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20.07.2021 12:30:00
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KeyCorp Reports Record Second Quarter 2021 Net Income Of $698 Million, Or $.72 Per Diluted Common Share
CLEVELAND, July 20, 2021 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $698 million, or $.72 per diluted common share for the second quarter of 2021. This compared to $591 million, or $.61 per diluted common share, for the first quarter of 2021 and $159 million, or $.16 per diluted common share, for the second quarter of 2020.
Our results this quarter reflect the success of our productive, client-centric team, strong risk management practices, and momentum from recent investments in both our teammates and digital capabilities.
We generated record second quarter revenue, driven by growth in both our commercial and consumer businesses, as we acquired and deepened relationships across our franchise. Our fee-based businesses reported another strong quarter, with noninterest income up 8% year-over-year. Our investment banking business generated record fees for the second quarter. Furthermore, our investment banking revenue in the second quarter represents the second-highest quarter in our history. With broad-based growth across our targeted industry verticals and continued investments in our teammates, our investment banking business has delivered a decade of consistent growth.
Credit quality remained strong this quarter, with lower nonperforming loans and net charge-offs as a percent of loans of 9 basis points. Our positive credit trends reflect our strong risk culture and disciplined underwriting practices. Our capital position also continues to be one of our strengths, with a Common Equity Tier 1 ratio of 9.9% at the end of the quarter. Earlier this month, our Board of Directors approved a new share repurchase authorization of up to $1.5 billion and will evaluate an increase to the common stock dividend in the fourth quarter 2021.
- Chris Gorman, Chairman and CEO
Selected Financial Highlights | |||||||||||||||
dollars in millions, except per share data | Change 2Q21 vs. | ||||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 698 | $ | 591 | $ | 159 | 18.1 | % | 339.0 | % | |||||
Income (loss) from continuing operations attributable to Key common shareholders per | .72 | .61 | .16 | 18.0 | 350.0 | ||||||||||
Return on average tangible common equity from continuing operations (a) | 22.34 | % | 18.25 | % | 4.96 | % | N/A | N/A | |||||||
Return on average total assets from continuing operations | 1.63 | 1.44 | .45 | N/A | N/A | ||||||||||
Common Equity Tier 1 ratio (b) | 9.9 | 9.9 | 9.1 | N/A | N/A | ||||||||||
Book value at period end | $ | 16.75 | $ | 16.22 | $ | 16.07 | 3.3 | % | 4.2 | % | |||||
Net interest margin (TE) from continuing operations | 2.52 | % | 2.61 | % | 2.76 | % | 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) | June 30, 2021 ratio is estimated. |
TE = Taxable Equivalent, N/A = Not Applicable | |
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||
Revenue | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Net interest income (TE) | $ | 1,023 | $ | 1,012 | $ | 1,025 | 1.1 | % | (.2) | % | ||||
Noninterest income | 750 | 738 | 692 | 1.6 | 8.4 | |||||||||
Total revenue | $ | 1,773 | $ | 1,750 | $ | 1,717 | 1.3 | % | 3.3 | % | ||||
TE = Taxable Equivalent |
Taxable-equivalent net interest income was $1.0 billion for the second quarter of 2021, a decrease of $2 million from the second quarter of 2020. The decrease in net interest income reflects a decrease in the net interest margin, largely offset by higher earning asset balances. The net interest margin was impacted by lower interest rates and a change in balance sheet mix, including elevated levels of liquidity.
Compared to the first quarter of 2021, taxable-equivalent net interest income increased by $11 million, and the net interest margin decreased by 9 basis points. Both net interest income and the net interest margin were impacted by higher earning asset balances, including elevated levels of liquidity, lower interest-bearing deposit costs, and higher loan fees from the Paycheck Protection Program ("PPP") forgiveness, partially offset by lower earning asset yields. Net interest income also benefited from one additional day in the second quarter of 2021.
Noninterest Income | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Trust and investment services income | $ | 133 | $ | 133 | $ | 123 | — | % | 8.1 | % | ||||
Investment banking and debt placement fees | 217 | 162 | 156 | 34.0 | 39.1 | |||||||||
Service charges on deposit accounts | 83 | 73 | 68 | 13.7 | 22.1 | |||||||||
Operating lease income and other leasing gains | 36 | 38 | 60 | (5.3) | (40.0) | |||||||||
Corporate services income | 55 | 64 | 52 | (14.1) | 5.8 | |||||||||
Cards and payments income | 113 | 105 | 91 | 7.6 | 24.2 | |||||||||
Corporate-owned life insurance income | 30 | 31 | 35 | (3.2) | (14.3) | |||||||||
Consumer mortgage income | 26 | 47 | 62 | (44.7) | (58.1) | |||||||||
Commercial mortgage servicing fees | 44 | 34 | 12 | 29.4 | 266.7 | |||||||||
Other income | 13 | 51 | 33 | (74.5) | (60.6) | |||||||||
Total noninterest income | $ | 750 | $ | 738 | $ | 692 | 1.6 | % | 8.4 | % | ||||
Compared to the second quarter of 2020, noninterest income increased by $58 million, primarily driven by a $61 million increase in investment banking and debt placement fees. Commercial mortgage servicing fees increased $32 million. Additionally, cards and payments income increased $22 million, reflecting broad-based growth across credit, debit, and merchant product categories. Partially offsetting these increases were consumer mortgage income and other income, which decreased $36 million and $20 million, respectively.
Compared to the first quarter of 2021, noninterest income increased by $12 million. The largest driver of the quarter-over-quarter increase was a $55 million increase in investment banking and debt placement fees, reflecting broad-based growth in all areas. Commercial mortgage servicing fees and service charges on deposit accounts both increased $10 million. Partially offsetting these increases were a $38 million decrease in other income, reflecting market-related valuation adjustments, and a $21 million decrease in consumer mortgage income.
Noninterest Expense | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Personnel expense | $ | 623 | $ | 624 | $ | 572 | (.2) | % | 8.9 | % | ||||
Nonpersonnel expense | 453 | 447 | 441 | 1.3 | 2.7 | |||||||||
Total noninterest expense | $ | 1,076 | $ | 1,071 | $ | 1,013 | .5 | % | 6.2 | % | ||||
Key's noninterest expense was $1.1 billion for the second quarter of 2021, an increase of $63 million from the year-ago period. The increase is primarily related to higher personnel costs of $51 million, reflecting higher incentive and stock-based compensation, attributed to an increase in revenue and stock performance and an increase in employee benefits. Additionally, other drivers for the year-over-year increase include higher computer processing expense and marketing expense.
Compared to the first quarter of 2021, noninterest expense increased $5 million. Incentive and stock-based compensation increased $14 million, reflecting Key's strong investment banking performance, offset by a $15 million decrease in employee benefits.
BALANCE SHEET HIGHLIGHTS | ||||||||||||||
Average Loans | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Commercial and industrial (a) | $ | 51,808 | $ | 52,581 | $ | 60,480 | (1.5) | % | (14.3) | % | ||||
Other commercial loans | 19,034 | 18,848 | 19,850 | 1.0 | (4.1) | |||||||||
Total consumer loans | 29,972 | 29,299 | 27,611 | 2.3 | 8.6 | |||||||||
Total loans | $ | 100,814 | $ | 100,728 | $ | 107,941 | .1 | % | (6.6) | % | ||||
(a) | Commercial and industrial average loan balances include $132 million, $126 million, and $135 million of assets from commercial credit cards at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. |
Average loans were $100.8 billion for the second quarter of 2021, a decrease of $7.1 billion compared to the second quarter of 2020. Commercial loans decreased $9.5 billion, reflecting decreased utilization versus the year-ago period, partly offset by growth in PPP loans. Consumer loans increased $2.4 billion, reflecting strength from Laurel Road and Key's consumer mortgage business, partly offset by Key's exit from the indirect auto lending business.
Compared to the first quarter of 2021, average loans increased by $86 million. Commercial loans declined due to lower commercial utilization rates, partly offset by growth in PPP loans. Consumer loans continue to reflect strength from Key's consumer mortgage business, partly offset by Key's exit from the indirect auto lending business.
Average Deposits | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Non-time deposits | $ | 139,480 | $ | 132,267 | $ | 118,694 | 5.5 | % | 17.5 | % | ||||
Certificates of deposit ($100,000 or more) | 2,212 | 2,571 | 4,950 | (14.0) | (55.3) | |||||||||
Other time deposits | 2,630 | 2,902 | 4,333 | (9.4) | (39.3) | |||||||||
Total deposits | $ | 144,322 | $ | 137,740 | $ | 127,977 | 4.8 | % | 12.8 | % | ||||
Cost of total deposits | .05 | % | .06 | % | .30 | % | N/A | N/A | ||||||
N/A = Not Applicable |
Average deposits totaled $144.3 billion for the second quarter of 2021, an increase of $16.3 billion compared to the year-ago quarter, reflecting growth from consumer and commercial relationships, partially offset by a decline in time deposits.
Compared to the first quarter of 2021, average deposits increased by $6.6 billion, primarily driven by broad-based commercial growth and higher consumer balances.
ASSET QUALITY | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Net loan charge-offs | $ | 22 | $ | 114 | $ | 96 | (80.7) | % | (77.1) | % | ||||
Net loan charge-offs to average total loans | .09 | % | .46 | % | .36 | % | N/A | N/A | ||||||
Nonperforming loans at period end | $ | 694 | $ | 728 | $ | 760 | (4.7) | (8.7) | ||||||
Nonperforming assets at period end | 738 | 790 | 951 | (6.6) | (22.4) | |||||||||
Allowance for loan and lease losses | 1,220 | 1,438 | 1,708 | (15.2) | (28.6) | |||||||||
Allowance for credit losses | 1,372 | 1,616 | 1,906 | (15.1) | (28.0) | |||||||||
Allowance for loan and lease losses to nonperforming loans | 175.8 | % | 197.5 | % | 224.7 | % | N/A | N/A | ||||||
Allowance for credit losses to nonperforming loans | 197.7 | 222.0 | 250.8 | N/A | N/A | |||||||||
Provision for credit losses | $ | (222) | $ | (93) | $ | 482 | 138.7 | % | (146.1) | % | ||||
N/A = Not Applicable |
Key's provision for credit losses was a net benefit of $222 million, including a $244 million reserve release for the second quarter of 2021, compared to an expense of $482 million in the second quarter of 2020 and a net benefit of $93 million in the first quarter of 2021. The reserve release was largely driven by a continued improvement in the economic outlook.
Net loan charge-offs for the second quarter of 2021 totaled $22 million, or .09% of average total loans. These results compare to $96 million, or .36%, for the second quarter of 2020 and $114 million, or .46%, for the first quarter of 2021. Key's allowance for credit losses was $1.4 billion, or 1.36% of total period-end loans at June 30, 2021, compared to 1.80% at June 30, 2020, and 1.60% at March 31, 2021.
At June 30, 2021, Key's nonperforming loans totaled $694 million, which represented .69% of period-end portfolio loans. These results compare to .72% at June 30, 2020, and .72% at March 31, 2021. Nonperforming assets at June 30, 2021, totaled $738 million, and represented .73% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at June 30, 2020, and .78% at March 31, 2021.
CAPITAL
Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2021.
Capital Ratios | ||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | ||||
Common Equity Tier 1 (a) | 9.9 | % | 9.9 | % | 9.1 | % |
Tier 1 risk-based capital (a) | 11.3 | 11.3 | 10.5 | |||
Total risk based capital (a) | 13.2 | 13.4 | 12.8 | |||
Tangible common equity to tangible assets (b) | 7.4 | 7.5 | 7.6 | |||
Leverage (a) | 8.7 | 8.9 | 8.8 | |||
(a) | June 30, 2021 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. |
(b) | The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
Key's capital position remained strong in the second quarter of 2021. As shown in the preceding table, at June 30, 2021, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.9% and 11.3%, respectively. Key's tangible common equity ratio was 7.4% at June 30, 2021.
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 20 basis points.
Summary of Changes in Common Shares Outstanding | ||||||||||||
in thousands | Change 2Q21 vs. | |||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||
Shares outstanding at beginning of period | 972,587 | 975,773 | 975,319 | (.3) | % | (.3) | % | |||||
Open market repurchases and return of shares under employee compensation | (13,304) | (9,277) | (19) | 43.4 | N/M | |||||||
Shares issued under employee compensation plans (net of cancellations) | 993 | 6,091 | 647 | (83.7) | 53.5 | |||||||
Shares outstanding at end of period | 960,276 | 972,587 | 975,947 | (1.3) | % | (1.6) | % | |||||
N/M = Not Meaningful |
During the second quarter of 2021, Key declared a dividend of $.185 per common share and completed $300 million of common share repurchases. Capital distributions for the quarter were consistent with the regulatory capital distribution guidelines. In July of 2021, Key's Board of Directors approved a new share repurchase authorization program of up to $1.5 billion, applicable for the third quarter of 2021 through the third quarter of 2022, that supersedes the remaining capacity under the previous authorization. Additionally, Key will evaluate an increase to the per share common dividend in the fourth quarter of 2021, subject to Board approval.
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 2Q21 vs. | ||||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | |||||||||||
Revenue from continuing operations (TE) | |||||||||||||||
Consumer Bank | $ | 854 | $ | 867 | $ | 835 | (1.5) | % | 2.3 | % | |||||
Commercial Bank | 874 | 859 | 879 | 1.7 | (.6) | ||||||||||
Other (a) | 45 | 24 | 3 | 87.5 | 1,400.0 | ||||||||||
Total | $ | 1,773 | $ | 1,750 | $ | 1,717 | 1.3 | % | 3.3 | % | |||||
Income (loss) from continuing operations attributable to Key | |||||||||||||||
Consumer Bank | $ | 259 | $ | 220 | $ | 98 | 17.7 | % | 164.3 | % | |||||
Commercial Bank | 434 | 384 | 106 | 13.0 | 309.4 | ||||||||||
Other (a) | 31 | 14 | (19) | 121.4 | N/M | ||||||||||
Total | $ | 724 | $ | 618 | $ | 185 | 17.2 | % | 291.4 | % | |||||
(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 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Summary of operations | ||||||||||||||
Net interest income (TE) | $ | 600 | $ | 610 | $ | 589 | (1.6) | % | 1.9 | % | ||||
Noninterest income | 254 | 257 | 246 | (1.2) | 3.3 | |||||||||
Total revenue (TE) | 854 | 867 | 835 | (1.5) | 2.3 | |||||||||
Provision for credit losses | (70) | (23) | 155 | (204.3) | (145.2) | |||||||||
Noninterest expense | 584 | 601 | 552 | (2.8) | 5.8 | |||||||||
Income (loss) before income taxes (TE) | 340 | 289 | 128 | 17.6 | 165.6 | |||||||||
Allocated income taxes (benefit) and TE adjustments | 81 | 69 | 30 | 17.4 | 170.0 | |||||||||
Net income (loss) attributable to Key | $ | 259 | $ | 220 | $ | 98 | 17.7 | % | 164.3 | % | ||||
Average balances | ||||||||||||||
Loans and leases | $ | 40,598 | $ | 39,249 | $ | 37,300 | 3.4 | % | 8.8 | % | ||||
Total assets | 43,991 | 42,476 | 42,194 | 3.6 | 4.3 | |||||||||
Deposits | 88,412 | 85,033 | 79,235 | 4.0 | 11.6 | |||||||||
Assets under management at period end | $ | 47,737 | $ | 45,218 | $ | 39,722 | 5.6 | % | 20.2 | % | ||||
TE = Taxable Equivalent |
Additional Consumer Bank Data | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Noninterest income | ||||||||||||||
Trust and investment services income | $ | 104 | $ | 101 | $ | 87 | 3.0 | % | 19.5 | % | ||||
Service charges on deposit accounts | 47 | 38 | 36 | 23.7 | 30.6 | |||||||||
Cards and payments income | 62 | 54 | 47 | 14.8 | 31.9 | |||||||||
Consumer mortgage income | 26 | 47 | 61 | (44.7) | (57.4) | |||||||||
Other noninterest income | 15 | 17 | 15 | (11.8) | .0 | |||||||||
Total noninterest income | $ | 254 | $ | 257 | $ | 246 | (1.2) | % | 3.3 | % | ||||
Average deposit balances | ||||||||||||||
NOW and money market deposit accounts | $ | 56,038 | $ | 54,685 | $ | 49,143 | 2.5 | % | 14.0 | % | ||||
Savings deposits | 6,523 | 5,878 | 4,816 | 11.0 | 35.4 | |||||||||
Certificates of deposit ($100,000 or more) | 2,083 | 2,424 | 4,520 | (14.1) | (53.9) | |||||||||
Other time deposits | 2,615 | 2,888 | 4,296 | (9.5) | (39.1) | |||||||||
Noninterest-bearing deposits | 21,153 | 19,159 | 16,460 | 10.4 | 28.5 | |||||||||
Total deposits | $ | 88,412 | $ | 85,033 | $ | 79,235 | 4.0 | 11.6 | % | |||||
Home equity loans | ||||||||||||||
Average balance | $ | 9,081 | $ | 9,234 | $ | 9,893 | ||||||||
Combined weighted-average loan-to-value ratio (at date of origination) | 68 | % | 69 | % | 70 | % | ||||||||
Percent first lien positions | 70 | 68 | 63 | |||||||||||
Other data | ||||||||||||||
Branches | 1,014 | 1,068 | 1,077 | |||||||||||
Automated teller machines | 1,329 | 1,368 | 1,394 | |||||||||||
Consumer Bank Summary of Operations (2Q21 vs. 2Q20)
- Net income attributable to Key of $259 million for the second quarter of 2021, compared to $98 million for the year-ago quarter
- Taxable-equivalent net interest income increased by $11 million, or 1.9%, compared to the second quarter of 2020, driven by strong consumer mortgage balance sheet growth and fees related to PPP loans, partially offset by the lower interest rate environment
- Average loans and leases increased $3.3 billion, or 8.8%, driven by growth in consumer mortgage and benefit from the PPP
- Average deposits increased $9.2 billion, or 11.6%, from the second quarter of 2020, driven by retention of consumer stimulus payments and relationship growth
- Provision for credit losses decreased $225 million, compared to the second quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions and continued strength in client credit quality
- Noninterest income increased $8 million, or 3.3%, from the year ago quarter, driven by higher trust and investment services income and client spend activity, partially offset by lower consumer mortgage income, due to lower gain on sale volume
- Noninterest expense increased $32 million, or 5.8%, from the year ago quarter, driven by higher variable compensation and support expenses related to higher loan volumes
Commercial Bank | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Summary of operations | ||||||||||||||
Net interest income (TE) | $ | 419 | $ | 413 | $ | 458 | 1.5 | % | (8.5) | % | ||||
Noninterest income | 455 | 446 | 421 | 2.0 | 8.1 | |||||||||
Total revenue (TE) | 874 | 859 | 879 | 1.7 | (.6) | |||||||||
Provision for credit losses | (131) | (67) | 326 | 95.5 | (140.2) | |||||||||
Noninterest expense | 451 | 443 | 441 | 1.8 | 2.3 | |||||||||
Income (loss) before income taxes (TE) | 554 | 483 | 112 | 14.7 | 394.6 | |||||||||
Allocated income taxes and TE adjustments | 120 | 99 | 6 | 21.2 | N/M | |||||||||
Net income (loss) attributable to Key | $ | 434 | $ | 384 | $ | 106 | 13.0 | % | 309.4 | % | ||||
Average balances | ||||||||||||||
Loans and leases | $ | 59,953 | $ | 61,221 | $ | 70,336 | (2.1) | % | (14.8) | % | ||||
Loans held for sale | 1,341 | 1,237 | 2,012 | 8.4 | (33.3) | |||||||||
Total assets | 69,101 | 70,448 | 79,267 | (1.9) | (12.8) | |||||||||
Deposits | 54,814 | 51,894 | 47,954 | 5.6 | % | 14.3 | % | |||||||
TE = Taxable Equivalent, N/M = Not Meaningful |
Additional Commercial Bank Data | ||||||||||||||
dollars in millions | Change 2Q21 vs. | |||||||||||||
2Q21 | 1Q21 | 2Q20 | 1Q21 | 2Q20 | ||||||||||
Noninterest income | ||||||||||||||
Trust and investment services income | $ | 27 | $ | 32 | $ | 37 | (15.6) | % | (27.0) | |||||
Investment banking and debt placement fees | 215 | 162 | 156 | 32.7 | 37.8 | % | ||||||||
Operating lease income and other leasing gains | 35 | 38 | 59 | (7.9) | (40.7) | |||||||||
Corporate services income | 47 | 56 | 45 | (16.1) | 4.4 | |||||||||
Service charges on deposit accounts | 34 | 33 | 30 | 3.0 | 13.3 | |||||||||
Cards and payments income | 49 | 52 | 45 | (5.8) | 8.9 | |||||||||
Payments and services income | 130 | 141 | 120 | (7.8) | 8.3 | |||||||||
Commercial mortgage servicing fees | 44 | 34 | 12 | 29.4 | 266.7 | |||||||||
Other noninterest income | 4 | 39 | 37 | (89.7) | (89.2) | |||||||||
Total noninterest income | $ | 455 | $ | 446 | $ | 421 | 2.0 | % | 8.1 | % | ||||
N/M = Not Meaningful |
Commercial Bank Summary of Operations (2Q21 vs. 2Q20)
- Net income attributable to Key of $434 million for the second quarter of 2021, compared to $106 million for the year-ago quarter
- Taxable-equivalent net interest income decreased by $39 million, compared to the second quarter of 2020, as lower average loan balances offset fees related to PPP loans
- Average loan and lease balances decreased $10.4 billion, compared to the second quarter of 2020, driven by lower commercial and industrial line draws
- Average deposit balances increased $6.9 billion, or 14.3%, compared to the second quarter of 2020, driven by growth in targeted relationships and the impact of government programs
- Provision for credit losses decreased $457 million, compared to the second quarter of 2020. The provision for credit losses was a net benefit and was driven by expected improvements in economic conditions
- Noninterest income increased $34 million, from the year-ago quarter, driven by elevated investment banking client activity and commercial mortgage servicing fees, partially offset by favorable market-related adjustments to customer derivatives in the year-ago period
- Noninterest expense increased by $10 million, or 2.3%, from the second quarter of 2020, driven by higher personnel-related costs
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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 $181.1 billion at June 30, 2021.
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 1,300 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 |
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, 2020, 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 worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, and the impact of the COVID-19 global pandemic on us, our clients, our third-party service providers, and the markets. 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/irat 10:00 a.m. ET, on July 20, 2021. A replay of the call will be available through July 29, 2021.
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KeyCorp | |
Second Quarter 2021 | |
Financial Supplement | |
Page | |
12 | 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 | |||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | |||||||||
Summary of operations | |||||||||||
Net interest income (TE) | $ | 1,023 | $ | 1,012 | $ | 1,025 | |||||
Noninterest income | 750 | 738 | 692 | ||||||||
Total revenue (TE) | 1,773 | 1,750 | 1,717 | ||||||||
Provision for credit losses | (222) | (93) | 482 | ||||||||
Noninterest expense | 1,076 | 1,071 | 1,013 | ||||||||
Income (loss) from continuing operations attributable to Key | 724 | 618 | 185 | ||||||||
Income (loss) from discontinued operations, net of taxes | 5 | 4 | 2 | ||||||||
Net income (loss) attributable to Key | 729 | 622 | 187 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders | 698 | 591 | 159 | ||||||||
Income (loss) from discontinued operations, net of taxes | 5 | 4 | 2 | ||||||||
Net income (loss) attributable to Key common shareholders | 703 | 595 | 161 | ||||||||
Per common share | |||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .73 | $ | .61 | $ | .16 | |||||
Income (loss) from discontinued operations, net of taxes | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders (a) | .73 | .62 | .17 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | .72 | .61 | .16 | ||||||||
Income (loss) from discontinued operations, net of taxes — assuming dilution | — | — | — | ||||||||
Net income (loss) attributable to Key common shareholders — assuming dilution (a) | .73 | .61 | .17 | ||||||||
Cash dividends declared | .185 | .185 | .185 | ||||||||
Book value at period end | 16.75 | 16.22 | 16.07 | ||||||||
Tangible book value at period end | 13.81 | 13.30 | 13.12 | ||||||||
Market price at period end | 20.65 | 19.98 | 12.18 | ||||||||
Performance ratios | |||||||||||
From continuing operations: | |||||||||||
Return on average total assets | 1.63 | % | 1.44 | % | .45 | % | |||||
Return on average common equity | 18.21 | 14.98 | 4.05 | ||||||||
Return on average tangible common equity (b) | 22.34 | 18.25 | 4.96 | ||||||||
Net interest margin (TE) | 2.52 | 2.61 | 2.76 | ||||||||
Cash efficiency ratio (b) | 59.9 | 60.3 | 57.9 | ||||||||
From consolidated operations: | |||||||||||
Return on average total assets | 1.64 | % | 1.45 | % | .46 | % | |||||
Return on average common equity | 18.34 | 15.08 | 4.10 | ||||||||
Return on average tangible common equity (b) | 22.50 | 18.37 | 5.02 | ||||||||
Net interest margin (TE) | 2.55 | 2.60 | 2.76 | ||||||||
Loan to deposit (c) | 70.4 | 73.1 | 80.4 | ||||||||
Capital ratios at period end | |||||||||||
Key shareholders' equity to assets | 9.9 | % | 10.0 | % | 10.2 | % | |||||
Key common shareholders' equity to assets | 8.9 | 9.0 | 9.2 | ||||||||
Tangible common equity to tangible assets (b) | 7.4 | 7.5 | 7.6 | ||||||||
Common Equity Tier 1 (d) | 9.9 | 9.9 | 9.1 | ||||||||
Tier 1 risk-based capital (d) | 11.3 | 11.3 | 10.5 | ||||||||
Total risk-based capital (d) | 13.2 | 13.4 | 12.8 | ||||||||
Leverage (d) | 8.7 | 8.9 | 8.8 | ||||||||
Asset quality — from continuing operations | |||||||||||
Net loan charge-offs | $ | 22 | $ | 114 | $ | 96 | |||||
Net loan charge-offs to average loans | .09 | % | .46 | % | .36 | % | |||||
Allowance for loan and lease losses | $ | 1,220 | $ | 1,438 | $ | 1,708 | |||||
Allowance for credit losses | 1,372 | 1,616 | 1,906 | ||||||||
Allowance for loan and lease losses to period-end loans | 1.21 | % | 1.42 | % | 1.61 | % | |||||
Allowance for credit losses to period-end loans | 1.36 | 1.60 | 1.80 | ||||||||
Allowance for loan and lease losses to nonperforming loans | 175.8 | 197.5 | 224.7 | ||||||||
Allowance for credit losses to nonperforming loans | 197.7 | 222.0 | 250.8 | ||||||||
Nonperforming loans at period-end | $ | 694 | $ | 728 | $ | 760 | |||||
Nonperforming assets at period-end | 738 | 790 | 951 | ||||||||
Nonperforming loans to period-end portfolio loans | .69 | % | .72 | % | .72 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .73 | .78 | .89 | ||||||||
Trust assets | |||||||||||
Assets under management | $ | 47,737 | $ | 45,218 | $ | 39,722 | |||||
Other data | |||||||||||
Average full-time equivalent employees | 17,157 | 17,086 | 16,646 | ||||||||
Branches | 1,014 | 1,068 | 1,077 | ||||||||
Taxable-equivalent adjustment | $ | 6 | $ | 7 | $ | 7 | |||||
Financial Highlights (continued) | |||||||
(dollars in millions, except per share amounts) | |||||||
Six months ended | |||||||
6/30/2021 | 6/30/2020 | ||||||
Summary of operations | |||||||
Net interest income (TE) | $ | 2,035 | $ | 2,014 | |||
Noninterest income | 1,488 | 1,169 | |||||
Total revenue (TE) | 3,523 | 3,183 | |||||
Provision for credit losses | (315) | 841 | |||||
Noninterest expense | 2,147 | 1,944 | |||||
Income (loss) from continuing operations attributable to Key | 1,342 | 330 | |||||
Income (loss) from discontinued operations, net of taxes | 9 | 3 | |||||
Net income (loss) attributable to Key | 1,351 | 333 | |||||
Income (loss) from continuing operations attributable to Key common shareholders | 1,289 | 277 | |||||
Income (loss) from discontinued operations, net of taxes | 9 | 3 | |||||
Net income (loss) attributable to Key common shareholders | 1,298 | 280 | |||||
Per common share | |||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 1.34 | $ | .29 | |||
Income (loss) from discontinued operations, net of taxes | .01 | — | |||||
Net income (loss) attributable to Key common shareholders (a) | 1.35 | .29 | |||||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | 1.33 | .28 | |||||
Income (loss) from discontinued operations, net of taxes — assuming dilution | .01 | — | |||||
Net income (loss) attributable to Key common shareholders — assuming dilution (a) | 1.34 | .29 | |||||
Cash dividends paid | .37 | .37 | |||||
Performance ratios | |||||||
From continuing operations: | |||||||
Return on average total assets | 1.55 | % | .43 | % | |||
Return on average common equity | 16.64 | 3.58 | |||||
Return on average tangible common equity (b) | 20.34 | 4.40 | |||||
Net interest margin (TE) | 2.56 | 2.88 | |||||
Cash efficiency ratio (b) | 60.1 | 60.0 | |||||
From consolidated operations: | |||||||
Return on average total assets | 1.55 | % | .43 | % | |||
Return on average common equity | 16.76 | 3.62 | |||||
Return on average tangible common equity (b) | 20.48 | 4.45 | |||||
Net interest margin (TE) | 2.57 | 2.87 | |||||
Asset quality — from continuing operations | |||||||
Net loan charge-offs | $ | 136 | $ | 180 | |||
Net loan charge-offs to average total loans | .27 | % | .35 | % | |||
Other data | |||||||
Average full-time equivalent employees | 17,122 | 16,587 | |||||
Taxable-equivalent adjustment | 13 | 15 | |||||
(a) | Earnings per share may not foot due to rounding. |
(b) | The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
(c) | Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits. |
(d) | June 30, 2021, 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." |
The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. |
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis. |
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis. |
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. |
Three months ended | Six months ended | |||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 6/30/2021 | 6/30/2020 | ||||||||||||
Tangible common equity to tangible assets at period-end | ||||||||||||||||
Key shareholders' equity (GAAP) | $ | 17,941 | $ | 17,634 | $ | 17,542 | ||||||||||
Less: Intangible assets (a) | 2,828 | 2,842 | 2,877 | |||||||||||||
Preferred Stock (b) | 1,856 | 1,856 | 1,856 | |||||||||||||
Tangible common equity (non-GAAP) | $ | 13,257 | $ | 12,936 | $ | 12,809 | ||||||||||
Total assets (GAAP) | $ | 181,115 | $ | 176,203 | $ | 171,192 | ||||||||||
Less: Intangible assets (a) | 2,828 | 2,842 | 2,877 | |||||||||||||
Tangible assets (non-GAAP) | $ | 178,287 | $ | 173,361 | $ | 168,315 | ||||||||||
Tangible common equity to tangible assets ratio (non-GAAP) | 7.44 | % | 7.46 | % | 7.61 | % | ||||||||||
Pre-provision net revenue | ||||||||||||||||
Net interest income (GAAP) | $ | 1,017 | $ | 1,005 | $ | 1,018 | $ | 2,022 | $ | 1,999 | ||||||
Plus: Taxable-equivalent adjustment | 6 | 7 | 7 | 13 | 15 | |||||||||||
Noninterest income | 750 | 738 | 692 | 1,488 | 1,169 | |||||||||||
Less: Noninterest expense | 1,076 | 1,071 | 1,013 | 2,147 | 1,944 | |||||||||||
Pre-provision net revenue from continuing operations (non-GAAP) | $ | 697 | $ | 679 | $ | 704 | $ | 1,376 | $ | 1,239 | ||||||
Average tangible common equity | ||||||||||||||||
Average Key shareholders' equity (GAAP) | $ | 17,271 | $ | 17,769 | $ | 17,688 | $ | 17,519 | $ | 17,452 | ||||||
Less: Intangible assets (average) (c) | 2,840 | 2,844 | 2,886 | 2,840 | 2,894 | |||||||||||
Preferred stock (average) | 1,900 | 1,900 | 1,900 | 1,900 | 1,900 | |||||||||||
Average tangible common equity (non-GAAP) | $ | 12,531 | $ | 13,025 | $ | 12,902 | $ | 12,779 | $ | 12,658 | ||||||
Return on average tangible common equity from continuing operations | ||||||||||||||||
Net income (loss) from continuing operations attributable to Key common | $ | 698 | $ | 591 | $ | 159 | $ | 1,289 | $ | 277 | ||||||
Average tangible common equity (non-GAAP) | 12,531 | 13,025 | 12,902 | 12,779 | 12,658 | |||||||||||
Return on average tangible common equity from continuing operations (non- | 22.34 | % | 18.25 | % | 4.96 | % | 20.34 | % | 4.40 | % | ||||||
Return on average tangible common equity consolidated | ||||||||||||||||
Net income (loss) attributable to Key common shareholders (GAAP) | $ | 703 | $ | 595 | $ | 161 | $ | 1,298 | $ | 280 | ||||||
Average tangible common equity (non-GAAP) | 12,531 | 13,025 | 12,902 | 12,779 | 12,658 | |||||||||||
Return on average tangible common equity consolidated (non-GAAP) | 22.50 | % | 18.37 | % | 5.02 | % | 20.48 | % | 4.45 | % | ||||||
GAAP to Non-GAAP Reconciliations (continued) | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 6/30/2021 | 6/30/2020 | ||||||||||||
Cash efficiency ratio | ||||||||||||||||
Noninterest expense (GAAP) | $ | 1,076 | $ | 1,071 | $ | 1,013 | $ | 2,147 | $ | 1,944 | ||||||
Less: Intangible asset amortization | 14 | 15 | 18 | 29 | 35 | |||||||||||
Adjusted noninterest expense (non-GAAP) | $ | 1,062 | $ | 1,056 | $ | 995 | $ | 2,118 | $ | 1,909 | ||||||
Net interest income (GAAP) | $ | 1,017 | $ | 1,005 | $ | 1,018 | $ | 2,022 | $ | 1,999 | ||||||
Plus: Taxable-equivalent adjustment | 6 | 7 | 7 | 13 | 15 | |||||||||||
Noninterest income | 750 | 738 | 692 | 1,488 | 1,169 | |||||||||||
Total taxable-equivalent revenue (non-GAAP) | $ | 1,773 | $ | 1,750 | $ | 1,717 | $ | 3,523 | $ | 3,183 | ||||||
Cash efficiency ratio (non-GAAP) | 59.9 | % | 60.3 | % | 57.9 | % | 60.1 | % | 60.0 | % | ||||||
(a) | For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, intangible assets exclude $4 million, $4 million, and $5 million, respectively, of period-end purchased credit card receivables. |
(b) | Net of capital surplus. |
(c) | For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, average intangible assets exclude $4 million, $4 million, and $6 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2021, and June 30, 2020, average intangible assets exclude $4 million and $6 million, respectively, of average purchased credit card receivables |
GAAP = U.S. generally accepted accounting principles | |
Consolidated Balance Sheets | |||||||||||
(dollars in millions) | |||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | |||||||||
Assets | |||||||||||
Loans | $ | 100,730 | $ | 100,926 | $ | 106,159 | |||||
Loans held for sale | 1,537 | 2,296 | 2,007 | ||||||||
Securities available for sale | 34,638 | 33,923 | 23,600 | ||||||||
Held-to-maturity securities | 6,175 | 6,857 | 9,075 | ||||||||
Trading account assets | 851 | 811 | 645 | ||||||||
Short-term investments | 20,460 | 15,376 | 14,036 | ||||||||
Other investments | 635 | 621 | 655 | ||||||||
Total earning assets | 165,026 | 160,810 | 156,177 | ||||||||
Allowance for loan and lease losses | (1,220) | (1,438) | (1,708) | ||||||||
Cash and due from banks | 792 | 938 | 1,059 | ||||||||
Premises and equipment | 785 | 737 | 776 | ||||||||
Goodwill | 2,673 | 2,673 | 2,664 | ||||||||
Other intangible assets | 159 | 173 | 218 | ||||||||
Corporate-owned life insurance | 4,304 | 4,296 | 4,251 | ||||||||
Accrued income and other assets | 7,966 | 7,347 | 6,976 | ||||||||
Discontinued assets | 630 | 667 | 779 | ||||||||
Total assets | $ | 181,115 | 176,203 | 171,192 | |||||||
Liabilities | |||||||||||
Deposits in domestic offices: | |||||||||||
NOW and money market deposit accounts | $ | 85,242 | $ | 82,777 | $ | 78,853 | |||||
Savings deposits | 6,993 | 6,655 | 5,371 | ||||||||
Certificates of deposit ($100,000 or more) | 2,064 | 2,437 | 4,476 | ||||||||
Other time deposits | 2,493 | 2,782 | 4,011 | ||||||||
Total interest-bearing deposits | 96,792 | 94,651 | 92,711 | ||||||||
Noninterest-bearing deposits | 49,280 | 47,532 | 42,802 | ||||||||
Total deposits | 146,072 | 142,183 | 135,513 | ||||||||
Federal funds purchased and securities sold under repurchase agreements | 211 | 281 | 267 | ||||||||
Bank notes and other short-term borrowings | 723 | 744 | 1,716 | ||||||||
Accrued expense and other liabilities | 2,957 | 2,862 | 2,420 | ||||||||
Long-term debt | 13,211 | 12,499 | 13,734 | ||||||||
Total liabilities | 163,174 | 158,569 | 153,650 | ||||||||
Equity | |||||||||||
Preferred stock | 1,900 | 1,900 | 1,900 | ||||||||
Common shares | 1,257 | 1,257 | 1,257 | ||||||||
Capital surplus | 6,232 | 6,213 | 6,240 | ||||||||
Retained earnings | 13,689 | 13,166 | 12,154 | ||||||||
Treasury stock, at cost | (5,287) | (5,005) | (4,945) | ||||||||
Accumulated other comprehensive income (loss) | 150 | 103 | 936 | ||||||||
Key shareholders' equity | 17,941 | 17,634 | 17,542 | ||||||||
Noncontrolling interests | — | — | — | ||||||||
Total equity | 17,941 | 17,634 | 17,542 | ||||||||
Total liabilities and equity | $ | 181,115 | $ | 176,203 | $ | 171,192 | |||||
Common shares outstanding (000) | 960,276 | 972,587 | 975,947 | ||||||||
Consolidated Statements of Income | ||||||||||||||||||
(dollars in millions, except per share amounts) | ||||||||||||||||||
Three months ended | Six months ended | |||||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 6/30/2021 | 6/30/2020 | ||||||||||||||
Interest income | ||||||||||||||||||
Loans | $ | 888 | $ | 889 | $ | 980 | $ | 1,777 | $ | 2,006 | ||||||||
Loans held for sale | 11 | 11 | 21 | 22 | 40 | |||||||||||||
Securities available for sale | 133 | 130 | 121 | 263 | 250 | |||||||||||||
Held-to-maturity securities | 45 | 45 | 56 | 90 | 118 | |||||||||||||
Trading account assets | 5 | 5 | 5 | 10 | 13 | |||||||||||||
Short-term investments | 6 | 5 | 7 | 11 | 13 | |||||||||||||
Other investments | 2 | 2 | — | 4 | 1 | |||||||||||||
Total interest income | 1,090 | 1,087 | 1,190 | 2,177 | 2,441 | |||||||||||||
Interest expense | ||||||||||||||||||
Deposits | 16 | 21 | 96 | 37 | 265 | |||||||||||||
Federal funds purchased and securities sold under repurchase agreements | — | — | — | — | 6 | |||||||||||||
Bank notes and other short-term borrowings | 3 | 1 | 5 | 4 | 10 | |||||||||||||
Long-term debt | 54 | 60 | 71 | 114 | 161 | |||||||||||||
Total interest expense | 73 | 82 | 172 | 155 | 442 | |||||||||||||
Net interest income | 1,017 | 1,005 | 1,018 | 2,022 | 1,999 | |||||||||||||
Provision for credit losses | (222) | (93) | 482 | (315) | 841 | |||||||||||||
Net interest income after provision for credit losses | 1,239 | 1,098 | 536 | 2,337 | 1,158 | |||||||||||||
Noninterest income | ||||||||||||||||||
Trust and investment services income | 133 | 133 | 123 | 266 | 256 | |||||||||||||
Investment banking and debt placement fees | 217 | 162 | 156 | 379 | 272 | |||||||||||||
Service charges on deposit accounts | 83 | 73 | 68 | 156 | 152 | |||||||||||||
Operating lease income and other leasing gains | 36 | 38 | 60 | 74 | 90 | |||||||||||||
Corporate services income | 55 | 64 | 52 | 119 | 114 | |||||||||||||
Cards and payments income | 113 | 105 | 91 | 218 | 157 | |||||||||||||
Corporate-owned life insurance income | 30 | 31 | 35 | 61 | 71 | |||||||||||||
Consumer mortgage income | 26 | 47 | 62 | 73 | 82 | |||||||||||||
Commercial mortgage servicing fees | 44 | 34 | 12 | 78 | 30 | |||||||||||||
Other income | 13 | 51 | 33 | 64 | (55) | |||||||||||||
Total noninterest income | 750 | 738 | 692 | 1,488 | 1,169 | |||||||||||||
Noninterest expense | ||||||||||||||||||
Personnel | 623 | 624 | 572 | 1,247 | 1,087 | |||||||||||||
Net occupancy | 75 | 76 | 71 | 151 | 147 | |||||||||||||
Computer processing | 71 | 73 | 56 | 144 | 111 | |||||||||||||
Business services and professional fees | 51 | 50 | 49 | 101 | 93 | |||||||||||||
Equipment | 25 | 25 | 25 | 50 | 49 | |||||||||||||
Operating lease expense | 31 | 34 | 34 | 65 | 70 | |||||||||||||
Marketing | 31 | 26 | 24 | 57 | 45 | |||||||||||||
Intangible asset amortization | 14 | 15 | 18 | 29 | 35 | |||||||||||||
Other expense | 155 | 148 | 164 | 303 | 307 | |||||||||||||
Total noninterest expense | 1,076 | 1,071 | 1,013 | 2,147 | 1,944 | |||||||||||||
Income (loss) from continuing operations before income taxes | 913 | 765 | 215 | 1,678 | 383 | |||||||||||||
Income taxes | 189 | 147 | 30 | 336 | 53 | |||||||||||||
Income (loss) from continuing operations | 724 | 618 | 185 | 1,342 | 330 | |||||||||||||
Income (loss) from discontinued operations, net of taxes | 5 | 4 | 2 | 9 | 3 | |||||||||||||
Net income (loss) | 729 | 622 | 187 | 1,351 | 333 | |||||||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | — | — | — | |||||||||||||
Net income (loss) attributable to Key | $ | 729 | $ | 622 | $ | 187 | $ | 1,351 | $ | 333 | ||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | 698 | $ | 591 | $ | 159 | $ | 1,289 | $ | 277 | ||||||||
Net income (loss) attributable to Key common shareholders | 703 | 595 | 161 | 1,298 | 280 | |||||||||||||
Per common share | ||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .73 | $ | .61 | $ | .16 | $ | 1.34 | $ | .29 | ||||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | .01 | — | |||||||||||||
Net income (loss) attributable to Key common shareholders (a) | .73 | .62 | .17 | 1.35 | .29 | |||||||||||||
Per common share — assuming dilution | ||||||||||||||||||
Income (loss) from continuing operations attributable to Key common shareholders | $ | .72 | $ | .61 | $ | .16 | $ | 1.33 | $ | .28 | ||||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | .01 | — | |||||||||||||
Net income (loss) attributable to Key common shareholders (a) | .73 | .61 | .17 | 1.34 | .29 | |||||||||||||
Cash dividends declared per common share | $ | .185 | $ | .185 | $ | .185 | $ | .370 | $ | .370 | ||||||||
Weighted-average common shares outstanding (000) | 961,292 | 964,878 | 967,147 | 957,423 | 967,380 | |||||||||||||
Effect of common share options and other stock awards | 9,514 | 9,419 | 4,994 | 9,740 | 6,892 | |||||||||||||
Weighted-average common shares and potential common shares outstanding (000) (b) | 970,806 | 974,297 | 972,141 | 967,163 | 974,272 | |||||||||||||
(a) | Earnings per share may not foot due to rounding. |
(b) | Assumes conversion of common share options and other stock awards, as applicable. |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations | |||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||
Second Quarter 2021 | First Quarter 2021 | Second Quarter 2020 | |||||||||||||||||||||||||
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) | $ | 51,808 | $ | 450 | 3.52 | $ | 52,581 | $ | 453 | 3.48 | $ | 60,480 | $ | 518 | 3.44 | ||||||||||||
Real estate — commercial mortgage | 12,825 | 117 | 3.67 | 12,658 | 114 | 3.67 | 13,510 | 128 | 3.80 | ||||||||||||||||||
Real estate — construction | $ | 2,149 | $ | 20 | 3.68 | $ | 2,048 | $ | 19 | 3.75 | $ | 1,756 | $ | 17 | 3.97 | ||||||||||||
Commercial lease financing | 4,060 | 30 | 2.98 | 4,142 | 31 | 2.99 | 4,584 | 33 | 2.96 | ||||||||||||||||||
Total commercial loans | $ | 70,842 | $ | 617 | 3.53 | $ | 71,429 | $ | 617 | 3.50 | $ | 80,330 | $ | 696 | 3.49 | ||||||||||||
Real estate — residential mortgage | 11,055 | 81 | 2.92 | 9,699 | 76 | 3.12 | 7,783 | 69 | 3.57 | ||||||||||||||||||
Home equity loans | $ | 9,089 | $ | 85 | 3.76 | $ | 9,282 | $ | 85 | 3.73 | $ | 9,949 | $ | 97 | 3.89 | ||||||||||||
Consumer direct loans | 4,910 | 57 | 4.69 | 4,817 | 56 | 4.72 | 4,152 | 55 | 5.24 | ||||||||||||||||||
Credit cards | $ | 908 | $ | 22 | 9.79 | $ | 933 | $ | 24 | 10.45 | $ | 983 | $ | 25 | 10.22 | ||||||||||||
Consumer indirect loans | 4,010 | 32 | 3.23 | 4,568 | 37 | 3.30 | 4,744 | 45 | 3.82 | ||||||||||||||||||
Total consumer loans | $ | 29,972 | $ | 277 | 3.74 | $ | 29,299 | $ | 278 | 3.84 | $ | 27,611 | $ | 291 | 4.22 | ||||||||||||
Total loans | 100,814 | 894 | 3.59 | 100,728 | 895 | 3.60 | 107,941 | 987 | 3.67 | ||||||||||||||||||
Loans held for sale | $ | 1,616 | $ | 11 | 2.60 | $ | 1,531 | $ | 11 | 2.89 | $ | 2,463 | $ | 21 | 3.50 | ||||||||||||
Securities available for sale (b), (e) | 33,623 | 133 | 3.13 | 30,039 | 130 | 1.76 | 20,749 | 121 | 2.43 | ||||||||||||||||||
Held-to-maturity securities (b) | $ | 6,452 | $ | 45 | 2.75 | $ | 7,188 | $ | 46 | 2.53 | $ | 9,331 | $ | 56 | 2.43 | ||||||||||||
Trading account assets | 837 | 5 | 2.56 | 848 | 5 | 2.15 | 760 | 5 | 2.43 | ||||||||||||||||||
Short-term investments | $ | 18,817 | $ | 6 | 0.13 | $ | 16,510 | $ | 5 | 0.13 | $ | 7,892 | $ | 7 | 0.31 | ||||||||||||
Other investments (e) | 622 | 2 | 1.02 | 614 | 2 | 1.40 | 672 | — | 0.29 | ||||||||||||||||||
Total earning assets | $ | 162,781 | $ | 1,096 | 2.72 | $ | 157,458 | $ | 1,094 | 2.81 | $ | 149,808 | $ | 1,197 | 3.22 | ||||||||||||
Allowance for loan and lease losses | (1,442) | (1,623) | (1,413) | ||||||||||||||||||||||||
Accrued income and other assets | $ | 16,531 | $ | 16,398 | $ | 15,704 | |||||||||||||||||||||
Discontinued assets | 650 | 686 | 793 | ||||||||||||||||||||||||
Total assets | $ | 178,520 | $ | 172,919 | $ | 164,892 | |||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||
NOW and money market deposit accounts | $ | 83,981 | $ | 9 | .05 | $ | 81,439 | $ | 10 | .05 | $ | 75,297 | $ | 56 | .30 | ||||||||||||
Savings deposits | 6,859 | 1 | .03 | 6,203 | 1 | .03 | 5,130 | — | .04 | ||||||||||||||||||
Certificates of deposit ($100,000 or more) | $ | 2,212 | $ | 4 | .72 | $ | 2,571 | $ | 6 | .96 | $ | 4,950 | $ | 24 | 1.93 | ||||||||||||
Other time deposits | 2,630 | 2 | .38 | 2,902 | 4 | .57 | 4,333 | 16 | 1.52 | ||||||||||||||||||
Total interest-bearing deposits | $ | 95,682 | $ | 16 | .07 | $ | 93,115 | $ | 21 | .09 | $ | 89,710 | $ | 96 | .43 | ||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 251 | — | .02 | 243 | — | .04 | 242 | — | .03 | ||||||||||||||||||
Bank notes and other short-term borrowings | $ | 744 | $ | 3 | 1.19 | $ | 878 | $ | 1 | .64 | $ | 2,869 | $ | 5 | .57 | ||||||||||||
Long-term debt (f), (g) | 11,978 | 54 | 1.83 | 12,831 | 60 | 1.93 | 12,954 | 71 | 2.30 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 108,655 | $ | 73 | .27 | $ | 107,067 | $ | 82 | .31 | $ | 105,775 | $ | 172 | .66 | ||||||||||||
Noninterest-bearing deposits | 48,640 | 44,625 | 38,267 | ||||||||||||||||||||||||
Accrued expense and other liabilities | $ | 3,304 | $ | 2,772 | $ | 2,369 | |||||||||||||||||||||
Discontinued liabilities (g) | 650 | 686 | 793 | ||||||||||||||||||||||||
Total liabilities | $ | 161,249 | $ | 155,150 | $ | 147,204 | |||||||||||||||||||||
Equity | |||||||||||||||||||||||||||
Key shareholders' equity | $ | 17,271 | $ | 17,769 | $ | 17,688 | |||||||||||||||||||||
Noncontrolling interests | — | — | — | ||||||||||||||||||||||||
Total equity | $ | 17,271 | $ | 17,769 | $ | 17,688 | |||||||||||||||||||||
Total liabilities and equity | $ | 178,520 | $ | 172,919 | $ | 164,892 | |||||||||||||||||||||
Interest rate spread (TE) | 2.45 | % | 2.50 | % | 2.56 | % | |||||||||||||||||||||
Net interest income (TE) and net interest margin (TE) | 1,023 | 2.52 | % | 1,012 | 2.61 | % | 1,025 | 2.76 | % | ||||||||||||||||||
TE adjustment (b) | 6 | 7 | 7 | ||||||||||||||||||||||||
Net interest income, GAAP basis | $ | 1,017 | $ | 1,005 | $ | 1,018 | |||||||||||||||||||||
(a) | Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) | Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020. |
(c) | For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) | Commercial and industrial average balances include $132 million, $126 million, and $135 million of assets from commercial credit cards for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. |
(e) | Yield is calculated on the basis of amortized cost. |
(f) | Rate calculation excludes basis adjustments related to fair value hedges. |
(g) | A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles | |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations | |||||||||||||||||||
(dollars in millions) | |||||||||||||||||||
Six months ended June 30, 2021 | Six months ended June 30, 2020 | ||||||||||||||||||
Average | Yield/ | Average | Yield/ | ||||||||||||||||
Balance | Interest (a) | Rate (a) | Balance | Interest (a) | Rate (a) | ||||||||||||||
Assets | |||||||||||||||||||
Loans: (b), (c) | |||||||||||||||||||
Commercial and industrial (d) | $ | 52,194 | $ | 902 | 3.48 | % | $ | 54,973 | $ | 1,026 | 3.75 | % | |||||||
Real estate — commercial mortgage | 12,742 | 232 | 3.67 | 13,529 | 283 | 4.20 | |||||||||||||
Real estate — construction | 2,099 | 39 | 3.71 | 1,711 | 37 | 4.35 | |||||||||||||
Commercial lease financing | 4,101 | 61 | 2.99 | 4,575 | 72 | 3.17 | |||||||||||||
Total commercial loans | 71,136 | 1,234 | 3.49 | 74,788 | 1,418 | 3.81 | |||||||||||||
Real estate — residential mortgage | 10,380 | 154 | 2.97 | 7,500 | 137 | 3.66 | |||||||||||||
Home equity loans | 9,189 | 173 | 3.79 | 10,052 | 210 | 4.19 | |||||||||||||
Consumer direct loans | 4,864 | 113 | 4.70 | 3,930 | 109 | 5.56 | |||||||||||||
Credit cards | 920 | 46 | 10.12 | 1,032 | 56 | 10.89 | |||||||||||||
Consumer indirect loans | 4,288 | 69 | 3.25 | 4,756 | 91 | 3.84 | |||||||||||||
Total consumer loans | 29,641 | 555 | 3.77 | 27,270 | 603 | 4.44 | |||||||||||||
Total loans | 100,777 | 1,789 | 3.58 | 102,058 | 2,021 | 3.98 | |||||||||||||
Loans held for sale | 1,574 | 22 | 2.74 | 2,174 | 40 | 3.71 | |||||||||||||
Securities available for sale (b), (e) | 31,841 | 263 | 1.66 | 20,960 | 250 | 2.46 | |||||||||||||
Held-to-maturity securities (b) | 6,818 | 90 | 2.63 | 9,575 | 118 | 2.47 | |||||||||||||
Trading account assets | 842 | 10 | 2.35 | 913 | 13 | 2.73 | |||||||||||||
Short-term investments | 17,670 | 11 | 0.13 | 4,828 | 13 | 0.52 | |||||||||||||
Other investments (e) | 618 | 4 | 1.21 | 643 | 1 | 0.34 | |||||||||||||
Total earning assets | 160,140 | 2,189 | 2.75 | 141,151 | 2,456 | 3.51 | |||||||||||||
Allowance for loan and lease losses | (1532) | (1255) | |||||||||||||||||
Accrued income and other assets | 16,463 | 15,268 | |||||||||||||||||
Discontinued assets | 668 | 815 | |||||||||||||||||
Total assets | $ | 175,739 | $ | 155,979 | |||||||||||||||
Liabilities | |||||||||||||||||||
NOW and money market deposit accounts | $ | 82,717 | 20 | .05 | $ | 71,009 | 168 | .47 | |||||||||||
Savings deposits | 6,533 | 1 | .03 | 4,893 | 1 | .04 | |||||||||||||
Certificates of deposit ($100,000 or more) | 2,390 | 10 | .85 | 5,630 | 58 | 2.08 | |||||||||||||
Other time deposits | 2,766 | 6 | .48 | 4,617 | 38 | 1.67 | |||||||||||||
Total interest-bearing deposits | 94,406 | 37 | .08 | 86,149 | 265 | .62 | |||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 247 | — | .03 | 1,122 | 6 | 1.05 | |||||||||||||
Bank notes and other short-term borrowings | 811 | 4 | .89 | 2,135 | 10 | .90 | |||||||||||||
Long-term debt (f), (g) | 12,402 | 114 | 1.87 | 12,698 | 161 | 2.62 | |||||||||||||
Total interest-bearing liabilities | 107,866 | 155 | .29 | 102,104 | 442 | .87 | |||||||||||||
Noninterest-bearing deposits | 46,638 | 33,004 | |||||||||||||||||
Accrued expense and other liabilities | 3,048 | 2,604 | |||||||||||||||||
Discontinued liabilities (g) | 668 | 815 | |||||||||||||||||
Total liabilities | 158,220 | 138,527 | |||||||||||||||||
Equity | |||||||||||||||||||
Key shareholders' equity | 17,519 | 17,452 | |||||||||||||||||
Noncontrolling interests | — | — | |||||||||||||||||
Total equity | 17,519 | 17,452 | |||||||||||||||||
Total liabilities and equity | $ | 175,739 | $ | 155,979 | |||||||||||||||
Interest rate spread (TE) | 2.46 | % | 2.64 | % | |||||||||||||||
Net interest income (TE) and net interest margin (TE) | 2,035 | 2.56 | % | 2,014 | 2.88 | % | |||||||||||||
TE adjustment (b) | 13 | 15 | |||||||||||||||||
Net interest income, GAAP basis | $ | 2,022 | $ | 1,999 | |||||||||||||||
(a) | Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) | Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the six months ended June 30, 2021, and June 30, 2020, respectively. |
(c) | For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) | Commercial and industrial average balances include $129 million and $140 million of assets from commercial credit cards for the six months ended June 30, 2021, and June 30, 2020, respectively. |
(e) | Yield is calculated on the basis of amortized cost. |
(f) | Rate calculation excludes basis adjustments related to fair value hedges. |
(g) | A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles | |
Noninterest Expense | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 6/30/2021 | 6/30/2020 | ||||||||||||
Personnel (a) | $ | 623 | $ | 624 | $ | 572 | $ | 1,247 | $ | 1,087 | ||||||
Net occupancy | 75 | 76 | 71 | 151 | 147 | |||||||||||
Computer processing | 71 | 73 | 56 | 144 | 111 | |||||||||||
Business services and professional fees | 51 | 50 | 49 | 101 | 93 | |||||||||||
Equipment | 25 | 25 | 25 | 50 | 49 | |||||||||||
Operating lease expense | 31 | 34 | 34 | 65 | 70 | |||||||||||
Marketing | 31 | 26 | 24 | 57 | 45 | |||||||||||
Intangible asset amortization | 14 | 15 | 18 | 29 | 35 | |||||||||||
Other expense | 155 | 148 | 164 | 303 | 307 | |||||||||||
Total noninterest expense | $ | 1,076 | $ | 1,071 | $ | 1,013 | $ | 2,147 | $ | 1,944 | ||||||
Average full-time equivalent employees (b) | 17,157 | 17,086 | 16,646 | 17,122 | 16,587 | |||||||||||
(a) | Additional detail provided in Personnel Expense table below. |
(b) | The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
Personnel Expense | ||||||||||||||||
(in millions) | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 6/30/2021 | 6/30/2020 | ||||||||||||
Salaries and contract labor | $ | 321 | $ | 320 | $ | 332 | $ | 641 | $ | 648 | ||||||
Incentive and stock-based compensation | 210 | 196 | 162 | 406 | 264 | |||||||||||
Employee benefits | 92 | 107 | 76 | 199 | 168 | |||||||||||
Severance | — | 1 | 2 | 1 | 7 | |||||||||||
Total personnel expense | $ | 623 | $ | 624 | $ | 572 | $ | 1,247 | $ | 1,087 | ||||||
Loan Composition | ||||||||||||||
(dollars in millions) | ||||||||||||||
Percent change 6/30/2021 vs | ||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 3/31/2021 | 6/30/2020 | ||||||||||
Commercial and industrial (a) | $ | 50,672 | $ | 52,486 | $ | 58,297 | (3.5) | % | (13.1) | % | ||||
Commercial real estate: | ||||||||||||||
Commercial mortgage | 12,965 | 12,702 | 13,465 | 2.1 | (3.7) | |||||||||
Construction | 2,132 | 2,122 | 1,919 | .5 | 11.1 | |||||||||
Total commercial real estate loans | 15,097 | 14,824 | 15,384 | 1.8 | (1.9) | |||||||||
Commercial lease financing (b) | 4,061 | 4,104 | 4,524 | (1.0) | (10.2) | |||||||||
Total commercial loans | 69,830 | 71,414 | 78,205 | (2.2) | (10.7) | |||||||||
Residential — prime loans: | ||||||||||||||
Real estate — residential mortgage | 12,131 | 10,300 | 8,149 | 17.8 | 48.9 | |||||||||
Home equity loans | 9,047 | 9,158 | 9,782 | (1.2) | (7.5) | |||||||||
Total residential — prime loans | 21,178 | 19,458 | 17,931 | 8.8 | 18.1 | |||||||||
Consumer direct loans | 5,049 | 4,862 | 4,327 | 3.8 | 16.7 | |||||||||
Credit cards | 923 | 909 | 974 | 1.5 | (5.2) | |||||||||
Consumer indirect loans | 3,750 | 4,283 | 4,722 | (12.4) | (20.6) | |||||||||
Total consumer loans | 30,900 | 29,512 | 27,954 | 4.7 | 10.5 | |||||||||
Total loans (c), (d) | $ | 100,730 | $ | 100,926 | $ | 106,159 | (.2) | % | (5.1) | % | ||||
(a) | Loan balances include $135 million, $126 million, and $132 million of commercial credit card balances at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. |
(b) | Commercial lease financing includes receivables held as collateral for a secured borrowing of $19 million, $21 million, and $18 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Principal reductions are based on the cash payments received from these related receivables. |
(c) | Total loans exclude loans of $636 million at June 30, 2021, $675 million at March 31, 2021, and $780 million at June 30, 2020, related to the discontinued operations of the education lending business. |
(d) | Accrued interest of $225 million, $241 million, and $225 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table. |
Loans Held for Sale Composition | ||||||||||||||
(dollars in millions) | ||||||||||||||
Percent change 6/30/2021 vs | ||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 3/31/2021 | 6/30/2020 | ||||||||||
Commercial and industrial | $ | 233 | $ | 1,175 | $ | 419 | (80.2) | % | (44.4) | % | ||||
Real estate — commercial mortgage | 1,073 | 837 | 1,107 | 28.2 | (3.1) | |||||||||
Commercial lease financing | — | — | — | N/M | N/M | |||||||||
Real estate — residential mortgage | 231 | 236 | 250 | (2.1) | (7.6) | |||||||||
Consumer direct loans | — | 48 | 231 | N/M | N/M | |||||||||
Total loans held for sale | $ | 1,537 | $ | 2,296 | $ | 2,007 | (33.1) | % | (23.4) | % | ||||
N/M = Not Meaningful |
Summary of Changes in Loans Held for Sale | |||||||||||||||
(in millions) | |||||||||||||||
2Q21 | 1Q21 | 4Q20 | 3Q20 | 2Q20 | |||||||||||
Balance at beginning of period | $ | 2,296 | $ | 1,583 | $ | 1,724 | $ | 2,007 | $ | 2,143 | |||||
New originations | 3,573 | 4,010 | 3,835 | 3,282 | 3,621 | ||||||||||
Transfers from (to) held to maturity, net | (71) | 83 | (24) | 75 | (15) | ||||||||||
Loan sales | (4,195) | (3,303) | (3,932) | (3,583) | (3,679) | ||||||||||
Loan draws (payments), net | (27) | (73) | (19) | (57) | (61) | ||||||||||
Valuation and other adjustments | (39) | (4) | — | — | (2) | ||||||||||
Balance at end of period | $ | 1,537 | $ | 2,296 | $ | 1,583 | $ | 1,724 | $ | 2,007 | |||||
Summary of Loan and Lease Loss Experience From Continuing Operations | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
6/30/2021 | 3/31/2021 | 6/30/2020 | 6/30/2021 | 6/30/2020 | ||||||||||||
Average loans outstanding | $ | 100,814 | $ | 100,728 | $ | 107,941 | $ | 100,777 | $ | 102,058 | ||||||
Allowance for loan and lease losses at the end of the prior period | $ | 1,438 | $ | 1,626 | $ | 1359 | $ | 1,626 | $ | 900 | ||||||
Cumulative effect from change in accounting principle (a) | — | — | — | — | 204 | |||||||||||
Allowance for loan and lease losses at the beginning of the period | 1,438 | 1,626 | 1,359 | 1,626 | 1,104 | |||||||||||
Loans charged off: | ||||||||||||||||
Commercial and industrial | 41 | 73 | 71 | 114 | 351 | |||||||||||
Real estate — commercial mortgage | 4 | 35 | 2 | 39 | 19 | |||||||||||
Real estate — construction | — | — | — | — | — | |||||||||||
Total commercial real estate loans | 4 | 35 | 2 | 39 | 19 | |||||||||||
Commercial lease financing | — | 4 | 4 | 4 | 35 | |||||||||||
Total commercial loans | 45 | 112 | 77 | 157 | 405 | |||||||||||
Real estate — residential mortgage | 1 | — | 2 | 1 | 2 | |||||||||||
Home equity loans | 4 | 2 | 2 | 6 | 11 | |||||||||||
Consumer direct loans | 7 | 8 | 10 | 15 | 37 | |||||||||||
Credit cards | 9 | 6 | 12 | 15 | 39 | |||||||||||
Consumer indirect loans | 5 | 7 | 7 | 12 | 28 | |||||||||||
Total consumer loans | 26 | 23 | 33 | 49 | 117 | |||||||||||
Total loans charged off | 71 | 135 | 110 | 206 | 522 | |||||||||||
Recoveries: | ||||||||||||||||
Commercial and industrial | 32 | 8 | 5 | 40 | 34 | |||||||||||
Real estate — commercial mortgage | 6 | 1 | — | 7 | 3 | |||||||||||
Real estate — construction | — | — | — | — | — | |||||||||||
Total commercial real estate loans | 6 | 1 | — | 7 | 3 | |||||||||||
Commercial lease financing | — | 1 | 1 | 1 | 1 | |||||||||||
Total commercial loans | 38 | 10 | 6 | 48 | 38 | |||||||||||
Real estate — residential mortgage | — | 1 | — | 1 | 1 | |||||||||||
Home equity loans | 1 | 1 | 1 | 2 | 7 | |||||||||||
Consumer direct loans | 2 | 2 | 2 | 4 | 7 | |||||||||||
Credit cards | 3 | 2 | 2 | 5 | 8 | |||||||||||
Consumer indirect loans | 5 | 5 | 3 | 10 | 18 | |||||||||||
Total consumer loans | 11 | 11 | 8 | 22 | 41 | |||||||||||
Total recoveries | 49 | 21 | 14 | 70 | 78 | |||||||||||
Net loan charge-offs | (22) | (114) | (96) | (136) | (443) | |||||||||||
Provision (credit) for loan and lease losses | (196) | (74) | 445 | (270) | 965 | |||||||||||
Allowance for loan and lease losses at end of period | $ | 1,220 | $ | 1,438 | $ | 1,708 | $ | 1,220 | $ | 1,626 | ||||||
Liability for credit losses on lending-related commitments at the end of the prior | $ | 178 | $ | 197 | $ | 161 | $ | 197 | $ | 68 | ||||||
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 | 178 | 197 | 161 | 197 | 141 | |||||||||||
Provision (credit) for losses on lending-related commitments | (26) | (19) | 37 | (45) | 56 | |||||||||||
Liability for credit losses on lending-related commitments at end of period (c) | $ | 152 | $ | 178 | $ | 198 | $ | 152 | $ | 197 | ||||||
Total allowance for credit losses at end of period | $ | 1,372 | $ | 1,616 | $ | 1,906 | $ | 1,372 | $ | 1,823 | ||||||
Net loan charge-offs to average total loans | .09 | % | .46 | % | .36 | % | .27 | % | .35 | % | ||||||
Allowance for loan and lease losses to period-end loans | 1.21 | 1.42 | 1.61 | 1.21 | 1.61 | |||||||||||
Allowance for credit losses to period-end loans | 1.36 | 1.60 | 1.80 | 1.36 | 1.80 | |||||||||||
Allowance for loan and lease losses to nonperforming loans | 175.8 | 197.5 | 224.7 | 175.8 | 224.7 | |||||||||||
Allowance for credit losses to nonperforming loans | 197.7 | 222.0 | 250.8 | 197.7 | 250.8 | |||||||||||
Discontinued operations — education lending business: | ||||||||||||||||
Loans charged off | $ | 1 | 1 | $ | 2 | $ | 2 | $ | 5 | |||||||
Recoveries | — | 1 | 2 | 1 | 5 | |||||||||||
Net loan charge-offs | $ | (1) | — | $ | — | (1) | $ | (1) | ||||||||
(a) | The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13. |
(b) | Six months ended June 30, 2020, excludes $4 million related to the provision for other financial assets as a result of the change in accounting principle. |
(c) | Included in "Accrued expense and other liabilities" on the balance sheet. |
Asset Quality Statistics From Continuing Operations | |||||||||||||||
(dollars in millions) | |||||||||||||||
2Q21 | 1Q21 | 4Q20 | 3Q20 | 2Q20 | |||||||||||
Net loan charge-offs | $ | 22 | $ | 114 | $ | 135 | $ | 128 | $ | 96 | |||||
Net loan charge-offs to average total loans | .09 | % | .46 | % | .53 | % | .49 | % | .36 | % | |||||
Allowance for loan and lease losses | $ | 1,220 | $ | 1,438 | $ | 1,626 | $ | 1,730 | $ | 1,708 | |||||
Allowance for credit losses (a) | 1,372 | 1,616 | 1,823 | 1,938 | 1,906 | ||||||||||
Allowance for loan and lease losses to period-end loans | 1.21 | % | 1.42 | % | 1.61 | % | 1.68 | % | 1.61 | % | |||||
Allowance for credit losses to period-end loans | 1.36 | 1.60 | 1.80 | 1.88 | 1.80 | ||||||||||
Allowance for loan and lease losses to nonperforming loans | 175.8 | 197.5 | 207.1 | 207.4 | 224.7 | ||||||||||
Allowance for credit losses to nonperforming loans | 197.7 | 222.0 | 232.2 | 232.4 | 250.8 | ||||||||||
Nonperforming loans at period end | $ | 694 | $ | 728 | $ | 785 | $ | 834 | $ | 760 | |||||
Nonperforming assets at period end | 738 | 790 | 937 | 1,003 | 951 | ||||||||||
Nonperforming loans to period-end portfolio loans | .69 | % | .72 | % | .78 | % | .81 | % | .72 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other | .73 | .78 | .92 | .97 | .89 | ||||||||||
(a) | Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments. |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations | |||||||||||||||
(dollars in millions) | |||||||||||||||
6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | |||||||||||
Commercial and industrial | $ | 355 | $ | 387 | $ | 385 | $ | 459 | $ | 404 | |||||
Real estate — commercial mortgage | 66 | 66 | 104 | 104 | 91 | ||||||||||
Real estate — construction | — | — | — | 1 | 1 | ||||||||||
Total commercial real estate loans | 66 | 66 | 104 | 105 | 92 | ||||||||||
Commercial lease financing | 7 | 8 | 8 | 6 | 9 | ||||||||||
Total commercial loans | 428 | 461 | 497 | 570 | 505 | ||||||||||
Real estate — residential mortgage | 99 | 95 | 110 | 96 | 89 | ||||||||||
Home equity loans | 146 | 148 | 154 | 146 | 141 | ||||||||||
Consumer direct loans | 4 | 5 | 5 | 3 | 3 | ||||||||||
Credit cards | 3 | 3 | 2 | 2 | 2 | ||||||||||
Consumer indirect loans | 14 | 16 | 17 | 17 | 20 | ||||||||||
Total consumer loans | 266 | 267 | 288 | 264 | 255 | ||||||||||
Total nonperforming loans | 694 | 728 | 785 | 834 | 760 | ||||||||||
OREO | 9 | 12 | 100 | 105 | 112 | ||||||||||
Nonperforming loans held for sale | 32 | 47 | 49 | 61 | 75 | ||||||||||
Other nonperforming assets | 3 | 3 | 3 | 3 | 4 | ||||||||||
Total nonperforming assets | $ | 738 | $ | 790 | $ | 937 | $ | 1,003 | $ | 951 | |||||
Accruing loans past due 90 days or more | 74 | 92 | 86 | 73 | 87 | ||||||||||
Accruing loans past due 30 through 89 days | 190 | 191 | 241 | 336 | 419 | ||||||||||
Restructured loans — accruing and nonaccruing (a) | 334 | 376 | 363 | 306 | 310 | ||||||||||
Restructured loans included in nonperforming loans (a) | 177 | 192 | 229 | 168 | 166 | ||||||||||
Nonperforming assets from discontinued operations — education lending business | 5 | 5 | 5 | 6 | 7 | ||||||||||
Nonperforming loans to period-end portfolio loans | .69 | % | .72 | % | .78 | % | .81 | % | .72 | % | |||||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .73 | .78 | .92 | .97 | .89 | ||||||||||
(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) | |||||||||||||||
2Q21 | 1Q21 | 4Q20 | 3Q20 | 2Q20 | |||||||||||
Balance at beginning of period | $ | 728 | $ | 785 | $ | 834 | $ | 760 | $ | 632 | |||||
Loans placed on nonaccrual status | 186 | 196 | 300 | 387 | 293 | ||||||||||
Charge-offs | (74) | (135) | (160) | (150) | (111) | ||||||||||
Loans sold | (10) | (13) | (9) | (6) | (5) | ||||||||||
Payments | (92) | (37) | (83) | (83) | (29) | ||||||||||
Transfers to OREO | — | (3) | (3) | — | — | ||||||||||
Transfers to nonperforming loans held for sale | — | — | — | — | — | ||||||||||
Loans returned to accrual status | (44) | (65) | (94) | (74) | (20) | ||||||||||
Balance at end of period | $ | 694 | $ | 728 | $ | 785 | $ | 834 | $ | 760 | |||||
Line of Business Results | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Percentage change 2Q21 vs. | ||||||||||||||||||||
2Q21 | 1Q21 | 4Q20 | 3Q20 | 2Q20 | 1Q21 | 2Q20 | ||||||||||||||
Consumer Bank | ||||||||||||||||||||
Summary of operations | ||||||||||||||||||||
Total revenue (TE) | $ | 854 | $ | 867 | $ | 899 | $ | 866 | $ | 835 | (1.5) | % | 2.3 | % | ||||||
Provision for credit losses | (70) | (23) | (5) | (3) | 155 | (204.3) | 145.2 | |||||||||||||
Noninterest expense | 584 | 601 | 606 | 567 | 552 | (2.8) | 5.8 | |||||||||||||
Net income (loss) attributable to Key | 259 | 220 | 228 | 231 | 98 | 17.7 | 164.3 | |||||||||||||
Average loans and leases | 40,598 | 39,249 | 39,455 | 38,476 | 37,300 | 3.4 | 8.8 | |||||||||||||
Average deposits | 88,412 | 85,033 | 82,854 | 82,836 | 79,235 | 4.0 | 11.6 | |||||||||||||
Net loan charge-offs | 34 | 36 | 28 | 23 | 40 | (5.6) | (15.0) | |||||||||||||
Net loan charge-offs to average total loans | .34 | % | .37 | % | .28 | % | .24 | % | .43 | % | (8.1) | (20.9) | ||||||||
Nonperforming assets at period end | $ | 274 | $ | 345 | $ | 374 | $ | 353 | $ | 332 | (20.6) | (17.5) | ||||||||
Return on average allocated equity | 28.74 | % | 26.10 | % | 25.95 | % | 26.44 | % | 11.50 | % | 10.1 | 149.9 | ||||||||
Commercial Bank | ||||||||||||||||||||
Summary of operations | ||||||||||||||||||||
Total revenue (TE) | $ | 874 | $ | 859 | $ | 923 | $ | 813 | $ | 879 | 1.7 | % | (.6) | % | ||||||
Provision for credit losses | (131) | (67) | 44 | 150 | 326 | 95.5 | (120.6) | |||||||||||||
Noninterest expense | 451 | 443 | 498 | 447 | 441 | 1.8 | 2.3 | |||||||||||||
Net income (loss) attributable to Key | 434 | 384 | 311 | 174 | 106 | 13.0 | 309.4 | |||||||||||||
Average loans and leases | 59,953 | 61,221 | 62,016 | 66,264 | 70,336 | (2.1) | (14.8) | |||||||||||||
Average loans held for sale | 1,341 | 1,237 | 1,285 | 1,383 | 2,012 | 8.4 | (33.3) | |||||||||||||
Average deposits | 54,814 | 51,894 | 52,489 | 51,585 | 47,954 | 5.6 | 14.3 | |||||||||||||
Net loan charge-offs | 9 | 78 | 108 | 103 | 57 | (88.5) | (84.2) | |||||||||||||
Net loan charge-offs to average total loans | .06 | % | .52 | % | .69 | % | .62 | % | .33 | % | N/A | N/A | ||||||||
Nonperforming assets at period end | $ | 464 | $ | 441 | $ | 558 | $ | 645 | $ | 616 | 5.2 | (24.7) | ||||||||
Return on average allocated equity | 20.79 | % | 17.45 | % | 23.87 | % | 13.43 | % | 8.66 | % | N/A | N/A | ||||||||
TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful |
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SOURCE KeyCorp
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