OR $.03 PER DILUTED COMMON SHARE

Strong capital position: Common Equity Tier 1 of 10.0%(a), above targeted range

Exceeded 2023 full year balance sheet optimization goal: $14 billion reduction in risk-weighted assets(b)

    CLEVELAND, January 18, 2024 - KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $30 million, or $.03 per diluted common share, for the fourth quarter of 2023. This compared to $266 million, or $.29 per diluted common share, for the third quarter of 2023 and $356 million, or $.38 per diluted common share, for the fourth quarter of 2022. Included in the fourth quarter of 2023 are $209 million, or $.22 per diluted common share, of charges related to a FDIC special assessment, efficiency related expenses, and a pension settlement charge(c).

(a)December 31, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)December 31, 2023 figures are estimated.

(c)See table on page 25 for more information on Selected Items Impacts to Earnings.

(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)December 31, 2023 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

Taxable-equivalent net interest income was $928 million for the fourth quarter of 2023 and the net interest margin was 2.07%. Compared to the fourth quarter of 2022, net interest income decreased $299 million, and the net interest margin decreased by 66 basis points. The decrease in net interest income and the net interest margin reflect the impact of higher interest rates, partly offset by a favorable earning asset mix. The higher interest rate environment drove the cost of interest-bearing deposits and borrowings higher, which outpaced the benefit from higher earning asset yields. Additionally, the balance sheet experienced a shift in funding mix from noninterest-bearing deposits to higher-cost interest-bearing deposits.

Compared to the third quarter of 2023, taxable-equivalent net interest income increased by $5 million, and the net interest margin increased by six basis points. The increases in net interest income and the net interest margin were driven by actions taken to manage Key’s interest rate risk, elevated levels of liquidity, and an improved funding mix. The increase was partly offset by higher interest-bearing deposit costs, which exceeded the benefit from higher earning asset yields, and a planned reduction in loan balances, which benefited Key’s net interest margin.

    Compared to the fourth quarter of 2022, noninterest income decreased by $61 million. The decrease was driven by a $36 million decline in investment banking and debt placement fees, driven by lower syndication fees and merger and acquisition advisory fees. Corporate services income also declined by $22 million, driven by lower customer derivatives trading activity and related revenue.

Compared to the third quarter of 2023, noninterest income decreased by $33 million, reflective of a $13 million decline in other income primarily driven by a gain on a loan sale in the prior quarter. Cards and payments income declined by $6 million and corporate services income declined by $6 million, reflecting lower customer derivatives trading revenue. Additionally, investment banking and debt placement fees declined by $5 million.

    Compared to the fourth quarter of 2022, noninterest expense increased $216 million. The increase in noninterest expense was driven by the following impacts in the fourth quarter of 2023: a $190 million charge related to the FDIC special assessment, $67 million from efficiency related expenses, and $18 million from a pension settlement charge. See the Selected Items Impact on Earnings table on page 25 for more information.

    Compared to the third quarter of 2023, noninterest expense increased $262 million. The increase was driven by the FDIC special assessment, efficiency related expenses, and a pension settlement charge in the fourth quarter, which collectively totaled $275 million. See the Selected Items Impact on Earnings table on page 25 for more information. Personnel expense increased $11 million, primarily driven by an increase in severance as part of the previously discussed efficiency related expenses.

(a)Commercial and industrial average loan balances include $210 million, $202 million, and $171 million of assets from commercial credit cards at December 31, 2023, September 30, 2023, and December 31, 2022, respectively.

    

Average loans were $113.9 billion for the fourth quarter of 2023, a decrease of $3.8 billion compared to the fourth quarter of 2022, reflecting Key's planned balance sheet optimization efforts. The decline in average loans was driven by commercial and industrial loans which decreased $1.5 billion. Average consumer loans also decreased $1.4 billion, driven by a decline in home equity and consumer direct loans.

Compared to the third quarter of 2023, average loans decreased by $3.7 billion, driven by Key's planned balance sheet optimization efforts. Average commercial loans declined by $3.0 billion, reflective of a $2.5 billion decrease in commercial and industrial loans.

Additionally, average consumer loans declined $727 million, driven by lower consumer mortgage and home equity loan balances.

    Average deposits totaled $145.1 billion for the fourth quarter of 2023, a decrease of $590 million compared to the year-ago quarter. The decrease was driven by changing client behavior reflective of higher interest rates.

Compared to the third quarter of 2023, average deposits increased by $251 million, driven by a seasonal increase in commercial deposit balances. The increase was partly offset by a decline in other time deposits, reflecting a decrease in wholesale deposit balances.

    

    Key's provision for credit losses was $102 million, compared to $265 million in the fourth quarter of 2022 and $81 million in the third quarter of 2023. The decline from the year-ago period reflects a more stable economic outlook and the impact of current balance sheet optimization efforts. The increase from the prior quarter reflects credit migration partially offset by lower loan balances.

    Net loan charge-offs for the fourth quarter of 2023 totaled $76 million, or 0.26% of average total loans. These results compare to $41 million, or 0.14%, for the fourth quarter of 2022 and $71 million, or 0.24%, for the third quarter of 2023. Key’s allowance for credit losses was $1.8 billion, or 1.60% of total period-end loans at December 31, 2023, compared to 1.31% at December 31, 2022, and 1.54% at September 30, 2023.

    At December 31, 2023, Key’s nonperforming loans totaled $574 million, which represented 0.51% of period-end portfolio loans. These results compare to 0.32% at December 31, 2022, and 0.39% at September 30, 2023. Nonperforming assets at December 31, 2023, totaled $591 million, and represented 0.52% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.35% at December 31, 2022, and 0.41% at September 30, 2023.

Key’s estimated risk-based capital ratios, included in the following table, continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2023.

(a)December 31, 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 regulatory capital position remained strong in the fourth quarter of 2023. As shown in the preceding table, at December 31, 2023, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.0% and 11.7%, respectively. Key's tangible common equity ratio was 5.1% at December 31, 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 nine basis points.

    

    Key declared a dividend of $.205 per common share for the first quarter of 2024.

    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 $1 million for the fourth quarter of 2023, compared to $38 million for the year-ago quarter

•Taxable-equivalent net interest income decreased by $76 million, or 12.0%, compared to the fourth quarter of 2022, reflecting higher interest-bearing deposit costs

•Average loans and leases decreased $1.8 billion, or 4.1%, from the fourth quarter of 2022, driven by lower home equity and consumer direct loans

•Average deposits decreased $2.5 billion, or 2.9%, from the fourth quarter of 2022, reflecting changing client behavior due to higher interest rates

•Provision for credit losses decreased $100 million compared to the fourth quarter of 2022, driven by planned balance sheet optimization efforts and a more stable economic outlook

•Noninterest income increased $2 million from the year-ago quarter, driven by an increase in trust and investment services and consumer mortgage income

•Noninterest expense increased $75 million from the year-ago quarter, primarily reflective of a FDIC special assessment charge

•Key's Commercial Bank recorded net income attributable to Key of $143 million for the fourth quarter of 2023 compared to $225 million for the year-ago quarter

•Taxable-equivalent net interest income decreased by $42 million, or 8.6%, compared to the fourth 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, decreased $2.0 billion, or 2.7%, compared to the fourth quarter of 2022 driven by a decline in commercial and industrial loans as we de-emphasized non-relationship business

•Average deposit balances increased $2.5 billion compared to the fourth quarter of 2022, driven by our focus on growing deposits across our commercial businesses

•Provision for credit losses decreased $69 million compared to the fourth quarter of 2022, driven by planned balance sheet optimization efforts and a more stable economic outlook

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

•Noninterest expense increased $66 million from the fourth quarter of 2022, primarily due to the FDIC special assessment charge

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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 $188 billion at December 31, 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 1,200 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.

A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on January 18, 2024. A replay of the call will be available through January 28, 2024.

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.

*****

    

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)December 31, 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 December 31, 2023, September 30, 2023, and December 31, 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 December 31, 2023, September 30, 2023, and December 31, 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)
									12/31/2023			9/30/2023			12/31/2022
Assets
			Loans						$	112,606		$	115,544		$	119,394
			Loans held for sale						483			730			963
			Securities available for sale						37,185			35,839			39,117
			Held-to-maturity securities						8,575			8,853			8,710
			Trading account assets						1,142			1,325			829
			Short-term investments						10,817			7,871			2,432
			Other investments						1,244			1,356			1,308
						Total earning assets			172,052			171,518			172,753
			Allowance for loan and lease losses						(1,508)			(1,488)			(1,337)
			Cash and due from banks						941			766			887
			Premises and equipment						661			649			636
			Goodwill						2,752			2,752			2,752
			Other intangible assets						55			65			94
			Corporate-owned life insurance						4,383			4,381			4,369
			Accrued income and other assets						8,601			8,843			9,223
			Discontinued assets						344			365			436
						Total assets			$	188,281		$	187,851		$	189,813
Liabilities
			Deposits in domestic offices:
						Interest-bearing deposits			$	114,859		$	112,581		$	101,761
						Noninterest-bearing deposits			30,728			31,710			40,834
						Total deposits			145,587			144,291			142,595
			Federal funds purchased and securities sold under repurchase agreements						38			43			4,077
			Bank notes and other short-term borrowings						3,053			3,470			5,386
			Accrued expense and other liabilities						5,412			5,388			4,994
			Long-term debt						19,554			21,303			19,307
						Total liabilities			173,644			174,495			176,359
Equity
			Preferred stock						2,500			2,500			2,500
			Common shares						1,257			1,257			1,257
			Capital surplus						6,281			6,254			6,286
			Retained earnings						15,672			15,835			15,616
			Treasury stock, at cost						(5,844)			(5,851)			(5,910)
			Accumulated other comprehensive income (loss)						(5,229)			(6,639)			(6,295)
						Key shareholders’ equity			14,637			13,356			13,454
Total liabilities and equity									$	188,281		$	187,851		$	189,813
Common shares outstanding (000)									936,564			936,161			933,325

    

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

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