KeyCorp

and Mark Midkiff, our Chief Risk Officer. On slide two, you will find our statement on forward-looking disclosure and non-GAAP financial measures. It covers our presentation materials and comments, as well as the question and answer segment of our call. I'm now moving to slide three. This morning, we reported another strong quarter with net income of $616 million, or $0.65 a share. We delivered positive operating leverage and expect to generate positive operating leverage for the full year. We delivered record third quarter revenue, which was up 8% from the year-ago period. Our results were driven by growth in both net interest income and non-interest income. Non-interest income reached a record third quarter level, up 17% from the same period last year. The increase was driven by broad-based growth across our fee-based businesses, including investment banking, which was up 61%. I am especially proud of the way our teammates continue to serve our communities and clients, and in doing so, creating new and deeper relationships across our franchise. In our consumer business, we experienced record growth in net new households in the first nine months of the year. Our Western franchise is growing at a rate of over two times the rest of our footprint, and younger clients continue to be our fastest growing segment. Additionally, our consumer business generated a record $4.2 billion in loan originations for the quarter, which reflects growth from our consumer mortgage business and Laurel Road. Through the first nine months of the year, our consumer mortgage originations increased have exceeded 2020's full-year record level of $8.3 billion. Laurel Road had another strong quarter as we continued to add and expand high-quality relationships through our national digital bank. Importantly, what really sets Laurel Road apart is our targeted client approach, which results in high-value digital relationships nationally. Currently, 75% of our volume is coming from outside our footprint. Laurel Road is part of a broader healthcare initiative across our company that has established Key as one of the leading healthcare banks. Moving on to our commercial businesses, we had another strong quarter. Our investment banking business generated fees of $235 million, a record third quarter level. and the second highest quarterly level in our history, we experienced growth across the entire platform. Our broad and comprehensive platform has enabled this business to grow consistently over the past decade. Our investment banking business has grown at an 11% compound annual growth rate over the last 10 years. We are on pace to generate double-digit growth again in 2021. Expenses this quarter reflect higher production-related incentives and the investments we continue to make in our franchise, in digital, in analytics, and in our teammates. Year to date, we consolidated 73 branches, or approximately 7% of our branch network. These consolidations will drive future cost savings and support ongoing investments. We will continue to look for opportunities to right-size our footprint. Shifting to credit quality, our trends remained very strong this quarter. Non-performing loans and criticized loans were all down from the prior quarter, and net charge-offs to average loans were 11 basis points. We continue to support our clients while maintaining our moderate risk profile, which has and will continue to position the company to perform well through all business cycles. Finally, we have maintained our strong capital position while continuing to return capital to our shareholders. Our common equity tier one ratio ended the quarter at 9.6%, above our targeted range of 9% to 9.5%. In the third quarter, we entered into an accelerated share repurchase program facilitated by the capital relief from the sale of our indirect auto portfolio. The accelerated share repurchase program is part of our previously disclosed $1.5 billion share authorization. In total, we repurchased $593 million of common stock in the third quarter. Dividends also remain a priority. Our dividend yield remains above 3%. Our board of directors will consider a dividend increase at our meeting next month. I will close by restating that it was another strong quarter. We generated positive operating leverage by growing our top line and managing expenses while continuing to make investments for our future. As always, we remain committed to our disciplined approach to risk management and returning capital to shareholders through both dividends and share repurchases. I will now turn the call over to Don, who will provide more details on the results of the quarter. Don?

Thanks, Chris. I'm now on slide five. For the third quarter, net income from continuing operations was $0.65 per common share. Our results reflected a net benefit from our provision for credit losses, which was largely driven by our strong credit metrics and positive economic outlook. Importantly, we delivered positive operating leverage this quarter, and as Chris said, we expect to deliver positive operating leverage for the year. Total revenues were up 8% compared to the same period last year. We had year-over-year growth in both net interest income and non-interest income. Our return on tangible common equity for the quarter was 18.6%. I'll cover the other items on this slide later in my presentation. Turn to slide six. There were two major items that impacted loan growth this quarter, PPP loans and the sale of our indirect auto portfolio. Average PPP loans declined $3.3 billion this quarter as we helped clients take advantage of loan forgiveness. We also sold our indirect auto portfolio last month. The sale impacted our third quarter average results by approximately $800 million and $3.3 billion on an ending basis. Average loans were down from the year-ago period, reflecting the reduction in PPP balances and lower commercial line utilizations. Compared to the prior quarter, average loans were down 0.7%. Adjusting for the sale of the indirect auto portfolio, our loans were up approximately $100 million on average and up over $1 billion on an ending basis. Adding to the comments on our core loan growth, adjusting for both the indirect auto loan sale and PPP loans, our linked quarter total loan growth would have been 4.3%. we continued to see strong consumer loan growth driven by Laurel Road and consumer mortgage. On the commercial side, we were pleased to see a slight uptick in utilization. Continuing on to slide seven, average deposits total $147 billion for the third quarter of 2021, up $12 billion, or 9% compared to the year-ago period, and up 2% from the prior quarter. The linked quarter and year-ago comparisons reflect growth in both commercial and consumer balances. The growth was partially offset by a continued, unexpected decline in time deposits. So, interest-bearing deposit costs came down one basis point from the second quarter, following a two basis point decline last quarter. We continue to have a strong, stable core deposit base with consumer deposits accounting for approximately 60% of our total deposit mix. Turn to slide eight. Taxable equivalent net interest income was $1.025 billion for the third quarter of 2021 compared to $1.006 billion a year ago and $1.023 billion from the prior quarter. Our net interest margin was 2.47 percent for the third quarter of 2021 compared to 2.62 percent for the same period last year and 2.52 percent for the prior quarter. Both net interest income and net interest margin were meaningfully impacted by the significant growth in our balance sheet compared to a year ago period. The larger balance sheet benefited net interest income but reduced net interest margin due to the significant increase in liquidity driven by strong deposit inflows. Compared to the prior quarter, net interest income increased $2 million and the margin declined five basis points. Lower interest-bearing deposit costs and the benefit of the day count were partially offset by lower earning asset yields and continued elevated liquidity levels. For the quarter, total loan fees from PPP loans were $45 million, compared to $50 million last quarter. We've also included in the appendix additional detail on our investment portfolio and our asset liability positioning. In the third quarter, our sensitivity to rising rates moved higher, and we ended the period with over $25 billion in cash and short-term investments. Moving on to slide nine, we continue to see strong growth in our fee-based businesses, which have benefited from our ongoing investments. Non-interest income was $797 million for the third quarter of 2021, compared to $681 million for the year-ago period and $750 million in the second quarter. Compared to the year-ago period, non-interest income increased 17%. We had a record third quarter for investment banking and debt placement fees, which reached $235 million, driven by broad-based growth across the platform, including strong M&A fees. Additionally, corporate services income increased $18 million, and commercial mortgage servicing fees increased $16 million. Offsetting this growth was lower consumer mortgage fees due to a lower gain on sale margin. Compared to the second quarter, Non-interest income increased by $47 million. The largest driver of this quarterly increase was the record third quarter investment banking and debt placement fees. I'm now on slide 10. Total non-interest expense for the quarter was $1.112 billion compared to $1.037 billion last year and $1.076 billion in the prior quarter. Our expense levels reflect higher production-related incentives and the investments we have made to drive future growth. The increase from the year-ago period primarily reflects higher incentive and stock-based compensation attributed to our higher fee production and key increased stock price. The quarter-over-quarter increase in expenses was primarily driven by two areas. The first, personnel expense, related to one additional day of salary expense in the quarter and slightly higher employee benefits. The second was an increase in other expense of $18 million, largely related to a pension settlement charge and higher charitable contributions. Now moving to slide 11. Overall credit quality continues to outperform expectations. For the third quarter, net charge-offs were $29 million, or 11 basis points of average loans. Net charge-offs in the current quarter included $22 million related to the sale of the indirect auto loan portfolio. Our provision for credit losses was a net benefit of $107 million. This was determined based on our continued strong credit metrics as well as our outlook for the overall economy and loan production. Non-performing loans were $554 million this quarter or 56 basis points of period end loans, a decline of $140 million or 20% from the prior quarter. Now on to slide 12. We ended the third quarter with a common equity Tier 1 ratio of 9.6%, which places us above our targeted range of 9% to 9.5%. This provides us with sufficient capacity to continue to support our customers and their borrowing needs and return capital to our shareholders. Importantly, we continue to return capital to our shareholders in accordance with our capital priorities. We repurchased $593 million of common shares during the quarter, and our Board of Directors approved a third quarter dividend at 18.5 cents per common share. Of the 593 million in common share repurchases, $468 million were related to the initial settlement of our accelerated share repurchase program, representing 80% of the $585 million authorization. The remaining $125 million were purchased in the open market. The remaining 20% of the ASR will be settled in the fourth quarter. On slide 13, similar to prior years, we've provided guidance for the fourth quarter relative to our third quarter results. Guidance ranges are listed at the bottom of the slide. Importantly, using midpoints of this outlook would imply our PPNR is at or above our full year 2021 outlook provided last quarter. We have adjusted our guidance to reflect our strong third quarter performance, especially in our fee-based businesses, as well as the continued strength in our credit quality. Average loans will be up low single digits, excluding the impact of the sale of our indirect auto portfolio. We expect continued growth in both our core commercial and consumer balances. Average deposits should remain relatively stable in the fourth quarter. Net interest income is expected to be down low single digits, reflecting lower PPP forgiveness in the fourth quarter and the impact of the auto loan sale. Non-interest income should be relatively stable off our record third quarter performance with momentum in most of our fee-based businesses through year end. We will also benefit from what we expect to be another record year for our investment banking business. We expect non-interest expense to be down low single digits in the fourth quarter. Moving on to credit quality, we expect our net charge-off to be below 20 basis points for the fourth quarter. Credit trends were strong in the third quarter, and we expect a strong finish to the year. And our guidance for our GAAP tax rate has remained unchanged at 20%. Finally, shown at the bottom of the slide, are our long-term targets, which remain unchanged. We expect to continue to make progress on these targets by maintaining our moderate risk profile and improving our productivity and efficiency, which will drive returns. Overall, it was another strong quarter, and we remain confident in our ability to deliver on our commitments to all of our stakeholders. With that, I will now turn the call back to the operator for instructions of the Q&A portion of the call. Operator?

Thank you. And ladies and gentlemen, if you would like to ask a question on the call, please press 1, then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press 1, then 0 at this time. And first, we'll line up with Stephen Alexopoulos with J.P. Morgan. Please go ahead.