KEYCORP /NEW/ - Annual Report: 2019 (Form 10-K)

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•	our concentrated credit exposure in commercial and industrial loans;

•	deterioration of commercial real estate market fundamentals;

•	defaults by our loan counterparties or clients;

•	adverse changes in credit quality trends;

•	declining asset prices;

•	the extensive regulation of the U.S. financial services industry;

•	changes in accounting policies, standards, and interpretations;

•	operational or risk management failures by us or critical third parties;

•	breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;

•	negative outcomes from claims or litigation;

•	failure or circumvention of our controls and procedures;

•	the occurrence of natural or man-made disasters, global pandemics, conflicts, or terrorist attacks, or other adverse external events;

•	evolving capital and liquidity standards under applicable regulatory rules;

•	disruption of the U.S. financial system;

•	our ability to receive dividends from our subsidiaries, including KeyBank;

•	unanticipated changes in our liquidity position, including but not limited to, changes in our access to or the cost of funding and our ability to secure alternative funding sources;

•	downgrades in our credit ratings or those of KeyBank;

•	a reversal of the U.S. economic recovery due to financial, political or other shocks;

•	our ability to anticipate interest rate changes and manage interest rate risk;

•	uncertainty surrounding the transition from LIBOR to an alternate reference rate;

•	deterioration of economic conditions in the geographic regions where we operate;

•	the soundness of other financial institutions;

•	our ability to attract and retain talented executives and employees and to manage our reputational risks;

•	our ability to timely and effectively implement our strategic initiatives;

•	increased competitive pressure;

•	our ability to adapt our products and services to industry standards and consumer preferences;

•	unanticipated adverse effects of strategic partnerships or acquisitions and dispositions of assets or businesses; and

•	our ability to develop and effectively use the quantitative models we rely upon in our business planning.

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•	We use the phrase continuing operations in this document to mean all of our businesses other than the our government-guaranteed and private education lending business and Austin. The government-guaranteed and private education lending business and Austin have been accounted for as discontinued operations since 2009.

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We engage in capital markets activities primarily through business conducted by our Commercial Bank segment. These activities encompass a variety of products and services. Among other things, we trade securities as a dealer, enter into derivative contracts (both to accommodate clients’ financing needs and to mitigate certain risks), and conduct transactions in foreign currencies (both to accommodate clients’ needs and to benefit from fluctuations in exchange rates).

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For regulatory purposes, capital is divided into two classes. Federal regulations currently prescribe that at least one-half of a bank or BHC’s total risk-based capital must qualify as Tier 1 capital. Both total and Tier 1 capital serve as bases for several measures of capital adequacy, which is an important indicator of financial stability and condition. Banking regulators evaluate a component of Tier 1 capital, known as Common Equity Tier 1, under the Regulatory Capital Rules. The “Capital” section of this report under the heading “Capital adequacy” provides more information on total capital, Tier 1 capital, and the Regulatory Capital Rules, including Common Equity Tier 1, and describes how these measures are calculated.

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(a)	See section entitled “GAAP to Non-GAAP Reconciliations,” which presents the computation of Common Equity Tier 1 capital under the fully phased-in regulatory capital rules.

(b)	As a standardized approach banking organization, KeyCorp is not subject to the 3% supplemental leverage ratio requirement, which became effective January 1, 2018.

(c)	Capital conservation buffer must consist of Common Equity Tier 1 capital. As a standardized approach banking organization, KeyCorp is not subject to the countercyclical capital buffer of up to 2.5% imposed upon an advanced approaches banking organization under the Regulatory Capital Rules.

(a)	A “well capitalized” institution also must not be subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure.

(b)	As a standardized approach banking organization, KeyBank is not subject to the 3% supplemental leverage ratio requirement, which became effective January 1, 2018.

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•	A loss of confidence in the financial services industry and the debt and equity markets by investors, placing pressure on the price of Key’s common shares or decreasing the credit or liquidity available to Key;

•	A decrease in consumer and business confidence levels generally, decreasing credit usage and investment or increasing delinquencies and defaults;

•	A decrease in household or corporate incomes, reducing demand for Key’s products and services;

•	A decrease in the value of collateral securing loans to Key’s borrowers or a decrease in the quality of Key’s loan portfolio, increasing loan charge-offs and reducing Key’s net income;

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•	A decrease in our ability to liquidate positions at acceptable market prices;

•	The extended continuation of the current low-interest rate environment, continuing or increasing downward pressure to our net interest income;

•	An increase in competition or consolidation in the financial services industry;

•	Increased concern over and scrutiny of the capital and liquidity levels of financial institutions generally, and those of our transaction counterparties specifically;

•	A decrease in confidence in the creditworthiness of the United States or other governments whose securities we hold; and

•	An increase in limitations on or the regulation of financial services companies like Key.

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(a)	Share price performance is not necessarily indicative of future price performance.

(a)	Includes Common Shares repurchased in the open market.

(b)	Calculated using the remaining general repurchase amount divided by the closing price of KeyCorp Common Shares as follows: on October 31, 2019, at $17.97; on November 29, 2019, at $19.39; and on December 31, 2019, at $20.24.

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(a)	EPS may not foot due to rounding.

(b)	Assumes conversion of Common Share options and other stock awards and/or convertible preferred stock, as applicable.

(c)	See the section entitled “GAAP to Non-GAAP Reconciliations,” which presents the computations of certain financial measures related to “tangible common equity” and “cash efficiency.” The section includes tables that reconcile the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(d)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits (excluding deposits in foreign office).

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Grow profitably — We intend to continue to focus on generating positive operating leverage by growing revenue and creating a more efficient operating environment. We expect our relationship business model to keep generating organic growth as it helps us expand engagement with existing clients and attract new customers. We plan to leverage our continuous improvement culture to maintain an efficient cost structure that is aligned, sustainable, and consistent with the current operating environment and that supports our relationship business model.

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Acquire and expand targeted client relationships — We seek to be client-centric in our actions and have taken purposeful steps to enhance our ability to acquire and expand targeted relationships. We seek to provide solutions to serve our clients' needs. We focus on markets and clients where we can be the most relevant. In aligning our businesses and investments against these targeted client segments, we are able to make a meaningful impact for our clients.

•	Effectively manage risk and rewards — Our risk management activities are focused on ensuring we properly identify, measure, and manage risks across the entire company to maintain safety and soundness and maximize profitability.

•	Maintain financial strength — With the foundation of a strong balance sheet, we intend to remain focused on sustaining strong reserves, liquidity and capital. We plan to work closely with our Board and regulators to manage capital to support our clients’ needs and drive long-term shareholder value. Our capital remains a competitive advantage for us.

•	Engage a high-performing, talented, and diverse workforce — Every day our employees provide our clients with great ideas, extraordinary service, and smart solutions. We intend to continue to engage our high-performing, talented, and diverse workforce to create an environment where they can make a difference, own their careers, be respected, and feel a sense of pride.

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We continued to grow profitably during 2019. Our cash efficiency ratio improved to 59.6% and we achieved our seventh consecutive year of positive operating leverage. Full year expenses were down 1.9% from the prior year as we completed our $200 million cost reduction program. Revenue was slightly down for the year, reflecting the impact of lower interest rates. We continued to see strong balance sheet growth as average loans were up 3.6% and average deposits were up 4.7% compared to the prior year. Our relationship-based business model continues to position us well with our targeted clients, which results in new and expanded relationships.

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We acquired Laurel Road in April of 2019, which originated $1.8 billion of consumer direct loans during the year, well above our original expectations. These high quality loans provide us with an opportunity to build a broader digital relationship with our clients. Our residential mortgage business is another area where we are seeing strong returns on our investments. Residential mortgage loan originations for 2019 were $4.3 billion, up over 120% from 2018, with $1.5 billion originated in the fourth quarter of 2019. These two investments highlight our commitment to acquire and expand targeted client relationships.

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During 2019, our net loan charge-offs to average loans ratio was impacted by a previously disclosed fraud loss. Our provision for credit losses and net loan charge-offs include $139 million related to the fraud loss. Overall, credit quality remains strong as our new loan originations in both our commercial and consumer book continue to meet our criteria for high quality loans as we continue to effectively manage risk and rewards.

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Maintaining financial strength while driving long-term shareholder value was again a focus during 2019. At December 31, 2019, our Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.44% and 10.86%, respectively. During 2019, we repurchased $379 million of Common Shares under our 2018 capital plan authorization and $489 million under our 2019 capital plan authorization. Our full-year dividend for 2019 was $.71, a 26% increase from the previous year.

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We remained committed to our strategy to engage a high-performing, talented, and diverse workforce. In 2019, we were recognized by multiple organizations for our dedication to creating an environment where employees are treated with respect and empowered to bring their authentic selves to work. Some of these awards and recognitions included the Human Rights Campaign naming us one of the Best Places to Work for LGBT Equality, G.I. Jobs and Military Spouse Magazine recognizing us as a Military Friendly® and Military Friendly® Spouse Employer, and receiving the Leading Disability Employer Seal from the National Organization on Disability. We were also named to DiversityInc’s 2019 Top 50 Companies for Diversity.

•	Identify and analyze LIBOR-based exposure and develop and execute transition strategies;

•	Review and update near-term strategies and actions for our current LIBOR-based business currently being written;

•	Assess financial impact and risk while planning and executing mitigation actions;

•	Understand and strategically address the current market approach to LIBOR and SOFR; and

•	Determine and execute system and process work to be operationally ready for SOFR.

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(a)	Includes Net income (loss) attributable to noncontrolling interest and Preferred dividends.

•	the volume, pricing, mix, and maturity of earning assets and interest-bearing liabilities;

•	the volume and value of net free funds, such as noninterest-bearing deposits and equity capital;

•	the use of derivative instruments to manage interest rate risk;

•	interest rate fluctuations and competitive conditions within the marketplace;

•	asset quality; and

•	fair value accounting of acquired earning assets and interest-bearing liabilities.

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(a)	Average deposits for the year ended December 31, 2015, exclude deposits in foreign office.

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(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 TE basis using the statutory federal income tax rate in effect that calendar year.

(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)	Commercial and industrial average balances include $141 million, $126 million, $117 million, $99 million, and $88 million of assets from commercial credit cards for the years ended December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, respectively.

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(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 our matched funds transfer pricing methodology to discontinued operations.

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(a)	The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

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(a)	Other noninterest income includes operating lease income and other leasing gains, corporate services income, corporate-owned life insurance income, consumer mortgage income, mortgage servicing fees, and other income. See the "Consolidated Statements of Income" in Part II, Item 8. Financial Statements and Supplementary Data of this report.

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(a)	Other noninterest expense includes equipment, operating lease expense, marketing, FDIC assessment, intangible asset amortization, OREO expense, net, and other expense. See the "Consolidated Statements of Income" in Part II, Item 8. Financial Statements and Supplementary Data of this report.

(a)	Excludes directors’ stock-based compensation of $3 million in 2019 and 2018, reported as “other noninterest expense” in Figure 5.

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•	Simplification and digitalization to drive growth and operating leverage

•	Relationship-based strategy with a focus on financial wellness as a differentiator

•	Deliver ease, value, and expertise to help guide our clients to the right approach to meet their goals

•	Ease - enabling simple and clear banking with no surprises

•	Value - knowing our clients and valuing each relationship

•	Expertise - provide our clients with industry-leading expertise and personalized service

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•	Net income attributable to Key of $706 million in 2019, compared to $632 million in 2018, an increase of 11.7%.

•	Taxable equivalent net interest income increased in 2019 by $60 million, or 2.6%, from the prior year. The increase in net interest income was primarily driven by strong balance sheet growth.

•	Average loans and leases increased in 2019 by $1.2 billion, or 3.9%, from the prior year. This was driven by the addition of Laurel Road along with strength in residential mortgage and indirect auto lending.

•	Average deposits increased in 2019 by $3.7 billion, or 5.4%, from the prior year. This was driven by growth in money market and certificates of deposit, reflecting Key’s relationship strategy.

•	Provision for credit losses increased $41 million in 2019 compared to the prior year, driven by higher net loan charge-offs and balance sheet growth. Credit quality in 2019 remained stable to 2018.

•	Noninterest income increased in 2019 by $7 million, or .8%, from the prior year, primarily driven by growth in consumer mortgage income.

•	Noninterest expense decreased in 2019 by $71 million, or 3.2%, from the prior year. The decline reflects the benefit of efficiency initiatives, strong expense discipline, and the elimination of the FDIC quarterly surcharge. The decline in expense was partially offset by expenses related to the acquisition of Laurel Road.

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•	Solve complex client needs through a differentiated product set of banking and capital markets capabilities

•	Drive targeted scale through distinct product capabilities delivered to a broad set of clients

•	Utilize industry expertise and broad capabilities to build relationships with narrowly targeted client sets

•	Net income attributable to Key of $1.1 billion in 2019, compared to $1.1 billion in 2018, an increase of 3.6%.

•	Taxable equivalent net interest income decreased in 2019 by $36 million, or 2.2%, from the prior year. The decrease in net interest income was primarily driven by loan spread compression due to a lower rate environment, lower purchase accounting accretion, and lower loan fees.

•	Average loan and lease balances increased $2.2 billion in 2019, or 3.9%, compared to the prior year driven by broad-based growth in commercial and industrial loans.

•	Average deposit balances increased $2.5 billion in 2019, or 7.5%, compared to the prior year, driven by growth in core deposits.

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•	Provision for credit losses increased $16 million in 2019 compared to the prior year, driven by balance sheet growth, lower recoveries, and higher charge-offs. Net charge-offs to average loans remained well below Key’s long term targeted range.

•	Noninterest income increased $62 million in 2019, or 4.7%, from the prior year. Operating lease income and other leasing gains increased $75 million from the prior year driven by favorable client activity and a $42 million lease residual loss in 2018.

•	Noninterest expense decreased by $46 million in 2019, or 2.9%, from the prior year. The decline reflects the benefit of efficiency initiatives, strong expense discipline, and the elimination of the FDIC quarterly surcharge.

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(a)	Loan balances include $144 million, $132 million, $119 million, $116 million, and $85 million of commercial credit card balances at December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, respectively.

(b)

Commercial lease financing includes receivables held as collateral for a secured borrowing of $15 million, $10 million, $24 million, $68 million, and $134 million at December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 20 (“Long-Term Debt”).

(c)	Total loans exclude loans of $865 million at December 31, 2019, $1.1 billion at December 31, 2018, $1.3 billion at December 31, 2017, $1.6 billion at December 31, 2016, and $1.8 billion at December 31, 2015, related to the discontinued operations of the education lending business.

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(a)	Floating and adjustable rates vary in relation to other interest rates (such as the base lending rate) or a variable index that may change during the term of the loan.

(b)	Predetermined interest rates either are fixed or may change during the term of the loan according to a specific formula or schedule.

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(a)	Includes securities held in the available-for-sale and held-to-maturity portfolios.

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(a)	Maturity is based upon expected average lives rather than contractual terms.

(b)	Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year.

(a)	Maturity is based upon expected average lives rather than contractual terms.

(b)	Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year.

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1.	Investing in our businesses, supporting our clients, and loan growth;

2.	Maintaining or increasing our Common Share dividend; and

3.	Returning capital in the form of Common Share repurchases to our shareholders.

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(a)	Common Share repurchases were suspended during the third quarter of 2015 due to the then pending merger with First Niagara. We resumed our Common Share repurchase program during the third quarter of 2016 upon the completion of the First Niagara merger.

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(a)	Net of capital surplus.

(b)	The ALLL included in Tier 2 capital is limited by regulation to 1.25% of the institution’s standardized total risk-weighted assets (excluding its standardized market risk-weighted assets). The ALLL includes $10 million and $14 million of allowance classified as “discontinued assets” on the balance sheet at December 31, 2019, and December 31, 2018, respectively.

(c)	This ratio is Tier 1 capital divided by average quarterly total assets as defined by the Federal Reserve less: (i) goodwill, (ii) the disallowed intangible and deferred tax assets, and (iii) other deductions from assets for leverage capital purposes.

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(a)	Deposits and borrowings exclude interest.

(b)	Includes purchase obligations for goods and services covered by noncancellable contracts and contracts including cancellation fees.

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(a)

The Audit and Risk Committees meet jointly, as appropriate, to discuss matters that relate to each committee’s responsibilities. Committee chairpersons routinely meet with management during interim months to plan agendas for upcoming meetings and to discuss emerging trends and events that have transpired since the preceding meeting. All members of the Board receive formal reports designed to keep them abreast of significant developments during the interim months.

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Fixed income includes those instruments associated with our capital markets business and the trading of securities as a dealer. These instruments may include positions in municipal bonds, bonds backed by the U.S. government, agency and corporate bonds, certain mortgage-backed and asset-backed securities, securities issued by the U.S. Treasury, money markets, and certain CMOs. The activities and instruments within the fixed income portfolio create exposures to interest rate and credit spread risks.

•	Interest rate derivatives include interest rate swaps, caps, and floors, which are transacted primarily to accommodate the needs of commercial loan clients. In addition, we enter into interest rate derivatives to offset or mitigate the interest rate risk related to the client positions. The activities within this portfolio create exposures to interest rate risk.

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•	“Reprice risk” is the exposure to changes in the level of interest rates and occurs when the volume of interest-bearing liabilities and the volume of interest-earning assets they fund (e.g., deposits used to fund loans) do not mature or reprice at the same time.

•	“Basis risk” is the exposure to asymmetrical changes in interest rate indexes and occurs when floating-rate assets and floating-rate liabilities reprice at the same time, but in response to different market factors or indexes.

•	“Yield curve risk” is the exposure to non-parallel changes in the slope of the yield curve (where the yield curve depicts the relationship between the yield on a particular type of security and its term to maturity) and occurs when interest-bearing liabilities and the interest-earning assets that they fund do not price or reprice to the same term point on the yield curve.

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“Option risk” is the exposure to a customer or counterparty’s ability to take advantage of the interest rate environment and terminate or reprice one of our assets, liabilities, or off-balance sheet instruments prior to contractual maturity without a penalty. Option risk occurs when exposures to customer and counterparty early withdrawals or prepayments are not mitigated with an offsetting position or appropriate compensation.

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(a)	Portfolio swaps designated as A/LM are used to manage interest rate risk tied to both assets and liabilities.

(b)	Conventional A/LM floors do not have a stated receive rate or pay rate and are given a strike price on the option.

(c)	Excludes accrued interest of $543 million and $114 million at December 31, 2019, and December 31, 2018, respectively.

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(a)	Excludes allocations of the ALLL related to the discontinued operations of the education lending business in the amount of $10 million at December 31, 2019, $14 million at December 31, 2018, $16 million at December 31, 2017, $24 million at December 31, 2016, and $28 million at December 31, 2015.

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(a)	Credit amounts indicate that recoveries exceeded charge-offs.

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(a)	See Figure 12 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.

(b)	See Figure 11 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio.

(c)	Included in “accrued expense and other liabilities” on the balance sheet.

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(a)	See Figure 12 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.

(b)	See Figure 11 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio.

(c)	Nonperforming loan balances exclude $446 million, $575 million, $738 million, $865 million, and $11 million of PCI loans at December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, respectively.

(d)	Restructured loans (i.e., TDRs) 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. See Note 5,(“Asset Quality“) for more information on our TDRs.

(a)	Nonperforming loan balances exclude $446 million and $575 million of PCI loans at December 31, 2019, and December 31, 2018, respectively.

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(a)	For the years ended December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, intangible assets exclude $7 million, $14 million, $26 million, $42 million, and $45 million, respectively, of period-end purchased credit card relationships.

(b)	Net of capital surplus.

(c)	For the years ended December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, average intangible assets exclude $10 million, $20 million, $34 million, $43 million, and $55 million, respectively, of average purchased credit card relationships.

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(a)	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.

(b)	The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies’ Regulatory Capital Rules (as fully phased-in on January 1, 2019); we are subject to the Regulatory Capital Rules under the “standardized approach.”

(c)	Item is included in the 25% exceptions bucket calculation and is risk-weighted at 250%.

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(a)	EPS may not foot due to rounding.

(b)	Assumes conversion of Common Share options and other stock awards and/or convertible preferred stock, as applicable.

(c)	See Figure 36 entitled “Selected Quarterly GAAP to Non-GAAP Reconciliations,” which 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.

(d)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.

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(a)

For the three months ended December 31, 2019, September 30, 2019, June 30, 2019, and March 31, 2019, intangible assets exclude $7 million, $9 million, $10 million, and $12 million, respectively, of period-end purchased credit card relationships. For the three months ended December 31, 2018, September 30, 2018, June 30, 2018, and March 31, 2018, intangible assets exclude $14 million, $17 million, $20 million, and $23 million, respectively, of period-end purchased credit card relationships.

(b)	Net of capital surplus.

(c)

For the three months ended December 31, 2019, September 30, 2019, June 30, 2019, and March 31, 2019, average intangible assets exclude $8 million, $9 million, $11 million, and $13 million, respectively, of average purchased credit card relationships. For the three months ended December 31, 2018, September 30, 2018, June 30, 2018, and March 31, 2018, average intangible assets exclude $15 million, $18 million, $21 million, and $24 million, respectively, of average purchased credit card relationships.

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(a)	Represents our outstanding leases.

(b)	Represents contracts to hedge our balance sheet asset and liability needs, and to accommodate our clients’ trading and/or hedging needs. Our derivative mark-to-market exposures are calculated and reported on a daily basis. These exposures are largely covered by cash or highly marketable securities collateral with daily collateral calls.

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(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $140 million at December 31, 2019, and $54 million at December 31, 2018.

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(a)	Net securities gains (losses) totaled $20 million for the year ended December 31, 2019, less than $1 million for the year ended December 31, 2018, and $1 million for the year ended December 31, 2017. For 2019, 2018, and 2017, we did not have any impairment losses related to securities.

(b)	EPS may not foot due to rounding.

(c)	Assumes conversion of Common Share options and other stock awards and/or convertible preferred stock, as applicable.

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(a)	Includes the impact of implementing ASU 2014-09, ASU 2016-01, and ASU 2017-12

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•	changes in international, national, regional, and local economic and business conditions;

•	changes in the experience, ability, and depth of our lending management and staff;

•	changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices;

•	changes in the nature and volume of the loan portfolio, including the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

•	changes in the volume and/or severity of past due, nonaccrual, and adversely classified or graded loans; and

•	external factors, such as competition, legal developments, and regulatory requirements.

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(a)	Assumes conversion of Common Share options and other stock awards and/or convertible preferred stock, as applicable.

(b)	EPS may not foot due to rounding.

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(a)	Loan balances include $144 million and $132 million of commercial credit card balances at December 31, 2019, and December 31, 2018, respectively.

(b)	Commercial lease financing includes receivables of $15 million and $10 million held as collateral for a secured borrowing at December 31, 2019, and December 31, 2018, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 20 (“Long-Term Debt”).

(c)	Total loans exclude loans in the amount of $865 million at December 31, 2019, and $1.1 billion at December 31, 2018, related to the discontinued operations of the education lending business.

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(a)	Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)	The term criticized refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

(a)	Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay their debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

(a)	Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)	The term criticized refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

(a)	Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay their debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

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(a)	Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b)	Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c)	Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d)	Future accretable yield related to PCI loans is not included in the analysis of the loan portfolio.

(a)	Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b)	Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c)	Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d)	Future accretable yield related to PCI loans is not included in the analysis of the loan portfolio.

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(a)	The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b)	The Unpaid Principal Balance represents the customer’s legal obligation to us.

(c)	See Note 1 (“Summary of Significant Accounting Policies”) under the heading “Impaired Loans” for a description of the specific allowance methodology.

(a)	The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

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(a)	All TDRs that were restructured prior to January 1, 2019, and January 1, 2018, are fully accruing.

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(a)	Excludes a provision for losses on lending-related commitments of $4 million.

(b)	Includes the realization of $139 million loss related to a previously disclosed fraud incident.

(a)	Excludes a provision for losses on lending-related commitments of $6 million.

(a)	Excludes a provision for losses on lending-related commitments of $2 million.

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(a)	Amount includes $2 million of loans carried at fair value that are excluded from ALLL consideration.

(a)	Amount includes $2 million of loans carried at fair value that are excluded from ALLL consideration.

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(a)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(b)

Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

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(a)

Our direct investments consist of equity and debt investments directly in independent business enterprises. Operations of the business enterprises are handled by management of the portfolio company. The purpose of funding these enterprises is to provide financial support for business development and acquisition strategies. We infuse equity capital based on an initial contractual cash contribution and later from additional requests on behalf of the companies’ management.

(b)

Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. At December 31, 2019, no significant liquidation of the underlying investments has been communicated to Key. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.

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•	the amount of time since the last relevant valuation;

•	whether there is an actual trade or relevant external quote available at the measurement date; and

•	volatility associated with the primary pricing components.

•	review documentation received from our third-party pricing service regarding the inputs used in its valuations and determine a level assessment for each category of securities;

•	substantiate actual inputs used for a sample of securities by comparing the actual inputs used by our third-party pricing service to comparable inputs for similar securities; and

•	substantiate the fair values determined for a sample of securities by comparing the fair values provided by our third-party pricing service to prices from other independent sources for the same and similar securities. We

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(a)	Amounts represent Level 3 interest rate lock commitments.

(b)	Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(c)	Realized and unrealized gains and losses on principal investments are reported in “other income” on the income statement. Realized and unrealized losses on equity investments are reported in “other income” on the income statement.

(d)	Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on the income statement.

(e)	Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant. Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less significant.

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(a)	Asset classes included in “Accrued income and other assets” on the Consolidated Balance Sheets

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(a)	Principal investments, direct is excluded from this table as the balance at December 31, 2019, is insignificant (less than $1 million).

(b)	The weighted average of significant unobservable inputs is calculated using a weighting relative to fair value.

(c)	For significant unobservable inputs with no range, a single figure is reported to denote the single quantitative factor used.

(d)	Amounts represent interest rate lock commitments.

(e)	Excludes $46 million pertaining to mortgage servicing assets measured at fair value as of December 31, 2019. Refer to Note 8 (“Mortgage Servicing Assets”) for significant unobservable inputs pertaining to these assets.

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(a)	Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b)

Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” in this Note. Investments accounted for under the cost method (or cost less impairment adjusted for observable price changes for certain equity investments) are classified as Level 3 assets. These investments are not actively traded in an open market as sales for these types of investments are rare. The carrying amount of the investments carried at cost are adjusted for declines in value if they are considered to be other-than-temporary (or due to observable orderly transactions of the same issuer for equity investments eligible for the cost less impairment measurement alternative). These adjustments are included in “other income” on the income statement.

(c)

Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities, and certain prepayment assumptions. We review the valuations derived from the models to ensure that they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(d)

The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(e)	Fair values of time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(f)

Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

(g)	Derivative assets-hedging and derivative liabilities-hedging includes both cash flow and fair value hedges. Additional information regarding our accounting policies for cash flow and fair value hedges is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging.”

•	Loans at carrying value, net of allowance, of $855 million ($729 million at fair value) at December 31, 2019, and $1.1 billion ($890 million at fair value) at December 31, 2018; and

•	Portfolio loans at fair value of $2 million at December 31, 2019, and $2 million at December 31, 2018.

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(a)

At December 31, 2019, gross unrealized losses totaled less than $1 million for U.S. Treasury, Agencies, and Corporations and agency residential mortgage-backed securities available for sale with a loss duration of less than 12 months and less than $1 million for agency residential mortgage-backed securities, asset-backed securities, and other securities held-to-maturity with a loss duration of less than 12 months. At December 31, 2019, gross unrealized losses totaled less than $1 million for U.S. Treasury, Agencies, and Corporations securities available for sale with a loss duration greater than 12 months or longer.

(b)	At December 31, 2018, gross unrealized losses totaled less than $1 million for agency residential mortgage-backed securities available for sale with a loss duration of less than 12 months and less than $1 million for agency commercial mortgage-backed securities held-to-maturity with a loss duration of less than 12 months.

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(a)	Realized losses totaled less than $1 million for the year ended December 31, 2019, and December 31, 2017.

(b)	Realized gains and losses totaled less than $1 million for the year ended December 31, 2018.

•	interest rate risk is the risk that the EVE or net interest income will be adversely affected by fluctuations in interest rates;

•	credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms; and

•	foreign exchange risk is the risk that an exchange rate will adversely affect the fair value of a financial instrument.

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•	interest rate swap, cap, and floor contracts entered into generally to accommodate the needs of commercial loan clients;

•	energy and base metal swap and option contracts entered into to accommodate the needs of clients;

•	foreign exchange forward and option contracts entered into primarily to accommodate the needs of clients; and

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•	futures contracts and positions with third parties that are intended to offset or mitigate the interest rate or market risk related to client positions discussed above.

(a)	Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when issued securities.

(b)	Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(c)

Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

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(a)	The carrying amount represents the portion of the liability designated as the hedged item.

(b)	Basis adjustments related to de-designated hedges that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $9 million and $10 million at December 31, 2019 and December 31, 2018, respectively.

(a)	Prior period gain or loss amounts were not restated to conform to the new hedge accounting guidance adopted in 2018.

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(a)	Prior period gain or loss amounts were not restated to conform to the new hedge accounting guidance adopted in 2018.

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•

Single-name credit default swap: A bilateral contract whereby the seller agrees, for a premium, to provide protection against the credit risk of a specific entity (the “reference entity”) in connection with a specific debt obligation. The protected credit risk is related to adverse credit events, such as bankruptcy, failure to make payments, and acceleration or restructuring of obligations, identified in the credit derivative contract.

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•	Traded credit default swap index: Represents a position on a basket or portfolio of reference entities.

•

Risk participation agreement: A transaction in which the lead participant has a swap agreement with a customer. The lead participant (purchaser of protection) then enters into a risk participation agreement with a counterparty (seller of protection), under which the counterparty receives a fee to accept a portion of the lead participant’s credit risk. If the customer defaults on the swap contract, the counterparty to the risk participation agreement must reimburse the lead participant for the counterparty’s percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, the counterparty has no reimbursement requirements. If the customer defaults on the swap contract and the seller fulfills its payment obligations under the risk participation agreement, the seller is entitled to a pro rata share of the lead participant’s claims against the customer under the terms of the swap agreement.

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(a)	Short-term lease cost was less than less than $1 million for the twelve months ended December 31, 2019.

(a)	There were no right-of-use assets obtained in exchange for finance lease obligations for the twelve months ended December 31, 2019.

(b)	During the third quarter of 2019, we entered into a sale leaseback transaction related to one branch which resulted in total proceeds of $16 million.

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(a)	Capitalized building and equipment leases are amortized over the lesser of the useful life of asset or lease term.

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•	The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

•	The entity’s investors lack the power to direct the activities that most significantly impact the entity’s economic performance.

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•	The entity’s equity at risk holders do not have the obligation to absorb losses or the right to receive residual returns.

•	The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

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(a)

There was income tax (benefit) expense on securities transactions of $5 million in 2019, and no income tax (benefit) expense on securities transactions in 2018 and 2017. Income tax expense excludes equity- and gross receipts-based taxes, which are assessed in lieu of an income tax in certain states in which we operate. These non-income taxes, which are recorded in “noninterest expense” on the income statement, totaled $23 million in 2019, $15 million in 2018, and $22 million in 2017.

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(a)	A separate deferred tax asset and liability is recognized for each operating lease item resulting from the adoption of ASC 842 in 2019.

(b)	From continuing operations.

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(a)	Netting adjustments take into account the impact of master netting agreements that allow us to settle with a single counterparty on a net basis.

(b)	These adjustments take into account the impact of bilateral collateral agreements that allow us to offset the net positions with the related collateral. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

(c)	Repurchase agreements are collateralized by mortgaged-backed agency securities and are contracted on an overnight or continuous basis.

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(a)	The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of the option.

•	deferred cash payments that generally vest and are payable at the rate of 25% per year;

•	time-lapsed (service condition) restricted stock units payable in stock, which generally vest at the rate of 25% per year;

•	performance units payable in stock, which vest at the end of the three-year performance cycle and will not vest unless Key attains defined performance levels and the service condition is met; and

•	performance units payable in cash, which vest at the end of the three-year performance cycle and will not vest unless Key attains defined performance levels and the service condition is met.

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(a)	The shortage of the FVA under the PBO.

(b)	Represents the accrued benefit liability of the pension plans.

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•	Our expectations for returns on plan assets over the long term, weighted for the investment mix of the assets. These expectations consider, among other factors, historical capital market returns of equity, fixed income, convertible, and other securities, and forecasted returns that are modeled under various economic scenarios.

•	Historical returns on our plan assets. Based on an annual reassessment of current and expected future capital market returns, our expected return on plan assets was 4.5% for 2019, 4.75% for 2018 and 6% for 2017. We deemed a rate of 3.75% to be appropriate in estimating 2019 pension cost.

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(a)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote.

(a)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote.

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(a)	The shortage of the FVA under the APBO.

(b)	Consists entirely of noncurrent liabilities.

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(a)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote.

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(a)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote.

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(a)	Rates exclude the effects of interest rate swaps and caps, which modify the repricing characteristics of certain short-term borrowings. For more information about such financial instruments, see Note 8 (“Derivatives and Hedging Activities”).

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(a)	Senior medium-term notes had a weighted-average interest rate of 3.7815% at December 31, 2019, and 4.057% at December 31, 2018. These notes had fixed interest rates at December 31, 2019, and December 31, 2018. These notes may not be redeemed prior to their maturity dates.

(b)	See Note 21 (“Trust Preferred Securities Issued by Unconsolidated Subsidiaries”) for a description of these notes.

(c)	The First Niagara subordinated debt had a weighted-average interest rate of 7.25% at December 31, 2019, and a weighted-average interest rate of 7.25% at December 31, 2018. These notes may not be redeemed prior to their maturity dates.

(d)	The First Niagara senior notes had a weighted-average interest rate of 6.75% at December 31, 2018. On October 21, 2019, KeyCorp redeemed for cash all of the outstanding $300 million aggregate principal amount of its 6.75% Senior Notes due March 19, 2020.

(e)	The First Niagara variable rate trust preferred securities had a weighted-average interest rate of 3.42% at December 31, 2019, and 4.20% at December 31, 2018. These notes may be redeemed prior to their maturity dates.

(f)	Senior medium-term notes had weighted-average interest rates of 2.595% at December 31, 2019, and 2.593% at December 31, 2018. These notes are a combination of fixed and floating rates. These notes may not be redeemed prior to their maturity dates.

(g)	The remarketable senior medium-term notes had a weighted-average interest rate of 3.18% at December 31, 2019, and 3.18% at December 31, 2018. These notes had fixed interest rates at December 31, 2017, and December 31, 2018. These notes may not be redeemed prior to their maturity dates.

(h)	These notes are all obligations of KeyBank and may not be redeemed prior to their maturity dates.

(i)

The secured borrowing had weighted-average interest rates of 4.445% at December 31, 2019, and 4.455% at December 31, 2018. This borrowing is collateralized by commercial lease financing receivables, and principal reductions are based on the cash payments received from the related receivables. Additional information pertaining to these commercial lease financing receivables is included in Note 4 (“Loan Portfolio”).

(j)	Long-term advances from the Federal Home Loan Bank had a weighted-average interest rate of 3.506% at December 31, 2019, and 2.333% at December 31, 2018. These advances, which had fixed interest rates, were secured by real estate loans and securities totaling $121 million at December 31, 2019, and $1.1 billion at December 31, 2018.

(k)	Investment Fund Financing had a weighted-average interest rate of 1.63% at December 31, 2019, and 1.85% at December 31, 2018.

(l)	These are capital leases acquired in the First Niagara merger with a maturity range from March 2021 through October 2032.

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•	required distributions on the trust preferred securities;

•	the redemption price when a capital security is redeemed; and

•	the amounts due if a trust is liquidated or terminated.

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(a)

The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include debt issuance costs and basis adjustments related to fair value hedges totaling $57 million at December 31, 2019, and $46 million at December 31, 2018. See Note 8 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b)

We have the right to redeem these debentures. If the debentures purchased by KeyCorp Capital I, HNC Statutory Trust III, Willow Grove Statutory Trust I, HNC Statutory Trust IV, Westbank Capital Trust II, or Westbank Capital Trust III are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (i) the principal amount, plus any accrued but unpaid interest, or (ii) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points for KeyCorp Capital II or 25 basis points for KeyCorp Capital III or 50 basis points in the case of redemption upon either a tax or a capital treatment event for either KeyCorp Capital II or KeyCorp Capital III, plus any accrued but unpaid interest. The principal amount of certain debentures includes debt issuance costs and basis adjustments related to fair value hedges totaling $57 million at December 31, 2019, and $46 million at December 31, 2018. See Note 8 for an explanation of fair value hedges. The principal amount of debentures, net of discounts, is included in “long-term debt” on the balance sheet.

(c)

The interest rates for the trust preferred securities issued by KeyCorp Capital II and KeyCorp Capital III are fixed. The trust preferred securities issued by KeyCorp Capital I have a floating interest rate, equal to three-month LIBOR plus 74 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust III have a floating interest rate, equal to three-month LIBOR plus 140 basis points, that reprices quarterly. The trust preferred securities issued by Willow Grove Statutory Trust I have a floating interest rate, equal to three-month LIBOR plus 131 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust IV have a floating interest rate, equal to three-month LIBOR plus 128 basis points, that reprices quarterly. The trust preferred securities issued by Westbank Capital Trust II and Westbank Capital Trust III each have a floating interest rate, equal to three-month LIBOR plus 219 basis points, that reprices quarterly.  The total interest rates are weighted-average rates.

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(a)	The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

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(a)	See table below for details about these reclassifications.

(b)	See Note 14 (“Income Taxes”) for details about the accounting impacts resulting from the TCJ Act.

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•	Net interest income is determined by assigning a standard cost for funds used or a standard credit for funds provided based on their assumed maturity, prepayment, and/or repricing characteristics.

•	Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent that each line of business actually uses the services.

•

The consolidated provision for credit losses is allocated among the lines of business primarily based on their actual net loan charge-offs, adjusted periodically for loan growth and changes in risk profile. The amount of the consolidated provision is based on the methodology that we use to estimate our consolidated ALLL. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses.”

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•	Income taxes are allocated based on the 2019 statutory federal income tax rate of 21% and a blended state income tax rate (net of the federal income tax benefit) of 2.7%. Prior to 2018, income taxes were allocated based on the previous statutory federal income tax rate of 35% and a blended state income tax rate (net of the federal income tax benefit) of 2.2%.

•	Capital is assigned to each line of business based on economic equity.

(a)	Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software, and goodwill held by our major business segments, are located in the United States.

(b)	From continuing operations.

(c)	The number of average full-time equivalent employees was not adjusted for discontinued operations.

(d)	Other segments included $106 million provision for credit loss, net of tax, related to a previously disclosed fraud incident.

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(a)	See Key’s Consolidated Statements of Changes in Equity.

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(a)	Noninterest income considered earned outside the scope of contracts with customers.

(b)

Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations. Refer to Note 25 (“Business Segment Reporting”) for more information.

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•	“Proposal One: Election of Directors”

•	“Corporate Governance Documents — Code of Business Conduct and Ethics”

•	“The Board of Directors and Its Committees — Board and Committee Responsibilities — Audit Committee”

•	“Additional Information — Other Proposals and Director Nominations for the 2021 Annual Meeting of Shareholders”

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•	“Compensation Discussion and Analysis”

•	“Compensation of Executive Officers and Directors”

•	“Compensation and Organization Committee Report”

•	“The Board of Directors and Its Committees — Oversight of Compensation Related Risks”

•	“The Board of Directors and Its Committees — Director Independence”

•	“The Board of Directors and Its Committees — Related Party Transactions”

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