OR $.27 PER DILUTED COMMON SHARE

Built capital: Common Equity Tier 1 of 9.2%(a)

    CLEVELAND, July 20, 2023 - KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $250 million, or $.27 per diluted common share for the second quarter of 2023. This compared to $275 million, or $.30 per diluted common share, for the first quarter of 2023 and $504 million, or $.54 per diluted common share, for the second quarter of 2022.

(a)June 30, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(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, 2023 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

Taxable-equivalent net interest income was $986 million for the second quarter of 2023 and the net interest margin was 2.12%. Compared to the second quarter of 2022, net interest income decreased $118 million, and the net interest margin decreased by 49 basis points. The decline in net interest income and the net interest margin reflects higher interest-bearing deposit costs and a shift in funding mix to higher cost deposits and borrowings.

Compared to the first quarter of 2023, taxable-equivalent net interest income decreased by $120 million, and the net interest margin decreased by 35 basis points. The decline in net interest income and the net interest margin reflects higher interest-bearing deposit costs and a shift in funding mix to higher-cost deposits and borrowings.

    

Compared to the second quarter of 2022, noninterest income decreased by $79 million. The decrease was driven by a $29 million decline in investment banking and debt placement fees, reflecting lower merger and acquisition advisory fees and lower syndication fees.

Service charges on deposit accounts decreased $27 million, reflecting a reduction in overdraft and non-sufficient funds fees and lower account analysis fees related to the interest rate environment. Additionally, trust and investment services declined $11 million, reflecting a decline in fixed income and equity trading, and corporate services income decreased $10 million.

Compared to the first quarter of 2023, noninterest income increased by $1 million. The increase was driven by broad-based growth across most fee categories, including a $10 million increase in corporate services income, reflecting an increase in income associated with customer derivatives trading. These increases were mostly offset by a $25 million decline in investment banking and debt placement fees due to lower merger and acquisition advisory fees and lower syndication fees.

    Compared to the second quarter of 2022, noninterest expense decreased by $2 million. The decline was driven by a $13 million decrease in net occupancy expense as we exit corporate facilities and a $11 million decline in business services and professional fees. Partly offsetting the decline was an increase in computer processing expense of $17 million, due to technology investments, and a $15 million increase in personnel expense, due to an increase in salaries as a result of higher merit increases and employee benefits.

    Compared to the first quarter of 2023, noninterest expense decreased $100 million. The decline was primarily driven by a $79 million decrease in personnel expense, reflective of lower incentive and stock-based compensation and a decline in severance expense. Additionally, other expense declined by $24 million, reflecting higher expenses related to corporate real estate rationalization in the prior quarter.

(a)Commercial and industrial average loan balances include $194 million, $178 million, and $153 million of assets from commercial credit cards at June 30, 2023, March 31, 2023, and June 30, 2022, respectively.

    

Average loans were $120.7 billion for the second quarter of 2023, an increase of $11.5 billion compared to the second quarter of 2022. Commercial loans increased by $9.0 billion, largely reflecting growth in commercial and industrial loans of $7.6 billion, as well as an increase in commercial mortgage real estate loans of $1.5 billion. Consumer loans increased $2.5 billion, largely driven by Key's residential mortgage business.

Compared to the first quarter of 2023, average loans increased by $835 million. The increase was driven by commercial loans, reflecting growth in commercial and industrial loans.

    Average deposits totaled $142.9 billion for the second quarter of 2023, a decrease of $4.6 billion compared to the year-ago quarter. The decline reflects elevated inflation-related spend, changing client behavior due to higher interest rates, and a normalization of pandemic-related deposits.

Compared to the first quarter of 2023, average deposits decreased by $502 million. The decline was driven by changing client behavior due to higher interest rates and normal seasonal deposit outflows in commercial deposits.

    

    Key's provision for credit losses was $167 million, compared to $45 million in the second quarter of 2022 and $139 million in the first quarter of 2023. The increase from the year-ago period and prior quarter reflects changes in the economic outlook and portfolio activity.

    Net loan charge-offs for the second quarter of 2023 totaled $52 million, or 0.17% of average total loans. These results compare to $44 million, or 0.16%, for the second quarter of 2022 and $45 million, or 0.15%, for the first quarter of 2023. Key’s allowance for credit losses was $1.8 billion, or 1.49% of total period-end loans at June 30, 2023, compared to 1.13% at June 30, 2022, and 1.38% at March 31, 2023.

    At June 30, 2023, Key’s nonperforming loans totaled $431 million, which represented 0.36% of period-end portfolio loans. These results compare to 0.38% at June 30, 2022, and 0.35% at March 31, 2023. Nonperforming assets at June 30, 2023, totaled $462 million, and represented 0.39% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.41% at June 30, 2022, and 0.37% at March 31, 2023.

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at June 30, 2023.

(a)June 30, 2023 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 2023. As shown in the preceding table, at June 30, 2023, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.2% and 10.7%, respectively. Key's tangible common equity ratio was 4.5% at June 30, 2023.

    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 eight basis points.

    

    During the second quarter of 2023, Key declared a dividend of $.205 per common share. Additionally, we have $752 million remaining in our share repurchase authorization through the third quarter of 2023.

    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.

(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.

•Key's Consumer Bank recorded net income attributable to Key of $82 million for the second quarter of 2023, compared to $128 million for the year-ago quarter

•Taxable-equivalent net interest income decreased by $46 million, or 7.6%, compared to the second quarter of 2022, driven by higher interest-bearing deposit costs and a shift in funding mix

•Average loans and leases increased $2.1 billion, or 5.2%, from the second quarter of 2022, driven by growth in consumer mortgage loans

•Average deposits decreased $8.9 billion, or 9.7%, from the second quarter of 2022, reflecting elevated inflation-related spend, changing client behavior due to higher interest rates, and a normalization of pandemic-related deposits

•Provision for credit losses increased $24 million compared to the second quarter of 2022, driven by increases in both the allowance for credit losses and net loan charge-offs

•Noninterest income decreased $9 million from the year-ago quarter, driven by lower service charges on deposit accounts due to a planned reduction in overdraft and non-sufficient funds fees

•Noninterest expense decreased $18 million from the year-ago quarter, reflecting lower incentive compensation and employee benefits from the prior period, partly offset by an increase in salaries

•Key's Commercial Bank recorded net income attributable to Key of $214 million for the second quarter of 2023 compared to $340 million for the year-ago quarter

•Taxable-equivalent net interest income decreased by $11 million, or 2.3%, compared to the second quarter of 2022, primarily reflecting higher interest-bearing deposit costs and a shift in funding mix to higher-cost deposits

•Average loan and lease balances increased $9.5 billion, or 13.9%, compared to the second quarter of 2022, reflecting growth in commercial and industrial loans and an increase in commercial mortgage real estate loans

•Average deposit balances decreased $3.4 billion compared to the second quarter of 2022, reflecting changing client behavior due to higher interest rates

•Provision for credit losses increased $97 million compared to the second quarter of 2022, driven by higher allowance for credit losses due to changes in the economic outlook and portfolio activity

•Noninterest income decreased $58 million from the year-ago quarter, primarily driven by lower investment banking and debt placement fees reflecting lower merger and acquisition advisory fees and lower syndication fees, as well as a decrease in corporate services income

•Noninterest expense decreased $6 million from the second quarter of 2022, primarily driven by a decline in incentive compensation

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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 $195 billion at June 30, 2023.

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 1,300 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.

A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 10:00 a.m. ET, on July 20, 2023. A replay of the call will be available through July 29, 2023.

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

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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).

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.

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.

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.

(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, 2023, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(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.

(a)For the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, intangible assets exclude $1 million, $1 million, and $2 million, respectively, of period-end purchased credit card receivables.

(b)Net of capital surplus.

(c)For the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, average intangible assets exclude $1 million, $1 million, and $2 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(Dollars in millions)
									6/30/2023			3/31/2023			6/30/2022
Assets
			Loans						$	119,011		$	119,971		$	112,390
			Loans held for sale						1,130			1,211			1,306
			Securities available for sale						37,908			39,498			42,437
			Held-to-maturity securities						9,189			9,561			8,186
			Trading account assets						1,177			1,118			809
			Short-term investments						8,959			8,410			2,456
			Other investments						1,474			1,587			969
						Total earning assets			178,848			181,356			168,553
			Allowance for loan and lease losses						(1,480)			(1,380)			(1,099)
			Cash and due from banks						758			784			678
			Premises and equipment						652			628			638
			Goodwill						2,752			2,752			2,752
			Other intangible assets						75			85			118
			Corporate-owned life insurance						4,378			4,372			4,343
			Accrued income and other assets						8,668			8,512			10,529
			Discontinued assets						386			410			496
						Total assets			$	195,037		$	197,519		$	187,008
Liabilities
			Deposits in domestic offices:
						Interest-bearing deposits			111,766			106,841			94,892
						Noninterest-bearing deposits			33,366			37,307			50,973
						Total deposits			145,132			144,148			145,865
			Federal funds purchased and securities sold under repurchase agreements						1,702			1,374			3,234
			Bank notes and other short-term borrowings						6,949			10,061			2,809
			Accrued expense and other liabilities						5,339			4,861			4,056
			Long-term debt						22,071			22,753			16,617
						Total liabilities			181,193			183,197			172,581
Equity
			Preferred stock						2,500			2,500			1,900
			Common shares						1,257			1,257			1,257
			Capital surplus						6,231			6,207			6,241
			Retained earnings						15,759			15,700			15,118
			Treasury stock, at cost						(5,859)			(5,868)			(5,923)
			Accumulated other comprehensive income (loss)						(6,044)			(5,474)			(4,166)
						Key shareholders’ equity			13,844			14,322			14,427
Total liabilities and equity									$	195,037		$	197,519		$	187,008
Common shares outstanding (000)									935,733			935,229			932,643

    

(a)Earnings per share may not foot due to rounding.

(b)Assumes conversion of common share options and other stock awards, as applicable.