UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): January 17, 2019
KEYLOGOA05.JPG
 
(Exact name of registrant as specified in charter)
 
 
 
 
 
 
Ohio
 
001-11302
 
34-6542451
(State or other jurisdiction of incorporation)
 
Commission File Number
 
(I.R.S. Employer Identification No.)
 
 
 
127 Public Square, Cleveland, Ohio
 
44114-1306
(Address of principal executive offices)
 
(Zip Code)
 
(216) 689-3000
Registrant’s telephone number, including area code
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02
Results of Operations and Financial Condition .

On January 17, 2019 , KeyCorp issued a press release announcing its financial results for the three- and twelve- month period ended December 31, 2018 (the “Press Release”), and posted on its website its fourth quarter 2018 Supplemental Information Package (the “Supplemental Information Package”). The Press Release and Supplemental Information Package are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively.

The information in the preceding paragraph, as well as Exhibit 99.1 and Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”).

KeyCorp’s Consolidated Balance Sheets and Consolidated Statements of Income (collectively, the “Financial Statements”), included as part of the Press Release, are filed as Exhibit 99.3 to this report. Exhibit 99.3 is deemed “filed” for purposes of Section 18 of the Exchange Act and, therefore, may be incorporated by reference in filings under the Securities Act.

Item 9.01
Financial Statements and Exhibits .

(d)
Exhibits

The following exhibits are furnished, or filed in the case of Exhibit 99.3, herewith:

99.1

99.2

99.3






SIGNATURE
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
KEYCORP
 
 
(Registrant)
 
 
 
 
 
 
Date: January 17, 2019
 
/s/ Douglas M. Schosser
 
 
By: Douglas M. Schosser
 
 
Chief Accounting Officer
 
 
 







KEYLOGOICONONLYRGBA01.JPG

KEYCORP REPORTS FOURTH QUARTER 2018 NET INCOME OF $459 MILLION,
OR $.45 PER COMMON SHARE

4Q18 results included a net impact of $.03 per common share related to notable items: a pension settlement charge and efficiency initiative expenses

Sixth consecutive year of positive operating leverage with record full-year revenue of $6.4 billion

Cash efficiency ratio and return on average tangible common equity improved
over 300 basis points vs. the prior year
Strong credit quality: 4Q18 net charge-offs to average loans of .27%

Significant capital return: 62% increase in common share dividend and over $1.1 billion share repurchases in 2018

CLEVELAND, January 17, 2019 - KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $459 million, or $.45 per common share for the fourth quarter of 2018, compared to $468 million, or $.45 per common share, for the third quarter of 2018 and $181 million, or $.17 per common share, for the fourth quarter of 2017. During the fourth quarter of 2018, Key’s results included notable items resulting in a net impact of $.03 per common share, consisting of a pension settlement charge and efficiency initiative expenses. No notable items were reported in the third quarter of 2018, however, notable items resulting in a net impact of $.19 per common share were reported in the fourth quarter of 2017.

For the year ended December 31, 2018, net income from continuing operations attributable to Key common shareholders was $1.8 billion, or $1.70 per common share, compared to $1.2 billion, or $1.12 per common share, for the same period one year ago.

A4Q18ERQUOTEA03.JPG

Selected Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions, except per share data
 
 
 
 
Change 4Q18 vs.
 
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Income (loss) from continuing operations attributable to Key common shareholders
$
459

$
468

$
181

 
(1.9
)%
153.6
%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution
.45

.45

.17

 

164.7

Return on average tangible common equity from continuing operations (a)
16.40
%
16.81
%
6.35
%
 
N/A

N/A

Return on average total assets from continuing operations
1.37

1.40

.57

 
N/A

N/A

Common Equity Tier 1 ratio (b)
9.92

9.95

10.16

 
N/A

N/A

Book value at period end
$
13.90

$
13.33

$
13.09

 
4.3
 %
6.2
%
Net interest margin (TE) from continuing operations
3.16
%
3.18
%
3.09
%
 
N/A

N/A

 
 
 
 
 
 
 
 
(a)
The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Return on average tangible common equity from continuing operations.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b)
12/31/18 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Net interest income (TE)
$
1,008

$
993

$
952

 
1.5
%
5.9
 %
Noninterest income
645

609

656

 
5.9

(1.7
)
Total revenue
$
1,653

$
1,602

$
1,608

 
3.2
%
2.8
 %
 
 
 
 
 
 
 
TE = Taxable Equivalent
    
Taxable-equivalent net interest income was $1.0 billion for the fourth quarter of 2018 , and the net interest margin was 3.16%, compared to taxable-equivalent net interest income of $952 million and a net interest margin of 3.09% for the fourth quarter of 2017 , reflecting the benefit from higher interest rates and higher earning asset balances. Fourth quarter 2018 net interest income included $23 million of purchase accounting accretion, a decline of $15 million from the fourth quarter of 2017 .

Compared to the third quarter of 2018, taxable-equivalent net interest income increased by $15 million, and the net interest margin declined by two basis points. Net interest income benefited from higher earning asset balances, while the overall decline in the net interest margin reflects the impact of lower purchase accounting accretion.


Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Trust and investment services income
$
121

$
117

$
131

 
3.4
 %
(7.6
)%
Investment banking and debt placement fees
186

166

200

 
12.0

(7.0
)
Service charges on deposit accounts
84

85

89

 
(1.2
)
(5.6
)
Operating lease income and other leasing gains
28

35

27

 
(20.0
)
3.7

Corporate services income
58

52

56

 
11.5

3.6

Cards and payments income
68

69

77

 
(1.4
)
(11.7
)
Corporate-owned life insurance income
39

34

37

 
14.7

5.4

Consumer mortgage income
7

9

7

 
(22.2
)

Mortgage servicing fees
21

19

17

 
10.5

23.5

Other income
33

23

15

 
43.5

120.0

Total noninterest income
$
645

$
609

$
656

 
5.9
 %
(1.7
)%
 
 
 
 
 
 
 




KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 2


Key’s noninterest income was $645 million for the fourth quarter of 2018 , compared to $656 million for the year-ago quarter. Trust and investment services income declined $10 million, related to the sale of Key Insurance and Benefits Services in the second quarter of 2018. Cards and payments income and service charges on deposit accounts were impacted by the 2018 adoption of the revenue recognition accounting standard. Excluding the revenue recognition changes, both of these line items grew from the prior year. Investment banking and debt placement fees were lower, following a record fourth quarter in 2017. Partially offsetting these declines were increases in other income and mortgage servicing fees.

Compared to the third quarter of 2018, noninterest income increase d by $36 million, driven by momentum in many of Key's core fee-based businesses. Investment banking and debt placement fees increased $20 million, largely related to strength in commercial mortgage banking and advisory fees. Corporate services income reflected higher derivatives and trading income, and trust and investment services income grew, largely due to stronger brokerage commissions.

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Personnel expense
$
576

$
553

$
609

 
4.2
%
(5.4
)%
Nonpersonnel expense
436

411

489

 
6.1

(10.8
)
Total noninterest expense
$
1,012

$
964

$
1,098

 
5.0
%
(7.8
)%
 
 
 
 
 
 
 
 
Key’s noninterest expense was $1.0 billion for the fourth quarter of 2018 , compared to $1.1 billion in the year-ago quarter. Personnel expense declined year-over-year, driven by lower incentive compensation and employee benefits costs, partially offset by increased severance expense related to Key's efficiency initiative. Net occupancy and marketing expenses also declined, largely related to merger-related charges in the fourth quarter of 2017. In the fourth quarter of 2018, Key's FDIC assessment costs decreased, due to the elimination of the FDIC quarterly surcharge.

Compared to the third quarter of 2018, noninterest expense increase d by $48 million. The increase was primarily driven by notable items in the quarter - efficiency initiative expenses of $24 million and a $17 million pension settlement charge (reported in other expense). Business services and professional fees and other expense increased, but were partially offset by the benefit from the FDIC surcharge elimination.


BALANCE SHEET HIGHLIGHTS

Average Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Commercial and industrial (a)
$
45,129

$
44,749

$
41,289

 
.8
 %
9.3
 %
Other commercial loans
20,899

20,471

21,040

 
2.1

(.7
)
Home equity loans
11,234

11,415

12,128

 
(1.6
)
(7.4
)
Other consumer loans
12,026

11,832

11,549

 
1.6

4.1

Total loans
$
89,288

$
88,467

$
86,006

 
.9
 %
3.8
 %
 
 
 
 
 
 
 
(a)
Commercial and industrial average loan balances include $132 million, $128 million, and $119 million of assets from commercial credit cards at December 31, 2018 , September 30, 2018 , and December 31, 2017 , respectively.
    
Average loans were $89.3 billion for the fourth quarter of 2018 , an increase of $3.3 billion compared to the fourth quarter of 2017 , reflecting broad-based growth in commercial and industrial loans, partially offset by higher paydowns in home equity lines of credit.




KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 3


Compared to the third quarter of 2018 , average loans increased by $821 million, driven by growth in commercial real estate and commercial and industrial loans.

Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Non-time deposits
$
94,480

$
92,414

$
92,251

 
2.2
%
2.4
%
Certificates of deposit ($100,000 or more)
8,217

8,186

6,776

 
.4

21.3

Other time deposits
5,255

5,026

4,771

 
4.6

10.1

Total deposits
$
107,952

$
105,626

$
103,798

 
2.2
%
4.0
%
 
 
 
 
 
 
 
Cost of total deposits
.64
%
.53
%
.31
%
 
N/A

N/A

 
 
 
 
 
 
 
N/A = Not Applicable

Average deposits totaled $108.0 billion for the fourth quarter of 2018 , an increase of $4.2 billion compared to the year-ago quarter, reflecting growth in higher-yielding deposit products, as well as strength in Key’s retail banking franchise and growth from commercial relationships.

Compared to the third quarter of 2018 , average deposits increase d by $2.3 billion, driven primarily by the penetration of existing retail and commercial relationships, as well as short-term and seasonal deposit inflows.

ASSET QUALITY
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Net loan charge-offs
$
60

$
60

$
52

 

15.4
%
Net loan charge-offs to average total loans
.27
%
.27
%
.24
%
 
N/A

N/A

Nonperforming loans at period end (a)
$
542

$
645

$
503

 
(16.0
)%
7.8

Nonperforming assets at period end (a)
577

674

534

 
(14.4
)
8.1

Allowance for loan and lease losses
883

887

877

 
(.5
)
.7

Allowance for loan and lease losses to nonperforming loans (a)
162.9
%
137.5
%
174.4
%
 
N/A

N/A

Provision for credit losses
$
59

$
62

$
49

 
(4.8
)%
20.4
%
 
 
 
 
 
 
 
(a)
Nonperforming loan balances exclude $575 million, $606 million, and $738 million of purchased credit impaired loans at December 31, 2018 , September 30, 2018 , and December 31, 2017 , respectively.
N/A = Not Applicable

Key’s provision for credit losses was $59 million for the fourth quarter of 2018 , compared to $49 million for the fourth quarter of 2017 and $62 million for the third quarter of 2018. Key’s allowance for loan and lease losses was $883 million, or .99% of total period-end loans at December 31, 2018 , compared to 1.01% at December 31, 2017 , and .99% at September 30, 2018 .

Net loan charge-offs for the fourth quarter of 2018 totaled $60 million, or .27% of average total loans. These results compare to $52 million, or .24% , for the fourth quarter of 2017 , and $60 million, or .27% , for the third quarter of 2018 .

At December 31, 2018 , Key’s nonperforming loans totaled $542 million, a decline of $103 million from the prior quarter, which represented .61% of period-end portfolio loans. These results compare to .58% at December 31, 2017 , and .72% at September 30, 2018 . Nonperforming assets at December 31, 2018 , totaled $577 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .62% at December 31, 2017 , and .75% at September 30, 2018 .
 
CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2018 .
 



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 4


Capital Ratios
 
 
 
 
 
 
 
 
12/31/2018
9/30/2018
12/31/2017
Common Equity Tier 1 (a)
9.92
%
9.95
%
10.16
%
Tier 1 risk-based capital (a)
11.07

11.11

11.01

Total risk based capital (a)
12.88

12.99

12.92

Tangible common equity to tangible assets (b)
8.30

8.05

8.23

Leverage (a)
9.93

10.03

9.73

 
 
 
 
(a)
12/31/2018 ratio is estimated.
(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. See below for further information on the Regulatory Capital Rules.

Key's capital position remained strong in the fourth quarter of 2018. As shown in the preceding table, at December 31, 2018 , Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.92% and 11.07% , respectively. Key's tangible common equity ratio was 8.30% at December 31, 2018 .

As a “standardized approach” banking organization, Key’s mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”) began on January 1, 2015, subject to transitional provisions. Key’s estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 9.83% at December 31, 2018 . This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.

Summary of Changes in Common Shares Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
in thousands
 
 
 
 
Change 4Q18 vs.
 
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Shares outstanding at beginning of period
1,034,287

1,058,944

1,079,039

 
(2.3
)%
(4.1
)%
Open market repurchases and return of shares under employee compensation plans
(15,216
)
(25,418
)
(10,617
)
 
(40.1
)
43.3

Shares issued under employee compensation plans (net of cancellations)
432

761

662

 
(43.2
)
(34.7
)
 
Shares outstanding at end of period
1,019,503

1,034,287

1,069,084

 
(1.4
)%
(4.6
)%
 
 
 
 
 
 
 
 

Consistent with Key's 2018 Capital Plan, during the fourth quarter of 2018, Key declared a dividend of $.17 per common share and completed $278 million of common share repurchases. Key's remaining share repurchase authorization consistent with the 2018 Capital Plan (which continues through the second quarter of 2019) is $405 million.

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 4Q18 vs.
 
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Revenue from continuing operations (TE)
 
 
 
 
 
 
Key Community Bank
$
1,022

$
994

$
961

 
2.8
%
6.3
 %
Key Corporate Bank
581

574

605

 
1.2

(4.0
)
Other Segments
53

24

41

 
120.8

29.3

 
Total segments
1,656

1,592

1,607

 
4.0

3.0

Reconciling Items
(3
)
10

1

 
N/M

N/M

 
Total
$
1,653

$
1,602

$
1,608

 
3.2
%
2.8
 %
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key
 
 
 
 
 
 
Key Community Bank
$
261

$
241

$
152

 
8.3
%
71.7
 %
Key Corporate Bank
215

199

223

 
8.0

(3.6
)
Other Segments
45

22

48

 
104.5

(6.3
)
 
Total segments
521

462

423

 
12.8
%
23.2

Reconciling Items
(39
)
20

(228
)
 
N/M

N/M

 
Total
$
482

$
482

$
195

 

147.2
 %
 
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful





KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 5


Key Community Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
744

$
726

$
674

 
2.5
 %
10.4
 %
Noninterest income
278

268

287

 
3.7

(3.1
)
Total revenue (TE)
1,022

994

961

 
2.8

6.3

Provision for credit losses
48

43

57

 
11.6

(15.8
)
Noninterest expense
633

635

665

 
(.3
)
(4.8
)
Income (loss) before income taxes (TE)
341

316

239

 
7.9

42.7

Allocated income taxes (benefit) and TE adjustments
80

75

87

 
6.7

(8.0
)
Net income (loss) attributable to Key
$
261

$
241

$
152

 
8.3
 %
71.7
 %
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
47,976

$
47,862

$
47,408

 
.2
 %
1.2
 %
Total assets
51,881

51,740

51,398

 
.3

.9

Deposits
84,288

82,259

80,352

 
2.5

4.9

 
 
 
 
 
 
 
Assets under management at period end
$
36,775

$
40,575

$
39,588

 
(9.4
)%
(7.1
)%
 
 
 
 
 
 
 
TE = Taxable Equivalent





KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 6


Additional Key Community Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
90

$
90

$
87

 

3.4
 %
Service charges on deposit accounts
72

72

77

 

(6.5
)
Cards and payments income
61

59

67

 
3.4
 %
(9.0
)
Other noninterest income
55

47

56

 
17.0

(1.8
)
Total noninterest income
$
278

$
268

$
287

 
3.7
 %
(3.1
)%
 
 
 
 
 
 
 
Average deposit balances
 
 
 
 
 
 
NOW and money market deposit accounts
$
47,310

$
45,967

$
44,415

 
2.9
 %
6.5
 %
Savings deposits
4,777

4,923

5,090

 
(3.0
)
(6.1
)
Certificates of deposit ($100,000 or more)
6,169

5,608

4,628

 
10.0

33.3

Other time deposits
5,244

5,019

4,765

 
4.5

10.1

Noninterest-bearing deposits
20,788

20,742

21,454

 
.2

(3.1
)
Total deposits
$
84,288

$
82,259

$
80,352

 
2.5
 %
4.9
 %
 
 
 
 
 
 
 
Home equity loans
 
 
 
 
 
 
Average balance
$
11,144

$
11,317

$
12,005

 
 
 
Combined weighted-average loan-to-value ratio (at date of origination)
70
%
70
%
70
%
 
 
 
Percent first lien positions
60

60

60

 
 
 
 
 
 
 
 
 
 
Other data
 
 
 
 
 
 
Branches
1,159

1,166

1,197

 
 
 
Automated teller machines
1,505

1,518

1,572

 
 
 
 
 
 
 
 
 
 

Key Community Bank Summary of Operations (4Q18 vs. 4Q17)

Positive operating leverage compared to the prior year
Net income increased $109 million, or 71.7%, from the prior year
Average commercial and industrial loans increased $1.0 billion, or 5.6%, from the prior year

Key Community Bank recorded net income attributable to Key of $261 million for the fourth quarter of 2018, compared to $152 million for the year-ago quarter, benefiting from momentum in Key's core businesses, expense discipline, and a lower tax rate as a result of tax reform.

Taxable-equivalent net interest income increased by $70 million, or 10.4%, from the fourth quarter of 2017. The increase in net interest income was primarily attributable to the benefit from higher interest rates and loan growth, partially offset by lower purchase accounting accretion. Average loans and leases increased $568 million, or 1.2%, largely driven by a $1.0 billion, or 5.6%, increase in commercial and industrial loans. Additionally, average deposits increased $3.9 billion, or 4.9%, from the fourth quarter of 2017 due to strength in our relationship strategy.

Noninterest income decreased $9 million, or 3.1%, from the year-ago quarter driven by lower service charges on deposit accounts and cards and payments income, which were impacted by revenue recognition changes. Excluding the impact of the accounting change, both businesses grew from the prior period, related to continued household growth.

The provision for credit losses decreased by $9 million, or 15.8%, from the fourth quarter of 2017. Net loan charge-offs increased $7 million from the fourth quarter of 2017 driven by a larger balance sheet.

Noninterest expense decreased by $32 million, or 4.8%, from the year-ago quarter. Both personnel and nonpersonnel expense declined, driven by strong expense discipline across the businesses while continuing to invest strategically for growth.





KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 7


Key Corporate Bank
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Summary of operations
 
 
 
 
 
 
Net interest income (TE)
$
272

$
273

$
284

 
(.4
)%
(4.2
)%
Noninterest income
309

301

321

 
2.7

(3.7
)
Total revenue (TE)
581

574

605

 
1.2

(4.0
)
Provision for credit losses
12

20

(6
)
 
(40.0
)
N/M

Noninterest expense
329

316

352

 
4.1

(6.5
)
Income (loss) before income taxes (TE)
240

238

259

 
.8

(7.3
)
Allocated income taxes and TE adjustments
25

39

36

 
(35.9
)
(30.6
)
Net income (loss) attributable to Key
$
215

$
199

$
223

 
8.0
 %
(3.6
)%
 
 
 
 
 
 
 
Average balances
 
 
 
 
 
 
Loans and leases
$
40,438

$
39,714

$
37,457

 
1.8
 %
8.0
 %
Loans held for sale
2,249

1,042

1,345

 
115.8

67.2

Total assets
48,853

46,860

44,501

 
4.3

9.8

Deposits
21,793

21,056

21,558

 
3.5
 %
1.1
 %
 
 
 
 
 
 
 
TE = Taxable Equivalent, N/M = Not Meaningful




KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 8


Additional Key Corporate Bank Data
 
 
 
 
 
 
 
 
 
 
 
 
 
dollars in millions
 
 
 
 
Change 4Q18 vs.
 
4Q18
3Q18
4Q17
 
3Q18
4Q17
Noninterest income
 
 
 
 
 
 
Trust and investment services income
$
30

$
27

$
33

 
11.1
 %
(9.1
)%
Investment banking and debt placement fees
178

162

195

 
9.9

(8.7
)
Operating lease income and other leasing gains
24

34

25

 
(29.4
)
(4.0
)
 
 
 
 
 
 
 
Corporate services income
43

37

40

 
16.2

7.5

Service charges on deposit accounts
12

13

12

 
(7.7
)

Cards and payments income
7

10

10

 
(30.0
)
(30.0
)
Payments and services income
62

60

62

 
3.3


 
 
 
 
 
 
 
Mortgage servicing fees
18

15

15

 
20.0

20.0

Other noninterest income
(3
)
3

(9
)
 
N/M

N/M

Total noninterest income
$
309

$
301

$
321

 
2.7
 %
(3.7
)%
 
 
 
 
 
 
 
N/M = Not Meaningful

Key Corporate Bank Summary of Operations ( 4Q18 vs. 4Q17 )

Record year for investment banking and debt placement fees
Commercial and industrial loans up $2.8 billion, or 12.7%, from prior year

            Key Corporate Bank recorded net income attributable to Key of $215 million for the fourth quarter of 2018, compared to $223 million for the year-ago quarter.

Taxable-equivalent net interest income decreased by $12 million, or 4.2%, compared to the fourth quarter of 2017.  This decline is related to lower purchase accounting accretion, as well as loan spread compression. Average loan and lease balances increased $3 billion, or 8%, from the year-ago quarter, driven by broad-based growth in commercial and industrial loans. Average deposit balances increased $235 million, or 1.1%, from the year-ago quarter, driven by growth in core deposits.

            Noninterest income was down $12 million, or 3.7%, from the prior year. Investment banking and debt placement fees decreased $17 million, or 8.7%, from a record quarter in the year-ago period. This decrease was partially offset by increases in other noninterest income of $6 million related to higher gains on certain tax-advantaged assets, as well as higher mortgage servicing fees of $3 million.

            During the fourth quarter of 2018, the provision for credit losses increased $18 million compared to the fourth quarter of 2017, mostly related to loan growth.

            Noninterest expense decreased by $23 million, or 6.5%, from the fourth quarter of 2017. The decrease from the prior year was largely driven by lower personnel expense. The prior year also had higher impairments on certain tax-advantaged assets related to tax reform. These decreases are slightly offset by higher volumes driving increased operating lease expense.


Other Segments

Other Segments consist of Corporate Treasury, Key’s Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $45 million for the fourth quarter of 2018 , compared to $48 million for the same period last year.

*****

KeyCorp's roots trace back 190 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 $139.6 billion at December 31, 2018 .

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 over 1,100 branches and more than 1,500 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.



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 9



CONTACTS:
 
 
 
ANALYSTS
MEDIA
Vernon L. Patterson
Susan Donlan
216.689.0520
216.471.3133
Vernon_Patterson@KeyBank.com
Susan_E_Donlan@KeyBank.com
 
 Twitter: @keybank_news
Melanie S. Kaiser
 
216.689.4545
 
Melanie_S_Kaiser@KeyBank.com
 
 
 
Emily J. Mills
 
216.689.7781
 
emills@key.com
 
 
 
INVESTOR
KEY MEDIA
RELATIONS: www.key.com/ir
NEWSROOM: www.key.com/newsroom
  
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, 2017, as well as in KeyCorp’s subsequent SEC filings, all of which have been filed with the Securities and Exchange Commission (the “SEC”) and are 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 reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive regulation of the U.S. financial services industry. 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/ir at 9:00 a.m. ET, on Thursday, January 17, 2019 . An audio replay of the call will be available through January 27, 2019.
 
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 Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 10





KeyCorp
Fourth Quarter 2018
Financial Supplement


    
Page
 
Financial Highlights
GAAP to Non-GAAP Reconciliation
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
Noninterest Expense
Personnel Expense
Loan Composition
Loans Held for Sale Composition
Summary of Changes in Loans Held for Sale
Summary of Loan and Lease Loss Experience From Continuing Operations
Asset Quality Statistics From Continuing Operations
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
Summary of Changes in Nonperforming Loans From Continuing Operations
Line of Business Results



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 11


Financial Highlights
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
 
 
12/31/2018
9/30/2018
12/31/2017
Summary of operations
 
 
 
 
Net interest income (TE)
$
1,008

$
993

$
952

 
Noninterest income
645

609

656

 
 
Total revenue (TE)
1,653

1,602

1,608

 
Provision for credit losses
59

62

49

 
Noninterest expense
1,012

964

1,098

 
Income (loss) from continuing operations attributable to Key
482

482

195

 
Income (loss) from discontinued operations, net of taxes (a)
2


1

 
Net income (loss) attributable to Key
484

482

196

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
459

468

181

 
Income (loss) from discontinued operations, net of taxes (a)
2


1

 
Net income (loss) attributable to Key common shareholders
461

468

182

 
 
 
 
 
 
Per common share
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.45

$
.45

$
.17

 
Income (loss) from discontinued operations, net of taxes (a)



 
Net income (loss) attributable to Key common shareholders (b)
.45

.45

.17

 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
.45

.45

.17

 
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)



 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
.45

.45

.17

 
 
 
 
 
 
 
Cash dividends declared
.17

.17

.105

 
Book value at period end
13.90

13.33

13.09

 
Tangible book value at period end
11.14

10.59

10.35

 
Market price at period end
14.78

19.89

20.17

 
 
 
 
 
 
Performance ratios
 
 
 
 
From continuing operations:
 
 
 
 
Return on average total assets
1.37
%
1.40
%
.57
%
 
Return on average common equity
13.07

13.36

5.04

 
Return on average tangible common equity (c)
16.40

16.81

6.35

 
Net interest margin (TE)
3.16

3.18

3.09

 
Cash efficiency ratio (c)
59.9

58.7

66.7

 
 
 
 
 
 
 
From consolidated operations:
 
 
 
 
Return on average total assets
1.37
%
1.39
%
.57
%
 
Return on average common equity
13.13

13.36

5.07

 
Return on average tangible common equity (c)
16.47

16.81

6.39

 
Net interest margin (TE)
3.14

3.16

3.07

 
Loan to deposit (d)
85.6

87.0

84.4

 
 
 
 
 
 
Capital ratios at period end
 
 
 
 
Key shareholders’ equity to assets
11.17
%
10.96
%
10.91
%
 
Key common shareholders’ equity to assets
10.15

9.93

10.17

 
Tangible common equity to tangible assets (c)
8.30

8.05

8.23

 
Common Equity Tier 1  (e)
9.92

9.95

10.16

 
Tier 1 risk-based capital (e)
11.07

11.11

11.01

 
Total risk-based capital (e)
12.88

12.99

12.92

 
Leverage (e)
9.93

10.03

9.73

 
 
 
 
 
 
Asset quality — from continuing operations
 
 
 
 
Net loan charge-offs
$
60

$
60

$
52

 
Net loan charge-offs to average loans
.27
%
.27
%
.24
%
 
Allowance for loan and lease losses
$
883

$
887

$
877

 
Allowance for credit losses
946

947

934

 
Allowance for loan and lease losses to period-end loans
.99
%
.99
%
1.01
%
 
Allowance for credit losses to period-end loans
1.06

1.06

1.08

 
Allowance for loan and lease losses to nonperforming loans (f)
162.9

137.5

174.4

 
Allowance for credit losses to nonperforming loans (f)
174.5

146.8

185.7

 
Nonperforming loans at period-end (f)
$
542

$
645

$
503

 
Nonperforming assets at period-end (f)
577

674

534

 
Nonperforming loans to period-end portfolio loans (f)
.61
%
.72
%
.58
%
 
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (f)
.64

.75

.62

 
 
 
 
 
 
Trust assets
 
 
 
 
Assets under management
$
36,775

$
40,575

$
39,588

 
 
 
 
 
 
Other data
 
 
 
 
Average full-time equivalent employees
17,664

18,150

18,379

 
Branches
1,159

1,166

1,197

 
 
 
 
 
 
Taxable-equivalent adjustment
$
8

$
7

$
14





KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 12


Financial Highlights (continued)
(dollars in millions, except per share amounts)
 
 
Twelve months ended
 
 
12/31/2018
12/31/2017
Summary of operations
 
 
 
Net interest income (TE)
$
3,940

$
3,830

 
Noninterest income
2,515

2,478

 
Total revenue (TE)
6,455

6,308

 
Provision for credit losses
246

229

 
Noninterest expense
3,975

4,098

 
Income (loss) from continuing operations attributable to Key
1,859

1,289

 
Income (loss) from discontinued operations, net of taxes (a)
7

7

 
Net income (loss) attributable to Key
1,866

1,296

 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
1,793

$
1,219

 
Income (loss) from discontinued operations, net of taxes (a)
7

7

 
Net income (loss) attributable to Key common shareholders
1,800

1,226

 
 
 
 
Per common share
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
1.72

$
1.13

 
Income (loss) from discontinued operations, net of taxes (a)
.01

.01

 
Net income (loss) attributable to Key common shareholders (b)
1.73

1.14

 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution
1.70

1.12

 
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)
.01

.01

 
Net income (loss) attributable to Key common shareholders — assuming dilution (b)
1.71

1.13

 
 
 
 
 
Cash dividends paid
.565

.38

 
 
 
 
Performance ratios
 
 
 
From continuing operations:
 
 
 
Return on average total assets
1.36
%
.96
%
 
Return on average common equity
12.88

8.65

 
Return on average tangible common equity (c)
16.22

10.84

 
Net interest margin (TE)
3.17

3.17

 
Cash efficiency ratio (c)
60.0

63.5

 
 
 
 
 
From consolidated operations:
 
 
 
Return on average total assets
1.35
%
.96
%
 
Return on average common equity
12.93

8.70

 
Return on average tangible common equity (c)
16.28

10.90

 
Net interest margin (TE)
3.15

3.15

 
 
 
 
Asset quality — from continuing operations
 
 
 
Net loan charge-offs
$
234

$
208

 
Net loan charge-offs to average total loans
.26
%
.24
%
 
 
 
 
Other data
 
 
 
Average full-time equivalent employees
18,180

18,415

 
 
 
 
Taxable-equivalent adjustment
31

53

(a)
In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.
(b)
Earnings per share may not foot due to rounding.
(c)
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. For further information on the Regulatory Capital Rules, see the “Capital” section of this release.
(d)
Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(e)
December 31, 2018 , ratio is estimated.
(f)
Nonperforming loan balances exclude $575 million , $606 million , and $738 million of purchased credit impaired loans at December 31, 2018 , September 30, 2018 , and December 31, 2017 , respectively.
 
 
 
 
 
 




KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 13


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,” “Common Equity Tier 1,” “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. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, “Common Equity Tier 1,” a non-GAAP financial measure. The mandatory compliance date for Key as a “standardized approach” banking organization began on January 1, 2015, subject to transitional provisions.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key’s intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key’s results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
 
Three months ended
 
Twelve months ended
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Tangible common equity to tangible assets at period-end
 
 
 
 
 
 
Key shareholders’ equity (GAAP)
$
15,595

$
15,208

$
15,023

 
 
 
Less: Intangible assets (a)
2,818

2,838

2,928

 
 
 
Preferred Stock  (b)
1,421

1,421

1,009

 
 
 
Tangible common equity (non-GAAP)
$
11,356

$
10,949

$
11,086

 
 
 
Total assets (GAAP)
$
139,613

$
138,805

$
137,698

 
 
 
Less: Intangible assets  (a)
2,818

2,838

2,928

 
 
 
Tangible assets (non-GAAP)
$
136,795

$
135,967

$
134,770

 
 
 
Tangible common equity to tangible assets ratio (non-GAAP)
8.30
%
8.05
%
8.23
%
 
 
 
Pre-provision net revenue
 
 
 
 
 
 
Net interest income (GAAP)
$
1,000

$
986

$
938

 
$
3,909

$
3,777

Plus: Taxable-equivalent adjustment
8

7

14

 
31

53

Noninterest income
645

609

656

 
2,515

2,478

Less: Noninterest expense
1,012

964

1,098

 
3,975

4,098

Pre-provision net revenue from continuing operations (non-GAAP)
$
641

$
638

$
510

 
$
2,480

$
2,210

Average tangible common equity
 
 
 
 
 
 
Average Key shareholders' equity (GAAP)
$
15,384

$
15,210

$
15,268

 
$
15,131

$
15,224

Less: Intangible assets (average) (c)
2,828

2,848

2,939

 
2,869

2,837

Preferred stock (average)
1,450

1,316

1,025

 
1,205

1,137

Average tangible common equity (non-GAAP)
$
11,106

$
11,046

$
11,304

 
$
11,057

$
11,250

Return on average tangible common equity from continuing operations
 
 
 
 

 
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)
$
459

$
468

$
181

 
$
1,793

$
1,219

Average tangible common equity (non-GAAP)
11,106

11,046

11,304

 
11,057

11,250

 
 
 
 
 
 
 
Return on average tangible common equity from continuing operations (non-GAAP)
16.40
%
16.81
%
6.35
%
 
16.22
%
10.84
%
Return on average tangible common equity consolidated
 
 
 
 
 
 
Net income (loss) attributable to Key common shareholders (GAAP)
$
461

$
468

$
182

 
$
1,800

$
1,226

Average tangible common equity (non-GAAP)
11,106

11,046

11,304

 
11,057

11,250

 
 
 
 
 
 
 
Return on average tangible common equity consolidated (non-GAAP)
16.47
%
16.81
%
6.39
%
 
16.28
%
10.90
%
Cash efficiency ratio
 
 
 
 
 
 
Noninterest expense (GAAP)
$
1,012

$
964

$
1,098

 
$
3,975

$
4,098

Less: Intangible asset amortization
22

23

26

 
99

95

Adjusted noninterest expense (non-GAAP)
$
990

$
941

$
1,072

 
$
3,876

$
4,003

 
 
 
 
 
 
 
Net interest income (GAAP)
$
1,000

$
986

$
938

 
$
3,909

$
3,777

Plus: Taxable-equivalent adjustment
8

7

14

 
31

53

Noninterest income
645

609

656

 
2,515

2,478

Total taxable-equivalent revenue (non-GAAP)
$
1,653

$
1,602

$
1,608

 
$
6,455

$
6,308

 
 
 
 
 
 
 
Cash efficiency ratio (non-GAAP)
59.9
%
58.7
%
66.7
%
 
60.0
%
63.5
%




KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 14


GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
 
 
 
Three months ended
 
 
 
12/31/2018
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
 
 
Common Equity Tier 1 under current RCR
$
12,273

 
Adjustments from current RCR to the fully phased-in RCR:
 
 
 
Deferred tax assets and other intangible assets (d)

 
 
Common Equity Tier 1 anticipated under the fully phased-in RCR (e)
$
12,273

 
 
 
 
 
Net risk-weighted assets under current RCR
$
123,719

 
Adjustments from current RCR to the fully phased-in RCR:
 
 
 
Mortgage servicing assets (f)
809

 
 
Deferred tax assets
276

 
 
All other assets

 
 
Total risk-weighted assets anticipated under the fully phased-in RCR (e)
$
124,804

 
 
 
 
 
Common Equity Tier 1 ratio under the fully phased-in RCR (e)
9.83
%

(a)
For the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , intangible assets exclude $14 million , $17 million , and $26 million , respectively, of period-end purchased credit card receivables.
(b)
Net of capital surplus.
(c)
For the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , average intangible assets exclude $15 million , $18 million , and $28 million , respectively, of average purchased credit card receivables. For the twelve months ended December 31, 2018 , and December 31, 2017 , average intangible assets exclude $20 million and $34 million , respectively, of average purchased credit card receivables.
(d)
Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule.
(e)
The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies’ Regulatory Capital Rules (fully phased-in); Key is subject to the Regulatory Capital Rules under the “standardized approach.”
(f)
Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.
GAAP = U.S. generally accepted accounting principles




KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 15


Consolidated Balance Sheets
(dollars in millions)
 
 
 
 
 
 
 
 
 
12/31/2018

9/30/2018

12/31/2017

Assets
 
 
 
 
Loans
$
89,552

$
89,268

$
86,405

 
Loans held for sale
1,227

1,618

1,107

 
Securities available for sale
19,428

18,341

18,139

 
Held-to-maturity securities
11,519

11,869

11,830

 
Trading account assets
849

958

836

 
Short-term investments
2,562

2,272

4,447

 
Other investments
666

681

726

 
 
Total earning assets
125,803

125,007

123,490

 
Allowance for loan and lease losses
(883
)
(887
)
(877
)
 
Cash and due from banks
678

319

671

 
Premises and equipment
882

891

930

 
Operating lease assets
993

930

821

 
Goodwill
2,516

2,516

2,538

 
Other intangible assets
316

338

416

 
Corporate-owned life insurance
4,171

4,156

4,132

 
Accrued income and other assets
4,037

4,378

4,237

 
Discontinued assets
1,100

1,157

1,340

 
 
Total assets
$
139,613

138,805

137,698

 
 
 
 
 
 
Liabilities
 
 
 
 
Deposits in domestic offices:
 
 
 
 
 
NOW and money market deposit accounts
$
59,918

$
57,219

$
53,627

 
 
Savings deposits
4,854

4,948

6,296

 
 
Certificates of deposit ($100,000 or more)
7,913

8,453

6,849

 
 
Other time deposits
5,332

5,130

4,798

 
 
Total interest-bearing deposits
78,017

75,750

71,570

 
 
Noninterest-bearing deposits
29,292

30,030

33,665

 
 
Total deposits
107,309

105,780

105,235

 
Federal funds purchased and securities sold under repurchase agreements 
319

1,285

377

 
Bank notes and other short-term borrowings
544

637

634

 
Accrued expense and other liabilities
2,113

2,044

2,094

 
Long-term debt
13,732

13,849

14,333

 
 
Total liabilities
124,017

123,595

122,673

 
 
 
 
 
 
Equity
 
 
 
 
Preferred stock
1,450

1,450

1,025

 
Common shares
1,257

1,257

1,257

 
Capital surplus
6,331

6,315

6,335

 
Retained earnings
11,556

11,262

10,335

 
Treasury stock, at cost
(4,181
)
(3,910
)
(3,150
)
 
Accumulated other comprehensive income (loss)
(818
)
(1,166
)
(779
)
 
 
Key shareholders’ equity
15,595

15,208

15,023

 
Noncontrolling interests
1

2

2

 
 
Total equity
15,596

15,210

15,025

Total liabilities and equity
$
139,613

$
138,805

$
137,698

 
 
 
 
 
 
Common shares outstanding (000)
1,019,503

1,034,287

1,069,084







KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 16


Consolidated Statements of Income
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
Twelve months ended
 
 
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Interest income
 
 
 
 
 
 
 
Loans
$
1,058

$
1,025

$
924

 
$
4,023

$
3,677

 
Loans held for sale
26

12

13

 
66

52

 
Securities available for sale
115

102

93

 
409

369

 
Held-to-maturity securities
71

72

61

 
284

222

 
Trading account assets
8

7

6

 
29

27

 
Short-term investments
15

15

12

 
46

26

 
Other investments
4

6

5

 
21

17

 
 
Total interest income
1,297

1,239

1,114

 
4,878

4,390

Interest expense
 
 
 
 
 
 
 
Deposits
174

140

82

 
517

278

 
Federal funds purchased and securities sold under repurchase agreements
1

1


 
11

1

 
Bank notes and other short-term borrowings
4

4

3

 
21

15

 
Long-term debt
118

108

91

 
420

319

 
 
Total interest expense
297

253

176

 
969

613

Net interest income
1,000

986

938

 
3,909

3,777

Provision for credit losses
59

62

49

 
246

229

Net interest income after provision for credit losses
941

924

889

 
3,663

3,548

Noninterest income
 
 
 
 
 
 
 
Trust and investment services income
121

117

131

 
499

535

 
Investment banking and debt placement fees
186

166

200

 
650

603

 
Service charges on deposit accounts
84

85

89

 
349

357

 
Operating lease income and other leasing gains
28

35

27

 
89

96

 
Corporate services income
58

52

56

 
233

219

 
Cards and payments income
68

69

77

 
270

287

 
Corporate-owned life insurance income
39

34

37

 
137

131

 
Consumer mortgage income
7

9

7

 
30

26

 
Mortgage servicing fees
21

19

17

 
82

71

 
Other income  (a)
33

23

15

 
176

153

 
 
Total noninterest income
645

609

656

 
2,515

2,478

Noninterest expense
 
 
 
 
 
 
 
Personnel
576

553

609

 
2,309

2,278

 
Net occupancy
75

76

92

 
308

331

 
Computer processing
55

52

54

 
210

225

 
Business services and professional fees
49

43

52

 
184

192

 
Equipment
26

27

31

 
105

114

 
Operating lease expense
32

31

28

 
120

92

 
Marketing
25

26

35

 
102

120

 
FDIC assessment
9

21

20

 
72

82

 
Intangible asset amortization
22

23

26

 
99

95

 
OREO expense, net
1

3

3

 
6

11

 
Other expense
142

109

148

 
460

558

 
 
Total noninterest expense
1,012

964

1,098

 
3,975

4,098

Income (loss) from continuing operations before income taxes
574

569

447

 
2,203

1,928

 
Income taxes
92

87

251

 
344

637

Income (loss) from continuing operations
482

482

196

 
1,859

1,291

 
Income (loss) from discontinued operations, net of taxes
2


1

 
7

7

Net income (loss)
484

482

197

 
1,866

1,298

 
Less: Net income (loss) attributable to noncontrolling interests


1

 

2

Net income (loss) attributable to Key
$
484

$
482

$
196

 
$
1,866

$
1,296

 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
459

$
468

$
181

 
$
1,793

$
1,219

Net income (loss) attributable to Key common shareholders
461

468

182

 
1,800

1,226

Per common share
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.45

$
.45

$
.17

 
$
1.72

$
1.13

Income (loss) from discontinued operations, net of taxes



 
.01

.01

Net income (loss) attributable to Key common shareholders (b)
.45

.45

.17

 
1.73

1.14

Per common share — assuming dilution
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.45

$
.45

$
.17

 
$
1.70

$
1.12

Income (loss) from discontinued operations, net of taxes



 
.01

.01

Net income (loss) attributable to Key common shareholders  (b)
.45

.45

.17

 
1.71

1.13

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
.17

$
.17

$
.105

 
$
.565

$
.38

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (000)
1,018,614

1,036,480

1,062,348

 
1,040,890

1,072,077

 
Effect of common share options and other stock awards
11,803

13,497

16,982

 
13,792

16,515

Weighted-average common shares and potential common shares outstanding (000)  (c)
1,030,417

1,049,976

1,079,330

 
1,054,682

1,088,593

 
 
 
 
 
 
 
 
 
(a)
For the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , net securities gains (losses) totaled less than $1 million. For the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , Key did not have any impairment losses related to securities.
(b)
Earnings per share may not foot due to rounding.
(c)
Assumes conversion of common share options and other stock awards, as applicable.



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 17


Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
 
 
Fourth Quarter 2018
 
Third Quarter 2018
 
Fourth Quarter 2017
 
 
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)
$
45,129

512

4.51
%
 
$
44,749

495

4.39
%
 
$
41,289

417

4.01
%
 
Real estate — commercial mortgage
14,656

185

5.03

 
14,268

176

4.89

 
14,386

167

4.60

 
Real estate — construction
1,761

23

5.26

 
1,759

22

5.05

 
1,967

23

4.55

 
Commercial lease financing
4,482

43

3.79

 
4,444

43

3.88

 
4,687

45

3.86

 
Total commercial loans
66,028

763

4.59

 
65,220

736

4.49

 
62,329

652

4.15

 
Real estate — residential mortgage
5,496

54

3.97

 
5,466

55

3.99

 
5,474

54

3.95

 
Home equity loans
11,234

141

4.96

 
11,415

137

4.80

 
12,128

134

4.39

 
Consumer direct loans
1,806

36

7.87

 
1,789

35

7.71

 
1,782

32

7.15

 
Credit cards
1,112

33

11.61

 
1,095

32

11.43

 
1,061

30

11.14

 
Consumer indirect loans
3,612

39

4.28

 
3,482

37

4.25

 
3,232

36

4.42

 
Total consumer loans
23,260

303

5.16

 
23,247

296

5.06

 
23,677

286

4.80

 
Total loans
89,288

1,066

4.74

 
88,467

1,032

4.64

 
86,006

938

4.33

 
Loans held for sale
2,319

26

4.50

 
1,117

12

4.59

 
1,420

13

3.81

 
Securities available for sale (b), (e)
18,626

115

2.38

 
17,631

102

2.22

 
18,447

93

1.97

 
Held-to-maturity securities (b)
11,683

71

2.42

 
12,065

72

2.40

 
11,121

61

2.20

 
Trading account assets
934

8

3.42

 
787

7

3.37

 
898

6

2.72

 
Short-term investments
2,795

15

2.12

 
2,928

15

1.93

 
3,684

12

1.29

 
Other investments (e)
671

4

2.86

 
685

6

3.27

 
725

5

2.80

 
Total earning assets
126,316

1,305

4.09

 
123,680

1,246

3.98

 
122,301

1,128

3.66

 
Allowance for loan and lease losses
(878
)
 
 
 
(886
)
 
 
 
(871
)
 
 
 
Accrued income and other assets
13,743

 
 
 
13,935

 
 
 
13,825

 
 
 
Discontinued assets
1,120

 
 
 
1,186

 
 
 
1,358

 
 
 
Total assets
$
140,301

 
 
 
$
137,915

 
 
 
$
136,613

 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
NOW and money market deposit accounts
$
59,292

110

.74

 
$
56,391

82

.58

 
$
53,601

40

.29

 
Savings deposits
4,915

1

.08

 
5,413

3

.20

 
6,372

3

.24

 
Certificates of deposit ($100,000 or more)
8,217

42

2.02

 
8,186

38

1.86

 
6,776

26

1.50

 
Other time deposits
5,255

21

1.59

 
5,026

17

1.40

 
4,771

13

1.05

 
Total interest-bearing deposits
77,679

174

.89

 
75,016

140

.74

 
71,520

82

.45

 
Federal funds purchased and securities sold under repurchase agreements
281

1

.12

 
552

1

1.00

 
360


.08

 
Bank notes and other short-term borrowings
618

4

3.05

 
596

4

2.76

 
693

3

1.72

 
Long-term debt (f), (g)
12,963

118

3.58

 
12,678

108

3.34

 
13,140

91

2.76

 
Total interest-bearing liabilities
91,541

297

1.28

 
88,842

253

1.13

 
85,713

176

.81

 
Noninterest-bearing deposits
30,273

 
 
 
30,610

 
 
 
32,278

 
 
 
Accrued expense and other liabilities
1,981

 
 
 
2,065

 
 
 
1,994

 
 
 
Discontinued liabilities (g)
1,120

 
 
 
1,186

 
 
 
1,359

 
 
 
Total liabilities
124,915

 
 
 
122,703

 
 
 
121,344

 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
Key shareholders’ equity
15,384

 
 
 
15,210

 
 
 
15,268

 
 
 
Noncontrolling interests
2

 
 
 
2

 
 
 
1

 
 
 
Total equity
15,386

 
 
 
15,212

 
 
 
15,269

 
 
 
Total liabilities and equity
$
140,301

 
 
 
$
137,915

 
 
 
$
136,613

 
 
Interest rate spread (TE)
 
 
2.81
%
 
 
 
2.85
%
 
 
 
2.85
%
Net interest income (TE) and net interest margin (TE)
 
1,008

3.16
%
 
 
993

3.18
%
 
 
952

3.09
%
TE adjustment (b)
 
8

 
 
 
7

 
 
 
14

 
 
Net interest income, GAAP basis
 
1,000

 
 
 
986

 
 
 
938

 
(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 December 31, 2018 , and September 30, 2018 , and 35% for the three months ended December 31, 2017 .
(c)
For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)
Commercial and industrial average balances include $132 million , $128 million , and $119 million of assets from commercial credit cards for the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , respectively.
(e)
Yield is calculated on the basis of amortized cost.
(f)
Rate calculation excludes basis adjustments related to fair value hedges.
(g)
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 18


 
 
 
 
 
 
 
 
 
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended December 31, 2018
 
Twelve months ended December 31, 2017
 
 
Average
 
Yield/
 
Average
 
Yield/
 
 
Balance
Interest (a)
Rate (a)
 
Balance
Interest (a)
Rate (a)
Assets
 
 
 
 
 
 
 
 
Loans: (b), (c)
 
 
 
 
 
 
 
 
Commercial and industrial (d)
$
44,418

$
1,926

4.34
%
 
$
40,848

$
1,613

3.95
%
 
Real estate — commercial mortgage
14,267

698

4.90

 
14,878

687

4.62

 
Real estate — construction
1,816

90

4.97

 
2,143

103

4.78

 
Commercial lease financing
4,534

168

3.70

 
4,677

185

3.96

 
Total commercial loans
65,035

2,882

4.43

 
62,546

2,588

4.14

 
Real estate — residential mortgage
5,473

217

3.97

 
5,499

214

3.89

 
Home equity loans
11,530

547

4.74

 
12,380

536

4.33

 
Consumer direct loans
1,782

137

7.66

 
1,765

126

7.12

 
Credit cards
1,092

125

11.40

 
1,055

118

11.15

 
Consumer indirect loans
3,426

146

4.27

 
3,120

148

4.75

 
Total consumer loans
23,303

1,172

5.03

 
23,819

1,142

4.79

 
Total loans
88,338

4,054

4.59

 
86,365

3,730

4.32

 
Loans held for sale
1,501

66

4.43

 
1,325

52

3.96

 
Securities available for sale (b), (e)
17,898

409

2.20

 
18,548

369

1.96

 
Held-to-maturity securities (b)
12,003

284

2.37

 
10,515

222

2.11

 
Trading account assets
893

29

3.25

 
949

27

2.81

 
Short-term investments
2,450

46

1.86

 
2,363

26

1.11

 
Other investments (e)
697

21

3.04

 
712

17

2.35

 
Total earning assets
123,780

4,909

3.94

 
120,777

4,443

3.67

 
Allowance for loan and lease losses
(878
)
 
 
 
(865
)
 
 
 
Accrued income and other assets
13,910

 
 
 
13,807

 
 
 
Discontinued assets
1,212

 
 
 
1,448

 
 
 
Total assets
$
138,024

 
 
 
$
135,167

 
 
Liabilities
 
 
 
 
 
 
 
 
NOW and money market deposit accounts
$
56,001

297

.53

 
$
54,032

143

.26

 
Savings deposits
5,704

14

.24

 
6,569

13

.20

 
Certificates of deposit ($100,000 or more)
7,728

139

1.80

 
6,233

82

1.31

 
Other time deposits
5,025

67

1.34

 
4,698

40

.85

 
Total interest-bearing deposits
74,458

517

.69

 
71,532

278

.39

 
Federal funds purchased and securities sold under repurchase agreements
928

11

1.14

 
517

1

.24

 
Bank notes and other short-term borrowings
915

21

2.34

 
1,140

15

1.34

 
Long-term debt (f), (g)
12,715

420

3.27

 
11,921

319

2.69

 
Total interest-bearing liabilities
89,016

969

1.09

 
85,110

613

.72

 
Noninterest-bearing deposits
30,593

 
 
 
31,414

 
 
 
Accrued expense and other liabilities
2,071

 
 
 
1,970

 
 
 
Discontinued liabilities (g)
1,212

 
 
 
1,448

 
 
 
Total liabilities
122,892

 
 
 
119,942

 
 
Equity
 
 
 
 
 
 
 
 
Key shareholders’ equity
15,131

 
 
 
15,224

 
 
 
Noncontrolling interests
1

 
 
 
1

 
 
 
Total equity
15,132

 
 
 
15,225

 
 
 
Total liabilities and equity
$
138,024

 
 
 
$
135,167

 
 
Interest rate spread (TE)
 
 
2.85
%
 
 
 
2.95
%
Net interest income (TE) and net interest margin (TE)
 
3,940

3.17
%
 
 
3,830

3.17
%
TE adjustment (b)
 
31

 
 
 
53

 
 
Net interest income, GAAP basis
 
$
3,909

 
 
 
$
3,777

 
(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% and 35% for the twelve months ended December 31, 2018 , and December 31, 2017 , respectively.
(c)
For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)
Commercial and industrial average balances include $126 million and $117 million of assets from commercial credit cards for the twelve months ended December 31, 2018 , and December 31, 2017 , respectively.
(e)
Yield is calculated on the basis of amortized cost.
(f)
Rate calculation excludes basis adjustments related to fair value hedges.
(g)
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 19


Noninterest Expense
(dollars in millions)
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Personnel
$
576

$
553

$
609

 
$
2,309

$
2,278

Net occupancy
75

76

92

 
308

331

Computer processing
55

52

54

 
210

225

Business services and professional fees
49

43

52

 
184

192

Equipment
26

27

31

 
105

114

Operating lease expense
32

31

28

 
120

92

Marketing
25

26

35

 
102

120

FDIC assessment
9

21

20

 
72

82

Intangible asset amortization
22

23

26

 
99

95

OREO expense, net
1

3

3

 
6

11

Other expense
142

109

148

 
460

558

Total noninterest expense
$
1,012

$
964

$
1,098

 
$
3,975

$
4,098

Average full-time equivalent employees (b)
17,664

18,150

18,379

 
18,180

18,415

(a)
Additional detail provided in Personnel Expense table below.
(b)
The number of average full-time equivalent employees has not been adjusted for discontinued operations.


Personnel Expense
(in millions)
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Salaries and contract labor
$
336

$
335

$
346

 
$
1,351

$
1,341

Incentive and stock-based compensation
139

138

168

 
569

566

Employee benefits
77

79

91

 
343

347

Severance
24

1

4

 
46

24

Total personnel expense
$
576

$
553

$
609

 
$
2,309

$
2,278


Merger-Related Charges
(in millions)
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Personnel


$
26

 

$
112

Net occupancy


12

 

14

Business services and professional fees


3

 

16

Computer processing


1

 

12

Marketing


5

 

22

Other nonpersonnel expense


9

 

41

Total merger-related charges


$
56

 

$
217





KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 20


Loan Composition
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
Percent change 12/31/2018 vs
 
12/31/2018
9/30/2018
12/31/2017
 
9/30/2018
12/31/2017
Commercial and industrial (a)
$
45,753

$
45,023

$
41,859

 
1.6
 %
9.3
 %
Commercial real estate:
 
 
 
 




Commercial mortgage
14,285

14,716

14,088

 
(2.9
)
1.4

Construction
1,666

1,763

1,960

 
(5.5
)
(15.0
)
Total commercial real estate loans
15,951

16,479

16,048

 
(3.2
)
(.6
)
Commercial lease financing (b)
4,606

4,470

4,826

 
3.0

(4.6
)
Total commercial loans
66,310

65,972

62,733

 
.5

5.7

Residential — prime loans:
 
 
 
 




Real estate — residential mortgage
5,513

5,497

5,483

 
.3

.5

Home equity loans
11,142

11,339

12,028

 
(1.7
)
(7.4
)
Total residential — prime loans
16,655

16,836

17,511

 
(1.1
)
(4.9
)
Consumer direct loans
1,809

1,807

1,794

 
.1

.8

Credit cards
1,144

1,098

1,106

 
4.2

3.4

Consumer indirect loans
3,634

3,555

3,261

 
2.2

11.4

Total consumer loans
23,242

23,296

23,672

 
(.2
)
(1.8
)
Total loans (c)
$
89,552

$
89,268

$
86,405

 
.3
 %
3.6
 %
(a)
Loan balances include $132 million, $129 million, and $119 million of commercial credit card balances at December 31, 2018 , September 30, 2018 , and December 31, 2017 , respectively.
(b)
Commercial lease financing includes receivables held as collateral for a secured borrowing of $10 million, $12 million, and $24 million at December 31, 2018 , September 30, 2018 , and December 31, 2017 , respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)
Total loans exclude loans of $1.1 billion at December 31, 2018 , $1.1 billion at September 30, 2018 , and $1.3 billion at December 31, 2017 , related to the discontinued operations of the education lending business.
Loans Held for Sale Composition
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
Percent change 12/31/2018 vs
 
12/31/2018
9/30/2018
12/31/2017
 
9/30/2018
12/31/2017
Commercial and industrial
$
279

$
97

$
139

 
187.6
 %
100.7
 %
Real estate — commercial mortgage
894

1,433

897

 
(37.6
)
(0.3
)
Commercial lease financing

1


 
N/M

N/M

Real estate — residential mortgage
54

87

71

 
(37.9
)
(23.9
)
Total loans held for sale (a)
$
1,227

$
1,618

$
1,107

 
(24.2
)%
10.8
 %
(a)
Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $54 million at December 31, 2018 , $87 million at September 30, 2018 , and $71 million at December 31, 2017 .
N/M = Not Meaningful
Summary of Changes in Loans Held for Sale
(in millions)
 
 
 
 
 
 
 
4Q18
3Q18
2Q18
1Q18
4Q17
Balance at beginning of period
$
1,618

$
1,418

$
1,667

$
1,107

$
1,341

New originations
5,057

2,976

2,665

3,280

3,566

Transfers from (to) held to maturity, net
24

4

(4
)
(14
)
(10
)
Loan sales
(5,448
)
(2,491
)
(2,909
)
(2,705
)
(3,783
)
Loan draws (payments), net
(24
)
(289
)
(1
)
(1
)
(7
)
Balance at end of period (a)
$
1,227

$
1,618

$
1,418

$
1,667

$
1,107

(a)
Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $54 million at December 31, 2018 , $87 million at September 30, 2018 , $58 million at June 30, 2018 , $47 million at March 31, 2018 , and $71 million at December 31, 2017 .







KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 21


Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Average loans outstanding
$
89,288

$
88,467

$
86,006

 
$
88,338

$
86,365

Allowance for loan and lease losses at beginning of period
$
887

$
887

$
880

 
$
877

$
858

Loans charged off:
 
 
 
 
 
 
Commercial and industrial
45

38

32

 
159

133

 
 
 
 
 
 
 
Real estate — commercial mortgage
12

6

2

 
21

11

Real estate — construction



 

2

Total commercial real estate loans
12

6

2

 
21

13

Commercial lease financing
1

4

5

 
10

14

Total commercial loans
58

48

39

 
190

160

Real estate — residential mortgage

2

1

 
3

3

Home equity loans
7

4

7

 
21

30

Consumer direct loans
9

10

8

 
36

34

Credit cards
10

10

10

 
44

44

Consumer indirect loans
8

7

7

 
30

31

Total consumer loans
34

33

33

 
134

142

Total loans charged off
92

81

72

 
324

302

Recoveries:
 
 
 
 
 
 
Commercial and industrial
19

5

8

 
37

40

 
 
 
 
 
 
 
Real estate — commercial mortgage
1

1

1

 
3

2

Real estate — construction
1



 
2

1

Total commercial real estate loans
2

1

1

 
5

3

Commercial lease financing
1

3

1

 
5

6

Total commercial loans
22

9

10

 
47

49

Real estate — residential mortgage

2


 
2

4

Home equity loans
2

3

3

 
11

15

Consumer direct loans
2

1

2

 
7

6

Credit cards
2

2

1

 
7

5

Consumer indirect loans
4

4

4

 
16

15

Total consumer loans
10

12

10

 
43

45

Total recoveries
32

21

20

 
90

94

Net loan charge-offs
(60
)
(60
)
(52
)
 
(234
)
(208
)
Provision (credit) for loan and lease losses
56

60

49

 
240

227

Allowance for loan and lease losses at end of period
$
883

$
887

$
877

 
$
883

$
877

 
 
 
 
 
 
 
Liability for credit losses on lending-related commitments at beginning of period
$
60

$
58

$
57

 
$
57

$
55

Provision (credit) for losses on lending-related commitments
3

2


 
6

2

Liability for credit losses on lending-related commitments at end of period (a)
$
63

$
60

$
57

 
$
63

$
57

 
 
 
 
 
 
 
Total allowance for credit losses at end of period
$
946

$
947

$
934

 
$
946

$
934

 
 
 
 
 
 
 
Net loan charge-offs to average total loans
.27
%
.27
%
.24
%
 
.26
%
.24
%
Allowance for loan and lease losses to period-end loans
.99

.99

1.01

 
.99

1.01

Allowance for credit losses to period-end loans
1.06

1.06

1.08

 
1.06

1.08

Allowance for loan and lease losses to nonperforming loans
162.9

137.5

174.4

 
162.9

174.4

Allowance for credit losses to nonperforming loans
174.5

146.8

185.7

 
174.5

185.7

 
 
 
 
 
 
 
Discontinued operations — education lending business:
 
 
 
 
 
 
Loans charged off
$
4

$
4

$
6

 
$
15

$
26

Recoveries
1

1

2

 
5

8

Net loan charge-offs
$
(3
)
$
(3
)
$
(4
)
 
$
(10
)
$
(18
)
(a)
Included in "Accrued expense and other liabilities" on the balance sheet.



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 22


Asset Quality Statistics From Continuing Operations
(dollars in millions)
 
4Q18
3Q18
2Q18
1Q18
4Q17
Net loan charge-offs
$
60

$
60

$
60

$
54

$
52

Net loan charge-offs to average total loans
.27
%
.27
%
.27
%
.25
%
.24
%
Allowance for loan and lease losses
$
883

$
887

$
887

$
881

$
877

Allowance for credit losses (a)
946

947

945

941

934

Allowance for loan and lease losses to period-end loans
.99
%
.99
%
1.01
%
1.00
%
1.01
%
Allowance for credit losses to period-end loans
1.06

1.06

1.07

1.07

1.08

Allowance for loan and lease losses to nonperforming loans (b)
162.9

137.5

162.8

162.8

174.4

Allowance for credit losses to nonperforming loans (b)
174.5

146.8

173.4

173.9

185.7

Nonperforming loans at period end (b)
$
542

$
645

$
545

$
541

$
503

Nonperforming assets at period end (b)
577

674

571

569

534

Nonperforming loans to period-end portfolio loans (b)
.61
%
.72
%
.62
%
.61
%
.58
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (b)
.64

.75

.65

.65

.62

(a)
Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related unfunded commitments.
(b)
Nonperforming loan balances exclude $575 million, $606 million, $629 million, $690 million, and $738 million of purchased credit impaired loans at December 31, 2018 , September 30, 2018 , June 30, 2018 , March 31, 2018 , and December 31, 2017 , respectively.
  
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
 
12/31/2018
9/30/2018
6/30/2018
3/31/2018
12/31/2017
Commercial and industrial
$
152

$
227

$
178

$
189

$
153

 
 
 
 
 
 
Real estate — commercial mortgage
81

98

42

33

30

Real estate — construction
2

2

2

2

2

Total commercial real estate loans
83

100

44

35

32

Commercial lease financing
9

10

21

5

6

Total commercial loans
244

337

243

229

191

Real estate — residential mortgage
62

62

55

59

58

Home equity loans
210

221

222

229

229

Consumer direct loans
4

4

4

4

4

Credit cards
2

2

2

2

2

Consumer indirect loans
20

19

19

18

19

Total consumer loans
298

308

302

312

312

Total nonperforming loans (a)
542

645

545

541

503

OREO
35

28

26

28

31

Other nonperforming assets

1




Total nonperforming assets (a)
$
577

$
674

$
571

$
569

$
534

Accruing loans past due 90 days or more
112

87

103

82

89

Accruing loans past due 30 through 89 days
312

368

429

305

359

Restructured loans — accruing and nonaccruing (b)
399

366

347

317

317

Restructured loans included in nonperforming loans (b)
247

211

184

179

189

Nonperforming assets from discontinued operations — education lending business 
8

6

6

6

7

Nonperforming loans to period-end portfolio loans (a)
.61
%
.72
%
.62
%
.61
%
.58
%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (a)
.64

.75

.65

.65

.62

(a)
Nonperforming loan balances exclude $575 million, $606 million, $629 million, $690 million, and $738 million of purchased credit impaired loans at December 31, 2018 , September 30, 2018 , June 30, 2018 , March 31, 2018 , and December 31, 2017 , respectively.    
(b)
Restructured loans (i.e., troubled debt restructuring) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.
Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
 
4Q18
3Q18
2Q18
1Q18
4Q17
Balance at beginning of period
$
645

$
545

$
541

$
503

$
517

Loans placed on nonaccrual status
103

263

175

182

137

Charge-offs
(92
)
(81
)
(78
)
(70
)
(67
)
Loans sold
(16
)

(1
)


Payments
(53
)
(57
)
(33
)
(29
)
(52
)
Transfers to OREO
(10
)
(5
)
(5
)
(4
)
(8
)
Loans returned to accrual status
(35
)
(20
)
(54
)
(41
)
(24
)
Balance at end of period (a)
$
542

$
645

$
545

$
541

$
503

(a)
Nonperforming loan balances exclude $575 million, $606 million, $629 million, $690 million, and $738 million of purchased credit impaired loans at December 31, 2018 , September 30, 2018 , June 30, 2018 , March 31, 2018 , and December 31, 2017 , respectively.



KeyCorp Reports Fourth Quarter 2018 Profit     
January 17, 2019
Page 23


Line of Business Results
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage change 4Q18 vs.
 
4Q18
3Q18
2Q18
1Q18
4Q17
 
3Q18
4Q17
Key Community Bank
 
 
 
 
 
 
 
 
Summary of operations
 
 
 
 
 
 
 
 
Total revenue (TE)
$
1,022

$
994

$
997

$
959

$
961

 
2.8
 %
6.3
 %
Provision for credit losses
48

43

38

48

57

 
11.6

(15.8
)
Noninterest expense
633

635

640

653

665

 
(.3
)
(4.8
)
Net income (loss) attributable to Key
261

241

243

197

152

 
8.3

71.7

Average loans and leases
47,976

47,862

47,985

47,683

47,408

 
.2

1.2

Average deposits
84,288

82,259

80,930

79,945

80,352

 
2.5

4.9

Net loan charge-offs
42

43

34

42

35

 
(2.3
)
20.0

Net loan charge-offs to average total loans
.35
%
.36
%
.28
%
.36
%
.29
%
 
N/A

N/A

Nonperforming assets at period end
$
408

$
467

$
468

$
425

$
405

 
(12.6
)
.7

Return on average allocated equity
21.55
%
19.80
%
20.05
%
16.51
%
12.46
%
 
N/A

N/A

Average full-time equivalent employees
10,195

10,529

10,619

10,666

10,629

 
(3.2
)
(4.1
)
 
 
 
 
 
 
 
 
 
Key Corporate Bank
 
 
 
 
 
 
 
 
Summary of operations
 
 
 
 
 
 
 
 
Total revenue (TE)
$
581

$
574

$
542

$
558

$
605

 
1.2
 %
(4.0
)%
Provision for credit losses
12

20

28

14

(6
)
 
(40.0
)
N/M

Noninterest expense
329

316

325

312

352

 
4.1

(6.5
)
Net income (loss) attributable to Key
215

199

167

208

223

 
8.0

(3.6
)
Average loans and leases
40,438

39,714

39,709

38,257

37,457

 
1.8

8.0

Average loans held for sale
2,249

1,042

1,299

1,118

1,345

 
115.8

67.2

Average deposits
21,793

21,056

21,057

20,815

21,558

 
3.5

1.1

Net loan charge-offs
16

19

26

11

16

 
(15.8
)

Net loan charge-offs to average total loans
.16
%
.19
%
.26
%
.12
%
.17
%
 
N/A

N/A

Nonperforming assets at period end
$
161

$
196

$
91

$
127

$
109

 
(17.9
)
47.7

Return on average allocated equity
28.91
%
26.91
%
22.80
%
29.49
%
31.51
%
 
N/A

N/A

Average full-time equivalent employees
2,486

2,546

2,537

2,543

2,418

 
(2.4
)
2.8

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful



KeyCorp Fourth Quarter 2018 Earnings Review January 17, 2019 Beth E. Mooney Don Kimble Chairman and Vice Chairman and Chief Executive Officer Chief Financial Officer


 
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “seek,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible,” “potential,” “strategy,” “opportunities,” or “trends,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are based on assumptions that involve risks and uncertainties, which are subject to change based on various important factors (some of which are beyond KeyCorp’s control.) Actual results may differ materially from current projections. Actual outcomes may differ materially from those expressed or implied as a result of the factors described under “Forward-looking Statements” and “Risk Factors” in KeyCorp’s Annual Report on Form 10-K for the year ended December 31, 2017 (“Form 10-K”) and in other filings of KeyCorp with the Securities and Exchange Commission (the “SEC”). Such forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding KeyCorp, please refer to our SEC filings available at www.key.com/ir . Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. This presentation also includes certain non-GAAP financial measures related to “tangible common equity,” “cash efficiency ratio,” and certain financial measures excluding notable items, including merger-related charges. Notable items include certain revenue or expense items that may occur in a reporting period in which management does not consider indicative of ongoing financial performance. Management believes it is useful for the investment community to consider financial metrics with and without notable items in order to enable a better understanding of company results, facilitate comparability of period-to-period financial results, and to evaluate and forecast those results. Although Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components, they have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of results under GAAP. For more information on these calculations and to view the reconciliations to the most comparable GAAP measures, please refer to the appendix of this presentation, Figure 2 of our Form 10-K dated December 31, 2017 or Form 10-Q dated September 30, 2018. GAAP: Generally Accepted Accounting Principles 2


 
2018 – Delivering on Commitments ° 6th consecutive year of positive operating leverage − Record full-year revenue of $6.4 billion − All-time highs in several fee-based businesses, including investment banking and debt placement fees ($650 MM in FY2018) − Expenses remain well-managed; reflect focus on efficiency and investments for growth Driving − Net interest income up 3% from prior year: balance sheet growth and benefit from higher rates Stronger − Loan and deposit growth reflects execution of relationship-based business model within Returns moderate risk profile ° Significant progress on LT financial targets − Cash efficiency ratio and return on tangible common equity improved by >300 bps − Increased ROTCE long-term target range to 16-19% − Progress on $200 MM cost savings initiative ° Maintained strong credit quality and disciplined underwriting standards Strong Risk − Net charge-offs to average loans of .26%; portfolios continue to perform well Management − Nonperforming loans of $542 million at 12/31/18; down >$100 million from 3Q18 ° Maintained strong capital position with CET1 ratio of 9.92% (a) Disciplined Capital ° Common share dividend increased 62% ($.105 to $.17 per common share) in 2018 Management ° $1.1.B (b) of common share repurchases in 2018; $278MM (b) in 4Q18 (a) 12/31/18 ratio is estimated (b) Common share repurchase amount includes repurchases to offset issuances of common shares under our employee compensation plans 3


 
Strategic Acquisition: Laurel Road Finance Acquisition of online lending platform focused on super prime professionals Transaction Overview Positioned to Outperform ° Acquisition of leading national, digital-first consumer Revisiting 2018 Investor Day Themes lending platform P • Leading digital originations capability Distinctive and front-end customer experience ° Proven end-to-end digital lending platform targeting super- Model • Alignment with Key’s Financial Wellness prime millennials with relationship expansion opportunity focus and relationship strategy ° Business built inside an FDIC regulated bank resulting in P sound risk and compliance culture • Proven model with targeted scale against Targeted defined client set Ï student lending Scale refinance for super-prime millennial Emphasis on strategic partnerships with a growing network ° Ï medical professionals pipeline of >150 affinity groups P ° Origination volume of >$4 billion since inception (2013) Focused • Targeted investments in a streamlined Execution suite of distinctive products Solution Set P Digital Mortgage Disciplined Student • High quality consumer assets Ï Loan Refinance Origination Capital & Risk opportunity to balance Key’s portfolio by Management adding proven consumer lending engine Personal Digital Banking Unsecured Loans Platform P The transaction is subject to customary closing conditions, including Delivering • Sound, profitable growth driving regulatory approvals, and expected to close mid-2019 Results shareholder returns over the long term 4


 
Financial Review 5


 
Financial Highlights Continuing operations, unless otherwise noted 4Q18 3Q18 4Q17 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .45 $ .45 $ .17 - N/M EPS – excl. notable items (a), (b) .48 .45 .36 7 % 33 % (a) Cash efficiency ratio 59.9 % 58.7 % 66.7 % 120 bps (680) bps Cash efficiency –excl. notable items (a), (b) 57.4 58.7 61.3 (130) (390) Profitability Return on average tangible common equity (a) 16.4 16.8 6.4 (41) N/M ROTCE – excl. notable items (a), (b) 17.5 16.8 13.6 69 388 Return on average total assets 1.37 1.40 .57 (3) 80 Net interest margin 3.16 3.18 3.09 (2) 7 Common Equity Tier 1(d) 9.92 % 9.95 % 10.16 % (3) bps (24) bps Capital (c) Tier 1 risk-based capital (d) 11.07 11.11 11.01 (4) 6 Tangible common equity to tangible assets (a) 8.30 8.05 8.23 25 7 NCOs to average loans .27 % .27 % .24 % - 3 bps Asset NPLs to EOP portfolio loans (e) .61 .72 .58 (11) bps 3 Quality Allowance for loan and lease losses to EOP loans .99 .99 1.01 - (2) EOP = End of Period (d) 12/31/18 ratios are estimated (a) Non-GAAP measure: see Appendix for reconciliation (e) Nonperforming loan balances exclude $575 million, $606 million, and (b) Excludes notable items; see Appendix for detail and reconciliations $738 million of purchased credit impaired loans at December 31, 2018, 6 (c) From consolidated operations September 30, 2018, and December 31, 2017, respectively


 
Loans Total Average Loans Highlights $ in billions vs. Prior Year $89 $90 $86 ° Average loans up 4% from 4Q17 – C&I balances up 9% driven by broad-based growth with middle-market clients $80 – Home equity loans continue to be impacted by market trends vs. Prior Quarter $70 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 ° Average loans up 1% from 3Q18 – Strength in CRE and C&I driven by execution Average C&I Loans of relationship business model in targeted areas and industry verticals $ in billions $50 $45 $41 $40 $30 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 7


 
Deposits Average Deposits Highlights $ in billions ° Deposit cost up 11 bps from 3Q18, reflecting: $110 1.00% $108 – Higher interest rates and beta $104 .80% – Continued migration of portfolio into higher-yielding products $100 .60% .64% ° Strong and stable deposit base .40% – 28% noninterest-bearing $90 – ~65% stable retail and low-cost escrow .31% .20% vs. Prior Year $80 .00% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 ° Average deposits up 4% from 4Q17 Total average deposits Cost of total deposits ° Continued mix shift to higher-yielding deposit products 4Q18 Average Deposit Mix ° Strength in retail banking franchise and growth $ in billions from commercial relationships $13.5 vs. Prior Quarter $4.9 $30.3 39% ° Average deposit balances up 2% from 3Q18 61% ° Penetration of existing retail and commercial $59.3 relationships ° Short-term and seasonal deposit inflows Noninterest-bearing Consumer (a) NOW and MMDA Commercial and corporate Savings CDs and other time deposits 8 (a) Consumer includes retail banking, small business, and private banking


 
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations ° Excluding PAA, 4Q18 net interest income was $23 $1,008 $1,000 $38 $952 4.0% $985 MM and net interest margin was 3.09% $800 vs. Prior Year 3.5% $600 ° Net interest income up $71 MM, or 8%, from 3.16% 3.09% 4Q17, excl. PAA $400 3.09% 3.0% – Largely driven by higher interest rates and $200 2.97% earning asset growth $0 2.5% vs. Prior Quarter 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Net interest income (TE), excl. PAA Reported NIM (TE) ° Net interest income up $18 MM, or 2%, from Purchase accounting accretion (PAA) x NIM (TE); excl. PAA 3Q18, excl. PAA – Reflects earning asset growth and higher loan fees – Partially offset by higher deposit betas 4Q17 1Q18 2Q18 3Q18 4Q18 NIM – reported 3.09% 3.15% 3.19% 3.18% 3.16% PAA .12 .11 .09 .09 .07 NIM Change vs. Prior Quarter 3Q18: 3.18% 2.97% 3.04% 3.10% 3.09% 3.09% NIM – excl. PAA PAA (4Q vs. 3Q) (.02) NII – reported ($MM) $ 952 $ 952 $ 987 $993 $1,008 Earning asset growth .01 PAA 38 33 28 26 23 (a) Other (.01) NII – excl. PAA $914 $919 $959 $967 $985 Total change (.02) 4Q18: 3.16% TE = Taxable equivalent PAA = Purchase accounting accretion 9 (a) 4Q18 purchase accounting accretion of $23 MM is made up of $16 MM related to contractual maturities and $7 MM related to prepayments


 
Noninterest Income Noninterest Income Highlights $ in millions up / (down) 4Q18 vs. 4Q17 vs. 3Q18 vs. Prior Year Trust and investment services income $ 121 $ (10) $ 4 ° Noninterest income down $11 MM (-2%) from 4Q17 Investment banking and debt 186 (14) 20 placement fees ° Trust and investment services income lower, Service charges on deposit accounts 84 (5) (1) primarily related to the sale of Key’s insurance Operating lease income and other 28 1 (7) business leasing gains ° Deposit service charges and cards and payments Corporate services income 58 2 6 income impacted by revenue recognition changes Cards and payments income 68 (9) (1) ° Lower investment banking and debt placement Corporate-owned life insurance 39 2 5 fees (record quarter in 4Q17) Consumer mortgage income 7 -- (2) Mortgage servicing fees 21 4 2 Other income 33 18 10 vs. Prior Quarter Total noninterest income $ 645 $ (11) $ 36 ° Noninterest income up $36 MM (+6%) from 3Q18 ° Investment banking and debt placement fees up $20 MM related to strength in commercial mortgage and advisory fees ° Growth in corporate services income from strong derivatives and trading 10


 
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 4Q18 vs. 4Q17 vs. 3Q18 vs. Prior Year Personnel $ 576 $ (33) $ 23 ° Noninterest expense down $86 MM, or 8% (down Net occupancy 75 (17) (1) $42 MM excl. notable items) Computer processing 55 1 3 ° Personnel expense reflects: Business services, professional 49 (3) 6 fees − Lower incentive compensation (IBDP) Equipment 26 (5) (1) − Lower employee benefits (tax reform in 4Q17) − Higher severance (efficiency initiative expenses) Operating lease expense 32 4 1 Marketing 25 (10) (1) ° Lower net occupancy & marketing expense FDIC assessment 9 (11) (12) (merger-related charges in 4Q17) Intangible asset amortization 22 (4) (1) ° Lower FDIC assessment reflecting elimination of OREO expense, net 1 (2) (2) quarterly surcharge Other expense 142 (6) 33 vs. Prior Quarter Total noninterest expense $ 1,012 $ (86) $ 48 ° Noninterest expense up $48 MM, or 5% (up $7 MM excl. notable items) Notable items: ° Personnel expense up $23 MM, largely related to $ in millions 4Q18 4Q17 3Q18 efficiency initiative expenses Merger-related charges - $56 - ° Increase in other expense includes pension Impact of tax reform and related actions - 29 - settlement charge Efficiency initiative expenses $24 - ° FDIC assessment decline of $12 MM from Pension settlement charge 17 - - elimination of quarterly surcharge $41 $85 - 11


 
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 4Q18 allowance for loan losses to period-end loans of .99% $100 1.00% $900 $877 $883 250% .80% $75 200% $60 $59 .60% $800 $52 $49 $50 174% 150% 163% .40% 100% $700 $25 .27% .20% 50% .24% $0 .00% $600 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 NCOs Provision for credit NCOs to average loans Allowance for loan Allowance for loan and losses and lease losses lease losses to NPLs Nonperforming Loans (a) Acquired Loans $ in millions $ in millions NPLs down > $100MM from 3Q18 $800 2.00% $100 1.00% 1.60% $600 $503 $542 $80 .80% $80 1.20% $72 $73 $71 $68 $400 .60% .58% .61% .80% $60 $200 .50% .52% .53% .40% .40% .45% .48% $0 .00% $40 .20% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18 NPLs NPLs to period-end loans Allowance for Acquired loan allowance to acquired loans period-end acquired loans NCO = Net charge-off (a) Nonperforming loan balances exclude $575 million and $738 million of purchased credit impaired loans at December 31, 2018, and 12 December 31, 2017, respectively


 
Capital Common Equity Tier 1 (a) Highlights 12.00% ° Strong capital position with Common Equity Tier 1 ratio of 9.92% (a) at 12/31/2018 10.16% 9.92% 10.00% ° Increased common share dividend by 62% (from $0.105 to $0.17 per quarter) from 4Q17 8.00% ° Repurchased $278 MM (c) in common shares during 4Q18 6.00% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Tangible Common Equity to Tangible Assets (b) Quarterly Common Share Dividend 10.00% $0.20 +62% 4Q18 vs. 4Q17 8.23% 8.30% $.17 7.50% $0.16 5.00% $0.12 $.105 2.50% $0.08 0.00% $0.04 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 (a) 12/31/18 ratios are estimated (b) Non-GAAP measure: see Appendix for reconciliation 13 (c) Common share repurchase amount includes repurchases to offset issuances of common shares under our employee compensation plans


 
FY2019 Outlook & Long-term Targets FY 2019 Average Balance • Loans: average balances in the range of $90 B - $91 B Sheet • Deposits: average balances in the range of $108 B - $109 B Net Interest Income • Net interest income expected to be in the range of $4.0 B - $4.1 B (TE) • Outlook assumes no interest rate increases in 2019 Noninterest Income • Expected to be in the range of $2.5 B - $2.6 B Noninterest • Expected to be in the range of $3.85 B - $3.95 B − Includes realization of $200 MM run-rate cost savings in 2H19 Expense − Achieve cash efficiency ratio target of 54 - 56% by 2H19 • Net charge-offs to average loans below targeted range of 40 - 60 bps Credit Quality • Provision expected to slightly exceed net charge-offs Taxes • GAAP tax rate in the range of 18% - 19% Note: 2019 Outlook includes the impact of the mid-year acquisition of Laurel Road Long-term Targets Positive operating Cash efficiency ratio: Moderate risk profile: ROTCE: Net charge-offs to avg. loans leverage 54% - 56% 16 - 19% targeted range of 40-60 bps 14


 
Appendix 15


 
Loan Portfolio Detail, at 12/31/18 Total Loans Commercial Loans $ in billions 12/31/18 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 45.8 51 Automotive Transportation Business Products Commercial real estate 16.0 18 Technology Media Business Services C&I CRE And Telecom Chemicals Commercial lease financing$40 4.6$18 5 Construction Total Commercial $ 66.3 74 Consumer Discretionary Residential mortgage 5.5 6 Real Estate Home equity 11.1 12 Consumer Services Consumer direct 1.8 2 Equipment Credit card 1.1 1 Public Sector Consumer indirect 3.6 4 Finance Other Total Consumer $ 23.2 26 Oil And Gas Materials/ Extraction Metals And Mining Home Equity Commercial Real Estate 2008/ Outstanding Average Average prior Balances Loan Size FICO Construction vintage ° Focused on relationships with CRE owners First lien $ 6,606 59 % $ 71,202 773 16 % Second lien 4,536 41 46,479 772 29 ° Aligned with targeted industry verticals Total home equity $ 11,142 ° Primarily commercial mortgage; selective approach to construction ° Combined weighted-average LTV at Commercial mortgage origination: 70% Fixed ° Criticized non-accruals: 0.6% of period- 58% 90% Variable 47% end balances (a) 53% ° $563 million in lines outstanding (7.7% of the home equity lines) come to end of draw period by 4Q20 12/31/2008 12/31/2018 Tables may not foot due to rounding 16 (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition


 
Investment Portfolio Average Total Investment Securities Highlights $ in billions ° Portfolio composed primarily of GNMA and GSE- $32.0 $29.6 $30.3 2.50% backed MBS and CMOs $24.0 2.39% 2.25% ‒ Primarily fixed rate 2.06% ‒ GNMA 45% of 4Q18 average balances $16.0 2.00% ° Portfolio used for funding and liquidity $8.0 1.75% management: ‒ Securities cash flows of $1.1 billion in 4Q18 $0.0 1.50% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 – Reinvesting cash flows into High Quality Liquid Assets Average AFS securities Average yield (a) Average HTM securities ° Replaced cash flows at higher yields during 4Q18 Securities to Total Assets (b) − Yield on new investments ~135 bps higher than maturities (In 1Q19 continue to replace 25% maturing investments with new investments at ~100 bps yield increase) 22% 22% − Portfolio yield has increased 33 bps from 20% prior year ° Portfolio average life of 4.9 years and duration of 15% 4.1 years at 12/31/2018 10% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 (a) Yield is calculated on the basis of amortized cost 17 (b) Includes end-of-period held-to-maturity securities at amortized cost and available-for-sale securities at fair value


 
Asset & Liability Management Positioning Moderate asset sensitivity supports strong, stable net interest margin Business and Balance Sheet Highlights Positioning • Strong, low-cost deposit base • Actively hedging to reduce current and future – $78 B interest-bearing deposits at 89 bps exposure to declining rates – $30 B noninterest-bearing deposits – $4.75 B in interest rate floors purchased in 3Q18 offer immediate protection – Cumulative interest-bearing deposit beta of 33% – Executed ~$3 B in forward starting interest rate swaps in 4Q18 – ~65% stable retail and low-cost escrow to manage down exposure to interest rates – >85% from markets where Key maintains Top 5 deposit or branch share • Shifting asset sensitivity as the pace of rate increases and economic growth slows • Relationship-oriented lending franchise – Lower level of exposure due to a more balanced rate outlook – Distinctive commercial capabilities drive C&I loan growth and ~70% floating-rate loan mix – Shorter duration loan and investment portfolios provide opportunity for continued benefit to higher rates – Higher deposit betas have reduced the benefit to rising short • Disciplined balance sheet management with term interest rates recurring re-investment opportunities – $31 B securities portfolio is >99% government-guaranteed and generates ~$400 MM cash flows per month Modest asset sensitive position: – Discretionary hedge activities help moderate interest rate risk NII impact of +2.8% for a 200 bps increase over 12 months exposure and lock in spreads on new business NII impact of -2.3% for a 100 bps decrease over 12 months Each 25 bps increase in interest rates results in NII benefit of ~$4-8 MM per quarter 18


 
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings (a) to Period-end Total Loans Continuing operations Continuing operations .80% 6.0% .60% 4.0% .42% 3.4% .40% .35% 2.8% 2.0% .20% .13% .10% .00% .0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 30 – 89 days delinquent 90+ days delinquent Metric (b) 4Q18 3Q18 2Q18 1Q18 4Q17 Delinquencies to EOP total loans: 30-89 days .35 % .41 % .49 % .35 % .42 % Delinquencies to EOP total loans: 90+ days .13 .10 .12 .09 .10 NPLs to EOP portfolio loans (c) .61 .72 .62 .61 .58 NPAs to EOP portfolio loans + OREO + Other NPAs (c) .64 .75 .65 .65 .62 Allowance for loan losses to period-end loans .99 .99 1.01 1.00 1.01 Allowance for loan losses to NPLs 162.9 137.5 162.8 162.8 174.4 (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations (c) Nonperforming loan balances exclude $575 million, $606 million, $629 million, $690 million, and $738 million of purchased credit impaired loans at December 31, 19 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively


 
Credit Quality Credit Quality by Portfolio Net loan Net loan Allowance / Allowance / Period- Average charge-offs (b) / Nonperforming Ending charge- period-end NPLs end loans loans average loans loans (c) allowance (d) offs loans (d) (%) (%) $ in millions (%) 12/31/18 4Q18 4Q18 4Q18 12/31/18 12/31/18 12/31/18 12/31/18 Commercial and industrial (a) $ 45,753 $ 45,129 $ 26 0.23% $ 152 $ 532 1.16% 350.00% Commercial real estate: Commercial Mortgage 14,285 14,656 11 .30 81 142 .99 175.31 Construction 1,666 1,761 (1) (.23) 2 33 1.98 N/M Commercial lease financing (e) 4,606 4,482 - - 9 36 .78 400.00 Real estate – residential mortgage 5,513 5,496 - - 62 7 .13 11.29 Home equity 11,142 11,234 5 .18 210 35 .31 16.67 Credit cards 1,144 1,112 8 2.85 2 30 2.62 N/M Consumer direct loans 1,809 1,806 7 1.54 4 20 1.11 500.00 Consumer indirect loans 3,634 3,612 4 .44 20 48 1.32 240.00 Continuing total $ 89,552 $ 89,288 $ 60 .27% $ 542 $ 883 .99% 162.92% Discontinued operations 1,073 1,096 3 1.09 8 14 1.30 175.00 Consolidated total $ 90,625 $ 90,384 $ 63 .28% $ 550 $ 897 .99% 163.09% N/M = Not meaningful (a) 12/31/18 ending loan balance includes $132 million of commercial credit card balances; average loan balance includes $132 million of assets from commercial credit cards (b) Net loan charge-off amounts are annualized in calculation (c) 12/31/18 NPL amount excludes $575 million of purchased credit impaired loans (d) 12/31/18 allowance by portfolio is estimated (e) Commercial lease financing includes receivables held as collateral for a secured borrowing of $10 million at December 31, 2018. Principal reductions are based on 20 the cash payments received from these related receivables


 
GAAP to Non-GAAP Reconciliation $ in millions Three months ended Twelve months ended 12/31/2018 9/30/2018 12/31/17 12/31/2018 12/31/2017 Notable Items Efficiency initiative expenses $ 24 - -$ 24 - Pension settlement charge 17 - - 17 - Merger-related charges - -$ (56) -$ (217) Impacts of tax reform and related actions - - (30) - (30) Merchant services gain - - - - 59 Purchase accounting finalization, net - - - - 43 Charitable contribution - - - - (20) Total notable items $ 41 $ - $ (86) $ 41 $ (165) Income taxes $ 10 -$ (26) $ 10 $ (53) Revaluation of certain tax related assets - - 147 - 147 Total notable items after tax $ 31 $ - $ (207) $ 31 $ (259) Earnings per common share (EPS) excluding notable items EPS from continuing operations attributable to Key common shareholders ─ assuming dilution $ .45 $ .45 $ .17 Add: EPS impact of notable items .03 - .19 EPS from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP) $ .48 $ .45 $ .36 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $ 15,959 $ 15,208 $ 15,023 Less: Intangible assets (a) 2,818 2,838 2,928 Preferred Stock (b) 1,421 1,421 1,009 Tangible common equity (non-GAAP) $ 11,356 $ 10,949 $ 11,086 Total assets (GAAP) $ 136,613 $ 138,805 $ 137,698 Less: Intangible assets (a) 2,818 2,838 2,928 Tangible common equity to tangible assets ratio (non-GAAP) $ 136,795 $ 135,967 $ 134,770 Tangible common equity to tangible assets ratio (non-GAAP) 8.30% 8.05% 8.23% (a) For the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, intangible assets exclude $14 million, $17 million, and $26 million, respectively, of period-end purchased credit card receivables 21 (b) Net of capital surplus


 
GAAP to Non-GAAP Reconciliation Three months ended Twelve months ended $ in millions 12/31/2018 9/30/2018 12/31/17 12/31/2018 12/31/2017 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,384 $ 15,210 $ 15,268 $ 15,131 $ 15,224 Less: Intangible assets (average) (a) 2,828 2,848 2,939 2,869 2,837 Preferred Stock (average) 1,450 1,316 1,025 1,205 1,137 Average tangible common equity (non-GAAP) $ 11,106 $ 11,046 $ 11,304 $ 11,057 $ 11,250 Return on average tangible common equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 459 $ 468 $ 181 $ 1,793 $ 1,219 Plus: Notable items, after tax 31 - 207 31 259 Net income (loss) from continuing operations attributable to Key common shareholders excl. notable items $ 490 $ 468 $ 388 $ 1,824 $ 1,478 Average tangible common equity (non-GAAP) 11,106 11,046 11,304 11,057 11,250 Return on average tangible common equity from continuing operations (non- GAAP) 16.40% 16.81% 6.35% 16.22% 10.84% Return on average tangible common equity from continuing operations excl. notable items (non- GAAP) 17.50% 16.81% 13.62% 16.50% 13.14% Cash efficiency ratio Noninterest expense (GAAP) $ 1,012 $ 964 $ 1,098 $ 3,975 $ 4,098 Less: Intangible asset amortization 22 23 26 99 95 Adjusted noninterest expense (non-GAAP) $ 990 $ 941 $ 1,072 $ 3,876 $ 4,003 Less: Notable items 41 - 85 41 262 Adjusted noninterest expense (non-GAAP) $ 949 $ 941 $ 987 $ 3,835 $ 3,741 Net interest income (GAAP) $ 1,000 $ 986 $ 938 $ 3,909 $ 3,777 Plus: Taxable-equivalent adjustment 8 7 14 31 53 Noninterest income 645 609 656 2,515 2,478 Total taxable-equivalent revenue (non-GAAP) $ 1,653 $ 1,602 $ 1,608 $ 6,455 $ 6,308 Plus: Notable items - - 1 - (97) Adjusted total taxable-equivalent revenue (non-GAAP) $ 1,653 $ 1,602 $ 1,609 $ 6,455 $ 6,211 Cash efficiency ratio (non-GAAP) 59.9% 58.7% 66.7% 60.0%0.602 63.5%0.602 Cash efficiency ratio excluding notable items (non-GAAP) 57.4% 58.7% 61.3% 59.4% 60.2% (a) For the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, average intangible assets exclude $15 million, $18 million, and $28 million, respectively, of average purchased credit card receivables. For the twelve months ended December 31, 2018, and December 31, 2017, average 22 intangible assets exclude $20 million and $34 million, respectively, of average purchased credit card receivables


 
Exhibit 99.3


Consolidated Balance Sheets
(dollars in millions)
 
 
 
 
 
 
 
 
 
12/31/2018

9/30/2018

12/31/2017

Assets
 
 
 
 
Loans
$
89,552

$
89,268

$
86,405

 
Loans held for sale
1,227

1,618

1,107

 
Securities available for sale
19,428

18,341

18,139

 
Held-to-maturity securities
11,519

11,869

11,830

 
Trading account assets
849

958

836

 
Short-term investments
2,562

2,272

4,447

 
Other investments
666

681

726

 
 
Total earning assets
125,803

125,007

123,490

 
Allowance for loan and lease losses
(883
)
(887
)
(877
)
 
Cash and due from banks
678

319

671

 
Premises and equipment
882

891

930

 
Operating lease assets
993

930

821

 
Goodwill
2,516

2,516

2,538

 
Other intangible assets
316

338

416

 
Corporate-owned life insurance
4,171

4,156

4,132

 
Accrued income and other assets
4,037

4,378

4,237

 
Discontinued assets
1,100

1,157

1,340

 
 
Total assets
$
139,613

$
138,805

$
137,698

 
 
 
 
 
 
Liabilities
 
 
 
 
Deposits in domestic offices:
 
 
 
 
 
NOW and money market deposit accounts
$
59,918

$
57,219

$
53,627

 
 
Savings deposits
4,854

4,948

6,296

 
 
Certificates of deposit ($100,000 or more)
7,913

8,453

6,849

 
 
Other time deposits
5,332

5,130

4,798

 
 
Total interest-bearing deposits
78,017

75,750

71,570

 
 
Noninterest-bearing deposits
29,292

30,030

33,665

 
 
Total deposits
107,309

105,780

105,235

 
Federal funds purchased and securities sold under repurchase agreements 
319

1,285

377

 
Bank notes and other short-term borrowings
544

637

634

 
Accrued expense and other liabilities
2,113

2,044

2,094

 
Long-term debt
13,732

13,849

14,333

 
 
Total liabilities
124,017

123,595

122,673

 
 
 
 
 
 
Equity
 
 
 
 
Preferred stock
1,450

1,450

1,025

 
Common shares
1,257

1,257

1,257

 
Capital surplus
6,331

6,315

6,335

 
Retained earnings
11,556

11,262

10,335

 
Treasury stock, at cost
(4,181
)
(3,910
)
(3,150
)
 
Accumulated other comprehensive income (loss)
(818
)
(1,166
)
(779
)
 
 
Key shareholders’ equity
15,595

15,208

15,023

 
Noncontrolling interests
1

2

2

 
 
Total equity
15,596

15,210

15,025

Total liabilities and equity
$
139,613

$
138,805

$
137,698

 
 
 
 
 
 
Common shares outstanding (000)
1,019,503

1,034,287

1,069,084





Consolidated Statements of Income
(dollars in millions, except per share amounts)
 
 
 
Three months ended
 
Twelve months ended
 
 
 
12/31/2018
9/30/2018
12/31/2017
 
12/31/2018
12/31/2017
Interest income
 
 
 
 
 
 
 
Loans
$
1,058

$
1,025

$
924

 
$
4,023

$
3,677

 
Loans held for sale
26

12

13

 
66

52

 
Securities available for sale
115

102

93

 
409

369

 
Held-to-maturity securities
71

72

61

 
284

222

 
Trading account assets
8

7

6

 
29

27

 
Short-term investments
15

15

12

 
46

26

 
Other investments
4

6

5

 
21

17

 
 
Total interest income
1,297

1,239

1,114

 
4,878

4,390

Interest expense
 
 
 
 
 
 
 
Deposits
174

140

82

 
517

278

 
Federal funds purchased and securities sold under repurchase agreements
1

1


 
11

1

 
Bank notes and other short-term borrowings
4

4

3

 
21

15

 
Long-term debt
118

108

91

 
420

319

 
 
Total interest expense
297

253

176

 
969

613

Net interest income
1,000

986

938

 
3,909

3,777

Provision for credit losses
59

62

49

 
246

229

Net interest income after provision for credit losses
941

924

889

 
3,663

3,548

Noninterest income
 
 
 
 
 
 
 
Trust and investment services income
121

117

131

 
499

535

 
Investment banking and debt placement fees
186

166

200

 
650

603

 
Service charges on deposit accounts
84

85

89

 
349

357

 
Operating lease income and other leasing gains
28

35

27

 
89

96

 
Corporate services income
58

52

56

 
233

219

 
Cards and payments income
68

69

77

 
270

287

 
Corporate-owned life insurance income
39

34

37

 
137

131

 
Consumer mortgage income
7

9

7

 
30

26

 
Mortgage servicing fees
21

19

17

 
82

71

 
Other income  (a)
33

23

15

 
176

153

 
 
Total noninterest income
645

609

656

 
2,515

2,478

Noninterest expense
 
 
 
 
 
 
 
Personnel
576

553

609

 
2,309

2,278

 
Net occupancy
75

76

92

 
308

331

 
Computer processing
55

52

54

 
210

225

 
Business services and professional fees
49

43

52

 
184

192

 
Equipment
26

27

31

 
105

114

 
Operating lease expense
32

31

28

 
120

92

 
Marketing
25

26

35

 
102

120

 
FDIC assessment
9

21

20

 
72

82

 
Intangible asset amortization
22

23

26

 
99

95

 
OREO expense, net
1

3

3

 
6

11

 
Other expense
142

109

148

 
460

558

 
 
Total noninterest expense
1,012

964

1,098

 
3,975

4,098

Income (loss) from continuing operations before income taxes
574

569

447

 
2,203

1,928

 
Income taxes
92

87

251

 
344

637

Income (loss) from continuing operations
482

482

196

 
1,859

1,291

 
Income (loss) from discontinued operations, net of taxes
2


1

 
7

7

Net income (loss)
484

482

197

 
1,866

1,298

 
Less: Net income (loss) attributable to noncontrolling interests


1

 

2

Net income (loss) attributable to Key
$
484

$
482

$
196

 
$
1,866

$
1,296

 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
459

$
468

$
181

 
$
1,793

$
1,219

Net income (loss) attributable to Key common shareholders
461

468

182

 
1,800

1,226

Per common share
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.45

$
.45

$
.17

 
$
1.72

$
1.13

Income (loss) from discontinued operations, net of taxes



 
.01

.01

Net income (loss) attributable to Key common shareholders (b)
.45

.45

.17

 
1.73

1.14

Per common share — assuming dilution
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Key common shareholders
$
.45

$
.45

$
.17

 
$
1.70

$
1.12

Income (loss) from discontinued operations, net of taxes



 
.01

.01

Net income (loss) attributable to Key common shareholders  (b)
.45

.45

.17

 
1.71

1.13

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
.17

$
.17

$
.105

 
$
.565

$
.38

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (000)
1,018,614

1,036,480

1,062,348

 
1,040,890

1,072,077

 
Effect of common share options and other stock awards
11,803

13,497

16,982

 
13,792

16,515

Weighted-average common shares and potential common shares outstanding (000)  (c)
1,030,417

1,049,976

1,079,330

 
1,054,682

1,088,593

 
 
 
 
 
 
 
 
 
(a)
For the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , net securities gains (losses) totaled less than $1 million. For the three months ended December 31, 2018 , September 30, 2018 , and December 31, 2017 , Key did not have any impairment losses related to securities.
(b)
Earnings per share may not foot due to rounding.
(c)
Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.