KeyCorp Fourth Quarter 2020 Earnings Review January 21, 2021 Chris Gorman Chairman and Chief Executive Officer Don Kimble Vice Chairman and 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, 2019 and in other filings of KeyCorp with the Securities and Exchange Commission (the “SEC”). In addition to the aforementioned factors, the COVID-19 global pandemic is adversely affecting us, our clients, and our third-party service providers, among others, and its impact may adversely affect our business and results of operations over a period of time. Risks related to and stemming from COVID-19 are more fully described under “Risk Factors” in KeyCorp’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and September 30, 2020. 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,” “pre-provision net revenue,” and certain financial measures excluding notable items. 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, or page 48 of our Form 10-Q dated September 30, 2020. GAAP: Generally Accepted Accounting Principles 2
3 4Q20 & FY2020 Highlights Capital and Liquidity Strong capital position: CET1 ratio of 9.8% (a) – above targeted range Stress test results support strong credit profile a nd loss-absorbing capital: positioned to pay dividends and initiate new share repurchase program − Announced new share repurchase authorization of up to $900 MM for 1Q21-3Q21 − Maintained dividend of $.185 per common share in 4Q20 Financial Credit Quality Strong credit quality: net charge offs to average l oans of 53 bps (within targeted range) Provision for credit losses reflects strong credit metrics and outlook for the overall economy, credit migration and loan production Commercial portfolio focus areas performing in-line o r better than expectations Record 4Q20 earnings per share of $.56 up 37% from 3Q20 and 24% from 4Q19 All-time high revenue for both 4Q20 and FY2020 − Record investment banking and debt placement fees of $243 MM in 4Q20 (FY2020: $661 MM) − Consumer mortgage fees of $176 MM in 2020, up 179% from 2019 − Record consumer mortgage originations of $8.3 B and $2.3 B of Laurel Road originations in FY20 − Net interest income reflects 8 bps linked quarter NIM improvement (incl. benefit from PPP) 4Q20 expense levels reflect higher incentive compen sation from strong fee production, severance and charitable foundation contributions Return on average tangible common equity of 16.6% i n 4Q20, up 440 bps from PQ PPP = Paycheck Protection Program (a) 12/31/20 ratio is estimated
Financial Review 4
Financial Highlights EOP = End of Period (a) Non-GAAP measure: see Appendix for reconciliations (b) 12/31/20 ratios are estimated EPS – assuming dilution $ .56 $ .41 $ .45 37 % 24 % Cash efficiency ratio(a) 60.3 % 60.6 % 58.7 % (30) bps 160 bps Return on average tangible common equity(a) 16.6 12.2 14.1 440 250 Return on average total assets 1.35 1.00 1.27 35 8 Net interest margin 2.70 2.62 2.98 8 (28) Common Equity Tier 1(b) 9.8 % 9.5 % 9.4 % 30 bps 40 bps Tier 1 risk-based capital(b) 11.1 10.9 10.9 20 20 Tangible common equity to tangible assets(a) 7.9 7.8 8.6 10 (70) NCOs to average loans .53 % .49 % .42 % 4 bps 11 bps NPLs to EOP portfolio loans .78 .81 .61 (3) 17 Allowance for credit losses to EOP loans 1.80 1.88 1.02 (8) 78 Asset Quality Profitability Continuing operations, unless otherwise noted 4Q20 3Q20 4Q19 LQ ∆ Y/Y ∆ Capital 5
Loans $ in billions vs. Prior Year Total Average Loans Highlights Average loans up 9% from 4Q19 − Balances reflect $7.5 B of average PPP balances in 4Q20 − Commercial balances reflect broad-based core C&I growth partially offset by decreased utilization − Consumer loan growth (+12%) driven by consumer mortgage and Laurel Road vs. Prior Quarter Average loans down 3% from 3Q20 − Commercial balances reflect paydowns from line draws earlier in the year − Consumer loans up 3% reflecting: Record $2.5 B funded consumer mortgage volume in 4Q20 $590 MM Laurel Road originations in 4Q20 $ in billions Portfolio Detail $94 4.47% 3.68% 3.00% 4.00% 5.00% 6.00% $60 $70 $80 $90 $100 $110 4Q19 1Q20 2Q20 3Q20 4Q20 Loan yieldTotal average loans $48 $54 4Q19 4Q20 ConsumerC&I $26 $29 4Q19 4Q20 PPP $6 $105 $8 6 $102 $7.5
$43.2 $80.6 $5.7 $6.2 0.71% 0.96% 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% $0 $20 $40 $60 $80 $100 $120 $140 4Q19 1Q20 2Q20 3Q20 4Q20 Cost of total interest-bearing deposits Average deposit balances up .6% from 3Q20 − Broad-based commercial growth and higher consumer balances − Partially offset by a continued decline in time deposits 4Q20 Average Deposit Mix Average deposits up 21% from 4Q19 − Growth from consumer and commercial relationships − Partially offset by decline in time deposits as a result of lower interest rates Cost of total deposits CDs and other time deposits Savings Noninterest-bearing NOW and MMDA $ in billions $ in billions vs. Prior Year vs. Prior Quarter Consumer Commercial $113 .12% Average Deposits Highlights $136 .08% Interest-bearing deposit costs down 11 bps from 3Q20, reflecting impact of lower interest rates Strong and stable deposit base − 32% noninterest-bearing(a) − ~60% stable retail and low-cost escrow − 76% loan to deposit ratio(b) (a) Based on period-end balances (b) Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits x 7 Deposits
2.98% 2.70% 2.0% 2.5% 3.0% 3.5% 4.0% $500 $600 $700 $800 $900 $1,000 $1,100 4Q19 1Q20 2Q20 3Q20 4Q20 Net interest income up $37 MM (+4%) from 3Q20 − Largely reflecting lower interest-bearing deposit costs and higher loan fees from PPP − Partially offset by elevated liquidity levels TE = Taxable equivalent Net interest income (TE) Net Interest Margin (TE) Net Interest Income and Margin $ in millions; continuing operations vs. Prior Year vs. Prior Quarter $987 $1,043 Net Interest Income & Net Interest Margin Trend (TE ) Highlights x NIM Change vs. Prior Quarter 3Q20: 2.62% Loan fees .07 Deposit costs .06 Elevated liquidity (.05) Total change .08 4Q20: 2.70% Net interest income up $56 MM (+6%) from 4Q19 − Largely driven by higher earning asset balances and loan fees − Partially offset by a lower net interest margin Lower NIM driven by the impact from lower interest rates, elevated levels of liquidity, and P PP program participation 8
Noninterest income up $151 MM (+23%) from 4Q19 − Record quarter of investment banking and debt placement fees (+$62 MM) − Investments made in Key’s mortgage business drove higher consumer mortgage income (+$22 MM) − $30 MM increase in cards and payments income driven by higher prepaid card activity − Strong commercial mortgage servicing fees (+$13 MM) Noninterest Income Noninterest Income Noninterest income up $121 MM (+18%) from 3Q20 − Record quarter of investment banking and debt placement fees (+$97 MM) driven by strong M&A and loan syndication fees − Strong commercial mortgage servicing fees (+$14 MM) − Partially offset by a decline in cards and payments income (-$17 MM) vs. Prior Year vs. Prior Quarter Highlights $ in millions up / (down) 4Q20 vs. 4Q19 vs. 3Q20 Trust and investment services income $ 123 $ 3 $ (5) Investment banking and debt placement fees 243 62 97 Service charges on deposit accounts 82 (4) 5 Operating lease income and other leasing gains 39 - 1 Corporate services income 63 (2) 12 Cards and payments income 97 30 (17) Corporate-owned life insurance 38 (1) 8 Consumer mortgage income 43 22 (8) Commercial mortgage servicing fees 32 13 14 Other income 42 28 14 Total noninterest income $ 802 $ 151 $ 121 9
Noninterest Expense vs. Prior Year vs. Prior Quarter Noninterest Expense Highlights $ in millions favorable / (unfavorable) 4Q20 vs. 4Q19 vs. 3Q20 Personnel $ 661 $ (110) $ (73) Net occupancy 75 1 1 Computer processing 62 (11) (3) Business services, professional fees 54 - (5) Equipment 26 (1) (1) Operating lease expense 35 (3) (2) Marketing 30 (3) (8) FDIC assessment 9 (1) (3) Intangible asset amortization 15 4 - OREO expense, net - 3 (1) Other expense 161 (27) 4 Total noninterest expense $ 1,128 $ (148) $ (91) Noninterest expense up $148 MM (+15%) from 4Q19 − Higher personnel expense (+$110 MM) related to increased incentive and stock-based compensation from record fee generation in 4Q20, higher salaries and increased severance − Higher payments-related expense (reported in other expense) largely driven by heightened prepaid activity − Higher charitable foundation contributions (reported in other expense) Noninterest expense up $91MM (+9%) from 3Q20 − Higher personnel expense (+$73 MM) primarily related to increased incentive and stock-based compensation from record fee generation in 4Q20, as well as higher severance expense − Increased marketing expense (+$8 MM) 10
.42% .00% .20% .40% .60% .80% 1.00% $0 $100 $200 $300 $400 $500 4Q19 1Q20 2Q20 3Q20 4Q20 $ in millions Credit Quality $ in millions NCOs Provision for credit losses NCOs to avg loans $577 $785 .61% .78% .00% .40% .80% 1.20% 1.60% 2.00% $0 $300 $600 $900 4Q19 1Q20 2Q20 3Q20 4Q20 NPLs NPLs to period-end loans NCO = Net charge-off $968 $1,823 168% 232% 100% 150% 200% 250% 300% 350% 400% $0 $500 $1,000 $1,500 $2,000 $2,500 4Q19 1Q20 2Q20 3Q20 4Q20 Allowance for credit losses to NPLs Allowance for credit losses Nonperforming Loans 4Q20 allowance for credit losses to period-end loans of 1.80% (excl. PPP 1.93%) Allowance for Credit Losses (ACL) Net Charge-offs & Provision for Credit Losses $ in millions .53% CECL Implementation $109 $20 $135 11 $99
Portfolios in Focus Ongoing portfolio reviews Monitoring ratings migration Central reporting on enterprise-wide relief initiatives Established pandemic watchlist and ongoing review of commercial clients at risk − Evaluate business position as well as potential COVID implications Active Portfolio Surveillance Portfolios reviewed on a frequent and ongoing basis $ in millions 12/31/20 Outstandings 9/30/20 Outstandings % of Total Loans as of 12/31 Consumer behavior (a) $ 5,083 $ 5,020 5.0% Education 1,541 1,568 1.5 Sports 690 642 .7 Restaurants 400 396 .4 Retail commercial real estate (b) $ 525 $ 640 .5% Nondurable retail (c) $ 638 $ 632 .6% Travel / Tourism (d) $ 2,523 $ 2,786 2.5% Hotels 784 851 .8 Leveraged lending (e) $ 1,700 $ 1,859 1.7% Oil and gas $ 1,993 $ 2,095 2.0% Upstream (reserve-based) 1,263 1,391 1.2 Midstream 468 400 .5 Downstream 98 104 N/M (a) Consumer behavior includes restaurants, sports, entertainment and leisure, services, education, etc. (b) Retail commercial real estate is mainly composed of regional malls, strip centers (unanchored) and lifestyle centers (c) Nondurable retail includes direct lending to retailers including apparel, hobby shops, nursery garden centers, cosmetics, and gas stations with convenience stores (d) Travel/Tourism includes hotels, tours, and air/water/rail leasing (e) Leveraged lending exposures have total debt to EBITDA greater than four times or senior debt to EBITDA greater than three times and meet the purpose test (the new debt finances a buyout, acquisition, or capital distribution) Note: Approximately 3% of outstandings overlapped in multiple categories 12 Select Commercial Portfolio
Common Equity Tier 1 (a) Strong capital position: CET1 ratio up 30 bps from 3Q20 to 9.8% (a) at 12/31/2020 – above targeted range Stress test results support strong credit profile and loss-absorbing capital: − Announced new share repurchase authorization of up to $900 MM for 1Q21- 3Q21 − Maintained dividend of $.185 per common share in 4Q20 Tangible Common Equity to Tangible Assets (b) (a) 12/31/20 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision (b) Non-GAAP measure: see Appendix for reconciliation 9.4% 9.8% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 4Q19 1Q20 2Q20 3Q20 4Q20 8.6% 7.9% 6.0% 7.0% 8.0% 9.0% 10.0% 4Q19 1Q20 2Q20 3Q20 4Q20 Capital Highlights Common Share Dividend $0.215 2013 2014 2015 2016 2017 2018 2019 2020 $.74 13
FY2021 Outlook & Long -term Targets Average Balance Sheet • Loans: relatively stable • Deposits: up low-single digit Net Interest Income (TE) • Net interest income: relatively stable (includes ongoing participation in PPP) Noninterest Income • Noninterest income: up low-single digit Noninterest Expense • Noninterest expense: down low-single digit Credit Quality • Net charge-offs to average loans: 50 - 60 bps Taxes • GAAP tax rate: ~19% FY 2021 (vs. FY 2020) Long-term Targets Positive operating leverage Cash efficiency ratio: 54% - 56% Moderate risk profile: Net charge-offs to avg. loans targeted range of 40-60 bps ROTCE: 16% - 19% Guidance ranges: relatively stable: +/- 2%; low-single digit: 1% - 3% 14
Appendix 15
Total Commercial Loans C&I $40 CRE $18 $ in billions 12/31/20 % of total loans Commercial and industrial $ 52.9 52 Commercial real estate 14.7 15 Commercial lease financing 4.4 4 Total Commercial $ 72.0 71% Commercial Loan Portfolio Detail Solid middle market portfolio Aligning bankers to areas of market opportunity and growth - investing in strategic hires with industry vertical expertise High-quality borrowers Small, stable leveraged portfolio: < 2% of total loans Portfolio Highlights Target specific client segments focused in 7 industry verticals Experienced bankers with deep industry expertise Focused on high quality clients Credit quality metrics remain strong and stable − Disciplined, consistent underwriting − Active surveillance with ongoing portfolio reviews − Dynamic assessment of ratings migration Strengthened credit risk profile with strategic exits and growth in targeted client segments to focus on relationships Significantly scaled back construction portfolio from pre- recession (42% in 2008 14% in 2020) Focused on relationships with owners and operators Strategic focus in CDLI and multifamily Commercial Real Estate (CRE) Commercial & Industrial (C&I) Consumer Energy Healthcare Industrial Public Sector Real Estate Technology Targeted Industry Verticals ~80% commercial bank credit exposure from relationship(a) clients (a) Relationship client is defined as having two or more of the following: credit, capital markets, or payments 16
$1.5 $1.3 $2.2 $2.3 $2.5 4Q19 1Q20 2Q20 3Q20 4Q20 Origination Volume $801 $611 $706 $419 $590 4Q19 1Q20 2Q20 3Q20 4Q20 Origination Volume Portfolio Highlights Prime & super prime client base focused on relationships Continued consumer originations bring more balance to portfolio Continuing to invest in digital to drive future growth weighted average FICO at origination Total Consumer Loans Consumer Loan Portfolio Detail C&I $40 CRE $18 $ in billions 12/31/20 % of total loans WA FICO at origination Consumer mortgage 9.3 9 769 Home equity 9.4 9 812 Consumer direct 4.7 5 766 Credit card 1.0 1 800 Consumer indirect 4.8 5 775 Total Consumer $ 29.2 29% 781 $ in millions East Other $ in billions High-quality client base: primarily healthcare professionals − Weighted average FICO at origination: ~789 − Weighted average borrower income: >$200 K Growth engine for consumer business: 33K net new households added since acquisition with opportunity for further integration Focused on prime/super-prime clients (FICO: 769) Investing in digital capabilities to enhance client experience and improve efficiency Continued momentum with record loan originations of $2.5 B in 4Q20 and $8.3 B in FY20 Laurel Road Consumer Mortgage Other East Other 781 17
Average Total Investment Securities Average AFS securities Investment Portfolio Average yield(a) Average HTM securities $ in billions Highlights 2.47% .50% 1.00% 1.50% 2.00% 2.50% 3.00% $0.0 $8.0 $16.0 $24.0 $32.0 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 $32.5 $36.0 1.93% Securities Cash Flows (b) as a % of Total Securities Securities cash flows as a % of total securities(b) Mortgage rate(c) (a) Yield is calculated on the basis of amortized cost (b) Quarterly cash flows (c) Average 30-year Freddie Mac fixed mortgage rate Portfolio used for funding and liquidity management ‒ Portfolio composed primarily of fixed-rate GNMA and GSE-backed MBS and CMOs ‒ Portfolio yield excluding short-term Treasury Bill investments was 2.18% Excess cash was put to work in portfolio in 4Q20 ‒ Invested in higher yielding Agency Mortgage Securities during the quarter ‒ Continue to evaluate alternatives to deploy additional excess cash into securities while also maintaining flexibility to capitalize on higher interest rates as the economy continues to recover Strategically positioned the portfolio allocation t o provide greater yield stability in a lower interest rate environment: ‒ Grew allocation to bullet-like or locked-out cash flow securities backed by commercial mortgages ‒ Focused on investing in securities backed by residential and multi-family mortgage collateral with lower prepayment risks ‒ Limited exposure to net unamortized premiums on mortgage securities ‒ Quarterly mortgage security cash flows as a % of the portfolio increased a modest 4% with mortgage rates ~2.00% lower Portfolio average life of 5.0 years and duration of 4.9 years at 12/31/2020 18 4% 3% 4% 4% 5% 5% 7% 8% 8% 4.8% 3.5% 3.3% 3.0% 2.8% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Prime 10% 1M LIBOR 38.0% 3M LIBOR 6% Other 6% Fixed 40% Balanced approach to managing interest rate risk provides declining rate protection while maintaining significant upside to higher rates 4Q20 Balance Sheet Highlights (a) Loan Composition Deposit Mix Attractive business model with relationship-oriente d lending franchise − Distinctive commercial capabilities drive C&I growth and ~60% floating-rate loan mix (incl. PPP) − Laurel Road and consumer mortgage enhance fixed rate loan volumes with attractive client profile Strong, low-cost deposit base − ~60% stable retail and low-cost escrow − >85% from markets where Key maintains top-5 deposit or branch share $36 B investment portfolio structured to provide greater yield stability in a lower rate environment − Higher allocation of bullet-like securities and mortgage collateral with lower prepayment risks and limited exposure to unamortized premiums Actively Managing Interest Rate Risk Position Nominal exposure to further rate declines with prot ection against negative interest rates − Hedge program initiated in 3Q18 significantly reduced impact of 2020 rate declines (~$31 B in executions through 2Q20) − 90+% of existing Libor loan portfolio contain floors (at or above 0%), with floors incorporated into all new Libor loan contracts − Disciplined risk management approach with $3.8 B in A/LM swap executions in 4Q20 as proactive replacement of 1Q21 maturities Substantial investment opportunities to monetize hig her term rate levels ‒ $18+ B in cash and short-term treasuries ‒ $20+ B in projected annual fixed rate investments across loan, security, and derivative portfolios Total active hedge portfolio of $33.9 B at 12/31/20 20 (a) Loan and deposit statistics based on 12/31/2020 ending balances Continually evaluating opportunities to protect and enhance NII through new hedging and/or modifying existing positions FloorsA/LM Swaps Debt Swaps 4 Q 2 0 $21.0 B $7.9 B $5.0 B Interest- bearing 68% Noninterest- bearing 32% 19 Asset & Liability Management Positioning
Criticized Outstandings (a) to Period-end Total LoansDelinquencies to Period-end Total Loans Credit Quality Trends (a) Loan and lease outstandings (b) From continuing operations 30 – 89 days delinquent 90+ days delinquent .35% .24% .10% .08% .00% .20% .40% .60% .80% 4Q19 1Q20 2Q20 3Q20 4Q20 2.6% 4.3% .0% 2.0% 4.0% 6.0% 4Q19 1Q20 2Q20 3Q20 4Q20 Metric (b) 4Q20 3Q20 2Q20 1Q20 4Q19 Delinquencies to EOP total loans: 30-89 days .24 % .33 % .39 % .38 % .35 % Delinquencies to EOP total loans: 90+ days .08 .07 .08 .12 .10 NPLs to EOP portfolio loans .78 .81 .72 .61 .61 NPAs to EOP portfolio loans + OREO + Other NPAs .92 .97 .89 .82 .75 Allowance for credit losses to period-end loans 1.80 1.88 1.80 1.47 1.02 Allowance for credit losses to NPLs 232.2 232.4 250.8 240.5 167.8 Continuing operations Continuing operations 20
Period- end loans Average loans Net loan charge- offs Net loan charge-offs (b) / average loans (%) Nonperforming loans Ending allowance Allowance / period-end loans (%) Allowance / NPLs (%) 12/31/20 4Q20 4Q20 4Q20 12/31/20 12/31/20 12/31/20 12/31/20 Commercial and industrial(a) $ 52,907 $ 53,562 $ 104 .77% $ 385 $ 678 1.28% 176.10% Commercial real estate: Commercial Mortgage 12,687 12,862 1 .03 104 327 2.58 314.42 Construction 1,987 1,959 - - - 47 2.37 - Commercial lease financing(c) 4,399 4,353 19 1.73 8 47 1.07 587.50 Real estate – residential mortgage 9,298 8,968 - - 110 102 1.10 92.73 Home equity 9,360 9,410 - - 154 171 1.83 111.04 Consumer direct loans 4,714 4,583 6 .52 5 87 1.85 N/M Credit cards 989 973 5 2.04 2 128 12.94 N/M Consumer indirect loans 4,844 5,040 - - 17 39 .81 229.41 Continuing total $ 101,185 $ 101,710 $ 135 .53% $ 785 $ 1,626 1.61% 207.13% Discontinued operations 710 722 (1) (.55) 5 36 4.85 720.00 Consolidated total $ 101,895 $ 102,432 $ 134 .5 2% $ 790 $ 1,662 1.63% 210.38% Credit Quality by Portfolio Credit Quality $ in millions N/M = Not meaningful (a) Commercial and industrial ending loan balances include $127 million of commercial credit card balances at December 31, 2020; commercial and industrial average balances include $129 million of assets from commercial credit cards for the three months ended December 31, 2020 (b) Net loan charge-off amounts are annualized in calculation (c) Commercial lease financing includes receivables held as collateral for a secured borrowing of $23 million at December 31, 2020. Principal reductions are based on the cash payments received from these related receivables 21
GAAP to Non -GAAP Reconciliation (a) For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, intangible assets exclude $4 million, $5 million, and $7 million, respectively, of period-end purchased credit card receivables (b) Net of capital surplus (c) For the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, intangible assets exclude $5 million, $5 million, and $8 million, respectively, of average purchased credit card receivables $ in millions 12/31/2020 9/30/2020 12/31/2019 12/31/2020 12/31/2019 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) 17,981$ 17,722$ 17,038$ Less: Intangible assets (a) 2,848 2,862 2,910 Preferred Stock (b) 1,856 1,856 1,856 Tangible common equity (non-GAAP) 13,277$ 13,004$ 12,272$ Total assets (GAAP) 170,336$ 170,540$ 144,988$ Less: Intangible assets (a) 2,848 2,862 2,910 Tangible assets (non-GAAP) 167,488$ 167,678$ 142,078$ Tangible common equity to tangible assets ratio (non-GAAP) 7.9% 7.8% 8.6% Pre-provision net revenue Net interest income (GAAP) 1,035$ 1,000$ 979$ 4,034$ 3,909$ Plus: Taxable-equivalent adjustment 8 6 8 29 32 Noninterest income 802 681 651 2,652 2,459 Less: Noninterest expense 1,128 1,037 980 4,109 3,901 Pre-provision net revenue from continuing operations (non-GAAP) 717$ 650$ 658$ 2,606$ 2,499$ Average tangible common equity Average Key shareholders' equity (GAAP) 17,905$ 17,730$ 17,178$ 17,636$ 16,636$ Less: Intangible assets (average) (c) 2,855 2,870 2,919 2,878 2,909 Preferred Stock (average) 1,900 1,900 1,900 1,900 1,755 Average tangible common equity (non-GAAP) 13,150$ 12,960$ 12,359$ 12,858$ 11,972$ Twelve months endedThree months ended 22
12/31/2020 9/30/2020 12/30/2019 12/31/2020 12/31/2019 Return on average tangible common equity from conti nuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) 549$ 397$ 439$ 1,223$ 1,611$ Plus: Notable items, after tax - - 29 - 183 Net income (loss) from continuing operations attributable to Key common shareholders excl. notable items (non-GAAP) 549$ 397$ 468$ 1,223$ 1,794$ Average tangible common equity (non-GAAP) 13,150 12,960 12,359 12,858 11,972 Return on average tangible common equity from continuing operations (non-GAAP) 16.61% 12.19% 14.09% 9.51% 13.46% Return on average tangible common equity from continuing operations excl. notable items (non-GAAP) 16.61% 12.19% 15.02% 9.51% 14.98% Return on average tangible common equity consolidat ed Net income (loss) attributable to Key common shareholders (GAAP) 556$ 401$ 442$ 1,237$ 1,620$ Average tangible common equity (non-GAAP) 13,150 12,960 12,359 12,858 11,972 Return on average tangible common equity consolidation (non-GAAP) 16.82% 12.31% 14.19% 9.62% 13.53% Cash efficiency ratio Noninterest expense (GAAP) 1,128$ 1,037$ 980$ 4,109$ 3,901$ Less: Intangible asset amortization 15 15 19 65 89 Adjusted noninterest expense (non-GAAP) 1,113$ 1,022$ 961$ 4,044$ 3,812$ Less: Notable items - - 22 - 100 Adjusted noninterest expense excl. notable items (non-GAAP) 1,113$ 1,022$ 939$ 4,044$ 3,712$ Net interest income (GAAP) 1,035$ 1,000$ 979$ 4,034$ 3,909$ Plus: Taxable-equivalent adjustment 8 6 8 29 32 Noninterest income 802 681 651 2,652 2,459 Total taxable-equivalent revenue (non-GAAP) 1,845$ 1,687$ 1,638$ 6,715$ 6,400$ Cash efficiency ratio (non-GAAP) 60.3% 60.6% 58.7% 60.2% 59.6%0.602 0.602 Cash efficiency ratio excluding notable items (non-GAAP) 60.3% 60.6% 57.3% 60.2% 58.0% Notable Items Provision for credit losses - - 16$ - 139$ Professional fees related to fraud loss - - 4$ - 4$ Efficiency initiative expenses - - - - 76$ Laurel Road acquisition expenses - - - - 2$ Pension settlement charge - - 18$ - 18$ Total notable items - - 38$ - 239$ Income taxes - - 9$ - 56$ Total notable items after tax - - 29$ - 183$ Three months ended Twelve months ended GAAP to Non -GAAP Reconciliation $ in millions 23