Item 1. Financial Statements

Consolidated Balance Sheets

Dollars in millions, except per share data			March 31, 2023			December 31, 2022
			(Unaudited)
ASSETS
Cash and due from banks			$	784		$	887
Short-term investments			8,410			2,432
Trading account assets			1,118			829
Securities available for sale			39,498			39,117
Held-to-maturity securities (fair value: $9,085 and $8,113)			9,561			8,710
Other investments			1,587			1,308
Loans, net of unearned income of $353 and $368			119,971			119,394
Less: Allowance for loan and lease losses			(1,380)			(1,337)
Net loans			118,591			118,057
Loans held for sale (a)			1,211			963
Premises and equipment			628			636
Goodwill			2,752			2,752
Other intangible assets			85			94
Corporate-owned life insurance			4,372			4,369
Accrued income and other assets			8,512			9,223
Discontinued assets			410			436
Total assets			$	197,519		$	189,813
LIABILITIES
Deposits in domestic offices:
Interest-bearing deposits			106,841			101,761
Noninterest-bearing deposits			37,307			40,834
Total deposits			144,148			142,595
Federal funds purchased and securities sold under repurchase agreements			1,374			4,077
Bank notes and other short-term borrowings			10,061			5,386
Accrued expense and other liabilities			4,861			4,994
Long-term debt			22,753			19,307
Total liabilities			183,197			176,359
EQUITY
Preferred stock			2,500			2,500
Common Shares, $1 par value; authorized 2,100,000,000 shares; issued 1,256,702,081 shares			1,257			1,257
Capital surplus			6,207			6,286
Retained earnings			15,700			15,616
Treasury stock, at cost (321,472,743 and 323,377,500 shares)			(5,868)			(5,910)
Accumulated other comprehensive income (loss)			(5,474)			(6,295)
Total equity			14,322			13,454
Total liabilities and equity			$	197,519		$	189,813

(a)Total loans held for sale include real estate — residential mortgage loans held for sale at fair value of $45 million at March 31, 2023, and $24 million at December 31, 2022.

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Income

Dollars in millions, except per share amounts			Three months ended March 31,
(Unaudited)			2023			2022
INTEREST INCOME
Loans			$	1,476		$	837
Loans held for sale			13			12
Securities available for sale			194			173
Held-to-maturity securities			74			46
Trading account assets			12			6
Short-term investments			42			4
Other investments			13			2
Total interest income			1,824			1,080
INTEREST EXPENSE
Deposits			350			14
Federal funds purchased and securities sold under repurchase agreements			22			—
Bank notes and other short-term borrowings			78			3
Long-term debt			275			49
Total interest expense			725			66
NET INTEREST INCOME			1,099			1,014
Provision for credit losses			139			83
Net interest income after provision for credit losses			960			931
NONINTEREST INCOME
Trust and investment services income			128			136
Investment banking and debt placement fees			145			163
Cards and payments income			81			80
Service charges on deposit accounts			67			91
Corporate services income			76			91
Commercial mortgage servicing fees			46			36
Corporate-owned life insurance income			29			31
Consumer mortgage income			11			21
Operating lease income and other leasing gains			25			32
Other income			—			(5)
Total noninterest income			608			676
NONINTEREST EXPENSE
Personnel			701			630
Net occupancy			70			73
Computer processing			92			77
Business services and professional fees			45			53
Equipment			22			23
Operating lease expense			20			28
Marketing			21			28
Other expense			205			158
Total noninterest expense			1,176			1,070
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			392			537
Income taxes			81			90
INCOME (LOSS) FROM CONTINUING OPERATIONS			311			447
Income (loss) from discontinued operations			1			1
NET INCOME (LOSS)			312			448
Less: Net income (loss) attributable to noncontrolling interests			—			—
NET INCOME (LOSS) ATTRIBUTABLE TO KEY			$	312		$	448
Income (loss) from continuing operations attributable to Key common shareholders			$	275		$	420
Net income (loss) attributable to Key common shareholders			276			421
Per Common Share:
Income (loss) from continuing operations attributable to Key common shareholders			$	.30		$	.45
Income (loss) from discontinued operations, net of taxes			—			—
Net income (loss) attributable to Key common shareholders (a)			.30			.46
Per Common Share — assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders			$	.30		$	.45
Income (loss) from discontinued operations, net of taxes			—			—
Net income (loss) attributable to Key common shareholders (a)			.30			.45
Weighted-average Common Shares outstanding (000)			926,490			922,941
Effect of Common Share options and other stock awards			7,314			10,692
Weighted-average Common Shares and potential Common Shares outstanding (000) (b)			933,804			933,634

(a)EPS may not foot due to rounding.

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

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Comprehensive Income

Dollars in millions			Three months ended March 31,
(Unaudited)			2023			2022
Net income (loss)			$	312		$	448
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale, net of income taxes of $(181) and $562			575			(1,784)
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $(77) and $177			245			(561)
Net pension and postretirement benefit costs, net of income taxes of $0 and $(1)			1			2
Total other comprehensive income (loss), net of tax			821			(2,343)
Comprehensive income (loss)			1,133			(1,895)
Less: Comprehensive income attributable to noncontrolling interests			—			—
Comprehensive income (loss) attributable to Key			$	1,133		$	(1,895)

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Changes in Equity

			Key Shareholders’ Equity
Dollars in millions, except per share amounts (Unaudited)			Preferred Shares Outstanding (000)			Common Shares Outstanding (000)			Preferred Stock			Common Shares			Capital Surplus			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)						Total Shareholders’ Equity
BALANCE AT DECEMBER 31, 2022			1,996			933,325			$	2,500		$	1,257		$	6,286		$	15,616		$	(5,910)		$	(6,295)					$	13,454
Net income (loss)																		312												312
Other comprehensive income (loss)																								821						821
Deferred compensation															(6)															(6)
Cash dividends declared
Common Shares ($.205 per share)																		(192)												(192)
Series D Preferred Stock ($12.50 per depositary share)																		(7)												(7)
Series E Preferred Stock ($.382813 per depositary share)																		(8)												(8)
Series F Preferred Stock ($.353125 per depositary share)																		(6)												(6)
Series G Preferred Stock ($.351563 per depositary share)																		(6)												(6)
Series H Preferred Stock ($.387500 per depositary share)																		(9)												(9)
Open market Common Share repurchases						(2,550)															(38)									(38)
Employee equity compensation program Common Share repurchases						(1,783)									—						(34)									(34)
Common shares reissued (returned) for stock options and other employee benefit plans						6,237									(73)						114									41
BALANCE AT MARCH 31, 2023			1,996			935,229			$	2,500		$	1,257		$	6,207		$	15,700		$	(5,868)		$	(5,474)					$	14,322

			Key Shareholders’ Equity
Dollars in millions, except per share amounts (Unaudited)			Preferred Shares Outstanding (000)			Common Shares Outstanding (000)			Preferred Stock			Common Shares			Capital Surplus			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)						Total Shareholders’ Equity
BALANCE AT DECEMBER 31, 2021			1,396			928,850			$	1,900		$	1,257		$	6,278		$	14,553		$	(5,979)		$	(586)					$	17,423
Net income (loss)																		448												448
Other comprehensive income (loss)																								(2,343)						(2,343)
Deferred compensation															(7)															(7)
Cash dividends declared
Common Shares ($.195 per share)																		(182)												(182)
Series D Preferred Stock ($12.50 per depositary share)																		(6)												(6)
Series E Preferred Stock ($.382813 per depositary share)																		(8)												(8)
Series F Preferred Stock ($.353125 per depositary share)																		(6)												(6)
Series G Preferred Stock ($.351563 per depositary share)																		(6)												(6)
Open market Common Share repurchases						—															—									—
Employee equity compensation program Common Share repurchases						(1,707)									—						(44)									(44)
Common shares reissued (returned) for stock options and other employee benefit plans						5,255									(57)						96									39
BALANCE AT MARCH 31, 2022			1,396			932,398			$	1,900		$	1,257		$	6,214		$	14,793		$	(5,927)		$	(2,929)					$	15,308

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Cash Flows

Dollars in millions			Three months ended March 31,
(Unaudited)			2023			2022
OPERATING ACTIVITIES
Net income (loss)			$	312		$	448
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for credit losses			139			83
Depreciation and amortization expense, net			36			40
Accretion of acquired loans			5			5
Increase in cash surrender value of corporate-owned life insurance			(26)			(27)
Stock-based compensation expense			34			29
Deferred income taxes (benefit)			75			124
Proceeds from sales of loans held for sale			1,534			4,317
Originations of loans held for sale, net of repayments			(1,779)			(2,711)
Net losses (gains) on sales of loans held for sale			(15)			(48)
Net losses (gains) on leased equipment			(1)			(1)
Net securities losses (gains)			—			—
Net losses (gains) on sales of fixed assets			12			(6)
Net decrease (increase) in trading account assets			(289)			(147)
Net transfers of loans held for sale			—			—
Other operating activities, net			681			(1,225)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			718			881
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments, excluding acquisitions			(5,978)			7,129
Purchases of securities available for sale			(200)			(2,515)
Proceeds from sales of securities available for sale			—			—
Proceeds from prepayments and maturities of securities available for sale			563			1,534
Proceeds from prepayments and maturities of held-to-maturity securities			333			673
Purchases of held-to-maturity securities			(1,179)			(4)
Purchases of other investments			(493)			(111)
Proceeds from sales of other investments			204			5
Proceeds from prepayments and maturities of other investments			3			4
Net decrease (increase) in loans, excluding acquisitions, sales and transfers			(613)			(4,793)
Proceeds from sales of portfolio loans			25			49
Proceeds from corporate-owned life insurance			22			14
Purchases of premises, equipment, and software			(24)			(18)
Proceeds from sales of premises and equipment			1			7
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			(7,336)			1,974
FINANCING ACTIVITIES
Net increase (decrease) in deposits			1,553			(3,909)
Net increase (decrease) in short-term borrowings			1,972			2,060
Net proceeds from issuance of long-term debt			4,490			4,001
Payments on long-term debt			(1,201)			(4,989)
Issuance of preferred shares			—			—
Open market common share repurchases			(38)			—
Employee equity compensation program Common Share repurchases			(34)			(44)
Net proceeds from reissuance of Common Shares			1			5
Cash dividends paid			(228)			(208)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			6,515			(3,084)
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS			(103)			(229)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD			887			913
CASH AND DUE FROM BANKS AT END OF PERIOD			$	784		$	684
Additional disclosures relative to cash flows:
Interest paid			$	426		$	58
Income taxes paid (refunded)			46			19
Noncash items:
Reduction of secured borrowing and related collateral			$	2		$	2
Loans transferred to portfolio from held for sale			17			—
Loans transferred to held for sale from portfolio			4			—
Loans transferred to OREO			3			1
CMBS risk retentions			52			—
ABS risk retentions			8			10

See Notes to Consolidated Financial Statements (Unaudited).

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation and Accounting Policies

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts related to derivative valuations and reserves have been reclassified from Other Income to Corporate Services Income to conform to current reporting practices.

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

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

The unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2022 Form 10-K.

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

Accounting Guidance Adopted in 2023

Standard			Date of 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 adoption of this guidance did not 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 adoption of this guidance did not 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 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.			As part of the adoption of this guidance, Key elected to discontinue use of a discounted cash flow (DCF) methodology and apply its portfolio-based allowance approach to non-collateral dependent modified loans. The adoption did not result in a material impact on Key’s financial condition or results of operations. Additionally, disclosures for gross charges-offs and loan modifications made to borrowers experiencing financial difficulty have been included in Note 4 (Asset Quality).

The following are additional disclosures about our significant accounting policies updated in the first quarter of 2023 or impacted by the adoption of ASU 2022-02.

Loans

Effective January 1, 2023, we adopted the provisions of ASU 2022-02, Financial Instruments —Credit Losses (Topic

326), which eliminated the accounting for troubled debt restructurings while expanding loan modification and vintage disclosure requirements. Under this guidance we assess all loan modifications to determine whether one is granted to a borrower experiencing financial difficulty, regardless of whether the modification loan terms include a concession. Modifications granted to borrowers experiencing financial difficulty may be in the form an interest rate reduction, payment delay, other modifications, or some combination thereof. A borrower is considered to be experiencing financial difficulty when there is significant doubt about the borrower’s ability to make required payments on the loan or to get equivalent financing from another creditor at a market rate for a similar loan.

Prior to the adoption of ASU 2022-02, a TDR occurred when a loan to a borrower experiencing financial difficulty was restricted with a concession provided that a creditor would not otherwise consider.

Nonperforming Loans

Nonperforming loans are loans for which we do not accrue interest income and may include both commercial and consumer loans and leases, modified loans to borrowers experiencing financial difficulty, and nonaccruing TDR loans prior to the adoption of ASU 2022-02. Nonperforming loans do not include loans held for sale. Once a loan is designated nonaccrual, the interest accrued but not collected is reversed against interest income, and payments subsequently received are applied to principal until qualifying for return to accrual.

Allowance for Loan and Lease Losses

We estimate the ALLL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The ALLL is measured on a collective (pool) basis when similar risk characteristics exist. Our portfolio segments include commercial and consumer. Each of these two segments comprises multiple loan classes. Classes are characterized by similarities in initial measurement, risk attributes, and the manner in which we monitor and assess credit risk. The commercial segment is composed of commercial and industrial, commercial real estate, and commercial lease financing loan classes. The consumer lending segment is composed of residential mortgage, home equity, consumer direct, credit card, student lending and consumer indirect loan classes.

The ALLL represents our current estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date. In determining the ALLL, we estimate expected future losses for the loan's entire contractual term adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications.

The ALLL is the sum of three components: (i) asset specific/ individual loan reserves; (ii) quantitative (formulaic or pooled) reserves; and (iii) qualitative (judgmental) reserves.

Asset Specific / Individual Component

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. We have elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any costs to sell, when foreclosure is not probable, when repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.

Individual reserves are determined as follows:

• For commercial non-accruing loans greater than or equal to a defined dollar threshold, individual reserves are determined based on an analysis of the present value of the loan's expected future cash flows or the fair value of the collateral less costs to sell.

• For commercial non-accruing loans below the defined dollar threshold, an established LGD percentage is multiplied by the loan balance and the results are aggregated for purposes of measuring specific reserve impairment.

• The population of individually assessed consumer loans includes loans deemed collateral dependent. These loans are written down based on the collateral's fair market value less costs to sell.

Quantitative Component

We use a non-DCF factor-based approach to estimate expected credit losses that include component PD/LGD/EAD

models as well as less complex estimation methods for smaller loan portfolios.

• PD: This component model is used to estimate the likelihood that a borrower will cease making payments as agreed. The major contributors to this are the borrower credit attributes and macro-economic trends. The objective of the PD model is to produce default likelihood forecasts based on the observed loan-level information and projected paths of macroeconomic variables.

• LGD: This component model is used to estimate the loss on a loan once a loan is in default.

• EAD: Estimates the loan balance at the time the borrower stops making payments. For all term loans, an amortization based formulaic approach is used for account level EAD estimates. We calculate EAD using a portfolio specific method in each of our revolving product portfolios. For line products that are unconditionally cancellable, the balances will either use a paydown curve or be held flat through the life of the loan.

Qualitative Component

The ALLL also includes identified qualitative factors related to idiosyncratic risk factors, changes in current economic conditions that may not be reflected in quantitatively derived results, and other relevant factors to ensure the ALLL reflects our best estimate of current expected credit losses. While our reserve methodologies strive to reflect all relevant risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between estimates

and actual outcomes. We provide additional reserves that are designed to provide coverage for losses attributable to such risks. The ALLL also includes factors that may not be directly measured in the determination of individual or collective reserves. Such qualitative factors may include:

• The nature and volume of the institution’s financial assets;

• The existence, growth, and effect of any concentrations of credit;

• The volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets;

• The value of the underlying collateral for loans that are not collateral dependent;

• The institution’s lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;

• The quality of the institution’s credit review function;

• The experience, ability, and depth of the institution’s lending, investment, collection, and other relevant management and staff;

• The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters; and

• Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets.

Income Taxes

Deferred tax assets and liabilities are determined based on temporary differences between financial statement asset and liability amounts and their respective tax bases and are measured using enacted tax laws and rates that are expected to apply in the periods in which the deferred tax assets or liabilities are expected to be realized. Deferred tax assets are also recorded for any tax attributes, such as tax credit and net operating loss carryforwards. The net balance of deferred tax assets and liabilities is reported in “Accrued income and other assets” or “Accrued expense and other liabilities” in the consolidated balance sheets, as appropriate. Subsequent changes in the tax laws require adjustment to these assets and liabilities with the cumulative effect included in the provision for income taxes for the period in which the change is enacted. A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not that some portion or all of the deferred tax asset will not be realized.

We use the proportional amortization method for LIHTC investments, whereby the associated investment tax credits are recognized as a reduction to tax expense. Certain federal tax credits that are nonrefundable and transferable under applicable regulations are accounted for as government grants and recorded as a reduction to the amortized cost or net investment in the applicable asset generating the credit, generally within “Accrued income and other assets” or “Loans, net of unearned income”. Amounts are amortized through depreciation or as an adjustment to yield over the estimated life of the asset. Any gain or loss on the transfer of a tax credit is recorded within “Other income”.

2. Earnings Per Common Share

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

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

			Three months ended March 31,
Dollars in millions, except per share amounts			2023			2022
EARNINGS
Income (loss) from continuing operations			$	311		$	447
Less: Net income (loss) attributable to noncontrolling interests			—			—
Income (loss) from continuing operations attributable to Key			311			447
Less: Dividends on Preferred Stock			36			27
Income (loss) from continuing operations attributable to Key common shareholders			275			420
Income (loss) from discontinued operations, net of taxes			1			1
Net income (loss) attributable to Key common shareholders			$	276		$	421
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average Common Shares outstanding (000)			926,490			922,941
Effect of Common Share options and other stock awards			7,314			10,692
Weighted-average Common Shares and potential Common Shares outstanding (000) (a)			933,804			933,634
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders			$	.30		$	.45
Income (loss) from discontinued operations, net of taxes			—			—
Net income (loss) attributable to Key common shareholders (b)			.30			.46
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			$	.30		$	.45
Income (loss) from discontinued operations, net of taxes — assuming dilution			—			—
Net income (loss) attributable to Key common shareholders — assuming dilution (b)			.30			.45

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

(b)EPS may not foot due to rounding.

3. Loan Portfolio

Loan Portfolio by Portfolio Segment and Financing Receivable (a)

Dollars in millions			March 31, 2023			December 31, 2022
Commercial and industrial (b)			$	60,565		$	59,647
Commercial real estate:
Commercial mortgage			16,348			16,352
Construction			2,590			2,530
Total commercial real estate loans			18,938			18,882
Commercial lease financing (c)			3,763			3,936
Total commercial loans			83,266			82,465
Residential — prime loans:
Real estate — residential mortgage			21,632			21,401
Home equity loans			7,706			7,951
Total residential — prime loans			29,338			29,352
Consumer direct loans			6,359			6,508
Credit cards			969			1,026
Consumer indirect loans			39			43
Total consumer loans			36,705			36,929
Total loans (d)			$	119,971		$	119,394

(a)Accrued interest of $487 million and $417 million at March 31, 2023, and December 31, 2022, respectively, presented in "Accrued income and other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

(b)Loan balances include $185 million and $172 million of commercial credit card balances at March 31, 2023, and December 31, 2022, respectively.

(c)Commercial lease financing includes receivables held as collateral for a secured borrowing of $6 million and $8 million at March 31, 2023, and December 31, 2022, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 20 (“Long-Term Debt”) beginning on page 164 of our 2022 Form 10-K.

(d)Total loans exclude loans of $407 million at March 31, 2023, and $434 million at December 31, 2022, related to the discontinued operations of the education lending business.

4. Asset Quality

ALLL

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 ("Summary of Significant Accounting Policies") under the heading "Allowance for Loan and Lease Losses" beginning on page 107 of our 2022 Form 10-K.

The ALLL at March 31, 2023, represents our current estimate of lifetime credit losses inherent in the loan portfolio at that date. The changes in the ALLL by loan category for the periods indicated are as follows:

Three months ended March 31, 2023:

Dollars in millions			December 31, 2022			Provision						Charge-offs			Recoveries			March 31, 2023
Commercial and Industrial			$	601		$	31					$	(35)		$	8		$	605
Commercial real estate:
Real estate — commercial mortgage			203			20						(5)			—			218
Real estate — construction			28			—						—			—			28
Total commercial real estate loans			231			20						(5)			—			246
Commercial lease financing			32			(1)						1			1			33
Total commercial loans			864			50						(39)			9			884
Real estate — residential mortgage			196			15						—			1			212
Home equity loans			98			(2)						(1)			1			96
Consumer direct loans			111			14						(11)			2			116
Credit cards			66			13						(9)			1			71
Consumer indirect loans			2			(2)						—			1			1
Total consumer loans			473			38						(21)			6			496
Total ALLL — continuing operations			1,337			88			(a)			(60)			15			1,380
Discontinued operations			21			(1)						(1)			—			19
Total ALLL — including discontinued operations			$	1,358		$	87					$	(61)		$	15		$	1,399

(a)Excludes a provision for losses on lending-related commitments of $51 million.

Three months ended March 31, 2022:

Dollars in millions			December 31, 2021			Provision						Charge-offs			Recoveries			March 31, 2022
Commercial and Industrial			$	445		$	63					$	(30)		$	11		$	489
Commercial real estate:
Real estate — commercial mortgage			182			(7)						(4)			1			172
Real estate — construction			29			(4)						—			—			25
Total commercial real estate loans			211			(11)						(4)			1			197
Commercial lease financing			32			1						(2)			—			31
Total commercial loans			688			53						(36)			12			717
Real estate — residential mortgage			95			12						1			—			108
Home equity loans			110			(6)						(1)			1			104
Consumer direct loans			105			11						(7)			2			111
Credit cards			61			7						(7)			2			63
Consumer indirect loans			2			—						(1)			1			2
Total consumer loans			373			24						(15)			6			388
Total ALLL — continuing operations			1,061			77			(a)			(51)			18			1,105
Discontinued operations			28			1						(2)			—			27
Total ALLL — including discontinued operations			$	1,089		$	78					$	(53)		$	18		$	1,132

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

As described in Note 1 ("Summary of Significant Accounting Policies"), under the heading “Allowance for Loan and Lease Losses” beginning on page 107 of our 2022 Form 10-K, we estimate the ALLL using relevant available information, from internal and external sources, relating to past events, current economic and portfolio conditions, and reasonable and supportable forecasts. In our estimation of expected credit losses, we use a two year reasonable and supportable period across all products. Following this two year period in which supportable forecasts can be generated, for all modeled loan portfolios, we revert expected credit losses to a level that is consistent with our historical information by reverting the macroeconomic variables (model inputs) to their long run average. We revert to historical loss rates for less complex estimation methods for smaller portfolios. A 20-year fixed length look back period is used to calculate the long run average of the macroeconomic variables. A four quarter reversion period is used where the macroeconomic variables linearly revert to their long run average following the two year reasonable and supportable period.

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

Segment			Portfolio			Key Macroeconomic Variables (a)
Commercial			Commercial and industrial			BBB corporate bond rate (spread), fixed investment, business bankruptcies, GDP, industrial production, and unemployment rate, Producer Price Index
Commercial real estate			Property & real estate price indices, unemployment rate, business bankruptcies, GDP, SOFR
Commercial lease financing			BBB corporate bond rate (spread), GDP, and unemployment rate
Consumer			Real estate — residential mortgage			GDP, home price index, unemployment rate, and 30 year mortgage rate
Home equity			Home price index, unemployment rate, and 30 year mortgage rate
Consumer direct			Unemployment rate and U.S. household income
Consumer indirect			Unemployment rate
Credit cards			Unemployment rate and U.S. household income
Discontinued operations			Unemployment rate

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

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

Economic Outlook

As of March 31, 2023, risk of slowing economic growth is elevated due to the inflationary pressures and stress on financial markets. Unemployment rates are still expected to remain at relatively low levels, but job growth is moderating. Inflation in the United States is starting to ease as the restrictive monetary policy and higher interest rates are making an impact. Asset prices, including residential and commercial real estate values, are expected to come under pressure. We utilized the Moody’s February 2023 Consensus forecast as our baseline forecast to estimate our expected credit losses as of March 31, 2023. We determined such forecast to be a reasonable view of the outlook for the economy given all available information at quarter end.

The baseline scenario reflects slow economic growth over the next two years in markets in which we operate. U.S. GDP growth has slowed, with the annualized rate contracting 0.4% in the first quarter of 2023 and expected to grow at an annual rate of approximately 0.4% and 1.2% for 2023 and 2024, respectively. The national unemployment rate forecast is 3.4% in the first quarter of 2023 and is expected to increase through the fourth quarter of 2023 due to labor supply constraints. The U.S. Consumer Price Index (CPI) annualized rate is expected to remain below 4% over 2023. The national home price index is expected to decline approximately 9% over 2023.

As a result of the current economic uncertainty, our future loss estimates may vary considerably from our March 31, 2023 assumptions.

Commercial Loan Portfolio

The ALLL from continuing operations for the commercial segment increased by $20 million, or 2.3%, from December 31, 2022. The overall change in the commercial allowance is driven by changes in the economic outlook and loan growth.

Changes to the economic forecast reflect lower economic growth projections in 2023, primarily related to high inflation and increased interest rates. The reserve increase is concentrated in the commercial real estate and commercial and industrial portfolios, reflecting the economic changes and more normalized portfolio conditions.

Consumer Loan Portfolio

The ALLL from continuing operations for the consumer segment increased by $23 million, or 4.9%, from December 31, 2022. The overall increase in the allowance is primarily driven by economic forecast changes.

Current reserve levels reflect the overall declining economic outlook quarter-over-quarter, with the most meaningful economic change being the slowing home price environment, which is contributing to higher reserve levels for the residential mortgage portfolio. Deterioration in the unemployment outlook also impacted reserves for all consumer segments.

Credit Risk Profile

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

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

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category and Vintage (a)

As of March 31, 2023			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions			2023			2022			2021			2020			2019			Prior			Total
Commercial and Industrial
Risk Rating:
Pass			$	1,605		$	11,348		$	7,729		$	3,365		$	2,544		$	4,593		$	26,824		$	165		$	58,173
Criticized (Accruing)			24			106			416			143			152			407			951			23			2,222
Criticized (Nonaccruing)			4			34			3			6			3			33			87			—			170
Total commercial and industrial			1,633			11,488			8,148			3,514			2,699			5,033			27,862			188			60,565
Current period gross write-offs			1			1			4			1			—			11			17			—			35
Real estate — commercial mortgage
Risk Rating:
Pass			445			4,602			3,663			959			1,776			3,218			1,087			88			15,838
Criticized (Accruing)			—			16			63			45			85			209			33			—			451
Criticized (Nonaccruing)			—			—			—			1			1			26			31			—			59
Total real estate — commercial mortgage			445			4,618			3,726			1,005			1,862			3,453			1,151			88			16,348
Current period gross write-offs			—			—			—			—			—			3			2			—			5
Real estate — construction
Risk Rating:
Pass			13			774			947			376			231			114			11			6			2,472
Criticized (Accruing)			—			5			—			17			43			51			—			2			118
Criticized (Nonaccruing)			—			—			—			—			—			—			—			—			—
Total real estate — construction			13			779			947			393			274			165			11			8			2,590
Current period gross write-offs			—			—			—			—			—			—			—			—			—
Commercial lease financing
Risk Rating:
Pass			131			982			690			470			427			1,000			—			—			3,700
Criticized (Accruing)			—			23			5			10			10			14			—			—			62
Criticized (Nonaccruing)			—			—			—			—			—			1			—			—			1
Total commercial lease financing			131			1,005			695			480			437			1,015						—			3,763
Current period gross write-offs			—			—			—			—			—			(1)			—			—			(1)
Total commercial loans			$	2,222		$	17,890		$	13,516		$	5,392		$	5,272		$	9,666		$	29,024		$	284		$	83,266
Total commercial loan current period gross write-offs			$	1		$	1		$	4		$	1		$	—		$	13		$	19		$	—		$	39

As of December 31, 2022			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions			2022			2021			2020			2019			2018			Prior			Total
Commercial and Industrial
Risk Rating:
Pass			$	11,580		$	8,636		$	3,540		$	2,839		$	1,787		$	3,307		$	25,565		$	138		$	57,392
Criticized (Accruing)			40			357			131			160			227			205			936			25			2,081
Criticized (Nonaccruing)			34			2			5			4			22			20			87			—			174
Total commercial and industrial			11,654			8,995			3,676			3,003			2,036			3,532			26,588			163			59,647
Real estate — commercial mortgage
Risk Rating:
Pass			4,786			3,817			992			1,853			788			2,578			1,068			67			15,949
Criticized (Accruing)			6			13			20			48			73			175			47			—			382
Criticized (Nonaccruing)			—			—			1			1			1			15			3			—			21
Total real estate — commercial mortgage			4,792			3,830			1,013			1,902			862			2,768			1,118			67			16,352
Real estate — construction
Risk Rating:
Pass			698			895			445			262			107			48			1			—			2,456
Criticized (Accruing)			5			1			5			32			25			4			—			2			74
Criticized (Nonaccruing)			—			—			—			—			—			—			—			—			—
Total real estate — construction			703			896			450			294			132			52			1			2			2,530
Commercial lease financing
Risk Rating:
Pass			1,039			743			509			467			174			947			—			—			3,879
Criticized (Accruing)			15			1			9			12			9			10			—			—			56
Criticized (Nonaccruing)			—			—			—			—			—			1			—			—			1
Total commercial lease financing			1,054			744			518			479			183			958			—			—			3,936
Total commercial loans			$	18,203		$	14,465		$	5,657		$	5,678		$	3,213		$	7,310		$	27,707		$	232		$	82,465

**(a)**Accrued interest of $353 million and $314 million as of March 31, 2023, and December 31, 2022, respectively, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in these tables.

Consumer Credit Exposure

Credit Risk Profile by FICO Score and Vintage (a)

As of March 31, 2023			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions			2023			2022			2021			2020			2019			Prior			Total
Real estate — residential mortgage
FICO Score:
750 and above			$	332		$	5,412		$	8,654		$	2,546		$	614		$	1,015		$	—		$	—		$	18,573
660 to 749			114			1,031			895			277			110			272			—			—			2,699
Less than 660			5			51			37			17			18			143			—			—			271
No Score			—			63			1			1			—			23			1			—			89
Total real estate — residential mortgage			451			6,557			9,587			2,841			742			1,453			1			—			21,632
Current period gross write-offs			—			—			—			—			—			—			—			—			—
Home equity loans
FICO Score:
750 and above			—			128			1,251			628			172			578			2,150			387			5,294
660 to 749			5			76			276			186			77			206			948			127			1,901
Less than 660			—			11			30			27			17			90			294			34			503
No Score			1			—			—			—			—			2			5			—			8
Total home equity loans			6			215			1,557			841			266			876			3,397			548			7,706
Current period gross write-offs			—			—			—			—			—			—			—			—			—
Consumer direct loans
FICO Score:
750 and above			81			1,296			1,600			780			332			133			96			—			4,318
660 to 749			71			449			391			201			106			60			196			—			1,474
Less than 660			6			64			60			31			20			14			57			—			252
No Score			21			50			27			17			11			26			163			—			315
Total consumer direct loans			179			1,859			2,078			1,029			469			233			512			—			6,359
Current period gross write-offs			—			2			2			2			2			1			3			—			12
Credit cards
FICO Score:
750 and above			—			—			—			—			—			—			478			—			478
660 to 749			—			—			—			—			—			—			395			—			395
Less than 660			—			—			—			—			—			—			95			—			95
No Score			—			—			—			—			—			—			1			—			1
Total credit cards			—			—			—			—			—			—			969			—			969
Current period gross write-offs			—			—			—			—			—			—			9			—			9
Consumer indirect loans
FICO Score:
750 and above			—			—			1			—			—			19			—			—			20
660 to 749			—			—			—			—			—			14			—			—			14
Less than 660			—			—			—			—			—			5			—			—			5
No Score			—			—			—			—			—			—			—			—			—
Total consumer indirect loans			—			—			1			—			—			38			—			—			39
Current period gross write-offs			—			—			—			—			—			—			—			—			—
Total consumer loans			$	636		$	8,631		$	13,223		$	4,711		$	1,477		$	2,600		$	4,879		$	548		$	36,705
Total consumer loan current period gross write-offs			$	—		$	2		$	2		$	2		$	2		$	1		$	12		$	—		$	21

As of December 31, 2022			Term Loans																		Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions			2022			2021			2020			2019			2018			Prior			Total
Real estate — residential mortgage
FICO Score:
750 and above			$	5,205		$	8,702		$	2,584		$	636		$	64		$	978		$	—		$	—		$	18,169
660 to 749			1,286			919			282			106			28			260			—			—			2,881
Less than 660			41			42			17			14			15			130			—			—			259
No Score			62			1			1			1			1			25			1			—			92
Total real estate — residential mortgage			6,594			9,664			2,884			757			108			1,393			1			—			21,401
Home equity loans
FICO Score:
750 and above			146			1,044			736			207			74			617			2,238			398			5,460
660 to 749			83			291			194			79			32			187			974			126			1,966
Less than 660			11			31			25			17			10			81			300			37			512
No Score			7			—			—			—			—			2			4			—			13
Total home equity loans			247			1,366			955			303			116			887			3,516			561			7,951
Consumer direct loans
FICO Score:
750 and above			1,291			1,632			811			351			45			97			102			—			4,329
660 to 749			526			434			229			120			26			41			206			—			1,582
Less than 660			58			63			32			23			7			9			57			—			249
No Score			59			32			22			11			9			22			193			—			348
Total consumer direct loans			1,934			2,161			1,094			505			87			169			558			—			6,508
Credit cards
FICO Score:
750 and above			—			—			—			—			—			—			524			—			524
660 to 749			—			—			—			—			—			—			402			—			402
Less than 660			—			—			—			—			—			—			99			—			99
No Score			—			—			—			—			—			—			1			—			1
Total credit cards			—			—			—			—			—			—			1,026			—			1,026
Consumer indirect loans
FICO Score:
750 and above			—			2			—			—			—			19			—			—			21
660 to 749			—			—			—			—			—			15			—			—			15
Less than 660			—			—			—			—			—			7			—			—			7
No Score			—			—			—			—			—			—			—			—			—
Total consumer indirect loans			—			2			—			—			—			41			—			—			43
Total consumer loans			$	8,775		$	13,193		$	4,933		$	1,565		$	311		$	2,490		$	5,101		$	561		$	36,929

**(a)**Accrued interest of $134 million and $103 million as of March 31, 2023, and December 31, 2022, respectively, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.

Nonperforming and Past Due Loans

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 106 of our 2022 Form 10-K.

The following aging analysis of past due and current loans as of March 31, 2023, and December 31, 2022, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio(a)

As of March 31, 2023			Current (b)			30-59 Days Past Due (b)			60-89 Days Past Due (b)			90 and Greater Days Past Due (b)			Non-performing Loans			Total Past Due and Non-performing Loans (b)			Total Loans (c)
Dollars in millions
LOAN TYPE
Commercial and industrial			$	60,299		$	29		$	44		$	23		$	170		$	266		$	60,565
Commercial real estate:
Commercial mortgage			16,265			13			4			7			59			83			16,348
Construction			2,590			—			—			—			—			—			2,590
Total commercial real estate loans			18,855			13			4			7			59			83			18,938
Commercial lease financing			3,755			1			4			2			1			8			3,763
Total commercial loans			$	82,909		$	43		$	52		$	32		$	230		$	357		$	83,266
Real estate — residential mortgage			$	21,548		$	5		$	2		$	2		$	75		$	84		$	21,632
Home equity loans			7,565			24			7			6			104			141			7,706
Consumer direct loans			6,329			13			7			7			3			30			6,359
Credit cards			948			6			4			8			3			21			969
Consumer indirect loans			37			1			—			—			1			2			39
Total consumer loans			$	36,427		$	49		$	20		$	23		$	186		$	278		$	36,705
Total loans			$	119,336		$	92		$	72		$	55		$	416		$	635		$	119,971

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

(b)Accrued interest of $487 million presented in “Accrued income and other assets” on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

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

As of December 31, 2022			Current (b)			30-59 Days Past Due (b)			60-89 Days Past Due (b)			90 and Greater Days Past Due (b)			Non-performing Loans			Total Past Due and Non-performing Loans (b)						Total Loans (c)
Dollars in millions
LOAN TYPE
Commercial and industrial			$	59,366		$	43		$	33		$	31		$	174		$	281					$	59,647
Commercial real estate:
Commercial mortgage			16,305			16			2			8			21			47						16,352
Construction			2,530			—			—			—			—			—						2,530
Total commercial real estate loans			18,835			16			2			8			21			47						18,882
Commercial lease financing			3,928			3			1			3			1			8						3,936
Total commercial loans			$	82,129		$	62		$	36		$	42		$	196		$	336					$	82,465
Real estate — residential mortgage			$	21,307		$	13		$	3		$	1		$	77		$	94					$	21,401
Home equity loans			7,804			27			8			5			107			147						7,951
Consumer direct loans			6,478			15			7			5			3			30						6,508
Credit cards			1,007			5			4			7			3			19						1,026
Consumer indirect loans			42			—			—			—			1			1						43
Total consumer loans			$	36,638		$	60		$	22		$	18		$	191		$	291					$	36,929
Total loans			$	118,767		$	122		$	58		$	60		$	387		$	627					$	119,394

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

(b)Accrued interest of $417 million presented in “Accrued income and other assets” on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.

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

At March 31, 2023, the approximate carrying amount of our commercial nonperforming loans outstanding represented 59% of their original contractual amount owed, total nonperforming loans outstanding represented 70% of their original contractual amount owed, and nonperforming assets in total were carried at 78% of their original contractual amount owed.

Nonperforming loans reduced expected interest income by $8 million for the three months ended March 31, 2023, and $5 million for the three months ended March 31, 2022.

The amortized cost basis of nonperforming loans on nonaccrual status for which there is no related allowance for credit losses was $220 million at March 31, 2023.

Collateral-dependent Financial Assets

We classify financial assets as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of the collateral. Our commercial loans have collateral that includes cash, accounts receivable, inventory, commercial machinery, commercial properties, commercial real estate construction projects, enterprise value, and stock or ownership interests in the borrowing

entity. When appropriate we also consider the enterprise value of the borrower as a repayment source for collateral-dependent loans. Our consumer loans have collateral that includes residential real estate, automobiles, boats, and RVs.

There were no significant changes in the extent to which collateral secures our collateral-dependent financial assets during the three months ended March 31, 2023.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023 the Bank adopted the provision of ASU 2022-02, which eliminated the accounting for TDRs while expanding loan modification and vintage disclosure requirements. As part of our loss mitigation activities, we may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Such modifications may include an extension of maturity date, interest rate reduction, an other than insignificant payment delay, other modifications, or some combination thereof. Many factors can go into what is considered an other than insignificant payment delay such as the significance of the restricted payment amount relative to the normal loan payment or the relative significance of the delay to the original loan terms. Generally, the Bank considers any delay in payment of greater than 90 days in the last 12 months to be significant. The ALLL for loans modified for borrowers experiencing financial difficulty is determined based on Key’s ALLL policy as described within Note 1 (“Basis of Presentation and Accounting Policies”).

Modifications for Borrowers Experiencing Financial Difficulty

The Bank’s strategy in working with commercial borrowers is to allow them time to improve their financial position through loan modification. Commercial borrowers that are rated substandard or worse in accordance with the regulatory definition, or that cannot otherwise restructure at market terms and conditions, are considered to be experiencing financial difficulty. A modification of a loan is subject to the normal underwriting standards and processes for other similar credit extensions, both new and existing. The modified loan is evaluated to determine if it is a new loan or a continuation of the prior loan.

Consumer loans in which a borrower requires a modification as a result of negative changes to their financial condition or to avoid default, generally indicate the borrower is experiencing financial difficulty. The primary modifications made to consumer loans are amortization, maturity date and interest rate changes. Consumer borrowers identified as experiencing financial difficulty are generally unable to refinance their loans through the Company’s normal origination channel or through other independent sources.

The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficult, disaggregated by class of loan and type of concession granted. The table does not include those modifications that only resulted in an insignificant payment delay. The table does not include consumer loans that are still within a trial modification period. Trial modifications may be done for consumer borrowers where a trial payment plan period is offered in advance of a permanent loan modification. As of March 31, 2023, there were 136 loans totaling $17 million in a trial modification period.

Commitments outstanding to lend additional funds to borrowers experiencing financial difficulty whose loans were modified were $23 million at March 31, 2023.

As of March 31, 2023			Interest Rate Reduction			Term Extension			Other			Combination			Total
Dollars in millions			Amortized Cost Basis						Amortized Cost Basis						Amortized Cost Basis						Amortized Cost Basis						Amortized Cost Basis			% of Total Loan Type
LOAN TYPE
Commercial and Industrial			$	—					$	79					$	1					$	4					$	84		0.14		%
Commercial real estate:
Commercial mortgage			—						4						—						—						4			0.02
Construction			—						—						—						—						—			—
Total commercial real estate loans			—						4						—						—						4			0.02
Commercial lease financing			—						—						—						—						—			—
Total commercial loans			$	—					$	83					$	1					$	4					$	88		0.11		%
Real estate — residential mortgage			—						—						—						1						1			—
Home equity loans			—						—						—						2						2			0.03
Consumer direct loans			—						—						—						1						1			0.02
Credit cards			—						—						—						1						1			0.10
Consumer indirect loans			—						—						—						—						—			—
Total consumer loans			—						—						—						5						5			0.01
Total loans			$	—					$	83					$	1					$	9					$	93		0.08		%

Financial Effects of Modifications to Borrowers Experiencing Financial Difficulty

The following table summarizes the financial impacts of loan modifications made to specific loans during the three months ended March 31, 2023.

Three months ended March 31, 2023			Weighted-average Interest Rate Reduction			Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial			—		%	1.03
Commercial mortgage			—		%	1.42
Real estate — residential mortgage			1.33		%	6.68
Home equity loans			3.72		%	2.90

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

As of March 31, 2023, there were $4 million of Commercial and Industrial loans that were modified for borrowers experiencing financial difficulty that received combination modifications and subsequently defaulted during the period.

Key closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified for borrowers experiencing financial difficulty since the adoption of ASU 2022-02 on January 1, 2023.

As of March 31, 2023			Current			30-89 Days Past Due						90 and Greater Days Past Due			Total
Dollars in millions
LOAN TYPE
Commercial and Industrial			$	80		$	3					$	1		$	84
Commercial real estate
Commercial mortgage			4			—						—			4
Construction			—			—						—			—
Total commercial real estate loans			84			3						1			88
Commercial lease financing			—			—						—			—
Total commercial loans			84			3						1			88
Real estate — residential mortgage			1			—						—			1
Home equity loans			2			—						—			2
Consumer direct loans			1			—						—			1
Credit cards			1			—						—			1
Consumer indirect loans			—			—						—			—
Total consumer loans			$	5		$	—					$	—		$	5
Total loans			$	89		$	3					$	1		$	93

Liability for Credit Losses on Off Balance Sheet Exposures

The liability for credit losses on off balance sheet exposure is included in “accrued expense and other liabilities” on the balance sheet. This includes credit risk for recourse associated with loans sold under the Fannie Mae Delegated Underwriting and Servicing program and credit losses inherent in unfunded lending-related commitments, such as letters of credit and unfunded loan commitments, and certain financial guarantees.

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

			Three months ended March 31,
Dollars in millions			2023			2022
Balance at beginning of period			$	225		$	160
Provision (credit) for losses on off balance sheet exposures			51			6
Balance at end of period			$	276		$	166

TDR Disclosures Prior to the Adoption of ASU 2022-02

Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. On January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all modifications occurring on or after January 1, 2023. See Note 1 (“Summary of Significant Accounting Policies”) in our 2022 Form 10-K for more information on TDR accounting and disclosure requirements and Note 1 (“Summary of Significant Accounting Policies”) under the heading “Basis of Presentation” in this report for more information on our adoption of ASU 2022-02.

Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs were $1 million at March 31, 2022.

The consumer TDR other concession category in the table below primarily includes those borrowers’ debts that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed. At March 31, 2022, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $126 million.

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

						Three Months Ended March 31,
Dollars in millions						2022
Commercial loans:
Extension of Maturity Date						$	—
Payment or Covenant Modification/Deferment						1
Bankruptcy Plan Modification						—
Increase in new commitment or new money						—
Total						$	1
Consumer loans:
Interest rate reduction						$	1
Other						9
Total						$	10
Total TDRs						$	11

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

									Three Months Ended March 31,
Dollars in millions												2022
Balance at beginning of the period												$	220
Additions												11
Payments												(12)
Charge-offs												—
Balance at end of period												$	219

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

									December 31, 2022
															Number of Loans			Pre-modification Outstanding Recorded Investment			Post-modification Outstanding Recorded Investment
Dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial															27			$	60		$	45
Commercial real estate:
Commercial mortgage															4			50			13
Total commercial real estate loans															4			50			13
Total commercial loans															31			110			58
Real estate — residential mortgage															238			30			27
Home equity loans															468			32			28
Consumer direct loans															156			2			2
Credit cards															331			2			2
Consumer indirect loans															16			2			1
Total consumer loans															1,209			68			60
Total nonperforming TDRs															1,240			178			118
Prior-year accruing:****(a)
Commercial and industrial															19			—			—
Commercial real estate
Commercial mortgage															—			—			—
Total commercial real estate loans															—			—			—
Total commercial loans															19			—			—
Real estate — residential mortgage															425			41			35
Home equity loans															1,547			96			73
Consumer direct loans															272			4			3
Credit cards															607			4			2
Consumer indirect loans															95			11			5
Total consumer loans															2,946			156			118
Total prior-year accruing TDRs															2,965			156			118
Total TDRs															4,205			$	334		$	236

(a)All TDRs that were restructured prior to January 1, 2022 are fully accruing.

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the three months ended March 31, 2022, there were four commercial loan TDRs and 38 consumer loan TDRs with a combined recorded investment of $8 million that experienced payment defaults after modifications resulting in TDR status during 2021.

5. Fair Value Measurements

In accordance with GAAP, Key measures certain assets and liabilities at fair value. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants in our principal market. Additional information regarding our accounting policies for determining fair value is provided in Note 6 (“Fair Value Measurements”) and Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” of our 2022 Form 10-K.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. For more information on the valuation techniques used to measure classes of assets and liabilities reported at fair value on a recurring basis as well as the classification of each in the valuation hierarchy, refer to Note 6 (“Fair Value Measurements” in our 2022 Form 10-K. The following tables present these assets and liabilities at March 31, 2023, and December 31, 2022.

			March 31, 2023												December 31, 2022
			Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Dollars in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations			$	—		$	926		$	—		$	926		$	—		$	698		$	—		$	698
States and political subdivisions			—			36			—			36			—			33			—			33
Other mortgage-backed securities			—			152			—			152			—			84			—			84
Other securities			—			3			—			3			—			—			—			—
Total trading account securities			—			1,117			—			1,117			—			815			—			815
Commercial loans			—			1			—			1			—			14			—			14
Total trading account assets			—			1,118			—			1,118			—			829			—			829
Securities available for sale:
U.S. Treasury, agencies and corporations			—			9,514			—			9,514			—			9,415			—			9,415
States and political subdivisions			—			—			—			—			—			—			—			—
Agency residential collateralized mortgage obligations			—			16,425			—			16,425			—			16,433			—			16,433
Agency residential mortgage-backed securities			—			3,900			—			3,900			—			3,920			—			3,920
Agency commercial mortgage-backed securities			—			9,659			—			9,659			—			9,349			—			9,349
Other securities			—			—			—			—			—			—			—			—
Total securities available for sale			$	—		$	39,498		$	—		$	39,498		$	—		$	39,117		$	—		$	39,117
Other investments:
Principal investments:
Direct			$	—		$	—		$	1		$	1		$	—		$	—		$	1		$	1
Indirect (measured at NAV) (a)			—			—			—			20			—			—			—			34
Total principal investments			—			—			1			21			—			—			1			35
Equity investments:
Direct			3			—			2			5			4			—			2			6
Direct (measured at NAV) (a)			—			—			—			31			—			—			—			32
Indirect (measured at NAV) (a)			—			—			—			4			—			—			—			4
Total equity investments			3			—			2			40			4			—			2			42
Total other investments			3			—			3			61			4			—			3			77
Loans, net of unearned income (residential)			—			—			9			9			—			—			9			9
Loans held for sale (residential)			—			45			—			45			—			24			—			24
Derivative assets:
Interest rate			—			228			13			241			—			301			2			303
Foreign exchange			113			18			—			131			112			23			—			136
Commodity			—			986			—			986			—			1,328			—			1,328
Credit			—			—			1			1			—			—			1			1
Other			—			15			1			16			—			13			—			13
Derivative assets			113			1,247			15			1,375			112			1,666			3			1,781
Netting adjustments (b)			—			—			—			(978)			—			—			—			(757)
Total derivative assets			113			1,247			15			397			112			1,666			3			1,024
Total assets on a recurring basis at fair value			$	116		$	41,908		$	27		$	41,128		$	116		$	41,636		$	15		$	41,080
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions			$	58		$	753		$	—		$	811		$	126		$	509		$	—		$	635
Derivative liabilities:
Interest rate			—			1,057			—			1,057			—			1,307			—			1,307
Foreign exchange			95			18			—			113			107			24			—			131
Commodity			—			962			—			962			—			1,304			—			1,304
Credit			—			1			2			3			—			—			3			3
Other			—			9			—			9			—			5			—			5
Derivative liabilities			95			2,047			2			2,144			107			2,640			3			2,750
Netting adjustments (b)			—			—			—			(850)			—			—			—			(1,262)
Total derivative liabilities			95			2,047			2			1,294			107			2,640			3			1,488
Total liabilities on a recurring basis at fair value			$	153		$	2,800		$	2		$	2,105		$	233		$	3,149		$	3		$	2,123

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

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

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at March 31, 2023, as well as financial support provided for the three months ended March 31, 2023, and March 31, 2022.

												Financial support provided
												Three months ended March 31,
			March 31, 2023									2023									2022
Dollars in millions			Fair Value			Unfunded Commitments						Funded Commitments			Funded Other						Funded Commitments			Funded Other
INVESTMENT TYPE
Direct investments			$	1		$	—					$	—		$	—					$	—		$	—
Indirect investments (measured at NAV) (a)			20			3						—			—						—			—
Total			$	21		$	3					$	—		$	—					$	—		$	—

(a) Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. At March 31, 2023, no significant liquidation of the underlying investments has been communicated to Key. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.

Changes in Level 3 Fair Value Measurements

The following table shows the components of the change in the fair values of our Level 3 financial instruments measured at fair value on a recurring basis for the three months ended March 31, 2023, and March 31, 2022.

Dollars in millions			Beginning of Period Balance			Gains (Losses) Included in Other Comprehensive Income			Gains (Losses) Included in Earnings						Purchases			Sales			Settlements			Transfers Other			Transfers into Level 3						Transfers out of Level 3						End of Period Balance			Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2023
Other investments
Principal investments
Direct (a)			$	1		$	—		$	—					$	—		$	—		$	—		$	—		$	—					$	—					$	1		$	—
Other indirect			—			—			—						—			—			—			—			—						—						—			—
Equity investments
Direct (a)			2			—			—						—			—			—			—			—						—						2			—
Loans, net of unearned income (residential)			9			—			—						—			—			—			—			—						—						9			—
Derivative instruments (b)
Interest rate			2			—			6			(c)			18			(1)			—			—			(8)			(d)			(4)			(d)			13			—
Credit			(2)			—			1			(c)			—			—			—			—			—						—						(1)			—
Other (e)			—			—			—			(c)			—			—			—			1			—						—						1			—

Dollars in millions			Beginning of Period Balance			Gains (Losses) Included in Other Comprehensive Income			Gains (Losses) Included in Earnings						Purchases			Sales			Settlements			Transfers Other			Transfers into Level 3						Transfers out of Level 3						End of Period Balance			Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2022
Other investments
Principal investments
Direct (a)			$	1		$	—		$	—					$	—		$	—		$	—		$	—		$	—					$	—					$	1		$	—
Equity investments
Direct (a)			9						(2)						—			—			—			—			—						—						7			(2)
Loans, net of unearned income (residential)			11			—			—						—			—			—			—			—						—						11			—
Derivative instruments (b)
Interest rate			33			—			(11)			(c)			1			—									29			(d)			(9)			(d)			43			—
Credit			(6)			—			1			(c)			—			—			—			—			—						—						(5)			—
Other (e)			5			—			—			(c)			—						—			(7)			—						—						(2)			—

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

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

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

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

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. For more information on the valuation techniques used to measure classes of assets and liabilities measured at fair value on a nonrecurring basis, refer to Note 6 (“Fair Value Measurements”) in our 2022 Form 10-K. There were no liabilities measured at fair value on a nonrecurring basis at March 31, 2023, and December 31, 2022.

The following table presents our assets measured at fair value on a nonrecurring basis at March 31, 2023, and December 31, 2022:

			March 31, 2023															December 31, 2022
Dollars in millions			Level 1			Level 2			Level 3			Total						Level 1			Level 2			Level 3			Total
ASSETS MEASURED ON A NONRECURRING BASIS
Collateral-dependent loans			$	—		$	—		$	60		$	60					$	—		$	—		$	17		$	17
Accrued income and other assets			—			—			72			72						—			—			14			14
Total assets on a nonrecurring basis at fair value			$	—		$	—		$	132		$	132					$	—		$	—		$	31		$	31

We have other investments in equity securities that do not have readily determinable fair values and do not qualify for the practical expedient to measure the investment using a net asset value per share. We have elected to measure these securities at cost less impairment plus or minus adjustments due to observable orderly transactions. Impairment is recorded when there is evidence that the expected fair value of the investment has declined to below the recorded cost. At each reporting period, we assess if these investments continue to qualify for this measurement alternative. At March 31, 2023, and December 31, 2022, the carrying amount of equity investments under this method was $256 million and $249 million, respectively. No impairment was recorded for the three months ended March 31, 2023.

Quantitative Information about Level 3 Fair Value Measurements

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

recurring and nonrecurring assets at March 31, 2023, and December 31, 2022, along with the valuation

techniques used, are shown in the following table:

			Level 3 Asset (Liability)						Valuation Technique			Significant Unobservable Input			Range (Weighted-Average) (a), (b)
Dollars in millions			March 31, 2023			December 31, 2022			March 31, 2023			December 31, 2022
Recurring
Loans, net of unearned income (residential)			$	9		$	9		Market comparable pricing			Comparability factor			61.72 - 87.23% (72.34%)			61.00-86.58% (72.21%)
Derivative instruments:
Interest rate			13			2			Discounted cash flows			Probability of default			.02 - 100% (6.80%)			.02 - 100% (8.00%)
												Loss given default			0 - 1 (.495)			0 - 1 (.492)
Insignificant level 3 assets, net of liabilities(c)			3			1
Nonrecurring
Collateral-dependent loans			60			17			Fair value of collateral			Discount rate			0 - 10.00% (4.00%)			0 - 85.00% (34.00%)
Accrued income and other assets:
OREO and other Level 3 assets (d)			72			14			Appraised value			Appraised value			N/M			N/M

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

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

(c)Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes certain equity investments and certain financial derivative assets and liabilities.

(d)Excludes amounts pertaining to mortgage servicing assets. No mortgage servicing assets required nonrecurring valuation adjustments as of March 31, 2023, and December 31, 2022. Refer to Note 8 (“Mortgage Servicing Assets”) for significant unobservable inputs pertaining to these assets.

Fair Value Disclosures of Financial Instruments

The Levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at March 31, 2023, and December 31, 2022, are shown in the following tables. Assets and liabilities are further arranged by measurement category.

			March 31, 2023
						Fair Value
Dollars in millions			Carrying Amount			Level 1			Level 2			Level 3			Measured at NAV			Netting Adjustment						Total
ASSETS (by measurement category)
Fair value - net income
Trading account assets (b)			$	1,118		$	—		$	1,118		$	—		$	—		$	—					$	1,118
Other investments (b)			1,587			3			—			1,530			54			—						1,587
Loans, net of unearned income (residential) (d)			9			—			—			9			—			—						9
Loans held for sale (residential) (b)			45			—			45			—			—			—						45
Derivative assets - trading (b)			382			113			1,193			15			—			(939)			(f)			382
Fair value - OCI
Securities available for sale (b)			39,498			—			39,498			—			—			—						39,498
Derivative assets - hedging (b)(g)			15			—			54			—			—			(39)			(f)			15
Amortized cost
Held-to-maturity securities (c)			9,561			—			9,085			—			—			—						9,085
Loans, net of unearned income (d)			118,582			—			—			112,964			—			—						112,964
Loans held for sale (b)			1,166			—			—			1,166			—			—						1,166
Other
Cash and other short-term investments (a)			9,194			9,194			—			—			—			—						9,194
LIABILITIES (by measurement category)
Fair value - net income
Derivative liabilities - trading (b)			$	1,332		$	95		$	2,070		$	2		$	—		$	(835)		(f)			$	1,332
Fair value - OCI
Derivative liabilities - hedging (b)(g)			(38)			—			(23)			—			—			(15)			(f)			(38)
Amortized cost
Time deposits (e)			13,838			—			13,898			—			—			—						13,898
Short-term borrowings (a)			11,435			58			11,377			—			—			—						11,435
Long-term debt (e)			22,753			12,195			9,696			—			—			—						21,891
Other
Deposits with no stated maturity (a)			130,310			—			130,310			—			—			—						130,310

			December 31, 2022
						Fair Value
Dollars in millions			Carrying Amount			Level 1			Level 2			Level 3			Measured at NAV			Netting Adjustment						Total
ASSETS (by measurement category)
Fair value - net income
Trading account assets (b)			$	829		$	—		$	829		$	—		$	—		$	—					$	829
Other investments (b)			1,308			4			—			1,234			70			—						1,308
Loans, net of unearned income (residential) (d)			9			—			—			9			—			—						9
Loans held for sale (residential) (b)			24			—			24			—			—			—						24
Derivative assets - trading (b)			927			$	112		1,552			3			—			(740)			(f)			927
Fair value - OCI
Securities available for sale (b)			39,117			—			39,117			—			—			—						39,117
Derivative assets - hedging (b)(g)			97			—			114			—			—			(17)			(f)			97
Amortized cost
Held-to-maturity securities (c)			8,710			—			8,113			—			—			—						8,113
Loans, net of unearned income (d)			118,048			—			—			112,590			—			—						112,590
Loans held for sale (b)			939			—			—			939			—			—						939
Other
Cash and other short-term investments (a)			3,319			3,319			—			—			—			—						3,319
LIABILITIES (by measurement category)
Fair value - net income
Derivative liabilities - trading (b)			$	1,485		$	107		$	2,637		$	3		$	—		$	(1,262)		(f)			$	1,485
Fair value - OCI
Derivative liabilities - hedging (b)(g)			3			—			3			—			—			—			(f)			3
Amortized cost
Time deposits (e)			7,373			—			7,392			—			—			—						7,392
Short-term borrowings (a)			9,463			126			9,337			—			—			—						9,463
Long-term debt (e)			19,307			12,196			6,685			—			—			—						18,881
Other
Deposits with no stated maturity (a)			135,222			—			135,222			—			—			—						135,222

Valuation Methods and Assumptions

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

(b)Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” within our 2022 Form 10-K Note 6 (“Fair Value Measurements”). Investments accounted for under the cost method (or cost less impairment adjusted for observable price changes for certain equity investments) are classified as Level 3 assets. These investments are not actively traded in an open market as sales for these types of investments are rare. The carrying amount of the investments carried at cost are adjusted for declines in value if they are considered to be other-than-temporary (or due to observable orderly transactions of the same issuer for equity investments eligible for the cost less impairment measurement alternative). These adjustments are included in “other income” on the income statement.

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

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

(e)Fair values of time deposits and long-term debt classified as Level 2 are based on discounted cash flows utilizing relevant market inputs.

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

(g)Derivative assets-hedging and derivative liabilities-hedging includes both cash flow and fair value hedges. Additional information regarding our accounting policies for cash flow and fair value hedges is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging” beginning on page 111 of our 2022 Form 10-K.

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

• Loans at carrying value, net of allowance, of $407 million ($334 million at fair value) at March 31, 2023, and $434 million ($357 million at fair value) at December 31, 2022.

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

6. Securities

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

			March 31, 2023															December 31, 2022
Dollars in millions			Amortized Cost (a)			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value						Amortized Cost (b)			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations			$	10,027		$	—		$	513		$	9,514					$	10,044		$	—		$	629		$	9,415
Agency residential collateralized mortgage obligations			19,770			—			3,345			16,425						20,180			—			3,747			16,433
Agency residential mortgage-backed securities			4,534			—			634			3,900						4,616			—			696			3,920
Agency commercial mortgage-backed securities			10,848			5			1,194			9,659						10,712			2			1,365			9,349
Other securities			—			—			—			—						—			—			—			—
Total securities available for sale			$	45,179		$	5		$	5,686		$	39,498					$	45,552		$	2		$	6,437		$	39,117
HELD-TO-MATURITY SECURITIES
Agency residential collateralized mortgage obligations			$	5,566		$	15		$	232		$	5,349					$	4,586		$	5		$	283		$	4,308
Agency residential mortgage-backed securities			177			—			12			165						181			—			16			165
Agency commercial mortgage-backed securities			2,584			2			184			2,402						2,522			1			208			2,315
Asset-backed securities (c)			1,219			—			64			1,155						1,407			—			96			1,311
Other securities			15			—			1			14						14			—			—			14
Total held-to-maturity securities			$	9,561		$	17		493			$	9,085					$	8,710		$	6		$	603		$	8,113

(a)Amortized cost amounts exclude accrued interest receivable which is recorded within Other Assets on the balance sheet. At March 31, 2023, accrued interest receivable on available for sale securities and held-to-maturity securities totaled $66 million and $24 million, respectively.

(b)Amortized cost amounts exclude accrued interest receivable which is recorded within Other Assets on the balance sheet. At December 31, 2022, accrued interest receivable on available for sale securities and held-to-maturity securities totaled $67 million and $88 million, respectively.

(c)Consists primarily of $1.2 billion of securities as of March 31, 2023, and $1.4 billion of securities as of December 31, 2022, related to the purchase of senior notes from a securitization collateralized by sold indirect auto loans.

The following table summarizes securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of March 31, 2023, and December 31, 2022.

			Duration of Unrealized Loss Position
			Less than 12 Months									12 Months or Longer									Total
Dollars in millions			Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses
March 31, 2023
Securities available for sale:
U.S Treasury, agencies, and corporations			$	—		$	—					$	9,514		$	513					$	9,514		$	513
Agency residential collateralized mortgage obligations			127			4						16,297			3,341						16,424			3,345
Agency residential mortgage-backed securities			350			12						3,547			622						3,897			634
Agency commercial mortgage-backed securities			2,780			118						6,684			1,076						9,464			1,194
Held-to-maturity securities:
Agency residential collateralized mortgage obligations			2,935			85						1,399			147						4,334			232
Agency residential mortgage-backed securities			45			2						119			10						164			12
Agency commercial mortgage-backed securities			370			32						1,958			152						2,328			184
Asset-backed securities			—			—						1,155			64						1,155			64
Other securities			10			—			(a)			4			1						14			1
Total securities in an unrealized loss position			$	6,617		$	253					$	40,677		$	5,926					$	47,294		$	6,179
December 31, 2022
Securities available for sale:
U.S. Treasury, agencies, and corporations			$	494		$	48					$	8,920		$	581					$	9,414		$	629
Agency residential collateralized mortgage obligations			3,114			377						13,317			3,370						16,431			3,747
Agency residential mortgage-backed securities			579			31						3,338			665						3,917			696
Agency commercial mortgage-backed securities			4,511			282						4,791			1,083						9,302			1,365
Held-to-maturity securities:
Agency residential collateralized mortgage obligations			2,659			178						726			105						3,385			283
Agency residential mortgage-backed securities			165			16						—			—						165			16
Agency commercial mortgage-backed securities			2,243			208						—			—						2,243			208
Asset-backed securities			1			—			(b)			1,309			96						1,310			96
Other securities			10			—			(b)			4			—			(b)			14			—
Total securities in an unrealized loss position			$	13,776		$	1,140					$	32,405		$	5,900					$	46,181		$	7,040

(a)At March 31, 2023, gross unrealized losses totaled less than $1 million for other securities held-to-maturity with a loss duration of less than 12 months.

(b)At December 31, 2022, gross unrealized losses totaled less than $1 million for asset-back securities and other securities held-to-maturity with a loss duration of less than 12 months. At December 31, 2022, gross unrealized losses totaled less than $1 million for agency residential mortgage-backed securities held-to-maturity with a loss duration greater than 12 months or longer.

Based on our evaluation at March 31, 2023, an allowance for credit losses has not been recorded nor have unrealized losses been recognized into income. The issuers of the securities are of high credit quality and have a history of no credit losses, management does not intend to sell, and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely attributed to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments.

At March 31, 2023, securities available for sale and held-to-maturity securities totaling $31.5 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

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

March 31, 2023			Securities Available for Sale						Held to Maturity Securities
Dollars in millions			Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in one year or less			$	1,944		$	1,887		$	21		$	21
Due after one through five years			15,833			14,676			5,497			5,222
Due after five through ten years			21,477			18,176			3,191			3,023
Due after ten years			5,925			4,759			852			819
Total			$	45,179		$	39,498		$	9,561		$	9,085

7. Derivatives and Hedging Activities

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

At March 31, 2023, after taking into account the effects of bilateral collateral and master netting agreements, we had $15 million of derivative assets and $38 million of derivative liabilities in a positive fair value position that relate to contracts entered into for hedging purposes. As a result of bilateral collateral and master netting agreements, we could have derivative contracts with negative fair values included in derivative assets and contracts with positive fair values included in derivative liabilities. As of the same date, after taking into account the effects of bilateral collateral and master netting agreements and a reserve for potential future losses, we had derivative assets of $382 million and derivative liabilities of $1.3 billion that were not designated as hedging instruments. These positions are primarily comprised of derivative contracts entered into for client accommodation purposes.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging” beginning on page 111 of our 2022 Form 10-K. Our derivative strategies and related risk management objectives are described in Note 8 (“Derivatives and Hedging Activities”) beginning on page 137 of our 2022 Form 10-K.

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

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2023, and December 31, 2022. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the Consolidated Balance Sheets, as follows:

			March 31, 2023												December 31, 2022
						Fair Value**(a)**												Fair Value**(a)**
Dollars in millions			Notional Amount			Derivative Assets			Derivative Liabilities						Notional Amount			Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate			$	50,243		$	54		$	(23)					$	41,200		$	114		$	3
Derivatives not designated as hedging instruments:
Interest rate			84,338			187			1,080						80,772			189			1,304
Foreign exchange			10,320			131			113						9,507			136			131
Commodity			14,382			986			962						16,176			1,328			1,304
Credit			146			1			3						95			1			3
Other (b)			1,860			16			9						940			13			5
Total derivatives not designated as hedging instruments:			111,046			1,321			2,167						107,490			1,667			2,747
Netting adjustments (c)			—			(978)			(850)						—			(757)			(1,262)
Net derivatives in the balance sheet			161,289			397			1,294						148,690			1,024			1,488
Other collateral (d)			—			—			(13)						—			—			(5)
Net derivative amounts			$	161,289		$	397		$	1,281					$	148,690		$	1,024		$	1,483

(a)We take into account bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related cash collateral when recognizing derivative assets and liabilities. As a result, we could have derivative contracts with negative fair values included in derivative assets and contracts with positive fair values included in derivative liabilities.

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

(c)Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. Excess collateral that has not been offset against net derivative instrument positions totaled $184 million of collateral posted and $58 million of collateral held.

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

Fair value hedges. During the three months ended March 31, 2023, we did not exclude any portion of fair value hedging instruments from the assessment of hedge effectiveness.

The following tables summarize the amounts that were recorded on the balance sheet as of March 31, 2023, and December 31, 2022, related to cumulative basis adjustments for fair value hedges.

			March 31, 2023
Dollars in millions			Balance sheet line item in which the hedge item is included			Carrying amount of hedged item (a)			Hedge accounting basis adjustment (b)
Interest rate contracts			Long-term debt			$	10,836		$	(359)
Interest rate contracts			Securities Available for Sale**(c)**			1,663			53
			December 31, 2022
			Balance sheet line item in which the hedge item is included			Carrying amount of hedged item (a)			Hedge accounting basis adjustment (b)
Interest rate contracts			Long-term debt			$	10,411		$	(552)
Interest rate contracts			Securities Available for Sale**(c)**			405			48

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

(b)Basis adjustments related to de-designated hedged items that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $6 million and $6 million at March 31, 2023, and December 31, 2022, respectively.

(c)Certain amounts are designed as fair value hedges under the last-of-layer method. The carrying amount represents the amortized costs basis of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the relationship. At March 31, 2023, and December 31, 2022, the amortized costs of the closed portfolios in these hedging relationships was $695 million and $708 million, respectively.

Cash flow hedges. During the three-month period ended March 31, 2023, we did not exclude any portion of cash flow hedging instruments from the assessment of hedge effectiveness.

Considering the interest rates, yield curves, and notional amounts as of March 31, 2023, we expect to reclassify an estimated $609 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI to income during the next 12 months. In addition, we expect to reclassify approximately $3 million of net losses related to terminated cash flow hedges from AOCI to income during the next 12 months. These reclassified amounts could differ from actual amounts recognized due to changes in interest rates hedge de-designations and the addition of other hedges subsequent to March 31, 2023. As of March 31, 2023, the maximum length of time over which we hedge forecasted transactions is 4.76 years.

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three-month periods ended March 31, 2023, and March 31, 2022.

			Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
Dollars in millions			Interest expense – long-term debt			Interest income – loans						Interest Income - securities			Investment banking and debt placement fees
Three months ended March 31, 2023
Total amounts presented in the consolidated statement of income			$	(275)		$	1,476					$	194		$	145
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items			$	(155)		$	—					$	6		$	—
Recognized on derivatives designated as hedging instruments			108			—						(2)			—
Net income (expense) recognized on fair value hedges			$	(47)		$	—					$	4		$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income			$	(1)		$	(215)					$	—		$	—
Net income (expense) recognized on cash flow hedges			$	(1)		$	(215)					$	—		$	—
Three months ended March 31, 2022
Total amounts presented in the consolidated statement of income			$	(49)		$	837					$	173		$	163
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items			$	240		$	—					$	(276)		$	—
Recognized on derivatives designated as hedging instruments			(216)			—						282			—
Net income (expense) recognized on fair value hedges			$	24		$	—					$	6		$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income			$	(1)		$	64					$	—		$	2
Net income (expense) recognized on cash flow hedges			$	(1)		$	64					$	—		$	2

The following tables summarize the pre-tax net gains (losses) on our cash flow hedges for the three-month periods ended March 31, 2023, and March 31, 2022, and where they are recorded on the income statement. The table includes net gains (losses) recognized in OCI during the period and net gains (losses) reclassified from OCI into income during the current period.

Dollars in millions			Net Gains (Losses) Recognized in OCI			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income			Net Gains (Losses) Reclassified From OCI Into Income
Three months ended March 31, 2023
Cash Flow Hedges
Interest rate			$	109		Interest income — Loans			$	(215)
Interest rate			(1)			Interest expense — Long-term debt			(1)
Interest rate			(1)			Investment banking and debt placement fees			—
Total			$	107					$	(216)
Three months ended March 31, 2022
Cash Flow Hedges
Interest rate			$	(670)		Interest income — Loans			$	64
Interest rate			3			Interest expense — Long-term debt			(1)
Interest rate			9			Investment banking and debt placement fees			2
Total			$	(658)					$	65

Nonhedging instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2023, and March 31, 2022, and where they are recorded on the income statement.

			Three months ended March 31, 2023															Three months ended March 31, 2022
Dollars in millions			Corporate services income			Consumer mortgage income			Other income						Total						Corporate services income			Consumer mortgage income			Other income						Total
NET GAINS (LOSSES)
Interest rate			$	12		$	—		$	(2)					$	10					$	13		$	—		$	9					$	22
Foreign exchange			13			—			—						13						13			—			—						13
Commodity			7			—			—						7						5			—			—						5
Credit			—			—			(14)						(14)						2			—			(10)						(8)
Other			—			1			(2)						(1)						—			(4)			7						3
Total net gains (losses)			$	32		$	1		$	(18)					$	15					$	33		$	(4)		$	6					$	35

Counterparty Credit Risk

We hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises, or GNMA. Cash collateral of $289 million was netted against derivative assets on the balance sheet at March 31, 2023, compared to $10 million of cash collateral netted against derivative assets at December 31, 2022. The cash collateral netted against derivative liabilities totaled $161 million at March 31, 2023, and $626 million at December 31, 2022. Our means of mitigating and managing exposure to credit risk on derivative contracts is described in Note 8 (“Derivatives and Hedging Activities”) beginning on page 137 of our 2022 Form 10-K under the heading “Counterparty Credit Risk.”

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

Dollars in millions			March 31, 2023			December 31, 2022
Interest rate			$	169		$	136
Foreign exchange			63			67
Commodity			439			820
Credit			—			—
Other			15			11
Derivative assets before collateral			686			1,034
Plus(Less): Related collateral			(289)			(10)
Total derivative assets			$	397		$	1,024

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

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

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

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

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

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

counterparty credit risk. At March 31, 2023, we had gross exposure of $632 million to broker-dealers and banks. We had net exposure of $41 million after the application of master netting agreements and cash collateral, where such qualifying agreements exist.

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

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

“accrued income and other assets”) in the amount of $15 million at March 31, 2023. The CVA is calculated from

potential future exposures, expected recovery rates, and market-implied probabilities of default. At March 31, 2023, we had gross exposure of $495 million to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements. We had net exposure of $356 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve.

Credit Derivatives

We are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. Our credit derivative portfolio was in a net liability position of $2 million as of March 31, 2023, and $2 million as of December 31, 2022. Our credit derivative portfolio consists of traded credit default swap indices and risk participation agreements. Additional descriptions of our credit derivatives are provided in Note 8 (“Derivatives and Hedging Activities”) beginning on page 137 of our 2022 Form 10-K under the heading “Credit Derivatives.”

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2023, and December 31, 2022. The notional amount represents the amount that the seller could

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

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

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

internal risk rating.

			March 31, 2023												December 31, 2022
Dollars in millions			Notional Amount			Average Term (Years)			Payment / Performance Risk						Notional Amount			Average Term (Years)			Payment / Performance Risk
Other			$	1		11.04			6.05		%				$	1		15.17			5.10		%
Total credit derivatives sold			$	1		—			—						$	1		—			—

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At March 31, 2023, KeyBank’s rating was “A3” with Moody’s and “A-” with S&P, and KeyCorp’s rating was “Baa1” with Moody’s and “BBB+” with S&P. Refer to the table below for the aggregate fair value of all derivative contracts with credit risk contingent features held by KeyBank that were in a net liability position.

Dollars in millions			March 31, 2023									December 31, 2022
Net derivative liabilities with credit-risk contingent features			(171)									(612)
Collateral posted			141									534

As of March 31, 2023, and December 31, 2022, the fair value of additional collateral that could be required to be posted as a result of the credit risk related contingent features being triggered was immaterial to Key’s consolidated financial statements. There were no derivative contracts with credit risk contingent features held by KeyCorp at March 31, 2023.

8. Mortgage Servicing Assets

We originate and periodically sell commercial and residential mortgage loans but continue to service those loans for the buyers. We also may purchase the right to service commercial mortgage loans from other lenders. We record a servicing asset if we purchase or retain the right to service loans in exchange for servicing fees that exceed the going market servicing rate and are considered more than adequate compensation for servicing. Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” beginning on page 112 of our 2022 Form 10-K.

Commercial

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

			Three months ended March 31,
Dollars in millions			2023			2022
Balance at beginning of period			$	653		$	634
Servicing retained from loan sales			9			30
Purchases			4			11
Amortization			(32)			(31)
Temporary (impairments) recoveries			—			—
Balance at end of period			$	634		$	644
Fair value at end of period			$	981		$	846

The fair value of commercial mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted average of the significant unobservable inputs used to determine the fair value of our commercial mortgage servicing assets at March 31, 2023, and March 31, 2022, along with the valuation techniques, are shown in the following table:

Dollars in millions						March 31, 2023												March 31, 2022
Valuation Technique			Significant Unobservable Input			Range						Weighted Average						Range						Weighted Average
Discounted cash flow			Expected defaults			0.96		%	2.00		%	1.06		%				1.00		%	2.00		%	1.12		%
			Residual cash flows discount rate			8.57		%	10.03		%	9.49		%				8.34		%	10.32		%	9.52		%
			Escrow earn rate			4.94		%	4.95		%	4.94		%				2.06		%	2.49		%	2.31		%
			Loan assumption rate			—		%	1.40		%	1.14		%				—		%	1.64		%	1.29		%

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

The amortization of commercial servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of commercial servicing assets for each period, as shown in the table at the beginning of this note, is recorded as a reduction to contractual fee income. The contractual fee income from servicing commercial mortgage loans totaled $78 million for the three-month period ended March 31, 2023, and $67 million for the three-month period ended March 31, 2022. This fee income was offset by $32 million of

amortization for the three-month period ended March 31, 2023, and $31 million for the three-month period ended March 31, 2022. Both the contractual fee income and the amortization are recorded, net, in “commercial mortgage servicing fees” on the income statement.

Residential

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

			Three months ended March 31,
Dollars in millions			2023			2022
Balance at beginning of period			$	106		$	93
Servicing retained from loan sales			1			11
Purchases			—			—
Amortization			(2)			(4)
Temporary (impairments) recoveries			—			1
Balance at end of period			$	105		$	101
Fair value at end of period			$	129		$	116

The fair value of mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted-average of the significant unobservable inputs used to fair value our mortgage servicing assets at March 31, 2023, and March 31, 2022, along with the valuation techniques, are shown in the following table:

						March 31, 2023												March 31, 2022
Valuation Technique			Significant Unobservable Input			Range						Weighted Average						Range						Weighted Average
Discounted cash flow			Prepayment speed			6.41		%	40.74		%	7.30		%				5.84		%	59.51		%	8.82		%
			Discount rate			7.50		%	8.50		%	7.54		%				7.50		%	8.52		%	7.53		%
			Servicing cost			$	62.00		$	8,075		$	67.36					$	62.00		$	8,075		$	67.46

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

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

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

fair value of our residential mortgage servicing assets.

The amortization of servicing assets for March 31, 2023, as shown in the table above, is recorded as a reduction to contractual fee income. The contractual fee income from servicing residential mortgage loans totaled $9 million for the three-month period ended March 31, 2023, and $10 million for the three-month period ended March 31, 2022. This fee income was offset by $2 million of amortization for the three-month period ended March 31, 2023, and $4 million for the three-month period ended March 31, 2022. Both the contractual fee income and the amortization are recorded, net, in “consumer mortgage income” on the income statement.

9. Leases

As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business. For more information on our leasing activity, see Note 10 (“Leases”) beginning on page 145 of our 2022 Form 10-K.

Lessor Equipment Leasing

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

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

			Three months ended March 31,
Dollars in millions			2023			2022
Sales-type and direct financing leases
Interest income on lease receivable			$	19		$	16
Interest income related to accretion of unguaranteed residual asset			3			4
Total sales-type and direct financing lease income			$	22		$	20
Operating leases
Operating lease income related to lease payments			$	24		$	28
Other operating leasing gains			1			4
Total operating lease income and other leasing gains			25			32
Total lease income			$	47		$	52

10. Goodwill

Our annual goodwill impairment testing is performed as of October 1 each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. A quantitative or qualitative testing approach may be used. Additional information pertaining to our accounting policy for goodwill and other intangible assets is summarized in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Goodwill and Other Intangible Assets” beginning on page 112 of our 2022 Form 10-K.

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

Dollars in millions			Consumer Bank			Commercial Bank			Total
BALANCE AT MARCH 31, 2022			$	1,761		$	932		$	2,693
XUP acquisition measurement period adjustment			—			1			1
GradFin acquisition			58			—			58
BALANCE AT DECEMBER 31, 2022			$	1,819		$	933		$	2,752
BALANCE AT MARCH 31, 2023			$	1,819		$	933		$	2,752

11. Variable Interest Entities

Our significant VIEs are summarized below. Additional information pertaining to the criteria used in determining if an entity is a VIE is included in Note 13 (“Variable Interest Entities”) beginning on page 149 of our 2022 Form 10-K.

LIHTC investments. We had $2.1 billion and $1.9 billion of investments in LIHTC operating partnerships at March 31, 2023, and December 31, 2022, respectively. These investments are recorded in “accrued income and other assets” on our Consolidated Balance Sheets. We do not have any loss reserves recorded related to these investments because we believe the likelihood of any loss to be remote. For all legally binding, unfunded equity commitments, we increase our recognized investment and recognize a liability. As of March 31, 2023, and December 31, 2022, we had liabilities of $1.1 billion and $957 million, respectively, related to investments in qualified affordable housing projects, which are recorded in “accrued expenses and other liabilities” on our Consolidated Balance Sheets. We continue to invest in these LIHTC operating partnerships.

The assets and liabilities presented in the table below convey the size of KCDC’s direct and indirect investments at March 31, 2023, and December 31, 2022. As these investments represent unconsolidated VIEs, the assets and liabilities of the investments themselves are not recorded on our Consolidated Balance Sheets. Additional information pertaining to our LIHTC investments is included in Note 13 (“Variable Interest Entities”) beginning on page 149 of our 2022 Form 10-K.

			Unconsolidated VIEs
Dollars in millions			Total Assets			Total Liabilities			Maximum Exposure to Loss
March 31, 2023
LIHTC investments			$	7,921		$	2,913		$	2,514
December 31, 2022
LIHTC investments			$	8,227		$	3,091		$	2,370

We amortize our LIHTC investments over the period that we expect to receive the tax benefits. During the three months ended March 31, 2023, we recognized $53 million of amortization and $51 million of tax credits associated with these investments within “income taxes” on our income statement. During the three months ended March 31, 2022, we recognized $46 million of amortization and $45 million of tax credits associated with these investments within “income taxes” on our income statement.

Principal investments. Our maximum exposure to loss associated with indirect principal investments consists of the investments’ fair value plus any unfunded equity commitments. The fair value of our indirect principal investments totaled $20 million and $34 million at March 31, 2023, and December 31, 2022, respectively. These investments are recorded in “other investments” on our Consolidated Balance Sheets. The table below reflects the size of the private equity funds in which we were invested as well as our maximum exposure to loss in connection with these investments at March 31, 2023, and December 31, 2022.

			Unconsolidated VIEs
Dollars in millions			Total Assets			Total Liabilities			Maximum Exposure to Loss
March 31, 2023
Indirect investments			$	4,523		$	87		$	23
December 31, 2022
Indirect investments			$	6,636		$	90		$	43

Through our principal investing entities, we have formed and funded operating entities that provide management and other related services to our investment company funds, which directly invest in portfolio companies. These entities had no assets at March 31, 2023, and December 31, 2022, that can be used to settle the entities’ obligations. The entities had no liabilities at March 31, 2023, and December 31, 2022, and other equity investors have no recourse to our general credit.

Additional information on our indirect and direct principal investments is provided in Note 6 (“Fair Value Measurements”) beginning on page 125 and in Note 13 (“Variable Interest Entities “) beginning on page 149 of our 2022 Form 10-K.

Other unconsolidated VIEs. We are involved with other various entities in the normal course of business which we have determined to be VIEs. We have determined that we are not the primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact their economic performance or hold a variable interest that could potentially be significant. The table below shows our assets and liabilities associated with these unconsolidated VIEs at March 31, 2023, and December 31, 2022. These assets are recorded in “accrued income and other assets,” “other investments,” “securities available for sale,” “held-to-maturity securities,” and “loans, net of unearned income” on our Consolidated Balance Sheets. Of the total balance as of March 31, 2023, $1.2 billion related to the purchase of senior notes from a securitization collateralized by sold indirect auto loans. Additional information pertaining to our other unconsolidated VIEs is included in Note 13 (“Variable Interest Entities“) under the heading “Other unconsolidated VIEs” on page 151 of our 2022 Form 10-K.

			Other unconsolidated VIEs
Dollars in millions			Total Assets			Total Liabilities
March 31, 2023
Other unconsolidated VIEs			$	1,659		$	—
December 31, 2022
Other unconsolidated VIEs			$	1,798		$	1

12. Income Taxes

Income Tax Provision

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

The effective tax rate, which is the provision for income taxes as a percentage of income before income taxes, was 20.7% for the first quarter of 2023 and 16.7% for the first quarter of 2022. The effective tax rates are less than our combined federal and state statutory tax rate of 23.7%, primarily due to income from investments in tax-advantaged assets such as corporate-owned life insurance and tax credits associated with low-income housing investments.

Deferred Taxes

At March 31, 2023, we had a net deferred tax asset of $1.7 billion, compared to a net deferred tax asset of $2.0 billion at December 31, 2022, which are included in “accrued income and other assets” on the balance sheet. The deferred tax asset is primarily related to market fluctuations in the investment security portfolio accounted for in other comprehensive income.

To determine the amount of deferred tax assets that are more likely than not to be realized, and therefore recorded, we conduct a quarterly assessment of all available evidence. This evidence includes, but is not limited to, taxable income in prior periods, projected future taxable income, and projected future reversals of deferred tax items. These assessments involve a degree of subjectivity and may undergo change. Based on these criteria, we had a valuation allowance of $11 million at March 31, 2023, and $11 million at December 31, 2022. The valuation allowance is associated with federal and state capital loss carryforwards.

Unrecognized Tax Benefits

At March 31, 2023, Key’s unrecognized tax benefits were $40 million. As permitted under the applicable accounting guidance for income taxes, it is our policy to recognize interest and penalties related to unrecognized tax benefits in “income tax expense.”

Pre-1988 Bank Reserves Acquired in a Business Combination

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

13. Acquisitions and Discontinued Operations

Acquisitions

XUP Payments. On November 19, 2021, KeyBank acquired XUP Payments, a B2B focused digital platform. The acquisition was accounted for as a business combination. As a result of the acquisition, we recognized goodwill of $20.6 million and no separately identified intangible assets were recorded. Other acquired assets and liabilities of XUP were immaterial. The valuation was final as of March 31, 2022.

GradFin. On May 2, 2022, KeyBank acquired GradFin, a public service loan forgiveness counseling provider. The acquisition was accounted for as a business combination. Consideration paid totaled $72 million consisting of $62 million in cash and $10 million in contingent consideration. As a result of the acquisition, we recognized goodwill of $58 million and other intangible assets of $12 million, with remaining assets acquired consisting primarily of cash. Other acquired assets and liabilities of GradFin were immaterial. The valuation was final as of September 30, 2022.

Discontinued operations

Discontinued operations primarily includes our government-guaranteed and private education lending business. At March 31, 2023, and December 31, 2022, approximately $407 million and $434 million, respectively, of education loans are included in discontinued assets on the Consolidated Balance Sheets. Net interest income after provision for credit losses for this business is not material and is included in income (loss) from discontinued operations, net of taxes on the Consolidated Statements of Income.

14. Securities Financing Activities

Additional information regarding our securities financing activities, including risk management activities, is provided in Note 1 (“Summary of Significant Accounting Policies”) beginning on page 105 our 2022 Form 10-K and Note 16 (“Securities Financing Activities”) beginning on page 154 of our 2022 Form 10-K.

The following table summarizes our securities financing agreements at March 31, 2023, and December 31, 2022:

			March 31, 2023															December 31, 2022
Dollars in millions			Gross Amount Presented in Balance Sheet			Netting Adjustments (a)			Collateral (b)			Net Amounts						Gross Amount Presented in Balance Sheet			Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements			$	12		$	(12)		$	—		$	—					$	8		$	(8)		$	—		$	—
Securities borrowed			—			—			—			—						—			—			—			—
Total			$	12		$	(12)		$	—		$	—					$	8		$	(8)		$	—		$	—
Offsetting of financial liabilities:
Repurchase agreements (c)			$	59		$	(12)		$	(47)		$	—					$	71		$	(8)		$	(63)		$	—
Total			$	59		$	(12)		$	(47)		$	—					$	71		$	(8)		$	(63)		$	—

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

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

(c)Repurchase agreements are collateralized by mortgage-backed securities and U.S. Treasuries and are contracted on an overnight or continuous basis.

As of March 31, 2023, the carrying amount of assets pledged as collateral against repurchase agreements totaled $122 million. Assets pledged as collateral are reported in “securities available for sale” and “held-to-maturity securities” on the Consolidated Balance Sheets. At March 31, 2023, the liabilities associated with collateral pledged were solely comprised of customer sweep financing activity and had a carrying value of $47 million. The collateral pledged under customer sweep repurchase agreements is posted to a third-party custodian and cannot be sold or repledged by the secured party. The risk related to a decline in the market value of collateral pledged is minimal given the collateral's high credit quality and the overnight duration of the repurchase agreements.

15. Employee Benefits

Pension Plans

The components of net pension cost (benefit) for all funded and unfunded plans are recorded in Other expense and are summarized in the following table. For more information on our Pension Plans and Other Postretirement Benefit Plans, see Note 18 (“Employee Benefits”) beginning on page 157 of our 2022 Form 10-K.

			Three months ended March 31,
Dollars in millions			2023			2022
Interest cost on PBO			$	11		$	7
Expected return on plan assets			(11)			(7)
Amortization of losses			3			4
Settlement loss			—			—
Net pension cost			$	3		$	4

16. Trust Preferred Securities Issued by Unconsolidated Subsidiaries

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

• required distributions on the trust preferred securities;

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

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

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

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

Dollars in millions			Trust Preferred Securities, Net of Discount (a)(d)			Common Stock			Principal Amount of Debentures, Net of Discount (b)(d)			Interest Rate of Trust Preferred Securities and Debentures (c)			Maturity of Trust Preferred Securities and Debentures
March 31, 2023
KeyCorp Capital I			$	156		$	6		$	162		5.494		%	2028
KeyCorp Capital II			90			4			94			6.875			2029
KeyCorp Capital III			116			4			120			7.750			2029
HNC Statutory Trust III			20			1			21			6.322			2035
HNC Statutory Trust IV			20			1			21			6.176			2036
Willow Grove Statutory Trust I			18			1			19			6.082			2037
Westbank Capital Trust II			8			—			8			7.153			2034
Westbank Capital Trust III			8			—			8			7.153			2034
Total			$	436		$	17		$	453		6.533		%	—
December 31, 2022			$	433		$	17		$	450		5.321		%	—

(a)The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture.

(b)We have the right to redeem these debentures. If the debentures purchased by KeyCorp Capital I, HNC Statutory Trust III, Willow Grove Statutory Trust I, HNC Statutory Trust IV, Westbank Capital Trust II, or Westbank Capital Trust III are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (i) the principal amount, plus any accrued but unpaid interest, or (ii) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points for KeyCorp Capital II or 25 basis points for KeyCorp Capital III, or 50 basis points in the case of redemption upon either a tax or a capital treatment event for either KeyCorp Capital II or KeyCorp Capital III, plus any accrued but unpaid interest.

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

(d)Certain trust preferred securities include basis adjustments related to fair value hedges totaling $21 million at March 31, 2023, and $17 million at December 31, 2022. See Note 7 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

17. Contingent Liabilities and Guarantees

Legal Proceedings

Litigation. From time to time, in the ordinary course of business, we and our subsidiaries are subject to various litigation, investigations, and administrative proceedings. Private, civil litigation may range from individual actions involving a single plaintiff to putative class action lawsuits with potentially thousands of class members. Investigations may involve both formal and informal proceedings, by both government agencies and self-regulatory bodies. These matters may involve claims for substantial monetary relief. At times, these matters may present novel claims or legal theories. Due to the complex nature of these various other matters, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information presently known to us, we do not believe there is any matter to which we are a party, or involving any of our properties that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on our financial condition. We continually monitor and reassess the potential materiality of these litigation matters. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Record-Keeping Investigation. The Company’s broker-dealer and investment advisory subsidiaries have been responding to a request for information from the SEC concerning compliance with certain record-keeping requirements relating to business communications transmitted on unapproved electronic communications platforms. The SEC is conducting similar inquiries into recordkeeping practices at other financial institutions. The Company is cooperating with the inquiry.

Guarantees

We are a guarantor in various agreements with third parties. The following table shows the types of guarantees that we had outstanding at March 31, 2023. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Contingencies and Guarantees” beginning on page 113 of our 2022 Form 10-K.

March 31, 2023			Maximum Potential Undiscounted Future Payments			Liability Recorded
Dollars in millions
Financial guarantees:
Standby letters of credit			$	4,838		$	90
Recourse agreement with FNMA			6,812			83
Residential mortgage reserve			3,279			13
Written put options (a)			3,725			248
Total			$	18,654		$	434

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

We determine the payment/performance risk associated with each type of guarantee described below based on the probability that we could be required to make the maximum potential undiscounted future payments shown in the preceding table. We use a scale of low (0% to 30% probability of payment), moderate (greater than 30% to 70% probability of payment), or high (greater than 70% probability of payment) to assess the payment/performance risk, and have determined that the payment/performance risk associated with each type of guarantee outstanding at March 31, 2023, is low. Information pertaining to the nature of each of the guarantees listed below is included in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Guarantees” beginning on page 166 of our 2022 Form 10-K.

Standby letters of credit. At March 31, 2023, our standby letters of credit had a remaining weighted-average life of 1.5 years, with remaining actual lives ranging from less than 1 year to as many as 11.7 years.

Recourse agreement with FNMA. At March 31, 2023, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of 7.3 years, and the unpaid principal balance outstanding of loans sold by us as a participant was $22.2 billion. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 30.7% of the principal balance of loans outstanding at March 31, 2023. FNMA delegates responsibility for originating, underwriting, and servicing mortgages, and we assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan that we sell to FNMA. We maintain a reserve for such potential losses in an amount that we believe approximates the fair value of our liability in addition to the expected credit loss for the guarantee as described in Note 4 (“Asset Quality”).

Residential Mortgage Banking. At March 31, 2023, the unpaid principal balance outstanding of loans sold by us in this program was $10.9 billion. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 30% of the principal balance of loans outstanding at March 31, 2023.

Our liability for estimated repurchase obligations on loans sold, which is included in “accrued expenses and other liabilities” on the Consolidated Balance Sheets, was $13 million at March 31, 2023. For more information on our residential mortgages, see Note 8 (“Mortgage Servicing Assets”).

Written put options. At March 31, 2023, our written put options had an average life of 2.0 years. These written put options are accounted for as derivatives at fair value, as further discussed in Note 7 (“Derivatives and Hedging Activities”).

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

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in the applicable accounting guidance, and from other relationships. Additional information pertaining to types of other off-balance sheet risk is included in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Other Off-Balance Sheet Risk” on page 166 of our 2022 Form 10-K.

18. Accumulated Other Comprehensive Income

Our changes in AOCI for the three months ended March 31, 2023, and March 31, 2022, are as follows:

Dollars in millions			Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative financial instruments						Net pension and postretirement benefit costs			Total
Balance at December 31, 2022			$	(4,895)		$	(1,124)					$	(276)		$	(6,295)
Other comprehensive income before reclassification, net of income taxes			575			80						(1)			654
Amounts reclassified from AOCI, net of income taxes (a)			—			165						2			167
Net current-period other comprehensive income, net of income taxes			575			245						1			821
Balance at March 31, 2023			$	(4,320)		$	(879)					$	(275)		$	(5,474)
Balance at December 31, 2021			$	(403)		$	88					$	(271)		$	(586)
Other comprehensive income before reclassification, net of income taxes			(1,784)			(511)						(1)			(2,296)
Amounts reclassified from AOCI, net of income taxes (a)			—			(50)						3			(47)
Net current-period other comprehensive income, net of income taxes			(1,784)			(561)						2			(2,343)
Balance at March 31, 2022			$	(2,187)		$	(473)					$	(269)		$	(2,929)

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

Our reclassifications out of AOCI for the three months ended March 31, 2023, and March 31, 2022, are as follows:

			Three months ended March 31,						Affected Line Item in the Consolidated Statement of Income
Dollars in millions			2023			2022
Unrealized gains (losses) on derivative financial instruments
Interest rate			$	(215)		$	64		Interest income — Loans
Interest rate			(1)			(1)			Interest expense — Long-term debt
Interest rate			—			2			Investment banking and debt placement fees
			(216)			65			Income (loss) from continuing operations before income taxes
			(51)			15			Income taxes
			$	(165)		$	50		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses			$	(3)		$	(4)		Other expense
Settlement loss			—			—			Other expense
			(3)			(4)			Income (loss) from continuing operations before income taxes
			(1)			(1)			Income taxes
			$	(2)		$	(3)		Income (loss) from continuing operations

19. Shareholders' Equity

Comprehensive Capital Plan

In July 2021, the Board of Directors authorized the repurchase of up to $1.5 billion of our Common Shares, effective for the third quarter of 2021 through the third quarter of 2022. In September 2022, the Board of Directors approved the extension of the previous authorization through the third quarter of 2023. As of March 31, 2023, approximately $752 million remained available for repurchase under the authorization. During the first quarter of 2023, Key repurchased $38 million of shares under this authorization as well as $34 million of shares related to equity compensation programs.

Consistent with our capital plan, the Board declared a quarterly dividend of $.205 per Common Share for the first quarter of 2023.

Preferred Stock

The following table summarizes our preferred stock at March 31, 2023.

Preferred stock series			Amount outstanding (in millions)			Shares authorized and outstanding			Par value			Liquidation preference			Ownership interest per depositary share			Liquidation preference per depositary share			First quarter 2023 dividends paid per depositary share
5.000% Fixed-to-Floating Rate Perpetual Noncumulative Series D			$	525		21,000			$	1		$	25,000		1/25th			$	1,000		$	12.50
6.125% Fixed-to-Floating Rate Perpetual Noncumulative Series E			500			500,000			1			1,000			1/40th			25			.382813
5.650% Fixed Rate Perpetual Noncumulative Series F			425			425,000			1			1,000			1/40th			25			.353125
5.625% Fixed Rate Perpetual Non-Cumulative Series G			450			450,000			1			1,000			1/40th			25			.351563
6.200% Fixed Rate Reset Perpetual Non-Cumulative Series H			600			600,000			1			1,000			1/40th			25			.387500

20. Business Segment Reporting

The following is description of the segments and their primary businesses at March 31, 2023.

Consumer Bank

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

Commercial Bank

The Commercial Bank 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 underwriting, derivatives, foreign exchange, debt and M&A advisory, public finance, and fixed income and equity sales and trading services.

Other

Other includes various corporate treasury activities such as management of our investment securities portfolio, long-term debt, short-term liquidity and funding activities, and balance sheet risk management, our principal investing unit, restructuring charges, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also include intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

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

The table below shows selected financial data for our business segments for the three-month periods ended March 31, 2023, and March 31, 2022. Capital is assigned to each business segment based on a combination of regulatory and economic equity.

Three months ended March 31,			Consumer Bank									Commercial Bank									Other									Total Key
Dollars in millions			2023			2022						2023			2022						2023			2022						2023			2022
SUMMARY OF OPERATIONS
Net interest income (TE)			$	614		$	543					$	475		$	414					$	17		$	63					$	1,106		$	1,020
Noninterest income			228			256						366			394						14			26						608			676
Total revenue (TE) (a)			842			799						841			808						31			89						1,714			1,696
Provision for credit losses			60			43						80			41						(1)			(1)						139			83
Depreciation and amortization expense			21			21						23			31						17			18						61			70
Other noninterest expense			654			642						405			383						56			(25)						1,115			1,000
Income (loss) from continuing operations before income taxes (TE)			107			93						333			353						(41)			97						399			543
Allocated income taxes and TE adjustments			26			22						69			69						(7)			5						88			96
Income (loss) from continuing operations			81			71						264			284						(34)			92						311			447
Income (loss) from discontinued operations, net of taxes			—			—						—			—						1			1						1			1
Net income (loss)			81			71						264			284						(33)			93						312			448
Less: Net income (loss) attributable to noncontrolling interests			—			—						—			—						—			—						—			—
Net income (loss) attributable to Key			$	81		$	71					$	264		$	284					$	(33)		$	93					$	312		$	448
AVERAGE BALANCES (b)
Loans and leases			$	43,086		$	38,654					$	76,306		$	64,684					$	445		$	424					$	119,837		$	103,762
Total assets (a)			45,911			41,786						85,852			74,816						59,088			65,987						190,851			182,589
Deposits			84,492			91,516						52,185			57,241						6,728			1,406						143,405			150,163
OTHER FINANCIAL DATA
Net loan charge-offs (b)			$	24		$	22					$	21		$	11					$	—		$	—					$	45		$	33
Return on average allocated equity (b)			8.98		%	8.02		%				10.39		%	13.26		%				95.76		%	8.29		%				9.13		%	10.80		%
Return on average allocated equity			8.98			8.02						10.39			13.26						92.94			8.38						9.16			10.83
Average full-time equivalent employees (c)			8,046			7,885						2,517			2,416						7,657			6,808						18,220			17,109

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

(b)From continuing operations.

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

21. Revenue from Contracts with Customers

The following table represents a disaggregation of revenue from contracts with customers, by business segment, for the three-month periods ended March 31, 2023, and March 31, 2022. The development and application of the methodologies that we use to allocate items among our business segments is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocations drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

			Three months ended March 31, 2023												Three months ended March 31, 2022
Dollars in millions			Consumer Bank			Commercial Bank			Total Contract Revenue						Consumer Bank			Commercial Bank			Total Contract Revenue
NONINTEREST INCOME
Trust and investment services income			$	100		$	16		$	116					$	106		$	18		$	124
Investment banking and debt placement fees			—			113			113						—			109			109
Services charges on deposit accounts			39			28			67						55			36			91
Cards and payments income			45			32			77						42			36			78
Other noninterest income			2			—			2						2			—			2
Total revenue from contracts with customers			$	186		$	189		$	375					$	205		$	199		$	404
Other noninterest income (a)									$	219											$	246
Noninterest income from Other(b)									14												26
Total noninterest income									$	608											$	676

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

(b)Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations. Refer to Note 20 (“Business Segment Reporting”) for more information.

We had no material contract assets or contract liabilities as of March 31, 2023, and March 31, 2022.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of KeyCorp

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of KeyCorp as of March 31, 2023, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2023 and 2022, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of KeyCorp as of December 31, 2022, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 22, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

Cleveland, Ohio
May 4, 2023