		—
Total commercial loans	67,479		67,860		65,972		(.6)		2.3
Residential — prime loans:
Real estate — residential mortgage	6,527		6,053		5,497		7.8		18.7
Home equity loans	10,456		10,575		11,339		(1.1)		(7.8)
Total residential — prime loans	16,983		16,628		16,836		2.1		.9
Consumer direct loans	2,789		2,350		1,807		18.7		54.3
Credit cards	1,105		1,096		1,098		.8		.6
Consumer indirect loans	4,404		4,003		3,555		10.0		23.9
Total consumer loans	25,281		24,077		23,296		5.0		8.5
Total loans ^(c)	$	92,760	$	91,937	$	89,268	.9	%	3.9	%


(a)	Loan balances include $147 million, $143 million, and $128 million of commercial credit card balances at September 30, 2019, June 30, 2019, and September 30, 2018, respectively.
(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $10 million, $11 million, and $12 million at September 30, 2019, June 30, 2019, and September 30, 2018, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)	Total loans exclude loans of $915 million at September 30, 2019, $964 million at June 30, 2019, and $1.1 billion at September 30, 2018, related to the discontinued operations of the education lending business.

Loans Held for Sale Composition
(dollars in millions)

							Percent change 9/30/2019 vs
	9/30/2019		6/30/2019		9/30/2018		6/30/2019		9/30/2018
Commercial and industrial	$	195	$	255	$	97	(23.5)	%	101.0	%
Real estate — commercial mortgage	1,123		1,123		1,433		—		(21.6)
Commercial lease financing	100		—		1		N/M		N/M
Real estate — residential mortgage	120		164		87		(26.8)		37.9
Consumer direct loans	60		248		—		(75.8)		N/M
Total loans held for sale ^(a)	$	1,598	$	1,790	$	1,618	(10.7)	%	(1.2)	%


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $120 million at September 30, 2019, $164 million at June 30, 2019, and $87 million at September 30, 2018.

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

	3Q19		2Q19		1Q19		4Q18		3Q18
Balance at beginning of period	$	1,790	$	894	$	1,227	$	1,618	$	1,418
New originations	3,222		3,218		1,676		5,057		2,976
Transfers from (to) held to maturity, net	237		42		6		24		4
Loan sales	(3,602)		(2,358)		(2,017)		(5,448)		(2,491)
Loan draws (payments), net	(49)		(6)		2		(24)		(289)
Balance at end of period ^(a)	$	1,598	$	1,790	$	894	$	1,227	$	1,618


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $120 million at September 30, 2019, $164 million at June 30, 2019, $71 million at March 31, 2019, $54 million at December 31, 2018, and $87 million at September 30, 2018.

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

	Three months ended									Nine months ended
	9/30/2019			6/30/2019			9/30/2018			9/30/2019			9/30/2018
Average loans outstanding	$	91,956		$	90,785		$	88,467		$	90,805		$	88,018
Allowance for loan and lease losses at beginning of period	$	890		$	883		$	887		$	883		$	877
Loans charged off:
Commercial and industrial	176			30			38			242			114

Real estate — commercial mortgage	—			1			6			6			9
Real estate — construction	—			—			—			4			—
Total commercial real estate loans	—			1			6			10			9
Commercial lease financing	1			16			4			25			9
Total commercial loans	177			47			48			277			132
Real estate — residential mortgage	1			1			2			3			3
Home equity loans	6			6			4			16			14
Consumer direct loans	10			10			10			30			27
Credit cards	11			12			10			34			34
Consumer indirect loans	8			8			7			24			22
Total consumer loans	36			37			33			107			100
Total loans charged off	213			84			81			384			232
Recoveries:
Commercial and industrial	6			6			5			22			18

Real estate — commercial mortgage	—			1			1			2			2
Real estate — construction	—			—			—			—			1
Total commercial real estate loans	—			1			1			2			3
Commercial lease financing	1			2			3			4			4
Total commercial loans	7			9			9			28			25
Real estate — residential mortgage	—			—			2			1			2
Home equity loans	2			2			3			6			9
Consumer direct loans	2			2			1			5			5
Credit cards	2			2			2			6			5
Consumer indirect loans	4			4			4			13			12
Total consumer loans	10			10			12			31			33
Total recoveries	17			19			21			59			58
Net loan charge-offs	(196)			(65)			(60)			(325)			(174)
Provision (credit) for loan and lease losses	199			72			60			335			184
Allowance for loan and lease losses at end of period	$	893		$	890		$	887		$	893		$	887

Liability for credit losses on lending-related commitments at beginning of period	$	64		$	62		$	58		$	64		$	57
Provision (credit) for losses on lending-related commitments	1			2			2			1			3
Liability for credit losses on lending-related commitments at end of period ^(a)	$	65		$	64		$	60		$	65		$	60

Total allowance for credit losses at end of period	$	958		$	954		$	947		$	958		$	947

Net loan charge-offs to average total loans	.85		%	.29		%	.27		%	.48		%	.26		%
Allowance for loan and lease losses to period-end loans	.96			.97			.99			.96			.99
Allowance for credit losses to period-end loans	1.03			1.04			1.06			1.03			1.06
Allowance for loan and lease losses to nonperforming loans	152.6			158.6			137.5			152.6			137.5
Allowance for credit losses to nonperforming loans	163.8			170.1			146.8			163.8			146.8

Discontinued operations — education lending business:
Loans charged off	$	1		$	4		$	4		$	9		$	11
Recoveries	1			1			1			3			4
Net loan charge-offs	—			$	(3)		$	(3)		$	(6)		$	(7)


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

Asset Quality Statistics From Continuing Operations
(dollars in millions)

	3Q19			2Q19			1Q19			4Q18			3Q18
Net loan charge-offs	$	196		$	65		$	64		$	60		$	60
Net loan charge-offs to average total loans	.85		%	.29		%	.29		%	.27		%	.27		%
Allowance for loan and lease losses	$	893		$	890		$	883		$	883		$	887
Allowance for credit losses ^(a)	958			954			945			946			947
Allowance for loan and lease losses to period-end loans	.96		%	.97		%	.98		%	.99		%	.99		%
Allowance for credit losses to period-end loans	1.03			1.04			1.05			1.06			1.06
Allowance for loan and lease losses to nonperforming loans ^(b)	152.6			158.6			161.1			162.9			137.5
Allowance for credit losses to nonperforming loans ^(b)	163.8			170.1			172.4			174.5			146.8
Nonperforming loans at period end ^(b)	$	585		$	561		$	548		$	542		$	645
Nonperforming assets at period end ^(b)	711			608			597			577			674
Nonperforming loans to period-end portfolio loans ^(b)	.63		%	.61		%	.61		%	.61		%	.72		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(b)	.77			.66			.66			.64			.75


(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 $497 million, $518 million, $551 million, $575 million, and $606 million of purchased credit impaired loans at September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, and September 30, 2018, respectively.

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Commercial and industrial	$	238		$	189		$	170		$	152		$	227

Real estate — commercial mortgage	92			85			82			81			98
Real estate — construction	2			2			2			2			2
Total commercial real estate loans	94			87			84			83			100
Commercial lease financing	7			7			9			9			10
Total commercial loans	339			283			263			244			337
Real estate — residential mortgage	42			62			64			62			62
Home equity loans	179			191			195			210			221
Consumer direct loans	3			3			3			4			4
Credit cards	2			2			3			2			2
Consumer indirect loans	20			20			20			20			19
Total consumer loans	246			278			285			298			308
Total nonperforming loans ^(a)	585			561			548			542			645
OREO	39			38			40			35			28
Nonperforming loans held for sale	78			—			—			—			—
Other nonperforming assets	9			9			9			—			1
Total nonperforming assets ^(a)	$	711		$	608		$	597		$	577		$	674
Accruing loans past due 90 days or more	54			74			118			112			87
Accruing loans past due 30 through 89 days	366			299			290			312			368
Restructured loans — accruing and nonaccruing ^(b)	347			395			365			399			366
Restructured loans included in nonperforming loans ^(b)	176			228			198			247			211
Nonperforming assets from discontinued operations — education lending business	7			7			7			8			6
Nonperforming loans to period-end portfolio loans ^(a)	.63		%	.61		%	.61		%	.61		%	.72		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(a)	.77			.66			.66			.64			.75


(a)	Nonperforming loan balances exclude $497 million, $518 million, $551 million, $575 million, and $606 million of purchased credit impaired loans at September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, and September 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)
	3Q19		2Q19		1Q19		4Q18		3Q18
Balance at beginning of period	$	561	$	548	$	542	$	645	$	545
Loans placed on nonaccrual status	271		189		196		103		263
Charge-offs	(91)		(84)		(91)		(92)		(81)
Loans sold	—		(38)		(18)		(16)		—
Payments	(37)		(23)		(22)		(53)		(57)
Transfers to OREO	(4)		(4)		(8)		(10)		(5)
Transfers to nonperforming loans held for sale	(78)		—		—		—		—
Transfers to other nonperforming assets	—		—		(13)		—		—
Loans returned to accrual status	(37)		(27)		(38)		(35)		(20)
Balance at end of period ^(a)	$	585	$	561	$	548	$	542	$	645


(a)	Nonperforming loan balances exclude $497 million, $518 million, $551 million, $575 million, and $606 million of purchased credit impaired loans at September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, and September 30, 2018, respectively.

Line of Business Results
(dollars in millions)

																Percentage change 3Q19 vs.
	3Q19			2Q19			1Q19			4Q18			3Q18			2Q19		3Q18
Consumer Bank
Summary of operations
Total revenue (TE)	$	833		$	825		$	805		$	829		$	809		1.0	%	3.0	%
Provision for credit losses	48			40			45			43			32			20.0		50.0
Noninterest expense	531			552			540			554			557			(3.8)		(4.7)
Net income (loss) attributable to Key	194			177			168			177			168			9.6		15.5
Average loans and leases	32,760			31,881			31,321			31,241			31,172			2.8		5.1
Average deposits	72,995			72,303			71,288			70,426			69,124			1.0		5.6
Net loan charge-offs	40			40			34			40			36			—		11.1
Net loan charge-offs to average total loans	.48		%	.50		%	.44		%	.51		%	.46		%	N/A		N/A
Nonperforming assets at period end	$	354		$	366		$	365		$	364		$	380		(3.3)		(6.8)
Return on average allocated equity	22.82		%	21.75		%	21.27		%	21.51		%	20.38		%	N/A		N/A

Commercial Bank
Summary of operations
Total revenue (TE)	$	779		$	760		$	702		$	771		$	753		2.5	%	3.5	%
Provision for credit losses	32			33			16			17			31			(3.0)		3.2
Noninterest expense	372			389			373			401			385			(4.4)		(3.4)
Net income (loss) attributable to Key	304			277			250			302			274			9.7		10.9
Average loans and leases	58,215			57,918			57,267			56,884			56,096			.5		3.8
Average loans held for sale	1,325			1,168			1,066			2,250			1,042			13.4		27.2
Average deposits	36,204			35,960			34,417			35,113			33,603			.7		7.7
Net loan charge-offs	35			23			30			19			26			52.2		34.6
Net loan charge-offs to average total loans	.24		%	.16		%	.21		%	.13		%	.18		%	N/A		N/A
Nonperforming assets at period end	$	351		$	235		$	225		$	205		$	280		49.4		25.4
Return on average allocated equity	26.37		%	24.09		%	22.60		%	26.64		%	24.46		%	N/A		N/A

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

Notable Items
(in millions)

	Three months ended					Nine months ended
	9/30/2019		6/30/2019		9/30/2018	9/30/2019		9/30/2018
Provision for credit losses	$	(123)	—		—	$	(123)	—

Gain on sale of Key Insurance and Benefits Services	—		—		—	—		$	78
Expenses related to the sale of Key Insurance and Benefits Services	—		—		—	—		5
Net gain on sale of Key Insurance and Benefits Services	—		—		—	—		73

Efficiency initiative expenses	—		$	(50)	—	(76)		(22)
Laurel Road acquisition expenses	—		(2)		—	(2)		—
Lease residual loss	—		—		—	—		(42)
Total notable items	$	(123)	$	(52)	—	$	(201)	$	9
Income taxes	(29)		(12)		—	(47)		7
Total notable items, after tax	$	(94)	$	(40)	—	$	(154)	$	2