Received initial $821 million tranche of strategic minority investment from Scotiabank; Common Equity Tier 1 ratio of 10.8%and Tangible Common Equity ratio of 6.2%(b)
Net interest income up 7% quarter-over-quarter, with average deposits up 2.5%; Client deposits were up 4% year-over-year
Continued strong fee momentum across investment banking, commercial mortgage servicing, commercial payments, and wealth management
Nonperforming assets and provision for credit losses were stable to improved quarter-over-quarter
KeyCorp (NYSE: KEY) today announced net loss from continuing operations attributable to Key common shareholders of $(447) million, or $(.47) per diluted common share, or adjusted net income of $290 million or $.30 per diluted common share(a), for the third quarter of 2024. Included in the third quarter of 2024 are $(737) million, or $(.77) per diluted common share, after-tax, of charges related to the loss on the sale of securities(c). Net income from continuing operations attributable to Key common shareholders was $237 million, or $.25 per diluted common share, for the second quarter of 2024 and $266 million, or $.29 per diluted common share, for the third quarter of 2023.
Comments from Chairman and CEO, Chris Gorman
“Key performed well in the third quarter. EPS was impacted by a previously communicated securities portfolio repositioning that will enhance future earnings, capital, and liquidity starting in the fourth quarter. Underlying results were solid as relationship clients, deposits, and business-related fees all demonstrated continued momentum. As anticipated, we saw a meaningful increase in net interest income, up 7% quarter-over-quarter, as substantial portions of low-yielding securities and swaps matured. Concurrently, both our credit risk profile and expenses remained stable.
We continue to make progress regarding our $2.8 billion capital raise from Scotiabank, completing the initial $821 million investment tranche this quarter. As a result of this initial investment and the meaningful decline in interest rates in the third quarter, our tangible common equity ratio improved by 100 basis points quarter-over-quarter, and our reported CET1 ratio further strengthened to 10.8%. We continue to expect to complete the final tranche of the equity financing in the first quarter of 2025, subject to Fed approval.
Our fee-based pipelines continue to build. Investment banking and debt placement pipelines remain near record levels. Wealth management and commercial payments continue to demonstrate momentum.
Given the combination of our strong pipelines, further expected net interest income tailwinds in the quarters ahead, and a stable-to-improved credit outlook, I remain optimistic with respect to the trajectory of our business and our ability to drive value for all of our stakeholders.”
(a) The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "adjusted earnings per share" and "adjusted net income." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. (b) September30, 2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. (c) See table on page 25 for more information on Selected Items Impact on Earnings.
Selected Financial Highlights
Dollars in millions, except per share data Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Income (loss) from continuing operations attributable to Key common shareholders $ (447) $ 237 $ 266 (288.6)% (268.0)%
Income (loss) from continuing operations attributable to Key common shareholders per (.47) .25 .29 (288.0) (262.1)
common share - assuming dilution
Return on average tangible common equity from continuing operations (a) (16.98)% 10.39% 12.40% N/A N/A
Return on average total assets from continuing operations (.87) .59 .62 N/A N/A
Common Equity Tier 1 ratio (b) 10.8 10.5 9.8 N/A N/A
Book value at period end $ 14.53 $ 13.09 $ 11.65 11.0 24.7
Net interest margin (TE) from continuing operations 2.17% 2.04% 2.01% 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 "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. (b) September 30, 2024 ratio is estimated. TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Net interest income (TE) $ 964 $ 899 $ 923 7.2% 4.4%
Noninterest income (269) 627 643 (142.9) (141.8)
Total revenue (TE) $ 695 $ 1,526 $ 1,566 (54.5)% (55.6)%
TE = Taxable Equivalent
Taxable-equivalent net interest income was $964 million for the third quarter of 2024 and the net interest margin was 2.17%. Compared to the third quarter of 2023, net interest income increased by $41million, and the net interest margin increased by 16 basis points. Both net interest income and the net interest margin benefited from the reinvestment of proceeds from maturing investment securities into higher yielding investments, the maturity of lower-yielding interest rate swaps with negative carry, and a shift in funding mix from higher-cost wholesale borrowings to lower-cost interest-bearing deposits. In addition, during the third quarter of 2024, Key began the repositioning of the available-for-sale portfolio, which involved the sale of approximately $7.0 billion of lower-yielding mortgaged-backed securities and reinvestment of the proceeds into higher-yielding investments. These benefits were partially offset by a decline in loan balances and higher deposit costs relative to a year ago.
Compared to the second quarter of 2024, taxable-equivalent net interest income increased by $65 million, and the net interest margin increased by 13 basis points. Both net interest income and the net interest margin benefited from the reinvestment of proceeds from maturing investment securities into higher yielding investments, continued amortization of low-yielding interest rate swaps that had been terminated in 2023, the repositioning of the available-for-sale portfolio, and an improved funding mix. Lower loan balances and higher interest-bearing deposit costs somewhat offset the increase.
Noninterest Income
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Trust and investment services income $ 140 $ 139 $ 130 .7% 7.7%
Investment banking and debt placement fees 171 126 141 35.7 21.3
Cards and payments income 84 85 90 (1.2) (6.7)
Service charges on deposit accounts 67 66 69 1.5 (2.9)
Corporate services income 69 68 73 1.5 (5.5)
Commercial mortgage servicing fees 73 61 46 19.7 58.7
Corporate-owned life insurance income 36 34 35 5.9 2.9
Consumer mortgage income 12 16 15 (25.0) (20.0)
Operating lease income and other leasing gains 16 21 22 (23.8) (27.3)
Other income (937) 11 22 N/M N/M
Total noninterest income $ (269) $ 627 $ 643 (142.9)% (141.8)%
N/M = Not Meaningful
Compared to the third quarter of 2023, noninterest incomedecreased by $912 million. The decrease was driven primarily by a $918 million loss on the sale of securities as part of a strategic repositioning of the portfolio in the third quarter of 2024. See the Selected Items Impact on Earnings table on page 25 for more information. The decline was partly offset by a $30 million increase in investment banking and debt placement fees, reflective of stronger syndication, debt, and equity underwriting fees, as well as a $27 million increase in commercial mortgage servicing fees reflecting higher active special servicing balances and overall growth of the servicing portfolio.
Compared to the second quarter of 2024, noninterest income decreased by $896 million. The decrease was driven primarily by the loss on the sale of securities referenced above. The decline was partly offset by a $45 million increase in investment banking and debt placement fees, reflective of stronger syndication and equity underwriting fees, as well as a $12 million increase in commercial mortgage servicing fees.
Noninterest Expense
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Personnel expense $ 670 $ 636 $ 663 5.3% 1.1%
Net occupancy 66 66 67 - (1.5)
Computer processing 104 101 89 3.0 16.9
Business services and professional fees 41 37 38 10.8 7.9
Equipment 20 20 20 - -
Operating lease expense 14 17 18 (17.6) (22.2)
Marketing 21 21 28 - (25.0)
Other expense 158 181 187 (12.7) (15.5)
Total noninterest expense $ 1,094 $ 1,079 $ 1,110 1.4% (1.4)%
Compared to the third quarter of 2023, noninterest expense decreased $16 million. The decline in noninterest expense was driven by a $7 million decrease in marketing expense, and a reduction in the estimated FDIC special assessment in the third quarter of 2024. See the Selected Items Impact on Earnings table on page 25 for more information. Partly offsetting the decline was an increase in computer processing expense of $15 million, due to technology investments, and a $7 million increase in personnel expense due to an increase in incentive and stock-based compensation related to strong capital markets activity and a higher stock price compared to the year-ago period.
Compared to the second quarter of 2024, noninterest expense increased by $15 million. The increase was driven by a $34 million increase in personnel expense, primarily from incentive and stock-basedcompensation, reflecting stronger capital markets activity. The increase was partly offset by a decline in other expense of $23 million, related to a reduction of the estimated FDIC special assessment charge recognized in the third quarter of 2024 when compared to the second quarter of 2024. See the Selected Items Impact on Earnings table on page 25 for more information.
BALANCE SHEET HIGHLIGHTS
Average Loans
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Commercial and industrial (a) $ 53,121 $ 54,599 $ 59,187 (2.7)% (10.2)%
Other commercial loans 19,929 20,500 22,371 (2.8) (10.9)
Total consumer loans 33,194 33,862 36,069 (2.0) (8.0)
Total loans $ 106,244 $ 108,961 $ 117,627 (2.5)% (9.7)%
(a) Commercial and industrial average loan balances include $215 million, $218 million, and $202 million of assets from commercial credit cards at September 30, 2024, June 30, 2024, and September 30, 2023, respectively.
Average loans were $106.2 billion for the third quarter of 2024, a decrease of $11.4 billion compared to the third quarter of 2023, reflective of Key’s planned balance sheet optimization efforts in 2023, and continued tepid client loan demand. The decline in average loans was mostly driven by a $8.5billion decline in average commercial loans, due to lower commercial and industrial loans and commercial mortgage real estate loans. Additionally, average consumer loans declined by $2.9billion, reflective of broad-based declines across all consumer loan categories.
Compared to the second quarter of 2024, average loans decreased by $2.7 billion. Average commercial loans declined by $2.0 billion, primarily driven by a decrease in commercial and industrial loans and commercial mortgage real estate loans. Average consumer loans declined $668 million, driven by broad-based declines across all consumer loan categories.
Average Deposits
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Non-time deposits $ 129,901 $ 128,161 $ 129,743 1.4% 0.1%
Time deposits 17,870 16,019 15,082 11.6 18.5
Total deposits $ 147,771 $ 144,180 $ 144,825 2.5% 2.0%
Cost of total deposits 2.39% 2.28% 1.88% N/A N/A
N/A = Not Applicable
Average deposits totaled $147.8 billion for the third quarter of 2024, an increase of $2.9 billion compared to the year-ago quarter, reflecting growth in both consumer and commercial deposits.
Compared to the second quarter of 2024, average deposits increased by $3.6 billion, driven by an increase in both consumer and commercial deposit balances.
ASSET QUALITY
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Net loan charge-offs $ 154 $ 91 $ 71 69.2% 116.9%
Net loan charge-offs to average total loans .58% .34% .24% N/A N/A
Nonperforming loans at period end $ 728 $ 710 $ 455 2.5 60.0
Nonperforming assets at period end 741 727 471 1.9 57.3
Allowance for loan and lease losses 1,494 1,547 1,488 (3.4) 0.4
Allowance for credit losses 1,774 1,833 1,778 (3.2) (0.2)
Provision for credit losses 95 100 81 (5.0) 17.3
Allowance for loan and lease losses to nonperforming loans 205% 218% 327% N/A N/A
Allowance for credit losses to nonperforming loans 244 258 391 N/A N/A
N/A = Not Applicable
Key’s provision for credit losses was $95 million, compared to $81 million in the third quarter of 2023 and $100 million in the second quarter of 2024. The increase from the year-ago period reflects continued, but slowing, credit portfolio migration, higher net charge-offs, and changes in the economic outlook, partly offset by balance sheet optimization efforts.
Net loan charge-offs for the third quarter of 2024 totaled $154 million, or 0.58% of average total loans. These results compare to $71 million, or 0.24%, for the third quarter of 2023 and $91 million, or 0.34%, for the second quarter of 2024. Key’s allowance for credit losses was $1.8 billion, or 1.68% of total period-end loans at September 30, 2024, compared to 1.54% at September 30, 2023, and 1.71% at June 30, 2024.
At September 30, 2024, Key’s nonperforming loans totaled $728 million, which represented 0.69% of period-end portfolio loans. These results compare to 0.39% at September 30, 2023, and 0.66% at June 30, 2024. Nonperforming assets at September 30, 2024, totaled $741 million, and represented 0.70% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.41% at September 30, 2023, and 0.68% at June 30, 2024.
CAPITAL
Key’s estimated risk-based capital ratios, included in the following table, continued to exceed all “well-capitalized” regulatory benchmarks at September 30, 2024.
Capital Ratios
9/30/2024 6/30/2024 9/30/2023
Common Equity Tier 1 (a) 10.8% 10.5% 9.8%
Tier 1 risk-based capital (a) 12.6 12.2 11.4
Total risk-based capital (a) 15.1 14.7 13.8
Tangible common equity to tangible assets (b) 6.2 5.2 4.4
Leverage (a) 9.2 9.1 8.9
(a) September 30, 2024 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 regulatory capital position remained strong in the third quarter of 2024. As shown in the preceding table, at September 30, 2024, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.8% and 12.6%, respectively. Key’s tangible common equity ratio was 6.2% at September 30, 2024.
Key elected the CECL phase-in option provided by regulatory guidance which delayed for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. Effective for the first quarter 2022, Key is now in the three-year transition period. On a fully phased-in basis, Key’s Common Equity Tier 1 ratio would be reduced by five basis points.
Summary of Changes in Common Shares Outstanding
In thousands Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Shares outstanding at beginning of period 943,200 942,776 935,733 -% .8%
Shares issued under employee compensation plans (net of cancellations and returns) 222 424 428 (47.6) (48.1)
Shares issued under Scotiabank investment agreement 47,829 - - N/M N/M
Shares outstanding at end of period 991,251 943,200 936,161 5.1% 5.9%
N/M = Not Meaningful
Key declared a dividend of $.205 per common share for the third quarter of 2024.
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 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Revenue from continuing operations (TE)
Consumer Bank $ 814 $ 769 $ 775 5.9% 5.0%
Commercial Bank 868 770 809 12.7 7.3
Other (a) (987) (13) (18) N/M N/M
Total $ 695 $ 1,526 $ 1,566 (54.5)% (55.6)%
Income (loss) from continuing operations attributable to Key
Consumer Bank $ 86 $ 67 $ 65 28.4% 32.3%
Commercial Bank 300 207 240 44.9 25.0
Other (a) (797) (1) (3) N/M N/M
Total $ (411) $ 273 $ 302 (250.5)% (236.1)%
(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. Corporate treasury includes realized gains and losses from transactions associated with Key's investment securities portfolio. 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 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Summary of operations
Net interest income (TE) $ 584 $ 535 $ 534 9.2% 9.4%
Noninterest income 230 234 241 (1.7) (4.6)
Total revenue (TE) 814 769 775 5.9 5.0
Provision for credit losses 52 33 14 57.6 271.4
Noninterest expense 649 648 676 .2 (4.0)
Income (loss) before income taxes (TE) 113 88 85 28.4 32.9
Allocated income taxes (benefit) and TE adjustments 27 21 20 28.6 35.0
Net income (loss) attributable to Key $ 86 $ 67 $ 65 28.4% 32.3%
Average balances
Loans and leases $ 38,332 $ 39,174 $ 41,610 (2.1)% (7.9)%
Total assets 41,188 42,008 44,429 (2.0) (7.3)
Deposits 86,431 85,397 82,683 1.2 4.5
Assets under management at period end $ 61,122 $ 57,602 $ 52,516 6.1% 16.4%
TE = Taxable Equivalent
Additional Consumer Bank Data
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Noninterest income
Trust and investment services income $ 114 $ 112 $ 105 1.8% 8.6%
Service charges on deposit accounts 34 34 39 - (12.8)
Cards and payments income 60 61 65 (1.6) (7.7)
Consumer mortgage income 12 16 15 (25.0) (20.0)
Other noninterest income 10 11 17 (9.1) (41.2)
Total noninterest income $ 230 $ 234 $ 241 (1.7)% (4.6)%
Average deposit balances
Money market deposits $ 30,805 $ 30,229 $ 28,638 1.9% 7.6%
Demand deposits 22,310 22,292 22,526 .1 (1.0)
Savings deposits 4,553 4,791 5,676 (5.0) (19.8)
Time deposits 13,927 13,038 8,752 6.8 59.1
Noninterest-bearing deposits 14,836 15,047 17,091 (1.4) (13.2)
Total deposits $ 86,431 $ 85,397 $ 82,683 1.2% 4.5%
Other data
Branches 944 946 959
Automated teller machines 1,194 1,199 1,249
Consumer Bank Summary of Operations (3Q24 vs. 3Q23)
— Key’s Consumer Bank recorded net income attributable to Key of $86 million for the third quarter of 2024, compared to $65 million for the year-ago quarter
— Taxable-equivalent net interest income increased by $50 million, or 9.4%, compared to the third quarter of 2023
— Average loans and leases decreased $3.3 billion, or 7.9%, from the third quarter of 2023, driven by broad-based declines across all loan categories
— Average deposits increased $3.7 billion, or 4.5%, from the third quarter of 2023, driven by growth in retail deposits
— Provision for credit losses increased $38 million compared to the third quarter of 2023, driven by changes in economic outlook and higher net charge-offs, partly offset by planned balance sheet optimization efforts
— Noninterest income decreased $11 million from the year-ago quarter, driven by declines in service charges on deposit accounts and cards and payments income
— Noninterest expense decreased $27 million from the year-ago quarter, reflective of lower marketing expense
Commercial Bank
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Summary of operations
Net interest income (TE) $ 460 $ 411 $ 446 11.9% 3.1%
Noninterest income 408 359 363 13.6 12.4
Total revenue (TE) 868 770 809 12.7 7.3
Provision for credit losses 41 87 68 (52.9) (39.7)
Noninterest expense 445 432 433 3.0 2.8
Income (loss) before income taxes (TE) 382 251 308 52.2 24.0
Allocated income taxes and TE adjustments 82 44 68 86.4 20.6
Net income (loss) attributable to Key $ 300 $ 207 $ 240 44.9% 25.0%
Average balances
Loans and leases $ 67,452 $ 69,248 $ 75,598 (2.6)% (10.8)%
Loans held for sale 998 522 1,268 91.2 (21.3)
Total assets 76,395 78,328 85,930 (2.5) (11.1)
Deposits 58,696 57,360 56,078 2.3% 4.7%
TE = Taxable Equivalent
Additional Commercial Bank Data
Dollars in millions Change 3Q24 vs.
3Q24 2Q24 3Q23 2Q24 3Q23
Noninterest income
Trust and investment services income $ 26 $ 26 $ 25 -% 4.0%
Investment banking and debt placement fees 171 126 141 35.7 21.3
Cards and payments income 22 21 18 4.8 22.2
Service charges on deposit accounts 32 31 29 3.2 10.3
Corporate services income 62 61 64 1.6 (3.1)
Commercial mortgage servicing fees 73 61 45 19.7 62.2
Operating lease income and other leasing gains 16 21 22 (23.8) (27.3)
Other noninterest income 6 12 19 (50.0) (68.4)
Total noninterest income $ 408 $ 359 $ 363 13.6% 12.4%
Commercial Bank Summary of Operations (3Q24 vs. 3Q23)
— Key’s Commercial Bank recorded net income attributable to Key of $300 million for the third quarter of 2024 compared to $240 million for the year-ago quarter
— Taxable-equivalent net interest income increased by $14 million, or 3.1%, compared to the third quarter of 2023
— Average loan and lease balances decreased $8.1 billion, or 10.8%, compared to the third quarter of 2023, driven by a decline in commercial and industrial loans
— Average deposit balances increased $2.6 billion compared to the third quarter of 2023, driven by our focus on growing deposits across our commercial businesses
— Provision for credit losses decreased $27 million compared to the third quarter of 2023, driven by the impact of balance sheet optimization efforts, partly offset by slowing credit portfolio migration, changes in economic outlook, and higher net charge-offs
— Noninterest income increased $45 million compared to the third quarter of 2023, primarily driven by an increase in investment banking and debt placement fees and commercial mortgage servicing fees
— Noninterest expense increased $12 million compared to the third quarter of 2023, driven by higher incentive compensation related to stronger investment banking and debt placement fees
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KeyCorp’s roots trace back nearly 200 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 $190 billion at September 30, 2024.
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 approximately 1,000 branches and approximately 1,200 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, 2023 and 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 worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, the soundness of other financial institutions and the impact of changes in the interest rate environment. 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 ofKeyCorp’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 October 17, 2024. A replay of the call will be available on our website through October 17, 2025.
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.
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KeyCorp ThirdQuarter 2024 Financial Supplement
Page 12 Basis of Presentation 13 Financial Highlights 15 GAAP to Non-GAAP Reconciliation 17 Consolidated Balance Sheets 18 Consolidated Statements of Income 19 Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations 21 Noninterest Expense 21 Personnel Expense 22 Loan Composition 22 Loans Held for Sale Composition 22 Summary of Changes in Loans Held for Sale 22 Summary of Loan and Lease Loss Experience From Continuing Operations 24 Asset Quality Statistics From Continuing Operations 24 Summary of Nonperforming Assets and Past Due Loans From Continuing Operations 24 Summary of Changes in Nonperforming Loans From Continuing Operations 25 Line of Business Results 25 Selected Items Impact on Earnings
Basis of Presentation
Use of Non-GAAP Financial Measures This document contains GAAP financial measures and non-GAAP financial measures where managementbelieves it to be helpful in understanding Key’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document, the financial supplement, or conference call slides related to this document, all of which can be found on Key’s website (www.key.com/ir).
Annualized Data Certain returns, yields, performance ratios, or quarterly growth rates are presented on an “annualized” basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts.
Taxable Equivalent Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at the federal statutory rate. This adjustment puts all earning assets, most notably tax-exempt municipal securities, and certain lease assets, on a common basis that facilitates comparison of results to results of peers.
Earnings Per Share Equivalent Certain income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total consolidated earnings per share performance excluding the impact of such items. When the impact of certain income or expense items is disclosed separately, the after-tax amount is computed using the marginal tax rate, unless otherwise specified, with this then being the amount used to calculate the earnings per share equivalent.
Financial Highlights
(Dollars in millions, except per share amounts)
Three months ended
9/30/2024 6/30/2024 9/30/2023
Summary of operations
Net interest income (TE) $ 964 $ 899 $ 923
Noninterest income (269) 627 643
Total revenue (TE) 695 1,526 1,566
Provision for credit losses 95 100 81
Noninterest expense 1,094 1,079 1,110
Income (loss) from continuing operations attributable to Key (411) 273 302
Income (loss) from discontinued operations, net of taxes 1 1 1
Net income (loss) attributable to Key (410) 274 303
Income (loss) from continuing operations attributable to Key common shareholders (447) 237 266
Income (loss) from discontinued operations, net of taxes 1 1 1
Net income (loss) attributable to Key common shareholders (446) 238 267
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $ (.47) $ .25 $ .29
Income (loss) from discontinued operations, net of taxes - - -
Net income (loss) attributable to Key common shareholders (a) (.47) .25 .29
Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution (.47) .25 .29
Income (loss) from discontinued operations, net of taxes - assuming dilution - - -
Net income (loss) attributable to Key common shareholders - assuming dilution (a) (.47) .25 .29
Cash dividends declared .205 .205 .205
Book value at period end 14.53 13.09 11.65
Tangible book value at period end 11.72 10.13 8.65
Market price at period end 16.75 14.21 10.76
Performance ratios
From continuing operations:
Return on average total assets (.87)% .59% .62%
Return on average common equity (13.41) 7.96 9.31
Return on average tangible common equity (b) (16.98) 10.39 12.40
Net interest margin (TE) 2.17 2.04 2.01
Cash efficiency ratio (b) 156.4 70.2 70.3
From consolidated operations:
Return on average total assets (.87)% .59% .62%
Return on average common equity (13.38) 7.99 9.35
Return on average tangible common equity (b) (16.95) 10.43 12.45
Net interest margin (TE) 2.17 2.04 2.01
Loan to deposit (c) 71.0 74.0 80.8
Capital ratios at period end
Key shareholders' equity to assets 8.9% 7.9% 7.1%
Key common shareholders' equity to assets 7.6 6.6 5.8
Tangible common equity to tangible assets (b) 6.2 5.2 4.4
Common Equity Tier 1 (d) 10.8 10.5 9.8
Tier 1 risk-based capital (d) 12.6 12.2 11.4
Total risk-based capital (d) 15.1 14.7 13.8
Leverage (d) 9.2 9.1 8.9
Asset quality - from continuing operations
Net loan charge-offs $ 154 $ 91 $ 71
Net loan charge-offs to average loans .58% .34% .24%
Allowance for loan and lease losses $ 1,494 $ 1,547 $ 1,488
Allowance for credit losses 1,774 1,833 1,778
Allowance for loan and lease losses to period-end loans 1.42% 1.44% 1.29%
Allowance for credit losses to period-end loans 1.68 1.71 1.54
Allowance for loan and lease losses to nonperforming loans 205 218 327
Allowance for credit losses to nonperforming loans 244 258 391
Nonperforming loans at period-end $ 728 $ 710 $ 455
Nonperforming assets at period-end 741 727 471
Nonperforming loans to period-end portfolio loans .69% .66% .39%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets .70 .68 .41
Trust assets
Assets under management $ 61,122 $ 57,602 $ 52,516
Other data
Average full-time equivalent employees 16,805 16,646 17,666
Branches 944 946 959
Taxable-equivalent adjustment $ 12 $ 12 $ 8
Financial Highlights (continued)
(Dollars in millions, except per share amounts)
Nine months ended
9/30/2024 9/30/2023
Summary of operations
Net interest income (TE) $ 2,749 $ 3,015
Noninterest income 1,005 1,860
Total revenue (TE) 3,754 4,875
Provision for credit losses 296 387
Noninterest expense 3,316 3,362
Income (loss) from continuing operations attributable to Key 81 899
Income (loss) from discontinued operations, net of taxes 2 3
Net income (loss) attributable to Key 83 902
Income (loss) from continuing operations attributable to Key common shareholders (27) 791
Income (loss) from discontinued operations, net of taxes 2 3
Net income (loss) attributable to Key common shareholders (25) 794
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $ (.03) $ .85
Income (loss) from discontinued operations, net of taxes - -
Net income (loss) attributable to Key common shareholders (a) (.03) .86
Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution (.03) .85
Income (loss) from discontinued operations, net of taxes - assuming dilution - -
Net income (loss) attributable to Key common shareholders - assuming dilution (a) (.03) .85
Cash dividends paid .62 .62
Performance ratios
From continuing operations:
Return on average total assets .06% .62%
Return on average common equity (.29) 9.18
Return on average tangible common equity (b) (.37) 12.17
Net interest margin (TE) 2.08 2.20
Cash efficiency ratio (b) 87.7 68.4
From consolidated operations:
Return on average total assets .06% .62%
Return on average common equity (0.27) 9.22
Return on average tangible common equity (b) (0.35) 12.22
Net interest margin (TE) 2.08 2.20
Asset quality - from continuing operations
Net loan charge-offs $ 326 $ 168
Net loan charge-offs to average total loans .40% .19%
Other data
Average full-time equivalent employees 16,734 17,880
Taxable-equivalent adjustment 35 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. (c) Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits. (d) September 30, 2024, 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,” “cash efficiency ratio,” “adjusted income (loss) available from continuing operations attributable to Key common shareholders,” and “diluted earnings per share – adjusted.”
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 provides 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.
Adjusted income (loss) available from continuing operations attributable to Key common shareholders (or “adjusted net income”) and diluted earnings per share – adjusted (or “adjusted earnings per share”) are non-GAAP in that these measures exclude securities portfolio repositioning, net of tax, that occurred in the third quarter of 2024. Management believes these measures provide investors with useful information to gain a better understanding of ongoing operations and enhance comparability of results with prior periods, as well as demonstrate the effects of the significant losses related to the securities repositioning.
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
9/30/2024 6/30/2024 9/30/2023 9/30/2024 9/30/2023
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP) $ 16,852 $ 14,789 $ 13,356
Less: Intangible assets (a) 2,786 2,793 2,816
Preferred Stock(b) 2,446 2,446 2,446
Tangible common equity (non-GAAP) $ 11,620 $ 9,550 $ 8,094
Total assets (GAAP) $ 189,763 $ 187,450 $ 187,851
Less: Intangible assets(a) 2,786 2,793 2,816
Tangible assets (non-GAAP) $ 186,977 $ 184,657 $ 185,035
Tangible common equity to tangible assets ratio (non-GAAP) 6.21% 5.17% 4.37%
Pre-provision net revenue
Net interest income (GAAP) $ 952 $ 887 $ 915 $ 2,714 $ 2,992
Plus: Taxable-equivalent adjustment 12 12 8 35 23
Noninterest income (269) 627 643 1,005 1,860
Less: Noninterest expense 1,094 1,079 1,110 3,316 3,362
Pre-provision net revenue from continuing operations (non-GAAP) $ (399) $ 447 $ 456 $ 438 $ 1,513
Average tangible common equity
Average Key shareholders' equity (GAAP) $ 15,759 $ 14,474 $ 13,831 $ 14,963 $ 14,020
Less: Intangible assets (average) (c) 2,789 2,796 2,821 2,796 2,831
Preferred stock (average) 2,500 2,500 2,500 2,500 2,500
Average tangible common equity (non-GAAP) $ 10,470 $ 9,178 $ 8,510 $ 9,667 $ 8,689
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ (447) $ 237 $ 266 $ (27) $ 791
Average tangible common equity (non-GAAP) 10,470 9,178 8,510 9,667 8,689
Return on average tangible common equity from continuing operations (non-GAAP) (16.98)% 10.39% 12.40% (0.37)% 12.17%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP) $ (446) $ 238 $ 267 $ (25) $ 794
Average tangible common equity (non-GAAP) 10,470 9,178 8,510 9,667 8,689
Return on average tangible common equity consolidated (non-GAAP) (16.95)% 10.43% 12.45% (0.35)% 12.22%
GAAP to Non-GAAP Reconciliations (continued)
(Dollars in millions)
Three months ended Nine months ended
9/30/2024 6/30/2024 9/30/2023 9/30/2024 9/30/2023
Cash efficiency ratio
Noninterest expense (GAAP) $ 1,094 $ 1,079 $ 1,110 $ 3,316 $ 3,362
Less: Intangible asset amortization 7 7 9 22 29
Adjusted noninterest expense (non-GAAP) $ 1,087 $ 1,072 $ 1,101 $ 3,294 $ 3,333
Net interest income (GAAP) $ 952 $ 887 $ 915 $ 2,714 $ 2,992
Plus: Taxable-equivalent adjustment 12 12 8 35 23
Net interest income TE (non-GAAP) 964 899 923 2,749 3,015
Noninterest income (GAAP) (269) 627 643 1,005 1,860
Total taxable-equivalent revenue (non-GAAP) $ 695 $ 1,526 $ 1,566 $ 3,754 $ 4,875
Cash efficiency ratio (non-GAAP) 156.4% 70.2% 70.3% 87.7% 68.4%
Adjusted income (loss) available from continuing operations attributable to Key common shareholders
Income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ (447) $ 237 $ 266
Plus: Loss on sale of securities (net of tax) 737 - -
Adjusted income (loss) available from continuing operations attributable to Key common shareholders (non-GAAP) $ 290 $ 237 $ 266
Diluted earnings per common share (EPS) - adjusted
Diluted EPS from continuing operations attributable to Key common shareholders (GAAP) $ (.47) $ .25 $ .29
Plus: EPS impact of loss on sale of securities .77 - -
Diluted EPS from continuing operations attributable to Key common shareholders - adjusted (non-GAAP) $ .30 $ .25 $ .29
(a) For the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, intangible assets exclude less than $1 million, less than $1 million, and $1 million, respectively, of period-end purchased credit card receivables. (b) Net of capital surplus. (c) For the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, average intangible assets exclude less than $1 million, less than $1 million, and $1 million, respectively, of average purchased credit card receivables. GAAP = U.S. generally accepted accounting principles
Consolidated Balance Sheets
(Dollars in millions)
9/30/2024 6/30/2024 9/30/2023
Assets
Loans $ 105,346 $ 107,078 $ 115,544
Loans held for sale 1,058 517 730
Securities available for sale 34,169 37,460 35,839
Held-to-maturity securities 7,702 7,968 8,853
Trading account assets 1,404 1,219 1,325
Short-term investments 22,796 15,536 7,871
Other investments 1,117 1,259 1,356
Total earning assets 173,592 171,037 171,518
Allowance for loan and lease losses (1,494) (1,547) (1,488)
Cash and due from banks 1,276 1,326 766
Premises and equipment 624 631 649
Goodwill 2,752 2,752 2,752
Other intangible assets 34 41 65
Corporate-owned life insurance 4,379 4,382 4,381
Accrued income and other assets 8,323 8,532 8,843
Discontinued assets 277 296 365
Total assets $ 189,763 $ 187,450 $ 187,851
Liabilities
Deposits in domestic offices:
Interest-bearing deposits $ 119,995 $ 117,570 $ 112,581
Noninterest-bearing deposits 30,358 28,150 31,710
Total deposits 150,353 145,720 144,291
Federal funds purchased and securities sold under repurchase agreements 44 25 43
Bank notes and other short-term borrowings 2,359 5,292 3,470
Accrued expense and other liabilities 4,478 4,755 5,388
Long-term debt 15,677 16,869 21,303
Total liabilities 172,911 172,661 174,495
Equity
Preferred stock 2,500 2,500 2,500
Common shares 1,257 1,257 1,257
Capital surplus 6,149 6,185 6,254
Retained earnings 15,066 15,706 15,835
Treasury stock, at cost (4,839) (5,715) (5,851)
Accumulated other comprehensive income (loss) (3,281) (5,144) (6,639)
Key shareholders' equity 16,852 14,789 13,356
Total liabilities and equity $ 189,763 $ 187,450 $ 187,851
Common shares outstanding (000) 991,251 943,200 936,161
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three months ended Nine months ended
9/30/2024 6/30/2024 9/30/2023 9/30/2024 9/30/2023
Interest income
Loans $ 1,516 $ 1,524 $ 1,593 $ 4,578 $ 4,645
Loans held for sale 18 8 19 40 49
Securities available for sale 298 259 192 789 580
Held-to-maturity securities 70 73 79 218 234
Trading account assets 15 16 15 45 42
Short-term investments 244 192 123 578 276
Other investments 14 16 22 47 51
Total interest income 2,175 2,088 2,043 6,295 5,877
Interest expense
Deposits 887 817 687 2,486 1,568
Federal funds purchased and securities sold under repurchase agreements 1 1 9 3 79
Bank notes and other short-term borrowings 43 51 81 140 263
Long-term debt 292 332 351 952 975
Total interest expense 1,223 1,201 1,128 3,581 2,885
Net interest income 952 887 915 2,714 2,992
Provision for credit losses 95 100 81 296 387
Net interest income after provision for credit losses 857 787 834 2,418 2,605
Noninterest income
Trust and investment services income 140 139 130 415 384
Investment banking and debt placement fees 171 126 141 467 406
Cards and payments income 84 85 90 246 256
Service charges on deposit accounts 67 66 69 196 205
Corporate services income 69 68 73 206 235
Commercial mortgage servicing fees 73 61 46 190 142
Corporate-owned life insurance income 36 34 35 102 96
Consumer mortgage income 12 16 15 42 40
Operating lease income and other leasing gains 16 21 22 61 70
Other income(c) (937) 11 22 (920) 26
Total noninterest income (269) 627 643 1,005 1,860
Noninterest expense
Personnel 670 636 663 1,980 1,986
Net occupancy 66 66 67 199 202
Computer processing 104 101 89 307 276
Business services and professional fees 41 37 38 119 124
Equipment 20 20 20 60 64
Operating lease expense 14 17 18 48 59
Marketing 21 21 28 61 78
Other expense 158 181 187 542 573
Total noninterest expense 1,094 1,079 1,110 3,316 3,362
Income (loss) from continuing operations before income taxes (506) 335 367 107 1,103
Income taxes (benefit) (95) 62 65 26 204
Income (loss) from continuing operations (411) 273 302 81 899
Income (loss) from discontinued operations, net of taxes 1 1 1 2 3
Net income (loss) (410) 274 303 83 902
Net income (loss) attributable to Key $ (410) $ 274 $ 303 $ 83 $ 902
Income (loss) from continuing operations attributable to Key common shareholders $ (447) $ 237 $ 266 $ (27) $ 791
Net income (loss) attributable to Key common shareholders (446) 238 267 (25) 794
Per common share
Income (loss) from continuing operations attributable to Key common shareholders $ (.47) $ .25 $ .29 $ (.03) $ .85
Income (loss) from discontinued operations, net of taxes - - - - -
Net income (loss) attributable to Key common shareholders (a) (.47) .25 .29 (.03) .86
Per common share - assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders $ (.47) $ .25 $ .29 $ (.03) $ .85
Income (loss) from discontinued operations, net of taxes - - - - -
Net income (loss) attributable to Key common shareholders(a) (.47) .25 .29 (.03) .85
Cash dividends declared per common share $ .205 $ .205 $ .205 $ .615 $ .615
Weighted-average common shares outstanding (000) 948,979 931,726 927,131 936,962 927,019
Effect of common share options and other stock awards 8,951 6,761 4,613 7,678 5,213
Weighted-average common shares and potential common shares outstanding (000)(b) 957,929 938,487 931,744 944,640 932,232
(a) Earnings per share may not foot due to rounding. (b) Assumes conversion of common share options and other stock awards, as applicable. (c) For the three months ended September 30, 2024, and June 30, 2024, we had $935 million and $13 million in net securities losses, respectively. For the three months ended September 30, 2023, we had no net securities gains or losses. For the nine months ended September 30, 2024, and September 30, 2023, we had $948 million and $7 million in net securities losses, respectively.
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(Dollars in millions)
Third Quarter 2024 Second Quarter 2024 Third Quarter 2023
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) $ 53,121 $ 847 6.34% $ 54,599 $ 860 6.34% $ 59,187 $ 886 5.94%
Real estate - commercial mortgage 13,864 225 6.46 14,287 217 6.10 15,844 238 5.97
Real estate - construction 3,077 59 7.65 3,020 56 7.51 2,820 48 6.77
Commercial lease financing 2,988 26 3.46 3,193 28 3.46 3,707 30 3.25
Total commercial loans 73,050 1,157 6.30 75,099 1,161 6.22 81,558 1,202 5.85
Real estate - residential mortgage 20,215 167 3.30 20,515 169 3.30 21,459 176 3.28
Home equity loans 6,634 100 5.98 6,817 102 5.98 7,418 110 5.87
Other consumer loans 5,426 69 5.08 5,597 70 5.00 6,201 78 4.96
Credit cards 919 35 15.22 933 34 14.63 991 35 14.16
Total consumer loans 33,194 371 4.46 33,862 375 4.44 36,069 399 4.40
Total loans 106,244 1,528 5.73 108,961 1,536 5.66 117,627 1,601 5.41
Loans held for sale 1,098 18 6.54 599 8 5.42 1,356 19 5.73
Securities available for sale (b), (e) 36,700 298 2.87 36,764 259 2.42 37,271 192 1.76
Held-to-maturity securities (b) 7,838 70 3.58 8,123 73 3.59 9,020 79 3.50
Trading account assets 1,142 15 5.08 1,231 16 5.38 1,203 15 4.97
Short-term investments 17,773 244 5.47 13,729 192 5.62 8,416 123 5.79
Other investments (e) 1,193 14 4.77 1,234 16 5.19 1,395 22 6.35
Total earning assets 171,988 2,187 4.93 170,641 2,100 4.77 176,288 2,051 4.47
Allowance for loan and lease losses (1,533) (1,534) (1,477)
Accrued income and other assets 17,154 17,476 17,530
Discontinued assets 284 305 374
Total assets $ 187,893 $ 186,888 $ 192,715
Liabilities
Money market deposits $ 40,379 $ 309 3.04% $ 39,364 $ 290 2.97% $ 35,243 $ 213 2.40%
Demand deposits 56,087 365 2.59 54,629 340 2.50 55,837 315 2.24
Savings deposits 4,967 3 .22 5,189 2 .19 5,966 1 .05
Time deposits 17,870 210 4.68 16,019 185 4.64 15,082 158 4.16
Total interest-bearing deposits 119,303 887 2.96 115,201 817 2.85 112,128 687 2.43
Federal funds purchased and securities sold 98 1 4.48 124 1 4.76 710 9 5.04
under repurchase agreements
Bank notes and other short-term borrowings 3,172 43 5.44 3,617 51 5.57 5,819 81 5.54
Long-term debt (f) 16,422 292 7.09 19,219 332 6.91 21,584 351 6.50
Total interest-bearing liabilities 138,995 1,223 3.50 138,161 1,201 3.49 140,241 1,128 3.20
Noninterest-bearing deposits 28,468 28,979 32,697
Accrued expense and other liabilities 4,387 4,969 5,572
Discontinued liabilities (f) 284 305 374
Total liabilities $ 172,134 $ 172,414 $ 178,884
Equity
Key shareholders' equity $ 15,759 $ 14,474 $ 13,831
Noncontrolling interests - - -
Total equity 15,759 14,474 13,831
Total liabilities and equity $ 187,893 $ 186,888 $ 192,715
Interest rate spread (TE) 1.43% 1.28% 1.27%
Net interest income (TE) and net interest margin (TE) $ 964 2.17% $ 899 2.04% $ 923 2.01%
TE adjustment (b) 12 12 8
Net interest income, GAAP basis $ 952 $ 887 $ 915
(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (f) 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, 2024, June 30, 2024, and September 30, 2023. (c) For purposes of these computations, nonaccrual loans are included in average loan balances. (d) Commercial and industrial average balances include $215 million, $218 million, and $202 million of assets from commercial credit cards for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively. (e) Yield presented is calculated on the basis of amortized cost. The average amortized cost for securities available for sale was $41.6 billion, $42.8 billion, and $43.6 billion for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively. Yield based on the fair value of securities available for sale was 3.25%, 2.82%, and 2.06% for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively. (f) 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, 2024 Nine months ended September 30, 2023
Average Yield/ Average Yield/
Balance Interest (a) Rate (a) Balance Interest (a) Rate (a)
Assets
Loans: (b), (c)
Commercial and industrial (d) $ 54,309 $ 2,561 6.30% $ 60,294 $ 2,574 5.71%
Real estate - commercial mortgage 14,328 671 6.25 16,178 697 5.76
Real estate - construction 3,046 172 7.56 2,663 131 6.58
Commercial lease financing 3,175 81 3.38 3,749 86 3.06
Total commercial loans 74,858 3,485 6.22 82,884 3,488 5.63
Real estate - residential mortgage 20,514 508 3.30 21,534 524 3.25
Home equity loans 6,824 305 5.98 7,621 325 5.71
Other consumer loans 5,607 211 5.02 6,346 230 4.84
Credit cards 935 104 14.92 986 101 13.68
Total consumer loans 33,880 1,128 4.44 36,487 1,180 4.32
Total loans 108,738 4,613 5.67 119,371 4,668 5.23
Loans held for sale 862 40 6.14 1,118 49 5.90
Securities available for sale (b), (e) 36,850 789 2.48 38,440 580 1.74
Held-to-maturity securities (b) 8,127 218 3.58 9,108 234 3.43
Trading account assets 1,161 45 5.23 1,150 42 4.82
Short-term investments 13,929 578 5.55 6,600 276 5.59
Other investments (e) 1,221 47 5.12 1,423 51 4.78
Total earning assets 170,888 6,330 4.79 177,210 5,900 4.30
Allowance for loan and lease losses (1,524) (1,398)
Accrued income and other assets 17,327 17,411
Discontinued assets 306 395
Total assets $ 186,997 $ 193,618
Liabilities
Money market deposits $ 39,139 $ 863 2.94% $ 33,829 $ 414 1.64%
Other demand deposits 55,619 1,062 2.55 53,951 754 1.87
Savings deposits 5,136 6 .16 6,630 2 .04
Time deposits 16,113 555 4.60 13,615 398 3.90
Total interest-bearing deposits 116,007 2,486 2.86 108,025 1,568 1.94
Federal funds purchased and securities sold under repurchase agreements 109 3 4.44 2,183 79 4.84
Bank notes and other short-term borrowings 3,371 140 5.55 6,797 263 5.17
Long-term debt (f) 18,386 952 6.90 21,341 975 6.09
Total interest-bearing liabilities 137,873 3,581 3.47 138,346 2,885 2.79
Noninterest-bearing deposits 28,947 35,691
Accrued expense and other liabilities 4,908 5,166
Discontinued liabilities (f) 306 395
Total liabilities $ 172,034 $ 179,598
Equity
Key shareholders' equity $ 14,963 $ 14,020
Noncontrolling interests - -
Total equity 14,963 14,020
Total liabilities and equity $ 186,997 $ 193,618
Interest rate spread (TE) 1.32% 1.52%
Net interest income (TE) and net interest margin (TE) $ 2,749 2.08% $ 3,015 2.20%
TE adjustment (b) 35 23
Net interest income, GAAP basis $ 2,714 $ 2,992
(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (f) 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, 2024, and September 30, 2023, respectively. (c) For purposes of these computations, nonaccrual loans are included in average loan balances. (d) Commercial and industrial average balances include $215 million and $192 million of assets from commercial credit cards for the nine months ended September 30, 2024, and September 30, 2023, respectively. (e) Yield presented is calculated on the basis of amortized cost. The average amortized cost for securities available for sale was $42.4 billion and $44.5 billion for the nine months ended September 30, 2024, and September 30, 2023, respectively. Yield based on the fair value of securities available for sale was 2.85% and 2.01% for the nine months ended September 30, 2024, and September 30, 2023, respectively. (f) 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
9/30/2024 6/30/2024 9/30/2023 9/30/2024 9/30/2023
Personnel (a) $ 670 $ 636 $ 663 $ 1,980 $ 1,986
Net occupancy 66 66 67 199 202
Computer processing 104 101 89 307 276
Business services and professional fees 41 37 38 119 124
Equipment 20 20 20 60 64
Operating lease expense 14 17 18 48 59
Marketing 21 21 28 61 78
Other expense 158 181 187 542 573
Total noninterest expense $ 1,094 $ 1,079 $ 1,110 $ 3,316 $ 3,362
Average full-time equivalent employees (b) 16,805 16,646 17,666 16,734 17,880
(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
(Dollars in millions)
Three months ended Nine months ended
9/30/2024 6/30/2024 9/30/2023 9/30/2024 9/30/2023
Salaries and contract labor $ 408 $ 394 $ 415 $ 1,191 $ 1,250
Incentive and stock-based compensation 162 143 141 464 386
Employee benefits 99 98 106 323 308
Severance 1 1 1 2 42
Total personnel expense $ 670 $ 636 $ 663 $ 1,980 $ 1,986
Loan Composition
(Dollars in millions)
Change 9/30/2024 vs.
9/30/2024 6/30/2024 9/30/2023 6/30/2024 9/30/2023
Commercial and industrial (a)(b) $ 52,774 $ 53,129 $ 57,606 (.7)% (8.4)%
Commercial real estate:
Commercial mortgage 13,637 14,218 15,549 (4.1) (12.3)
Construction 3,093 3,077 2,982 .5 3.7
Total commercial real estate loans 16,730 17,295 18,531 (3.3) (9.7)
Commercial lease financing (b) 2,913 3,101 3,681 (6.1) (20.9)
Total commercial loans 72,417 73,525 79,818 (1.5) (9.3)
Residential - prime loans:
Real estate - residential mortgage 20,122 20,380 21,309 (1.3) (5.6)
Home equity loans 6,555 6,729 7,324 (2.6) (10.5)
Total residential - prime loans 26,677 27,109 28,633 (1.6) (6.8)
Other consumer loans 5,338 5,514 6,105 (3.2) (12.6)
Credit cards 914 930 988 (1.7) (7.5)
Total consumer loans 32,929 33,553 35,726 (1.9) (7.8)
Total loans (c), (d) $ 105,346 $ 107,078 $ 115,544 (1.6)% (8.8)%
(a) Loan balances include $219 million, $217 million, and $207 million of commercial credit card balances at September 30, 2024, June 30, 2024, and September 30, 2023, respectively. (b) Commercial and industrial includes receivables held as collateral for a secured borrowing of $261 million at September 30, 2024, $285 million at June 30, 2024 and no amounts held as collateral for a secured borrowing at September 30, 2023. Commercial lease financing includes receivables held as collateral for a secured borrowing of $3 million, $5 million, and $4 million at September 30, 2024, June 30, 2024, and September 30, 2023, respectively. Principal reductions are based on the cash payments received from these related receivables. (c) Total loans exclude loans of $272 million at September 30, 2024, $291 million at June 30, 2024, and $360 million at September 30, 2023, related to the discontinued operations of the education lending business. (d) Accrued interest of $480 million, $487 million, and $522 million at September 30, 2024, June 30, 2024, and September 30, 2023, 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)
Change 9/30/2024 vs.
9/30/2024 6/30/2024 9/30/2023 6/30/2024 9/30/2023
Commercial and industrial $ 250 $ 72 $ 47 247.2% 431.9%
Real estate - commercial mortgage 747 354 571 111.0 30.8
Real estate - residential mortgage 61 91 112 (33.0) (45.5)
Total loans held for sale $ 1,058 $ 517 $ 730 104.6% 44.9%
Summary of Changes in Loans Held for Sale
(Dollars in millions)
3Q24 2Q24 1Q24 4Q23 3Q23
Balance at beginning of period $ 517 $ 228 $ 483 $ 730 $ 1,130
New originations 2,473 1,532 1,738 1,879 3,035
Transfers from (to) held to maturity, net (16) (1) (105) (31) (94)
Loan sales (1,889) (1,234) (1,893) (2,095) (3,312)
Loan draws (payments), net (28) (7) 4 - (29)
Valuation and other adjustments 1 (1) 1 - -
Balance at end of period $ 1,058 $ 517 $ 228 $ 483 $ 730
Summary of Loan and Lease Loss Experience From Continuing Operations
(Dollars in millions)
Three months ended Nine months ended
9/30/2024 6/30/2024 9/30/2023 9/30/2024 9/30/2023
Average loans outstanding $ 106,244 $ 108,961 $ 117,627 $ 108,738 $ 119,371
Allowance for loan and lease losses at the beginning of the period $ 1,547 $ 1,542 $ 1,480 $ 1,508 $ 1,337
Loans charged off:
Commercial and industrial 131 86 62 279 139
Real estate - commercial mortgage 7 10 1 22 15
Real estate - construction - - - - -
Total commercial real estate loans 7 10 1 22 15
Commercial lease financing - 6 - 6 -
Total commercial loans 138 102 63 307 154
Real estate - residential mortgage - 1 - 2 1
Home equity loans 1 - 1 2 4
Other consumer loans 17 16 14 49 37
Credit cards 11 12 9 35 27
Total consumer loans 29 29 24 88 69
Total loans charged off 167 131 87 395 223
Recoveries:
Commercial and industrial 7 31 10 46 33
Real estate - commercial mortgage 1 1 - 2 1
Real estate - construction - - - - -
Total commercial real estate loans 1 1 - 2 1
Commercial lease financing - 3 1 5 4
Total commercial loans 8 35 11 53 38
Real estate - residential mortgage 1 1 1 4 3
Home equity loans 1 - 1 2 3
Other consumer loans 2 2 2 6 7
Credit cards 1 2 1 4 4
Total consumer loans 5 5 5 16 17
Total recoveries 13 40 16 69 55
Net loan charge-offs (154) (91) (71) (326) (168)
Provision (credit) for loan and lease losses 101 96 79 312 319
Allowance for loan and lease losses at end of period $ 1,494 $ 1,547 $ 1,488 $ 1,494 $ 1,488
Liability for credit losses on lending-related commitments at beginning of period $ 286 $ 281 $ 291 $ 296 $ 225
Provision (credit) for losses on lending-related commitments (6) 4 2 (16) 68
Other - 1 (3) - (3)
Liability for credit losses on lending-related commitments at end of period (a) $ 280 $ 286 $ 290 $ 280 $ 290
Total allowance for credit losses at end of period $ 1,774 $ 1,833 $ 1,778 $ 1,774 $ 1,778
Net loan charge-offs to average total loans .58% .34% .24% .40% .19%
Allowance for loan and lease losses to period-end loans 1.42 1.44 1.29 1.42 1.29
Allowance for credit losses to period-end loans 1.68 1.71 1.54 1.68 1.54
Allowance for loan and lease losses to nonperforming loans 205 218 327 205 327
Allowance for credit losses to nonperforming loans 244 258 391 244 391
Discontinued operations - education lending business:
Loans charged off $ 1 $ 1 $ - $ 3 $ 3
Recoveries - 1 - 1 1
Net loan charge-offs $ (1) $ - $ - $ (2) $ (2)
(a) Included in "Accrued expense and other liabilities" on the balance sheet.
Asset Quality Statistics From Continuing Operations
(Dollars in millions)
3Q24 2Q24 1Q24 4Q23 3Q23
Net loan charge-offs $ 154 $ 91 $ 81 $ 76 $ 71
Net loan charge-offs to average total loans .58% .34% .29% .26% .24%
Allowance for loan and lease losses $ 1,494 $ 1,547 $ 1,542 $ 1,508 $ 1,488
Allowance for credit losses (a) 1,774 1,833 1,823 1,804 1,778
Allowance for loan and lease losses to period-end loans 1.42% 1.44% 1.40% 1.34% 1.29%
Allowance for credit losses to period-end loans 1.68 1.71 1.66 1.60 1.54
Allowance for loan and lease losses to nonperforming loans 205 218 234 263 327
Allowance for credit losses to nonperforming loans 244 258 277 314 391
Nonperforming loans at period end $ 728 $ 710 $ 658 $ 574 $ 455
Nonperforming assets at period end 741 727 674 591 471
Nonperforming loans to period-end portfolio loans .69% .66% .60% .51% .39%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets .70 .68 .61 .52 .41
(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)
9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023
Commercial and industrial $ 365 $ 358 $ 360 $ 297 $ 214
Real estate - commercial mortgage 176 173 113 100 63
Real estate - construction - - - - -
Total commercial real estate loans 176 173 113 100 63
Commercial lease financing - 1 1 - 1
Total commercial loans 541 532 474 397 278
Real estate - residential mortgage 87 77 79 71 72
Home equity loans 90 91 95 97 97
Other Consumer loans 4 4 4 4 4
Credit cards 6 6 6 5 4
Total consumer loans 187 178 184 177 177
Total nonperforming loans (a) 728 710 658 574 455
OREO 13 17 16 17 16
Nonperforming loans held for sale - - - - -
Other nonperforming assets - - - - -
Total nonperforming assets $ 741 $ 727 $ 674 $ 591 $ 471
Accruing loans past due 90 days or more $ 166 $ 137 $ 119 $ 107 $ 52
Accruing loans past due 30 through 89 days 184 282 242 222 178
Nonperforming assets from discontinued operations - education lending business 2 3 2 3 2
Nonperforming loans to period-end portfolio loans .69% .66% .60% .51% .39%
Nonperforming assets to period-end portfolio loans plus OREO and other .70 .68 .61 .52 .41
nonperforming assets
Summary of Changes in Nonperforming Loans From Continuing Operations
(Dollars in millions)
3Q24 2Q24 1Q24 4Q23 3Q23
Balance at beginning of period $ 710 $ 658 $ 574 $ 455 $ 431
Loans placed on nonaccrual status 271 317 243 297 159
Charge-offs (167) (131) (97) (95) (87)
Loans sold (32) (22) (5) (9) (4)
Payments (37) (76) (35) (56) (25)
Transfers to OREO (1) (1) (2) (2) (3)
Loans returned to accrual status (16) (35) (20) (16) (16)
Balance at end of period $ 728 $ 710 $ 658 $ 574 $ 455
Line of Business Results
(Dollars in millions)
Change 3Q24 vs.
3Q24 2Q24 1Q24 4Q23 3Q23 2Q24 3Q23
Consumer Bank
Summary of operations
Total revenue (TE) $ 814 $ 769 $ 757 $ 770 $ 775 5.9% 5.0%
Provision for credit losses 52 33 (2) 5 14 57.6 271.4
Noninterest expense 649 648 704 779 676 .2 (4.0)
Net income (loss) attributable to Key 86 67 41 (11) 65 28.4 32.3
Average loans and leases 38,332 39,174 39,919 40,763 41,610 (2.1) (7.9)
Average deposits 86,431 85,397 84,075 83,557 82,683 1.2 4.5
Net loan charge-offs 54 45 44 40 36 20.0 50.0
Net loan charge-offs to average total loans .56% .46% .44% .39% .34% 21.7 64.7
Nonperforming assets at period end $ 195 $ 190 $ 196 $ 190 $ 190 2.6 2.6
Return on average allocated equity 10.34% 7.93% 4.69% (1.28)% 7.42% 30.4 39.4
Commercial Bank
Summary of operations
Total revenue (TE) $ 868 $ 770 $ 798 $ 804 $ 809 12.7% 7.3%
Provision for credit losses 41 87 102 96 68 (52.9) (39.7)
Noninterest expense 445 432 442 526 433 3.0 2.8
Net income (loss) attributable to Key 300 207 205 150 240 44.9 25.0
Average loans and leases 67,452 69,248 70,633 72,713 75,598 (2.6) (10.8)
Average loans held for sale 998 522 840 635 1,268 91.2 (21.3)
Average deposits 58,696 57,360 56,331 58,196 56,078 2.3 4.7
Net loan charge-offs 99 64 37 35 35 54.7 182.9
Net loan charge-offs to average total loans .58% .37% .21% .19% .18% 56.8 222.2
Nonperforming assets at period end $ 546 $ 537 $ 478 $ 401 $ 281 1.7 94.3
Return on average allocated equity 11.98% 8.31% 8.24% 5.88% 9.11% 44.2 31.5
TE = Taxable Equivalent
Selected Items Impact on Earnings(a)
(Dollars in millions, except per share amounts)
Pretax(b) After-tax at marginal rate(b)(c)
Quarter to date results Amount Net Income EPS(d)
Three months ended September 30, 2024
Loss on sale of securities (other income) $ (918) $ (737) $ (0.77)
FDIC special assessment (other expense)(d) 6 5 -
Three months ended June 30, 2024
FDIC special assessment (other expense)(e) (5) (4) -
Three months ended March 31, 2024
FDIC special assessment (other expense)(e) (29) (22) (0.02)
Three months ended December 31, 2023
Efficiency related expenses(f) (67) (51) (0.05)
Pension settlement (other expense) (18) (14) (0.02)
FDIC special assessment (other expense)(e) (190) (144) (0.15)
Three months ended September 30, 2023
No items
(a) Includes items impacting results or trends during the period but are not considered non-GAAP adjustments. (b) Favorable (unfavorable) impact. (c) After-tax loss on sale of securities adjusted to reflect impact of GAAP accounting for income taxes in interim periods, with related adjustments to be required in the fourth quarter of 2024. (d) Impact to EPS reflected on a fully diluted basis. (e) In November 2023, the FDIC issued a final rule implementing a special assessment on insured depository institutions to recover the loss to the FDIC's deposit insurance fund (DIF) associated with protecting uninsured depositors following the 2023 closures of Silicon Valley Bank and Signature Bank. KeyCorp recorded the initial loss estimate related to the special assessment during the fourth quarter of 2023. In late February 2024, the FDIC provided updated estimates on the uninsured deposit losses and recoverable assets related to the 2023 closures of Silicon Valley Bank and Signature Bank. KeyCorp recorded the additional expense related to the revised special assessment during the first quarter of 2024. Amounts reflected for both the three-months ended June 30, 2024, and September 30, 2024, represent adjustments from initial estimates based on quarterly invoices received from the FDIC. (f) Efficiency related expenses for the three-months ended December 31, 2023, consist primarily of $39 million of severance recorded in personnel expense and $24 million of corporate real estate related rationalization and other contract termination or renegotiation costs recorded in other expense.
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