KEYCORP REPORTS FIRST QUARTER 2024 NET INCOME OF $183 MILLION, OR $.20 PER DILUTED COMMON SHARE, WITH $.02 IMPACT FROM THE FDIC SPECIAL ASSESSMENT(a)
Noninterest income up 6% year-over-year and linked quarter, driven by strength in investment banking and debt placement fees
Continued to strengthen the balance sheet by reducing reliance on wholesale funding and higher cost brokered deposits
Common Equity Tier 1 ratio increased 120 basis points year-over-year to 10.3%(b)
Credit costs remain low: net loan charge-offs to average loans of 29 basis points
CLEVELAND, April 18, 2024 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $183 million, or $.20 per diluted common share, for the first quarter of 2024. Net income from continuing operations attributable to Key common shareholders was $30 million, or $.03 per diluted common share, for the fourth quarter of 2023 and $275 million, or $.30 per diluted common share, for the first quarter of 2023. Included in the first quarter of 2024 are $22 million, or $.02 per diluted common share, after-tax, of charges related to the FDIC special assessment(a). Included in the fourth quarter of 2023 are $209 million, or $.22 per diluted common share, after-tax, of charges related to the FDIC special assessment, efficiency related expenses, and a pension settlement charge(a).
Comments from Chairman and CEO, Chris Gorman
"We are off to a solid start in 2024. Investment Banking posted its best first quarter in our history, net interest income was within the range of guidance that we provided in January, and expenses remained well controlled. Customer deposits were up 2% year-over-year, while relationship households and commercial clients grew 2.5% and 6%, respectively. Net charge-offs and nonperforming loans remained low and below their historical averages.
Our Common Equity Tier 1 ratio rose to 10.3%, bringing our organic capital build to approximately 120 basis points over the past twelve months. Tangible common equity measures were steady to improved, despite the first quarter's increase in interest rates, reflecting the work we have done over the past year to improve our asset liability positioning.
We continued to invest and make progress in our fee-based businesses where we have a differentiated value proposition. Last month, we announced a strategic partnership that will help us accelerate growth in our commercial platform, another example of how we are delivering best-in-class execution services for our clients while concurrently managing risk.
Key is back to playing offense. I remain excited for our future and believe our strong foundation positions us to deliver sound, profitable growth moving forward."
(a)
See table on page 24 for more information on Selected Items Impact on Earnings, including information on the FDIC special assessment, efficiency related expenses, and the pension settlement charge.
(b)
March 31, 2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
Selected Financial Highlights
Dollars in millions, except per share data
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Income (loss) from continuing operations attributable to Key common shareholders
$ 183
$ 30
$ 275
510.0 %
(33.5) %
Income (loss) from continuing operations attributable to Key common shareholders per common share - assuming dilution
.20
.03
.30
566.7
(33.3)
Return on average tangible common equity from continuing operations (a)
7.87 %
1.46 %
13.16 %
N/A
N/A
Return on average total assets from continuing operations
.47
.14
.66
N/A
N/A
Common Equity Tier 1 ratio (b)
10.3
10.0
9.1
N/A
N/A
Book value at period end
$ 12.84
$ 13.02
$ 12.70
(1.4)
1.1
Net interest margin (TE) from continuing operations
2.02 %
2.07 %
2.47 %
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)
March 31, 2024 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable
INCOME STATEMENT HIGHLIGHTS
Revenue
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Net interest income (TE)
$ 886
$ 928
$ 1,106
(4.5) %
(19.9) %
Noninterest income
647
610
608
6.1
6.4
Total revenue (TE)
$ 1,533
$ 1,538
$ 1,714
(.3) %
(10.6) %
TE = Taxable Equivalent
Taxable-equivalent net interest income was $886 million for the first quarter of 2024 and the net interest margin was 2.02%. Compared to the first quarter of 2023, net interest income decreased by $220 million, and the net interest margin decreased by 45 basis points. While both net interest income and the net interest margin benefited from the reinvestment of proceeds from maturing interest rate swaps, investments, and U.S. Treasury securities into higher-yielding cash and swaps, the decline in net interest income and the net interest margin reflects the higher interest rate environment and Key's balance sheet optimization efforts, which resulted in planned reductions in loan balances. The higher interest rate environment drove earning asset yields higher, but were outpaced by the higher cost of deposits and borrowings. Additionally, the balance sheet experienced a shift in funding mix from noninterest-bearing deposits to higher-cost deposits and borrowings.
Compared to the fourth quarter of 2023, taxable-equivalent net interest income decreased by $42 million, and the net interest margin decreased by five basis points. Net interest income and the net interest margin benefited from the reinvestment of proceeds from maturing interest rate swaps and U.S. Treasury securities into higher-yielding cash, investments, and swaps. The decline in net interest income and the net interest margin was driven by higher deposit costs, an unfavorable funding mix, and lower loan balances. Additionally, net interest income fell in part because of one less day to earn interest.
Noninterest Income
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Trust and investment services income
$ 136
$ 132
$ 128
3.0 %
6.3 %
Investment banking and debt placement fees
170
136
145
25.0
17.2
Cards and payments income
77
84
81
(8.3)
(4.9)
Service charges on deposit accounts
63
65
67
(3.1)
(6.0)
Corporate services income
69
67
76
3.0
(9.2)
Commercial mortgage servicing fees
56
48
46
16.7
21.7
Corporate-owned life insurance income
32
36
29
(11.1)
10.3
Consumer mortgage income
14
11
11
27.3
27.3
Operating lease income and other leasing gains
24
22
25
9.1
(4.0)
Other income
6
9
-
(33.3)
N/M
Total noninterest income
$ 647
$ 610
$ 608
6.1 %
6.4 %
N/M = Not Meaningful
Compared to the first quarter of 2023, noninterest income increased by $39 million. The increase was driven by investment banking and debt placement fees, up $25 million, related to strong commercial mortgage and debt capital markets activity. Additionally, commercial mortgage servicing fees increased $10 million.
Compared to the fourth quarter of 2023, noninterest income increased by $37 million. The increase was driven by investment banking and debt placement fees, up $34 million, reflective of increased merger and acquisition advisory fees, syndication fees, and debt and equity capital markets activity. Commercial mortgage servicing fees increased $8 million, which was partly offset by a $7 million decline in cards and payments income.
Noninterest Expense
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Personnel expense
$ 674
$ 674
$ 701
.0 %
(3.9) %
Net occupancy
67
65
70
3.1
(4.3)
Computer processing
102
92
92
10.9
10.9
Business services and professional fees
41
44
45
(6.8)
(8.9)
Equipment
20
24
22
(16.7)
(9.1)
Operating lease expense
17
18
20
(5.6)
(15.0)
Marketing
19
31
21
(38.7)
(9.5)
Other expense
203
424
205
(52.1)
(1.0)
Total noninterest expense
$ 1,143
$ 1,372
$ 1,176
(16.7) %
(2.8) %
Compared to the first quarter of 2023, noninterest expense decreased $33 million, reflective of lower personnel expense, which decreased $27 million this quarter, due to lower headcount from efficiency related actions taken last year. In the first quarter of 2024, other expense included $29 million from the FDIC special assessment. See the Selected Items Impact on Earnings table on page 24 for more information.
Compared to the fourth quarter of 2023, noninterest expense decreased by $229 million. The decline was driven by selected items that impacted earnings in the fourth quarter, which included the FDIC special assessment, efficiency related expenses, and a pension settlement charge in the fourth quarter, which collectively totaled $275 million. The decline was partly offset by a $29 million charge related to the FDIC special assessment in the first quarter of 2024, as well as an increase in employee benefits. See the Selected Items Impact on Earnings table on page 24 for more information.
BALANCE SHEET HIGHLIGHTS
Average Loans
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Commercial and industrial (a)
$ 55,220
$ 56,664
$ 60,281
(2.5) %
(8.4) %
Other commercial loans
21,222
21,942
22,778
(3.3)
(6.8)
Total consumer loans
34,592
35,342
36,778
(2.1)
(5.9)
Total loans
$ 111,034
$ 113,948
$ 119,837
(2.6) %
(7.3) %
(a)
Commercial and industrial average loan balances include $211 million, $210 million, and $178 million of assets from commercial credit cards at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
Average loans were $111.0 billion for the first quarter of 2024, a decrease of $8.8 billion compared to the first quarter of 2023, reflective of Key's planned balance sheet optimization efforts. The decline in average loans was mostly driven by lower commercial and industrial loans, as well as a decline in commercial mortgage real estate loans. Additionally, average consumer loans decreased by $2.2 billion, reflective of broad-based declines across all consumer loan categories.
Compared to the fourth quarter of 2023, average loans decreased by $2.9 billion. Average commercial loans declined by $2.2 billion, primarily driven by a decrease in commercial and industrial loans. Additionally, average consumer loans declined $750 million, driven by declines across all consumer loan categories.
Average Deposits
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Non-time deposits
$ 128,448
$ 130,750
$ 132,907
(1.8) %
(3.4) %
Time deposits
14,430
14,326
10,498
.7
37.5
Total deposits
$ 142,878
$ 145,076
$ 143,405
(1.5) %
(.4) %
Cost of total deposits
2.20 %
2.06 %
.99 %
N/A
N/A
N/A = Not Applicable
Average deposits totaled $142.9 billion for the first quarter of 2024, a decrease of $527 million compared to the year-ago quarter. The decrease was driven by continued changing client behavior reflective of higher interest rates, as well as a decline in wholesale deposit balances.
Compared to the fourth quarter of 2023, average deposits decreased by $2.2 billion. The decline was driven by normal seasonal deposit outflows and a decrease in wholesale deposit balances.
ASSET QUALITY
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Net loan charge-offs
$ 81
$ 76
$ 45
6.6 %
80.0 %
Net loan charge-offs to average total loans
.29 %
.26 %
.15 %
N/A
N/A
Nonperforming loans at period end
$ 658
$ 574
$ 416
14.6
58.2
Nonperforming assets at period end
674
591
447
14.0
50.8
Allowance for loan and lease losses
1,542
1,508
1,380
2.3
11.7
Allowance for credit losses
1,823
1,804
1,656
1.1
10.1
Provision for credit losses
101
102
139
(1.0)
(27.3)
Allowance for loan and lease losses to nonperforming loans
234 %
263 %
332 %
N/A
N/A
Allowance for credit losses to nonperforming loans
277
314
398
N/A
N/A
N/A = Not Applicable
Key's provision for credit losses was $101 million, compared to $139 million in the first quarter of 2023 and $102 million in the fourth quarter of 2023. The decline from the year-ago period reflects a more stable economic outlook and the impact of balance sheet optimization efforts, partly offset by portfolio migration.
Net loan charge-offs for the first quarter of 2024 totaled $81 million, or 0.29% of average total loans. These results compare to $45 million, or 0.15%, for the first quarter of 2023 and $76 million, or 0.26%, for the fourth quarter of 2023. Key's allowance for credit losses was $1.8 billion, or 1.66% of total period-end loans at March 31, 2024, compared to 1.38% at March 31, 2023, and 1.60% at December 31, 2023.
At March 31, 2024, Key's nonperforming loans totaled $658 million, which represented 0.60% of period-end portfolio loans. These results compare to 0.35% at March 31, 2023, and 0.51% at December 31, 2023. Nonperforming assets at March 31, 2024, totaled $674 million, and represented 0.61% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.37% at March 31, 2023, and 0.52% at December 31, 2023.
CAPITAL
Key's estimated risk-based capital ratios, included in the following table, continued to exceed all "well-capitalized" regulatory benchmarks at March 31, 2024.
Capital Ratios
3/31/2024
12/31/2023
3/31/2023
Common Equity Tier 1 (a)
10.3 %
10.0 %
9.1 %
Tier 1 risk-based capital (a)
12.0
11.7
10.6
Total risk-based capital (a)
14.5
14.1
12.8
Tangible common equity to tangible assets (b)
5.0
5.1
4.6
Leverage (a)
9.1
9.0
8.8
(a)
March 31, 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 first quarter of 2024. As shown in the preceding table, at March 31, 2024, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.3% and 12.0%, respectively. Key's tangible common equity ratio was 5.0% at March 31, 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 four basis points.
Summary of Changes in Common Shares Outstanding
In thousands
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Shares outstanding at beginning of period
936,564
936,161
933,325
- %
.3 %
Open market share repurchases
-
-
(2,550)
-
(100.0)
Shares issued under employee compensation plans (net of cancellations and returns)
6,212
403
4,454
1,441.4
39.5
Shares outstanding at end of period
942,776
936,564
935,229
.7 %
.8 %
Key declared a dividend of $.205 per common share for the first 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 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Revenue from continuing operations (TE)
Consumer Bank
$ 773
$ 786
$ 840
(1.7) %
(8.0) %
Commercial Bank
791
794
844
(.4)
(6.3)
Other (a)
(31)
(42)
30
26.2
(203.3)
Total
$ 1,533
$ 1,538
$ 1,714
(.3) %
(10.6) %
Income (loss) from continuing operations attributable to Key
Consumer Bank
$ 55
$ 1
$ 89
N/M
(38.2) %
Commercial Bank
200
143
255
39.9
(21.6)
Other (a)
(36)
(79)
(33)
54.4
(9.1)
Total
$ 219
$ 65
$ 311
236.9 %
(29.6) %
(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 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Summary of operations
Net interest income (TE)
$ 549
$ 558
$ 612
(1.6) %
(10.3) %
Noninterest income
224
228
228
(1.8)
(1.8)
Total revenue (TE)
773
786
840
(1.7)
(8.0)
Provision for credit losses
(2)
5
60
(140.0)
(103.3)
Noninterest expense
703
780
663
(9.9)
6.0
Income (loss) before income taxes (TE)
72
1
117
N/M
(38.5)
Allocated income taxes (benefit) and TE adjustments
17
-
28
N/M
(39.3)
Net income (loss) attributable to Key
$ 55
$ 1
$ 89
N/M
(38.2) %
Average balances
Loans and leases
$ 40,446
$ 41,381
$ 43,086
(2.3) %
(6.1) %
Total assets
43,239
44,178
45,935
(2.1)
(5.9)
Deposits
84,317
84,856
84,637
(.6)
(.4)
Assets under management at period end
$ 57,305
$ 54,859
$ 53,689
4.5 %
6.7 %
TE = Taxable Equivalent
N/M = Not Meaningful
Additional Consumer Bank Data
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Noninterest income
Trust and investment services income
$ 109
$ 105
$ 101
3.8 %
7.9 %
Service charges on deposit accounts
33
37
38
(10.8)
(13.2)
Cards and payments income
56
62
61
(9.7)
(8.2)
Consumer mortgage income
14
11
11
27.3
27.3
Other noninterest income
12
13
17
(7.7)
(29.4)
Total noninterest income
$ 224
$ 228
$ 228
(1.8) %
(1.8) %
Average deposit balances
Money market deposits
$ 29,918
$ 29,752
$ 28,128
.6 %
6.4 %
Demand deposits
22,353
23,072
24,849
(3.1)
(10.0)
Savings deposits
4,987
5,241
7,025
(4.8)
(29.0)
Time deposits
11,809
10,265
4,351
15.0
171.4
Noninterest-bearing deposits
15,250
16,526
20,284
(7.7)
(24.8)
Total deposits
$ 84,317
$ 84,856
$ 84,637
(.6) %
(.4) %
Other data
Branches
957
959
971
Automated teller machines
1,214
1,217
1,263
Consumer Bank Summary of Operations (1Q24 vs. 1Q23)
Key's Consumer Bank recorded net income attributable to Key of $55 million for the first quarter of 2024, compared to $89 million for the year-ago quarter
Taxable-equivalent net interest income decreased by $63 million, or 10.3%, compared to the first quarter of 2023, reflective of a shift in funding mix from noninterest-bearing deposits to higher-cost deposits and borrowings, as well as Key's balance sheet optimization efforts
Average loans and leases decreased $2.6 billion, or 6.1%, from the first quarter of 2023, driven by broad-based declines across loan categories
Average deposits decreased $320 million, or 0.4%, from the first quarter of 2023
Provision for credit losses decreased $62 million compared to the first quarter of 2023, driven by planned balance sheet optimization efforts and an improving economic outlook, partly offset by higher net charge-offs
Noninterest income decreased $4 million from the year-ago quarter, driven by declines in service charges on deposit accounts and cards and payments income
Noninterest expense increased $40 million from the year-ago quarter, primarily reflective of the FDIC special assessment charge
Commercial Bank
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Summary of operations
Net interest income (TE)
$ 391
$ 444
$ 478
(11.9) %
(18.2) %
Noninterest income
400
350
366
14.3
9.3
Total revenue (TE)
791
794
844
(.4)
(6.3)
Provision for credit losses
102
96
80
6.3
27.5
Noninterest expense
442
525
442
(15.8)
-
Income (loss) before income taxes (TE)
247
173
322
42.8
(23.3)
Allocated income taxes and TE adjustments
47
30
67
56.7
(29.9)
Net income (loss) attributable to Key
$ 200
$ 143
$ 255
39.9 %
(21.6) %
Average balances
Loans and leases
$ 70,099
$ 72,088
$ 76,306
(2.8) %
(8.1) %
Loans held for sale
840
635
876
32.3
(4.1)
Total assets
79,456
81,393
85,852
(2.4)
(7.5)
Deposits
56,090
56,897
52,219
(1.4) %
7.4 %
TE = Taxable Equivalent
Additional Commercial Bank Data
Dollars in millions
Change 1Q24 vs.
1Q24
4Q23
1Q23
4Q23
1Q23
Noninterest income
Trust and investment services income
$ 27
$ 27
$ 27
- %
- %
Investment banking and debt placement fees
170
135
145
25.9
17.2
Cards and payments income
19
19
20
-
(5.0)
Service charges on deposit accounts
29
27
27
7.4
7.4
Corporate services income
63
61
69
3.3
(8.7)
Commercial mortgage servicing fees
56
49
46
14.3
21.7
Operating lease income and other leasing gains
24
21
24
14.3
-
Other noninterest income
12
11
8
9.1
50.0
Total noninterest income
$ 400
$ 350
$ 366
14.3 %
9.3 %
Commercial Bank Summary of Operations (1Q24 vs. 1Q23)
Key's Commercial Bank recorded net income attributable to Key of $200 million for the first quarter of 2024 compared to $255 million for the year-ago quarter
Taxable-equivalent net interest income decreased by $87 million, or 18.2%, compared to the first quarter of 2023, primarily reflecting higher interest-bearing deposit costs and a shift in funding mix to higher-cost deposits, as well as Key's balance sheet optimization efforts
Average loan and lease balances decreased $6.2 billion, or 8.1%, compared to the first quarter of 2023, driven by a decline in commercial and industrial loans
Average deposit balances increased $3.9 billion compared to the first quarter of 2023, driven by our focus on growing deposits across our commercial businesses
Provision for credit losses increased $22 million compared to the first quarter of 2023, driven by a more stable economic outlook and the impact of balance sheet optimization efforts, partly offset by portfolio migration
Noninterest income increased $34 million from the year-ago quarter, primarily driven by an increase in investment banking and debt placement fees and commercial mortgage servicing fees
Noninterest expense remained unchanged compared to the first quarter of 2023
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 $187 billion at March 31, 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 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 9:00 a.m. ET, on April 18, 2024. A replay of the call will be available on our website through April 18, 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.
KeyCorp First Quarter 2024 Financial Supplement
Basis of Presentation
Use of Non-GAAP Financial Measures This document contains GAAP financial measures and non-GAAP financial measures where management believes 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, 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
3/31/2024
12/31/2023
3/31/2023
Summary of operations
Net interest income (TE)
$ 886
$ 928
$ 1,106
Noninterest income
647
610
608
Total revenue (TE)
1,533
1,538
1,714
Provision for credit losses
101
102
139
Noninterest expense
1,143
1,372
1,176
Income (loss) from continuing operations attributable to Key
219
65
311
Income (loss) from discontinued operations, net of taxes
-
-
1
Net income (loss) attributable to Key
219
65
312
Income (loss) from continuing operations attributable to Key common shareholders
183
30
275
Income (loss) from discontinued operations, net of taxes
-
-
1
Net income (loss) attributable to Key common shareholders
183
30
276
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$ .20
$ .03
$ .30
Income (loss) from discontinued operations, net of taxes
-
-
-
Net income (loss) attributable to Key common shareholders (a)
.20
.03
.30
Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution
.20
.03
.30
Income (loss) from discontinued operations, net of taxes - assuming dilution
-
-
-
Net income (loss) attributable to Key common shareholders - assuming dilution (a)
.20
.03
.30
Cash dividends declared
.205
.205
.205
Book value at period end
12.84
13.02
12.70
Tangible book value at period end
9.87
10.02
9.67
Market price at period end
15.81
14.40
12.52
Performance ratios
From continuing operations:
Return on average total assets
.47 %
.14 %
.66 %
Return on average common equity
6.06
1.08
9.85
Return on average tangible common equity (b)
7.87
1.46
13.16
Net interest margin (TE)
2.02
2.07
2.47
Cash efficiency ratio (b)
74.0
88.6
68.0
From consolidated operations:
Return on average total assets
.47 %
.14 %
.66 %
Return on average common equity
6.06
1.08
9.89
Return on average tangible common equity (b)
7.87
1.46
13.21
Net interest margin (TE)
2.02
2.07
2.47
Loan to deposit (c)
76.6
77.9
84.4
Capital ratios at period end
Key shareholders' equity to assets
7.8 %
7.8 %
7.3 %
Key common shareholders' equity to assets
6.5
6.5
6.0
Tangible common equity to tangible assets (b)
5.0
5.1
4.6
Common Equity Tier 1 (d)
10.3
10.0
9.1
Tier 1 risk-based capital (d)
12.0
11.7
10.6
Total risk-based capital (d)
14.5
14.1
12.8
Leverage (d)
9.1
9.0
8.8
Asset quality - from continuing operations
Net loan charge-offs
$ 81
$ 76
$ 45
Net loan charge-offs to average loans
.29 %
.26 %
.15 %
Allowance for loan and lease losses
$ 1,542
$ 1,508
$ 1,380
Allowance for credit losses
1,823
1,804
1,656
Allowance for loan and lease losses to period-end loans
1.40 %
1.34 %
1.15 %
Allowance for credit losses to period-end loans
1.66
1.60
1.38
Allowance for loan and lease losses to nonperforming loans
234
263
332
Allowance for credit losses to nonperforming loans
277
314
398
Nonperforming loans at period-end
$ 658
$ 574
$ 416
Nonperforming assets at period-end
674
591
447
Nonperforming loans to period-end portfolio loans
.60 %
.51 %
.35 %
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
.61
.52
.37
Trust assets
Assets under management
$ 57,305
$ 54,859
$ 53,689
Other data
Average full-time equivalent employees
16,752
17,129
18,220
Branches
957
959
971
Taxable-equivalent adjustment
$ 11
$ 7
$ 7
(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)
March 31, 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," 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 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.
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
3/31/2024
12/31/2023
3/31/2023
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)
$ 14,547
$ 14,637
$ 14,322
Less: Intangible assets (a)
2,799
2,806
2,836
Preferred Stock (b)
2,446
2,446
2,446
Tangible common equity (non-GAAP)
$ 9,302
$ 9,385
$ 9,040
Total assets (GAAP)
$ 187,485
$ 188,281
$ 197,519
Less: Intangible assets (a)
2,799
2,806
2,836
Tangible assets (non-GAAP)
$ 184,686
$ 185,475
$ 194,683
Tangible common equity to tangible assets ratio (non-GAAP)
5.04 %
5.06 %
4.64 %
Pre-provision net revenue
Net interest income (GAAP)
$ 875
$ 921
$ 1,099
Plus: Taxable-equivalent adjustment
11
7
7
Noninterest income
647
610
608
Less: Noninterest expense
1,143
1,372
1,176
Pre-provision net revenue from continuing operations (non-GAAP)
$ 390
$ 166
$ 538
Average tangible common equity
Average Key shareholders' equity (GAAP)
$ 14,649
$ 13,471
$ 13,817
Less: Intangible assets (average) (c)
2,802
2,811
2,841
Preferred stock (average)
2,500
2,500
2,500
Average tangible common equity (non-GAAP)
$ 9,347
$ 8,160
$ 8,476
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$ 183
$ 30
$ 275
Average tangible common equity (non-GAAP)
9,347
8,160
8,476
Return on average tangible common equity from continuing operations (non-GAAP)
7.87 %
1.46 %
13.16 %
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$ 183
$ 30
$ 276
Average tangible common equity (non-GAAP)
9,347
8,160
8,476
Return on average tangible common equity consolidated (non-GAAP)
7.87 %
1.46 %
13.21 %
GAAP to Non-GAAP Reconciliations (continued)
(Dollars in millions)
Three months ended
3/31/2024
12/31/2023
3/31/2023
Cash efficiency ratio
Noninterest expense (GAAP)
$ 1,143
$ 1,372
$ 1,176
Less: Intangible asset amortization
8
10
10
Adjusted noninterest expense (non-GAAP)
$ 1,135
$ 1,362
$ 1,166
Net interest income (GAAP)
$ 875
$ 921
$ 1,099
Plus: Taxable-equivalent adjustment
11
7
7
Net interest income TE (non-GAAP)
886
928
1,106
Noninterest income (GAAP)
647
610
608
Total taxable-equivalent revenue (non-GAAP)
$ 1,533
$ 1,538
$ 1,714
Cash efficiency ratio (non-GAAP)
74.0 %
88.6 %
68.0 %
(a)
For the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, intangible assets exclude $1 million, $1 million, and $1 million, respectively, of period-end purchased credit card receivables.
(b)
Net of capital surplus.
(c)
For the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, average intangible assets exclude $1 million, $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)
3/31/2024
12/31/2023
3/31/2023
Assets
Loans
$ 109,885
$ 112,606
$ 119,971
Loans held for sale
228
483
1,211
Securities available for sale
37,298
37,185
39,498
Held-to-maturity securities
8,272
8,575
9,561
Trading account assets
1,171
1,142
1,118
Short-term investments
13,205
10,817
8,410
Other investments
1,247
1,244
1,587
Total earning assets
171,306
172,052
181,356
Allowance for loan and lease losses
(1,542)
(1,508)
(1,380)
Cash and due from banks
1,247
941
784
Premises and equipment
650
661
628
Goodwill
2,752
2,752
2,752
Other intangible assets
48
55
85
Corporate-owned life insurance
4,392
4,383
4,372
Accrued income and other assets
8,314
8,601
8,512
Discontinued assets
318
344
410
Total assets
$ 187,485
$ 188,281
$ 197,519
Liabilities
Deposits in domestic offices:
Interest-bearing deposits
$ 114,593
$ 114,859
$ 106,841
Noninterest-bearing deposits
29,638
30,728
37,307
Total deposits
144,231
145,587
144,148
Federal funds purchased and securities sold under repurchase agreements
27
38
1,374
Bank notes and other short-term borrowings
2,896
3,053
10,061
Accrued expense and other liabilities
5,008
5,412
4,861
Long-term debt
20,776
19,554
22,753
Total liabilities
172,938
173,644
183,197
Equity
Preferred stock
2,500
2,500
2,500
Common shares
1,257
1,257
1,257
Capital surplus
6,164
6,281
6,207
Retained earnings
15,662
15,672
15,700
Treasury stock, at cost
(5,722)
(5,844)
(5,868)
Accumulated other comprehensive income (loss)
(5,314)
(5,229)
(5,474)
Key shareholders' equity
14,547
14,637
14,322
Total liabilities and equity
$ 187,485
$ 188,281
$ 197,519
Common shares outstanding (000)
942,776
936,564
935,229
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
Three months ended
3/31/2024
12/31/2023
3/31/2023
Interest income
Loans
$ 1,538
$ 1,574
$ 1,476
Loans held for sale
14
12
13
Securities available for sale
232
213
194
Held-to-maturity securities
75
78
74
Trading account assets
14
13
12
Short-term investments
142
138
42
Other investments
17
22
13
Total interest income
2,032
2,050
1,824
Interest expense
Deposits
782
754
350
Federal funds purchased and securities sold under repurchase agreements
1
-
22
Bank notes and other short-term borrowings
46
45
78
Long-term debt
328
330
275
Total interest expense
1,157
1,129
725
Net interest income
875
921
1,099
Provision for credit losses
101
102
139
Net interest income after provision for credit losses
774
819
960
Noninterest income
Trust and investment services income
136
132
128
Investment banking and debt placement fees
170
136
145
Cards and payments income
77
84
81
Service charges on deposit accounts
63
65
67
Corporate services income
69
67
76
Commercial mortgage servicing fees
56
48
46
Corporate-owned life insurance income
32
36
29
Consumer mortgage income
14
11
11
Operating lease income and other leasing gains
24
22
25
Other income
6
9
-
Total noninterest income
647
610
608
Noninterest expense
Personnel
674
674
701
Net occupancy
67
65
70
Computer processing
102
92
92
Business services and professional fees
41
44
45
Equipment
20
24
22
Operating lease expense
17
18
20
Marketing
19
31
21
Other expense
203
424
205
Total noninterest expense
1,143
1,372
1,176
Income (loss) from continuing operations before income taxes
278
57
392
Income taxes
59
(8)
81
Income (loss) from continuing operations
219
65
311
Income (loss) from discontinued operations, net of taxes
-
-
1
Net income (loss)
219
65
312
Net income (loss) attributable to Key
$ 219
$ 65
$ 312
Income (loss) from continuing operations attributable to Key common shareholders
$ 183
$ 30
$ 275
Net income (loss) attributable to Key common shareholders
183
30
276
Per common share
Income (loss) from continuing operations attributable to Key common shareholders
$ .20
$ .03
$ .30
Income (loss) from discontinued operations, net of taxes
-
-
-
Net income (loss) attributable to Key common shareholders (a)
.20
.03
.30
Per common share - assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders
$ .20
$ .03
$ .30
Income (loss) from discontinued operations, net of taxes
-
-
-
Net income (loss) attributable to Key common shareholders (a)
.20
.03
.30
Cash dividends declared per common share
$ .205
$ .205
$ .205
Weighted-average common shares outstanding (000)
929,692
927,517
926,490
Effect of common share options and other stock awards
7,319
6,529
7,314
Weighted-average common shares and potential common shares outstanding (000) (b)
937,011
934,046
933,804
(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)
First Quarter 2024
Fourth Quarter 2023
First 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)
$ 55,220
$ 853
6.22 %
$ 56,664
$ 870
6.09 %
$ 60,281
$ 807
5.42 %
Real estate - commercial mortgage
14,837
229
6.21
15,346
234
6.05
16,470
224
5.52
Real estate - construction
3,039
57
7.50
3,028
54
7.05
2,525
39
6.30
Commercial lease financing
3,346
27
3.23
3,568
30
3.34
3,783
27
2.87
Total commercial loans
76,442
1,166
6.14
78,606
1,188
6.00
83,059
1,097
5.35
Real estate - residential mortgage
20,814
171
3.29
21,113
174
3.30
21,436
172
3.21
Home equity loans
7,024
104
5.97
7,227
108
5.93
7,879
106
5.47
Other consumer loans
5,800
72
4.99
6,015
75
4.94
6,480
76
4.69
Credit cards
954
36
14.93
987
36
14.47
983
32
13.37
Total consumer loans
34,592
383
4.44
35,342
393
4.43
36,778
386
4.23
Total loans
111,034
1,549
5.61
113,948
1,581
5.51
119,837
1,483
5.01
Loans held for sale
888
14
6.15
695
12
6.85
907
13
5.86
Securities available for sale (b), (e)
37,089
232
2.17
35,576
213
1.99
39,172
194
1.72
Held-to-maturity securities (b)
8,423
75
3.57
8,714
78
3.56
8,931
74
3.32
Trading account assets
1,110
14
5.21
1,104
13
4.93
1,001
12
4.86
Short-term investments
10,243
142
5.59
9,571
138
5.72
3,532
42
4.80
Other investments (e)
1,236
17
5.39
1,297
22
6.91
1,309
13
4.01
Total earning assets
170,023
2,043
4.67
170,905
2,057
4.60
174,689
1,831
4.09
Allowance for loan and lease losses
(1,505)
(1,484)
(1,336)
Accrued income and other assets
17,350
17,471
17,498
Discontinued assets
329
351
419
Total assets
$ 186,197
$ 187,243
$ 191,270
Liabilities
Money market deposits
$ 37,659
$ 264
2.82 %
$ 36,648
$ 251
2.72 %
$ 33,853
$ 78
.94 %
Demand deposits
56,137
357
2.56
56,963
348
2.42
52,365
183
1.42
Savings deposits
5,253
1
.07
5,492
1
.05
7,346
1
.03
Time deposits
14,430
160
4.45
14,326
154
4.26
10,498
88
3.39
Total interest-bearing deposits
113,479
782
2.77
113,429
754
2.63
104,062
350
1.36
Federal funds purchased and securities sold under repurchase agreements
106
1
4.03
56
-
2.29
2,087
22
4.34
Bank notes and other short-term borrowings
3,325
46
5.63
3,199
45
5.62
6,597
78
4.80
Long-term debt (f), (g)
19,537
328
6.72
19,921
330
6.64
20,141
275
5.47
Total interest-bearing liabilities
136,447
1,157
3.41
136,605
1,129
3.29
132,887
725
2.20
Noninterest-bearing deposits
29,399
31,647
39,343
Accrued expense and other liabilities
5,373
5,169
4,804
Discontinued liabilities (g)
329
351
419
Total liabilities
$ 171,548
$ 173,772
$ 177,453
Equity
Key shareholders' equity
$ 14,649
$ 13,471
$ 13,817
Noncontrolling interests
-
-
-
Total equity
14,649
13,471
13,817
Total liabilities and equity
$ 186,197
$ 187,243
$ 191,270
Interest rate spread (TE)
1.26 %
1.31 %
1.89 %
Net interest income (TE) and net interest margin (TE)
$ 886
2.02 %
$ 928
2.07 %
$ 1,106
2.47 %
TE adjustment (b)
11
7
7
Net interest income, GAAP basis
$ 875
$ 921
$ 1,099
(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 March 31, 2024, December 31, 2023, and March 31, 2023.
(c)
For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)
Commercial and industrial average balances include $211 million, $210 million, and $178 million of assets from commercial credit cards for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
(e)
Yield is calculated on the basis of amortized cost. The average amortized cost for securities available for sale was $42.7 billion, $42.6 billion, and $45.3 billion for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
(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
3/31/2024
12/31/2023
3/31/2023
Personnel (a)
$ 674
$ 674
$ 701
Net occupancy
67
65
70
Computer processing
102
92
92
Business services and professional fees
41
44
45
Equipment
20
24
22
Operating lease expense
17
18
20
Marketing
19
31
21
Other expense
203
424
205
Total noninterest expense
$ 1,143
$ 1,372
$ 1,176
Average full-time equivalent employees (b)
16,752
17,129
18,220
(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
3/31/2024
12/31/2023
3/31/2023
Salaries and contract labor
$ 389
$ 399
$ 419
Incentive and stock-based compensation
159
139
152
Employee benefits
126
97
99
Severance
-
39
31
Total personnel expense
$ 674
$ 674
$ 701
Loan Composition
(Dollars in millions)
Change 3/31/2024 vs.
3/31/2024
12/31/2023
3/31/2023
12/31/2023
3/31/2023
Commercial and industrial (a)(b)
$ 54,793
$ 55,815
$ 60,565
(1.8) %
(9.5) %
Commercial real estate:
Commercial mortgage
14,540
15,187
16,348
(4.3)
(11.1)
Construction
3,013
3,066
2,590
(1.7)
16.3
Total commercial real estate loans
17,553
18,253
18,938
(3.8)
(7.3)
Commercial lease financing (b)
3,305
3,523
3,763
(6.2)
(12.2)
Total commercial loans
75,651
77,591
83,266
(2.5)
(9.1)
Residential - prime loans:
Real estate - residential mortgage
20,704
20,958
21,632
(1.2)
(4.3)
Home equity loans
6,905
7,139
7,706
(3.3)
(10.4)
Total residential - prime loans
27,609
28,097
29,338
(1.7)
(5.9)
Other consumer loans
5,690
5,916
6,398
(3.8)
(11.1)
Credit cards
935
1,002
969
(6.7)
(3.5)
Total consumer loans
34,234
35,015
36,705
(2.2)
(6.7)
Total loans (c), (d)
$ 109,885
$ 112,606
$ 119,971
(2.4) %
(8.4) %
(a)
Loan balances include $214 million, $207 million, and $185 million of commercial credit card balances at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
(b)
Commercial and industrial includes receivables held as collateral for a secured borrowing of $349 million at March 31, 2024, and no amounts held as collateral for a secured borrowing at December 31, 2023, and March 31, 2023. Commercial lease financing includes receivables held as collateral for a secured borrowing of $6 million, $7 million, and $6 million at March 31, 2024, December 31, 2023, and March 31, 2023, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)
Total loans exclude loans of $313 million at March 31, 2024, $339 million at December 31, 2023, and $407 million at March 31, 2023, related to the discontinued operations of the education lending business.
(d)
Accrued interest of $508 million, $522 million, and $522 million at March 31, 2024, December 31, 2023, and March 31, 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 3/31/2024 vs.
3/31/2024
12/31/2023
3/31/2023
12/31/2023
3/31/2023
Commercial and industrial
$ -
$ 50
$ 351
N/M
N/M
Real estate - commercial mortgage
155
382
815
(59.4)
(81.0)
Real estate - residential mortgage
73
51
45
43.1
62.2
Total loans held for sale
$ 228
$ 483
$ 1,211
(52.8) %
(81.2) %
N/M = Not Meaningful
Summary of Changes in Loans Held for Sale
(Dollars in millions)
1Q24
4Q23
3Q23
2Q23
1Q23
Balance at beginning of period
$ 483
$ 730
$ 1,130
$ 1,211
$ 963
New originations
1,738
1,879
3,035
1,798
1,779
Transfers from (to) held to maturity, net
(105)
(31)
(94)
(52)
(13)
Loan sales
(1,893)
(2,095)
(3,312)
(1,798)
(1,518)
Loan draws (payments), net
4
-
(29)
(28)
-
Valuation and other adjustments
1
-
-
(1)
-
Balance at end of period
$ 228
$ 483
$ 730
$ 1,130
$ 1,211
Summary of Loan and Lease Loss Experience From Continuing Operations
(Dollars in millions)
Three months ended
3/31/2024
12/31/2023
3/31/2023
Average loans outstanding
$ 111,034
$ 113,948
$ 119,837
Allowance for loan and lease losses at the beginning of the period
1,508
1,488
1,337
Loans charged off:
Commercial and industrial
62
49
35
Real estate - commercial mortgage
5
24
5
Real estate - construction
-
-
-
Total commercial real estate loans
5
24
5
Commercial lease financing
-
-
(1)
Total commercial loans
67
73
39
Real estate - residential mortgage
1
-
-
Home equity loans
1
(2)
1
Other consumer loans
16
14
11
Credit cards
12
10
9
Total consumer loans
30
22
21
Total loans charged off
97
95
60
Recoveries:
Commercial and industrial
8
11
8
Real estate - commercial mortgage
-
1
-
Real estate - construction
-
1
-
Total commercial real estate loans
-
2
-
Commercial lease financing
2
1
1
Total commercial loans
10
14
9
Real estate - residential mortgage
2
1
1
Home equity loans
1
-
1
Other consumer loans
2
1
3
Credit cards
1
3
1
Total consumer loans
6
5
6
Total recoveries
16
19
15
Net loan charge-offs
(81)
(76)
(45)
Provision (credit) for loan and lease losses
115
96
88
Allowance for loan and lease losses at end of period
$ 1,542
$ 1,508
$ 1,380
Liability for credit losses on lending-related commitments at beginning of period
$ 296
$ 290
$ 225
Provision (credit) for losses on lending-related commitments
(14)
6
51
Other
(1)
-
-
Liability for credit losses on lending-related commitments at end of period (a)
$ 281
$ 296
$ 276
Total allowance for credit losses at end of period
$ 1,823
$ 1,804
$ 1,656
Net loan charge-offs to average total loans
.29 %
.26 %
.15 %
Allowance for loan and lease losses to period-end loans
1.40
1.34
1.15
Allowance for credit losses to period-end loans
1.66
1.60
1.38
Allowance for loan and lease losses to nonperforming loans
234
263
332
Allowance for credit losses to nonperforming loans
Included in "Accrued expense and other liabilities" on the balance sheet.
Asset Quality Statistics From Continuing Operations
(Dollars in millions)
1Q24
4Q23
3Q23
2Q23
1Q23
Net loan charge-offs
$ 81
$ 76
$ 71
$ 52
$ 45
Net loan charge-offs to average total loans
.29 %
.26 %
.24 %
.17 %
.15 %
Allowance for loan and lease losses
$ 1,542
$ 1,508
$ 1,488
$ 1,480
$ 1,380
Allowance for credit losses (a)
1,823
1,804
1,778
1,771
1,656
Allowance for loan and lease losses to period-end loans
1.40 %
1.34 %
1.29 %
1.24 %
1.15 %
Allowance for credit losses to period-end loans
1.66
1.60
1.54
1.49
1.38
Allowance for loan and lease losses to nonperforming loans
234
263
327
343
332
Allowance for credit losses to nonperforming loans
277
314
391
411
398
Nonperforming loans at period end
$ 658
$ 574
$ 455
$ 431
$ 416
Nonperforming assets at period end
674
591
471
462
447
Nonperforming loans to period-end portfolio loans
.60 %
.51 %
.39 %
.36 %
.35 %
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
.61
.52
.41
.39
.37
(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)
3/31/2024
12/31/2023
9/30/2023
6/30/2023
3/31/2023
Commercial and industrial
$ 360
$ 297
$ 214
$ 188
$ 170
Real estate - commercial mortgage
113
100
63
65
59
Real estate - construction
-
-
-
-
-
Total commercial real estate loans
113
100
63
65
59
Commercial lease financing
1
-
1
1
1
Total commercial loans
474
397
278
254
230
Real estate - residential mortgage
79
71
72
73
75
Home equity loans
95
97
97
97
104
Other Consumer loans
4
4
4
4
4
Credit cards
6
5
4
3
3
Total consumer loans
184
177
177
177
186
Total nonperforming loans (a)
658
574
455
431
416
OREO
16
17
16
15
13
Nonperforming loans held for sale
-
-
-
16
18
Other nonperforming assets
-
-
-
-
-
Total nonperforming assets
$ 674
$ 591
$ 471
$ 462
$ 447
Accruing loans past due 90 days or more
$ 119
$ 107
$ 52
$ 73
$ 55
Accruing loans past due 30 through 89 days
242
222
178
139
164
Nonperforming assets from discontinued operations - education lending business
2
3
2
2
3
Nonperforming loans to period-end portfolio loans
.60 %
.51 %
.39 %
.36 %
.35 %
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets
.61
.52
.41
.39
.37
Summary of Changes in Nonperforming Loans From Continuing Operations
(Dollars in millions)
1Q24
4Q23
3Q23
2Q23
1Q23
Balance at beginning of period
$ 574
$ 455
$ 431
$ 416
$ 387
Loans placed on nonaccrual status
243
297
159
169
143
Charge-offs
(97)
(95)
(87)
(76)
(60)
Loans sold
(5)
(9)
(4)
(23)
(2)
Payments
(35)
(56)
(25)
(20)
(31)
Transfers to OREO
(2)
(2)
(3)
(2)
(2)
Loans returned to accrual status
(20)
(16)
(16)
(33)
(19)
Balance at end of period
$ 658
$ 574
$ 455
$ 431
$ 416
Line of Business Results
(Dollars in millions)
Change 1Q24 vs.
1Q24
4Q23
3Q23
2Q23
1Q23
4Q23
1Q23
Consumer Bank
Summary of operations
Total revenue (TE)
$ 773
$ 786
$ 791
$ 803
$ 840
(1.7) %
(8.0) %
Provision for credit losses
(2)
5
14
32
60
(140.0)
(103.3)
Noninterest expense
703
780
677
663
663
(9.9)
6.0
Net income (loss) attributable to Key
55
1
76
82
89
N/M
(38.2)
Average loans and leases
40,446
41,381
42,250
42,934
43,086
(2.3)
(6.1)
Average deposits
84,317
84,856
83,864
82,498
84,637
(.6)
(.4)
Net loan charge-offs
44
40
36
32
24
10.0
83.3
Net loan charge-offs to average total loans
.44 %
.38 %
.34 %
.30 %
.23 %
15.8
91.3
Nonperforming assets at period end
$ 196
$ 190
$ 190
$ 193
$ 196
3.2
-
Return on average allocated equity
6.18 %
0.11 %
8.48 %
9.04 %
9.87 %
N/M
(37.4)
Commercial Bank
Summary of operations
Total revenue (TE)
$ 791
$ 794
$ 790
$ 805
$ 844
(.4) %
(6.3) %
Provision for credit losses
102
96
68
134
80
6.3
27.5
Noninterest expense
442
525
431
405
442
(15.8)
-
Net income (loss) attributable to Key
200
143
226
214
255
39.9
(21.6)
Average loans and leases
70,099
72,088
74,951
77,277
76,306
(2.8)
(8.1)
Average loans held for sale
840
635
1,268
1,014
876
32.3
(4.1)
Average deposits
56,090
56,897
54,896
51,420
52,219
(1.4)
7.4
Net loan charge-offs
37
35
35
20
21
5.7
76.2
Net loan charge-offs to average total loans
.21 %
.19 %
.19 %
.10 %
.11 %
10.5
90.9
Nonperforming assets at period end
$ 479
$ 401
$ 281
$ 269
$ 251
19.5
90.8
Return on average allocated equity
8.02 %
5.64 %
8.64 %
8.17 %
10.04 %
42.2
(20.1)
TE = Taxable Equivalent; N/M = Not Meaningful
Selected Items Impact on Earnings(a)
(Dollars in millions, except per share amounts)
Pretax(b)
After-tax at marginal rate(b)
Quarter to date results
Amount
Net Income
EPS(c)
Three months ended March 31, 2024
FDIC special assessment (other expense)(d)
$ (29)
$ (22)
$ (0.02)
Three months ended December 31, 2023
Efficiency related expenses(e)
(67)
(51)
(0.05)
Pension settlement (other expense)
(18)
(14)
(0.02)
FDIC special assessment (other expense)(d)
(190)
(144)
(0.15)
Total selected items
(275)
(209)
(0.22)
Three months ended March 31, 2023
Efficiency related expenses(f)
(64)
(49)
(0.05)
(a)
Includes items impacting results or trends during the period but are not considered non-GAAP adjustments.
(b)
Favorable (unfavorable) impact.
(c)
Impact to EPS reflected on a fully diluted basis.
(d)
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.
(e)
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.
(f)
Efficiency related expenses for the three months ended March 31, 2023, consist primarily of $31 million of severance recorded in personnel expense and $28 million of corporate real estate related rationalization and other contract termination or renegotiation costs recorded in other expense.