KeyCorp Reports Third Quarter 2020 Net Income Of $397 Million, Or $.41 Per Diluted Common Share

Revenue up 3% from year-ago period, reflecting continued momentum in consumer and commercial businesses

Strong balance sheet with Common Equity Tier 1 Capital of 9.5%, up 40 basis points from prior quarter

Disciplined risk management and underwriting drives credit quality: net charge-offs to average loans of 49 basis points

Double-digit growth in loans and deposits compared to prior year

Noninterest income up 5% from the prior year, driven by growth in payments business and consumer mortgage

News provided by

KeyCorp

Oct 21, 2020, 06:30 ET

CLEVELAND, Oct. 21, 2020 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $397 million, or $.41 per diluted common share for the third quarter of 2020. This compared to $159 million, or $.16 per diluted common share, for the second quarter of 2020 and $383 million, or $.38 per diluted common share, for the third quarter of 2019, which included $.10 per diluted common share related to notable items.

Key's third quarter results reflect continued momentum in our businesses, strong credit discipline and investments we have made to strengthen our franchise. Our success also demonstrates the resiliency and dedication of our team in serving our clients and supporting our communities.

In the third quarter, revenue increased 3% from the prior year, driven by strong balance sheet growth and higher fee income. Average loans and deposits were both up double-digits from the same period last year, reflecting the impact from the Paycheck Protection Program, as well as strong loan originations from consumer mortgage and Laurel Road. Noninterest income benefitted from higher cards and payments activity and growth in consumer mortgage fees.

During the quarter, expense levels reflected higher variable costs from production-related incentives and cards and payments activity, as well as elevated pandemic-related costs associated with keeping our teammates and clients safe. Through our continuous improvement efforts, we are maintaining our focus on expenses – improving our efficiency while continuing to invest for growth, including our digital capabilities across our franchise.

Importantly, we remain committed to strong risk management practices and being disciplined with our capital. Our Common Equity Tier 1 ratio ended the quarter at 9.5%, up 40 basis points from the prior quarter, and at the upper end of our targeted range.

Despite the challenges presented by the pandemic, low interest rates and economic uncertainty, we are confident that Key is well-positioned to navigate the current environment while concurrently assisting in the recovery phase and investing in our bright future.

- Chris Gorman, Chairman and CEO

Selected Financial Highlights

dollars in millions, except per share data										Change 3Q20 vs.
	3Q20			2Q20			3Q19			2Q20		3Q19
Income (loss) from continuing operations attributable to Key common shareholders	$	397		$	159		$	383		149.7	%	3.7	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution	.41			.16			.38			156.3		7.9
Return on average tangible common equity from continuing operations ^(a)	12.19		%	4.96		%	12.38		%	N/A		N/A
Return on average total assets from continuing operations	1.00			.45			1.14			N/A		N/A
Common Equity Tier 1 ratio ^(b)	9.5			9.1			9.5			N/A		N/A
Book value at period end	$	16.25		$	16.07		$	15.44		1.1	%	5.2	%
Net interest margin (TE) from continuing operations	2.62		%	2.76		%	3.00		%	N/A		N/A


(a)	The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "Return on average tangible common equity from continuing operations." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b)	9/30/20 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Net interest income (TE)	$	1,006	$	1,025	$	980	(1.9)	%	2.7	%
Noninterest income	681		692		650		(1.6)		4.8
Total revenue	$	1,687	$	1,717	$	1,630	(1.7)	%	3.5	%


TE = Taxable Equivalent

Taxable-equivalent net interest income was $1.0 billion for the third quarter of 2020, compared to taxable-equivalent net interest income of $980 million for the third quarter of 2019. The increase in net interest income reflects higher earning asset balances partially offset by a lower net interest margin. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity and Key's participation in the Paycheck Protection Program ("PPP").

Compared to the second quarter of 2020, taxable-equivalent net interest income decreased by $19 million, primarily reflecting lower loan balances. The lower net interest margin was driven by a shift in balance sheet mix, reflecting continued elevated levels of liquidity.

Noninterest Income

dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Trust and investment services income	$	128	$	123	$	118	4.1	%	8.5	%
Investment banking and debt placement fees	146		156		176		(6.4)		(17.0)
Service charges on deposit accounts	77		68		86		13.2		(10.5)
Operating lease income and other leasing gains	38		60		42		(36.7)		(9.5)
Corporate services income	51		52		63		(1.9)		(19.0)
Cards and payments income	114		91		69		25.3		65.2
Corporate-owned life insurance income	30		35		32		(14.3)		(6.3)
Consumer mortgage income	51		62		16		(17.7)		218.8
Commercial mortgage servicing fees	18		12		21		50.0		(14.3)
Other income	28		33		27		(15.2)		3.7
Total noninterest income	$	681	$	692	$	650	(1.6)	%	4.8	%

Compared to the third quarter of 2019, noninterest income increased by $31 million, primarily driven by a $45 million increase in cards and payments income related to higher prepaid card activity. Additionally, consumer mortgage income increased $35 million from the year-ago period, driven by strong loan originations and related fees. These increases were partially offset by a $30 million decline in investment banking and debt placement fees, primarily driven by lower loan syndication and M&A fees.

Compared to the second quarter of 2020, noninterest income decreased by $11 million. The largest driver of the quarterly decrease was a $22 million decline in operating lease income, related to gains on the sale of leveraged leases in the prior quarter. Investment banking and debt placement fees and consumer mortgage income delivered solid results, but both declined versus the prior quarter. Partially offsetting these declines was a $23 million increase in cards and payments income related to higher prepaid card activity and a $9 million increase in service charges on deposit accounts.

Noninterest Expense

dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Personnel expense	$	588	$	572	$	547	2.8	%	7.5	%
Nonpersonnel expense	449		441		392		1.8		14.5
Total noninterest expense	$	1,037	$	1,013	$	939	2.4	%	10.4	%

Key's noninterest expense was $1.0 billion for the third quarter of 2020, an increase of $98 million from the year-ago period. The increase is primarily related to higher payments-related expenses from prepaid card activity incurred in the current period, as well as COVID-19-related costs related to steps that the company has taken to ensure the health and safety of teammates. Personnel costs increased by $41 million, reflecting higher production-related incentives, merit increases and employee benefits costs.

Compared to the second quarter of 2020, noninterest expense increased $24 million. The increase was largely due to payments-related costs (in other expense), as well as higher employee benefits costs, which drove an increase in personnel costs quarter over quarter.

BALANCE SHEET HIGHLIGHTS

Average Loans

dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Commercial and industrial ^(a)	$	57,067	$	60,480	$	48,322	(5.6)	%	18.1	%
Other commercial loans	19,677		19,850		19,016		(.9)		3.5
Total consumer loans	28,175		27,611		24,618		2.0		14.4
Total loans	$	104,919	$	107,941	$	91,956	(2.8)	%	14.1	%


(a)	Commercial and industrial average loan balances include $129 million, $135 million, and $144 million of assets from commercial credit cards at September 30, 2020, June 30, 2020, and September 30, 2019, respectively.

Average loans were $104.9 billion for the third quarter of 2020, an increase of $13.0 billion compared to the third quarter of 2019. Commercial loans increased $9.4 billion, reflecting growth from PPP, as well as core broad-based growth in commercial and industrial loans and increased utilization versus the year-ago period. Consumer loans increased $3.6 billion, driven by strength from Laurel Road and Key's consumer mortgage business.

Compared to the second quarter of 2020, average loans decreased by $3.0 billion. Commercial loans declined as clients paid down elevated line draws from earlier in the year, partly offset by growth in PPP average balances. Consumer loans continue to reflect strength from Laurel Road, as well as Key's consumer mortgage business.

Average Deposits

dollars in millions										Change 3Q20 vs.
	3Q20			2Q20			3Q19			2Q20		3Q19
Non-time deposits	$	127,347		$	118,694		$	97,205		7.3	%	31.0	%
Certificates of deposit ($100,000 or more)	3,862			4,950			7,625			(22.0)		(49.4)
Other time deposits	3,735			4,333			5,449			(13.8)		(31.5)
Total deposits	$	134,944		$	127,977		$	110,279		5.4	%	22.4	%

Cost of total deposits	.16		%	.30		%	.82		%	N/A		N/A


N/A = Not Applicable

Average deposits totaled $134.9 billion for the third quarter of 2020, an increase of $24.7 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits as a result of lower interest rates.

Compared to the second quarter of 2020, average deposits increased by $7.0 billion, primarily driven by broad-based commercial growth as well as growth from consumer stimulus payments and lower consumer spending. This growth was offset by a continued decline in time deposits.

ASSET QUALITY

dollars in millions										Change 3Q20 vs.
	3Q20			2Q20			3Q19			2Q20		3Q19
Net loan charge-offs	$	128		$	96		$	196		33.3	%	(34.7)	%
Net loan charge-offs to average total loans	.49		%	.36		%	.85		%	N/A		N/A
Nonperforming loans at period end	$	834		$	760		$	585		9.7		42.6
Nonperforming assets at period end	1,003			951			711			5.5		41.1
Allowance for loan and lease losses	1,730			1,708			893			1.3		93.7
Allowance for credit losses	1,938			1,906			958			1.7		102.3
Allowance for loan and lease losses to nonperforming loans	207.4		%	224.7		%	152.6		%	N/A		N/A
Allowance for credit losses to nonperforming loans	232.4			250.8			163.8			N/A		N/A
Provision for credit losses	$	160		$	482		$	200		(66.8)	%	(20.0)	%


N/A = Not Applicable

Key's provision for credit losses was $160 million for the third quarter of 2020, compared to $200 million for the third quarter of 2019 (which included $123 million related to a previously-disclosed fraud loss), and $482 million for the second quarter of 2020. The provision for credit losses reflects the adoption of a new accounting standard, often referred to as Current Expected Credit Losses ("CECL"), beginning in the first quarter of 2020. This framework requires that management estimate credit losses over the full remaining expected life and consider expected future changes in macroeconomic conditions.

The provision for credit losses exceeded net charge-offs by $32 million. Net loan charge-offs for the third quarter of 2020 totaled $128 million, or .49% of average total loans. These results compare to $196 million, or .85%, for the third quarter of 2019 (which included $123 million related to a previously-disclosed fraud loss) and $96 million, or .36%, for the second quarter of 2020. Key's allowance for credit losses was $1.9 billion, or 1.88% of total period-end loans at September 30, 2020, compared to 1.03% at September 30, 2019, and 1.80% at June 30, 2020.

At September 30, 2020, Key's nonperforming loans totaled $834 million, which represented .81% of period-end portfolio loans. These results compare to .63% at September 30, 2019, and .72% at June 30, 2020. Nonperforming assets at September 30, 2020, totaled $1.0 billion, and represented .97% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .77% at September 30, 2019, and .89% at June 30, 2020.

CAPITAL

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

Capital Ratios

	9/30/2020		6/30/2020		9/30/2019
Common Equity Tier 1 ^(a)	9.5	%	9.1	%	9.5	%
Tier 1 risk-based capital ^(a)	10.9		10.5		10.9
Total risk based capital ^(a)	13.3		12.8		12.9
Tangible common equity to tangible assets ^(b)	7.8		7.6		8.6
Leverage ^(a)	8.7		8.8		9.9


(a)	9/30/2020 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
(b)	The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

Key's capital position remained strong in the third quarter of 2020. As shown in the preceding table, at September 30, 2020, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.5% and 10.9%, respectively. Key's tangible common equity ratio was 7.8% at September 30, 2020.

Key has elected the CECL phase-in option provided by regulatory guidance which delays for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by 31 basis points.

Summary of Changes in Common Shares Outstanding

in thousands					Change 3Q20 vs.
		3Q20	2Q20	3Q19	2Q20		3Q19
Shares outstanding at beginning of period		975,947	975,319	1,003,114	.1	%	(2.7)	%
Open market repurchases and return of shares under employee compensation plans		(1)	(19)	(15,076)	(94.7)		(100.0)
Shares issued under employee compensation plans (net of cancellations)		259	647	500	(60.0)		(48.2)
	Shares outstanding at end of period	976,205	975,947	988,538	—		(1.2)	%

Consistent with Key's 2020 Capital Plan, during the third quarter of 2020, Key declared a dividend of $.185 per common share. Per Key's announcement on March 17, 2020, share repurchase activity has been temporarily suspended in response to the COVID-19 pandemic.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.

Major Business Segments

dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Revenue from continuing operations (TE)
Consumer Bank	$	871	$	841	$	833	3.6	%	4.6	%
Commercial Bank	804		857		780		(6.2)		3.1
Other ^(a)	12		19		17		(36.8)		(29.4)
Total	$	1,687	$	1,717	$	1,630	(1.7)	%	3.5	%

Income (loss) from continuing operations attributable to Key
Consumer Bank	$	241	$	91	$	196	164.8	%	23.0	%
Commercial Bank	160		101		301		58.4		(46.8)
Other ^(a)	23		(7)		(84)		N/M		N/M
Total	$	424	$	185	$	413	129.2	%	2.7	%


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

Consumer Bank


dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Summary of operations
Net interest income (TE)	$	604	$	594	$	595	1.7	%	1.5	%
Noninterest income	267		247		238		8.1		12.2
Total revenue (TE)	871		841		833		3.6		4.6
Provision for credit losses	(16)		167		48		N/M		N/M
Noninterest expense	571		555		529		2.9		7.9
Income (loss) before income taxes (TE)	316		119		256		165.5		23.4
Allocated income taxes (benefit) and TE adjustments	75		28		60		167.9		25.0
Net income (loss) attributable to Key	$	241	$	91	$	196	164.8	%	23.0	%

Average balances
Loans and leases	$	41,471	$	39,197	$	32,760	5.8	%	26.6	%
Total assets	44,888		44,088		36,397		1.8		23.3
Deposits	83,175		79,502		72,995		4.6		13.9

Assets under management at period end	$	41,312	$	39,722	$	39,416	4.0	%	4.8	%


TE = Taxable Equivalent

Additional Consumer Bank Data

dollars in millions										Change 3Q20 vs.
	3Q20			2Q20			3Q19			2Q20		3Q19
Noninterest income
Trust and investment services income	$	100		$	87		$	90		14.9	%	11.1	%
Service charges on deposit accounts	44			38			58			15.8		(24.1)
Cards and payments income	55			47			52			17.0		5.8
Consumer mortgage income	51			62			16			(17.7)		218.8
Other noninterest income	17			13			22			30.8		(22.7)
Total noninterest income	$	267		$	247		$	238		8.1	%	12.2	%

Average deposit balances
NOW and money market deposit accounts	$	52,550		$	49,152		$	43,638		6.9	%	20.4	%
Savings deposits	5,169			4,817			4,406			7.3		17.3
Certificates of deposit ($100,000 or more)	3,550			4,520			6,488			(21.5)		(45.3)
Other time deposits	3,701			4,296			5,430			(13.9)		(31.8)
Noninterest-bearing deposits	18,205			16,717			13,033			8.9		39.7
Total deposits	$	83,175		$	79,502		$	72,995		4.6	%	13.9	%

Home equity loans
Average balance	$	9,528		$	9,893		$	10,413
Combined weighted-average loan-to-value ratio (at date of origination)	70		%	70		%	70		%
Percent first lien positions	64			63			60

Other data
Branches	1,077			1,077			1,101
Automated teller machines	1,388			1,394			1,422

Consumer Bank Summary of Operations (3Q20 vs. 3Q19)

Net income attributable to Key of $241 million for the third quarter of 2020, compared to $196 million for the year-ago quarter
Taxable-equivalent net interest income increased by $9 million, or 1.5%, compared to the third quarter of 2019, as a result of strong balance sheet growth, partially offset by the lower interest rate environment
Average loans and leases increased $8.7 billion, or 26.6%, driven by benefit from the PPP, as well as growth from consumer mortgage and Laurel Road
Average deposits increased $10.2 billion, or 13.9%, from the third quarter of 2019, driven by consumer stimulus payments and relationship growth
Provision for credit losses decreased $64 million compared to the third quarter of 2019, due to lower net charge-offs and a reduced allowance, driven by improved macroeconomic factors and continued strength in client credit quality
Noninterest income increased $29 million, or 12.2%, from the year ago quarter, driven by strength in consumer mortgage income and higher trust and investment services income, partially offset by lower consumer spend activity
Noninterest expense increased $42 million, or 7.9%, from the year ago quarter driven by higher variable expenses from production-related incentives and higher loan volumes

Commercial Bank


dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Summary of operations
Net interest income (TE)	$	421	$	452	$	399	(6.9)	%	5.5	%
Noninterest income	383		405		381		(5.4)		.5
Total revenue (TE)	804		857		780		(6.2)		3.1
Provision for credit losses	163		314		32		(48.1)		409.4
Noninterest expense	443		438		378		1.1		17.2
Income (loss) before income taxes (TE)	198		105		370		88.6		(46.5)
Allocated income taxes and TE adjustments	38		4		69		850.0		(44.9)
Net income (loss) attributable to Key	$	160	$	101	$	301	58.4	%	(46.8)	%

Average balances
Loans and leases	$	62,925	$	68,038	$	58,215	(7.5)	%	8.1	%
Loans held for sale	1,383		2,012		1,325		(31.3)		4.4
Total assets	72,613		76,974		66,549		(5.7)		9.1
Deposits	51,238		47,685		36,204		7.5	%	41.5	%


TE = Taxable Equivalent, N/M = Not Meaningful

Additional Commercial Bank Data

dollars in millions							Change 3Q20 vs.
	3Q20		2Q20		3Q19		2Q20		3Q19
Noninterest income
Trust and investment services income	$	28	$	36	$	28	(22.2)	%	—
Investment banking and debt placement fees	146		156		176		(6.4)		(17.0)	%
Operating lease income and other leasing gains	38		46		40		(17.4)		(5.0)

Corporate services income	44		45		56		(2.2)		(21.4)
Service charges on deposit accounts	32		30		27		6.7		18.5
Cards and payments income	59		44		16		34.1		268.8
Payments and services income	135		119		99		13.4		36.4

Commercial mortgage servicing fees	18		12		20		50.0		(10.0)
Other noninterest income	18		36		18		(50.0)		—
Total noninterest income	$	383	$	405	$	381	(5.4)	%	.5	%


N/M = Not Meaningful

Commercial Bank Summary of Operations (3Q20 vs. 3Q19)

Net income attributable to Key of $160 million for the third quarter of 2020, compared to $301 million for the year-ago quarter
Taxable-equivalent net interest income increased by $22 million, or 5.5%, compared to the third quarter of 2019, with balance sheet growth partially offset by the lower interest rate environment
Average loan and lease balances increased $4.7 billion, or 8.1%, compared to the third quarter of 2019 driven by growth in commercial and industrial loans from line draws and PPP loans
Average deposit balances increased $15 billion, or 41.5%, compared to the third quarter of 2019, driven by growth in targeted relationships and the impact of government programs
Provision for credit losses increased $131 million compared to the third quarter of 2019, driven by an increase in net charge-offs and higher reserve levels
Noninterest income increased $2 million, from the third quarter of 2019, as higher cards and payments income related to prepaid card revenue was partially offset by declines in investment banking and corporate services income
Noninterest expense increased by $65 million, or 17.2%, from the third quarter of 2019 driven by elevated variable expenses related to prepaid card

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

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $170.5 billion at September 30, 2020.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,000 branches and approximately 1,400 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

INVESTOR RELATIONS:	KEY MEDIA NEWSROOM:
www.key.com/ir	www.key.com/newsroom

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2019, as well as in KeyCorp's subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the "SEC") and are or will be available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive regulation of the U.S. financial services industry. In addition to the aforementioned factors, the COVID–19 global pandemic is adversely affecting us, our clients, and third–party service providers, among others, and its impact may adversely affect our business and results of operations over a period of time. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Wednesday, October 21, 2020. A replay of the call will be available through November 4, 2020.

For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

*****

KeyCorp Third Quarter 2020 Financial Supplement

Page
13	Financial Highlights
14	GAAP to Non-GAAP Reconciliation
16	Consolidated Balance Sheets
17	Consolidated Statements of Income
18	Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
20	Noninterest Expense
20	Personnel Expense
21	Loan Composition
21	Loans Held for Sale Composition
21	Summary of Changes in Loans Held for Sale
22	Summary of Loan and Lease Loss Experience From Continuing Operations
23	Asset Quality Statistics From Continuing Operations
23	Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
23	Summary of Changes in Nonperforming Loans From Continuing Operations
24	Line of Business Results

Financial Highlights
(dollars in millions, except per share amounts)
		Three months ended
		9/30/2020			6/30/2020			9/30/2019
Summary of operations
	Net interest income (TE)	$	1,006		$	1,025		$	980
	Noninterest income	681			692			650
	Total revenue (TE)	1,687			1,717			1,630
	Provision for credit losses	160			482			200
	Noninterest expense	1,037			1,013			939
	Income (loss) from continuing operations attributable to Key	424			185			413
	Income (loss) from discontinued operations, net of taxes	4			2			3
	Net income (loss) attributable to Key	428			187			416

	Income (loss) from continuing operations attributable to Key common shareholders	397			159			383
	Income (loss) from discontinued operations, net of taxes	4			2			3
	Net income (loss) attributable to Key common shareholders	401			161			386

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	.41		$	.16		$	.39
	Income (loss) from discontinued operations, net of taxes	—			—			—
	Net income (loss) attributable to Key common shareholders ^(a)	.41			.17			.39

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	.41			.16			.38
	Income (loss) from discontinued operations, net of taxes — assuming dilution	—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(a)	.41			.17			.39

	Cash dividends declared	.185			.185			.185
	Book value at period end	16.25			16.07			15.44
	Tangible book value at period end	13.32			13.12			12.48
	Market price at period end	11.93			12.18			17.84

Performance ratios
	From continuing operations:
	Return on average total assets	1.00		%	.45		%	1.14		%
	Return on average common equity	9.98			4.05			9.99
	Return on average tangible common equity ^(b)	12.19			4.96			12.38
	Net interest margin (TE)	2.62			2.76			3.00
	Cash efficiency ratio ^(b)	60.6			57.9			56.0

	From consolidated operations:
	Return on average total assets	1.00		%	.46		%	1.14		%
	Return on average common equity	10.08			4.10			10.07
	Return on average tangible common equity ^(b)	12.31			5.02			12.48
	Net interest margin (TE)	2.62			2.76			2.98
	Loan to deposit ^(c)	77.2			80.4			85.3

Capital ratios at period end
	Key shareholders' equity to assets	10.4		%	10.2		%	11.7		%
	Key common shareholders' equity to assets	9.3			9.2			10.4
	Tangible common equity to tangible assets ^(b)	7.8			7.6			8.6
	Common Equity Tier 1^(d)	9.5			9.1			9.5
	Tier 1 risk-based capital ^(d)	10.9			10.5			10.9
	Total risk-based capital ^(d)	13.3			12.8			12.9
	Leverage ^(d)	8.7			8.8			9.9

Asset quality — from continuing operations
	Net loan charge-offs	$	128		$	96		$	196
	Net loan charge-offs to average loans	.49		%	.36		%	.85		%
	Allowance for loan and lease losses	$	1,730		$	1,708		$	893
	Allowance for credit losses	1,938			1,906			958
	Allowance for loan and lease losses to period-end loans	1.68		%	1.61		%	.96		%
	Allowance for credit losses to period-end loans	1.88			1.80			1.03
	Allowance for loan and lease losses to nonperforming loans ^(e)	207.4			224.7			152.6
	Allowance for credit losses to nonperforming loans ^(e)	232.4			250.8			163.8
	Nonperforming loans at period-end ^(e)	$	834		$	760		$	585
	Nonperforming assets at period-end ^(e)	1,003			951			711
	Nonperforming loans to period-end portfolio loans ^(e)	.81		%	.72		%	.63		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(e)	.97			.89			.77

Trust assets
	Assets under management	$	41,312		$	39,722		$	39,416

Other data
	Average full-time equivalent employees	17,097			16,646			16,898
	Branches	1,077			1,077			1,101

Taxable-equivalent adjustment		$	6		$	7		$	8


Financial Highlights (continued)
(dollars in millions, except per share amounts)
					Nine months ended
					9/30/2020			9/30/2019
Summary of operations
	Net interest income (TE)				$	3,020		$	2,954
	Noninterest income				1,850			1,808
	Total revenue (TE)				4,870			4,762
	Provision for credit losses				1,001			336
	Noninterest expense				2,981			2,921
	Income (loss) from continuing operations attributable to Key				754			1,242
	Income (loss) from discontinued operations, net of taxes				7			6
	Net income (loss) attributable to Key				761			1,248

	Income (loss) from continuing operations attributable to Key common shareholders				$	674		$	1,172
	Income (loss) from discontinued operations, net of taxes				7			6
	Net income (loss) attributable to Key common shareholders				681			1,178

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders				$	.70		$	1.17
	Income (loss) from discontinued operations, net of taxes				.01			.01
	Net income (loss) attributable to Key common shareholders ^(a)				.70			1.18

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution				.69			1.16
	Income (loss) from discontinued operations, net of taxes — assuming dilution				.01			.01
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(a)				.70			1.17

	Cash dividends paid				.555			.525

Performance ratios
	From continuing operations:
	Return on average total assets				.63		%	1.17		%
	Return on average common equity				5.75			10.62
	Return on average tangible common equity ^(b)				7.06			13.23
	Net interest margin (TE)				2.78			3.06
	Cash efficiency ratio ^(b)				60.2			59.9

	From consolidated operations:
	Return on average total assets				.63		%	1.16		%
	Return on average common equity				5.81			10.68
	Return on average tangible common equity ^(b)				7.13			13.30
	Net interest margin (TE)				2.78			3.05

Asset quality — from continuing operations
	Net loan charge-offs				$	308		$	325
	Net loan charge-offs to average total loans				.40		%	.48		%

Other data
	Average full-time equivalent employees				16,758			17,217

Taxable-equivalent adjustment					21			24


(a)	Earnings per share may not foot due to rounding.
(b)	The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(c)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(d)	September 30, 2020, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

GAAP to Non-GAAP Reconciliations (dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "pre-provision net revenue," and "cash efficiency ratio" and certain ratios excluding notable items.

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

The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock.

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

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

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

	Three months ended									Nine months ended
	9/30/2020			6/30/2020			9/30/2019			9/30/2020			9/30/2019
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)	$	17,722		$	17,542		$	17,116
Less: Intangible assets ^(a)	2,862			2,877			2,928
Preferred Stock ^(b)	1,856			1,856			1,856
Tangible common equity (non-GAAP)	$	13,004		$	12,809		$	12,332
Total assets (GAAP)	$	170,540		$	171,192		$	146,691
Less: Intangible assets ^(a)	2,862			2,877			2,928
Tangible assets (non-GAAP)	$	167,678		$	168,315		$	143,763
Tangible common equity to tangible assets ratio (non-GAAP)	7.8		%	7.6		%	8.6		%
Pre-provision net revenue
Net interest income (GAAP)	$	1,000		$	1,018		$	972		$	2,999		$	2,930
Plus: Taxable-equivalent adjustment	6			7			8			21			24
Noninterest income	681			692			650			1,850			1,808
Less: Noninterest expense	1,037			1,013			939			2,981			2,921
Pre-provision net revenue from continuing operations (non-GAAP)	$	650		$	704		$	691		$	1,889		$	1,841
Average tangible common equity
Average Key shareholders' equity (GAAP)	$	17,730		$	17,688		$	17,113		$	17,545		$	16,454
Less: Intangible assets (average) ^(c)	2,870			2,886			2,942			2,886			2,905
Preferred stock (average)	1,900			1,900			1,900			1,900			1,705
Average tangible common equity (non-GAAP)	$	12,960		$	12,902		$	12,271		$	12,759		$	11,844
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)	$	397		$	159		$	383		$	674		$	1,172
Plus: Notable items, after tax ^(d)	—			—			94			—			154
Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)	$	397		$	159		$	477		$	674		$	1,326
Average tangible common equity (non-GAAP)	12,960			12,902			12,271			12,759			11,844

Return on average tangible common equity from continuing operations (non- GAAP)	12.19		%	4.96		%	12.38		%	7.06		%	13.23		%
Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)	12.19		%	4.96		%	15.42		%	7.06		%	14.97		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)	$	401		$	161		$	386		$	681		$	1,178
Average tangible common equity (non-GAAP)	12,960			12,902			12,271			12,759			11,844

Return on average tangible common equity consolidated (non-GAAP)	12.31		%	5.02		%	12.48		%	7.13		%	13.30		%


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
	Three months ended									Nine months ended
	9/30/2020			6/30/2020			9/30/2019			9/30/2020			9/30/2019
Cash efficiency ratio
Noninterest expense (GAAP)	$	1,037		$	1,013		$	939		$	2,981		$	2,921
Less: Intangible asset amortization	15			18			26			50			70
Adjusted noninterest expense (non-GAAP)	$	1,022		$	995		$	913		$	2,931		$	2,851
Less: Notable items ^(d)	—			—			—			—			78
Adjusted noninterest expense excluding notable items (non-GAAP)	$	1,022		$	995		$	913		$	2,931		$	2,773

Net interest income (GAAP)	$	1,000		$	1,018		$	972		$	2,999		$	2,930
Plus: Taxable-equivalent adjustment	6			7			8			21			24
Noninterest income	681			692			650			1,850			1,808
Total taxable-equivalent revenue (non-GAAP)	$	1,687		$	1,717		$	1,630		$	4,870		$	4,762

Cash efficiency ratio (non-GAAP)	60.6		%	57.9		%	56.0		%	60.2		%	59.9		%

Cash efficiency ratio excluding notable items (non-GAAP)	60.6		%	57.9		%	56.0		%	60.2		%	58.2		%


(a)	For the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, intangible assets exclude $5 million, $5 million, and $9 million, respectively, of period-end purchased credit card receivables.
(b)	Net of capital surplus.
(c)	For the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, average intangible assets exclude $5 million, $6 million, and $9 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2020, and September 30, 2019, average intangible assets exclude $6 million and $11 million, respectively, of average purchase credit card receivables.
(d)	Additional detail provided in Notable Items table on page 24 of this release.
GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(dollars in millions)

			9/30/2020		6/30/2020		9/30/2019
Assets
	Loans		$	103,081	$	106,159	$	92,760
	Loans held for sale		1,724		2,007		1,598
	Securities available for sale		26,895		23,600		22,378
	Held-to-maturity securities		8,384		9,075		10,490
	Trading account assets		733		645		963
	Short-term investments		14,148		14,036		3,351
	Other investments		620		655		620
		Total earning assets	155,585		156,177		132,160
	Allowance for loan and lease losses		(1,730)		(1,708)		(893)
	Cash and due from banks		956		1,059		636
	Premises and equipment		765		776		815
	Goodwill		2,664		2,664		2,664
	Other intangible assets		203		218		272
	Corporate-owned life insurance		4,274		4,251		4,216
	Accrued income and other assets		7,084		6,976		5,881
	Discontinued assets		739		779		940
		Total assets	$	170,540	171,192		146,691

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	80,791	$	78,853	$	65,604
		Savings deposits	5,585		5,371		4,668
		Certificates of deposit ($100,000 or more)	3,345		4,476		7,194
		Other time deposits	3,450		4,011		5,300
		Total interest-bearing deposits	93,171		92,711		82,766
		Noninterest-bearing deposits	43,575		42,802		28,883
		Total deposits	136,746		135,513		111,649
	Federal funds purchased and securities sold under repurchase agreements		213		267		182
	Bank notes and other short-term borrowings		818		1,716		700
	Accrued expense and other liabilities		2,356		2,420		2,574
	Long-term debt		12,685		13,734		14,470
		Total liabilities	152,818		153,650		129,575

Equity
	Preferred stock		1,900		1,900		1,900
	Common shares		1,257		1,257		1,257
	Capital surplus		6,263		6,240		6,287
	Retained earnings		12,375		12,154		12,209
	Treasury stock, at cost		(4,940)		(4,945)		(4,696)
	Accumulated other comprehensive income (loss)		867		936		159
		Key shareholders' equity	17,722		17,542		17,116
	Noncontrolling interests		—		—		—
		Total equity	17,722		17,542		17,116
Total liabilities and equity			$	170,540	$	171,192	$	146,691

Common shares outstanding (000)			976,205		975,947		988,538

Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended						Nine months ended
			9/30/2020		6/30/2020		9/30/2019		9/30/2020		9/30/2019
Interest income
	Loans		$	927	$	980	$	1,073	$	2,933	$	3,221
	Loans held for sale		18		21		18		58		46
	Securities available for sale		115		121		136		365		400
	Held-to-maturity securities		53		56		64		171		199
	Trading account assets		3		5		7		16		24
	Short-term investments		1		7		16		14		49
	Other investments		2		—		3		3		11
		Total interest income	1,119		1,190		1,317		3,560		3,950
Interest expense
	Deposits		54		96		227		319		652
	Federal funds purchased and securities sold under repurchase agreements		—		—		—		6		1
	Bank notes and other short-term borrowings		1		5		4		11		13
	Long-term debt		64		71		114		225		354
		Total interest expense	119		172		345		561		1020
Net interest income			1,000		1,018		972		2,999		2,930
Provision for credit losses			160		482		200		1,001		336
Net interest income after provision for credit losses			840		536		772		1,998		2,594
Noninterest income
	Trust and investment services income		128		123		118		384		355
	Investment banking and debt placement fees		146		156		176		418		449
	Service charges on deposit accounts		77		68		86		229		251
	Operating lease income and other leasing gains		38		60		42		128		123
	Corporate services income		51		52		63		165		171
	Cards and payments income		114		91		69		271		208
	Corporate-owned life insurance income		30		35		32		101		97
	Consumer mortgage income		51		62		16		133		42
	Commercial mortgage servicing fees		18		12		21		48		58
	Other income		28		33		27		(27)		54
		Total noninterest income	681		692		650		1,850		1,808
Noninterest expense
	Personnel		588		572		547		1,675		1,699
	Net occupancy		76		71		72		223		217
	Computer processing		59		56		53		170		163
	Business services and professional fees		49		49		43		142		132
	Equipment		25		25		27		74		75
	Operating lease expense		33		34		33		103		91
	Marketing		22		24		26		67		69
	FDIC assessment		6		8		7		23		23
	Intangible asset amortization		15		18		26		50		70
	OREO expense, net		(1)		6		3		8		10
	Other expense		165		150		102		446		372
		Total noninterest expense	1,037		1,013		939		2,981		2,921
Income (loss) from continuing operations before income taxes			484		215		483		867		1,481
	Income taxes		60		30		70		113		239
Income (loss) from continuing operations			424		185		413		754		1,242
	Income (loss) from discontinued operations, net of taxes		4		2		3		7		6
Net income (loss)			428		187		416		761		1,248
	Less: Net income (loss) attributable to noncontrolling interests		—		—		—		—		—
Net income (loss) attributable to Key			$	428	$	187	$	416	$	761	$	1,248

Income (loss) from continuing operations attributable to Key common shareholders			$	397	$	159	$	383	$	674	$	1,172
Net income (loss) attributable to Key common shareholders			401		161		386		681		1,178
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.41	$	.16	$	.39	$	.70	$	1.17
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		.01
Net income (loss) attributable to Key common shareholders ^(a)			.41		.17		.39		.70		1.18
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.41	$	.16	$	.38	$	.69	$	1.16
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		.01
Net income (loss) attributable to Key common shareholders ^(a)			.41		.17		.39		.70		1.17

Cash dividends declared per common share			$	.185	$	.185	$	.185	$	.555	$	.525

Weighted-average common shares outstanding (000)			967,804		967,147		988,319		967,632		998,268
	Effect of common share options and other stock awards		6,184		4,994		10,009		6,648		9,632
Weighted-average common shares and potential common shares outstanding (000) ^(b)			973,988		972,141		998,328		974,280		1,007,900


(a)	Earnings per share may not foot due to rounding.
(b)	Assumes conversion of common share options and other stock awards, as applicable.

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
		Third Quarter 2020						Second Quarter 2020						Third Quarter 2019
		Average				Yield/		Average				Yield/		Average				Yield/
		Balance		Interest ^(a)		Rate ^(a)		Balance		Interest ^(a)		Rate ^(a)		Balance		Interest ^(a)		Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	57,067	$	474	3.31	%	$	60,480	$	518	3.44	%	$	48,322	$	543	4.46	%
	Real estate — commercial mortgage	13,202		117		3.54		13,510		128		3.80		13,056		163		4.95
	Real estate — construction	1,987		18		3.57		1,756		17		3.97		1,463		19		5.22
	Commercial lease financing	4,488		35		3.10		4,584		33		2.96		4,497		42		3.68
	Total commercial loans	76,744		644		3.34		80,330		696		3.49		67,338		767		4.52
	Real estate — residential mortgage	8,398		73		3.46		7,783		69		3.57		6,256		62		3.97
	Home equity loans	9,580		91		3.82		9,949		97		3.89		10,488		132		4.97
	Consumer direct loans	4,403		56		5.07		4,152		55		5.24		2,548		45		6.99
	Credit cards	967		25		10.24		983		25		10.22		1,100		32		11.59
	Consumer indirect loans	4,827		44		3.66		4,744		45		3.82		4,226		43		4.10
	Total consumer loans	28,175		289		4.10		27,611		291		4.22		24,618		314		5.07
	Total loans	104,919		933		3.55		107,941		987		3.67		91,956		1,081		4.67
	Loans held for sale	1,924		18		3.61		2,463		21		3.50		1,558		18		4.65
	Securities available for sale ^{(b), (e)}	24,941		115		1.90		20,749		121		2.43		21,867		136		2.52
	Held-to-maturity securities ^(b)	8,677		53		2.44		9,331		56		2.43		10,684		64		2.41
	Trading account assets	686		3		2.08		760		5		2.43		884		7		3.00
	Short-term investments	12,525		1		.04		7,892		7		0.31		2,861		16		2.19
	Other investments ^(e)	640		2		1.49		672		—		.29		624		3		1.82
	Total earning assets	154,312		1,125		2.93		149,808		1,197		3.22		130,434		1,325		4.05
	Allowance for loan and lease losses	(1,696)						(1,413)						(881)
	Accrued income and other assets	16,195						15,704						14,605
	Discontinued assets	752						793						957
	Total assets	$	169,563					$	164,892					$	145,115
Liabilities
	NOW and money market deposit accounts	$	80,175	26		.13		$	75,297	56		.30		$	64,595	154		.94
	Savings deposits	5,478		1		.04		5,130		—		.04		4,709		1		.10
	Certificates of deposit ($100,000 or more)	3,862		16		1.60		4,950		24		1.93		7,625		45		2.37
	Other time deposits	3,735		11		1.17		4,333		16		1.52		5,449		27		1.96
	Total interest-bearing deposits	93,250		54		.23		89,710		96		.43		82,378		227		1.09
	Federal funds purchased and securities sold under repurchase agreements	225		—		.05		242		—		.03		187		—		.50
	Bank notes and other short-term borrowings	761		1		.68		2,869		5		.57		626		4		2.04
	Long-term debt ^{(f), (g)}	12,801		64		2.12		12,954		71		2.30		13,347		114		3.51
	Total interest-bearing liabilities	107,037		119		.45		105,775		172		.66		96,538		345		1.42
	Noninterest-bearing deposits	41,694						38,267						27,901
	Accrued expense and other liabilities	2,350						2,369						2,605
	Discontinued liabilities ^(g)	752						793						957
	Total liabilities	151,833						147,204						128,001
Equity
	Key shareholders' equity	17,730						17,688						17,113
	Noncontrolling interests	—						—						1
	Total equity	17,730						17,688						17,114
	Total liabilities and equity	$	169,563					$	164,892					$	145,115
Interest rate spread (TE)						2.48	%					2.56	%					2.63	%
Net interest income (TE) and net interest margin (TE)				1,006		2.62	%			1,025		2.76	%			980		3.00	%
TE adjustment ^(b)				6						7						8
	Net interest income, GAAP basis			$	1,000					$	1,018					$	972


(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $129 million, $135 million, and $144 million of assets from commercial credit cards for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively.
(e)	Yield is calculated on the basis of amortized cost.
(f)	Rate calculation excludes basis adjustments related to fair value hedges.
(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
		Nine months ended September 30, 2020						Nine months ended September 30, 2019
		Average				Yield/		Average				Yield/
		Balance		Interest ^(a)		Rate ^(a)		Balance		Interest ^(a)		Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	55,676	$	1,500	3.60	%	$	47,191	$	1,622	4.59	%
	Real estate — commercial mortgage	13,419		400		3.98		13,744		517		5.03
	Real estate — construction	1,804		55		4.06		1,482		60		5.37
	Commercial lease financing	4,546		107		3.15		4,490		124		3.66
	Total commercial loans	75,445		2,062		3.65		66,907		2,323		4.64
	Real estate — residential mortgage	7,801		210		3.59		5,866		176		4.00
	Home equity loans	9,894		301		4.07		10,726		404		5.03
	Consumer direct loans	4,089		165		5.38		2,256		125		7.42
	Credit cards	1,010		81		10.68		1,099		95		11.55
	Consumer indirect loans	4,779		135		3.78		3,951		122		4.13
	Total consumer loans	27,573		892		4.32		23,898		922		5.15
	Total loans	103,018		2,954		3.83		90,805		3,245		4.77
	Loans held for sale	2,090		58		3.68		1,329		46		4.64
	Securities available for sale ^{(b), (e)}	22,297		365		2.25		21,059		400		2.52
	Held-to-maturity securities ^(b)	9,274		171		2.46		11,035		199		2.41
	Trading account assets	837		16		2.55		988		24		3.22
	Short-term investments	7,412		14		.24		2,930		49		2.23
	Other investments ^(e)	642		3		.72		639		11		2.18
	Total earning assets	145,570		3,581		3.30		128,785		3,974		4.12
	Allowance for loan and lease losses	(1403)						(880)
	Accrued income and other assets	15,579						14,414
	Discontinued assets	794						1,010
	Total assets	$	160,540					$	143,329
Liabilities
	NOW and money market deposit accounts	$	74,087	194		.35		$	62,827	431		.92
	Savings deposits	5,089		2		.04		4,767		3		.09
	Certificates of deposit ($100,000 or more)	5,036		74		1.96		8,046		140		2.33
	Other time deposits	4,321		49		1.53		5,506		78		1.90
	Total interest-bearing deposits	88,533		319		.48		81,146		652		1.07
	Federal funds purchased and securities sold under repurchase agreements	821		6		.95		262		1		.63
	Bank notes and other short-term borrowings	1,674		11		.87		706		13		2.43
	Long-term debt ^{(f), (g)}	12,733		225		2.45		13,241		354		3.62
	Total interest-bearing liabilities	103,761		561		.73		95,355		1020		1.43
	Noninterest-bearing deposits	35,922						28,016
	Accrued expense and other liabilities	2,518						2,493
	Discontinued liabilities ^(g)	794						1,010
	Total liabilities	142,995						126,874
Equity
	Key shareholders' equity	17,545						16,454
	Noncontrolling interests	—						1
	Total equity	17,545						16,455
	Total liabilities and equity	$	160,540					$	143,329
Interest rate spread (TE)						2.57	%					2.69	%
Net interest income (TE) and net interest margin (TE)				3,020		2.78	%			2,954		3.06	%
TE adjustment ^(b)				21						24
	Net interest income, GAAP basis			$	2,999					$	2,930


(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the nine months ended September 30, 2020, and September 30, 2019, respectively.
(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)	Commercial and industrial average balances include $137 million and $139 million of assets from commercial credit cards for the nine months ended September 30, 2020, and September 30, 2019, respectively.
(e)	Yield is calculated on the basis of amortized cost.
(f)	Rate calculation excludes basis adjustments related to fair value hedges.
(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

Noninterest Expense
(dollars in millions)

	Three months ended						Nine months ended
	9/30/2020		6/30/2020		9/30/2019		9/30/2020		9/30/2019
Personnel ^(a)	$	588	$	572	$	547	$	1,675	$	1,699
Net occupancy	76		71		72		223		217
Computer processing	59		56		53		170		163
Business services and professional fees	49		49		43		142		132
Equipment	25		25		27		74		75
Operating lease expense	33		34		33		103		91
Marketing	22		24		26		67		69
FDIC assessment	6		8		7		23		23
Intangible asset amortization	15		18		26		50		70
OREO expense, net	(1)		6		3		8		10
Other expense	165		150		102		446		372
Total noninterest expense	$	1,037	$	1,013	$	939	$	2,981	$	2,921
Average full-time equivalent employees ^(b)	17,097		16,646		16,898		16,758		17,217


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

Personnel Expense
(in millions)

	Three months ended						Nine months ended
	9/30/2020		6/30/2020		9/30/2019		9/30/2020		9/30/2019
Salaries and contract labor	$	339	$	332	$	314	$	987	$	956
Incentive and stock-based compensation	155		162		143		419		430
Employee benefits	93		76		87		261		263
Severance	1		2		3		8		50
Total personnel expense	$	588	$	572	$	547	$	1,675	$	1,699

Loan Composition
(dollars in millions)

							Percent change 9/30/2020 vs
	9/30/2020		6/30/2020		9/30/2019		6/30/2020		9/30/2019
Commercial and industrial ^(a)	$	55,025	$	58,297	$	48,362	(5.6)	%	13.8	%
Commercial real estate:
Commercial mortgage	13,059		13,465		13,167		(3.0)		(.8)
Construction	1,947		1,919		1,480		1.5		31.6
Total commercial real estate loans	15,006		15,384		14,647		(2.5)		2.5
Commercial lease financing ^(b)	4,450		4,524		4,470		(1.6)		(.4)
Total commercial loans	74,481		78,205		67,479		(4.8)		10.4
Residential — prime loans:
Real estate — residential mortgage	8,715		8,149		6,527		6.9		33.5
Home equity loans	9,488		9,782		10,456		(3.0)		(9.3)
Total residential — prime loans	18,203		17,931		16,983		1.5		7.2
Consumer direct loans	4,395		4,327		2,789		1.6		57.6
Credit cards	970		974		1,105		(.4)		(12.2)
Consumer indirect loans	5,032		4,722		4,404		6.6		14.3
Total consumer loans	28,600		27,954		25,281		2.3		13.1
Total loans ^{(c), (d)}	$	103,081	$	106,159	$	92,760	(2.9)	%	11.1	%


(a)	Loan balances include $128 million, $132 million, and $147 million of commercial credit card balances at September 30, 2020, June 30, 2020, and September 30, 2019, respectively.
(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $18 million, $18 million, and $10 million at September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)	Total loans exclude loans of $743 million at September 30, 2020, $780 million at June 30, 2020, and $915 million at September 30, 2019, related to the discontinued operations of the education lending business.
(d)	Accrued interest of $235 million, $225 million, and $257 million at September 30, 2020, June 30, 2020, and September 30, 2019, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

Loans Held for Sale Composition
(dollars in millions)

							Percent change 9/30/2020 vs
	9/30/2020		6/30/2020		9/30/2019		6/30/2020		9/30/2019
Commercial and industrial	$	336	$	419	$	195	(19.8)	%	72.3	%
Real estate — commercial mortgage	1,031		1,107		1,123		(6.9)		(8.2)
Commercial lease financing	1		—		100		N/M		(99.0)
Real estate — residential mortgage	288		250		120		15.2		140.0
Consumer direct loans	68		231		60		(70.6)		13.3
Total loans held for sale ^(a)	$	1,724	$	2,007	$	1,598	(14.1)	%	7.9	%


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $288 million at September 30, 2020, $250 million at June 30, 2020, and $120 million at September 30, 2019.

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

	3Q20		2Q20		1Q20		4Q19		3Q19
Balance at beginning of period	$	2,007	$	2,143	$	1,334	$	1,598	$	1,790
New originations	3,282		3,621		3,333		3,659		3,222
Transfers from (to) held to maturity, net	75		(15)		200		26		237
Loan sales	(3,583)		(3,679)		(2,649)		(3,933)		(3,602)
Loan draws (payments), net	(57)		(61)		(77)		(18)		(49)
Valuation adjustments	—		(2)		2		2		—
Balance at end of period ^(a)	$	1,724	$	2,007	$	2,143	$	1,334	$	1,598


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $288 million at September 30, 2020, $250 million at June 30, 2020, $152 million at March 31, 2020, $140 million at December 31, 2019, and $120 million at September 30, 2019.

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

	Three months ended									Nine months ended
	9/30/2020			6/30/2020			9/30/2019			9/30/2020			9/30/2019
Average loans outstanding	$	104,919		$	107,941		$	91,956		$	103,018		$	90,805
Allowance for loan and lease losses at the end of the prior period	$	1,708		$	1359		$	890		$	900		$	883
Cumulative effect from change in accounting principle ^(a)	—			—			—			204			—
Allowance for loan and lease losses at the beginning of the period	1,708			1,359			890			1,104			883
Loans charged off:
Commercial and industrial	101			71			176			232			242

Real estate — commercial mortgage	13			2			—			18			6
Real estate — construction	—			—			—			—			4
Total commercial real estate loans	13			2			—			18			10
Commercial lease financing	10			4			1			16			25
Total commercial loans	124			77			177			266			277
Real estate — residential mortgage	—			2			1			2			3
Home equity loans	4			2			6			10			16
Consumer direct loans	8			10			10			30			30
Credit cards	9			12			11			32			34
Consumer indirect loans	6			7			8			22			24
Total consumer loans	27			33			36			96			107
Total loans charged off	151			110			213			362			384
Recoveries:
Commercial and industrial	9			5			6			19			22

Real estate — commercial mortgage	2			—			—			3			2
Total commercial real estate loans	2			—			—			3			2
Commercial lease financing	—			1			1			1			4
Total commercial loans	11			6			7			23			28
Real estate — residential mortgage	1			—			—			1			1
Home equity loans	3			1			2			6			6
Consumer direct loans	2			2			2			6			5
Credit cards	2			2			2			6			6
Consumer indirect loans	4			3			4			12			13
Total consumer loans	12			8			10			31			31
Total recoveries	23			14			17			54			59
Net loan charge-offs	(128)			(96)			(196)			(308)			(325)
Provision (credit) for loan and lease losses	150			445			199			934			335
Allowance for loan and lease losses at end of period	$	1,730		$	1,708		$	893		$	1,730		$	893

Liability for credit losses on lending-related commitments at the end of the prior period	$	198		$	161		$	64		$	68		$	64
Liability for credit losses on contingent guarantees at the end of the prior period	—			—			—			7			—
Cumulative effect from change in accounting principle ^{(a), (b)}	—			—			—			66			—
Liability for credit losses on lending-related commitments at beginning of period	198			161			64			141			64
Provision (credit) for losses on lending-related commitments	10			37			1			67			1
Liability for credit losses on lending-related commitments at end of period ^(c)	$	208		$	198		$	65		$	208		$	65

Total allowance for credit losses at end of period	$	1,938		$	1,906		$	958		$	1,938		$	958

Net loan charge-offs to average total loans	.49		%	.36		%	.85		%	.40		%	.48		%
Allowance for loan and lease losses to period-end loans	1.68			1.61			.96			1.68			.96
Allowance for credit losses to period-end loans	1.88			1.80			1.03			1.88			1.03
Allowance for loan and lease losses to nonperforming loans	207.4			224.7			152.6			207.4			152.6
Allowance for credit losses to nonperforming loans	232.4			250.8			163.8			232.4			163.8

Discontinued operations — education lending business:
Loans charged off	—			$	2		$	1		$	4		$	9
Recoveries	—			2			1			3			3
Net loan charge-offs	—			—			—			$	(1)		$	(6)


(a)	The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.
(b)	The nine months ended September 30, 2020, amount excludes $4 million related to the provision for other financial assets.
(c)	Included in "Accrued expense and other liabilities" on the balance sheet.

Asset Quality Statistics From Continuing Operations
(dollars in millions)
	3Q20			2Q20			1Q20			4Q19			3Q19
Net loan charge-offs	$	128		$	96		$	84		$	99		$	196
Net loan charge-offs to average total loans	.49		%	.36		%	.35		%	.42		%	.85		%
Allowance for loan and lease losses	$	1,730		$	1,708		$	1,359		$	900		$	893
Allowance for credit losses ^(a)	1,938			1,906			1,520			968			958
Allowance for loan and lease losses to period-end loans	1.68		%	1.61		%	1.32		%	.95		%	.96		%
Allowance for credit losses to period-end loans	1.88			1.80			1.47			1.02			1.03
Allowance for loan and lease losses to nonperforming loans	207.4			224.7			215.0			156.0			152.6
Allowance for credit losses to nonperforming loans	232.4			250.8			240.5			167.8			163.8
Nonperforming loans at period end	$	834		$	760		$	632		$	577		$	585
Nonperforming assets at period end	1,003			951			844			715			711
Nonperforming loans to period-end portfolio loans	.81		%	.72		%	.61		%	.61		%	.63		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets	.97			.89			.82			.75			.77


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

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Commercial and industrial	$	459		$	404		$	277		$	264		$	238

Real estate — commercial mortgage	104			91			87			83			92
Real estate — construction	1			1			2			2			2
Total commercial real estate loans	105			92			89			85			94
Commercial lease financing	6			9			5			6			7
Total commercial loans	570			505			371			355			339
Real estate — residential mortgage	96			89			89			48			42
Home equity loans	146			141			143			145			179
Consumer direct loans	3			3			4			4			3
Credit cards	2			2			3			3			2
Consumer indirect loans	17			20			22			22			20
Total consumer loans	264			255			261			222			246
Total nonperforming loans	834			760			632			577			585
OREO	105			112			119			35			39
Nonperforming loans held for sale	61			75			89			94			78
Other nonperforming assets	3			4			4			9			9
Total nonperforming assets	$	1,003		$	951		$	844		$	715		$	711
Accruing loans past due 90 days or more	73			87			128			97			54
Accruing loans past due 30 through 89 days	336			419			393			329			366
Restructured loans — accruing and nonaccruing ^(a)	306			310			340			347			347
Restructured loans included in nonperforming loans ^(a)	168			166			172			183			176
Nonperforming assets from discontinued operations — education lending business	6			7			7			7			7
Nonperforming loans to period-end portfolio loans	.81		%	.72		%	.61		%	.61		%	.63		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets	.97			.89			.82			.75			.77

(a)

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

Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
	3Q20		2Q20		1Q20		4Q19		3Q19
Balance at beginning of period	$	760	$	632	$	577	$	585	$	561
Loans placed on nonaccrual status ^(a)	387		293		219		268		271
Charge-offs	(150)		(111)		(100)		(114)		(91)
Loans sold	(6)		(5)		(4)		(1)		—
Payments	(83)		(29)		(31)		(59)		(37)
Transfers to OREO	—		—		(3)		(3)		(4)
Transfers to nonperforming loans held for sale	—		—		—		(47)		(78)
Loans returned to accrual status	(74)		(20)		(26)		(52)		(37)
Balance at end of period	$	834	$	760	$	632	$	577	$	585

(a)

Purchase credit impaired (PCI) loans meeting nonperforming criteria were historically excluded from Key's nonperforming disclosures. As a result of CECL implementation on January 1, 2020, PCI loans became purchased credit deteriorated (PCD) loans. PCD loans that met the definition of nonperforming are now included in nonperforming disclosures, resulting in a $45 million increase in nonperforming loans in the first quarter of 2020.

Line of Business Results
(dollars in millions)

																Percentage change 3Q20 vs.
	3Q20			2Q20			1Q20			4Q19			3Q19			2Q20		3Q19
Consumer Bank
Summary of operations
Total revenue (TE)	$	871		$	841		$	820		$	825		$	833		3.6	%	4.6	%
Provision for credit losses	(16)			167			140			55			48			N/M		N/M
Noninterest expense	571			555			542			550			529			2.9		7.9
Net income (loss) attributable to Key	241			91			105			168			196			164.8		23.0
Average loans and leases	41,471			39,197			35,197			34,148			32,760			5.8		26.6
Average deposits	83,175			79,502			73,320			73,561			72,995			4.6		13.9
Net loan charge-offs	23			39			43			43			40			(41.0)		(42.5)
Net loan charge-offs to average total loans	.22		%	.40		%	.49		%	.50		%	.48		%	N/A		N/A
Nonperforming assets at period end	$	332		$	342		$	306		$	354		$	354		(2.9)		(6.2)
Return on average allocated equity	27.03		%	10.45		%	12.26		%	19.64		%	23.22		%	N/A		N/A

Commercial Bank
Summary of operations
Total revenue (TE)	$	804		$	857		$	630		$	771		$	780		(6.2)	%	3.1	%
Provision for credit losses	163			314			218			38			32			(48.1)		409.4
Noninterest expense	443			438			358			393			378			1.1		17.2
Net income (loss) attributable to Key	160			101			63			311			301			58.4		(46.8)
Average loans and leases	62,925			68,038			60,082			58,535			58,215			(7.5)		8.1
Average loans held for sale	1,383			2,012			1,607			1,465			1,325			(31.3)		4.4
Average deposits	51,238			47,685			36,256			38,224			36,204			7.5		41.5
Net loan charge-offs	104			57			40			39			35			82.5		197.1
Net loan charge-offs to average total loans	.66		%	.34		%	.27		%	.26		%	.24		%	N/A		N/A
Nonperforming assets at period end	$	616		$	407		$	402		$	351		$	351		51.4		75.5
Return on average allocated equity	12.57		%	8.41		%	5.40		%	26.40		%	26.18		%	N/A		N/A

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

Notable Items
(in millions)

	Three months ended				Nine months ended
	9/30/2020	6/30/2020	9/30/2019		9/30/2020	9/30/2019
Provision for credit losses	—	—	$	(123)	—	$	(123)

Efficiency initiative expenses	—	—	—		—	(76)
Laurel Road acquisition expenses	—	—	—		—	(2)
Total notable items	—	—	(123)		—	(201)
Income taxes	—	—	(29)		—	(47)
Total notable items, after tax	—	—	$	(94)	—	$	(154)