Item 1. Financial Statements

Consolidated Balance Sheets

Dollars in millions, except per share data			September 30, 2021			December 31, 2020
			(Unaudited)
ASSETS
Cash and due from banks			$	763		$	1,091
Short-term investments			19,608			16,194
Trading account assets			902			735
Securities available for sale			40,594			27,556
Held-to-maturity securities (fair value: $8,664 and $8,023)			8,423			7,595
Other investments			607			621
Loans, net of unearned income of $361 and $449			98,609			101,185
Less: Allowance for loan and lease losses			(1,084)			(1,626)
Net loans			97,525			99,559
Loans held for sale (a)			1,805			1,583
Premises and equipment			678			753
Goodwill			2,673			2,664
Other intangible assets			144			188
Corporate-owned life insurance			4,312			4,286
Accrued income and other assets			8,404			6,812
Discontinued assets			597			699
Total assets			$	187,035		$	170,336
LIABILITIES
Deposits in domestic offices:
NOW and money market deposit accounts			$	87,242		$	80,427
Savings deposits			7,259			5,913
Certificates of deposit ($100,000 or more)			1,890			2,733
Other time deposits			2,315			3,010
Total interest-bearing deposits			98,706			92,083
Noninterest-bearing deposits			53,225			43,199
Total deposits			151,931			135,282
Federal funds purchased and securities sold under repurchase agreements			228			220
Bank notes and other short-term borrowings			767			759
Accrued expense and other liabilities			3,434			2,385
Long-term debt			13,165			13,709
Total liabilities			169,525			152,355
EQUITY
Preferred stock			1,900			1,900
Common Shares, $1 par value; authorized 2,100,000,000 and 2,100,000,000 shares; issued 1,256,702,081 and 1,256,702,081 shares			1,257			1,257
Capital surplus			6,141			6,281
Retained earnings			14,133			12,751
Treasury stock, at cost (326,158,458 and 280,928,782 shares)			(5,876)			(4,946)
Accumulated other comprehensive income (loss)			(45)			738
Total equity			17,510			17,981
Total liabilities and equity			$	187,035		$	170,336

(a)Total loans held for sale include real estate — residential mortgage loans held for sale at fair value of $237 million at September 30, 2021, and $264 million at December 31, 2020.

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Income

Dollars in millions, except per share amounts			Three months ended September 30,									Nine months ended September 30,
(Unaudited)			2021			2020						2021			2020
INTEREST INCOME
Loans			$	882		$	927					$	2,659		$	2,933
Loans held for sale			13			18						35			58
Securities available for sale			135			115						398			365
Held-to-maturity securities			43			53						133			171
Trading account assets			4			3						14			16
Short-term investments			9			1						20			14
Other investments			1			2						5			3
Total interest income			1,087			1,119						3,264			3,560
INTEREST EXPENSE
Deposits			15			54						52			319
Federal funds purchased and securities sold under repurchase agreements			—			—						—			6
Bank notes and other short-term borrowings			2			1						6			11
Long-term debt			54			64						168			225
Total interest expense			71			119						226			561
NET INTEREST INCOME			1,016			1,000						3,038			2,999
Provision for credit losses			(107)			160						(422)			1,001
Net interest income after provision for credit losses			1,123			840						3,460			1,998
NONINTEREST INCOME
Trust and investment services income			129			128						395			384
Investment banking and debt placement fees			235			146						614			418
Service charges on deposit accounts			91			77						247			229
Operating lease income and other leasing gains			37			38						111			128
Corporate services income			69			51						188			165
Cards and payments income			111			114						329			271
Corporate-owned life insurance income			33			30						94			101
Consumer mortgage income			33			51						106			133
Commercial mortgage servicing fees			34			18						112			48
Other income (a)			25			28						89			(27)
Total noninterest income			797			681						2,285			1,850
NONINTEREST EXPENSE
Personnel			640			588						1,887			1,675
Net occupancy			74			76						225			223
Computer processing			67			59						211			170
Business services and professional fees			56			49						157			142
Equipment			25			25						75			74
Operating lease expense			30			33						95			103
Marketing			32			22						89			67
Intangible asset amortization			15			15						44			50
Other expense			173			170						476			477
Total noninterest expense			1,112			1,037						3,259			2,981
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			808			484						2,486			867
Income taxes			165			60						501			113
INCOME (LOSS) FROM CONTINUING OPERATIONS			643			424						1,985			754
Income (loss) from discontinued operations			2			4						11			7
NET INCOME (LOSS)			645			428						1,996			761
Less: Net income (loss) attributable to noncontrolling interests			—			—						—			—
NET INCOME (LOSS) ATTRIBUTABLE TO KEY			$	645		$	428					$	1,996		$	761
Income (loss) from continuing operations attributable to Key common shareholders			$	616		$	397					$	1,905		$	674
Net income (loss) attributable to Key common shareholders			618			401						1,916			681
Per Common Share:
Income (loss) from continuing operations attributable to Key common shareholders			$	.65		$	.41					$	1.99		$	.70
Income (loss) from discontinued operations, net of taxes			—			—						.01			.01
Net income (loss) attributable to Key common shareholders (b)			.66			.41						2.00			.70
Per Common Share — assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders			$	.65		$	.41					$	1.98		$	.69
Income (loss) from discontinued operations, net of taxes			—			—						.01			.01
Net income (loss) attributable to Key common shareholders (b)			.65			.41						1.99			.70
Cash dividends declared per Common Share			$	.185		$	.185					$	.555		$	.555
Weighted-average Common Shares outstanding (000)			942,446			967,804						955,069			967,632
Effect of Common Share options and other stock awards			10,077			6,184						9,712			6,648
Weighted-average Common Shares and potential Common Shares outstanding (000) (c)			952,523			973,988						964,781			974,280

(a)For the three and nine months ended September 30, 2021, net securities gains (losses) totaled less than $1 million. For the three months ended September 30, 2021 and September 30, 2020, we did not have any impairment losses related to securities. For the three months ended September 30, 2020, we had no net securities gains (losses). For the nine months ended September 30, 2020, net securities gains (losses) totaled $4 million.

(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.

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Comprehensive Income

Dollars in millions			Three months ended September 30,									Nine months ended September 30,
(Unaudited)			2021			2020						2021			2020
Net income (loss)			$	645		$	428					$	1,996		$	761
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale, net of income taxes of $56, $(3), $195, and $163			(174)			(8)						(617)			527
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $9, $(19), $57, and $93			(29)			(64)						(180)			299
Net pension and postretirement benefit costs, net of income taxes of $(3), $1, $(5), and $5			8			3						14			15
Total other comprehensive income (loss), net of tax			(195)			(69)						(783)			841
Comprehensive income (loss)			450			359						1,213			1,602
Less: Comprehensive income attributable to noncontrolling interests			—			—						—			—
Comprehensive income (loss) attributable to Key			$	450		$	359					$	1,213		$	1,602

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Changes in Equity

			Key Shareholders’ Equity
Dollars in millions, except per share amounts (Unaudited)			Preferred Shares Outstanding (000)			Common Shares Outstanding (000)			Preferred Stock			Common Shares			Capital Surplus			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)						Total Shareholder’s Equity
BALANCE AT DECEMBER 31, 2020			1,396			975,773			$	1,900		$	1,257		$	6,281		$	12,751		$	(4,946)		$	738					$	17,981
Net income (loss)																		1,996												1,996
Other comprehensive income (loss)																								(783)						(783)
Deferred compensation															5															5
Cash dividends declared
Common Shares ($.555 per share)																		(534)												(534)
Series D Preferred Stock ($37.50 per depositary share)																		(20)												(20)
Series E Preferred Stock ($1.148439 per depositary share)																		(23)												(23)
Series F Preferred Stock ($1.059375 per depositary share)																		(18)												(18)
Series G Preferred Stock ($1.054689 per depositary share)																		(19)												(19)
Open market Common Share repurchases						(27,346)															(559)									(559)
Employee equity compensation program Common Share repurchases						(1,604)									—						(32)									(32)
Common shares reissued (returned) for stock options and other employee benefit plans						7,274									(28)						129									101
Common share purchases under ASR program						(23,553)									(117)						(468)									(585)
BALANCE AT SEPTEMBER 30, 2021			1,396			930,544			$	1,900		$	1,257		$	6,141		$	14,133		$	(5,876)		$	(45)					$	17,510
BALANCE AT JUNE 30, 2021			1,396			960,276			$	1,900		$	1,257		$	6,232		$	13,689		$	(5,287)		$	150					$	17,941
Net income (loss)																		645												645
Other comprehensive income (loss)																								(195)						(195)
Deferred compensation															5															5
Cash dividends declared
Common Shares ($.185 per share)																		(176)												(176)
Series D Preferred Stock ($12.50 per depositary share)																		(6)												(6)
Series E Preferred Stock ($.382813 per depositary share)																		(7)												(7)
Series F Preferred Stock ($.353125 per depositary share)																		(7)												(7)
Series G Preferred Stock ($.351563 per depositary share)																		(5)												(5)
Open market Common Share repurchases						(6,367)															(125)									(125)
Employee equity compensation program Common Share repurchases						(3)									—						—									—
Common shares reissued (returned) for stock options and other employee benefit plans						191									21						4									25
Common share purchases under ASR program						(23,553)									(117)						(468)									(585)
BALANCE AT SEPTEMBER 30, 2021			1,396			930,544			$	1,900		$	1,257		$	6,141		$	14,133		$	(5,876)		$	(45)					$	17,510

See Notes to Consolidated Financial Statements (Unaudited).

			Key Shareholders’ Equity
Dollars in millions, except per share amounts (Unaudited)			Preferred Shares Outstanding (000)			Common Shares Outstanding (000)			Preferred Stock			Common Shares			Capital Surplus			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)						Total Shareholder’s Equity
BALANCE AT DECEMBER 31, 2019			1,396			977,189			$	1,900		$	1,257		$	6,295		$	12,469		$	(4,909)		$	26					$	17,038
Cumulative effect from changes in accounting principle (a)																		(230)												(230)
Net income (loss)																		761												761
Other comprehensive income (loss)																								841						841
Deferred compensation															2															2
Cash dividends declared
Common Shares ($.555 per share)																		(542)												(542)
Series D Preferred Stock ($37.50 per depositary share)																		(20)												(20)
Series E Preferred Stock ($1.148439 per depositary share)																		(23)												(23)
Series F Preferred Stock ($1.059375 per depositary share)																		(18)												(18)
Series G Preferred Stock ($1.054689 per depositary share)																		(19)												(19)
Open market Common Share repurchases						(6,067)															(117)									(117)
Employee equity compensation program Common Share repurchases						(1,815)									(34)						(36)									(70)
Common shares reissued (returned) for stock options and other employee benefit plans						6,898															122									122
Other																		(3)												(3)
BALANCE AT SEPTEMBER 30, 2020			1,396			976,205			$	1,900		$	1,257		$	6,263		$	12,375		$	(4,940)		$	867					$	17,722
BALANCE AT JUNE 30, 2020			1,396			975,947			$	1,900		$	1,257		$	6,240		$	12,154		$	(4,945)		$	936					$	17,542
Net income (loss)																		428												428
Other comprehensive income (loss)																								(69)						(69)
Deferred compensation															2															2
Cash dividends declared
Common Shares ($.185 per share)																		(180)												(180)
Series D Preferred Stock ($12.50 per depositary share)																		(7)												(7)
Series E Preferred Stock ($.382813 per depositary share)																		(8)												(8)
Series F Preferred Stock ($.353125 per depositary share)																		(6)												(6)
Series G Preferred Stock ($.53125 per depositary share)																		(6)												(6)
Open market Common Share repurchases						—															—									—
Employee equity compensation program Common Share repurchases						(1)									21						—									21
Common shares reissued (returned) for stock options and other employee benefit plans						259									—						5									5
BALANCE AT SEPTEMBER 30, 2020			1,396			976,205			$	1,900		$	1,257		$	6,263		$	12,375		$	(4,940)		$	867					$	17,722

(a)Includes the impact of implementing ASU 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments. See Note 1 (“Summary of Significant Accounting Policies) in our 2020 Form 10-K for more information on our adoption of this guidance and the impact to our results of operations.

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Cash Flows

Dollars in millions			Nine months ended September 30,
(Unaudited)			2021						2020
OPERATING ACTIVITIES
Net income (loss)			$	1,996					$	761
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for credit losses			(422)						1,001
Depreciation and amortization expense, net			80						112
Accretion of acquired loans			19						23
Increase in cash surrender value of corporate-owned life insurance			(82)						(86)
Stock-based compensation expense			78						75
Deferred income taxes (benefit)			126						(217)
Proceeds from sales of loans held for sale			11,282						10,079
Originations of loans held for sale, net of repayments			(10,818)						(10,040)
Net losses (gains) on sales of loans held for sale			(192)						(169)
Net losses (gains) on leased equipment			(9)						(17)
Net securities losses (gains)			—						(4)
Net losses (gains) on sales of fixed assets			13						3
Net decrease (increase) in trading account assets			(167)						307
Net transfers of loans held for sale			26						—
Other operating activities, net			(767)						(1,101)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			1,163						727
INVESTING ACTIVITIES
Cash received (used) in acquisitions, net of cash acquired			(9)						—
Net decrease (increase) in short-term investments, excluding acquisitions			(3,414)						(12,876)
Purchases of securities available for sale			(19,726)						(9,582)
Proceeds from sales of securities available for sale			—						583
Proceeds from prepayments and maturities of securities available for sale			5,824						4,642
Proceeds from prepayments and maturities of held-to-maturity securities			2,004						1,702
Purchases of held-to-maturity securities			(3)						(17)
Purchases of other investments			(26)						(110)
Proceeds from sales of other investments			36						79
Proceeds from prepayments and maturities of other investments			8						13
Net decrease (increase) in loans, excluding acquisitions, sales and transfers			(545)						(9,118)
Proceeds from sales of portfolio loans			(243)						140
Proceeds from corporate-owned life insurance			56						46
Purchases of premises, equipment, and software			(31)						(45)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			(16,069)						(24,543)
FINANCING ACTIVITIES
Net increase (decrease) in deposits, excluding acquisitions			16,649						24,876
Net increase (decrease) in short-term borrowings			16						(61)
Net proceeds from issuance of long-term debt			1,203						2,502
Payments on long-term debt			(1,521)						(2,509)
Open market common share repurchases			(559)						(117)
Employee equity compensation program Common Share repurchases			(32)						(36)
Common share purchases under ASR program			(585)						—
Net proceeds from reissuance of Common Shares			21						7
Cash dividends paid			(614)						(622)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			14,578						24,040
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS			(328)						224
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD			1,091						732
CASH AND DUE FROM BANKS AT END OF PERIOD			$	763					$	956
Additional disclosures relative to cash flows:
Interest paid			$	254					$	601
Income taxes paid (refunded)			212						175
Noncash items:
Reduction of secured borrowing and related collateral			$	7					$	5
Loans transferred to portfolio from held for sale			86						32
Loans transferred to held for sale from portfolio			3,403						292
Loans transferred to OREO			3						94
CMBS risk retentions			—						41
ABS risk retentions			13						22
Securities received as consideration			2,825						—

See Notes to Consolidated Financial Statements (Unaudited).

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation and Accounting Policies

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly affect the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements, and financial instruments. See Note 11 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% are carried at the cost measurement alternative or at fair value. Investments held by our registered broker-dealer and investment company subsidiaries (principal investing entities and Real Estate Capital line of business) are carried at fair value.

The unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2020 Form 10-K.

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users or filed with the SEC.

Goodwill and Other Intangible Assets

Effective January 1, 2021, Key changed its approach for allocating equity to its reporting units. The carrying amounts of Key’s reporting units now represent the combination of regulatory and economic equity for goodwill impairment testing and management reporting purposes. The fair values of each reporting unit are estimated using a combination of market and income approaches. For more information, refer to Note 10 (“Goodwill”).

Accounting Guidance Adopted in 2021

Standard			Required Adoption			Description			Effect on Financial Statements or Other Significant Matters
ASU 2019-12, Simplifying the Accounting for Income Taxes			January 1, 2021			This ASU simplifies the accounting for income taxes by removing certain exceptions to the existing guidance, such as exceptions related to the incremental approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss, and the recognition of deferred tax liabilities when a foreign subsidiary becomes an equity method investment and when a foreign equity method investment becomes a subsidiary. Along with general improvements, it adds simplifications related to franchise taxes, the tax basis of goodwill, and the method for recognizing an enacted change in tax laws. The guidance also specifies that an entity is not required to allocate the consolidated amount of certain tax expense to a legal entity not subject to tax in its own separate financial statements. The guidance should be applied on either a retrospective, modified retrospective, or prospective basis depending on the amendment.			The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.
ASU 2020-01, Clarifying the Interactions between Topic 321,Investments —Equity Securities; Topic 323, Investments— Equity Method and Joint Ventures; and Topic 815, Derivatives and Hedging			January 1, 2021			This guidance clarifies that when applying the measurement alternative in Topic 321, companies should consider certain observable transactions that require the application or discontinuance of the equity method under Topic 323. It also clarifies that companies should not consider whether the underlying securities in certain forward contracts and purchased options would be accounted for under the equity method or fair value option when determining the method of accounting for those contracts. This guidance should be applied on prospective basis.			The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.
ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs			January 1, 2021			This ASU clarifies that at each reporting period an entity should reevaluate whether a callable debt security is within the scope of ASC 310, which says that to the extent the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the earliest call date, the premium shall be amortized to the earliest call date, unless prepayment guidance is applied. This guidance should be applied on a prospective basis.			The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.
ASU 2021-01, Reference Rate Reform (Topic 848)			January 1, 2021			The ASU clarifies that certain optional expedients and exceptions related to contracts modified as a result of reference rate reform and hedge accounting apply to derivatives affected by the discounting transition, such as those that use an interest rate for margining, discounting, or contract price alignment. The guidance may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. Alternatively, it may be applied on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final Update, until the financial statements are available to be issued.			Key adopted this guidance on January 1, 2021, on a prospective basis and will assess the impact in conjunction with the reference rate transition.

2. Earnings Per Common Share

Basic earnings per share is the amount of earnings (adjusted for dividends declared on our preferred stock) available to each Common Share outstanding during the reporting periods. Diluted earnings per share is the amount of earnings available to each Common Share outstanding during the reporting periods adjusted to include the effects of potentially dilutive Common Shares. Potentially dilutive Common Shares include stock options and other stock-based awards. Potentially dilutive Common Shares are excluded from the computation of diluted earnings per share in the periods where the effect would be antidilutive.

Our basic and diluted earnings per Common Share are calculated as follows:

			Three months ended September 30,									Nine months ended September 30,
Dollars in millions, except per share amounts			2021			2020						2021			2020
EARNINGS
Income (loss) from continuing operations			$	643		$	424					$	1,985		$	754
Less: Net income (loss) attributable to noncontrolling interests			—			—						—			—
Income (loss) from continuing operations attributable to Key			643			424						1,985			754
Less: Dividends on Preferred Stock			27			27						80			80
Income (loss) from continuing operations attributable to Key common shareholders			616			397						1,905			674
Income (loss) from discontinued operations, net of taxes			2			4						11			7
Net income (loss) attributable to Key common shareholders			$	618		$	401					$	1,916		$	681
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average Common Shares outstanding (000)			942,446			967,804						955,069			967,632
Effect of Common Share options and other stock awards			10,077			6,184						9,712			6,648
Weighted-average Common Shares and potential Common Shares outstanding (000) (a)			952,523			973,988						964,781			974,280
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders			$	.65		$	.41					$	1.99		$	.70
Income (loss) from discontinued operations, net of taxes			—			—						.01			.01
Net income (loss) attributable to Key common shareholders (b)			.66			.41						2.00			.70
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			$	.65		$	.41					$	1.98		$	.69
Income (loss) from discontinued operations, net of taxes — assuming dilution			—			—						.01			.01
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			.65			.41						1.99			.70

(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.

3. Loan Portfolio

Loan Portfolio by Portfolio Segment and Financing Receivable (a)

Dollars in millions			September 30, 2021			December 31, 2020
Commercial and industrial (b)			$	49,553		$	52,907
Commercial real estate:
Commercial mortgage			13,674			12,687
Construction			2,120			1,987
Total commercial real estate loans			15,794			14,674
Commercial lease financing (c)			3,982			4,399
Total commercial loans			69,329			71,980
Residential — prime loans:
Real estate — residential mortgage			14,204			9,298
Home equity loans			8,747			9,360
Total residential — prime loans			22,951			18,658
Consumer direct loans			5,324			4,714
Credit cards			928			989
Consumer indirect loans			77			4,844
Total consumer loans			29,280			29,205
Total loans (d)			$	98,609		$	101,185

(a)Accrued interest of $211 million and $241 million at September 30, 2021, and December 31, 2020, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

(b)Loan balances include $139 million and $127 million of commercial credit card balances at September 30, 2021, and December 31, 2020, respectively.

(c)Commercial lease financing includes receivables held as collateral for a secured borrowing of $16 million and $23 million at September 30, 2021, and December 31, 2020, 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”) beginning on page 171 of our 2020 Form 10-K.

(d)Total loans exclude loans of $602 million at September 30, 2021, and $710 million at December 31, 2020, related to the discontinued operations of the education lending business.

4. Asset Quality

ALLL

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 ("Summary of Significant Accounting Policies") under the heading "Allowance for Loan and Lease Losses" beginning on page 110 of our 2020 Form 10-K.

The ALLL at September 30, 2021, represents our current estimate of lifetime credit losses inherent in the loan portfolio at that date. The changes in the ALLL by loan category for the periods indicated are as follows:

Three months ended September 30, 2021:

Dollars in millions			June 30, 2021			Provision						Charge-offs			Recoveries			September 30, 2021
Commercial and Industrial			$	499		$	(30)					$	(27)		$	20		$	462
Commercial real estate:
Real estate — commercial mortgage			227			(44)						—			1			184
Real estate — construction			35			(8)						—			—			27
Total commercial real estate loans			262			(52)						—			1			211
Commercial lease financing			34			(7)						(1)			6			32
Total commercial loans			795			(89)						(28)			27			705
Real estate — residential mortgage			86			(1)						2			1			88
Home equity loans			136			(13)						(1)			2			124
Consumer direct loans			115			(5)						(7)			2			105
Credit cards			68			(4)						(6)			1			59
Consumer indirect loans			20			5						(26)			4			3
Total consumer loans			425			(18)						(38)			10			379
Total ALLL — continuing operations			1,220			(107)						(66)			37			1,084
Discontinued operations			30			(1)						(1)			1			29
Total ALLL — including discontinued operations			$	1,250		$	(108)					$	(67)		$	38		$	1,113

Three months ended September 30, 2020:

Dollars in millions			June 30, 2020			Provision						Charge-offs			Recoveries			September 30, 2020
Commercial and Industrial			$	725		$	177					$	(101)		$	9		$	810
Commercial real estate:
Real estate — commercial mortgage			292			(2)						(13)			2			279
Real estate — construction			41			(7)						—			—			34
Total commercial real estate loans			333			(9)						(13)			2			313
Commercial lease financing			55			13						(10)			—			58
Total commercial loans			1,113			181						(124)			11			1,181
Real estate — residential mortgage			101			2						—			1			104
Home equity loans			197			(13)						(4)			3			183
Consumer direct loans			130			1						(8)			2			125
Credit cards			107			(5)						(9)			2			95
Consumer indirect loans			60			(16)						(6)			4			42
Total consumer loans			595			(31)						(27)			12			549
Total ALLL — continuing operations			1,708			150			(a)			(151)			23			1,730
Discontinued operations			43			(1)						—			—			42
Total ALLL — including discontinued operations			$	1,751		$	149					$	(151)		$	23		$	1,772

(a)Excludes a provision for losses on lending-related commitments of $10 million.

Nine months ended September 30, 2021

Dollars in millions			December 31, 2020			Provision						Charge-offs			Recoveries			September 30, 2021
Commercial and Industrial			$	678		$	(135)					$	(141)		$	60		$	462
Commercial real estate:
Real estate — commercial mortgage			327			(112)						(39)			8			184
Real estate — construction			47			(20)						—			—			27
Total commercial real estate loans			374			(132)						—			—			211
Commercial lease financing			47			(17)						(5)			7			32
Total commercial loans			1,099			(284)						(185)			75			705
Real estate — residential mortgage			102			(17)						1			2			88
Home equity loans			171			(44)						(7)			4			124
Consumer direct loans			128			(7)						(22)			6			105
Credit cards			87			(13)						(21)			6			59
Consumer indirect loans			39			(12)						(38)			14			3
Total consumer loans			527			(93)						(87)			32			379
Total ALLL — continuing operations			1,626			(377)			(a)			(272)			107			1,084
Discontinued operations			36			(6)						(3)			2			29
Total ALLL — including discontinued operations			$	1,662		$	(383)					$	(275)		$	109		$	1,113

(a)Excludes a credit for losses on lending-related commitments of $45 million

Nine months ended September 30, 2020

Dollars in millions			December 31, 2019			Impact of ASC 326 Adoption			January 1, 2020			Provision						Charge-offs			Recoveries			September 30, 2020
Commercial and Industrial			$	551		$	(141)		$	410		$	613					$	(232)		$	19		$	810
Commercial real estate:
Real estate — commercial mortgage			143			16			159			135						(18)			3			279
Real estate — construction			22			(7)			15			19						—			—			34
Total commercial real estate loans			165			9			174			154						(18)			3			313
Commercial lease financing			35			8			43			30						(16)			1			58
Total commercial loans			751			(124)			627			797						(266)			23			1,181
Real estate — residential mortgage			7			77			84			21						(2)			1			104
Home equity loans			31			147			178			9						(10)			6			183
Consumer direct loans			34			63			97			52						(30)			6			125
Credit cards			47			35			82			39						(32)			6			95
Consumer indirect loans			30			6			36			16						(22)			12			42
Total consumer loans			149			328			477			137						(96)			31			549
Total ALLL — continuing operations			900			204			1,104			934			(a)			(362)			54			1,730
Discontinued operations			10			31			41			2						(4)			3			42
Total ALLL — including discontinued operations			$	910		$	235		$	1,145		$	936					$	(366)		$	57		$	1,772

(a)Excludes a provision for losses on lending-related commitments of $67 million.

As described in Note 1 ("Summary of Significant Accounting Policies"), under the heading “Allowance for Loan and Lease Losses” beginning on page 110 of our 2020 Form 10-K, we estimate the ALLL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In our estimation of expected credit losses, we use a two year reasonable and supportable period across all products. Following this two year period in which supportable forecasts can be generated, for all modeled loan portfolios, we revert expected credit losses to a level that is consistent with our historical information by reverting the macroeconomic variables (model inputs) to their long run average. We revert to historical loss rates for less complex estimation methods for smaller portfolios. A 20 year fixed length look back period is used to calculate the long run average of the macroeconomic variables. A four quarter reversion period is used where the macroeconomic variables linearly revert to their long run average following the two year reasonable and supportable period.

We develop our reasonable and supportable forecasts using relevant data including, but not limited to, changes in economic output, unemployment rates, property values, and other factors associated with the credit losses on financial assets. Some macroeconomic variables apply to all portfolio segments, while others are more portfolio specific. The following table discloses key macroeconomic variables for each loan portfolio.

Segment			Portfolio			Key Macroeconomic Variables (a)
Commercial			Commercial and industrial			BBB corporate bond rate (spread), GDP, industrial production, and unemployment rate
Commercial real estate			BBB corporate bond rate (spread), property and real estate price indices, and unemployment rate
Commercial lease financing			BBB corporate bond rate (spread), GDP, and unemployment rate
Consumer			Real estate — residential mortgage			GDP, home price index, unemployment rate, and 30 year mortgage rate
Home equity			Home price index, unemployment rate, and 30 year mortgage rate
Consumer direct			Unemployment rate and U.S. household income
Consumer indirect			New vehicle sales, used vehicle prices, and unemployment rate
Credit cards			Unemployment rate and U.S. household income
Discontinued operations			Unemployment rate

(a)Variables include all transformations and interactions with other risk drivers. Additionally, variables may have varying impacts at different points in the economic cycle.

In addition to macroeconomic drivers, portfolio attributes such as remaining term, outstanding balance, risk ratings, FICO, LTV, and delinquency also drive ALLL changes. Our ALLL models were designed to capture the correlation between economic and portfolio changes. As such, evaluating shifts in individual portfolio attributes and macroeconomic variables in isolation may not be indicative of past or future performance.

Economic Outlook

As of September 30, 2021, the economic outlook continues to be strong, but the emergence of the Delta variant of the COVID-19 virus negatively impacted supply chains and consumer confidence. We utilized the Moody’s August 2021 Consensus forecast as our baseline forecast to estimate our expected credit losses as of September 30, 2021. We determined such forecast to be a reasonable view of the outlook for the economy given all available information at quarter end.

The baseline scenario continues to reflect moderate economic growth over the next two years in markets in which we operate. U.S. GDP continues to increase at an 8.2% annualized rate in the third quarter of 2021 and at an annual rate of approximately 6% and 5% for 2021 and 2022, respectively. The national unemployment rate forecast is 5.3% in the third quarter of 2021, and is expected to decline to 4.7% by the fourth quarter of 2021 and 4.0% by the fourth quarter of 2022.

To the extent we identified credit risk considerations that were not captured by the third-party economic forecast, we addressed the risk through management’s qualitative adjustments to the ALLL.

As a result of the unprecedented economic uncertainty caused by the COVID-19 pandemic, our future loss estimates may vary considerably from our September 30, 2021 assumptions.

Commercial Loan Portfolio

The ALLL from continuing operations for the commercial segment decreased by $90 million, or 11.3%, from June 30, 2021. The overall decrease in the allowance is driven by improvements in economic forecasts and asset quality, partially offset by loan growth.

The changes to the economic forecast primarily reflect improvements in economic drivers used in our models. The favorable unemployment and GDP outlook contributes to the overall commercial segment reserve decrease. Expected improvements in real estate price indices lead to a reduction in reserve for our commercial real estate book. Positive risk rating migrations are driving a modest decrease in ALLL levels for the commercial and industrial portfolio. The ALLL results also reflect incremental credit risk considerations as a result of the future economic uncertainties which are addressed through qualitative adjustments.

As of September 30, 2021, we concluded that no ALLL is necessary for $3.1 billion in outstanding PPP loans as they are 100% guaranteed by the SBA.

Consumer Loan Portfolio

The ALLL from continuing operations for the consumer segment decreased by $46 million, or 10.8%, from June 30, 2021. The overall decrease in the allowance is driven by updated economic forecasts that capture an improving outlook for several drivers and strong portfolio performance, partially offset by growth in consumer real estate.

The most meaningful changes to the economic forecast contributing to the reduction in reserves include improvement in the unemployment rate outlook, which impacts all consumer portfolios. In addition, the housing market and home price index outlook continue to display strength, which impacts the residential mortgage and home equity segments. As it relates to the decline in the ALLL due to portfolio factors, shifts are largely driven by attrition activity, targeted portfolio growth and overall strong credit drivers. The ALLL results also reflect incremental credit risk considerations as a result of the economic uncertainty and related borrower assistance programs, which are addressed through qualitative adjustments.

Credit Risk Profile

The prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the refreshed FICO score assigned for the consumer loan portfolios. The internal risk grades assigned to loans follow our definitions of Pass and Criticized, which are consistent with published definitions of regulatory risk classifications. Loans with a pass rating represent those loans not classified on our rating scale for problem credits, as minimal credit risk has been identified. Criticized loans are those loans that either have a potential weakness deserving management's close attention or have a well-defined weakness that may put full collection of contractual cash flows at risk. 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 its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the tables below at the dates indicated.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category and Vintage (a)

As of September 30, 2021			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions			2021			2020			2019			2018			2017			Prior			Total
Commercial and Industrial
Risk Rating:
Pass			$	9,315		$	5,420		$	4,491		$	3,186		$	2,016		$	3,884		$	18,950		$	102		$	47,364
Criticized (Accruing)			40			115			193			192			236			208			925			27			1,936
Criticized (Nonaccruing)			—			9			18			41			6			16			160			3			253
Total commercial and industrial			9,355			5,544			4,702			3,419			2,258			4,108			20,035			132			49,553
Real estate — commercial mortgage
Risk Rating:
Pass			3,219			1,357			2,589			1,338			687			3,073			690			64			13,017
Criticized (Accruing)			15			20			87			85			123			228			48			2			608
Criticized (Nonaccruing)			—			1			1			5			1			37			4			—			49
Total real estate — commercial mortgage			3,234			1,378			2,677			1,428			811			3,338			742			66			13,674
Real estate — construction
Risk Rating:
Pass			318			619			610			292			104			49			29			6			2,027
Criticized (Accruing)			—			4			13			52			22			1			1			—			93
Criticized (Nonaccruing)			—			—			—			—			—			—			—			—			—
Total real estate — construction			318			623			623			344			126			50			30			6			2,120
Commercial lease financing
Risk Rating:
Pass			655			815			744			348			347			997			—			—			3,906
Criticized (Accruing)			—			4			35			14			13			5			—			—			71
Criticized (Nonaccruing)			—			—			1			1			1			2			—			—			5
Total commercial lease financing			655			819			780			363			361			1,004						—			3,982
Total commercial loans			$	13,562		$	8,364		$	8,782		$	5,554		$	3,556		$	8,500		$	20,807		$	204		$	69,329

As of December 31, 2020			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions			2020			2019			2018			2017			2016			Prior			Total
Commercial and Industrial
Risk Rating:
Pass			$	13,100		$	5,487		$	4,040		$	2,617		$	1,967		$	2,709		$	19,832		$	118		$	49,870
Criticized (Accruing)			66			198			174			236			150			279			1,527			22			2,652
Criticized (Nonaccruing)			8			27			71			28			17			7			226			1			385
Total commercial and industrial			13,174			5,712			4,285			2,881			2,134			2,995			21,585			141			52,907
Real estate — commercial mortgage
Risk Rating:
Pass			1,591			2,937			1,737			867			765			3,027			885			43			11,852
Criticized (Accruing)			12			142			81			145			72			255			22			2			731
Criticized (Nonaccruing)			—			1			4			4			2			88			5			—			104
Total real estate — commercial mortgage			1,603			3,080			1,822			1,016			839			3,370			912			45			12,687
Real estate — construction
Risk Rating:
Pass			367			764			510			188			27			22			31			5			1,914
Criticized (Accruing)			—			14			38			18			—			2			1			—			73
Criticized (Nonaccruing)			—			—			—			—			—			—			—			—			—
Total real estate — construction			367			778			548			206			27			24			32			5			1,987
Commercial lease financing
Risk Rating:
Pass			1,076			1,050			534			504			228			901			—			—			4,293
Criticized (Accruing)			10			35			15			26			7			4			—			—			97
Criticized (Nonaccruing)			—			2			2			2			2			1			—			—			9
Total commercial lease financing			1,086			1,087			551			532			237			906			—			—			4,399
Total commercial loans			$	16,230		$	10,657		$	7,206		$	4,635		$	3,237		$	7,295		$	22,529		$	191		$	71,980

**(a)**Accrued interest of $117 million and $140 million as of September 30, 2021 and December 31, 2020, respectively, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in these tables.

Consumer Credit Exposure

Credit Risk Profile by FICO Score and Vintage (a)

As of September 30, 2021			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions			2021			2020			2019			2018			2017			Prior			Total
Real estate — residential mortgage
FICO Score:
750 and above			$	6,071		$	3,150		$	933		$	104		$	141		$	1,218		—			—			$	11,617
660 to 749			1,300			407			186			47			31			323			—			—			2,294
Less than 660			23			12			19			16			10			151			—			—			231
No Score			19			1			1			2			4			34			1			—			62
Total real estate — residential mortgage			7,413			3,570			1,139			169			186			1,726			1			—			14,204
Home equity loans
FICO Score:
750 and above			919			885			285			113			139			739			$	2,333		$	462		5,875
660 to 749			345			295			130			49			47			222			1,037			158			2,283
Less than 660			20			26			20			14			15			99			336			48			578
No Score			—			2			—			1			—			2			5			1			11
Total home equity loans			1,284			1,208			435			177			201			1,062			3,711			669			8,747
Consumer direct loans
FICO Score:
750 and above			1,287			1,271			594			76			20			137			109			—			3,494
660 to 749			413			350			200			51			13			48			217			—			1,292
Less than 660			19			22			29			12			3			14			61			—			160
No Score			47			45			32			16			9			21			208			—			378
Total consumer direct loans			1,766			1,688			855			155			45			220			595			—			5,324
Credit cards
FICO Score:
750 and above			—			—			—			—			—			—			472			—			472
660 to 749			—			—			—			—			—			—			375			—			375
Less than 660			—			—			—			—			—			—			72			—			72
No Score			—			—			—			—			—			—			9			—			9
Total credit cards			—			—			—			—			—			—			928			—			928
Consumer indirect loans
FICO Score:
750 and above			4			—			—			—			—			36			—			—			40
660 to 749			—			—			—			—			—			26			—			—			26
Less than 660			—			—			—			—			—			11			—			—			11
No Score			—			—			—			—			—			—			—			—			—
Total consumer indirect loans			4			—			—			—			—			73			—			—			77
Total consumer loans			$	10,467		$	6,466		$	2,429		$	501		$	432		$	3,081		$	5,235		$	669		$	29,280

As of December 31, 2020			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions			2020			2019			2018			2017			2016			Prior			Total
Real estate — residential mortgage
FICO Score:
750 and above			$	3,595		$	1,620		$	194		$	254		$	537		$	1,211		—			—			$	7,411
660 to 749			710			284			76			48			100			332			—			—			1,550
Less than 660			16			28			21			10			26			170			—			—			271
No Score			1			2			2			7			2			52			—			—			66
Total real estate — residential mortgage			4,322			1,934			293			319			665			1,765			—			—			9,298
Home equity loans
FICO Score:
750 and above			1,043			404			168			202			190			839			$	2,689		$	590		6,125
660 to 749			385			198			82			77			69			253			1,237			206			2,507
Less than 660			27			30			18			20			20			113			426			61			715
No Score			2			2			1			—			—			2			5			1			13
Total home equity loans			1,457			634			269			299			279			1,207			4,357			858			9,360
Consumer direct loans
FICO Score:
750 and above			1,840			883			115			32			16			57			119			—			3,062
660 to 749			479			268			80			22			14			33			254			1			1,151
Less than 660			23			37			21			8			5			10			81			—			185
No Score			65			35			21			21			10			11			153			—			316
Total consumer direct loans			2,407			1,223			237			83			45			111			607			1			4,714
Credit cards
FICO Score:
750 and above			—			—			—			—			—			—			488			—			488
660 to 749			—			—			—			—			—			—			407			—			407
Less than 660			—			—			—			—			—			—			93			—			93
No Score			—			—			—			—			—			—			1			—			1
Total credit cards			—			—			—			—			—			—			989			—			989
Consumer indirect loans
FICO Score:
750 and above			1,092			924			369			188			69			66			—			—			2,708
660 to 749			653			558			232			97			36			47			—			—			1,623
Less than 660			143			163			99			54			25			28			—			—			512
No Score			1			—			—			—			—			—			—			—			1
Total consumer indirect loans			1,889			1,645			700			339			130			141			—			—			4,844
Total consumer loans			$	10,075		$	5,436		$	1,499		$	1,040		$	1,119		$	3,224		$	5,953		$	859		$	29,205

**(a)**Accrued interest of $95 million and $101 million as of September 30, 2021 and December 31, 2020, respectively, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.

Nonperforming and Past Due Loans

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2020 Form 10-K.

Under the CARES Act as well as banking regulator interagency guidance, certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic may not be required to be reported as past due. For COVID-19 related loan modifications which occurred from March 1, 2020, through September 30, 2021, and met the loan modification criteria under either the CARES Act or the criteria specified by the regulatory agencies, we have elected to re-age to current status all commercial loans and consumer loans that are not secured by real-estate and freeze the delinquency status of consumer real estate secured loans as of the modification or forbearance grant date. At September 30, 2021, the portfolio loans and leases in active deferral or forebearance as part of our COVID-19 hardship relief programs totaled $174 million, of which $124 million of loan modifications and forbearances made under the criteria of either the CARES Act, banking regulator interagency guidance, or short-term forbearance policies were not reported as nonperforming.

The following aging analysis of past due and current loans as of September 30, 2021, and December 31, 2020, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio(a)

September 30, 2021			Current			30-59 Days Past Due (b)			60-89 Days Past Due (b)			90 and Greater Days Past Due (b)			Non-performing Loans			Total Past Due and Non-performing Loans			Total Loans (c)
Dollars in millions
LOAN TYPE
Commercial and industrial			$	49,161		$	56		$	33		$	50		$	253		$	392		$	49,553
Commercial real estate:
Commercial mortgage			13,606			12			2			5			49			68			13,674
Construction			2,118			1			—			1			—			2			2,120
Total commercial real estate loans			15,724			13			2			6			49			70			15,794
Commercial lease financing			3,973			2			1			1			5			9			3,982
Total commercial loans			$	68,858		$	71		$	36		$	57		$	307		$	471		$	69,329
Real estate — residential mortgage			$	14,096		$	6		$	3		$	6		$	93		$	108		$	14,204
Home equity loans			8,559			22			10			10			146			188			8,747
Consumer direct loans			5,307			6			3			4			4			17			5,324
Credit cards			914			3			3			5			3			14			928
Consumer indirect loans			75			1			—			—			1			2			77
Total consumer loans			$	28,951		$	38		$	19		$	25		$	247		$	329		$	29,280
Total loans			$	97,809		$	109		$	55		$	82		$	554		$	800		$	98,609

(a)Amounts in table represent amortized cost and exclude loans held for sale.

(b)Accrued interest of $211 million presented in Other Assets on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

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

December 31, 2020			Current			30-59 Days Past Due (b)			60-89 Days Past Due (b)			90 and Greater Days Past Due (b)			Non-performing Loans			Total Past Due and Non-performing Loans						Total Loans (c)
Dollars in millions
LOAN TYPE
Commercial and industrial			$	52,396		$	36		$	50		$	40		$	385		$	511					$	52,907
Commercial real estate:
Commercial mortgage			12,548			9			5			21			104			139						12,687
Construction			1,986			—			—			1			—			1						1,987
Total commercial real estate loans			14,534			9			5			22			104			140						14,674
Commercial lease financing			4,369			21			1			—			8			30						4,399
Total commercial loans			$	71,299		$	66		$	56		$	62		$	497		$	681					$	71,980
Real estate — residential mortgage			$	9,173		$	11		$	3		$	1		$	110		$	125					$	9,298
Home equity loans			9,143			34			20			9			154			217						9,360
Consumer direct loans			4,694			7			4			4			5			20						4,714
Credit cards			972			5			3			7			2			17						989
Consumer indirect loans			4,792			25			7			3			17			52						4,844
Total consumer loans			$	28,774		$	82		$	37		$	24		$	288		$	431					$	29,205
Total loans			$	100,073		$	148		$	93		$	86		$	785		$	1,112					$	101,185

(a)Amounts in table represent amortized cost and exclude loans held for sale.

(b)Accrued interest of $241 million presented in Other Assets on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

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

At September 30, 2021, the approximate carrying amount of our commercial nonperforming loans outstanding represented 62% of their original contractual amount owed, total nonperforming loans outstanding represented 72% of their original contractual amount owed, and nonperforming assets in total were carried at 77% of their original contractual amount owed.

Nonperforming loans reduced expected interest income by $6 million and $20 million for the three and nine months ended September 30, 2021,respectively, and $7 million and $20 million for the three and nine months ended September 30, 2020, respectively.

The amortized cost basis of nonperforming loans on nonaccrual status for which there is no related allowance for credit losses was $492 million at September 30, 2021.

Collateral-dependent Financial Assets

We classify financial assets as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of the collateral. Our commercial loans have collateral that includes commercial machinery, commercial properties, and commercial real estate construction projects. Our consumer loans have collateral that includes residential real estate, automobiles, boats, and RVs.

There were no significant changes in the extent to which collateral secures our collateral-dependent financial assets during the three months ended September 30, 2021.

TDRs

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession without commensurate financial, structural, or legal consideration. Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Under the CARES Act as well as banking regulator interagency guidance, certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic may not be required to be treated as TDRs under U.S. GAAP. As of September 30, 2021, the outstanding balance of loans that underwent COVID-19 related loan modifications for which we elected to suspend TDR accounting as such loan modifications met the criteria under either the CARES Act or banking regulator interagency guidance totaled $124 million.

Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs were $21 million and $1 million at September 30, 2021, and December 31, 2020, respectively.

The consumer TDR other concession category in the table below primarily includes those borrowers’ debts that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed. At September 30, 2021, and December 31, 2020, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $70 million and $92 million, respectively.

The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs that occurred during the periods indicated:

			Three Months Ended September 30,						Nine Months Ended September 30,
Dollars in millions			2021			2020			2021			2020
Commercial loans:
Extension of Maturity Date			$	—		$	—		$	5		$	8
Payment or Covenant Modification/Deferment			—			—			7			—
Bankruptcy Plan Modification			—			—			—			—
Increase in new commitment or new money			—			—			—			—
Total			$	—		$	—		$	12		$	8
Consumer loans:
Interest rate reduction			$	3		$	13		$	6		$	22
Other			12			6			18			18
Total			$	15		$	19		$	24		$	40
Total TDRs			$	15		$	19		$	36		$	48

The following table summarizes the change in the post-modification outstanding recorded investment of our accruing and nonaccruing TDRs during the periods indicated:

			Three Months Ended September 30,						Nine Months Ended September 30,
Dollars in millions			2021			2020			2021			2020
Balance at beginning of the period			$	334		$	310		$	363		$	347
Additions			17			26			98			65
Payments			(81)			(22)			(162)			(75)
Charge-offs			—			(8)			(29)			(31)
Balance at end of period			$	270		$	306		$	270		$	306

A further breakdown of TDRs included in nonperforming loans by loan category for the periods indicated are as follows:

			September 30, 2021												December 31, 2020
			Number of Loans			Pre-modification Outstanding Recorded Investment			Post-modification Outstanding Recorded Investment						Number of Loans			Pre-modification Outstanding Recorded Investment			Post-modification Outstanding Recorded Investment
Dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial			35			$	92		$	53					66			$	136		$	92
Commercial real estate:
Commercial mortgage			3			50			29						7			62			50
Total commercial real estate loans			3			50			29						7			62			50
Total commercial loans			38			142			82						73			198			142
Real estate — residential mortgage			218			26			25						258			35			34
Home equity loans			569			38			33						630			41			37
Consumer direct loans			201			3			3						212			3			3
Credit cards			328			2			2						356			2			2
Consumer indirect loans			23			1			1						861			15			11
Total consumer loans			1,339			70			64						2,317			96			87
Total nonperforming TDRs			1,377			212			146						2,390			294			229
Prior-year accruing:****(a)
Commercial and industrial			7			49			26						3			5			—
Commercial real estate
Commercial mortgage			1			—			—						—			—			—
Total commercial real estate loans			1			—			—						—			—			—
Total commercial loans			8			49			26						3			5			—
Real estate — residential mortgage			464			39			34						485			37			31
Home equity loans			1,648			100			78						1,781			106			83
Consumer direct loans			206			5			3						163			4			3
Credit cards			564			4			1						536			3			1
Consumer indirect loans			150			16			8						775			29			16
Total consumer loans			3,032			164			124						3,740			179			134
Total prior-year accruing TDRs			3,040			163			124						3,743			184			134
Total TDRs			4,417			$	375		$	270					6,133			$	478		$	363

(a)All TDRs that were restructured prior to January 1, 2021, and January 1, 2020, are fully accruing.

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the three months ended September 30, 2021, there were two commercial loan TDRs and 33 consumer loan TDRs with a combined recorded investment of $2 million that experienced payment defaults after modifications resulting in TDR status during 2020. During the three months ended September 30, 2020, there were no commercial loan TDRs and 33 consumer loan TDRs with a combined recorded investment of $1 million that experienced payment defaults after modifications resulting in TDR status during 2019.

During the nine months ended September 30, 2021, there were five commercial loan TDRs and 98 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults after modifications resulting in TDR status during 2020. During the nine months ended September 30, 2020, there were no commercial loan TDRs and 160 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults after modifications resulting in TDR status during 2019.

Liability for Credit Losses on Off Balance Sheet Exposures

The liability for credit losses inherent in unfunded lending-related commitments, such as letters of credit and unfunded loan commitments, and certain financial guarantees is included in “accrued expense and other liabilities” on the balance sheet.

Changes in the liability for credit losses on off balance sheet exposures are summarized as follows:

			Three months ended September 30,						Nine months ended September 30,
Dollars in millions			2021			2020			2021			2020
Balance at the end of the prior period			$	152		$	198		$	197		$	68
Liability for credit losses on contingent guarantees at the end of the prior period			—			—			—			7
Cumulative effect from change in accounting principle (a), (b)			—			—			—			66
Balance at beginning of period			152			198			197			141
Provision (credit) for losses on off balance sheet exposures			—			10			(45)			67
Balance at end of period			$	152		$	208		$	152		$	208

(a)The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.

(b)The nine months ended September 30, 2020, amount excludes $4 million related to the provision for other financial assets.

5. Fair Value Measurements

In accordance with GAAP, Key measures certain assets and liabilities at fair value. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants in our principal market. Additional information regarding our accounting policies for determining fair value is provided in Note 6 (“Fair Value Measurements”) and Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” of our 2020 Form 10-K.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. For more information on the valuation techniques used to measure classes of assets and liabilities reported at fair value on a recurring basis as well as the classification of each in the valuation hierarchy, refer to Note 6 (“Fair Value Measurements” in our 2020 Form 10-K. The following tables present these assets and liabilities at September 30, 2021, and December 31, 2020.

			September 30, 2021												December 31, 2020
			Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Dollars in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations			—			$	747		—			$	747		—			$	633		—			$	633
States and political subdivisions			—			91			—			91			—			24			—			24
Other mortgage-backed securities			—			21			—			21			—			47			—			47
Other securities			$	17		13			—			30			—			13			—			13
Total trading account securities			17			872			—			889			—			717			—			717
Commercial loans			—			13			—			13			—			18			—			18
Total trading account assets			17			885			—			902			—			735			—			735
Securities available for sale:
U.S. Treasury, agencies and corporations			—			8,938			—			8,938			—			1,000			—			1,000
States and political subdivisions			—			—			—			—			—			—			—			—
Agency residential collateralized mortgage obligations			—			16,104			—			16,104			—			14,273			—			14,273
Agency residential mortgage-backed securities			—			5,408			—			5,408			—			2,164			—			2,164
Agency commercial mortgage-backed securities			—			10,121			—			10,121			—			10,106			—			10,106
Other securities			—			1			$	22		23			—			—			$	13		13
Total securities available for sale			—			40,572			22			40,594			—			27,543			13			27,556
Other investments:
Principal investments:
Direct			—			—			1			1			—			—			1			1
Indirect (measured at NAV) (a)			—			—			—			48			—			—			—			53
Total principal investments			—			—			1			49			—			—			1			54
Equity investments:
Direct			—			—			9			9			—			—			13			13
Direct (measured at NAV) (a)			—			—			—			16			—			—			—			7
Indirect (measured at NAV) (a)			—			—			—			6			—			—			—			7
Total equity investments			—			—			9			31			—			—			13			27
Total other investments			—			—			10			80			—			—			14			81
Loans, net of unearned income (residential)			—			—			10			10			—			—			11			11
Loans held for sale (residential)			—			237			—			237			—			264			—			264
Derivative assets:
Interest rate			—			920			34			954			—			1,528			56			1,584
Foreign exchange			65			15			—			80			$	78		31			—			109
Commodity			—			1,799			—			1,799			—			424			2			426
Credit			—			—			—			—			—			—			1			1
Other			—			16			6			22			—			26			32			58
Derivative assets			65			2,750			40			2,855			78			2,009			91			2,178
Netting adjustments (b)			—			—			—			(302)			—			—			—			(380)
Total derivative assets			65			2,750			40			2,553			78			2,009			91			1,798
Accrued income and other assets			—			—			—			—			—			—			—			—
Total assets on a recurring basis at fair value			$	82		$	44,444		$	82		$	44,376		$	78		$	30,551		$	129		$	30,445
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions			$	212		$	555		—			$	767		$	256		$	503		—			$	759
Derivative liabilities:
Interest rate			—			273			—			273			—			288			—			288
Foreign exchange			60			15			—			75			72			31			—			103
Commodity			—			1,805			—			1,805			—			408			—			408
Credit			—			1			$	6		7			—			—			$	11		11
Other			—			11			—			11			—			16			—			16
Derivative liabilities			60			2,105			6			2,171			72			743			11			826
Netting adjustments (b)			—			—			—			(1,911)			—			—			—			(675)
Total derivative liabilities			60			2,105			6			260			72			743			11			151
Total liabilities on a recurring basis at fair value			$	272		$	2,660		$	6		$	1,027		$	328		$	1,246		$	11		$	910

(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.

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at September 30, 2021, as well as financial support provided for the three and nine months ended September 30, 2021, and September 30, 2020.

												Financial support provided
												Three months ended September 30,																		Nine months ended September 30,
			September 30, 2021									2021									2020									2021									2020
Dollars in millions			Fair Value			Unfunded Commitments						Funded Commitments			Funded Other						Funded Commitments			Funded Other						Funded Commitments			Funded Other						Funded Commitments			Funded Other
INVESTMENT TYPE
Direct investments			$	1		—						—			—						—			—						—			—						—			—
Indirect investments (measured at NAV) (a)			48			$	13					$	—		—						1			—						$	4		—						$	1		—
Total			$	49		$	13					$	—		—						1			—						$	4		—						$	1		—

(a) 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 September 30, 2021, 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.

Changes in Level 3 Fair Value Measurements

The following table shows the components of the change in the fair values of our Level 3 financial instruments measured at fair value on a recurring basis for the three and nine months ended September 30, 2021, and September 30, 2020.

Dollars in millions			Beginning of Period Balance			Gains (Losses) Included in Other Comprehensive Income			Gains (Losses) Included in Earnings						Purchases			Sales			Settlements			Transfers Other			Transfers into Level 3						Transfers out of Level 3						End of Period Balance			Unrealized Gains (Losses) Included in Earnings
Nine months ended September 30, 2021
Securities available for sale
Other securities			$	13		$	9		—						—			—			—			—			—						—						$	22		—
Other investments
Principal investments
Direct (a)			1			—			—						—			—			—			—			—						—						1			—
Equity investments
Direct (a)			13			—			$	(1)					—			—			—			—			—						$	(3)					9			$	(1)
Loans held for sale (residential)			—			—			—						—			$	(1)		—			$	1		—						—						—			—
Loans, net of unearned income (residential)			11			—			—						—			(2)			—			1			—						—						10			—
Derivative instruments (b)
Interest rate			56			—			(20)			(c)			$	1		(7)			—			—			$	21		(d)			(17)			(d)			34			—
Credit			(10)			—			4			(c)			—			—			—			—			—						—						(6)			—
Other (e)			32			—			(3)			(c)			—			—			—			(23)			—						—						6			—
Three months ended September 30, 2021
Securities available for sale
Other securities			$	22		—			—						—			—			—			—			—						—						$	22		—
Other investments
Principal investments
Direct (a)			1			—			—						—			—			—			—			—						—						1			—
Equity investments
Direct (a)			9			—			—						—			—			—			—			—						—						9			—
Loans held for sale (residential)			—			—			—						—			—			—			—			—						—						—			—
Loans, net of unearned income (residential)			11			—			—						—			(1)			—			—			—						—						10			—
Derivative instruments (b)
Interest rate			35			—			$	(5)		(c)			$	1		$	(1)		—			—			$	9		(d)			$	(5)		(d)			34			—
Credit			(5)			—			—						(1)			—			—			—			—												(6)			—
Other (e)			13			—			—			(c)			—			—			—			$	(7)		—						—						6			—

Dollars in millions			Beginning of Period Balance			Gains (Losses) Included in Other Comprehensive Income			Gains (Losses) Included in Earnings						Purchases			Sales			Settlements			Transfers Other			Transfers into Level 3						Transfers out of Level 3						End of Period Balance			Unrealized Gains (Losses) Included in Earnings
Nine months ended September 30, 2020
Trading account assets
Other mortgage-backed securities			—			—			—						—			$	(9)		—			—			$	36					—						$	27		—
Securities available for sale
Other securities			$	11		$	1		—						—			—			—			—			—						—						12			—
Other investments
Principal investments
Direct (a)			1			—			—						—			—			—			—			—						—						1			—
Equity investments
Direct (a)			12			—			$	—					—			—			—			—			—						—						12			—
Loans held for sale (residential)			—			—			—						—			(10)			—			$	11		—						—						1			—
Loans, net of unearned income (residential)			4			—			—						—			(2)			—			6			—						—						8			—
Derivative instruments (b)
Interest rate			22			—			$	18		(c)			$	14		(5)			—			—			$	98		(d)			$	(66)		(d)			81			—
Credit			(8)			—			(6)			(c)			$	1					—			—			—												(13)			—
Other (e)			5			—			—						—			—			—			39			—						—						44			—
Three months ended September 30, 2020
Trading account assets
Other mortgage-backed securities			$	36		—			—						—			$	(9)		$	—		—			$	—					—						$	27		$	—
Securities available for sale
Other securities			12			—			—						—			—			—			—			—						—						12			—
Other investments
Principal investments
Direct (a)			1			—			—						—			—			—			—			—						—						1			—
Equity investments
Direct (a)			12						$	—																													12			—
Loans held for sale (residential)			—			—			—						—			$	—		—			$	1		—						—						1			—
Loans, net of unearned income (residential)			5			—			—						—			—			—			3			—						—						8			—
Derivative instruments (b)
Interest rate			52						$	(3)		(c)			$	2		$	(4)								$	36		(d)			$	(2)		(d)			81
Credit			(17)			—			4			(c)			—			—			—			—			—						—						(13)			—
Other (e)			46			—			5						—						—			(7)			—												44			—

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

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

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

(d)Certain instruments 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.

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. For more information on the valuation techniques used to measure classes of assets and liabilities measured at fair value on a nonrecurring basis, refer to Note 6 (“Fair Value Measurements” in our 2020 Form 10-K. There were no liabilities measured at fair value on a nonrecurring basis at September 30, 2021, and December 31, 2020.

The following table presents our assets measured at fair value on a nonrecurring basis at September 30, 2021, and December 31, 2020:

			September 30, 2021															December 31, 2020
Dollars in millions			Level 1			Level 2			Level 3			Total						Level 1			Level 2			Level 3			Total
ASSETS MEASURED ON A NONRECURRING BASIS
Collateral-dependent loans			—			—			$	5		$	5					—			—			$	108		$	108
Accrued income and other assets			—			—			74			74						—			$	—		56			56
Total assets on a nonrecurring basis at fair value			—			—			$	79		$	79					—			—			$	164		$	164

We have other investments in equity securities that do not have readily determinable fair values and do not qualify for the practical expedient to measure the investment using a net asset value per share. We have elected to measure these securities at cost less impairment plus or minus adjustments due to observable orderly transactions. Impairment is recorded when there is evidence that the expected fair value of the investment has declined to below the recorded cost. At each reporting period, we assess if these investments continue to qualify for this measurement alternative. At September 30, 2021, and December 31, 2020, the carrying amount of equity investments under this method was $168 million and $171 million, respectively. No impairment was recorded for the three months ended September 30, 2021.

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted-average of the significant unobservable inputs used to fair value our material Level 3

recurring and nonrecurring assets at September 30, 2021, and December 31, 2020, along with the valuation

techniques used, are shown in the following table:

			Level 3 Asset (Liability)						Valuation Technique			Significant Unobservable Input			Range (Weighted-Average) (b), (c)
Dollars in millions			September 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Recurring
Securities available-for-sale:
Other securities			$	22		13			Discounted cash flows			Discount rate			N/A (16.61%)			N/A (15.09%)
												Marketability discount			N/A (30.00%)			N/A (30.00%)
												Volatility factor			N/A (55.00%)			N/A (44.00%)
Other investments:(a)
Equity investments
Direct			9			13			Discounted cash flows			Discount rate			N/A (14.15%)			13.90 - 17.04% (15.47%)
												Marketability discount			N/A			N/A (30.00%)
												Volatility factor			N/A			N/A (52.00%)
Loans, net of unearned income (residential)			10			11			Market comparable pricing			Comparability factor			64.50 - 97.30% (94.13%)			64.50-99.04% (94.17%)
Derivative instruments:
Interest rate			34			56			Discounted cash flows			Probability of default			.02 - 100% (16.60%)			.02 - 100% (7.90%)
												Internal risk rating			1 - 19 (15.133)			1 - 19 (9.675)
												Loss given default			0 - 1 (.500)			0 - 1 (.483)
Credit (assets)			—			1			Discounted cash flows			Probability of default			.02 - 100% (3.10%)			.02 - 100% (4.70%)
												Internal risk rating			1 - 19 (9.024)			1 - 19 (10.478)
												Loss given default			0 - 1 (.498)			0 - 1 (.490)
Credit (liabilities)			(6)			(11)			Discounted cash flows			Probability of default			.02 - 100% (14.91%)			.02 - 100% (15.45%)
												Internal risk rating			1 - 19 (8.197)			1 - 19 (8.555)
												Loss given default			0 - 1 (.422)			0 - 1 (.431)
Other(d)			6			32			Discounted cash flows			Loan closing rates			5.90 - 99.70% (85.17%)			36.95 - 99.68% (77.51%)
Nonrecurring
Collateral-dependent loans			5			108			Fair value of collateral			Discount rate			0 - 0.00% (0.00%)			0 - 100.00% (36.00%)
Accrued income and other assets:
OREO and other Level 3 assets (e)			12			16			Appraised value			Appraised value			N/M			N/M

(a)Principal investments, direct is excluded from this table as the balance at September 30, 2021, and December 31, 2020, 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 $62 million and $40 million pertaining to servicing assets at September 30, 2021, and December 31, 2020, respectively. Refer to Note 8 (“Mortgage Servicing Assets”) for significant unobservable inputs pertaining to these assets.

Fair Value Disclosures of Financial Instruments

The Levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at September 30, 2021, and December 31, 2020, are shown in the following tables. Assets and liabilities are further arranged by measurement category.

			September 30, 2021
						Fair Value
Dollars in millions			Carrying Amount			Level 1			Level 2			Level 3			Measured at NAV			Netting Adjustment						Total
ASSETS (by measurement category)
Fair value - net income
Trading account assets (b)			$	902		$	17		$	885		—			—			—						$	902
Other investments (b)			607			—			—			$	537		$	70		—						607
Loans, net of unearned income (residential) (d)			10			—			—			10			—			—						10
Loans held for sale (residential) (b)			237			—			237			—			—			—						237
Derivative assets - trading (b)			2,469			65			2,739			7			—			$	(342)		(f)			2,469
Fair value - OCI
Securities available for sale (b)			40,594			—			40,572			22			—			—						40,594
Derivative assets - hedging (b)(g)			84			—			45			—			—			39			(f)			84
Amortized cost
Held-to-maturity securities (c)			8,423			—			8,664			—			—			—						8,664
Loans, net of unearned income (d)			97,515			—			—			97,435			—			—						97,435
Loans held for sale (b)			1,568			—			—			1,568			—			—						1,568
Other
Cash and other short-term investments (a)			20,371			20,371			—			—			—			—						20,371
LIABILITIES (by measurement category)
Fair value - net income
Derivative liabilities - trading (b)			$	249		$	60		$	2,093		$	7		—			$	(1,911)		(f)			$	249
Fair value - OCI
Derivative liabilities - hedging (b)(g)			11			—			11			—			—			—			(f)			11
Amortized cost
Time deposits (e)			4,205			—			4,214			—			—			—						4,214
Short-term borrowings (a)			995			212			783			—			—			—						995
Long-term debt (e)			13,165			13,076			716			—			—			—						13,792
Other
Deposits with no stated maturity (a)			147,726			—			147,726			—			—			—						147,726

			December 31, 2020
						Fair Value
Dollars in millions			Carrying Amount			Level 1			Level 2			Level 3			Measured at NAV			Netting Adjustment						Total
ASSETS (by measurement category)
Fair value - net income
Trading account assets (b)			$	735		—			$	735		—			—			—						$	735
Other investments (b)			621			—			—			$	555		$	66		—						621
Loans, net of unearned income (residential) (d)			11			—			—			11			—			—						11
Loans held for sale (residential) (b)			264			—			264			—			—			—						264
Derivative assets - trading (b)			1,676			$	78		1,939			91			—			$	(433)		(f)			1,675
Fair value - OCI
Securities available for sale (b)			27,556			—			27,543			13			—			—						27,556
Derivative assets - hedging (b)(g)			123			—			70			—			—			53			(f)			123
Amortized cost
Held-to-maturity securities (c)			7,595			—			8,023			—			—			—						8,023
Loans, net of unearned income (d)			99,548			—			—			98,946			—			—						98,946
Loans held for sale (b)			1,319			—			—			1,319			—			—						1,319
Other
Short-term investments - U.S. Treasury Bills (b)			—			—			—			—			—			—						—
Cash and other short-term investments (a)			17,285			17,285			—			—			—			—						17,285
LIABILITIES (by measurement category)
Fair value - net income
Derivative liabilities - trading (b)			$	154		$	72		$	746		$	11		—			$	(675)		(f)			$	154
Fair value - OCI
Derivative liabilities - hedging (b)(g)			(3)			—			(3)			—			—			—			(f)			(3)
Amortized cost
Time deposits (e)			5,743			—			5,765			—			—			—						5,765
Short-term borrowings (a)			979			256			723			—			—			—						979
Long-term debt (e)			13,709			13,925			734			—			—			—						14,659
Other
Deposits with no stated maturity (a)			129,539			—			129,539			—			—			—						129,539

Valuation Methods and Assumptions

(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” within our 2020 Form 10-K Note 6 (“Fair Value Measurements”). 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 (“1. Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging” beginning on page 114 of our 2020 Form 10-K.

Discontinued assets — education lending business**.** Our discontinued assets include government-guaranteed and private education loans originated through our education lending business that was discontinued in September 2009. This portfolio consists of loans recorded at carrying value with appropriate valuation reserves, and loans in portfolio recorded at fair value. All of these loans were excluded from the table above as follows:

• Loans at carrying value, net of allowance, of $602 million ($518 million at fair value) at September 30, 2021, and $674 million ($567 million at fair value) at December 31, 2020;

• Portfolio loans at fair value of $2 million at September 30, 2021, and $2 million at December 31, 2020.

These loans and securities are classified as Level 3 because we rely on unobservable inputs when determining fair value since observable market data is not available.

6. Securities

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.

			September 30, 2021																		December 31, 2020
Dollars in millions			Amortized Cost (a)						Gross Unrealized Gains			Gross Unrealized Losses			Fair Value						Amortized Cost (b)			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations			$	8,960					—			$	22		$	8,938					$	1,000		—			—			$	1,000
Agency residential collateralized mortgage obligations			16,143						$	168		207			16,104						14,001			$	297		$	25		14,273
Agency residential mortgage-backed securities			5,409						51			52			5,408						2,094			70			—			2,164
Agency commercial mortgage-backed securities			10,141						253			273			10,121						9,707			432			33			10,106
Other securities			8						15						23						8			5			—			13
Total securities available for sale			$	40,661					$	487		$	554		$	40,594					$	26,810		$	804		$	58		$	27,556
HELD-TO-MATURITY SECURITIES
Agency residential collateralized mortgage obligations			$	2,485					$	69		—			$	2,554					$	3,775		$	124		—			$	3,899
Agency residential mortgage-backed securities			184						7			—			191						271			14			—			285
Agency commercial mortgage-backed securities			2,901						165			—			3,066						3,515			290			—			3,805
Asset-backed securities (c)			2,837						—			—			2,837						19			—			—			19
Other securities			16						—			—			16						15			—			—			15
Total held-to-maturity securities			$	8,423					$	241		—			$	8,664					$	7,595		$	428		$	—		$	8,023

(a)Amortized cost amounts exclude accrued interest receivable which is recorded within Other Assets on the balance sheet. At September 30, 2021, accrued interest receivable on available for sale securities and held-to-maturity securities totaled $53 million and $15 million, respectively.

(b)Amortized cost amounts exclude accrued interest receivable which is recorded within Other Assets on the balance sheet. At December 31, 2020, accrued interest receivable on available for sale securities and held-to-maturity securities totaled $42 million and $15 million, respectively.

(c)Includes $2.8 billion of securities as of September 30, 2021 related to the purchase of senior notes from a securitization collateralized by sold indirect auto loans.

The following table summarizes securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of September 30, 2021, and December 31, 2020.

			Duration of Unrealized Loss Position
			Less than 12 Months									12 Months or Longer									Total
Dollars in millions			Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses
September 30, 2021
Securities available for sale:
U.S Treasury, agencies, and corporations			$	8,938		$	22					—			—						$	8,938		$	22
Agency residential collateralized mortgage obligations			7,647			150						$	868		$	57					8,515			207
Agency residential mortgage-backed securities			3,619			52						6			—			(a)			3,625			52
Agency commercial mortgage-backed securities			4,219			215						1,093			58						5,312			273
Held-to-maturity securities:
Asset-backed securities			1			—			(a)			1			—						2			—
Other securities			8,460			—			(a)			—			—			(a)			8,460			—
Total securities in an unrealized loss position			$	32,884		$	439					$	1,968		$	115					$	34,852		$	554
December 31, 2020
Securities available for sale:
Agency residential collateralized mortgage obligations			$	2,110		$	25					—			—						$	2,110		$	25
Agency residential mortgage-backed securities			6			—			(b)			$	5		—			(b)			11			—
Agency commercial mortgage-backed securities			2,709			33						—			—						2,709			33
Held-to-maturity securities:
Agency residential collateralized mortgage obligations			—			—						24			—			(b)			24			—
Other securities			5			—			(b)			—			—						5			—
Total securities in an unrealized loss position			$	4,830		$	58					$	29		—						$	4,859		$	58

(a)At September 30, 2021, gross unrealized losses totaled less than $1 million for asset-backed securities and other securities held-to-maturity with a loss duration of less than 12 months and asset-backed securities held-to-maturity with a loss duration of 12 months or longer. At September 30, 2021, gross unrealized losses totaled less than $1 million for agency residential mortgage-backed securities available for sale with a loss duration greater than 12 months.

(b)At December 31, 2020, 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 other securities held-to-maturity with a loss duration of less than 12 months. At December 31, 2020, gross unrealized losses totaled less than $1 million for agency residential mortgage-backed securities available for sale with a loss duration greater than 12 months or longer and less than $1 million for agency residential collateralized mortgage obligations held to maturity with a loss duration greater than 12 months or longer.

Based on our evaluation at September 30, 2021, an allowance for credit losses has not been recorded nor have unrealized losses been recognized into income. The issuers of the securities are of high credit quality and have a history of no credit losses, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely attributed to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments.

At September 30, 2021, securities available for sale and held-to-maturity securities totaling $14.7 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

The following table shows our securities by remaining maturity. CMOs, other mortgage-backed securities, and asset-backed securities in the available for sale portfolio and held-to-maturity portfolio are presented based on their expected average lives. The remaining securities, in both the available-for-sale and held-to-maturity portfolios, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

September 30, 2021			Securities Available for Sale						Held to Maturity Securities
Dollars in millions			Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in one year or less			$	230		$	247		$	93		$	95
Due after one through five years			19,818			20,076			6,330			6,452
Due after five through ten years			17,312			17,128			2,000			2,117
Due after ten years			3,301			3,143			—			—
Total			$	40,661		$	40,594		$	8,423		$	8,664

7. Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. The primary derivatives that we use are interest rate swaps, caps, floors, and futures; foreign exchange contracts; commodity derivatives; and credit derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in our loan portfolio, hedge against changes in foreign currency exchange rates, and meet client financing and hedging needs.

At September 30, 2021, after taking into account the effects of bilateral collateral and master netting agreements, we had $84 million of derivative assets and $11 million of derivative liabilities that relate to contracts entered into for hedging purposes. As of the same date, after taking into account the effects of bilateral collateral and master netting agreements and a reserve for potential future losses, we had derivative assets of $2.5 billion and derivative liabilities of $249 million that were not designated as hedging instruments. These positions are primarily comprised of derivative contracts entered into for client accommodation purposes.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging” beginning on page 108 of our 2020 Form 10-K. Our derivative strategies and related risk management objectives are described in Note 8 (“Derivatives and Hedging Activities”) beginning on page 143 of our 2020 Form 10-K.

Fair Values, Volume of Activity, and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of September 30, 2021, and December 31, 2020. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable 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. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the balance sheet, as follows:

			September 30, 2021												December 31, 2020
						Fair Value												Fair Value
Dollars in millions			Notional Amount			Derivative Assets			Derivative Liabilities						Notional Amount			Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate			$	36,423		$	45		$	11					$	36,135		$	70		$	(3)
Derivatives not designated as hedging instruments:
Interest rate			72,688			909			262						78,424			1,514			291
Foreign exchange			7,378			80			75						6,385			109			103
Commodity			15,090			1,799			1,805						9,702			426			408
Credit			339			—			7						423			1			11
Other (a)			3,652			22			11						4,951			58			16
Total			99,147			2,810			2,160						99,885			2,108			829
Netting adjustments (b)			—			(302)			(1,911)						—			(380)			(675)
Net derivatives in the balance sheet			135,570			2,553			260						136,020			1,798			151
Other collateral (c)			—			(1)			(30)						—			(2)			(11)
Net derivative amounts			$	135,570		$	2,552		$	230					$	136,020		$	1,796		$	140

(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, and other customized derivative contracts.

(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.

Fair value hedges. During the nine-month period ended September 30, 2021, we did not exclude any portion of fair value hedging instruments from the assessment of hedge effectiveness.

The following tables summarize the amounts that were recorded on the balance sheet as of September 30, 2021, and December 31, 2020, related to cumulative basis adjustments for fair value hedges.

			September 30, 2021
Dollars in millions			Balance sheet line item in which the hedge item is included			Carrying amount of hedged item (a)			Hedge accounting basis adjustment (b)
Interest rate contracts			Long-term debt			$	8,077		$	205
Interest rate contracts			Securities Available for Sale**(c)**			6,280			168
			December 31, 2020
			Balance sheet line item in which the hedge item is included			Carrying amount of hedged item (a)			Hedge accounting basis adjustment (b)
Interest rate contracts			Long-term debt			$	8,182		$	416
Interest rate contracts			Securities Available for Sale**(c)**			2,080			21

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

(b)Basis adjustments related to de-designated hedged items that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $7 million and $8 million at September 30, 2021, and December 31, 2020, respectively,

(c)These amounts are designed as fair value hedges under the last-of-layer method. The carrying amount represents the amortized costs basis of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the relationship. At September 30, 2021, and December 31, 2020, the amortized costs of the closed portfolios in these hedging relationships was $7.7 billion and $2.5 billion, respectively.

Cash flow hedges. During the nine-month period ended September 30, 2021, we did not exclude any portion of cash flow hedging instruments from the assessment of hedge effectiveness.

Considering the interest rates, yield curves, and notional amounts as of September 30, 2021, we expect to reclassify an estimated $167 million of after-tax net gains on derivative instruments designated as cash flow hedges from AOCI to income during the next 12 months. In addition, we expect to reclassify approximately $6 million of net gains related to terminated cash flow hedges from AOCI to income during the next 12 months. As of September 30, 2021, the maximum length of time over which we hedge forecasted transactions is 5.9 years.

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three- and nine-month periods ended September 30, 2021, and September 30, 2020.

			Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
Dollars in millions			Interest expense – long-term debt			Interest income – loans						Interest Income - securities			Investment banking and debt placement fees			Interest expense - deposits			Other income
Three months ended September 30, 2021
Total amounts presented in the consolidated statement of income			$	(54)		$	882					$	135		$	235		$	(15)		$	25
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items			37			—						(38)			—			—			—
Recognized on derivatives designated as hedging instruments			(8)			—						39			—			—			—
Net income (expense) recognized on fair value hedges			$	29		—						$	1		—			—			—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income			$	(1)		$	79					$	—		$	(1)		—			—
Net income (expense) recognized on cash flow hedges			$	(1)		$	79					—			$	(1)		—			—
Three months ended September 30, 2020
Total amounts presented in the consolidated statement of income			$	(64)		$	927					$	115		$	146		$	(54)		$	28
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items			$	47		—						—			—			—			—
Recognized on derivatives designated as hedging instruments			(7)			—						—			—			—			—
Net income (expense) recognized on fair value hedges			$	40		—						—			—			—			—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income			$	(1)		$	100					—			—			—			—
Net income (expense) recognized on cash flow hedges			$	(1)		$	100					—			—			—			—

			Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
Dollars in millions			Interest expense – long-term debt			Interest income – loans			Interest Income - Securities			Investment banking and debt placement fees			Interest expense - deposits			Other income
Nine months ended September 30, 2021
Total amounts presented in the consolidated statement of income			$	(168)		$	2,659		$	398		$	614		$	(52)		$	89
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items			210			—			(147)			—			—			—
Recognized on derivatives designated as hedging instruments			(113)			—			147			—			—			—
Net income (expense) recognized on fair value hedges			$	97		—			—			—			—			—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income			$	(3)		$	253		—			—			—			—
Net income (expense) recognized on cash flow hedges			$	(3)		$	253		—			—			—			—
Nine months ended September 30, 2020
Total amounts presented in the consolidated statement of income			$	(225)		$	2,933		$	365		$	418		$	(319)		$	(27)
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items			$	(252)		—			—			—			—			—
Recognized on derivatives designated as hedging instruments			343			—			—			—			—			—
Net income (expense) recognized on fair value hedges			$	91		—			—			—			—			—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income			$	(3)		$	224		—			—			—			—
Net income (expense) recognized on cash flow hedges			$	(3)		$	224		—			—			—			—

The following tables summarize the pre-tax net gains (losses) on our cash flow hedges for the three- and nine-month periods ended September 30, 2021, and September 30, 2020, and where they are recorded on the income statement. The table includes net gains (losses) recognized in OCI during the period and net gains (losses) reclassified from OCI into income during the current period.

Dollars in millions			Net Gains (Losses) Recognized in OCI			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income			Net Gains (Losses) Reclassified From OCI Into Income
Three months ended September 30, 2021
Cash Flow Hedges
Interest rate			$	(2)		Interest income — Loans			$	79
Interest rate			—			Interest expense — Long-term debt			(1)
Interest rate			4			Investment banking and debt placement fees			(1)
Total			$	2					$	77
Three months ended September 30, 2020
Cash Flow Hedges
Interest rate			$	5		Interest income — Loans			$	100
Interest rate			—			Interest expense — Long-term debt			(1)
Interest rate			10			Investment banking and debt placement fees			—
Total			$	15					$	99

Dollars in millions			Net Gains (Losses) Recognized in OCI			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income			Net Gains (Losses) Reclassified From OCI Into Income**(a)**
Nine months ended September 30, 2021
Cash Flow Hedges
Interest rate			$	(144)		Interest income — Loans			$	253
Interest rate			2			Interest expense — Long-term debt			(3)
Interest rate			9			Investment banking and debt placement fees			—
Net Investment Hedges
Foreign exchange contracts			—			Other Income			—
Total			$	(133)					$	250
Nine months ended September 30, 2020
Cash Flow Hedges
Interest rate			$	629		Interest income — Loans			$	224
Interest rate			(6)			Interest expense — Long-term debt			(3)
Interest rate			(10)			Investment banking and debt placement fees			—
Net Investment Hedges
Foreign exchange contracts			—			Other Income			—
Total			$	613					$	221

Nonhedging instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three- and nine-month periods ended September 30, 2021, and September 30, 2020, and where they are recorded on the income statement.

			Three months ended September 30, 2021															Three months ended September 30, 2020
Dollars in millions			Corporate services income			Consumer mortgage income			Other income						Total						Corporate services income			Consumer mortgage income			Other income						Total
NET GAINS (LOSSES)
Interest rate			$	8		—			—						$	8					$	5		—			$	(1)					$	4
Foreign exchange			12			—			—						12						9			—			—						9
Commodity			4			—			—						4						5			—			—						5
Credit			1			—			$	(9)					(8)						4			—			(8)						(4)
Other			—			$	—		—						—						—			$	28		(8)						20
Total net gains (losses)			$	25		$	—		$	(9)					$	16					$	23		$	28		$	(17)					$	34

			Nine months ended September 30, 2021															Nine months ended September 30, 2020
Dollars in millions			Corporate services income			Consumer mortgage income			Other income						Total						Corporate services income			Consumer mortgage income			Other income						Total
NET GAINS (LOSSES)
Interest rate			$	19		—			$	1					$	20					$	23		—			$	(10)					$	13
Foreign exchange			34			—			—						34						29			—			—						29
Commodity			12			—			—						12						13			—			—						13
Credit			5			—			(27)						(22)						(6)			—			(20)						(26)
Other			—			$	13		(22)						(9)						—			$	36		17						53
Total net gains (losses)			$	70		$	13		$	(48)					$	35					$	59		$	36		$	(13)					$	82

Counterparty Credit Risk

We hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises, or GNMA. Cash collateral of $49 million was netted against derivative assets on the balance sheet at September 30, 2021, compared to $63 million of cash collateral netted against derivative assets at December 31, 2020. The cash collateral netted against derivative liabilities totaled $1.6 billion at September 30, 2021, and $232 million at December 31, 2020. Our means of mitigating and managing exposure to credit risk on derivative contracts is described in Note 8 (“Derivatives and Hedging Activities”) beginning on page 147 of our 2020 Form 10-K under the heading “Counterparty Credit Risk.”

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

Dollars in millions			September 30, 2021			December 31, 2020
Interest rate			$	838		$	1,448
Foreign exchange			38			52
Commodity			1,606			178
Credit			—			(1)
Other			22			58
Derivative assets before collateral			2,504			1,735
Plus(Less): Related collateral			49			63
Total derivative assets			$	2,553		$	1,798

We enter into derivative transactions with two primary groups: broker-dealers and banks, and clients. Given that these groups have different economic characteristics, we have different methods for managing counterparty credit exposure and credit risk.

We enter into transactions with broker-dealers and banks for various risk management purposes. These types of

transactions are primarily high dollar volume. We enter into bilateral collateral and master netting agreements with

these counterparties. We clear certain types of derivative transactions with these counterparties, whereby central

clearing organizations become the counterparties to our derivative contracts. In addition, we enter into derivative

contracts through swap execution facilities. Swap clearing and swap execution facilities reduce our exposure to

counterparty credit risk. At September 30, 2021, we had gross exposure of $159 million to broker-dealers and banks. We had net exposure of $175 million after the application of master netting agreements and cash collateral, where such qualifying agreements exist. We had net exposure of $173 million after considering $2 million of additional collateral held in the form of securities.

We enter into transactions using master netting agreements with clients to accommodate their business needs. In

most cases, we mitigate our credit exposure by cross-collateralizing these transactions to the underlying loan collateral. For transactions that are not clearable, we mitigate our market risk by buying and selling U.S. Treasuries and Eurodollar futures or entering into offsetting positions. Due to the cross-collateralization to the underlying loan, we typically do not exchange cash or marketable securities collateral in connection with these transactions. To address the risk of default associated with these contracts, we have established a CVA reserve (included in

“accrued income and other assets”) in the amount of $25 million at September 30, 2021. The CVA is calculated from

potential future exposures, expected recovery rates, and market-implied probabilities of default. At September 30, 2021, we had gross exposure of $2.5 billion to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements. We had net exposure of $2.4 billion on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve.

Credit Derivatives

We are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. Our credit derivative portfolio was in a net liability position of $7 million as of September 30, 2021, and $9 million as of December 31, 2020. Our credit derivative portfolio consists of traded credit default swap indices and risk participation agreements. Additional descriptions of our credit derivatives are provided in Note 8 (“Derivatives and Hedging Activities”) beginning on page 148 of our 2020 Form 10-K under the heading “Credit Derivatives.”

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at September 30, 2021, and December 31, 2020. The notional amount represents the amount that the seller could

be required to pay. The payment/performance risk shown in the table represents a weighted average of the default

probabilities for all reference entities in the respective portfolios. These default probabilities are implied from

observed credit indices in the credit default swap market, which are mapped to reference entities based on Key’s

internal risk rating.

			September 30, 2021												December 31, 2020
Dollars in millions			Notional Amount			Average Term (Years)			Payment / Performance Risk						Notional Amount			Average Term (Years)			Payment / Performance Risk
Other			$	146		13.04			17.88		%				$	227		12.76			19.53		%
Total credit derivatives sold			$	146		—			—						$	227		—			—

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At September 30, 2021, KeyBank’s rating was “A3” with Moody’s and “A-” with S&P, and KeyCorp’s rating was “Baa1” with Moody’s and “BBB+” with S&P. As of September 30, 2021, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) held by KeyBank that were in a net liability position totaled $1.7 billion, which was comprised of $194 million in derivative assets and $1.9 billion in derivative liabilities. We had $1.6 billion in cash and securities collateral posted to cover those positions as of September 30, 2021. There were no derivative contracts with credit risk contingent features held by KeyCorp at September 30, 2021.

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of September 30, 2021, and December 31, 2020. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of September 30, 2021, and December 31, 2020, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of September 30, 2021, and December 31, 2020. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.

			September 30, 2021									December 31, 2020
Dollars in millions			Moody’s			S&P						Moody’s			S&P
KeyBank’s long-term senior unsecured credit ratings			A3			A-						A3			A-
One rating downgrade			$	2		$	2					$	1		$	1
Two rating downgrades			3			3						1			1
Three rating downgrades			3			3						1			1

KeyBank’s long-term senior unsecured credit rating was four ratings above noninvestment grade at Moody’s and S&P as of September 30, 2021, and December 31, 2020. If KeyBank’s ratings had been downgraded below investment grade as of September 30, 2021, or December 31, 2020, payments of $4 million and $2 million, respectively, would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted. If KeyCorp’s ratings had been downgraded below investment grade as of September 30, 2021, or December 31, 2020, no payments would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted.

8. Mortgage Servicing Assets

We originate and periodically sell commercial and residential mortgage loans but continue to service those loans for the buyers. We also may purchase the right to service commercial mortgage loans from other lenders. We record a servicing asset if we purchase or retain the right to service loans in exchange for servicing fees that exceed the going market servicing rate and are considered more than adequate compensation for servicing. Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” beginning on page 115 of our 2020 Form 10-K.

Commercial

Changes in the carrying amount of commercial mortgage servicing assets are summarized as follows:

			Three months ended September 30,									Nine months ended September 30,
Dollars in millions			2021			2020						2021			2020
Balance at beginning of period			$	600		$	565					$	578		$	539
Servicing retained from loan sales			31			30						88			107
Purchases			8			6						22			24
Amortization			(30)			(29)						(89)			(88)
Temporary (impairments) recoveries			—			(6)						10			(16)
Balance at end of period			$	609		$	566					$	609		$	566
Fair value at end of period			$	735		$	685					$	735		$	685

The fair value of commercial mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted average of the significant unobservable inputs used to determine the fair value of our commercial mortgage servicing assets at September 30, 2021, and September 30, 2020, along with the valuation techniques, are shown in the following table:

dollars in millions						September 30, 2021												September 30, 2020
Valuation Technique			Significant Unobservable Input			Range						Weighted Average						Range						Weighted Average
Discounted cash flow			Expected defaults			1.00		%	2.00		%	1.15		%				1.00		%	2.00		%	1.17		%
			Residual cash flows discount rate			7.64		%	10.49		%	9.31		%				7.72		%	10.66		%	9.30		%
			Escrow earn rate			1.04		%	1.37		%	1.04		%				0.92		%	1.16		%	1.05		%
			Loan assumption rate			—		%	1.71		%	1.40		%				—		%	1.78		%	1.39		%

If these economic assumptions change or prove incorrect, the fair value of commercial mortgage servicing assets may also change. Expected credit losses, escrow earning rates, and discount rates are critical to the valuation of commercial mortgage servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates, and reflect historical data associated with the commercial mortgage loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. A decrease in the value assigned to the escrow earning rates would cause a decrease in the fair value of our commercial mortgage servicing assets. An increase in the assumed default rates of commercial mortgage loans or an increase in the assigned discount rates would cause a decrease in the fair value of our commercial mortgage servicing assets. Prepayment activity on commercial serviced loans does not significantly affect the valuation of our commercial mortgage servicing assets. Unlike residential mortgages, commercial mortgages experience significantly lower prepayments due to certain contractual restrictions affecting the borrower’s ability to prepay the mortgage.

The amortization of commercial servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of commercial servicing assets for each period, as shown in the table at the beginning of this note, is recorded as a reduction to contractual fee income. The contractual fee income from servicing commercial mortgage loans totaled $193 million for the nine-month period ended September 30, 2021, and $154 million for the nine-month period ended September 30, 2020. This fee income was offset by $89 million of amortization for the nine-month period ended September 30, 2021, and $88 million for the nine-month period ended September 30, 2020. Both the contractual fee income and the amortization are recorded, net, in “commercial mortgage servicing fees” on the income statement.

Residential

Changes in the carrying amount of residential mortgage servicing assets are summarized as follows:

			Three months ended September 30,									Nine months ended September 30,
Dollars in millions			2021			2020						2021			2020
Balance at beginning of period			$	77		$	46					$	58		$	46
Servicing retained from loan sales			9			12						32			25
Purchases			—			—						—			—
Amortization			(4)			(4)						(14)			(9)
Temporary (impairments) recoveries			3			(1)						9			(9)
Balance at end of period			$	85		$	53					$	85		$	53
Fair value at end of period			$	89		$	54					$	89		$	54

The fair value of mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted-average of the significant unobservable inputs used to fair value our mortgage servicing assets at September 30, 2021, and September 30, 2020, along with the valuation techniques, are shown in the following table:

						September 30, 2021												September 30, 2020
Valuation Technique			Significant Unobservable Input			Range						Weighted Average						Range						Weighted Average
Discounted cash flow			Prepayment speed			8.03		%	48.88		%	11.67		%				12.35		%	53.36		%	16.89		%
			Discount rate			7.50		%	8.57		%	7.54		%				7.51		%	8.80		%	7.57		%
			Servicing cost			$	62.00		$	4,375		$	68.15					$	62.00		$	5,125		$	81.67

If these economic assumptions change or prove incorrect, the fair value of residential mortgage servicing assets may also change. Prepayment speed, discount rates, and servicing cost are critical to the valuation of residential mortgage servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates and reflect historical data associated with the residential mortgage loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. An

increase in the prepayment speed would cause a decrease in the fair value of our residential mortgage servicing

assets. An increase in the assigned discount rates and servicing cost assumptions would cause a decrease in the

fair value of our residential mortgage servicing assets.

The amortization of servicing assets for September 30, 2021, as shown in the table above, is recorded as a reduction to contractual fee income. The contractual fee income from servicing residential mortgage loans totaled $30 million for the nine-month period ended September 30, 2021, and $24 million for the nine-month period ended September 30, 2020. This fee income was offset by $14 million of amortization for the nine-month period ended September 30, 2021, and $9 million for the nine-month period ended September 30, 2020. Both the contractual fee income and the amortization are recorded, net, in “consumer mortgage income” on the income statement.

9. Leases

As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. For more information on our leasing activity, see Note 10 (“Leases”) beginning on page 152 of our 2020 Form 10-K.

Lessor Equipment Leasing

Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset.

Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the income statement. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the income statement. The components of equipment leasing income are summarized in the table below:

			Three months ended September 30,									Nine months ended September 30,
Dollars in millions			2021			2020						2021			2020
Sales-type and direct financing leases
Interest income on lease receivable			$	13		$	36					$	59		$	91
Interest income related to accretion of unguaranteed residual asset			9			(7)						12			(1)
Total sales-type and direct financing lease income			22			29						71			90
Operating leases
Operating lease income related to lease payments			31			34						95			103
Other operating leasing gains			6			4						16			25
Total operating lease income and other leasing gains			36			38						111			128
Total lease income			$	58		$	67					$	182		$	218

In April 2020, the FASB provided elections under which entities can choose to account for eligible rent concessions either by applying the existing lease modification accounting guidance or by applying an expedient to account for

them outside of the modification framework, thus, forgoing the performance of an assessment to determine whether contractual provisions in existing lease arrangements provide enforceable rights and obligations. Modification accounting may require remeasurement and reallocation of contract consideration. To be eligible for the expedient, rent concessions must relate to the COVID-19 pandemic and meet certain criteria. As a result of the pandemic, Key provides lessees with 90 day deferrals on its equipment leases and has elected not to apply modification accounting. Rent concessions were not material at September 30, 2021.

11. Variable Interest Entities

Our significant VIEs are summarized below. Additional information pertaining to the criteria used in determining if an entity is a VIE is included in Note 13 (“Variable Interest Entities “) beginning on page 156 of our 2020 Form 10-K.

LIHTC investments. We had $1.5 billion and $1.4 billion of investments in LIHTC operating partnerships at September 30, 2021, and December 31, 2020, respectively. These investments are recorded in “accrued income and other assets” on our balance sheet. We do not have any loss reserves recorded related to these investments because we believe the likelihood of any loss to be remote. For all legally binding, unfunded equity commitments, we increase our recognized investment and recognize a liability. As of September 30, 2021, and December 31, 2020, we had liabilities of $608 million and $484 million, respectively, related to investments in qualified affordable housing projects, which are recorded in “accrued expenses and other liabilities” on our balance sheet. We continue to invest in these LIHTC operating partnerships.

Through KCIC, formed as a wholly-owned subsidiary of KeyBank National Association, we create funds that hold interests in LIHTC investments. KCIC is the managing member of the fund. We have determined that we are not the primary beneficiary of the fund because although we have the power to direct the activities that most significantly influence its economic performance, we do not have benefits that could potentially be deemed significant to the fund. Therefore, we do not consolidate the fund.

The assets and liabilities presented in the table below convey the size of KCDC’s direct and indirect investments at September 30, 2021, and December 31, 2020. As these investments represent unconsolidated VIEs, the assets and liabilities of the investments themselves are not recorded on our balance sheet. Additional information pertaining to our LIHTC investments is included in Note 13 (“Variable Interest Entities”) beginning on page 156 of our 2020 Form 10-K.

			Unconsolidated VIEs
Dollars in millions			Total Assets			Total Liabilities			Maximum Exposure to Loss
September 30, 2021
LIHTC investments			$	7,389		$	2,861		$	1,882
December 31, 2020
LIHTC investments			$	6,914		$	2,765		$	1,823

We amortize our LIHTC investments over the period that we expect to receive the tax benefits. During the first nine months of 2021, we recognized $147 million of amortization and $139 million of tax credits associated with these investments within “income taxes” on our income statement. During the first nine months of 2020, we recognized $137 million of amortization and $135 million of tax credits associated with these investments within “income taxes” on our income statement.

Principal investments. Our maximum exposure to loss associated with indirect principal investments consists of the investments’ fair value plus any unfunded equity commitments. The fair value of our indirect principal investments totaled $48 million and $53 million at September 30, 2021, and December 31, 2020, respectively. These investments are recorded in “other investments” on our balance sheet. The table below reflects the size of the private equity funds in which we were invested as well as our maximum exposure to loss in connection with these investments at September 30, 2021, and December 31, 2020.

			Unconsolidated VIEs
Dollars in millions			Total Assets			Total Liabilities			Maximum Exposure to Loss
September 30, 2021
Indirect investments			$	10,199		$	189		$	61
December 31, 2020
Indirect investments			$	10,899		$	168		$	78

Through our principal investing entities, we have formed and funded operating entities that provide management and other related services to our investment company funds, which directly invest in portfolio companies. These entities had no assets at September 30, 2021, and December 31, 2020, that can be used to settle the entities’ obligations. The entities had no liabilities at September 30, 2021, and December 31, 2020, and other equity investors have no recourse to our general credit.

Additional information on our indirect and direct principal investments is provided in Note 5 (“Fair Value Measurements”) and in Note 13 (“Variable Interest Entities “) beginning on page 156 of our 2020 Form 10-K.

Other unconsolidated VIEs. We are involved with other various entities in the normal course of business which we have determined to be VIEs. We have determined that we are not the primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact their economic performance or hold a variable interest that could potentially be significant. The table below shows our assets and liabilities associated with these unconsolidated VIEs at September 30, 2021, and December 31, 2020. These assets are recorded in “accrued income and other assets,” “other investments,” “securities available for sale,” “held-to-maturity securities,” and “loans, net of unearned income” on our balance sheet. Of the total balance as of September 30, 2021, $2.8 billion related to the purchase of senior notes from a securitization collateralized by sold indirect auto loans. Additional information pertaining to our other unconsolidated VIEs is included in Note 13 (“Variable Interest Entities“) under the heading “Other unconsolidated VIEs” on page 1 of our 2020 Form 10-K.

			Other unconsolidated VIEs
Dollars in millions			Total Assets			Total Liabilities
September 30, 2021
Other unconsolidated VIEs			$	3,166		$	1
December 31, 2020
Other unconsolidated VIEs			$	351		$	1

10. Goodwill

Our annual goodwill impairment testing is performed as of October 1 each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. A quantitative or qualitative testing approach may be used. Additional information pertaining to our accounting policy for goodwill and other intangible assets is summarized in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Goodwill and Other Intangible Assets” beginning on page 115 of our 2020 Form 10-K.

The fair values of each reporting unit are estimated using a combination of market and income approaches. In our latest quantitative test as of September 30, 2020, the income approach, which was weighted at 75%, utilized discounted cash flow projections for each reporting unit. The market approach, which was weighted at 25%, consisted primarily of public company metrics but also considered recent transactions in the financial services industry. The carrying amounts of Key’s reporting units represent the combination of regulatory and economic equity for goodwill impairment testing and management reporting purposes.

Changes in the carrying amount of goodwill by reporting segment are presented in the following table:

Dollars in millions			Consumer Bank			Commercial Bank			Total
BALANCE AT SEPTEMBER 30, 2020			$	1,752		$	912		$	2,664
BALANCE AT BALANCE AT DECEMBER 31, 2020			$	1,752		$	912		$	2,664
AQN Strategies acquisition			9			—			9
BALANCE AT SEPTEMBER 30, 2021			$	1,761		$	912		$	2,673

12. Income Taxes

Income Tax Provision

In accordance with the applicable accounting guidance, the principal method established for computing the provision for income taxes in interim periods requires us to make our best estimate of the effective tax rate expected to be applicable for the full year. This estimated effective tax rate is then applied to interim consolidated pre-tax operating income to determine the interim provision for income taxes.

The effective tax rate, which is the provision for income taxes as a percentage of income before income taxes, was 20.4% for the third quarter of 2021 and 12.5% for the third quarter of 2020. The effective tax rates are less than our combined federal and state statutory tax rate of 23.7%, primarily due to income from investments in tax-advantaged assets such as corporate-owned life insurance and credits associated with renewable energy and low-income housing investments.

Deferred Taxes

At September 30, 2021, we had a net deferred tax asset of $41 million, compared to a net deferred tax liability of $100 million at December 31, 2020, which are included in “accrued income and other assets” and “accrued expense and other liabilities,” respectively, on the balance sheet.

To determine the amount of deferred tax assets that are more likely than not to be realized, and therefore recorded, we conduct a quarterly assessment of all available evidence. This evidence includes, but is not limited to, taxable income in prior periods, projected future taxable income, and projected future reversals of deferred tax items. These assessments involve a degree of subjectivity and may undergo change. Based on these criteria, we had a valuation allowance of $12 million at September 30, 2021, and no valuation allowance at December 31, 2020. The valuation allowance is associated with federal and state capital loss carryforwards.

Unrecognized Tax Benefits

At September 30, 2021, Key’s unrecognized tax benefits were $55 million. As permitted under the applicable accounting guidance for income taxes, it is our policy to recognize interest and penalties related to unrecognized tax benefits in “income tax expense.”

Pre-1988 Bank Reserves Acquired in a Business Combination

Retained earnings of KeyBank included approximately $92 million of allocated bad debt deductions for which no income taxes have been recorded. Under current federal law, these reserves are subject to recapture into taxable income if KeyBank, or any successor, fails to maintain its bank status under the Internal Revenue Code or makes non-dividend distributions or distributions greater than its accumulated earnings and profits. No deferred tax liability has been established as these events are not expected to occur in the foreseeable future.

13. Acquisition and Discontinued Operations

Acquisitions

Arbitria Quum Notitia, LLC (AQN Strategies). On February 25, 2021, KeyCorp acquired AQN Strategies, a diversified consulting practice, specializing in analytically driven strategies and solutions as it relates to bank transformations, credit and growth, and payments intelligence. The acquisition of AQN Strategies will advance Key’s analytics by adding senior talent and expertise directly aligned to Key’s focus areas. The acquisition was accounted

for as a business combination. As a result, we recognized goodwill of $9 million. No other material assets were acquired or liabilities assumed as a result of the acquisition.

Discontinued operations

Discontinued operations primarily includes our government-guaranteed and private education lending business. At September 30, 2021, and December 31, 2020, approximately $602 million and $710 million, respectively, of education loans are included in discontinued assets on the Consolidated Balance Sheets. Net interest income after provision for credit losses for this business is not material and is included in income (loss) from discontinued operations, net of taxes on the Consolidated Statements of Income.

14. Securities Financing Activities

We enter into repurchase agreements to finance overnight customer sweep deposits. We also enter into repurchase and reverse repurchase agreements to settle other securities obligations. We account for these securities financing agreements as collateralized financing transactions. Repurchase and reverse repurchase agreements are recorded on the balance sheet at the amounts for which the securities will be subsequently sold or repurchased. Securities borrowed transactions are recorded on the balance sheet at the amounts of cash collateral advanced. While our securities financing agreements incorporate a right of set off, the assets and liabilities are reported on a gross basis. Reverse repurchase agreements and securities borrowed transactions are included in “short-term investments” on the Consolidated Balance Sheets; repurchase agreements are included in “federal funds purchased and securities sold under repurchase agreements.” Additional information regarding our securities financing activities, including risk management activities, is provided in Note 16 (“Securities Financing Activities”) beginning on page 160 of our 2020 Form 10-K.

The following table summarizes our securities financing agreements at September 30, 2021, and December 31, 2020:

			September 30, 2021															December 31, 2020
Dollars in millions			Gross Amount Presented in Balance Sheet			Netting Adjustments (a)			Collateral (b)			Net Amounts						Gross Amount Presented in Balance Sheet			Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements			$	11		$	(11)		—			—						$	6		$	(6)		—			—
Securities borrowed			$	500		$	—		$	(500)		—						$	500		$	—		$	(500)		—
Total			$	511		$	(11)		$	(500)		—						$	506		$	(6)		$	(500)		—
Offsetting of financial liabilities:
Repurchase agreements (c)			$	229		$	(11)		$	(218)		—						$	220		$	(6)		$	(214)		—
Total			$	229		$	(11)		$	(218)		—						$	220		$	(6)		$	(214)		—

(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.

As of September 30, 2021, the carrying amount of assets pledged as collateral against repurchase agreements totaled $283 million. Assets pledged as collateral are reported in “securities available for sale” and “held-to-maturity securities” on the Consolidated Balance Sheets. At September 30, 2021, the liabilities associated with collateral pledged were solely comprised of customer sweep financing activity and had a carrying value of $218 million. The collateral pledged under customer sweep repurchase agreements is posted to a third-party custodian and cannot be sold or repledged by the secured party. The risk related to a decline in the market value of collateral pledged is minimal given the collateral's high credit quality and the overnight duration of the repurchase agreements.

15. Employee Benefits

Pension Plans

The components of net pension cost (benefit) for all funded and unfunded plans are recorded in Other expense and are summarized in the following table. For more information on our Pension Plans and Other Postretirement Benefit Plans, see Note 18 (“Employee Benefits”) beginning on page 164 of our 2020 Form 10-K.

			Three months ended September 30,									Nine months ended September 30,
Dollars in millions			2021			2020						2021			2020
Interest cost on PBO			$	6		$	9					$	18		$	26
Expected return on plan assets			(7)			(10)						(21)			(29)
Amortization of losses			5			5						14			13
Settlement loss			7			—						7			8
Net pension cost			$	11		$	4					$	18		$	18

16. Trust Preferred Securities Issued by Unconsolidated Subsidiaries

We own the outstanding common stock of business trusts formed by us that issued corporation-obligated, mandatorily redeemable, trust preferred securities. The trusts used the proceeds from the issuance of their trust preferred securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the mandatorily redeemable trust preferred securities. The outstanding common stock of these business trusts is recorded in Other investments on the Consolidated Balance Sheets. We unconditionally guarantee the following payments or distributions on behalf of the trusts:

• 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.

The Regulatory Capital Rules, discussed in “Supervision and regulation” in Item 2 of this report, require us to treat our mandatorily redeemable trust preferred securities as Tier 2 capital.

The trust preferred securities, common stock, and related debentures are summarized as follows:

Dollars in millions			Trust Preferred Securities, Net of Discount (a)			Common Stock			Principal Amount of Debentures, Net of Discount (b)			Interest Rate of Trust Preferred Securities and Debentures (c)			Maturity of Trust Preferred Securities and Debentures
September 30, 2021
KeyCorp Capital I			$	156		$	6		$	162		0.885		%	2028
KeyCorp Capital II			101			4			105			6.875			2029
KeyCorp Capital III			140			4			144			7.750			2029
HNC Statutory Trust III			20			1			21			1.531			2035
Willow Grove Statutory Trust I			20			1			21			1.409			2036
HNC Statutory Trust IV			17			1			18			1.426			2037
Westbank Capital Trust II			8			—			8			2.312			2034
Westbank Capital Trust III			8			—			8			2.312			2034
Total			$	470		$	17		$	486		4.343		%	—
December 31, 2020			$	483		$	17		$	500		4.464		%	—

(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 basis adjustments related to fair value hedges totaling $56 million at September 30, 2021, and $70 million at December 31, 2020. See Note 7 (“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 basis adjustments related to fair value hedges totaling $56 million at September 30, 2021, and $70 million at December 31, 2020. See Note 7 (“Derivatives and Hedging Activities”) 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.

17. Contingent Liabilities and Guarantees

Legal Proceedings

Litigation. From time to time, in the ordinary course of business, we and our subsidiaries are subject to various litigation, investigations, and administrative proceedings. Private, civil litigation may range from individual actions involving a single plaintiff to putative class action lawsuits with potentially thousands of class members. Investigations may involve both formal and informal proceedings, by both government agencies and self-regulatory bodies. These matters may involve claims for substantial monetary relief. At times, these matters may present novel

claims or legal theories. Due to the complex nature of these various other matters, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information presently known to us, we do not believe there is any matter to which we are a party, or involving any of our properties that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on our financial condition. We continually monitor and reassess the potential materiality of these litigation matters. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Guarantees

We are a guarantor in various agreements with third parties. The following table shows the types of guarantees that we had outstanding at September 30, 2021. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Contingencies and Guarantees” beginning on page 116 of our 2020 Form 10-K.

September 30, 2021			Maximum Potential Undiscounted Future Payments			Liability Recorded
Dollars in millions
Financial guarantees:
Standby letters of credit			$	3,463		$	83
Recourse agreement with FNMA			6,272			25
Residential mortgage reserve			2,972			14
Written put options (a)			3,835			57
Total			$	16,542		$	179

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

We determine the payment/performance risk associated with each type of guarantee described below based on the probability that we could be required to make the maximum potential undiscounted future payments shown in the preceding table. We use a scale of low (0% to 30% probability of payment), moderate (greater than 30% to 70% probability of payment), or high (greater than 70% probability of payment) to assess the payment/performance risk, and have determined that the payment/performance risk associated with each type of guarantee outstanding at September 30, 2021, is low. Information pertaining to the nature of each of the guarantees listed below is included in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Guarantees” beginning on page 174 of our 2020 Form 10-K.

Standby letters of credit. At September 30, 2021, our standby letters of credit had a remaining weighted-average life of 1.7 years, with remaining actual lives ranging from less than 1 year to as many as 13.2 years.

Recourse agreement with FNMA. At September 30, 2021, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of 7.7 years, and the unpaid principal balance outstanding of loans sold by us as a participant was $20.6 billion. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 30.5% of the principal balance of loans outstanding at September 30, 2021. FNMA delegates responsibility for originating, underwriting, and servicing mortgages, and we assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan that we sell to FNMA. We maintain a reserve for such potential losses in an amount that we believe approximates the fair value of our liability in addition to the expected credit loss for the guarantee as described in Note 4 (“Asset Quality“).

Residential Mortgage Banking. At September 30, 2021, the unpaid principal balance outstanding of loans sold by us in this program was $9.7 billion. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 30% of the principal balance of loans outstanding at September 30, 2021.

Our liability for estimated repurchase obligations on loans sold, which is included in Other liabilities on the Consolidated Balance Sheets, was $14 million at September 30, 2021. For more information on our residential mortgages, see Note 8 (“Mortgage Servicing Assets“).

Written put options. At September 30, 2021, our written put options had an average life of 2.1 years. These written put options are accounted for as derivatives at fair value, as further discussed in Note 7 (“Derivatives and Hedging Activities”).

Written put options where the counterparty is a broker-dealer or bank are accounted for as derivatives at fair value but are not considered guarantees since these counterparties typically do not hold the underlying instruments. In addition, we are a purchaser and seller of credit derivatives, which are further discussed in Note 7 (“Derivatives and Hedging Activities”).

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in the applicable accounting guidance, and from other relationships. Additional information pertaining to types of other off-balance sheet risk is included in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Other Off-Balance Sheet Risk” on page 175 of our 2020 Form 10-K.

18. Accumulated Other Comprehensive Income

Our changes in AOCI for the three and nine months ended September 30, 2021, and September 30, 2020, are as follows:

Dollars in millions			Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative financial instruments						Net pension and postretirement benefit costs			Total
Balance at December 31, 2020			$	567		$	476					$	(305)		$	738
Other comprehensive income before reclassification, net of income taxes			(617)			11						(2)			(608)
Amounts reclassified from AOCI, net of income taxes (a)			—			(191)						16			(175)
Net current-period other comprehensive income, net of income taxes			(617)			(180)						14			(783)
Balance at September 30, 2021			$	(50)		$	296					$	(291)		$	(45)
Balance at June 30, 2021			$	124		$	325					$	(299)		$	150
Other comprehensive income before reclassification, net of income taxes			(174)			30						(1)			(145)
Amounts reclassified from AOCI, net of income taxes (a)			—			(59)						9			(50)
Net current-period other comprehensive income, net of income taxes			(174)			(29)						8			(195)
Balance at September 30, 2021			$	(50)		$	296					$	(291)		$	(45)
Balance at December 31, 2019			$	115		$	250					$	(339)		$	26
Other comprehensive income before reclassification, net of income taxes			530			467						(1)			996
Amounts reclassified from AOCI, net of income taxes (a)			(3)			(168)						16			(155)
Net current-period other comprehensive income, net of income taxes			527			299						15			841
Balance at September 30, 2020			$	642		$	549					$	(324)		$	867
Balance at June 30, 2020			$	650		$	613					$	(327)		$	936
Other comprehensive income before reclassification, net of income taxes			(8)			11						(1)			2
Amounts reclassified from AOCI, net of income taxes (a)			—			(75)						4			(71)
Net current-period other comprehensive income, net of income taxes			(8)			(64)						3			(69)
Balance at September 30, 2020			$	642		$	549					$	(324)		$	867

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

Our reclassifications out of AOCI for the three and nine months ended September 30, 2021, and September 30, 2020, are as follows:

			Three months ended September 30,						Affected Line Item in the Statement Where Net Income is Presented
Dollars in millions			2021			2020
Unrealized gains (losses) on derivative financial instruments
Interest rate			$	79		$	100		Interest income — Loans
Interest rate			(1)			(1)			Interest expense — Long-term debt
Interest rate			(1)			—			Investment banking and debt placement fees
			77			99			Income (loss) from continuing operations before income taxes
			18			24			Income taxes
			$	59		$	75		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses			$	(5)		$	(5)		Other expense
Settlement loss			(7)			—			Other expense
			(12)			(5)			Income (loss) from continuing operations before income taxes
			(3)			(1)			Income taxes
			$	(9)		$	(4)		Income (loss) from continuing operations

			Nine months ended September 30,						Affected Line Item in the Statement Where Net Income is Presented
Dollars in millions			2021			2020
Unrealized gains (losses) on available for sale securities
Realized gains			—			$	4		Other income
			—			4			Income (loss) from continuing operations before income taxes
			—			1			Income taxes
			—			$	3		Income (loss) from continuing operations
Unrealized gains (losses) on derivative financial instruments
Interest rate			$	253		$	224		Interest income — Loans
Interest rate			(3)			(3)			Interest expense — Long-term debt
Interest rate			—			—			Investment banking and debt placement fees
			250			221			Income (loss) from continuing operations before income taxes
			59			53			Income taxes
			$	191		$	168		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses			$	(14)		$	(13)		Other expense
Settlement loss			(7)			(8)			Other expense
			(21)			(21)			Income (loss) from continuing operations before income taxes
			(5)			(5)			Income taxes
			$	(16)		$	(16)		Income (loss) from continuing operations

19. Shareholders' Equity

Comprehensive Capital Plan

In the third quarter of 2021, under our current authorization pursuant to our 2021 capital plan, we completed $593 million of Common Share repurchases. Of the $593 million total common shares repurchased in the third quarter of 2021, $468 million were related to the initial settlement of an ASR program entered into with Goldman Sachs & Co. LLC (Goldman Sachs) on September 10, 2021, and $125 million were purchased in the open market. Less than $1 million of Common Share repurchases related to employee equity compensation programs.

Under the ASR program, we made a cash payment of $585 million to Goldman Sachs and received an initial delivery of 23.6 million shares of our common stock from Goldman Sachs based on the then current market price of $19.87 of our common stock. The payment to Goldman Sachs was recorded as a reduction to our shareholders’ equity, consisting of a $468 million impact to treasury stock, which reflected the value of the initial 23.6 million shares received upon initial settlement, and a $117 million reduction to our capital surplus balance, which reflects the value of common stock held back by Goldman Sachs pending final settlement of the ASR program. The total number of shares that we will repurchase under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the ASR agreement, less a discount, and subject to potential adjustments pursuant to the terms and conditions of the ASR agreement.

Consistent with our capital plan, the Board declared a quarterly dividend of $.185 per Common Share for the third quarter of 2021. Common Share repurchases and Common Share dividends paid during the third quarter are consistent with the Federal Reserve’s third quarter capital distribution limitations.

Preferred Stock

Preferred stock series			Amount outstanding (in millions)			Shares authorized and outstanding			Par value			Liquidation preference			Ownership interest per depositary share			Liquidation preference per depositary share			Third quarter 2021 dividends paid per depositary share
Fixed-to-Floating Rate Perpetual Noncumulative Series D			$	525		21,000			$	1		$	25,000		1/25th			$	1,000		$	12.50
Fixed-to-Floating Rate Perpetual Noncumulative Series E			500			500,000			1			1,000			1/40th			25			.382813
Fixed Rate Perpetual Noncumulative Series F			425			425,000			1			1,000			1/40th			25			.353125
Fixed Rate Perpetual Non-Cumulative Series G			450			450,000			1			1,000			1/40th			25			.351563

20. Business Segment Reporting

Consumer Bank

The Consumer Bank serves individuals and small businesses throughout our 15-state branch footprint as well as healthcare professionals nationally through our Laurel Road digital brand by offering a variety of deposit and investment products, personal finance and financial wellness services, lending, student loan refinancing, mortgage and home equity, credit card, treasury services, and business advisory services. In addition, wealth management and investment services are offered to assist non-profit, and high-net-worth clients with their banking, trust, portfolio management, life insurance, charitable giving, and related needs.

Commercial Bank

The Commercial Bank is an aggregation of our Institutional and Commercial operating segments. The Commercial operating segment is a full-service corporate bank focused principally on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate, and technology. The Commercial operating segment is also a significant servicer of commercial mortgage loans and a significant special servicer of CMBS. The Institutional operating segment delivers a broad suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance.

Other

Other includes various corporate treasury activities such as management of our investment securities portfolio, long-term debt, short-term liquidity and funding activities, and balance sheet risk management, 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 include intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

The development and application of the methodologies that we use to allocate items among our business segments is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocations drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

The table below shows selected financial data for our business segments for the three- and nine-month periods ended September 30, 2021, and September 30, 2020. Capital is assigned to each business segment based on a combination of regulatory and economic equity.

Three months ended September 30,			Consumer Bank									Commercial Bank									Other									Total Key
Dollars in millions			2021			2020						2021			2020						2021			2020						2021			2020
SUMMARY OF OPERATIONS
Net interest income (TE)			$	582		$	598					$	414		$	427					$	29		$	(19)					$	1,025		$	1,006
Noninterest income			288			266						477			384						32			31						797			681
Total revenue (TE) (a)			870			864						891			811						61			12						1,822			1,687
Provision for credit losses			(38)			(3)						(69)			150						—			13						(107)			160
Depreciation and amortization expense			31			19						34			35						22			35						87			89
Other noninterest expense			560			548						436			412						29			(12)						1,025			948
Income (loss) from continuing operations before income taxes (TE)			317			300						490			214						10			(24)						817			490
Allocated income taxes and TE adjustments			76			71						106			41						(8)			(46)						174			66
Income (loss) from continuing operations			241			229						384			173						18			22						643			424
Income (loss) from discontinued operations, net of taxes			—			—						—			—						2			4						2			4
Net income (loss)			241			229						384			173						20			26						645			428
Less: Net income (loss) attributable to noncontrolling interests			—			—						—			—						—			—						—			—
Net income (loss) attributable to Key			$	241		$	229					$	384		$	173					$	20		$	26					$	645		$	428
AVERAGE BALANCES (b)
Loans and leases			$	39,796		$	38,354					$	59,914		$	66,378					$	428		$	187					$	100,138		$	104,919
Total assets (a)			42,981			43,304						69,285			74,530						69,105			50,977						181,371			168,811
Deposits			89,156			82,829						56,546			51,585						1,214			530						146,916			134,944
OTHER FINANCIAL DATA
Net loan charge-offs (b)			$	35		$	23					$	(6)		$	103					$	—		$	2					$	29		$	128
Return on average allocated equity (b)			25.81		%	26.21		%				18.68		%	13.35		%				1.18		%	.96		%				14.25		%	9.51		%
Return on average allocated equity			25.81			26.21						18.68			13.35						1.31			1.14						14.30			9.60
Average full-time equivalent employees (c)			7,976			8,323						2,371			2,312						6,662			6,462						17,009			17,097

(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.

Nine months ended September 30,			Consumer Bank									Commercial Bank									Other												Total Key
Dollars in millions			2021			2020						2021			2020						2021						2020						2021			2020
SUMMARY OF OPERATIONS
Net interest income (TE)			$	1,788		$	1,765					$	1,244		$	1,305					$	28					$	(50)					$	3,060		$	3,020
Noninterest income			798			740						1,377			1,023						110						87						2,285			1,850
Total revenue (TE) (a)			2,586			2,505						2,621			2,328						138						37						5,345			4,870
Provision for credit losses			(132)			289						(267)			697						(23)						15						(422)			1,001
Depreciation and amortization expense			71			59						101			108						95						105						267			272
Other noninterest expense			1,706			1,597						1,263			1,144						23						(32)						2,992			2,709
Income (loss) from continuing operations before income taxes (TE)			941			560						1,524			379						43						(51)						2,508			888
Allocated income taxes and TE adjustments			226			133						324			38						(27)						(37)						523			134
Income (loss) from continuing operations			715			427						1,200			341						70						(14)						1,985			754
Income (loss) from discontinued operations, net of taxes			—			—						—			—						11						7						11			7
Net income (loss)			715			427						1,200			341						81						(7)						1,996			761
Less: Net income (loss) attributable to noncontrolling interests			—			—						—			—						—						—						—			—
Net income (loss) attributable to Key			$	715		$	427					$	1,200		$	341					$	81		(d)			$	(7)					$	1,996		$	761
AVERAGE BALANCES (b)
Loans and leases			$	39,883		$	36,319					$	60,358		$	66,374					$	321					$	325					$	100,562		$	103,018
Total assets (a)			43,094			40,644						69,607			75,205						64,493						43,897						177,194			159,746
Deposits			87,549			78,414						54,660			45,350						814						691						143,023			124,455
OTHER FINANCIAL DATA
Net loan charge-offs (b)			$	105		$	106					$	81		$	200					(21)						2						$	165		$	308
Return on average allocated equity (b)			26.70		%	16.66		%				18.92		%	9.19		%				1.62		%				(.20)		%				14.87		%	5.74		%
Return on average allocated equity			26.70			16.66						18.92			9.19						1.87						(.10)						14.96			5.79
Average full-time equivalent employees (c)			8,062			8,171						2,371			2,288						6,601						6,299						17,034			16,758

(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.

21. Revenue from Contracts with Customers

The following table represents a disaggregation of revenue from contracts with customers, by business segment, for the three- and nine-month periods ended September 30, 2021, and September 30, 2020. The development and application of the methodologies that we use to allocate items among our business segments is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocations drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

			Three months ended September 30, 2021												Three months ended September 30, 2020
Dollars in millions			Consumer Bank			Commercial Bank			Total Contract Revenue						Consumer Bank			Commercial Bank			Total Contract Revenue
NONINTEREST INCOME
Trust and investment services income			$	105		$	16		$	121					$	100		$	15		$	115
Investment banking and debt placement fees			—			169			169						—			69			69
Services charges on deposit accounts			56			35			91						45			32			77
Cards and payments income			46			61			107						43			69			112
Other noninterest income			2			—			2						3			—			3
Total revenue from contracts with customers			$	209		$	281		$	490					$	191		$	185		$	376
Other noninterest income (a)									$	275											$	274
Noninterest income from Other(b)									32												31
Total noninterest income									$	797											$	681

(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 20 (“Business Segment Reporting”) for more information.

			Nine months ended September 30, 2021												Nine months ended September 30, 2020
Dollars in millions			Consumer Bank			Commercial Bank			Total Contract Revenue						Consumer Bank			Commercial Bank			Total Contract Revenue
NONINTEREST INCOME
Trust and investment services income			$	311		$	49		$	360					$	279		$	49		$	328
Investment banking and debt placement fees			—			367			367						—			176			176
Services charges on deposit accounts			145			102			247						138			91			229
Cards and payments income			135			187			322						118			147			265
Other noninterest income			5			2			7						7			—			7
Total revenue from contracts with customers			$	596		$	707		$	1,303					$	542		$	463		$	1,005
Other noninterest income (a)									$	872											$	758
Noninterest income from Other(b)									110												87
Total noninterest income									$	2,285											$	1,850

(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 20 (“Business Segment Reporting”) for more information.

We had no material contract assets or contract liabilities as of September 30, 2021, and September 30, 2020.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of KeyCorp

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of KeyCorp as of September 30, 2021, the related consolidated statements of income, comprehensive income, changes in equity for the three- and nine-month periods ended September 30, 2021 and 2020, the related consolidated statements of cash flows for the nine-month periods ended September 30, 2021 and 2020, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of KeyCorp as of December 31, 2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 22, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of KeyCorp's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to KeyCorp in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Cleveland, Ohio
November 2, 2021