Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations

Introduction

This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for the quarterly periods ended June 30, 2022, and June 30, 2021. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes in this report. The page locations of specific sections and notes that we refer to are presented in the Table of Contents.

References to our “2021 Form 10-K” refer to our Form 10-K for the year ended December 31, 2021, which has been filed with the SEC and is available on its website (www.sec.gov) and on our website (www.key.com/ir).

Terminology

Throughout this discussion, references to “Key,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. “KeyCorp” refers solely to the parent holding company, and “KeyBank” refers to KeyCorp’s subsidiary bank, KeyBank National Association.

We want to explain some industry-specific terms at the outset so you can better understand the discussion that follows.

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

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

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

The acronyms and abbreviations identified below are used in the Management’s Discussion & Analysis of Financial Condition & Results of Operations as well as in the Notes to Consolidated Financial Statements (Unaudited). You may find it helpful to refer back to this page as you read this report.

ABO: Accumulated benefit obligation. ALCO: Asset/Liability Management Committee. ALLL: Allowance for loan and lease losses. A/LM: Asset/liability management. AML: Anti-money laundering. AOCI: Accumulated other comprehensive income (loss). APBO: Accumulated postretirement benefit obligation. AQN Strategies: Arbitria Quum Notitia, LLC. ARRC: Alternative Reference Rates Committee. ASC: Accounting Standards Codification. ASR: Accelerated share repurchase. ASU: Accounting Standards Update. ATMs: Automated teller machines. BSA: Bank Secrecy Act. BHCA: Bank Holding Company Act of 1956, as amended. BHCs: Bank holding companies. Board: KeyCorp Board of Directors. CAPM: Capital Asset Pricing Model. CARES Act: Coronavirus Aid, Relief, and Economic Security Act CCAR: Comprehensive Capital Analysis and Review. Cain Brothers: Cain Brothers & Company, LLC. CECL: Current Expected Credit Losses. CFPB: Consumer Financial Protection Bureau, also known as the Bureau of Consumer Financial Protection. CFTC: Commodities Futures Trading Commission. CMBS: Commercial mortgage-backed securities. CMO: Collateralized mortgage obligation. Common Shares: KeyCorp common shares, $1 par value. CVA: Credit Valuation Adjustment. DCF: Discounted cash flow. DIF: Deposit Insurance Fund of the FDIC. Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. EAD: Exposure at default. EBITDA: Earnings before interest, taxes, depreciation, and amortization. EPS: Earnings per share. ERISA: Employee Retirement Income Security Act of 1974. ERM: Enterprise risk management. ESG: Environmental, social, and governance. EVE: Economic value of equity. FASB: Financial Accounting Standards Board. FDIA: Federal Deposit Insurance Act, as amended. FDIC: Federal Deposit Insurance Corporation. Federal Reserve: Board of Governors of the Federal Reserve System. FHLB: Federal Home Loan Bank of Cincinnati. FHLMC: Federal Home Loan Mortgage Corporation. FICO: Fair Isaac Corporation. FINRA: Financial Industry Regulatory Authority. First Niagara: First Niagara Financial Group, Inc. FNMA: Federal National Mortgage Association.			FSOC: Financial Stability Oversight Council. FVA: Fair value of employee benefit plan assets. GAAP: U.S. generally accepted accounting principles. GNMA: Government National Mortgage Association. HTC: Historic tax credit. IRS: Internal Revenue Service. ISDA: International Swaps and Derivatives Association. KBCM: KeyBanc Capital Markets, Inc. KCC: Key Capital Corporation. KCDC: Key Community Development Corporation. KCIC: Key Community Investment Capital LLC. KEF: Key Equipment Finance. LCR: Liquidity coverage ratio. LGD: Loss given default. LIBOR: London Interbank Offered Rate. LIHTC: Low-income housing tax credit. LTV: Loan-to-value. Moody’s: Moody’s Investor Services, Inc. MRM: Market Risk Management group. MRC: Market Risk Committee. N/A: Not applicable. NAV: Net asset value. NFA: National Futures Association. N/M: Not meaningful. NMTC: New market tax credit. NOW: Negotiable Order of Withdrawal. NPR: Notice of proposed rulemaking. NYSE: New York Stock Exchange. OCC: Office of the Comptroller of the Currency. OCI: Other comprehensive income (loss). OREO: Other real estate owned. PBO: Projected benefit obligation. PCCR: Purchased credit card relationship. PCD: Purchased credit deteriorated. PD: Probability of default. PPP: Paycheck Protection Program. RMBS: Residential mortgage-backed securities. S&P: Standard and Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc. SEC: U.S. Securities & Exchange Commission. SIFIs: Systemically important financial institutions, including large, interconnected BHCs and nonbank financial companies designated by FSOC for supervision by the Federal Reserve. SOFR: Secured Overnight Financing Rate. TDR: Troubled debt restructuring. TE: Taxable-equivalent. U.S. Treasury: United States Department of the Treasury. VaR: Value at risk. VEBA: Voluntary Employee Beneficiary Association. VIE: Variable interest entity.

Forward-looking statements

From time to time, we have made or will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as “goal,” “objective,” “plan,” “expect,” “assume,” “anticipate,” “intend,” “project,” “believe,” “estimate,” “will,” “would,” “should,” “could,” or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results or aspirations. Our disclosures in this report contain forward-looking statements. We may also make forward-looking statements in other documents filed with or furnished to the SEC. In addition, we may make forward-looking statements orally to analysts, investors, representatives of the media, and others.

Forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements.

There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause our actual results to differ from those described in forward-looking statements include, but are not limited to:

• our concentrated credit exposure in commercial and industrial loans;

• deterioration of commercial real estate market fundamentals;

• defaults by our loan counterparties or clients;

• adverse changes in credit quality trends;

• declining asset prices;

• deterioration of asset quality and an increase in credit losses due to the continued impact of the COVID-19 global pandemic, including any of the related variants;

• labor shortages and supply chain constraints;

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

• changes in accounting policies, standards, and interpretations;

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

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

• negative outcomes from claims or litigation;

• failure or circumvention of our controls and procedures;

• the occurrence of natural disasters, which may be exacerbated by climate change;

• societal responses to climate change;

• increased operational risks resulting from the COVID-19 global pandemic, including any of the related variants;

• evolving capital and liquidity standards under applicable regulatory rules;

• disruption of the U.S. financial system;

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

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

• downgrades in our credit ratings or those of KeyBank;

• uncertainty in markets due to the COVID-19 global pandemic, including any of the related variants;

• a worsening of the U.S. economy due to financial, political or other shocks;

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

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

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

• the soundness of other financial institutions;

• our ability to manage our reputational risks;

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

• increased competitive pressure;

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

• our ability to attract and retain talented executives and employees;

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

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

Any forward-looking statements made by us or on our behalf speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances, except as required by applicable securities laws. Before making an investment decision, you should carefully consider all risks and uncertainties disclosed in our 2021 Form 10-K and any subsequent reports filed with the SEC by Key, as well as our registration statements under the Securities Act of 1933, as amended, all of which are or will upon filing be accessible on the SEC’s website at www.sec.gov and on our website at www.key.com/ir.

Long-term financial targets

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

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

Positive Operating Leverage

Generate positive operating leverage and a cash efficiency ratio in the range of 54.0% to 56.0%.

We achieved positive operating leverage for the quarter. Revenues were up 6% quarter over quarter driven by growth in net interest income, reflecting strong loan growth. Our expense levels reflect the variable cost structure of the business as well as investments for future growth.

Moderate Risk Profile

Maintain a moderate risk profile by targeting a net loan charge-offs to average loans ratio in the range of .40% to .60% through a credit cycle.

We believe our strong risk management practices and disciplined underwriting continue to strengthen our credit quality. Net charge-offs to average loans remain at low levels, and we continue to see lower nonperforming loan levels.

Financial Return

A return on average tangible common equity in the range of 16.0% to 19.0%.

We remain committed to our stated priorities of supporting organic growth, increasing dividends, and prudently repurchasing Common Shares. During the second quarter of 2022, the Board declared a dividend of $.195 per Common Share.

Strategic developments

Our actions and results during the second quarter of 2022 support our corporate strategy described in the “Introduction” section under the “Corporate strategy” heading on page 47 of our 2021 Form 10-K.

• We continued the momentum of strong loan growth across both our consumer and commercial businesses as we continue to add clients and support our existing relationships.

• During the second quarter of 2022, we closed on the acquisition of GradFin, highlighting our commitment to accelerate growth through targeted investments in digital, niche businesses.

• We continued to expand targeted client relationships as Laurel Road extended product and service offerings for healthcare professionals, including nurses.

• We have expanded our climate commitments by investing in sustainable finance initiatives and joining the Partnership for Carbon Accounting Financials.

• Our strong capital position allows us to continue to execute against each of our capital priorities of organic growth, dividends, and share repurchases. During the second quarter, the Board of Directors announced a Common Share dividend of $.195 per Common Share.

Demographics

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.

The Commercial Bank consists of the Commercial and Institutional operating segments. The Commercial operating segment is a full-service, commercial banking platform that focuses primarily on serving the borrowing, cash management, and capital markets needs of middle market clients within Key’s 15-state branch footprint. It is also a significant, national, commercial real estate lender and third-party servicer of commercial mortgage loans and special servicer of CMBS. The Institutional operating segment operates nationally in providing lending, equipment financing, and banking products and services to large corporate and institutional clients. The industry coverage and product teams have established expertise in the following sectors: Consumer, Energy, Healthcare, Industrial, Public Sector, Real Estate, and Technology. The operating segment includes the KBCM platform which provides a broad suite of capital markets products and services including syndicated finance, debt and equity capital markets, derivatives, foreign exchange, financial advisory, and public finance. Additionally, KBCM provides fixed income and equity sales and trading services to investor clients.

Supervision and regulation

The following discussion provides a summary of recent regulatory developments and should be read in conjunction with the disclosure included in our 2021 Form 10-K under the heading “Supervision and Regulation” in Item 1. Business and under the heading “II. Compliance Risk” in Item 1A. Risk Factors.

Regulatory capital requirements

The final rule to implement the Basel III international capital framework (“Basel III”) was effective January 1, 2015, with a multi-year transition period (“Regulatory Capital Rules”). As of April 1, 2020, the Regulatory Capital Rules were fully phased-in for Key. The Basel III capital framework and the U.S. implementation of the Basel III capital framework are discussed in more detail in Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation — Regulatory capital requirements.”

Under the Regulatory Capital Rules, standardized approach banking organizations, such as KeyCorp and KeyBank, are required to meet the minimum capital and leverage ratios set forth in Figure 1 below. At June 30, 2022, KeyCorp’s ratios under the fully phased-in Regulatory Capital Rules are set forth in Figure 1.

Figure 1. Minimum Capital Ratios and KeyCorp Ratios Under the Regulatory Capital Rules

Ratios (including stress capital buffer)			Regulatory Minimum Requirement			Stress Capital Buffer (b)			Regulatory Minimum With Stress Capital Buffer			KeyCorp June 30, 2022 (c)
Common Equity Tier 1			4.5		%	2.5		%	7.0		%	9.2		%
Tier 1 Capital			6.0			2.5			8.5			10.4
Total Capital			8.0			2.5			10.5			12.0
Leverage (a)			4.0			N/A			4.0			8.6

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

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

(c)Ratios reflect the five-year transition of CECL impacts on regulatory ratios.

Revised prompt corrective action framework

The federal prompt corrective action (“PCA”) framework under the FDIA groups FDIC-insured depository institutions into one of five prompt corrective action capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” In addition to implementing the Basel III capital framework in the United States, the Regulatory Capital Rules also revised the PCA capital category threshold ratios applicable to FDIC-insured depository institutions such as KeyBank, with an effective date of January 1, 2015. The revised PCA framework table in Figure 2 identifies the capital category thresholds for a “well capitalized” and an “adequately capitalized” institution under the PCA Framework.

Figure 2. "Well Capitalized" and "Adequately Capitalized" Capital Category Ratios under Revised PCA Framework

Prompt Corrective Action						Capital Category
Ratio						Well Capitalized (a)			Adequately Capitalized
Common Equity Tier 1 Risk-Based						6.5		%	4.5		%
Tier 1 Risk-Based						8.0			6.0
Total Risk-Based						10.0			8.0
Tier 1 Leverage (b)						5.0			4.0

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

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

As of June 30, 2022, KeyBank (consolidated) satisfied the risk-based and leverage capital requirements necessary to be considered “well capitalized” for purposes of the PCA framework. However, investors should not regard this determination as a representation of the overall financial condition or prospects of KeyBank because the PCA framework is intended to serve a limited supervisory function. Moreover, it is important to note that the PCA framework does not apply to BHCs, like KeyCorp.

Capital planning and stress testing

On June 23, 2022, the Federal Reserve announced the results of the supervisory stress test that it conducted of 34 BHCs having more than $100 billion in total consolidated assets (including KeyCorp). The Federal Reserve indicated that all BHCs subject to the stress test maintained capital ratios above the minimum required levels under the severely adverse scenario. The stress test results for individual BHCs will be used to determine a BHC’s stress capital buffer requirement, which will be effective on October 1, 2022, and will remain in effect until September 30, 2023, unless the firm later receives an updated stress capital buffer requirement from the Federal Reserve. It is expected that the Federal Reserve will announce the final stress capital buffer requirement for each firm subject to the supervisory stress test by August 31, 2022.

See Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation - Regulatory capital requirements - Capital planning and stress testing” for a discussion of other recent developments concerning capital planning and stress testing requirements.

Liquidity requirements

See Item. 1 Business of our 2021 Form 10-K under the heading “Supervision and Regulation - Regulatory capital requirements - Liquidity requirements” for a discussion of liquidity requirements, including the Liquidity Coverage Rules.

Deposit insurance and assessments

On June 21, 2022, the FDIC issued for public comment a proposal to increase the initial base deposit insurance assessment rates paid by all insured depository institutions by two basis points and to amend the Restoration Plan it had adopted on September 15, 2020, to incorporate the proposed increase in rates. The FDIC indicated that it was taking these actions in order to restore the DIF reserve ratio to the required minimum of 1.35% by the statutory deadline of September 30, 2028. The FDIC said that the reserve ratio had declined below this level because of the increase in deposits since the start of the pandemic and other factors that affect the level of the DIF. Under the FDIC’s proposal, the increase in rates would begin with the first quarterly assessment period of 2023 and would remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% reserve ratio. Comments on the proposal are due by August 20, 2022. If the proposed increase in the assessment rates is adopted, it will apply to KeyBank.

See Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation – FDIA, Resolution Authority and Financial Stability” for a discussion of other recent developments concerning deposit insurance and assessments.

Resolution plans

See Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation - FDIA, Resolution Authority and Financial Stability” for a discussion of other recent developments concerning resolution plans.

Volcker Rule

The Volcker Rule is discussed in detail in Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation - Other Regulatory Developments - Volcker Rule.”

Community Reinvestment Act

See Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation - Other Regulatory Developments - Community Reinvestment Act” for a discussion of other recent developments concerning the CRA.

Supervision and governance

See Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation - Other Regulatory Developments - Supervision and governance” for a discussion of other recent supervision and governance-related developments, including a discussion of the LFI Rating System.

Regulatory developments concerning COVID-19

See Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation - Other Regulatory Developments - Regulatory developments concerning COVID-19” for a discussion of other recent regulatory developments relating to the COVID-19 pandemic.

Federal LIBOR transition legislation

On March 15, 2022, President Biden signed into law the Consolidated Appropriations Act, 2022, which contains the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”). The LIBOR Act addresses certain issues relating to the transition from the use of LIBOR as a benchmark reference rate in contracts to the use of alternate reference rates. Among other things, the LIBOR Act (i) provides for the replacement, by operation of law, of LIBOR with a SOFR-based reference rate selected by the Federal Reserve for contracts which do not have effective fallback language; (ii) authorizes persons who have discretionary authority for selecting a LIBOR replacement to opt into a statutory safe harbor from liability by selecting the benchmark identified by the Federal Reserve; (iii) states that parties to a contract may opt out of the LIBOR Act; and (iv) provides that no federal supervisory agency may take supervisory action against a bank solely because the bank uses a benchmark rate other than SOFR. The LIBOR Act directs the Federal Reserve to promulgate regulations to implement this legislation by 180 days after the date of enactment.

On July 19, 2022, the Federal Reserve issued for public comment a proposed rule to implement the LIBOR Act. The proposed rule would establish Federal Reserve-selected benchmark replacements for contracts governed by federal or state law that use LIBOR as a benchmark reference rate but do not provide for a clearly defined or practicable replacement after June 30, 2023, when LIBOR will no longer be available in its current form. The proposal identifies separate Federal Reserve-selected replacement rates for derivative transactions, consumer loans, contracts where a government sponsored enterprise is a party, and all other affected contracts. Consistent with the LIBOR Act, each proposed replacement rate would be based on SOFR and would incorporate spread adjustments for each specified tenor of LIBOR. The proposed rule would also define various terms and provide clarification of certain provisions of the LIBOR Act. In addition to asking for comment on all aspects of the proposed rule, the Federal Reserve asked for comment on a series of questions related to the proposal. Comments are due by 30 days after publication of the proposed rule in the Federal Register.

Developments relating to climate change

On December 16, 2021, the OCC issued draft principles designed to provide a high-level framework for the safe and sound management of exposures to climate-related financial risks by national banks with more than $100 billion in total consolidated assets. The draft principles support efforts by banks to identify, measure, monitor, and mitigate the risks associated with climate change and encourage banks to incorporate consideration of climate-related financial risks into, among other things, strategic planning, credit underwriting, internal reporting, policies, procedures, and limits. The OCC requested public feedback on its draft principles by February 14, 2022, and said that it planned to elaborate on these principles in subsequent guidance that would distinguish roles and responsibilities of boards of directors and management, incorporate the feedback it receives, and consider lessons learned and best practices from the industry and other jurisdictions. Final principles or other guidance from the OCC regarding climate-related risk management would apply to KeyBank.

On March 21, 2022, the SEC issued for public comment a proposal to amend its rules under the Securities Act of 1933 and the Securities Exchange Act of 1934 to require public companies (including KeyCorp) to provide detailed climate-related information in their registration statements and periodic reports. Among other things, the proposal would require public companies to disclose information about (i) climate-related risks that are reasonably likely to have a material impact on the company’s business or financial statements over the short-, medium- or long-term; (ii) the actual and potential impacts of such risks on the company’s strategy, business model, and outlook; (iii) the role of the board of directors in overseeing climate-related risks and management’s role in assessing and managing such risks; (iv) the impact of climate-related events and transitional activities on line items in the company’s consolidated financial statements as well as the financial estimates and assumptions used in the financial statements; and (v) the company’s direct greenhouse gas emissions, indirect emissions from purchased energy, and, if material, indirect emissions from the company’s value chain (which may include financed emissions in a bank’s loan portfolio). The financial services industry has not yet adopted a standardized methodology for banks to use to quantitatively measure indirect emissions from a bank’s value chain, such as financed emissions. Accordingly, this proposal would require many banks to quantify and disclose financed emissions on a comprehensive scale for the first time. Comments on the SEC’s proposal were originally due by May 20, 2022. The comment period was extended to June 17, 2022.

Computer-Security Incident Notification Requirements

On November 23, 2021, the federal banking agencies published a final rule that establishes computer-security incident notification requirements for banking organizations (including banks and BHCs) and bank service providers. The final rule requires a banking organization to notify its primary federal regulator as soon as possible and no later than 36 hours after the banking organization determines that a computer-security incident that rises to the level of a notification incident has occurred. A notification incident includes, among other things, a computer-security incident that materially disrupts or degrades, or is reasonable likely to materially disrupt or degrade, a banking organization’s operations or activities or its ability to deliver products or services to a material portion of its customer base. The final rule also requires a bank service provider to notify a banking organization of certain material disruptions in services provided to the banking organization. The final rule became effective on April 1, 2022, and has a compliance date of May 1, 2022. The final rule applies to KeyBank and KeyCorp.

Results of Operations

Earnings overview

The following chart provides a reconciliation of net income from continuing operations attributable to Key common shareholders for the three months ended June 30, 2021, to the three months ended June 30, 2022 (dollars in millions):

Net interest income

One of our principal sources of revenue is net interest income. Net interest income is the difference between interest income received on earning assets (such as loans and securities) and loan-related fee income, and interest expense paid on deposits and borrowings. There are several factors that affect net interest income, including:

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

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

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

• interest rate fluctuations and competitive conditions within the marketplace;

• asset quality; and

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

To make it easier to compare both the results across several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in this discussion on a “TE basis” (i.e., as if all income were taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100.

Figure 3 shows the various components of our balance sheet that affect interest income and expense and their respective yields or rates for the current periods and comparative year ago periods. This figure also presents a

reconciliation of TE net interest income to net interest income reported in accordance with GAAP for each of those quarters. The net interest margin, which is an indicator of the profitability of the earning assets portfolio less cost of funding, is calculated by dividing annualized TE net interest income by average earning assets.

Net interest income (TE) was $1.1 billion for the second quarter of 2022 and the net interest margin was 2.61%. Compared to the second quarter of 2021, net interest income increased $81 million and net interest margin increased by nine basis points. Net interest income (TE) and net interest margin benefited from higher earning asset balances, a favorable balance sheet mix, and higher interest rates. Net interest income (TE) and net interest margin were negatively impacted by the exit of the indirect auto loan portfolio and lower loan fees from the Paycheck Protection Program ("PPP")

For the six months ended June 30, 2022, net interest income (TE) increased $89 million from the same period last year and net interest margin decreased by three basis points. Net interest income (TE) and the net interest margin benefited from higher earning asset balances and a favorable balance sheet mix, higher interest rates, and lower interest-bearing deposit costs. Net interest income (TE) and the net interest margin were negatively impacted by the exit of the indirect auto loan portfolio and lower loan fees from the PPP.

Average loans were $109.1 billion for the second quarter of 2022, an increase of $8.3 billion compared to the second quarter of 2021. Commercial loans increased $4.2 billion, reflecting strength in commercial mortgage real estate loans and core commercial and industrial loans, which mitigated the impact of a $6.8 billion decline in PPP balances. Consumer loans increased $4.1 billion, due to strength from Key's consumer mortgage business and Laurel Road, partly offset by the sale of the indirect auto loan portfolio.

Average deposits totaled $147.5 billion for the second quarter of 2022, an increase of $3.1 billion compared to the year-ago quarter. The increase reflects growth from consumer and commercial relationships, including higher commercial escrow and retail deposits, partially offset by a decline in time deposits.

Figure 3. Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates and Components of Net Interest Income Changes from Continuing Operations**(h)**

			Three months ended June 30, 2022												Three months ended June 30, 2021												Change in Net interest income due to
Dollars in millions			Average Balance			Interest (a)			Yield/ Rate (a)						Average Balance			Interest (a)			Yield/ Rate (a)						Volume			Yield/Rate			Total
ASSETS
Loans (b), (c)
Commercial and industrial (d)			$	53,858		$	449		3.34		%				$	51,808		$	450		3.48		%				$	17		$	(18)		$	(1)
Real estate — commercial mortgage			15,231			136			3.58						12,825			117			3.67						22			(3)			19
Real estate — construction			2,125			20			3.81						2,149			20			3.68						—			—			—
Commercial lease financing			3,817			24			2.47						4,060			30			2.98						(2)			(4)			(6)
Total commercial loans			75,031			629			3.36						70,842			617			3.49						37			(25)			12
Real estate — residential mortgage			18,383			131			2.85						11,055			81			2.92						52			(2)			50
Home equity loans			8,208			78			3.83						9,089			85			3.76						(8)			1			(7)
Consumer direct loans			6,514			68			4.19						4,910			57			4.69						17			(6)			11
Credit cards			943			24			10.20						908			22			9.79						1			1			2
Consumer indirect loans			59			—			—						4,010			32			3.19						(16)			(16)			(32)
Total consumer loans			34,107			301			3.53						29,972			277			3.71						46			(22)			24
Total loans			109,138			930			3.41						100,814			894			3.56						83			(47)			36
Loans held for sale			1,107			10			3.49						1,616			11			2.60						(4)			3			(1)
Securities available for sale (b), (e)			43,023			188			1.60						33,623			133			1.57						40			15			55
Held-to-maturity securities (b)			7,291			48			2.65						6,452			45			2.75						6			(3)			3
Trading account assets			854			7			3.45						837			5			2.56						—			2			2
Short-term investments			3,591			13			1.45						18,817			6			.13						(8)			15			7
Other investments (e)			800			4			2.27						622			2			1.02						1			1			2
Total earning assets			165,804			1,200			2.83						162,781			1,096			2.70						118			(14)			104
Allowance for loan and lease losses			(1,103)												(1,442)
Accrued income and other assets			18,826												16,531
Discontinued assets			505												650
Total assets			$	184,032											$	178,520
LIABILITIES
NOW and money market deposit accounts			$	85,389		18			.08						$	83,981		9			.05						—			9			9
Savings deposits			7,891			—			.01						6,859			1			.03						—			(1)			(1)
Certificates of deposit ($100,000 or more)			1,487			1			.44						2,212			4			.72						(1)			(2)			(3)
Other time deposits			1,972			1			.13						2,630			2			.38						—			(1)			(1)
Total interest-bearing deposits			96,739			20			.08						95,682			16			.07						(1)			5			4
Federal funds purchased and securities sold under repurchase agreements			2,792			6			.88						251			—			.02						—			—			—
Bank notes and other short-term borrowings			1,943			9			1.77						744			3			1.19						5			1			6
Long-term debt (f), (g)			12,662			61			1.92						11,978			54			1.79						3			4			7
Total interest-bearing liabilities			114,136			96			.34						108,655			73			.27						7			10			17
Noninterest-bearing deposits			50,732												48,640
Accrued expense and other liabilities			4,261												2,716
Discontinued liabilities (g)			505												650
Total liabilities			169,634												160,661
EQUITY
Key shareholders’ equity			14,398												17,859
Noncontrolling interests			—												—
Total equity			14,398												17,859
Total liabilities and equity			$	184,032											$	178,520
Interest rate spread (TE)									2.50		%										2.43		%
Net interest income (TE) and net interest margin (TE)						1,104			2.61		%							1,023			2.52		%				$	111		$	(24)		87
TE adjustment (b)						7												6
Net interest income, GAAP basis						$	1,097											$	1,017

(a)Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g), calculated using a matched funds transfer pricing methodology.

(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended June 30, 2022, and June 30, 2021.

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

(d)Commercial and industrial average balances include $153 million and $132 million of assets from commercial credit cards for the three months ended June 30, 2022, and June 30, 2021, respectively.

(e)Yield is calculated on the basis of amortized cost.

(f)Rate calculation excludes basis adjustments related to fair value hedges.

(g)A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

(h)Average balances presented are based on daily average balances over the respective stated period.

Figure 3. Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates and Components of Net Interest Income Changes from Continuing Operations**(h)**

			Six months ended June 30, 2022												Six months ended June 30, 2021												Change in Net interest income due to
dollars in millions			Average Balance			Interest (a)			Yield/ Rate (a)						Average Balance			Interest (a)			Yield/ Rate (a)						Volume			Yield/Rate			Total
ASSETS
Loans (b), (c)
Commercial and industrial (d)			$	52,723		$	858		3.28		%				$	52,194		$	902		3.49		%				$	9		$	(53)		$	(44)
Real estate — commercial mortgage			14,910			257			3.48						12,742			232			3.67						38			(13)			25
Real estate — construction			2,076			37			3.60						2,099			39			3.71						—			(2)			(2)
Commercial lease financing			3,879			48			2.44						4,101			61			2.99						(3)			(10)			(13)
Total commercial loans			73,588			1,200			3.28						71,136			1,234			3.49						44			(78)			(34)
Real estate — residential mortgage			17,352			243			2.80						10,380			154			2.97						98			(9)			89
Home equity loans			8,276			153			3.72						9,189			173			3.79						(17)			(3)			(20)
Consumer direct loans			6,236			129			4.18						4,864			113			4.70						29			(13)			16
Credit cards			938			48			10.28						920			46			10.12						1			1			2
Consumer indirect loans			75			—			—						4,288			69			3.25						(34)			(35)			(69)
Total consumer loans			32,877			573			3.49						29,641			555			3.77						77			(59)			18
Total loans			106,465			1,773			3.35						100,777			1,789			3.58						121			(137)			(16)
Loans held for sale			1,295			22			3.40						1,574			22			2.74						(4)			4			—
Securities available for sale (b), (e)			43,968			361			1.55						31,841			263			1.66						100			(2)			98
Held-to-maturity securities (b)			7,239			94			2.59						6,818			90			2.63						5			(1)			4
Trading account assets			848			13			3.10						842			10			2.35						—			3			3
Short-term investments			5,447			17			.65						17,670			11			.13						(12)			18			6
Other investments (e)			726			6			1.82						618			4			1.21						1			1			2
Total earning assets			165,988			2,286			2.72						160,140			2,189			2.75						210			(113)			97
Allowance for loan and lease losses			(1,080)												(1,532)
Accrued income and other assets			18,152												16,463
Discontinued assets			522												668
Total assets			$	183,582											$	175,739
LIABILITIES
NOW and money market deposit accounts			$	86,943		29			.07						$	82,717		20			.05						1			8			9
Savings deposits			7,746			1			.01						6,533			1			.03						—			—			—
Certificates of deposit ($100,000 or more)			1,562			3			.44						2,390			10			.85						(3)			(4)			(7)
Other time deposits			2,035			1			.14						2,766			6			.48						(1)			(4)			(5)
Total interest-bearing deposits			98,286			34			.07						94,406			37			.08						(3)			—			(3)
Federal funds purchased and securities sold under repurchase agreements			1,547			6			.81						247			—			.03						—			—			—
Bank notes and other short-term borrowings			1,327			12			1.82						811			4			.89						3			5			8
Long-term debt (f), (g)			11,751			110			1.86						12,402			114			1.85						(6)			2			(4)
Total interest-bearing liabilities			112,911			162			.29						107,866			155			.29						(5)			6			1
Noninterest-bearing deposits			50,523												46,638
Accrued expense and other liabilities			4,043												2,753
Discontinued liabilities (g)			522												668
Total liabilities			167,999												157,925
EQUITY
Key shareholders’ equity			15,583												17,814
Noncontrolling interests			—												—
Total equity			15,583												17,814
Total liabilities and equity			$	183,582											$	175,739
Interest rate spread (TE)									2.44		%										2.46		%
Net interest income (TE) and net interest margin (TE)						2,124			2.53		%							2,035			2.56		%				$	216		$	(120)		$	96
TE adjustment (b)						13												13
Net interest income, GAAP basis						$	2,111											$	2,022

(a)Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.

(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for both the six months ended June 30, 2022, and June 30, 2021.

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

(d)Commercial and industrial average balances include $147 million and $129 million of assets from commercial credit cards for the six months ended June 30, 2022, and June 30, 2021, respectively.

(e)Yield is calculated on the basis of amortized cost.

(f)Rate calculation excludes basis adjustments related to fair value hedges.

(g)A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.

(h)Average balances presented are based on daily average balances over the respective stated period.

Provision for credit losses

Key’s provision for credit losses was $45 million for the three months ended June 30, 2022, compared to a net benefit of $222 million for the three months ended June 30, 2021. The provision for credit losses was $128 million for the six months ended June 30, 2022, compared to a net benefit of $315 million for the six months ended June 30, 2021. The increase reflects the impact of a reserve release in each respective year-ago period as uncertainty caused by the pandemic subsided.

Noninterest income

As shown in Figure 4, noninterest income was $688 million, and represented 38% of total revenue for the second quarter of 2022, compared to $750 million, representing 42% of total revenue, for the year-ago quarter.

The following discussion explains the composition of certain elements of our noninterest income and the factors that caused those elements to change.

Figure 4. Noninterest Income

(a)Other noninterest income includes operating lease income and other leasing gains, corporate services income, corporate-owned life insurance income, consumer mortgage income, commercial mortgage servicing fees, and other income. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.

Trust and investment services income

Trust and investment services income consists of brokerage commissions, trust and asset management fees, and insurance income. The assets under management that primarily generate certain trust and asset management fees are shown in Figure 5. For the three months ended June 30, 2022, trust and investment services income was up $4 million, or 3.0%, compared to the same period one year ago. For the six months ended June 30, 2022, trust and investment services income was up $7 million, or 2.6%, compared to the same period one year ago. This was primarily due to an increase in commissions based revenue offset by decreases in fees associated with lower assets under management balances.

A significant portion of our trust and investment services income depends on the value and mix of assets under management. At June 30, 2022, our bank, trust, and registered investment advisory subsidiaries had assets under management of $49.0 billion, compared to $51.0 billion at June 30, 2021. Assets under management were down compared to June 30, 2021, as shown in Figure 5, due to market impact on portfolios.

Figure 5. Assets Under Administration

Dollars in millions			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Discretionary assets under management by investment type:
Equity			$	28,344		$	32,270		$	33,767		$	31,361		$	30,952
Securities lending			—			—			—			13			135
Fixed income			12,913			13,414			13,851			13,673			13,384
Money market			4,604			4,481			4,541			4,425			3,266
Total discretionary assets under management			45,861			50,165			52,159			49,472			47,737
Non-discretionary assets under administration			3,142			3,542			3,647			3,395			3,276
Total			$	49,003		$	53,707		$	55,806		$	52,867		$	51,013

Investment banking and debt placement fees

Investment banking and debt placement fees consists of syndication fees, debt and equity securities underwriting fees, merger and acquisition and financial advisory fees, gains on sales of commercial mortgages, and agency origination fees. For the three months ended June 30, 2022, investment banking and debt placement fees were

down $68 million, or 31.3%, compared to the same period a year ago. For the six months ended June 30, 2022, investment banking and debt placement fees decreased $67 million, or 17.7%. The movement reflects the slowdown in capital markets activity.

Service charges on deposit accounts

Service charges on deposit accounts increased $13 million, or 15.7%, for the three months ended June 30, 2022, compared to the same period one year ago. For the six months ended June 30, 2022, service charges on deposit accounts increased by $31 million, or 19.9%, from the six months ended June 30, 2021. The increases were driven by higher gross overdraft fees and lower waiver rates.

Cards and payments income

Cards and payments income, which consists of debit card, prepaid card, consumer and commercial credit card, and merchant services income, decreased $28 million, or 24.8%, for the three months ended June 30, 2022, compared to the same period one year ago. For the six months ended June 30, 2022, cards and payment income decreased $53 million, or 24.3% from the same period a year ago. These decreases are primarily a result of lower prepaid card activity offset by slight increases in merchant services income.

Other noninterest income

Other noninterest income includes operating lease income and other leasing gains, corporate services income,

corporate-owned life insurance income, consumer mortgage income, commercial mortgage servicing fees, and other income. Other noninterest income for the three months ended June 30, 2022, increased $17 million, or 8.3%, from the year-ago quarter, as a result of an increase in corporate services income from derivative related activities slightly offset by a decrease in consumer mortgage income from lower gains on sale. For the six months ended June 30, 2022, other noninterest income decreased $42 million, or 9.0%, from the same period a year ago, driven by the overall decrease in consumer mortgage income as well as decreases from market adjustments on other investments partially offset by an increase in corporate services income.

Noninterest expense

As shown in Figure 6, noninterest expense was $1.1 billion for the second quarter of 2022, compared to $1.1 billion for the second quarter of 2021. Noninterest expense was $2.1 billion for the six months ended June 30, 2022, as well as for the six months ended June 30, 2021.

The following discussion explains the composition of certain elements of our noninterest expense and the factors that caused those elements to change.

Figure 6. Noninterest Expense

(a)Other noninterest expense includes equipment, operating lease expense, marketing, OREO expense, net, and other expense. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.

Personnel

Personnel expense, the largest category of our noninterest expense, decreased by $16 million, or 2.6%, for the three months ended June 30, 2022, compared to the same period one year ago. For the six months ended June 30, 2022, personnel expense was down $10 million, or 0.8%, compared to the same period one year ago. The decrease was driven by lower incentive compensation, reflecting lower production related incentives, partially offset by an increase in salaries and contract labor, as a result of higher merit increases and technology contract labor.

Other nonpersonnel expense

Other nonpersonnel expense includes net occupancy, computer processing, business services and professional fees, equipment, operating lease expense, marketing, and other miscellaneous expense categories. Other nonpersonnel expense for the three months ended June 30, 2022, increased $18 million, or 4.0%, from the year-ago quarter, primarily due to an increase in other expense, due to higher travel and entertainment, as well as an increase in computer processing expense. For the six months ended June 30, 2022, other nonpersonnel expense increased $11 million, or 1.2%, from the six months ended June 30, 2021.

Income taxes

We recorded tax expense of $132 million for the second quarter of 2022 and $189 million for the second quarter of 2021. We recorded tax expense of $222 million for the six months ended June 30, 2022, compared to $336 million for the six months ended June 30, 2021.

Our federal tax expense and effective tax rate differs from the amount that would be calculated using the federal statutory tax rate; primarily from investments in tax-advantaged assets, such as corporate-owned life insurance, tax credits associated with energy related projects and low-income housing investments, and periodic adjustments to our tax reserves.

Additional information pertaining to how our tax expense (benefit) and the resulting effective tax rates were derived is included in Note 14 (“Income Taxes”) beginning on page 156 of our 2021 Form 10-K.

Business Segment Results

This section summarizes the financial performance of our two major business segments (operating segments): Consumer Bank and Commercial Bank. Note 20 (“Business Segment Reporting”) describes the products and services offered by each of these business segments and provides more detailed financial information pertaining to the segments. For more information on the segment imperatives and market and business overview, see “Business Segment Results” beginning on page 55 of our 2021 Form 10-K. Dollars in the charts are presented in millions.

Consumer Bank

Summary of operations

• Net income attributable to Key of $107 million for the second quarter of 2022, compared to $257 million for the year-ago quarter

• Taxable-equivalent net interest income decreased by $29 million, or 4.8%, compared to the second quarter of 2021, related to the sale of the indirect auto portfolio, partially offset by strong consumer mortgage and Laurel Road balance sheet growth

• Average loans and leases increased $220 million, or 0.5%, from the second quarter of 2021, driven by growth in consumer mortgage and Laurel Road, largely offset by the sale of the indirect auto loan portfolio

• Average deposits increased $2.8 billion, or 3.2%, from the second quarter of 2021, driven by higher retail deposits

• Provision for credit losses increased $78 million compared to the second quarter of 2021, due to a reserve release in the year-ago quarter as uncertainty caused by the pandemic subsided

• Noninterest income increased $1 million, or 0.4%, from the second quarter of 2021, driven by an increase in service charges on deposit accounts, partially offset by a decline in consumer mortgage income, reflecting lower gain on sale margins and higher balance sheet retention

• Noninterest expense increased $92 million, or 15.8%, from the second quarter of 2021, driven by higher salary and employee benefits expense, as well as investments in digital, security, and fraud

Commercial Bank

Summary of operations

• Net income attributable to Key of $315 million for the second quarter of 2022, compared to $432 million for the year-ago quarter

• Taxable-equivalent net interest income increased by $23 million, compared to the second quarter of 2021, reflecting core loan growth in commercial and industrial loans and commercial mortgage real estate loans and higher interest rates, partially offset by lower loan fees from the PPP

• Average loan and lease balances increased $7.9 billion, compared to the second quarter of 2021, reflecting growth in core commercial and industrial loans and commercial mortgage real estate loans, partially offset by a decline in PPP balances

• Average deposit balances increased $50 million, or 0.1%, compared to the second quarter of 2021, driven by growth in targeted relationships and higher commercial escrow deposits, partially offset by outflows in interest-bearing deposits

• Provision for credit losses increased $168 million compared to the second quarter of 2021, due to a reserve release in the year-ago period as uncertainty caused by the pandemic subsided

• Noninterest income decreased $50 million, from the second quarter of 2021, driven by lower investment banking and debt placement fees and lower cards and payments income, partially offset by an increase in corporate services income

• Noninterest expense decreased by $37 million, or 8.2%, from the second quarter of 2021, driven by lower incentive compensation, reflecting a decrease in investment banking and debt placement fees

Financial Condition

Loans and loans held for sale

Figure 7. Breakdown of Loans at June 30, 2022

(a)Other consumer loans include Consumer direct loans, Credit cards, and Consumer indirect loans. See Note 3 (“Loan Portfolio”) in Item 1. Financial Statements of this report.

At June 30, 2022, total loans outstanding from continuing operations were $112.4 billion, compared to $101.9 billion at December 31, 2021. For more information on balance sheet carrying value, see Note 1 (“Summary of Significant Accounting Policies”) under the headings “Loans” and “Loans Held for Sale” starting on page 108 of our 2021 Form 10-K.

Commercial loan portfolio

Commercial loans outstanding were $77.0 billion at June 30, 2022, an increase of $6.1 billion, or 8.7%, compared to December 31, 2021, driven by core portfolio growth in commercial and industrial loans and commercial real estate loans, including an increase in utilization rates.

Figure 8 provides our commercial loan portfolios by industry classification at June 30, 2022, and December 31, 2021.

Figure 8. Commercial Loans by Industry

June 30, 2022			Commercial and industrial						Commercial real estate						Commercial lease financing						Total commercial loans						Percent of total
Dollars in millions
Industry classification:
Agriculture			$	875					$	151					$	82					$	1,108					1.4		%
Automotive			1,421						741						15						2,177						2.8
Business products			2,287						160						40						2,487						3.2
Business services			3,165						260						166						3,591						4.7
Chemicals			914						23						20						957						1.2
Commercial real estate			7,755						12,741						8						20,504						26.6
Construction materials and contractors			2,236						304						269						2,809						3.7
Consumer goods			4,273						543						254						5,070						6.6
Consumer services			4,897						916						421						6,234						8.1
Equipment			1,745						92						137						1,974						2.6
Finance			7,520						105						406						8,031						10.4
Healthcare			3,176						1,412						310						4,898						6.4
Metals and mining			1,341						75						51						1,467						1.9
Oil and gas			2,163						29						28						2,220						2.9
Public exposure			2,906						10						639						3,555						4.6
Technology			884						14						105						1,003						1.3
Transportation			1,302						135						536						1,973						2.6
Utilities			6,006						5						428						6,439						8.4
Other			379						64						41						484						.6
Total			$	55,245					$	17,780					$	3,956					$	76,981					100.0		%
December 31, 2021			Commercial and industrial						Commercial real estate						Commercial lease financing						Total commercial loans						Percent of total
Dollars in millions
Industry classification:
Agriculture			$	872					$	161					$	84					$	1,117					1.6		%
Automotive			1,253						609						18						1,880						2.7
Business products			1,732						131						39						1,902						2.7
Business services			3,202						235						177						3,614						5.1
Chemicals			786						25						22						833						1.2
Commercial real estate			6,494						11,456						9						17,959						25.3
Construction materials and contractors			2,248						338						264						2,850						4.0
Consumer goods			3,760						555						276						4,591						6.5
Consumer services			4,998						889						424						6,311						8.9
Equipment			1,650						97						138						1,885						2.7
Finance			6,676						98						380						7,154						10.1
Healthcare			3,138						1,302						245						4,685						6.6
Metals and mining			1,219						71						55						1,345						1.9
Oil and gas			1,758						26						35						1,819						2.6
Public exposure			2,768						15						720						3,503						4.9
Technology			649						9						149						807						1.1
Transportation			1,288						134						551						1,973						2.8
Utilities			5,491						—						467						5,958						8.4
Other			543						89						18						650						.9
Total			$	50,525					$	16,240					$	4,071					$	70,836					100.0		%

Commercial and industrial. Commercial and industrial loans are the largest component of our loan portfolio, representing 49% of our total loan portfolio at June 30, 2022, and 51% at December 31, 2021. This portfolio is approximately 84% variable rate and consists of loans originated primarily to large corporate, middle market, and small business clients.

Commercial and industrial loans totaled $55.2 billion at June 30, 2022, an increase of $4.7 billion, or 9.3%, compared to December 31, 2021. The increase was broad-based and spread across most industry categories with an increase in utilization.

Commercial real estate loans. Our commercial real estate portfolio includes both mortgage and construction loans and is conducted through two primary sources: our 15-state banking franchise, and KeyBank Real Estate Capital, a national line of business within the Commercial Bank that cultivates relationships with owners of commercial real estate located both within and beyond the branch system. Nonowner-occupied properties, generally properties for which at least 50% of the debt service is provided by rental income from nonaffiliated third parties, represented 81% of total commercial real estate loans outstanding at June 30, 2022. Construction loans, which provide a stream of funding for properties not fully leased at origination to support debt service payments over the term of the contract or project, represented 12% of commercial real estate loans at period end.

At June 30, 2022, commercial real estate loans totaled $17.8 billion, which includes $15.6 billion of mortgage loans and $2.1 billion of construction loans. Compared to December 31, 2021, this portfolio increased $1.5 billion, or 9.5%, driven by growth in multi-family lending. We continue to focus primarily on owners and operators of completed and stabilized commercial real estate in accordance with our relationship strategy.

As shown in Figure 9, our commercial real estate loan portfolio includes various property types and geographic

locations of the underlying collateral. These loans include commercial mortgage and construction loans in both

Consumer Bank and Commercial Bank.

Figure 9. Commercial Real Estate Loans

			Geographic Region																					Total			Percent of Total			Construction			Commercial Mortgage
Dollars in millions			West			Southwest			Central			Midwest			Southeast			Northeast			National
June 30, 2022
Nonowner-occupied:
Diversified			$	9		$	3		$	—		$	4		$	—		$	28		$	212		$	256		1.4		%	$	—		$	253
Industrial			34			25			57			75			247			234			83			755			4.2			102			653
Land & Residential			1			—			4			2			5			22			—			34			.2			15			22
Lodging			74			—			10			4			32			86			48			254			1.4			33			221
Medical Office			43			—			44			7			11			87			—			192			1.1			34			158
Multifamily			911			553			1,456			1,059			2,068			1,523			360			7,930			44.6			1,473			6,457
Office			190			—			172			120			134			356			86			1,058			6.0			—			1,058
Retail			278			36			131			155			73			420			257			1,350			7.6			89			1,261
Self Storage			71			12			43			19			55			49			98			347			2.0			5			342
Senior Housing			138			54			145			72			148			138			225			920			5.2			164			756
Skilled Nursing			—			—			18			52			—			272			163			505			2.8			—			505
Student Housing			—			25			—			53			175			14			—			267			1.5			62			205
Other			23			2			6			80			42			95			200			448			2.5			2			446
Total nonowner-occupied			1,772			710			2,086			1,702			2,990			3,324			1,732			14,316			80.5			1,979			12,337
Owner-occupied			1,132			3			321			546			133			1,329			—			3,464			19.5			165			3,299
Total			$	2,904		$	713		$	2,407		$	2,248		$	3,123		$	4,653		$	1,732		$	17,780		100.0		%	$	2,144		$	15,636
Nonperforming loans			$	1		—			—			$	2		$	—		$	9		$	23		$	35		N/M			$	—		$	35
Accruing loans past due 90 days or more			1			—			—			—			—			6			—			7			N/M			—			7
Accruing loans past due 30 through 89 days			2			—			2			1			—			6			—			11			N/M			1			10
December 31, 2021
Nonowner-occupied:
Diversified			$	18		$	—		$	—		$	1		$	—		$	40		$	183		$	242		1.5		%	$	—		$	242
Industrial			47			25			44			44			218			224			114			716			4.4			90			626
Land & Residential			13			3			4			2			5			29			—			56			.3			33			23
Lodging			75			—			21			4			30			101			28			259			1.6			27			232
Medical Office			46			—			44			5			6			95			—			196			1.2			24			172
Multifamily			855			490			1,166			941			1,651			1,392			239			6,734			41.5			1,249			5,485
Office			213			—			199			122			133			372			46			1,085			6.7			17			1,068
Retail			247			36			131			226			95			409			192			1,336			8.2			87			1,249
Self Storage			44			5			44			13			39			50			74			269			1.7			5			264
Senior Housing			115			32			109			57			107			198			222			840			5.2			114			726
Skilled Nursing			—			39			19			2			13			271			164			508			3.1			—			508
Student Housing			10			—			36			65			124			14			—			249			1.5			86			163
Other			20			—			6			77			33			120			89			345			2.1			2			343
Total nonowner-occupied			1,703			630			1,823			1,559			2,454			3,315			1,351			12,835			79.0			1,734			11,101
Owner-occupied			1,065			—			293			592			124			1,331			—			3,405			21.0			262			3,143
Total			$	2,768		$	630		$	2,116		$	2,151		$	2,578		$	4,646		$	1,351		$	16,240		100.0		%	$	1,996		$	14,244
Nonperforming loans			$	—		—			—			$	2		$	—		$	17		$	25		$	44		N/M			$	—		$	44
Accruing loans past due 90 days or more			1			—			1			—			—			6			—			8			N/M			1			7
Accruing loans past due 30 through 89 days			—			—			5			1			24			5			—			35			N/M			16			19

West –			Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington, and Wyoming
Southwest –			Arizona, Nevada, and New Mexico
Central –			Arkansas, Colorado, Oklahoma, Texas, and Utah
Midwest –			Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin
Southeast –			Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington D.C., and West Virginia
Northeast –			Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont
National –			Accounts in three or more regions

Consumer loan portfolio

Consumer loans outstanding as of June 30, 2022, totaled $35.4 billion, an increase of $4.4 billion, or 14.2%, from December 31, 2021. Consumer loans continue to reflect strength from the consumer mortgage business and Laurel Road.

The residential mortgage portfolio is comprised of loans originated by our Consumer Bank and is the largest segment of our consumer loan portfolio as of June 30, 2022, representing 55% of consumer loans outstanding. This is followed by our home equity portfolio representing 23% of consumer loans outstanding at June 30, 2022.

We held the first lien position for approximately 69% of the home equity portfolio at June 30, 2022, and 71% at December 31, 2021. For loans with real estate collateral, we track borrower performance monthly. Regardless of the lien position, credit metrics are refreshed quarterly, including recent FICO scores as well as updated loan-to-value ratios. This information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” of our 2021 Form 10-K.

Figure 10 presents our consumer loans by geography.

Figure 10. Consumer Loans by State

Dollars in millions			Real estate — residential mortgage			Home equity loans			Consumer direct loans			Credit cards			Consumer indirect loans			Total
June 30, 2022
Washington			$	4,029		$	1,074		$	253		$	83		$	2		$	5,441
Ohio			2,784			1,180			501			201			6			4,672
New York			755			2,361			752			341			2			4,211
Colorado			2,845			290			173			30			—			3,338
California			2,218			15			529			3			8			2,773
Oregon			1,166			642			122			40			1			1,971
Pennsylvania			414			608			390			56			3			1,471
Florida			780			46			446			13			9			1,294
Texas			254			4			394			4			3			659
Illinois			121			3			215			2			1			342
Other			4,222			1,911			2,890			194			20			9,237
Total			$	19,588		$	8,134		$	6,665		$	967		$	55		$	35,409
December 31, 2021
Ohio			$	2,631		$	1,284		$	485		$	206		$	8		$	4,614
New York			679			2,467			638			345			4			4,133
Washington			2,264			1,076			234			81			2			3,657
Colorado			2,602			284			156			30			—			3,072
California			1,781			14			430			3			10			2,238
Oregon			1,009			670			110			40			1			1,830
Pennsylvania			351			634			327			55			4			1,371
Connecticut			837			319			96			26			2			1,280
Florida			591			46			378			13			10			1,038
Texas			184			5			343			4			4			540
Other			2,827			1,668			2,556			169			25			7,245
Total			$	15,756		$	8,467		$	5,753		$	972		$	70		$	31,018

Figure 11 summarizes our loan sales for the six months ended June 30, 2022 and all of 2021.

Figure 11. Loans Sold (Including Loans Held for Sale)

Dollars in millions			Commercial			Commercial Real Estate			Commercial Lease Financing			Residential Real Estate			Consumer Direct			Consumer indirect			Total
2022
Second quarter			$	41		$	1,851		$	150		$	496		$	—		$	—		$	2,538
First quarter			1,469			1,909			39			901			—			—			4,318
Total			$	1,510		$	3,760		$	189		$	1,397		$	—		$	—		$	6,856
2021
Fourth quarter			$	296		$	3,460		$	93		$	987		$	—		$	—		$	4,836
Third quarter			215			1,996			68			901			—			3,305			6,485
Second quarter			1,085			1,907			75			1,192			—			—			4,259
First quarter			124			1,930			156			1,129			—			—			3,339
Total			$	1,720		$	9,293		$	392		$	4,209		$	—		3,305			$	18,919

Figure 12 shows loans that are either administered or serviced by us, but not recorded on the balance sheet; this includes loans that were sold.

Figure 12. Loans Administered or Serviced

Dollars in millions			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Commercial real estate loans			$	479,974		$	469,371		$	444,131		$	422,091		$	400,215
Residential mortgage			10,948			10,756			10,312			9,844			9,466
Education loans			366			389			415			442			465
Commercial lease financing			1,418			1,195			1,236			1,318			1,284
Commercial loans			724			740			750			743			716
Consumer direct			575			621			699			798			943
Consumer indirect			2,039			2,354			2,714			3,109			—
Total			$	496,044		$	485,426		$	460,257		$	438,345		$	413,089

In the event of default by a borrower, we are subject to recourse with respect to approximately $6.5 billion of the $496.0 billion of loans administered or serviced at June 30, 2022. Additional information about this recourse arrangement is included in Note 17 (“Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with FNMA.”

We derive income from several sources when retaining the right to administer or service loans that are sold. We earn noninterest income (recorded as “Consumer mortgage income” and “Commercial mortgage servicing fees”) from fees for servicing or administering loans. This fee income is reduced by the amortization of related servicing assets. In addition, we earn interest income from investing funds generated by escrow deposits collected in connection with the servicing loans. Additional information about our mortgage servicing assets is included in Note 8 (“Mortgage Servicing Assets”).

Securities

Our securities portfolio totaled $50.6 billion at June 30, 2022, compared to $52.9 billion at December 31, 2021. Available-for-sale securities were $42.4 billion at June 30, 2022, compared to $45.4 billion at December 31, 2021. Held-to-maturity securities were $8.2 billion at June 30, 2022, and $7.5 billion at December 31, 2021.

As shown in Figure 13, all of our mortgage-backed securities, which include both securities available-for-sale and held-to-maturity securities, are issued by government-sponsored enterprises or GNMA, and are traded in liquid secondary markets. These securities are recorded on the balance sheet at fair value for the available-for-sale portfolio and at amortized cost for the held-to-maturity portfolio. For more information about these securities, refer to our 2021 Form 10-K within Note 1 (“Summary of Significant Accounting Policies”) under the heading “Securities” and Note 6 (“Fair Value Measurements”) under the heading “Qualitative Disclosures of Valuation Techniques.” Additionally refer to Note 6 (“Securities”) within this report.

Figure 13. Mortgage-Backed Securities by Issuer

Dollars in millions			June 30, 2022			December 31, 2021
FHLMC			$	12,390		$	10,585
FNMA			14,447			17,876
GNMA			12,311			12,469
Total (a)			$	39,148		$	40,930

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

Securities available for sale

The majority of our securities available-for-sale portfolio consists of Federal Agency CMOs and mortgage-backed securities. CMOs are debt securities secured by a pool of mortgages or mortgage-backed securities. These mortgage securities generate interest income, serve as collateral to support certain pledging agreements, and provide liquidity value to help meet regulatory requirements.

Figure 14 shows the composition, yields, and remaining maturities of our securities available for sale. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 6 (“Securities”).

Figure 14. Securities Available for Sale

Dollars in millions			U.S. Treasury, Agencies, and Corporations						Agency Residential Collateralized Mortgage Obligations (a)			Agency Residential Mortgage-backed Securities (a)			Agency Commercial Mortgage-backed Securities (a)			Other Securities			Total			Weighted-Average Yield (b)
June 30, 2022
Remaining maturity:
One year or less			$	—					$	45		$	3		$	156		$	—		$	204		4.45		%
After one through five years			9,308						2,473			2,495			1,691			—			15,967			1.18
After five through ten years			164						12,987			1,580			5,482			1			20,214			1.72
After ten years			117						3,539			301			2,095			—			6,052			1.74
Fair value			$	9,589					$	19,044		$	4,379		$	9,424		$	1		$	42,437		—
Amortized cost			$	10,080					$	21,419		$	4,891		$	10,211		$	—		$	46,601		1.54		%
Weighted-average yield (b)			.59		%				1.67		%	1.59		%	2.20		%	—		%	1.54		%	—
Weighted-average maturity			2.4 years						7.9 years			5.1 years			7.9 years			— years			6.4 years			—
December 31, 2021
Fair value			$	9,472					$	21,119		$	5,122		$	9,651		$	—		$	45,364		—
Amortized cost			9,573						21,430			5,137			9,753			—			45,893			1.43		%

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

(b)Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate of 21%.

Held-to-maturity securities

The majority of our held-to-maturity portfolio consists of Federal agency CMOs and mortgage-backed securities. This portfolio is also comprised of asset-backed securities that were acquired as the result of balance sheet optimization strategies, including the indirect auto portfolio transaction in the third quarter of 2021. The remaining balance is comprised of foreign bonds. Figure 15 shows the composition, yields, and remaining maturities of these securities.

Figure 15. Held-to-Maturity Securities

Dollars in millions			Agency Residential Collateralized Mortgage Obligations (a)			Agency Residential Mortgage-backed Securities (a)			Agency Commercial Mortgage-backed Securities (a)			Asset-backed securities			Other Securities			Total			Weighted-Average Yield (b)
June 30, 2022
Remaining maturity:
One year or less			$	15		$	—		$	6		$	2		$	2		$	25		3.10		%
After one through five years			1,172			137			1,335			1,868			13			4,525			2.40
After five through ten years			1,852			7			1,108			—			—			2,967			3.00
After ten years			669			—			—			—			—			669			4.00
Amortized cost			$	3,708		$	144		$	2,449		$	1,870		$	15		$	8,186		2.74		%
Fair value			$	3,614		$	137		$	2,359		$	1,756		$	14		$	7,880		—
Weighted-average yield (b)			3.03		%	2.50		%	2.81		%	2.10		%	2.40		%	2.74		%	—
Weighted-average maturity			7.0 years			4.3 years			5.1 years			2.1 years			2.7 years			5.2 years			—
December 31, 2021
Amortized cost			$	2,196		$	164		$	2,678		$	2,485		$	16		$	7,539		2.37		%
Fair value			2,229			170			2,796			2,454			16			7,665			—

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

(b)Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate of 21%.

Deposits and other sources of funds

Figure 16. Breakdown of Deposits at June 30, 2022

Deposits are our primary source of funding. At June 30, 2022, our deposits totaled $145.9 billion, a decrease of $6.7 billion compared to December 31, 2021, largely reflecting seasonal retail and commercial outflows and public sector deposit outflows related to stimulus funds.

Wholesale funds, consisting of short-term borrowings and long-term debt, totaled $22.7 billion at June 30, 2022, compared to $12.8 billion at December 31, 2021. The increase reflects the use of both short- and longer-term borrowings to fund balance sheet growth.

Capital

The objective of capital management is to maintain capital levels consistent with our risk appetite and of a sufficient amount to operate under a wide range of economic conditions. We have identified three primary uses of capital:

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

2. Maintaining or increasing our Common Share dividend; and

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

The following sections discuss certain ways we have deployed our capital. For further information, see the Consolidated Statements of Changes in Equity and Note 19 (“Shareholders' Equity”).

Dividends

Consistent with our 2021 capital plan, we paid a quarterly dividend of $.195 per Common Share for the second quarter of 2022. Further information regarding the capital planning process and CCAR is included under the heading “Capital planning and stress testing” beginning on page 16 in the “Supervision and Regulation” section of our 2021 Form 10-K.

Common shares outstanding

Our Common Shares are traded on the NYSE under the symbol KEY with 30,176 holders of record at June 30, 2022. Our book value per Common Share was $13.48 based on 932.6 million shares outstanding at June 30, 2022, compared to $16.76 per Common Share based on 928.9 million shares outstanding at December 31, 2021. At June 30, 2022, our tangible book value per Common Share was $10.40, compared to $13.72 per Common Share at December 31, 2021.

Figure 17 shows activities that caused the change in outstanding Common Shares over the past five quarters.

Figure 17. Changes in Common Shares Outstanding

			2022									2021
In thousands			Second			First						Fourth			Third			Second
Shares outstanding at beginning of period			932,398			928,850						930,544			960,276			972,587
Open market repurchases, repurchases under an ASR program, and return of shares under employee compensation plans			(24)			(1,707)						(2,482)			(29,923)			(13,304)
Shares issued under employee compensation plans (net of cancellations)			269			5,255						788			191			993
Shares outstanding at end of period			932,643			932,398						928,850			930,544			960,276

As shown above, Common Shares outstanding increased by .2 million shares during the second quarter of 2022.

At June 30, 2022, we had 324.1 million treasury shares, compared to 327.9 million treasury shares at December 31, 2021. Going forward we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes.

Information on repurchases of Common Shares by KeyCorp is included in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this report.

Capital adequacy

Capital adequacy is an important indicator of financial stability and performance. All of our capital ratios remained in excess of regulatory requirements at June 30, 2022. Our capital and liquidity levels are intended to position us to weather an adverse operating environment while continuing to serve our clients’ needs, as well as to meet the Regulatory Capital Rules described in Item 1. Business of our 2021 Form 10-K under the heading “Supervision and Regulation.” Our shareholders’ equity to assets ratio was 7.7% at June 30, 2022, compared to 9.4% at December 31, 2021. Our tangible common equity to tangible assets ratio was 5.3% at June 30, 2022, compared to 6.9% at December 31, 2021. See the section entitled “GAAP to Non-GAAP Reconciliations,” which presents the computations of certain financial measures related to “tangible common equity.” The minimum capital and leverage ratios under the Regulatory Capital Rules together with the ratios of KeyCorp at June 30, 2022, are set forth in the “Supervision and regulation — Regulatory capital requirements” section in Item 2 of this report.

Figure 18 represents the details of our regulatory capital positions at June 30, 2022, and December 31, 2021, under the Regulatory Capital Rules. Information regarding the regulatory capital ratios of KeyCorp’s banking subsidiaries is presented annually, with the most recent information included in Note 24 (“Shareholders' Equity”) beginning on page 175 of our 2021 Form 10-K.

Figure 18. Capital Components and Risk-Weighted Assets

			Dollars in millions			June 30, 2022			December 31, 2021
COMMON EQUITY TIER 1
Key shareholders’ equity (GAAP)						$	14,427		$	17,423
Less:			Preferred Stock (a)			1,856			1,856
Add:			CECL phase-in (b)			178			237
			Common Equity Tier 1 capital before adjustments and deductions			12,749			15,804
Less:			Goodwill, net of deferred taxes			2,621			2,571
			Intangible assets, net of deferred taxes			112			125
			Deferred tax assets			1			1
			Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes			(3,139)			(300)
			Accumulated gains (losses) on cash flow hedges, net of deferred taxes			(760)			(14)
			Amounts in AOCI attributed to pension and postretirement benefit costs, net of deferred taxes			(267)			(272)
			Total Common Equity Tier 1 capital			$	14,181		$	13,693
TIER 1 CAPITAL
Common Equity Tier 1						$	14,181		$	13,693
Additional Tier 1 capital instruments and related surplus						1,856			1,856
Less:			Deductions			—			—
			Total Tier 1 capital			16,037			15,549
TIER 2 CAPITAL
Tier 2 capital instruments and related surplus						1,421			1,540
Allowance for losses on loans and liability for losses on lending-related commitments (c)						1,067			941
Less:			Deductions			—			—
			Total Tier 2 capital			2,488			2,481
			Total risk-based capital			$	18,525		$	18,030
RISK-WEIGHTED ASSETS
Risk-weighted assets on balance sheet						$	119,022		$	109,041
Risk-weighted off-balance sheet exposure						34,697			33,853
Market risk-equivalent assets						867			1,500
Gross risk-weighted assets						154,586			144,394
Less:			Excess allowance for loan and lease losses			—			—
			Net risk-weighted assets			$	154,586		$	144,394
AVERAGE QUARTERLY TOTAL ASSETS						$	185,604		$	183,604
CAPITAL RATIOS
Tier 1 risk-based capital						10.37		%	10.77		%
Total risk-based capital						11.98		%	12.49		%
Leverage (d)						8.64		%	8.47		%
Common Equity Tier 1						9.17		%	9.48		%

(a)Net of capital surplus.

(b)Amount reflects our decision to adopt the CECL transitional provision.

(c)The ALLL included in Tier 2 capital is limited by regulation to 1.25% of the institution’s standardized total risk-weighted assets (excluding its standardized market risk-weighted assets). The ALLL includes $24 million and $28 million of allowance classified as “discontinued assets” on the balance sheet at June 30, 2022, and December 31, 2021, respectively.

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

Risk Management

Overview

Like all financial services companies, we engage in business activities and assume the related risks. The most significant risks we face are credit, compliance, operational, liquidity, market, reputation, strategic, and model risks. Our risk management activities are focused on ensuring that we properly identify, measure, and manage such risks across the entire enterprise to maintain safety and soundness, and to maximize profitability. There have been no significant changes in our Risk Management practices as described under the heading “Risk Management” beginning on page 73 of our 2021 Form 10-K.

Market risk management

Market risk is the risk that movements in market risk factors, including interest rates, foreign exchange rates, equity prices, commodity prices, credit spreads, and volatilities will reduce Key’s income and the value of its portfolios. These factors influence prospective yields, values, or prices associated with the instrument. We are exposed to market risk both in our trading and nontrading activities, which include asset and liability management activities. Information regarding our fair value policies, procedures, and methodologies is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” on page 111 of our 2021 Form 10-K and Note 5 (“Fair Value Measurements”) in this report.

Trading market risk

Key incurs market risk as a result of trading activities that are used in support of client facilitation and hedging activities, principally within our investment banking and capital markets businesses. Key has exposures to a wide range of risk factors including interest rates, equity prices, foreign exchange rates, credit spreads, and commodity prices, as well as the associated implied volatilities and spreads. Our primary market risk exposures are a result of trading and hedging activities in the derivative and fixed income markets, including securitization positions exposures. At June 30, 2022, we did not have any re-securitization positions. We maintain modest trading inventories to facilitate customer flow, make markets in securities, and hedge certain risks including but not limited to credit risk and interest rate risk. The risks associated with these activities are mitigated in accordance with the Market Risk hedging policy. The majority of our positions are traded in active markets.

Market risk management is an integral part of Key’s risk culture. The Risk Committee of our Board provides oversight of trading market risks. The ERM Committee and the Market Risk Committee regularly review and discuss market risk reports prepared by our MRM that contain our market risk exposures and results of monitoring activities. Market risk policies and procedures have been defined and approved by the Market Risk Committee, a Tier 2 Risk Governance Committee, and take into account our tolerance for risk and consideration for the business environment. For more information regarding monitoring of trading positions and the activities related to the Market Risk Rule compliance, see ”Market Risk Management” beginning on page 75 of our 2021 Form 10-K.

VaR and stressed VaR. VaR is the estimate of the maximum amount of loss on an instrument or portfolio due to adverse market conditions during a given time interval within a stated confidence level. Stressed VaR is used to assess extreme conditions on market risk within our trading portfolios. The MRM calculates VaR and stressed VaR on a daily basis, and the results are distributed to appropriate management. VaR and stressed VaR results are also provided to our regulators and utilized in regulatory capital calculations.

We use a historical simulation VaR model to measure the potential adverse effect of changes in interest rates, foreign exchange rates, equity prices, and credit spreads on the fair value of our covered positions and other non-covered positions. We analyze market risk by portfolios and do not separately measure and monitor our portfolios by risk type. Historical scenarios are customized for specific positions, and numerous risk factors are incorporated in the calculation. Additional consideration is given to the risk factors to estimate the exposures that contain optionality features, such as options and cancellable provisions. VaR is calculated using daily observations over a one-year time horizon and approximates a 95% confidence level. Statistically, this means that we would expect to incur losses greater than VaR, on average, five out of 100 trading days, or three to four times each quarter. We also calculate VaR and stressed VaR at a 99% confidence level. For more information regarding our VaR model, its governance and assumptions, see ”Market Risk Management” on page 75 of our 2021 Form 10-K.

Actual losses for the total covered portfolios did not exceed aggregate daily VaR on any day during the quarter ended June 30, 2022. Actual losses for the total covered portfolios did not exceed the aggregate daily VaR at a 99% confidence level during the quarter ended June 30, 2021. The MRM backtests our VaR model on a daily basis to evaluate its predictive power. The test compares VaR model results at the 99% confidence level to daily held profit and loss. Results of backtesting are provided to the Market Risk Committee. Backtesting exceptions occur when trading losses exceed VaR. We do not engage in correlation trading or utilize the internal model approach for measuring default and credit migration risk. Our net VaR approach incorporates diversification, but our VaR calculation does not include the impact of counterparty risk and our own credit spreads on derivatives.

The aggregate VaR at the 99% confidence level with a one day holding period for all covered positions was $1.6 million at June 30, 2022, and $1.3 million at June 30, 2021. Figure 19 summarizes our VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended June 30, 2022, and June 30, 2021.

Figure 19. VaR for Significant Portfolios of Covered Positions

			2022															2021
			Three months ended June 30,															Three months ended June 30,
Dollars in millions			High			Low			Mean			June 30,						High			Low			Mean			June 30,
Trading account assets:
Fixed income			$	1.1		$	.6		$	.8		$	1.1					$	2.7		$	1.0		$	1.8		$	1.1
Derivatives:
Interest rate			$	.6		$	.1		$	.2		$	.2					$	.2		$	.1		$	.1		$	.1

Stressed VaR is calculated by running the portfolios through a predetermined stress period which is approved by the Market Risk Committee and is calculated at the 99% confidence level using the same model and assumptions used for general VaR. The aggregate stressed VaR for all covered positions was $2.8 million at June 30, 2022, and $6.5 million at June 30, 2021. The decrease in stressed VaR is due to several factors including a change in our VaR modeling and the change in the size and composition of the Fixed Income inventory. Figure 20 summarizes our stressed VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended June 30, 2022, and June 30, 2021.

Figure 20. Stressed VaR for Significant Portfolios of Covered Positions

			2022															2021
			Three months ended June 30,															Three months ended June 30,
Dollars in millions			High			Low			Mean			June 30,						High			Low			Mean			June 30,
Trading account assets:
Fixed income			$	2.8		$	1.2		$	1.9		$	1.9					$	8.6		$	4.7		$	6.4		$	5.6
Derivatives:
Interest rate			$	.5		$	.1		$	.3		$	.2					$	.6		$	.2		$	.3		$	.6

Internal capital adequacy assessment. Market risk is a component of our internal capital adequacy assessment. Our risk-weighted assets include a market risk-equivalent asset amount, which consists of a VaR component, stressed VaR component, a de minimis exposure amount, and a specific risk add-on including the securitization positions. The aggregate market value of the securitization positions as defined by the Market Risk Rule was $0.1 million at June 30, 2022, all of which were mortgage-backed security positions. Specific risk is the price risk of individual financial instruments, which is not accounted for by changes in broad market risk factors and is measured through a standardized approach. Market risk weighted assets, including the specific risk calculations, are run quarterly by the MRM in accordance with the Market Risk Rule, and approved by the Chief Market Risk Officer.

Nontrading market risk

Most of our nontrading market risk is derived from interest rate fluctuations and its impacts on our traditional loan and deposit products, as well as investments, hedging relationships, long-term debt, and certain short-term borrowings. Interest rate risk, which is inherent in the banking industry, is measured by the potential for fluctuations in net interest income and the EVE. Such fluctuations may result from changes in interest rates and differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. We manage the exposure to changes in net interest income and the EVE in accordance with our risk appetite and in accordance with the Board approved ERM policy.

Interest rate risk positions are influenced by a number of factors, including the balance sheet positioning that arises out of customer preferences for loan and deposit products, economic conditions, the competitive environment within our markets, changes in market interest rates that affect client activity, and our hedging, investing, funding, and capital positions. The primary components of interest rate risk exposure consist of reprice risk, basis risk, yield curve risk, and option risk.

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

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

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

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

The management of nontrading market risk is centralized within Corporate Treasury. The Risk Committee of our Board provides oversight of nontrading market risk. The ERM Committee and the ALCO review reports on the interest rate risk exposures described above. In addition, the ALCO reviews reports on stress tests and sensitivity analyses related to interest rate risk. These committees have various responsibilities related to managing nontrading market risk, including recommending, approving, and monitoring strategies that maintain risk positions within approved tolerance ranges. The A/LM policy provides the framework for the oversight and management of interest rate risk and is administered by the ALCO. The MRM, as the second line of defense, provides additional oversight.

LIBOR Transition

As disclosed in Item 1A. Risk Factors of our 2021 Form 10-K, LIBOR in its current form is no longer available for new contracts and the LIBOR Administrator will cease publishing all U.S. LIBOR tenors entirely after June 30, 2023. For most products, the most likely replacement benchmark is expected to be SOFR, which has been recommended by the ARRC, although uncertainty remains as to whether new benchmarks may evolve and a different credit sensitive benchmark could instead become the market-accepted benchmark. We have established an enterprise wide program to identify and address all LIBOR transition issues. We are collaborating closely with regulators and industry groups on the transition and closely monitoring developments in industry practices related to LIBOR alternatives. The goals of our LIBOR transition program are to:

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

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

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

• Understand and strategically address the current market approach to LIBOR relative to transition to alternative reference rates, including the impact of the Adjustable Interest Rate (LIBOR) Act;

• Determine and execute system and process work to be operationally ready for additional credit sensitive benchmarks; and

• Remediate remaining LIBOR contracts.

As part of the LIBOR transition program, we completed an initial risk assessment to help us identify the impact and risks associated with various products, systems, processes, and models. This risk assessment has assisted us in making necessary updates to our infrastructure and operational systems and processes to implement a replacement rate, and we are operationally ready for various SOFR-based benchmarks, including but not limited to, Daily Simple SOFR in Arrears, SOFR Compounded in Arrears, SOFR Averages in Advance, and Term SOFR. We are actively quoting alternative indexes other than LIBOR, such as SOFR and Term SOFR, and are originating new loans in those indexes. We have also begun to originate a small number of new loans using credit sensitive rates in a limited and managed fashion.

We have compiled an inventory of existing legal contracts that are impacted by the LIBOR transition. We have assessed the LIBOR fallback language in those contracts, have devised a strategy to address the LIBOR transition for those contracts, and are in the process of remediating such contracts. Our progress is well-paced, especially as many of the legacy contracts were provided additional time to remediate due to announcements by the ICE Benchmark Administration, the FCA-regulated and authorized administrator of LIBOR, that certain LIBOR tenors may continue until June 2023 for legacy contract purposes. In addition, we completed our work to address contracts with LIBOR tenors that had to transition by the end of 2021. We expect to leverage recommendations made by the ARRC and ISDA that are tailored to our specific client segments. We are currently evaluating the impact of the LIBOR Act, which was enacted on March 15, 2022. The legislation provides a uniform national approach for replacing LIBOR in legacy contracts that do not provide for the use of a clearly defined or practicable replacement benchmark rate.

As of June 30, 2022, Key had the following instruments that were either directly or indirectly dependent on LIBOR.

Dollars in millions			Maturity through June 30, 2023			Maturity past June 30, 2023
Outstanding balance of loans			$	7,427		$	23,480
Notional value of derivative contracts			16,310			71,527
Investment securities			—			588
Debt and equity instruments			—			1,276

Net interest income simulation analysis. The primary tool we use to measure our interest rate risk is simulation analysis. For purposes of this analysis, we estimate our net interest income based on the current and projected composition of our on- and off-balance sheet positions, accounting for recent and anticipated trends in customer activity. The analysis also incorporates assumptions for the current and projected interest rate environments and balance sheet growth projections based on a most likely macroeconomic view. The modeling incorporates investment portfolio and swap portfolio balances consistent with management's desired interest rate risk positioning. The simulation model estimates the amount of net interest income at risk by simulating the change in net interest income that would occur if rates were to gradually increase or decrease from current levels over the next 12 months (subject to a floor on market interest rates at zero).

Figure 21 presents the results of the simulation analysis at June 30, 2022, and June 30, 2021. At June 30, 2022, our simulated impact to changes in interest rates was moderate. The exposure to declining rates has increased as a result of an increase in the current level of market rates and a larger balance sheet compared to the June 30, 2021, analysis. Current modeled exposure is outside the Board approved tolerances, but is consistent with the Committee’s risk appetite. Declining rate exposure is expected to return within tolerance as deposit rates increase from current levels. If a tolerance level is breached and determined inconsistent with risk appetite, the development of a remediation plan is required to reduce exposure back to within tolerance.

Figure 21. Simulated Change in Net Interest Income

			June 30, 2022						June 30, 2021
Basis point change assumption			-200			+200			-200			+200
Assumed floor in market rates (in basis points)			—			N/A			—			N/A
Rising rate beta			N/A			Low 40s			N/A			High 20s
Tolerance level			(5.50)		%	(5.50)		%	(5.50)		%	(5.50)		%
Interest rate risk assessment			(5.70)		%	(1.56)		%	(3.66)		%	4.68		%
+200 NII at risk beta sensitivity			June 30, 2022
Beta assumption			Low 40s			Mid 30s			Low 30s			High 20s
Interest rate risk assessment			(1.56)		%	(0.51)		%	0.54		%	1.59		%

Simulation analyses produce a sophisticated estimate of interest rate exposure based on assumption inputs within the model. Assumptions are tailored to the specific interest rate environment and validated on a regular basis. However, actual results may differ from those derived in simulation analyses due to unanticipated changes to the balance sheet composition, customer behavior, product pricing, market interest rates, changes in management’s desired interest rate risk positioning, investment, funding and hedging activities or repercussions from exogenous events.

Regular stress tests and sensitivity analyses are performed on the model inputs that could materially change the resulting risk assessments. Assessments are performed using different yield curve shapes, including steepenings or

flattenings of the curve, immediate changes in market interest rates, and changes in the relationship of money market interest rates. Assessments are also performed on changes to the following assumptions: loan and deposit balances, the pricing of deposits without contractual maturities, changes in lending spreads, prepayments on loans and securities, investment, funding and hedging activities, and liquidity and capital management strategies.

The results of additional assessments indicate that net interest income could increase or decrease from the base simulation results presented in Figure 21. Net interest income is highly dependent on the timing, magnitude, frequency, and path of interest rate changes and the associated assumptions for deposit repricing relationships, lending spreads, and the balance behavior of transaction accounts. If fixed rate assets increase by $1 billion, or fixed rate liabilities decrease by $1 billion, then the benefit to rising rates would decrease by approximately 25 basis points. If the interest-bearing liquid deposit beta assumption increases or decreases by 5% (e.g., 40% to 45%), then the benefit to rising rates would decrease or increase by approximately 105 basis points.

The current interest rate risk position could fluctuate to higher or lower levels of risk depending on the competitive environment and client behavior that may affect the actual volume, mix, maturity, and repricing characteristics of loan and deposit flows. Corporate Treasury discretionary activities related to funding, investing, and hedging may also change as a result of changes in customer business flows or changes in management’s desired interest rate risk positioning. As changes occur to both the configuration of the balance sheet and the outlook for the economy, management proactively evaluates hedging opportunities that may change the interest rate risk profile..

Simulations are also conducted that measure the effect of changes in market interest rates in the second and third years of a three-year horizon. These simulations are conducted in a similar manner to those based on a 12-month horizon. To capture longer-term exposures, changes in the EVE are calculated as discussed in the following section.

Economic value of equity modeling. EVE complements net interest income simulation analysis as it estimates risk exposure beyond 12-, 24-, and 36-month horizons. EVE modeling measures the extent to which the economic values of assets, liabilities, and off-balance sheet instruments may change in response to fluctuations in interest rates. EVE is calculated by subjecting the balance sheet to an immediate increase or decrease in interest rates, measuring the resulting change in the values of assets, liabilities, and off-balance sheet instruments, and comparing those amounts with the base case of the current interest rate environment. EVE policy limits are measures against a +200 basis point/policy decline scenario. The policy decline scenario is equal to the current Fed Target Rate capped at 200 basis points. As of June 30, 2022, the policy decline scenario is minus 175 basis points. This analysis is highly dependent upon assumptions applied to assets and liabilities with non-contractual maturities. Those assumptions are based on historical behaviors, as well as forward expectations. Remediation plans are similarly developed if the analysis indicates that the EVE will decrease by more than 15% in response to an immediate increase or decrease in interest rates. The position is within these guidelines as of June 30, 2022.

Management of interest rate exposure. The results of the various interest rate risk analyses are used to formulate A/LM strategies to achieve the desired risk profile while managing to objectives for capital adequacy and liquidity risk exposures. Specifically, risk positions are managed by purchasing securities, issuing term debt with floating or fixed interest rates, and using derivatives. Interest rate swaps and options are predominantly used, which modify the interest rate characteristics of certain assets and liabilities.

Figure 22 shows all swap positions held for A/LM purposes. These positions are used to convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index. For example, fixed-rate debt is converted to a floating rate through a “receive fixed/pay variable” interest rate swap. The volume, maturity, and mix of portfolio swaps change frequently to reflect broader A/LM objectives and the balance sheet positions to be hedged. For more information about how interest rate swaps are used to manage the risk profile, see Note 7 (“Derivatives and Hedging Activities”).

Figure 22. Portfolio Swaps by Interest Rate Risk Management Strategy

			June 30, 2022
												Weighted-Average												December 31, 2021
Dollars in millions			Notional Amount			Fair Value						Maturity (Years)			Receive Rate			Pay Rate						Notional Amount			Fair Value
Receive fixed/pay variable — conventional A/LM (a)			$	23,100		$	(953)					2.2			1.1		%	1.4		%				$	23,950		$	9
Receive fixed/pay variable — conventional debt			8,855			(248)						3.9			1.8			1.3						7,432			137
Receive fixed/pay variable — forward A/LM			4,600			(31)						4.1			2.7			3.1						850			(1)
Pay fixed/receive variable — conventional debt			50			(2)						6.0			1.0			3.6						50			(7)
Pay fixed/receive variable — forward securities			135			15						7.6			3.0			1.1						6,280			135
Pay fixed/receive variable — securities			270			22						3.7			1.7			0.5
Total portfolio swaps			$	37,010		$	(1,197)		(b)			2.9			1.5		%	1.6		%				$	38,562		$	273		(b)

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

(b)Excludes accrued interest of $193 million and $108 million at June 30, 2022, and December 31, 2021, respectively.

Liquidity risk management

Liquidity risk, which is inherent in the banking industry, is measured by our ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund new business opportunities at a reasonable cost, in a timely manner, and without adverse consequences. Liquidity management involves maintaining sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets and liabilities under both normal and adverse conditions.

Factors affecting liquidity

Our liquidity could be adversely affected by both direct and indirect events. An example of a direct event would be a downgrade in our public credit ratings by a rating agency. Examples of indirect events (events unrelated to us) that could impair our access to liquidity would be an act of terrorism or war, natural disasters, global pandemics (including COVID-19), political events, or the default or bankruptcy of a major corporation, mutual fund, or hedge fund. Similarly, market speculation, or rumors about us or the banking industry in general, may adversely affect the cost and availability of normal funding sources. See Part I, Item 1A. Risk Factors section “IV. Liquidity Risk” in our 2021 Form 10-K for a discussion of how the COVID-19 global pandemic has impacted our liquidity and may continue to impact it in the future.

Our credit ratings at June 30, 2022, are shown in Figure 23. We believe these credit ratings, under normal conditions in the capital markets, would enable KeyCorp or KeyBank to issue fixed income securities to investors.

Figure 23. Credit Ratings

June 30, 2022			Short-Term Borrowings			Long-Term Deposits (a)			Senior Long-Term Debt			Subordinated Long-Term Debt			Capital Securities			Preferred Stock
KEYCORP
Standard & Poor’s			A-2			N/A			BBB+			BBB			BB+			BB+
Moody’s			P-2			N/A			Baa1			Baa1			Baa2			Baa3
Fitch Ratings, Inc.			F1			N/A			A-			Not Rated			BB+			BB+
DBRS, Inc.			R-1 (low)			N/A			A			A (low)			A (low)			BBB
KEYBANK
Standard & Poor’s			A-2			N/A			A-			BBB+			N/A			N/A
Moody’s			P-2			P-1/A1			A3			Baa1			N/A			N/A
Fitch Ratings, Inc.			F1			F1/A			A-			BBB+			N/A			N/A
DBRS, Inc.			R-1 (middle)			A (high)			A (high)			A			N/A			N/A

(a)P-1 rating assigned by Moody’s is specific to KeyBank’s short-term bank deposit ratings. F1 assigned by Fitch Ratings, Inc. is specific to KeyBank’s short-term deposit ratings.

Sources of liquidity

Our primary sources of funding for KeyBank include customer deposits, wholesale funding, and liquid assets. As of June 30, 2022, our consolidated loan-to-deposit ratio was 78%. In addition, we also have access to various sources of wholesale funding, maintain a portfolio of liquid assets, and have borrowing capacity at the FHLB and Federal Reserve Bank of Cleveland. Our liquid asset portfolio at June 30, 2022, totaled $34.7 billion, consisting of $33.0 billion of unpledged securities, $13.9 million of securities available for secured funding at the FHLB, and $1.7 billion of net balances of federal funds sold and balances in our Federal Reserve account. Additionally, as of June 30, 2022, our unused borrowing capacity secured by loan collateral was $30.3 billion at the Federal Reserve Bank of Cleveland and $7.7 billion at the FHLB. During the second quarter of 2022, our secured term borrowings increased

$5.8 billion as additional advances were taken. If the cash flows needed to support operating and investing activities are not satisfied by deposit balances, we rely on wholesale funding or on-balance sheet liquid reserves. Conversely, excess cash generated by operating, investing, and deposit-gathering activities may be used to repay outstanding debt or invest in liquid assets.

Liquidity for KeyCorp

The primary source of liquidity for KeyCorp is from subsidiary dividends, primarily from KeyBank. KeyCorp has sufficient liquidity when it can service its debt; support customary corporate operations and activities (including acquisitions); support occasional guarantees of subsidiaries’ obligations in transactions with third parties at a reasonable cost, in a timely manner, and without adverse consequences; and fund capital distributions in the form of dividends and share buybacks.

At June 30, 2022, KeyCorp held $3.2 billion in cash, which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing debt obligations for the periods prescribed by our risk tolerance.

Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank, supplemented with term debt. On May 23, 2022, KeyCorp issued $600 million of 3.878% Fixed-to-Floating Senior Notes due May 23, 2025 and $750 million of 4.789% Fixed-to-Floating Senior Notes due June 1, 2033. During the second quarter of 2022, KeyBank paid $200 million in cash dividends to KeyCorp. As of June 30, 2022, KeyBank had regulatory capacity to pay $1.5 billion in dividends to KeyCorp without prior regulatory approval.

Our liquidity position and recent activity

Over the past quarter, our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, has decreased primarily from a decrease in cash balances resulting from the cash consumption related to loan growth and deposit outflow. The liquid asset portfolio continues to exceed the amount that we estimate would be necessary to manage through an adverse liquidity event by providing sufficient time to develop and execute a longer-term solution. Key also experienced a decrease in its liquid asset portfolio due to market value reductions caused by increasing rates.

From time to time, KeyCorp or KeyBank may seek to retire, repurchase, or exchange outstanding debt, capital securities, preferred shares, or Common Shares through cash purchase, privately negotiated transactions or other means. Additional information on repurchases of Common Shares by KeyCorp is included in Part II, Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities beginning on page 41 of our 2021 Form 10-K and Part II, Item 2 of this Form 10-Q. Such transactions depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, regulatory requirements, and other factors. The amounts involved may be material, individually or collectively.

The Consolidated Statements of Cash Flows summarize our sources and uses of cash by type of activity for the six-month periods ended June 30, 2022, and June 30, 2021.

For more information regarding liquidity governance structure, factors affecting liquidity, management of liquidity risk at KeyBank and KeyCorp, long-term liquidity strategies, and other liquidity programs, see “Liquidity Risk Management” beginning on page 81 of our 2021 Form 10-K.

Credit risk management

Credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Like other financial services institutions, we make loans, extend credit, distribute credit risk, purchase securities, provide financial and payments products, and enter into financial derivative contracts, all of which have related credit risk.

Credit policy, approval, and evaluation

We manage credit risk exposure through a multifaceted program. The Credit Risk Committee approves management credit policies and recommends significant credit policies to the Enterprise Risk Management

Committee, the KeyBank Board, and the Risk Committee of the KeyCorp Board for approval. These policies are communicated throughout the organization to foster a consistent approach to granting credit.

Our credit risk management team and certain individuals within our lines of business, to whom credit risk management has delegated limited credit authority, are responsible for credit approval. Individuals with assigned credit authority are authorized to grant exceptions to credit policies. It is not unusual to make exceptions to established policies when mitigating circumstances dictate, however, a corporate level tolerance has been established to keep exceptions at an acceptable level based upon portfolio and economic considerations.

Our credit risk management team uses risk models to evaluate consumer loans. These models, known as scorecards, forecast the probability of serious delinquency and default for an applicant. The scorecards are embedded in the application processing system, which allows for real-time scoring and automated decisions for many of our products. We periodically validate the loan scoring processes.

We maintain an active concentration management program to mitigate concentration risk in our credit portfolios. For individual obligors, we employ a sliding scale of exposure, known as hold limits, which is dictated by the type of loan and strength of the borrower.

Allowance for loan and lease losses

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology used is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2021 Form 10-K. Briefly, the ALLL estimate uses various models and estimation techniques based on our historical loss experience, current borrower characteristics, current economic conditions, reasonable and supportable forecasts and other relevant factors. The ALLL at June 30, 2022, represents our best estimate of the lifetime expected credit losses inherent in the loan portfolio at that date.

As shown in Figure 24, our ALLL from continuing operations increased by $38 million, or 3.6%, from December 31, 2021. The commercial ALLL increased by $21 million, or 3.1%, from December 31, 2021, through June 30, 2022. Our consumer ALLL increased by $17 million, or 4.6%, from December 31, 2021, through June 30, 2022. Refer to Note 4 (“Asset Quality”) within this report for further discussion of changes in the ALLL.

Figure 24. Allocation of the Allowance for Loan and Lease Losses

			June 30, 2022												December 31, 2021
Dollars in millions			Amount			Percent of Allowance to Total Allowance			Percent of Loan Type to Total Loans						Amount			Percent of Allowance to Total Allowance			Percent of Loan Type to Total Loans
Commercial and industrial			$	503		45.8		%	49.2		%				$	445		41.9		%	49.6		%
Commercial real estate:
Commercial mortgage			156			14.2			13.9						182			17.2			13.9
Construction			21			1.9			1.9						29			2.7			2.0
Total commercial real estate loans			177			16.1			15.8						211			19.9			15.9
Commercial lease financing			29			2.6			3.5						32			3.0			4.0
Total commercial loans			709			64.5			68.5						688			64.8			69.5
Real estate — residential mortgage			122			11.1			17.4						95			9.0			15.5
Home equity loans			95			8.6			7.2						110			10.4			8.3
Consumer direct loans			112			10.2			5.9						105			9.9			5.6
Credit cards			59			5.4			0.9						61			5.7			1.0
Consumer indirect loans			2			0.2			0.1						2			0.2			0.1
Total consumer loans			390			35.5			31.5						373			35.2			30.5
Total ALLL — continuing operations (a)			$	1,099		100.0		%	100.0		%				$	1,061		100.0		%	100.0		%

(a)Excludes allocations of the ALLL related to the discontinued operations of the education lending business in the amount of $24 million at June 30, 2022, and $28 million at December 31, 2021.

Net loan charge-offs

Figure 25 shows the trend in our net loan charge-offs by loan type, while the composition of loan charge-offs and recoveries by type of loan is presented in Figure 27. Figure 26 shows the ratios of net charge-offs by loan category as a percentage of the respective average loan balance.

Net loan charge-offs for the three months ended June 30, 2022, increased $22 million compared to the year-ago quarter. For 2022, we expect net loan charge-offs to average loans to range between 15 - 25 basis points.

Figure 25. Net Loan Charge-offs from Continuing Operations (a)

			2022									2021
Dollars in millions			Second			First						Fourth			Third			Second
Commercial and industrial			$	31		$	19					$	10		$	7		$	9
Real estate — Commercial mortgage			2			3						—			(1)			(2)
Real estate — Construction			(1)			—						—			—			—
Commercial lease financing			(1)			2						1			(5)			—
Total commercial loans			31			24						11			1			7
Real estate — Residential mortgage			(3)			(1)						(2)			(3)			1
Home equity loans			(1)			—						1			(1)			3
Consumer direct loans			9			5						5			5			5
Credit cards			7			5						4			5			6
Consumer indirect loans			1			—						—			22			—
Total consumer loans			13			9						8			28			15
Total net loan charge-offs			$	44		$	33					$	19		$	29		$	22
Net loan charge-offs to average loans			.16		%	.13		%				.08		%	.11		%	.09		%
Net loan charge-offs from discontinued operations — education lending business			$	—		$	2					$	1		$	—		$	1

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

Figure 26. Net Loan Charge-offs to Average Loans from Continuing Operations (a)

			2022									2021
Dollars in millions			Second			First						Fourth			Third			Second
Commercial and industrial			0.23		%	0.15		%				0.08		%	0.06		%	0.07		%
Real estate — commercial mortgage			0.05			0.08						—			(0.03)			(0.06)
Real estate — construction			(0.19)			—						—			—			—
Commercial lease financing			(0.11)			0.21						0.10			(0.51)			—
Total commercial loans			0.17			0.13						0.06			0.01			0.04
Real estate — residential mortgage			(0.07)			(0.02)						(0.05)			(0.09)			0.04
Home equity loans			(0.05)			—						0.05			(0.04)			0.13
Consumer direct loans			0.55			0.34						0.36			0.38			0.41
Credit cards			2.98			2.18						1.69			2.16			2.65
Consumer indirect loans			6.80			—						—			3.17			—
Total consumer loans			0.15			0.12						0.11			0.36			0.20
Total net loan charge-offs			0.16		%	0.13		%				0.08		%	0.11		%	0.09		%

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

Figure 27. Summary of Loan and Lease Loss Experience from Continuing Operations

			Three months ended June 30,									Six months ended June 30,
Dollars in millions			2022			2021						2022			2021
Average loans outstanding			$	109,138		$	100,814					$	106,465		$	100,777
Allowance for loan and lease losses at beginning of period			1,105			1,438						1,061			1,626
Loans charged off:
Commercial and industrial			39			41						69			114
Real estate — commercial mortgage			3			4						7			39
Real estate — construction			—			—						—			—
Commercial lease financing			—			—						2			4
Total commercial loans			42			45						78			157
Real estate — residential mortgage			(2)			1						(3)			1
Home equity loans			—			4						1			6
Consumer direct loans			10			7						17			15
Credit cards			8			9						15			15
Consumer indirect loans			1			5						2			12
Total consumer loans			17			26						32			49
Total loans charged off			59			71						110			206
Recoveries:
Commercial and industrial			8			32						19			40
Real estate — commercial mortgage			1			6						2			7
Real estate — construction			1			—						1			—
Commercial lease financing			1			—						1			1
Total commercial loans			11			38						23			48
Real estate — residential mortgage			1			—						1			1
Home equity loans			1			1						2			2
Consumer direct loans			1			2						3			4
Credit cards			1			3						3			5
Consumer indirect loans			—			5						1			10
Total consumer loans			4			11						10			22
Total recoveries			15			49						33			70
Net loan charge-offs			(44)			(22)						(77)			(136)
Provision (credit) for loan and lease losses			38			(196)						115			(270)
Allowance for loan and lease losses at end of period			$	1,099		$	1,220					$	1,099		$	1,220
Liability for credit losses on off-balance sheet exposures at beginning of period			166			178						160			197
Provision (credit) for losses on off-balance sheet exposures			7			(26)						13			(45)
Liability for credit losses on off-balance sheet exposures at end of period(a)			$	173		$	152					$	173		$	152
Total allowance for credit losses at end of period			$	1,272		$	1,372					$	1,272		$	1,372
Net loan charge-offs to average total loans			.16		%	.09		%				.15		%	.27		%
Allowance for loan and lease losses to period-end loans			.98			1.21						.98			1.21
Allowance for credit losses to period-end loans			1.13			1.36						1.13			1.36
Allowance for loan and lease losses to nonperforming loans			256.2			175.8						256.2			175.8
Allowance for credit losses to nonperforming loans			296.5			197.7						296.5			197.7
Discontinued operations — education lending business:
Loans charged off			$	1		$	1					$	3		$	2
Recoveries			1			—						1			1
Net loan charge-offs			$	—		$	(1)					$	(2)		$	(1)

(a)Included in "Accrued expense and other liabilities" on the balance sheet.

Nonperforming assets

Figure 28 shows the composition of our nonperforming assets. As shown in Figure 28, nonperforming assets at June 30, 2022, decreased $26 million from December 31, 2021. This decrease was primarily driven by continual declines in our nonperforming loan balance.

See Note 1 (“Summary of Significant Accounting Policies”) of our 2021 Form 10-K under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” for a summary of our nonaccrual and charge-off policies.

Figure 28. Summary of Nonperforming Assets and Past Due Loans from Continuing Operations

Dollars in millions			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Commercial and industrial			$	197		$	186		$	191		$	253		$	355
Real estate — commercial mortgage			35			40			44			49			66
Real estate — construction			—			—			—			—			—
Total commercial real estate loans (a)			35			40			44			49			66
Commercial lease financing			2			3			4			5			7
Total commercial loans (b)			234			229			239			307			428
Real estate — residential mortgage			67			73			72			93			99
Home equity loans			120			129			135			146			146
Consumer direct loans			3			4			4			4			4
Credit cards			3			3			3			3			3
Consumer indirect loans			2			1			1			1			14
Total consumer loans			195			210			215			247			266
Total nonperforming loans			429			439			454			554			694
OREO			9			8			8			8			9
Nonperforming loans held for sale			25			20			24			35			32
Other nonperforming assets			—			—			3			2			3
Total nonperforming assets			$	463		$	467		$	489		$	599		$	738
Accruing loans past due 90 days or more			$	41		$	55		$	68		$	82		$	74
Accruing loans past due 30 through 89 days			137			122			165			164			190
Restructured loans — accruing and nonaccruing (c)			216			219			220			270			334
Restructured loans included in nonperforming loans (c)			94			98			99			146			177
Nonperforming assets from discontinued operations — education lending business			3			4			4			4			5
Nonperforming loans to period-end portfolio loans			.38		%	.41		%	.45		%	.56		%	.69		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.41			.44			.48			.61			.73

(a)See Figure 9 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.

(b)See Figure 8 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio.

(c)Restructured loans (i.e., TDRs) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

Figure 29 shows the types of activity that caused the change in our nonperforming loan balance during each of the last five quarters.

Figure 29. Summary of Changes in Nonperforming Loans from Continuing Operations

			2022									2021
Dollars in millions			Second			First						Fourth			Third			Second
Balance at beginning of period			$	439		$	454					$	554		$	694		$	728
Loans placed on nonaccrual status			118			87						116			116			186
Charge-offs			(59)			(50)						(51)			(66)			(74)
Loans sold			(8)			—						(38)			(17)			(10)
Payments			(35)			(27)						(68)			(136)			(92)
Transfers to OREO			(2)			(1)						(1)			(1)			—
Loans returned to accrual status			(24)			(24)						(58)			(36)			(44)
Balance at end of period			$	429		$	439					$	454		$	554		$	694

Operational and compliance risk management

Like all businesses, we are subject to operational risk, which is the risk of loss resulting from human error or malfeasance, inadequate or failed internal processes and systems, and external events. These events include, among other things, threats to our cybersecurity, as we are reliant upon information systems and the internet to conduct our business activities. Operational risk intersects with compliance risk, which is the risk of loss from violations of, or noncompliance with, laws, rules and regulations, prescribed practices, and ethical standards. This includes our compliance with lending programs established by the CARES Act, including the PPP and Main Street Lending Program. Under the Dodd-Frank Act, large financial companies like Key are subject to heightened prudential standards and regulation. This heightened level of regulation has increased our operational risk. While operational and compliance risk are separate risk disciplines in KeyCorp’s ERM framework, losses and/or additional regulatory compliance costs are included in operational loss reporting and could take the form of explicit charges, increased operational costs, harm to our reputation, or foregone opportunities.

We seek to mitigate operational risk through identification and measurement of risk, alignment of business strategies with risk appetite and tolerance, and a system of internal controls and reporting. We continuously strive to strengthen our system of internal controls to improve the oversight of our operational risk and to ensure compliance with laws, rules, and regulations. For example, an operational event database tracks the amounts and sources of operational risk and losses. This tracking mechanism helps to identify weaknesses and to highlight the need to take corrective action. We also rely upon software programs designed to assist in assessing operational risk and monitoring our control processes. This technology has enhanced the reporting of the effectiveness of our controls to senior management and the Board.

The Operational Risk Management Program provides the framework for the structure, governance, roles, and responsibilities, as well as the content, to manage operational risk for Key. The Compliance Risk Management Program serves the same function in managing compliance risk for Key. The Operational Risk Committee and the Compliance Risk Committee support the ERM Committee by identifying early warning events and trends, escalating emerging risks, and discussing forward-looking assessments. Both the Operational Risk Committee and the Compliance Risk Committee include attendees from each of the Three Lines of Defense. Primary responsibility for managing and monitoring internal control mechanisms lies with the managers of our various lines of business. The Operational Risk Committee and Compliance Risk Committee are senior management committees that oversee our level of operational and compliance risk and direct and support our operational and compliance infrastructure and related activities. These committees and the Operational Risk Management and Compliance Risk Management functions are an integral part of our ERM Program. Our Risk Review function regularly assesses the overall effectiveness of our Operational Risk Management and Compliance Risk Management Programs and our system of internal controls. Risk Review reports the results of reviews on internal controls and systems to senior

management and the Risk and Audit Committees and independently supports the Risk Committee’s oversight of these controls.

Cybersecurity

We maintain comprehensive Cyber Incident Response Plans, and we devote significant time and resources to maintaining and regularly updating our technology systems and processes to protect the security of our computer systems, software, networks, and other technology assets against attempts to obtain unauthorized access to confidential information, destroy data, disrupt or degrade service, sabotage systems, shut down access to systems for ransom, or cause other damage. As the threat landscape continues to evolve, critical infrastructure, including financial services, remains a top target for cyberattacks. COVID-19 has created a unique situation globally with many more employees and third-party service providers working from home, which inherently introduces additional risk. Cyberattacks may include, but are not limited to, attacks that are intended to disrupt or disable banking services and prevent banking transactions, attempts to breach the security of systems and data, and social engineering attempts aimed at tricking employees and clients into providing sensitive information or executing financial transactions.

Cyberattack risks may also occur with our third-party technology service providers and may result in financial loss or liability that could adversely affect our financial condition or results of operations. Cyberattacks could also interfere with third-party providers’ ability to fulfill their contractual obligations to us. Recent high-profile cyberattacks have targeted retailers, credit bureaus, and other businesses for the purpose of acquiring the confidential information (including personal, financial, and credit card information) of their customers. Recently, there have also been numerous highly publicized cases where hackers requested ransom payments in exchange for not disclosing

customer information or to restore company access to locked systems. We may incur expenses related to the investigation of such attacks or related to the protection of our customers from identity theft as a result of such attacks. We may also incur expenses to enhance our systems or processes to protect against cyber or other security incidents. Risks and exposures related to cyberattacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking, and other technology-based products and services by us and our clients. To date, Key has not experienced material disruption of our operations, or material harm to our customers, as a result of the heightened threat landscape of cyberattacks.

As described in more detail starting on page 73 of our 2021 Form 10-K under the heading “Risk Management — Overview,” the Board serves in an oversight capacity ensuring that Key’s risks are managed in a manner that is effective and balanced and adds value for the shareholders. The Board’s Risk Committee has primary oversight for enterprise-wide risk at KeyCorp, including operational risk (which includes cybersecurity). The Risk Committee reviews and provides oversight of management’s activities related to the enterprise-wide risk management framework, including cyber-related risk. Board members are updated on cybersecurity matters at each regularly-scheduled Board meeting. The ERM Committee, chaired by the Chief Executive Officer and comprising other senior level executives, is responsible for managing risk (including cyber-related risk) and ensuring that the corporate risk profile is managed in a manner consistent with our risk appetite. The ERM Committee reports to the Board’s Risk Committee.

GAAP to Non-GAAP Reconciliations

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not

audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company,

they have limitations as analytical tools, and should not be considered in isolation, nor as a substitute for analyses

of results as reported under GAAP.

The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes that these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock. Since analysts and banking regulators may assess our capital adequacy using tangible common equity, we believe it is useful to enable investors to assess our capital adequacy on these same bases.

						Three months ended																		Six months ended
Dollars in millions						6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021						6/30/2022			6/30/2021
Tangible common equity to tangible assets at period-end
Key shareholders’ equity (GAAP)						$	14,427		$	15,308		$	17,423		$	17,510		$	17,941
Less:			Intangible assets (a)			2,868			2,810			2,820			2,814			2,828
			Preferred Stock (b)			1,856			1,856			1,856			1,856			1,856
			Tangible common equity (non-GAAP)			$	9,703		$	10,642		$	12,747		$	12,840		$	13,257
Total assets (GAAP)						$	187,008		$	181,221		$	186,346		$	187,035		$	181,115
Less:			Intangible assets (a)			2,868			2,810			2,820			2,814			2,828
			Tangible assets (non-GAAP)			$	184,140		$	178,411		$	183,526		$	184,221		$	178,287
			Tangible common equity to tangible assets ratio (non-GAAP)			5.3		%	6.0		%	6.9		%	7.0		%	7.4		%
Average tangible common equity
Average Key shareholders’ equity (GAAP)						$	14,398		$	16,780		$	17,471		$	17,899		$	17,859					$	15,583		$	17,814
Less:			Intangible assets (average) (c)			2,827			2,814			2,814			2,823			2,840						2,821			2,840
			Preferred Stock (average)			1,900			1,900			1,900			1,900			1,900						1,900			1,900
			Average tangible common equity (non-GAAP)			$	9,671		$	12,066		$	12,757		$	13,176		$	13,119					$	10,862		$	13,074
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)						$	504		$	420		$	601		$	616		$	698					$	924		$	1,289
Average tangible common equity (non-GAAP)						9,671			12,066			12,757			13,176			13,119						10,862			13,074
Return on average tangible common equity from continuing operations (non-GAAP)						20.9		%	14.1		%	18.7		%	18.5		%	21.3		%				17.15		%	19.88		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)						$	507		$	421		$	603		$	618		$	703					$	928		$	1,298
Average tangible common equity (non-GAAP)						9,671			12,066			12,757			13,176			13,119						10,862			13,074
Return on average tangible common equity consolidated (non-GAAP)						21.0		%	14.2		%	18.8		%	18.6		%	21.5		%				17.23		%	20.02		%

(a)For the three months ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, intangible assets exclude $2 million, $2 million, $3 million, $3 million, and $4 million, respectively, of period-end purchased credit card receivables.

(b)Net of capital surplus.

(c)For the three months ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, average intangible assets exclude $2 million, $3 million, $3 million, $3 million, and $4 million, respectively, of average purchased credit card receivables. For the six months ended June 30, 2022, and June 30, 2021, average intangible assets exclude $2 million, and $4 million, respectively, of average purchased credit card receivables.

The cash efficiency ratio is a ratio of two non-GAAP performance measures, adjusted noninterest expense and total taxable-equivalent revenue. Accordingly, there is no directly comparable GAAP performance measure. The cash efficiency ratio excludes the impact of our intangible asset amortization from the calculation. We believe this ratio provides greater consistency and comparability between our results and those of our peer banks. Additionally, this ratio is used by analysts and investors to evaluate how effectively management is controlling noninterest expenses in generating revenue, as they develop earnings forecasts and peer bank analysis.

						Three months ended																		Six months ended
Dollars in millions						6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021						6/30/2022			6/30/2021
Cash efficiency ratio
Noninterest expense (GAAP)						$	1,078		$	1,070		$	1,170		$	1,112		$	1,076					$	2,148		$	2,147
Less:			Intangible asset amortization			12			11			14			15			14						23			29
Adjusted noninterest expense (non-GAAP)						$	1,066		$	1,059		$	1,156		$	1,097		$	1,062					$	2,125		$	2,118
Net interest income (GAAP)						$	1,097		$	1,014		$	1,033		$	1,016		$	1,017					$	2,111		$	2,022
Plus:			Taxable-equivalent adjustment			7			6			5			9			6						13			13
			Noninterest income (GAAP)			688			676			909			797			750						1,364			1,488
Total taxable-equivalent revenue (non-GAAP)						$	1,792		$	1,696		$	1,947		$	1,822		$	1,773					$	3,488		$	3,523
Cash efficiency ratio (non-GAAP)						59.5		%	62.4		%	59.4		%	60.2		%	59.9		%				60.9		%	60.1		%

Critical Accounting Policies and Estimates

Our business is dynamic and complex. Consequently, we must exercise judgment in choosing and applying accounting policies and methodologies. These choices are critical – not only are they necessary to comply with GAAP, they also reflect our view of the appropriate way to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Significant Accounting Policies”) beginning on page 107 of our 2021 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. Note 1 (“Basis of Presentation and Accounting Policies”) of this report should also be reviewed for more information on accounting standards that have been adopted during the period.

In our opinion, some accounting policies are more likely than others to have a critical effect on our financial results and to expose those results to potentially greater volatility. These policies apply to areas of relatively greater business importance or require us to exercise judgment and to make assumptions and estimates that affect amounts reported in the financial statements. Because these assumptions and estimates are based on current circumstances, they may prove to be inaccurate, or we may find it necessary to change them.

We rely heavily on the use of judgment, assumptions, and estimates to make a number of core decisions, including accounting for the ALLL; contingent liabilities, guarantees and income taxes; derivatives and related hedging activities; and assets and liabilities that involve valuation methodologies. In addition, we may employ outside valuation experts to assist us in determining fair values of certain assets and liabilities. A brief discussion of each of these areas appears on pages 91 through 95 of our 2021 Form 10-K. During the three months ended June 30, 2022, we did not significantly alter the manner in which we applied our critical accounting policies or developed related assumptions and estimates.

Accounting and Reporting Developments

Accounting Guidance Pending Adoption at June 30, 2022

Standard			Required Adoption			Description			Effect on Financial Statements or Other Significant Matters
ASU 2021-08, Business Combinations (Topic 805)			January 1, 2023 Early adoption is permitted.			At the acquisition date, an acquirer must account for any acquired revenue contracts in accordance with Topic 606 as if it had originated the contracts (i.e. measure contract assets and liabilities, generally consistent with acquiree's financial statements). The guidance should be applied on a prospective basis.			The guidance is not expected to have a material impact on Key’s financial condition or results of operations.
ASU 2022-01, Derivatives and Hedging (Topic 815)			January 1, 2023 Early adoption is permitted.			This guidance allows entities to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets. It also allows multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. If a breach is anticipated, an entity is required to partially or fully dedesignate a hedged layer or layers until a breach is no longer anticipated. There are additional requirements and enhanced disclosures related to basis adjustments. The guidance should be applied on a prospective, retrospective or modified retrospective basis depending on the amendment.			The guidance is not expected to have a material impact on Key’s financial condition or results of operations.
ASU 2022-02, Financial Instruments—Credit Losses (Topic 326)			January 1, 2023 Early adoption is permitted.			The amendments eliminate current Troubled Debt Restructuring (TDR) guidance and instead require entities to apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or is a continuation of an existing loan. Entities must disclose current-period gross write-offs on an amortized cost basis by credit quality indicator and class of financing receivable by year of origination. The guidance should be applied on a prospective basis except for amendments related to recognition and measurement of TDRs, where a modified retrospective transition method is optional.			Key is still evaluating the impact on its financial statements and disclosures.
ASU 2022-03, Fair Value Measurement - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820)			December 15, 2023 Early adoption is permitted.			The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and is not considered in measuring fair value. Entities cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments require disclosures for equity securities subject to contractual restrictions including; the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet, the nature and remaining duration of the restriction(s) and the circumstances that could cause a lapse in the restriction(s). The guidance should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.			The guidance is not expected to have a material impact on Key’s financial condition or results of operations.