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

211K characters. Original on sec.gov · Markdown

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

Introduction

This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for the quarterly periods ended June 30, 2025, and June 30, 2024. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes in this report. The page locations of specific sections and notes that we refer to are presented in the Table of Contents.

References to our “2024 Form 10-K” refer to our Form 10-K for the year ended December 31, 2024, which has been filed with the SEC and is available on its website (www.sec.gov) and on our website (www.key.com/ir).

Terminology

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

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

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

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

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

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

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

Forward-looking Statements

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

Forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this report

can or will be achieved. Factors that could cause our actual results to differ from those described in forward-looking statements include, but are not limited to:

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

  • complex and evolving laws and regulations regarding privacy and cybersecurity;

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

  • breaches of security or failures of our technology systems due to technological or other factors, cybersecurity threats, and increased risks resulting from remote work;

  • an ineffective risk management framework;

  • negative outcomes from claims, litigation, arbitration, investigations, or governmental proceedings;

  • failure or circumvention of our controls and procedures;

  • our exposure to a wide range of climate-related physical risks across different geographical areas;

  • evolving capital and liquidity standards under applicable regulatory rules;

  • disruption of the U.S. and global financial system and markets, including ongoing volatility in the capital and bond markets and the impact of inflation, tariffs, and a potential global economic downturn or recession;

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

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

  • downgrades in our credit ratings or those of KeyBank;

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

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

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

  • the soundness of other financial institutions, including instability in the financial industry;

  • our concentrated credit exposure in commercial and industrial loans;

  • deterioration of commercial real estate market fundamentals;

  • defaults by our loan clients or counterparties;

  • adverse changes in credit quality trends;

  • declining asset prices;

  • deterioration of asset quality and an increase in credit losses;

  • geopolitical destabilization;

  • labor shortages and supply chain constraints, as well as the impact of inflation;

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

  • our ability to manage reputational risk, including risks related to corporate responsibility and sustainability efforts;

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

  • increased competitive pressure;

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

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

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

  • the potential impact of Scotiabank’s significant equity interest in our business;

  • inaccurate assumptions or estimates underlying our consolidated financial statements;

  • changes in accounting policies, standards, and interpretations; and

  • impairment of goodwill.

Any forward-looking statements made by us or on our behalf speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances, except as required by applicable securities laws. Before making an investment decision, you should carefully consider all risks and uncertainties disclosed in our 2024 Form 10-K, in Part II, Item 1A. "Risk Factors" of this report, and in any subsequent reports filed with the SEC by Key, as well as our registration statements under the Securities Act of 1933, as amended, all of which are or will upon filing be accessible on the SEC’s website at www.sec.gov and on our website at www.key.com/ir.

Executive Overview

Key reported $387 million in net income from continuing operations attributable to Key common shareholders, or diluted earnings per share of $0.35, in the second quarter of 2025.

Our actions and results during the second quarter of 2025 support our corporate strategy described in the “Introduction” section under the “Corporate strategy” heading on page 50 of our 2024 Form 10-K.

  • Our relationship-based business model and our long-term strategic commitment to primacy, that is, serving as our client's primary bank, continues to serve us well, highlighted by a 3% increase quarter-over-quarter in commercial loans and 2% increase year-over-year in client deposits and net new relationship households.

  • Our Assets Under Management stand at a record high of $64.2 billion for the second quarter of 2025, driven by net positive cash inflows and market impacts on portfolios.

  • Our continuous focus on maintaining our risk discipline has and should continue to position us to perform well through all business cycles. Net charge-offs are tracking at the low-end of our current outlook for the year.

  • Our noninterest income increased 10% year-over-year, driven by differentiated fee businesses strategically focused on targeted scale.

  • We ended the quarter with a Common Equity Tier 1 ratio of 11.7%(a), up approximately 120 basis points year-over-year, which positions us to continue to support existing and prospective clients.

(a) June 30, 2025 capital ratios are estimates

Business outlook

Consistent with the forward guidance we provided on July 22, 2025, we expect these current year results, that is, full year 2025 vs. full year 2024:

Category2024 BaselineFY2025 (vs FY 2024)****(a)
Average loans$107.7 Billiondown 1% to 3% (previously down 2% to 5%)
Ending loans$104.3 Billionup ~2% vs YE 2024 (previously Flat vs YE 2024)
PE Commercial Loans$71.9 Billionup ~5% (previously up 2% - 4%)
Net interest income (TE)(c)$3,810 Millionup 20% to 22%(b) (previously up ~20%)
Adjusted noninterest income(c)$2,645 Millionup 5%+
Adjusted noninterest expense(c)$4,520 Millionup 3% to 5%
Net charge-offs to average loans41 bps40 to 45 basis points (FY2025)
Effective tax rate~21% to 22% (FY2025)
Tax-equivalent Effective Rate(d)~23% to 24% (FY2025)

(a) Ranges are shown on an operating basis.

(b) Additional Guidance: Net interest income (TE): 11%+ 4Q25 vs 4Q24 (previously 10%+ 4Q25 vs. 4Q24).

(c) Key is unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly related GAAP financial measures because Key is unable to provide without unreasonable effort a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur. such unavailable information could be significant for future results.

(d) Reflects the estimated full year taxable-equivalent adjustment.

Demographics

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

The Commercial Bank is an aggregation of our Institutional and Commercial operating segments. The Commercial operating segment is a full-service corporate bank focused principally on serving the borrowing, cash management, and capital markets needs of middle market clients within Key’s 15-state branch footprint. 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. It is also a significant, national, commercial real estate lender and third-party master and special servicer of commercial mortgage loans. The operating segment also includes the KBCM platform which provides a broad suite of capital markets products and services including syndicated finance, debt and equity underwriting, fixed income and equity sales and trading, derivatives, foreign exchange, mergers & acquisition and other advisory, and public finance.

Supervision and regulation

The following discussion provides a summary of recent regulatory developments and should be read in conjunction with the disclosure included in our 2024 Form 10-K under the heading “Supervision and Regulation” in Item 1. Business and under the heading “V. Compliance Risk” in Item 1A. Risk Factors as well as the disclosure included in Part II, Item 1A. "Risk Factors" of this report.

Regulatory capital requirements

KeyCorp and KeyBank are subject to regulatory capital requirements that are based largely on the Basel III international capital framework (“Basel III”). The Basel III capital framework and the U.S. implementation of the Basel III capital framework (“Regulatory Capital Rules”) are discussed in more detail in Item 1. Business of our 2024 Form 10-K under the heading “Supervision and Regulation — Regulatory capital requirements.”

Under the Regulatory Capital Rules, standardized approach banking organizations, such as KeyCorp and KeyBank, are required to meet the minimum capital and leverage ratios set forth in Figure 1 below. At June 30, 2025, KeyCorp’s ratios under the fully phased-in Regulatory Capital Rules were as set forth in Figure 1.

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

Ratios (including stress capital buffer)Regulatory Minimum RequirementStress Capital Buffer (b)Regulatory Minimum Stress Capital BufferKeyCorp June 30, 2025 (c)
Common Equity Tier 14.50%3.10%7.60%11.72%
Tier 1 Capital6.003.109.1013.43
Total Capital8.003.1011.1015.72
Leverage (a)4.00N/A4.0010.25

(a)As a standardized approach banking organization, KeyCorp is not subject to the 3% supplementary leverage ratio requirement. However, KeyCorp will be subject to the supplementary leverage ratio if proposed revisions to the Regulatory Capital Rules are adopted.

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

(c)June 30, 2025 capital ratios are estimates

Revised prompt corrective action framework

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

Figure 2. "Well Capitalized" and "Adequately Capitalized" Capital Category Ratios under Revised Prompt Corrective Action Framework

Prompt Corrective ActionCapital Category
RatioWell Capitalized (a)Adequately Capitalized
Common Equity Tier 1 Risk-Based6.50%4.50%
Tier 1 Risk-Based8.006.00
Total Risk-Based10.008.00
Tier 1 Leverage (b)5.004.00

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

(b)As a “standardized approach” banking organization, KeyBank is not subject to the 3% supplementary leverage ratio requirement, which became effective January 1, 2018. However, KeyBank will be subject to the supplementary leverage ratio if proposed revisions to the Regulatory Capital Rules are adopted.

As of June 30, 2025, KeyBank (consolidated) satisfied the risk-based and leverage capital requirements necessary to be considered “well capitalized” for purposes of the revised prompt corrective action framework. However, investors should not regard this determination as a representation of the overall financial condition or prospects of KeyBank because the PCA framework is intended to serve a limited supervisory function. Moreover, it is important to note that the PCA framework does not apply to BHCs, like KeyCorp.

Capital planning and stress testing

KeyCorp is a Category IV banking organization subject to a supervisory stress test every other year. On June 26, 2024, the Federal Reserve announced the results of the supervisory stress test that it conducted of 31 BHCs having

more than $100 billion in total consolidated assets (including KeyCorp). The Federal Reserve indicated that all BHCs subject to the stress test maintained capital ratios above the minimum required levels under the severely adverse scenario. The stress test results for individual BHCs (including KeyCorp) were used by the Federal Reserve to determine a BHC’s updated stress capital buffer requirement. The Federal Reserve published the updated stress capital buffer requirements on August 28, 2024. KeyCorp’s updated stress capital buffer is 3.1%. This stress capital buffer became effective on October 1, 2024 and will remain in effect until September 30, 2025, unless KeyCorp later receives an updated stress capital buffer requirement from the Federal Reserve.

On June 27, 2025, the Federal Reserve announced the results of the supervisory stress test that it conducted of 22 large BHCs (not including KeyCorp). As a Category IV banking organization subject to a supervisory stress test every other year, KeyCorp was not required to participate in the Federal Reserve’s supervisory stress test in 2025.

See Item 1. Business of our 2024 Form 10-K under the heading “Supervision and Regulation - Regulatory capital requirements - Capital planning and stress testing” for a discussion of other developments concerning capital planning and stress testing requirements.

Proposed updates to LFI Rating System

On July 10, 2025, the Federal Reserve issued for public comment a proposal to revise its Large Financial Institution Rating System (the “LFI Rating System”) that applies to BHCs with total consolidated assets of $100 billion or more, including KeyCorp. The proposal would revise the component ratings that a firm must receive to be considered “well managed.” A firm that is not “well managed” faces limitations on certain activities and acquisitions. The Federal Reserve said that the proposed revisions are intended to provide a more accurate assessment of a BHC’s financial and operational strength and resilience and better align the LFI Rating System with the rating systems used for other banking organizations. Comments on the proposal are due 30 days after publication in the Federal Register, or August 14, 2025.

Deposit insurance and assessments

The DIF provides insurance coverage for domestic deposits funded through assessments on insured depository institutions like KeyBank. The amount of deposit insurance coverage for each depositor’s deposits is $250,000 per depository.

The FDIC must assess the premium based on an insured depository institution’s assessment base, calculated as its average consolidated total assets minus its average tangible equity. KeyBank’s current annualized premium assessments can range from $0.025 to $0.45 for each $100 of its assessment base. The rate charged depends on KeyBank’s performance on the FDIC’s “large and highly complex institution” risk-assessment scorecard, which includes factors such as KeyBank’s regulatory rating, its ability to withstand asset and funding-related stress, and the relative magnitude of potential losses to the FDIC in the event of KeyBank’s failure.

See Item 1. Business of our 2024 Form 10-K under the heading “Supervision and Regulation – FDIA, Resolution Authority and Financial Stability - Deposit insurance and assessments” for a discussion of other developments concerning deposit insurance and assessments.

Consumer Financial Protection Bureau

The CFPB, which was created by the Dodd-Frank Act in 2010, was given the authority by that statute to regulate the offer and sale of consumer financial products and services, enforce federal consumer protection laws, and supervise certain providers of consumer financial products and services, including banks with over $10 billion in assets (such as KeyBank). The Trump administration has announced its intention to close the CFPB and has taken various actions to accomplish that objective, including issuing a stop work order to CFPB employees, terminating many CFPB employees, placing other CFPB employees on administrative leave, and significantly reducing the CFPB’s annual funding through legislation. A union representing the CFPB’s employees and other interested parties brought a lawsuit in the United States District Court for District of Columbia, seeking a court order to stop the Trump administration from dismantling the CFPB. On March 25, 2025, the court in that case issued a preliminary injunction, which enjoined the Trump administration from taking actions to dismantle the CFPB. The Trump administration has appealed this court order. On April 11, 2025, the United States Court of Appeals for the District of Columbia Circuit denied, in large part, a request by the Trump administration to stay the preliminary injunction while the appeal is pending, but the court ruled that the administration would be allowed to terminate some CFPB

employees before the appeal is resolved by making particularized assessments that those employees are not necessary to carry out the agency’s statutory duties. Key is monitoring developments in this case.

Data collection and reporting for small business loans

On March 30, 2023, the CFPB issued a final rule to require certain lenders (including depository institutions such as KeyBank) to report detailed data on applications for credit submitted by small businesses, including those owned by women and minorities. This rule was issued to implement Section 1071 of the Dodd-Frank Act. Various lawsuits were brought to challenge this rule. In one of these lawsuits, the CFPB, on April 3, 2025, asked the court to hold the lawsuit in abeyance because the CFPB planned to issue a new proposed rulemaking on this subject. Key is monitoring developments in this case. In that case and two other cases challenging the 1071 rule, courts stayed compliance with the rule for the parties in those cases. On June 18, 2025, the CFPB issued an interim final rule delaying compliance with the 1071 rule for all institutions covered by the rule. The CFPB extended the compliance dates by approximately one year so that the highest volume lenders would not have to begin collecting data in accordance with the 1071 rule until July 1, 2026, and the moderate and smallest volume lenders would not have to begin collecting such data until January 1, 2027, and October 1, 2027, respectively. Comments on the interim final rule were due by July 18, 2025. Key is monitoring developments regarding the status of the 1071 rule.

Personal financial data rights

On October 22, 2024, the CFPB issued a final rule to implement Section 1033 of the Dodd-Frank Act. The 1033 rule requires financial institutions (including KeyBank) to make available to consumers and authorized third parties data concerning covered consumer financial products or services in an electronic form usable by the consumer and authorized third parties. In adopting the rule, the CFPB said that the 1033 rule was a step towards bringing about an “open banking” system in the United States. Following the issuance of this rule, two trade associations and a national bank filed a lawsuit challenging the rule in the United States District Court for the Eastern District of Kentucky. In this lawsuit, the plaintiffs alleged that the CFPB exceeded its statutory authority in adopting the 1033 rule. On May 23, 2025, the CFPB filed a status report with the court saying that it agreed with the plaintiffs that the 1033 rule exceeded the agency’s statutory authority. On May 30, 2025, the parties challenging the rule and the CFPB filed a motion for summary judgment asking the court to invalidate the rule. In a summary judgment motion filed on June 29, 2025, the Financial Technology Association, which had been allowed to intervene in this case, asked the court to uphold the rule. Key is monitoring developments in this case.

Results of Operations

Earnings overview

The following chart provides a reconciliation of net income (loss) from continuing operations attributable to Key common shareholders for the three months ended June 30, 2024, to the three months ended June 30, 2025 (dollars in millions):

241

Net interest income

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

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

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

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

  • interest rate fluctuations and competitive conditions within the marketplace;

  • asset quality; and

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

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

1233

Net interest income (TE) was $1.15 billion for the second quarter of 2025 and the net interest margin was 2.66%. Compared to the second quarter of 2024, net interest income (TE) increased $251 million and net interest margin increased by 62 basis points. These increases primarily reflect the impact of lower deposit costs, reinvestment of proceeds from maturing low-yielding investment securities, fixed rate loans and swaps repricing into higher yielding investments, the repositioning of the available-for-sale portfolio during the third and fourth quarters of 2024, and an improved funding mix as lower-cost deposits increased while wholesale borrowings declined. These benefits were partially offset by the impact of lower interest rates on repricing of certain earning assets and lower loan balances.

For the six months ended June 30, 2025, net interest income (TE) increased $470 million from the same period last year and net interest margin increased by 59 basis points. Net interest income (TE) benefited from a decline in funding costs, including interest-bearing deposit costs, the reinvestment of maturing low-yielding investments, fixed rate loans and swaps into higher-yielding investments, the repositioning of the available-for-sale portfolio during the third and fourth quarters of 2024, and an improved funding mix as lower-cost deposits increased while wholesale borrowings declined. These benefits were partially offset by the impact of lower interest rates on repricing of certain earning assets and lower loan balances.

19711972

Average loans were $105.7 billion for the second quarter of 2025, a decrease of $3.2 billion compared to the second quarter of 2024. Average commercial loans declined by $787 million, primarily driven by a decrease in commercial real estate loans. Average consumer loans declined by $2.5 billion, reflective of broad-based declines across all loan categories.

Average deposits totaled $147.4 billion for the second quarter of 2025, an increase of $3.3 billion compared to the year-ago quarter, reflecting growth in consumer deposits.

Figure 3 shows the various components of our balance sheet that affect interest income and expense and their respective yields or rates for the current period and comparative year ago period. This figure also presents a reconciliation of TE net interest income to net interest income reported in accordance with GAAP for each of those quarters. The net interest margin, which is an indicator of the profitability of the earning assets portfolio less the cost of funding, is calculated by dividing annualized TE net interest income by average earning assets.

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

Three months ended June 30, 2025Three months ended June 30, 2024Change in Net interest income due to
Dollars in millionsAverage BalanceInterest (a)Yield/ Rate (a)Average BalanceInterest (a)Yield/ Rate (a)VolumeYield/RateTotal
ASSETS
Loans (b), (c)
Commercial and industrial (d)$55,604$8386.04%$54,599$8606.34%$16$(38)$(22)
Real estate — commercial mortgage13,3112006.0214,2872176.10(15)(2)(17)
Real estate — construction2,873506.953,020567.51(3)(3)(6)
Commercial lease financing2,524223.593,193283.46(6)—(6)
Total commercial loans74,3121,1105.9975,0991,1616.22(8)(43)(51)
Real estate — residential mortgage19,4461623.3420,5151693.30(9)2(7)
Home equity loans6,091865.636,8171025.98(10)(6)(16)
Other consumer loans4,946635.095,597705.00(8)1(7)
Credit cards9203113.449333414.63—(3)(3)
Total consumer loans31,4033424.3633,8623754.44(27)(6)(33)
Total loans105,7151,4525.51108,9611,5365.66(35)(49)(84)
Loans held for sale770115.7259985.42213
Securities available for sale (b), (e)40,7144113.7636,7642592.4230122152
Held-to-maturity securities (b)7,038613.468,123733.59(9)(3)(12)
Trading account assets1,259165.321,231165.38———
Short-term investments13,4891574.6713,7291925.62(3)(32)(35)
Other investments (e)1,01583.411,234165.19(2)(6)(8)
Total earning assets170,0002,1164.90170,6412,1004.77(17)3316
Allowance for loan and lease losses(1,424)(1,534)
Accrued income and other assets18,22417,476
Discontinued assets239305
Total assets$187,039$186,888
LIABILITIES
Money market deposits$42,586$2762.60%$39,364$2902.97%$23$(37)$(14)
Demand deposits57,1553092.1754,6293402.5015(46)(31)
Savings deposits4,63110.065,18920.19—(1)(1)
Time deposits15,6011443.7016,0191854.64(5)(36)(41)
Total interest-bearing deposits119,9737302.44115,2018172.8533(120)(87)
Federal funds purchased and securities sold under repurchase agreements41544.2812414.763—3
Bank notes and other short-term borrowings3,288344.273,617515.57(4)(13)(17)
Long-term debt (f)12,0881986.5519,2193326.91(118)(16)(134)
Total interest-bearing liabilities135,7649662.86138,1611,2013.49(86)(149)(235)
Noninterest-bearing deposits27,47328,979
Accrued expense and other liabilities4,2954,969
Discontinued liabilities (f)239305
Total liabilities167,771172,414
EQUITY
Key shareholders’ equity19,26814,474
Total liabilities and equity$187,039$186,888
Interest rate spread (TE)2.04%1.28%
Net interest income (TE) and net interest margin (TE)$1,1502.66%$8992.04%$69$182251
TE adjustment (b)912
Net interest income, GAAP basis$1,141$887

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

(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended June 30, 2025, and June 30, 2024.

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

(d)Commercial and industrial average balances include $218 million and $218 million of assets from commercial credit cards for the three months ended June 30, 2025, and June 30, 2024, respectively.

(e)Yield presented is calculated on the basis of amortized cost excluding fair value hedge basis adjustments. The average amortized cost for securities available for sale was $43.8 billion and $42.8 billion for the three months ended June 30, 2025 and June 30, 2024, respectively. Yield based on the fair value of securities available for sale was 4.03% and 2.82% for the three months ended June 30, 2025 and June 30, 2024, respectively.

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

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

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

Six months ended June 30, 2025Six months ended June 30, 2024Change in Net interest income due to
Dollars in millionsAverage BalanceInterest (a)Yield/ Rate (a)Average BalanceInterest (a)Yield/ Rate (a)VolumeYield/RateTotal
ASSETS
Loans (b), (c)
Commercial and industrial (d)$54,680$1,6386.04%$54,909$1,7146.28%$(7)$(69)$(76)
Real estate — commercial mortgage13,1873925.9914,5624466.16(41)(13)(54)
Real estate — construction2,889996.913,0301137.51(5)(9)(14)
Commercial lease financing2,588463.553,269553.34(12)3(9)
Total commercial loans73,3442,1755.9875,7702,3286.18(65)(88)(153)
Real estate — residential mortgage19,5913273.3420,6643403.30(18)5(13)
Home equity loans6,1691725.626,9212065.98(21)(13)(34)
Other consumer loans5,0161265.055,6991425.00(17)1(16)
Credit cards9196213.749436914.78(2)(5)(7)
Total consumer loans31,6956874.3534,2277574.44(58)(12)(70)
Total loans105,0392,8625.49109,9973,0855.64(123)(100)(223)
Loans held for sale792256.23744225.86123
Securities available for sale (b), (e)40,0218033.7336,9264912.2944268312
Held-to-maturity securities (b)7,1561243.468,2731483.58(19)(5)(24)
Trading account assets1,277335.261,171305.303—3
Short-term investments14,3453314.6511,9863345.6160(63)(3)
Other investments (e)975173.571,235335.29(6)(10)(16)
Total earning assets169,6054,1954.88170,3324,1434.72(40)9252
Allowance for loan and lease losses(1,413)(1,519)
Accrued income and other assets18,25417,412
Discontinued assets246317
Total assets$186,692$186,542
LIABILITIES
Money market deposits$42,298$5512.63%$38,512$5542.89%$52$(55)$(3)
Demand deposits57,3076192.1855,3836972.5324(102)(78)
Savings deposits4,6202.065,2213.13—(1)(1)
Time deposits16,1103113.9015,2253454.5519(53)(34)
Total interest-bearing deposits120,3351,4832.49114,3411,5992.8195(211)(116)
Federal funds purchased and securities sold under repurchase agreements25854.2211524.423—3
Bank notes and other short-term borrowings2,784614.473,471975.60(17)(19)(36)
Long-term debt (g)11,9343916.5819,3786606.81(245)(24)(269)
Total interest-bearing liabilities135,3111,9402.89137,3052,3583.45(164)(254)(418)
Noninterest-bearing deposits27,65529,189
Accrued expense and other liabilities4,5285,170
Discontinued liabilities (f)246317
Total liabilities167,740171,981
EQUITY
Key shareholders’ equity18,95214,561
Total liabilities and equity$186,692$186,542
Interest rate spread (TE)1.99%1.27%
Net interest income (TE) and net interest margin (TE)$2,2552.62%$1,7852.03%$124$346$470
TE adjustment (b)1823
Net interest income, GAAP basis$2,237$1,762

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

(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the six months ended June 30, 2025, and June 30, 2024, respectively.

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

(d)Commercial and industrial average balances include $216 million and $214 million of assets from commercial credit cards for the six months ended June 30, 2025, and June 30, 2024, respectively.

(e)Yield presented is calculated on the basis of amortized cost excluding fair value hedge basis adjustments. The average amortized cost for securities available for sale was $43.2 billion and $42.8 billion for the six months ended June 30, 2025, and June 30, 2024, respectively. Yield based on the fair value of securities available for sale was 4.01% and 2.66% for the six months ended June 30, 2025, and June 30, 2024, respectively.

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

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

Provision for credit losses

32

Key’s provision for credit losses was $138 million for the three months ended June 30, 2025, compared to $100 million for the three months ended June 30, 2024. The provision for credit losses was $256 million for the six months ended June 30, 2025, compared to $201 million for the six months ended June 30, 2024. The increase from the year-ago quarter reflects higher net loan charge-offs and a higher reserve build to capture loan growth and the worsening macroeconomic outlook, partly offset by changes in the portfolio mix.

Noninterest income

As shown in Figure 4, noninterest income was $690 million for the second quarter of 2025, compared to noninterest income of $627 million for the year-ago quarter. Noninterest income was $1.4 billion for the six months ended June 30, 2025, compared to $1.3 billion for the six months ended June 30, 2024.

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

Figure 4. Noninterest Income

7

910

1213

Trust and investment services income

Trust and investment services income consists of brokerage commissions, trust and asset management fees, and insurance income. The assets under management that primarily generate certain trust and asset management fees are shown in Figure 5. For the three months ended June 30, 2025, trust and investment services income was up $7 million, or 5.0%, compared to the same period one year ago. For the six months ended June 30, 2025, trust and investment services income was up $10 million, or 3.6%, compared to the same period one year ago. This revenue growth was primarily due to an increase in fees associated with higher assets under management balances.

A significant portion of our trust and investment services income depends on the value and mix of assets under management. As shown in Figure 5, at June 30, 2025, our bank, trust, and registered investment advisory subsidiaries had assets under management of $64.2 billion, up 11.5% compared to June 30, 2024. The increase was driven by net positive cash in-flows and market impacts on portfolios.

Figure 5. Assets Under Management or Administration

Dollars in millionsJune 30, 2025March 31, 2025December 31, 2024September 30, 2024June 30, 2024
Discretionary assets under management by investment type:
Equity$35,987$33,478$34,541$34,500$32,691
Fixed income14,59114,29013,94214,25614,136
Money market6,4206,8516,7856,5875,639
Total discretionary assets under management56,99854,61955,26855,34352,466
Non-discretionary assets under administration7,2466,4346,0935,7795,136
Total$64,244$61,053$61,361$61,122$57,602

Investment banking and debt placement fees

Investment banking and debt placement fees consist of syndication fees, debt and equity securities underwriting fees, merger and acquisition and financial advisory fees, gains on sales of commercial mortgages, and agency origination fees. For the three months ended June 30, 2025, investment banking and debt placement fees were up $52 million, or 41.3%, compared to the same period a year ago. For the six months ended June 30, 2025, investment banking and debt placement fees increased $57 million, or 19.3%. The movement reflects an increase in syndications, equity new issue underwriting, and commercial real estate activities.

Service charges on deposit accounts

Service charges on deposit accounts increased $7 million, or 10.6%, for the three months ended June 30, 2025, compared to the same period one year ago. For the six months ended June 30, 2025, service charges on deposit accounts increased by $13 million, or 10.1%, from the six months ended June 30, 2024. These increases were driven by higher account analysis fees.

Cards and payments income

Cards and payments income, which consists of debit card, prepaid card, consumer and commercial credit card, and merchant services income, was flat for the three months ended June 30, 2025, compared to the same period one year ago. For the six months ended June 30, 2025, cards and payment income increased $5 million, or 3.1%, from the same period a year ago. This increase was primarily a result of higher credit card spend volume slightly offset by higher credit card reward costs.

Other noninterest income

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

corporate-owned life insurance income, consumer mortgage income, commercial mortgage servicing fees, net securities gains/(losses), and other income. Other noninterest income for the three months ended June 30, 2025, decreased $3 million, or 1.4%, from the year-ago quarter, as a result of a decrease in other income and operating lease income, offset by increases in commercial mortgage servicing fees attributable to higher active special servicing balances, corporate services income and net securities gains/(losses). For the six months ended June 30, 2025, other noninterest income decreased $1 million, or 0.2%, from the same period a year ago, driven by a decrease in operating lease income and other leasing gains and other income, offset by increases in commercial mortgage servicing fees attributable to higher active special servicing balances and net securities gains/losses.

Noninterest expense

As shown in Figure 6, noninterest expense was $1.2 billion for the second quarter of 2025, compared to $1.1 billion for the second quarter of 2024. Noninterest expense was $2.3 billion for the six months ended June 30, 2025, compared to $2.2 billion for the six months ended June 30, 2024.

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

Figure 6. Noninterest Expense

89

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

205

Personnel

Personnel expense, the largest category of our noninterest expense, increased by $69 million, or 10.8%, for the three months ended June 30, 2025, compared to the same period one year ago. For the six months ended June 30, 2025, personnel expense was up $75 million, or 5.7%, compared to the same period one year ago. The increases were driven continued investments in people and higher incentive compensation.

Nonpersonnel expense

Other nonpersonnel expense includes net occupancy, computer processing, business services and professional fees, equipment, operating lease expense, marketing, and other miscellaneous expense categories. Other nonpersonnel expense for the three months ended June 30, 2025, increased $6 million, or 1.4%, from the year-ago quarter, primarily due to increases in business services and professional fees driven by increases in technology-related investments, offset by decreases in operating lease expense and other expense. For the six months ended June 30, 2025, other nonpersonnel expense decreased $12 million, or 1.3%, from the six months ended June 30, 2024, primarily due to decreases in operating lease expense and other expense.

Income taxes

We recorded tax expense of $116 million for the second quarter of 2025 and $62 million for the second quarter of 2024. We recorded tax expense of $225 million for the six months ended June 30, 2025, compared to $121 million for the six months ended June 30, 2024.

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

On July 4, 2025, new U.S. tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA"), which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026. Key is currently evaluating the impact of the new legislation, but does not expect any material change to our ongoing tax rate or any material impact on our results of operations.

Additional information pertaining to how our tax expense (benefit) and the resulting effective tax rates were derived is included in Note 14 (“Income Taxes”) beginning on page 158 of our 2024 Form 10-K.

Business Segment Results

This section summarizes the financial performance of our two major business segments (operating segments): Consumer Bank and Commercial Bank. Note 19 (“Business Segment Reporting”) describes the products and services offered by each of these business segments and provides more detailed financial information pertaining to the segments. For more information on the segment imperatives and market and business overview, see “Business Segment Results” beginning on page 60 of our 2024 Form 10-K. Dollars in the charts are presented in millions.

Consumer Bank

Summary of operations

  • Net income attributable to Key of $122 million for the second quarter of 2025, compared to $59 million for the year-ago quarter

  • Taxable-equivalent net interest income attributable to the Consumer Bank increased by $153 million, or 29.3%, compared to the second quarter of 2024

  • Average loans and leases decreased $3.0 billion, or 7.8%, from the second quarter of 2024, driven by broad-based declines across all loan categories

  • Average deposits increased $2.6 billion, or 3.1%, from the second quarter of 2024, driven by growth in money market deposits and demand deposits

400401402

404405

  • Provision for credit losses increased $22 million compared to the second quarter of 2024, primarily driven by changes in reserve levels due to deterioration in the economic outlook

  • Noninterest income increased $1 million, or 0.4%, from the second quarter of 2024, driven by an increase in trust and investment services income, partially offset by a decrease in consumer mortgage income

  • Noninterest expense increased $48 million, or 7.4%, from the second quarter of 2024, primarily driven by higher support and overhead expense

649650651

Commercial Bank

Summary of operations

  • Net income attributable to Key of $349 million for the second quarter of 2025, compared to $206 million for the year-ago quarter

  • Taxable-equivalent net interest income increased by $145 million, compared to the second quarter of 2024

  • Average loan and lease balances decreased $161 million, or 0.2%, compared to the second quarter of 2024, driven by a decline in commercial real estate loans and commercial lease financing

  • Average deposit balances decreased $1.5 billion, or 2.6%, compared to the second quarter of 2024, driven by a reduction in higher-cost client balances

380381382

384385

  • Provision for credit losses decreased $3 million compared to the second quarter of 2024, driven by a lower reserve build as changes in the portfolio mix offset economic deterioration, as well as lower net loan charge-offs

  • Noninterest income increased $61 million, or 17.1%, from the second quarter of 2024, primarily driven by an increase in investment banking and debt placement fees and commercial mortgage servicing fees

  • Noninterest expense increased $18 million, or 4.2%, compared to the second quarter of 2024, driven by higher support and overhead expense

620621622

Financial Condition

Loans and loans held for sale

Figure 7. Breakdown of Loans at June 30, 2025

3940

(a)See Note 3 (“Loan Portfolio”) in Item 1. Financial Statements of this report.

At June 30, 2025, total loans outstanding from continuing operations were $106.4 billion, compared to $104.3 billion at December 31, 2024. For more information on balance sheet carrying value, see Note 1 (“Summary of Significant Accounting Policies”) under the headings “Loans” and “Loans Held for Sale” starting on page 110 of our 2024 Form 10-K.

Commercial loan portfolio

Commercial loans outstanding were $75.2 billion at June 30, 2025, an increase of $3.3 billion, or 4.6%, compared to December 31, 2024, primarily driven by increases in commercial and industrial loans.

Figure 8 provides our commercial loan portfolios by industry classification at June 30, 2025, and December 31, 2024.

Figure 8. Commercial Loans by Industry

June 30, 2025Commercial and industrialCommercial real estateCommercial lease financingTotal commercial loansPercent of total
Dollars in millions
Industry classification:
Agriculture$902$101$78$1,0811.4%
Automotive2,32258312,9063.9
Business services3,187246863,5194.7
Commercial real estate7,92812,243120,17226.8
Construction materials and contractors1,9872411752,4033.2
Consumer goods3,9065141794,5996.1
Consumer services4,2016023005,1036.8
Equipment1,7701471152,0322.7
Finance11,68210619211,98015.9
Healthcare2,7331,4721734,3785.8
Materials and extraction2,0261961232,3453.1
Oil and gas1,9662992,0042.7
Public exposure1,87673312,2142.9
Technology, media, and telecom69511367421.0
Transportation8551272721,2541.7
Utilities7,70063648,07010.7
Other32261374200.6
Total$56,058$16,692$2,472$75,222100.0%
December 31, 2024Commercial and industrialCommercial real estateCommercial lease financingTotal commercial loansPercent of total
Dollars in millions
Industry classification:
Agriculture$875$99$80$1,0541.5%
Automotive2,17367322,8484.0
Business services2,899262813,2424.5
Commercial real estate7,79911,909319,71127.4
Construction materials and contractors1,8392582032,3003.2
Consumer goods3,5565331904,2795.9
Consumer services4,1276163285,0717.1
Equipment1,7401591372,0362.8
Finance10,1039920910,41114.5
Healthcare2,7071,2042104,1215.7
Materials and extraction2,1351961342,4653.4
Oil and gas1,95028101,9882.8
Public exposure1,96173872,3553.3
Technology, media, and telecom52110445750.8
Transportation8491272911,2671.8
Utilities7,27964227,70710.7
Other3966054610.6
Total$52,909$16,246$2,736$71,891100.0%

Commercial and industrial. Commercial and industrial loans are the largest component of our loan portfolio, representing 53% of our total loan portfolio at June 30, 2025, and 51% at December 31, 2024. This portfolio is approximately 91% variable rate and consists of loans originated primarily to large corporate, middle market, and small business clients.

Commercial and industrial loans totaled $56.1 billion at June 30, 2025, an increase of $3.1 billion, or 6.0%, compared to December 31, 2024. The increase was broad-based across most industry categories.

Commercial real estate loans. Our commercial real estate portfolio includes project loans primarily focused in market-rate and affordable multi-family housing loans, owner-occupied commercial and industrial operating company buildings, and community center grocer-anchored retail centers. These three commercial real estate segments make up 72% of our commercial real estate portfolio. Our non-owner-occupied portfolio is focused on operators of commercial real estate who not only utilize our loan products, but also utilize our broader industry-focused products and services and provide consistent pipelines into our agency, CMBS, and other long-term market take out products. This focus ensures our relationship clients foster and build portfolios with stable, recurring cash flows, with adequate, balanced cash reserves to support our balance sheet exposures through the economic cycle.

At June 30, 2025, commercial real estate loans totaled $16.7 billion, which includes $13.9 billion of mortgage loans and $2.8 billion of construction loans. Compared to December 31, 2024, this portfolio increased $446 million, or 2.7%, driven by increases in nonowner-occupied commercial mortgages in various industries. Nonowner-occupied

properties, generally properties for which at least 50% of the debt service is provided by rental income from nonaffiliated third parties, represented 82% of total commercial real estate loans outstanding at June 30, 2025.

Since the global financial crisis in 2008, we have limited our construction business and reduced our overall construction loans from 42% to 17% of commercial real estate loans as of June 30, 2025. Construction loans provide a stream of funding for properties not fully leased at origination to support debt service payments over the term of the contract or project. As of June 30, 2025, 80% of our construction portfolio are multi-family project loans. Our office exposure only represents 4% of commercial real estate loans at period end.

As shown in Figure 9, our commercial real estate loan portfolio includes various property types and geographic locations of the underlying collateral. These loans include commercial mortgage and construction loans in both Consumer Bank and Commercial Bank.

Figure 9. Commercial Real Estate Loans

Geographic RegionTotalPercent of TotalConstructionCommercial Mortgage
Dollars in millionsWestSouthwestCentralMidwestSoutheastNortheastNational
June 30, 2025
Nonowner-occupied:
Data Center$—$—$—$—$20$—$535$5553.3%$86$468
Diversified1——3—101211350.8—135
Industrial461531462242071298064.875730
Land & Residential961311520—640.44519
Lodging41—844551652141.3—214
Medical Office36—3112090792571.5—257
Multifamily1,2844471,3001,2491,9641,2373747,85547.12,2665,588
Office85111971842181116894.1—689
Retail1372980273722262931,1106.6401,070
Self Storage25—15758171813031.818285
Senior Housing956453119851061236453.995551
Skilled Nursing———481811442696423.8—643
Student Housing15—136250——1400.85091
Other—97283340761931.2—193
Total nonowner-occupied1,7745571,6922,0222,8412,3662,35613,60881.52,67510,933
Owner-occupied1,02212675181609421743,08418.51552,929
Total$2,796$558$1,959$2,540$3,001$3,308$2,530$16,692100.0%$2,830$13,862
Nonperforming loans$4$—$56$59$97$10$—$226N/M$—$226
Accruing loans past due 90 days or more1————6—7N/M—7
Accruing loans past due 30 through 89 days3—1—5011—65N/M263
Geographic RegionTotalPercent of TotalConstructionCommercial Mortgage
Dollars in millionsWestSouthwestCentralMidwestSoutheastNortheastNational
December 31, 2024
Nonowner-occupied:
Data Center$—$—$—$98$54$—$—$1520.9%$—$152
Diversified1——3—131181350.8—135
Industrial44195103214258187334.554679
Land & Residential10737—21—480.32820
Lodging48—12144655592341.4—234
Medical Office354342—3797172711.7—271
Multifamily1,3034851,2011,2042,3251,3361568,01049.32,4055,605
Office152112977134232137384.5—738
Retail15268117297293798805.443837
Self Storage44—44822218243602.214346
Senior Housing1723997855414245933.7154439
Skilled Nursing————132170903922.4—392
Student Housing41—1363123——2401.550190
Other11071124048—2181.3—218
Total nonowner-occupied2,0035921,7241,9463,4782,68357813,00480.02,74810,256
Owner-occupied1,078—3306011821,051—3,24220.01883,054
Total$3,081$592$2,054$2,547$3,660$3,734$578$16,246100.0%$2,936$13,310
Nonperforming loans$5$—$64$80$81$13$—$243N/M$—$243
Accruing loans past due 90 days or more10—21—7—20N/M416
Accruing loans past due 30 through 89 days1——3199—32N/M—32
West –Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington, and Wyoming
Southwest –Arizona, Nevada, and New Mexico
Central –Arkansas, Colorado, Oklahoma, Texas, and Utah
Midwest –Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin
Southeast –Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington D.C., and West Virginia
Northeast –Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont
National –Accounts in three or more regions

N/M = not meaningful

Consumer loan portfolio

Consumer loans outstanding as of June 30, 2025, totaled $31.2 billion, a decrease of $1.2 billion, or 3.7%, from December 31, 2024. The decrease was driven by declines across all consumer loan categories, including residential mortgages, home equity, and student loans, and was reflective of the intentional run-off of lower yielding loans.

The residential mortgage portfolio is comprised of loans originated by our Consumer Bank and is the largest segment of our consumer loan portfolio as of June 30, 2025, representing 62% of consumer loans outstanding. This is followed by our home equity portfolio representing 19% of consumer loans outstanding at June 30, 2025.

We held the first lien position for approximately 64% of the home equity portfolio at June 30, 2025, and 65% at December 31, 2024. For loans with real estate collateral, we track borrower performance monthly. Regardless of the lien position, credit metrics are refreshed quarterly, including recent FICO scores as well as updated loan-to-value ratios. This information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” of our 2024 Form 10-K.

Figure 10 presents our consumer loans by geography.

Figure 10. Consumer Loans by State

Dollars in millionsReal estate — residential mortgageHome equity loansOther consumer loansCredit cardsTotal
June 30, 2025
Washington$4,181$891$207$85$5,364
Ohio2,651835761793,741
New York6751,6607303253,390
Colorado2,831249122303,232
California2,1181241632,549
Oregon1,16751188411,807
Pennsylvania392421312601,185
Florida70938363121,122
Utah78122055171,073
Connecticut65721110128997
Other3,1689752,4111536,707
Total$19,330$6,023$4,881$933$31,167
December 31, 2024
Washington$4,312$929$214$85$5,540
Ohio2,6628951111973,865
New York7231,7567373303,546
Colorado2,891258131303,310
California2,1911244232,648
Oregon1,19553292401,859
Pennsylvania403449333601,245
Florida73341384131,171
Utah80523256181,111
Connecticut684223105281,040
Other3,2871,0312,5621547,034
Total$19,886$6,358$5,167$958$32,369

Figure 11 summarizes our loan sales for the six months ended June 30, 2025, and all of 2024.

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

Dollars in millionsCommercialCommercial Real EstateCommercial Lease FinancingResidential Real EstateTotal
2025
Second quarter$239$1,465$—$338$2,042
First quarter891,355272601,731
Total$328$2,820$27$598$3,773
2024
Fourth quarter$150$2,584$—$342$3,076
Third quarter601,406903931,949
Second quarter56860613121,289
First quarter861,554852091,934
Total$352$6,404$236$1,256$8,248

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

Figure 12. Loans Administered or Serviced

Dollars in millionsJune 30, 2025March 31, 2025December 31, 2024September 30, 2024June 30, 2024
Commercial real estate loans$576,703$572,449$557,633$557,387$535,826
Residential mortgage11,38311,35211,34411,30311,217
Education loans170179189199212
Commercial lease financing1,8151,8681,7351,8081,849
Commercial loans589596603617656
Consumer direct290307328347367
Consumer indirect174239319412524
Total$591,124$586,990$572,151$572,073$550,651

In the event of default by a borrower, we are subject to recourse with respect to approximately $7.8 billion of the $591.1 billion of loans administered or serviced at June 30, 2025. These are primarily associated with commercial real estate loans administered or serviced. Additional information about this recourse arrangement is included in Note 16 (“Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with FNMA.”

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

Securities

We manage our securities portfolio according to the following priorities: 1) store of liquidity, 2) interest rate risk management tool, and 3) source of earnings. In keeping with the first priority, the portfolio provides securities to meet our pledging requirements. Our securities portfolio totaled $47.6 billion at June 30, 2025, compared to $45.1 billion at December 31, 2024. Available-for-sale securities were $40.7 billion at June 30, 2025, compared to $37.7 billion at December 31, 2024. Held-to-maturity securities were $6.9 billion at June 30, 2025, and $7.4 billion at December 31, 2024.

As shown in Figure 13, all of our mortgage-backed securities, which include both securities available for sale and held-to-maturity securities, are issued by government-sponsored enterprises or GNMA, and are traded in liquid secondary markets. These securities are recorded on the balance sheet at fair value for the available-for-sale portfolio and at amortized cost for the held-to-maturity portfolio. For more information about these securities, refer to our 2024 Form 10-K within Note 1 (“Summary of Significant Accounting Policies”) under the heading “Securities” and Note 6 (“Fair Value Measurements”) under the heading “Qualitative Disclosures of Valuation Techniques.” Additionally refer to Note 6 (“Securities”) within this report.

Figure 13. Mortgage-Backed Securities by Issuer

Dollars in millionsJune 30, 2025December 31, 2024
FHLMC & FNMA$16,180$14,291
GNMA22,86321,573
Total (a)$39,043$35,864

(a) Includes securities in the available-for-sale portfolio recorded at fair value and securities in the held-to-maturity portfolio recorded at amortized cost.

56

Securities available for sale

The majority of our securities available-for-sale portfolio consists of federal agency mortgage-backed securities and CMOs. CMOs are debt securities secured by a pool of mortgages or mortgage-backed securities.

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

Figure 14. Securities Available for Sale

Dollars in millionsU.S. Treasury, Agencies, and CorporationsAgency Residential Collateralized Mortgage Obligations**(a)**Agency Residential Mortgage-backed Securities**(a)**Agency Commercial Mortgage-backed Securities**(a)**TotalWeighted-Average Yield**(b)**
June 30, 2025
Remaining maturity:
One year or less$2,696$4$4$321$3,0253.88%
After one through five years5,4361,3742,97874610,5343.63
After five through ten years1426,93810,8972,20420,1813.54
After ten years696145,3758716,9294.03
Fair value$8,343$8,930$19,254$4,142$40,669
Amortized cost(b)$8,318$10,840$19,812$4,533$43,5033.67%
Weighted-average yield(c)4.17%1.93%4.59%2.87%3.67%—
Weighted-average maturity1.7 years7.9 years9.2 years6.8 years7.2 years—
December 31, 2024
Fair value$8,904$9,224$15,169$4,410$37,707
Amortized cost8,92811,40916,0384,92741,3023.48%

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

(b)Excluded from the amortized cost of securities available for sale are basis adjustments for securities designated in active fair value hedges. Basis adjustments totaled $109 million and $(6) million as of June 30, 2025 and December 31, 2024, respectively. The securities being hedged are primarily U.S Treasuries, Agency RMBS, and Agency CMBS.

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

Held-to-maturity securities

The majority of our held-to-maturity portfolio consists of Federal agency CMOs and mortgage-backed securities. This portfolio is also comprised of asset-backed securities and foreign bonds. Figure 15 shows the composition, yields, and remaining maturities of these securities.

Figure 15. Held-to-Maturity Securities

Dollars in millionsAgency Residential Collateralized Mortgage Obligations (a)Agency Residential Mortgage-backed Securities**(a)**Agency Commercial Mortgage-backed Securities**(a)**Asset-backed securitiesOther SecuritiesTotalWeighted-Average Yield**(b)**
June 30, 2025
Remaining maturity:
One year or less$65$—$295$170$8$5382.39%
After one through five years1,267969111162,2913.30
After five through ten years2,64672322—2,8873.71
After ten years32741830——1,1983.52
Amortized cost$4,305$144$2,268$173$24$6,9143.44%
Fair value$4,092$129$2,104$170$24$6,519
Weighted-average yield(b)3.78%2.82%2.93%2.08%4.34%3.44%—
Weighted-average maturity6.6 years7.0 years8.2 years0.9 years1.6 years7.0 years—
December 31, 2024
Amortized cost$4,577$151$2,333$308$26$7,3953.43%
Fair value4,2481342,130300256,837

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

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

Deposits and other sources of funds

Figure 16. Breakdown of Deposits at June 30, 2025

4546

The following presents the breakdown of our deposits by product for the noted periods.

Dollars in billionsJune 30, 2025December 31, 2024
Money market deposits$41.4$41.0
Demand deposits57.957.6
Savings deposits4.64.6
Time deposits15.317.0
Noninterest bearing deposits27.729.6
Total$146.9$149.8

Our highly diversified deposit base is our primary source of funding. At June 30, 2025, our deposits totaled $146.9 billion, a decrease of $2.9 billion, compared to December 31, 2024.

Uninsured deposits totaled $61.8 billion and $64.4 billion at June 30, 2025 and December 31, 2024, respectively. Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regimes and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes.

Figure 17 presents estimated uninsured deposits for the noted periods which reflect amounts disclosed in KeyBank’s Call Report adjusted for intercompany deposits, which are not customer facing and are eliminated in consolidation, and accrued interest.

Figure 17. Estimated Uninsured Deposits

Dollars in billionsJune 30, 2025March 31, 2025December 31, 2024September 30, 2024June 30, 2024
Uninsured deposits(a)$61.8$65.2$64.4$66.6$62.3
Total deposits146.9150.7149.8150.4145.7
Uninsured % of Deposits42%43%43%44%43%
(a) Intercompany deposits and accrued interest excluded from uninsured deposits$12.5$12.4$12.4$11.8$10.5

As of June 30, 2025, approximately $12.2 billion of uninsured deposits were collateralized by government-backed securities compared to $12.3 billion as of December 31, 2024.

Wholesale funds, consisting of short-term borrowings and long-term debt, totaled $14.8 billion at June 30, 2025, compared to $14.2 billion at December 31, 2024. This change reflects an increase in short-term borrowings in the second quarter of 2025. Wholesale funding supplements client deposit funding and may rise or fall with seasonal or other funding needs. For more information regarding our wholesale funds, see Part II, Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations under the heading “Risk Management - Liquidity risk management” of this report.

Capital

The objective of capital management is to maintain capital levels consistent with our risk appetite and of a sufficient amount to operate under a wide range of economic conditions. Our current capital levels position us well to execute against our capital priorities including supporting organic growth and paying dividends.

The following sections discuss certain ways we have deployed our capital. For further information, see the Consolidated Statements of Changes in Equity and Note 18 (“Shareholders' Equity”).

512513

Dividends

Consistent with our capital plan, we paid a quarterly dividend of $.205 per Common Share for the second quarter of 2025. Further information regarding the capital planning process and CCAR is included under the heading “Capital planning and stress testing” beginning on page 15 in the “Supervision and Regulation” section of our 2024 Form 10-K.

Common shares outstanding

Our Common Shares are traded on the NYSE under the symbol KEY with 26,567 holders of record at June 30, 2025. Our book value per Common Share was $15.32 based on 1.1 billion shares outstanding at June 30, 2025, compared to $14.21 per Common Share based on 1.1 billion shares outstanding at December 31, 2024. At June 30, 2025, our tangible book value per Common Share was $12.83, compared to $11.70 per Common Share at December 31, 2024.

Figure 18 shows activities that caused the change in outstanding Common Shares over the past five quarters.

Figure 18. Changes in Common Shares Outstanding

20252024
In thousandsSecondFirstFourthThirdSecond
Shares outstanding at beginning of period1,111,9861,106,786991,251943,200942,776
Shares issued under employee compensation plans (net of cancellations and returns)4675,200493222424
Shares issued under Scotiabank investment agreement——115,04247,829—
Shares outstanding at end of period1,112,4531,111,9861,106,786991,251943,200

As shown above, Common Shares outstanding increased by 467 thousand shares during the second quarter of 2025, primarily attributable to shares issued under employee compensation plans. We did not complete any open market share repurchases in the second quarter of 2025.

At June 30, 2025, we had 144.2 million treasury shares, compared to 149.9 million treasury shares at December 31, 2024. The decrease in treasury shares is primarily attributable to shares issued under employee compensation plans. Going forward we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes.

In the first quarter of 2025, the Board of Directors authorized a share repurchase program pursuant to which we may purchase up to $1.0 billion of common shares. Information on repurchases of Common Shares by KeyCorp is included in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this report.

Capital adequacy

Capital adequacy is an important indicator of financial stability and performance. All of our capital ratios remained in excess of regulatory requirements at June 30, 2025. Our capital and liquidity levels are intended to position us to weather an adverse operating environment while continuing to serve our clients’ needs, as well as to meet the Regulatory Capital Rules described in Item 1. Business of our 2024 Form 10-K under the heading “Supervision and Regulation.” Our shareholders’ equity to assets ratio was 10.5% and 9.7% at June 30, 2025, and December 31, 2024, respectively. Our tangible common equity to tangible assets ratio was 7.8% and 7.0% at June 30, 2025, and December 31, 2024, respectively. See the section entitled “GAAP to Non-GAAP Reconciliations,” which presents the computations of certain financial measures related to “tangible common equity.” The minimum capital and leverage ratios under the Regulatory Capital Rules together with the ratios of KeyCorp at June 30, 2025, are set forth in the “Supervision and regulation — Regulatory capital requirements” section in Part I, Item 2 of this report.

Figure 19 represents the details of our regulatory capital positions at June 30, 2025, and December 31, 2024, under the Regulatory Capital Rules. Information regarding the regulatory capital ratios of KeyCorp’s banking subsidiaries is presented annually, with the most recent information included in Note 24 (“Shareholders' Equity”) beginning on page 175 of our 2024 Form 10-K.

Figure 19. Capital Components and Risk-Weighted Assets

Dollars in millionsJune 30, 2025December 31, 2024
COMMON EQUITY TIER 1
Key shareholders’ equity (GAAP)$19,484$18,176
Less:Preferred Stock (a)2,4462,446
Add:CECL phase-in (b)—59
Common Equity Tier 1 capital before adjustments and deductions17,03815,789
Less:Goodwill, net of deferred taxes2,5652,574
Intangible assets, net of deferred taxes1624
Deferred tax assets183172
Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes(2,240)(2,729)
Accumulated gains (losses) on cash flow hedges, net of deferred taxes(24)(438)
Amounts in AOCI attributed to pension and postretirement benefit costs, net of deferred taxes(236)(303)
Total Common Equity Tier 1 capital$16,774$16,489
TIER 1 CAPITAL
Common Equity Tier 1$16,774$16,489
Additional Tier 1 capital instruments and related surplus2,4462,445
Less:Deductions——
Total Tier 1 capital$19,220$18,934
TIER 2 CAPITAL
Tier 2 capital instruments and related surplus$1,521$1,767
Allowance for losses on loans and liability for losses on lending-related commitments (c)1,7521,635
Less:Deductions——
Total Tier 2 capital3,2733,402
Total risk-based capital$22,493$22,336
RISK-WEIGHTED ASSETS**(e)**$143,083$138,296
AVERAGE QUARTERLY TOTAL ASSETS$187,533$188,855
CAPITAL RATIOS**(e)**
Tier 1 risk-based capital13.43%13.69%
Total risk-based capital15.72%16.15%
Leverage (d)10.25%10.03%
Common Equity Tier 111.72%11.92%

(a)Net of capital surplus.

(b)As of January 1, 2025, the CECL optional transition provision had been fully phased-in. Amounts prior to January 1, 2025, reflect Key's election to adopt the CECL optional transition provision.

(c)The ALLL included in Tier 2 capital is limited by regulation to 1.25% of the institution’s standardized total risk-weighted assets (excluding its standardized market risk-weighted assets). The ALLL includes $12 million and $13 million of allowance classified as “discontinued assets” on the balance sheet at June 30, 2025, and December 31, 2024, respectively.

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

(e)June 30, 2025 capital ratios and risk weighted assets are estimates.

Risk Management

Overview

Like all financial services companies, we engage in business activities and assume the related risks. The most significant risks we face are credit, compliance, operational, liquidity, market, reputation, strategic, model and technology risks, as depicted in the following chart. We manage such risks across the entire enterprise to maintain safety and soundness and maximize profitability. Certain of these risks are defined and discussed in greater detail in the remainder of this section.

updated risk flow chart.jpg

Federal banking regulators continue to emphasize with financial institutions the importance of relating capital management strategy to the level of risk at each institution. We believe our internal risk management processes help us achieve and maintain capital levels that are commensurate with our business activities and risks, and conform to regulatory expectations. The table below depicts our risk management hierarchy and associated responsibilities and activities of each group.

updated risk governance structure.jpg

GroupOverview and ResponsibilitiesActivities
Board of Directors•Oversight capacity •Oversees that Key’s risks are managed in a manner that is effective and balanced •Fiduciary duty to Key’s shareholders•Understands Key's risk philosophy •Approves the risk appetite •Inquires about risk practices •Reviews the portfolio of risks •Compares the actual risks to the risk appetite •Is apprised of significant risks, both actual and emerging, and determines whether management is responding appropriately •Challenges management and promotes accountability
Board of Directors Risk Committee(a)•Assists the Board in oversight of strategies, policies, procedures, and practices relating to the assessment and management of enterprise-wide risk, including credit, market, liquidity, model, operational, compliance, reputation, strategic, and technology risks •Assists the Board in overseeing risks related to capital adequacy, capital planning, and capital actions•Reviews and provides oversight of management’s activities related to the enterprise-wide risk management framework, which includes an annual review of the ERM Policy, including the Risk Appetite Statement, and management and ERM reports •Approves any material changes to Executive Level (Level II) Risk Governance Committee charters and significant policies relating to risk management, including corporate risk metrics for major risk categories
Board of Directors Compensation & Organization Committee(a)•Assists the Board in oversight of compensation policies and practices to support Key’s efforts to attract, retain, develop, motivate, and reward a high performing and collaborative workforce to achieve its business objectives•Oversees compensation for Key’s Board-Reported Executives, talent management and organizational development, including succession planning, leadership development and strategic hiring objectives
Board of Directors Nominating & Corporate Governance Committee(a)•Assists the Board with oversight of corporate governance matters and Key’s policies and practices on significant issues of corporate responsibility•Oversees the evaluation of the Board, the directors, and the Lead Director •Provides guidance on Board-related matters, including director candidates, director compensation, director independence, the Board committee structure, and succession planning matters •Reviews the Corporate Governance Guidelines •Provides oversight with respect to community investment strategy and activities of bank subsidiaries of KeyCorp
Board of Directors Technology Committee (a)•Assists the Board with oversight of major technology investments and technology risks•Support’s Key’s strategic objectives in areas such as cybersecurity, fraud, and data, project management, technology strategy, technology innovation, and emerging technology trends •In consultation with the Risk Committee, oversees technology-related risks including (but not limited to) cybersecurity, business resiliency, and other technology-related risks as necessary and appropriate
Board of Directors Audit Committee(a)•Assists the Board in oversight of financial statement integrity, regulatory and legal requirements, independent auditors’ qualifications and independence, and the performance of the internal audit function and independent auditors •Assists the Board in oversight of financial reporting, legal matters, and fraud risk•Meets with management and approves significant policies relating to the risk areas overseen by the Audit Committee •Receives reports on enterprise risk •Convenes to discuss the content of our financial disclosures and quarterly earnings releases
Executive Level (Level II) Risk Governance Committees•Includes ERM Committee, Asset Liability Committee, Capital Committee, Credit Risk Committee, Compliance Risk Committee, and Operational Risk Committee. Level II Risk Governance Committees report to the Risk Committee of the Board (except for the Compensation & Benefits Oversight Committee, which reports to the Compensation & Organization Committee of the Board, and the Disclosure Committee, which reports to the Audit Committee of the Board) and are generally responsible for the activities listed herein•Escalation of risk issues regarding unresolved differences and accepted risks, particularly issues that have the potential to increase aggregated risk beyond Key’s risk appetite, to the appropriate Level I Governance Committee, typically the Risk or Audit Committees of the Board •Identifying early warning events or trends, top and emerging risks and discussing forward looking assessments •Approving certain risk metrics •Monitoring certain metric limits, as well as associated risk levels to the Board approved risk appetite •Providing governance, direction, oversight and high-level management of their associated risk and the risk assessment process which is used in capital adequacy stress testing; •Monitoring stress testing results related to their associated risks (if required per committee charter) and escalating emerging risks as appropriate •Providing assurance, advice and support to the Risk Committee on their associated risk
Management Level (Level III) Risk Governance Committees•Includes attendees from each of the Three Lines of Defense: First Line (line of business), Second Line (risk management), and Third Line (internal audit function)•Supports the ERM Committee, Asset Liability Committee, Capital Committee, Credit Risk Committee, Compliance Risk Committee, and Operational Risk Committee by identifying early warning events and trends, escalating emerging risks, and discussing forward-looking assessments
Disclosure Committee•Includes representatives from each of the Three Lines of Defense •Responsible for overseeing the accuracy and completeness of the Company’s disclosures in SEC filings and other public communications•Considers and discusses recent internal and external events to determine whether all appropriate disclosures have been made in reports filed with the SEC
Internal Audit•Provides the KeyCorp Board and management with independent, risk-based, and objective assurance, advice, insight, and foresight•Conducts objective examinations of evidence for the purpose of providing independent assessments to the Audit Committee, management, and outside parties on the adequacy and effectiveness of business processes, risk management activities, internal controls, and governance processes for KeyCorp

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

Market risk management

Market risk is the risk that movements in market risk factors, including interest rates, foreign exchange rates, equity prices, commodity prices, credit spreads, and volatilities, will reduce Key’s income and the value of its portfolios. These factors influence prospective yields, values, or prices associated with the instrument. We are exposed to market risk both in our trading and nontrading activities, which include asset and liability management activities. Information regarding our fair value policies, procedures, and methodologies is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” on page 114 of our 2024 Form 10-K and Note 5 (“Fair Value Measurements”) in this report.

Trading market risk

Key incurs market risk as a result of trading activities that are used in support of client facilitation and hedging activities, principally within our investment banking and capital markets businesses. Key has exposures to a wide range of risk factors including interest rates, equity prices, foreign exchange rates, credit spreads, and commodity prices, as well as the associated implied volatilities and spreads. Our primary market risk exposures are a result of trading and hedging activities in the derivative and fixed income markets, including securitization exposures. At June 30, 2025, we did not have any re-securitization positions. We maintain modest trading inventories to facilitate customer flow, make markets in securities, and hedge certain risks including but not limited to credit risk and interest rate risk. The risks associated with these activities are mitigated in accordance with the Market Risk policies. The majority of our positions are traded in active markets.

Market risk management is an integral part of Key’s risk culture. The Joint KeyCorp and KeyBank National Association Risk Committee provides oversight of trading market risks. The ALCO and the Market Risk Committee regularly review and discuss market risk exposures and results of monitoring activities. Market risk policies and procedures have been defined and take into account our tolerance for risk and consideration for the business environment. The Market Risk Committee approves market risk policies and recommends our significant market risk policy to the ALCO and the Joint KeyCorp and KeyBank National Association Risk Committee for approval. For more information regarding monitoring of trading positions and the activities related to Market Risk Rule compliance, see “Market Risk Management” beginning on page 78 of our 2024 Form 10-K.

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

We use a historical simulation VaR model to measure the potential adverse effect of changes in interest rates, foreign exchange rates, equity prices, and credit spreads on the fair value of our covered positions and other non-covered positions. Historical moves in risk factors across various asset classes are incorporated in VaR metrics. Additional consideration is given to the risk factors to estimate the exposures that contain optionality features, such as options and cancellable provisions. VaR is calculated using daily observations over a one-year lookback period and approximates a 95% confidence level. Statistically, this means that we would expect to incur losses greater than VaR, on average, five out of 100 trading days, or three to four times each quarter. For more information regarding our VaR model, its governance, and assumptions, see “Market Risk Management” on page 78 of our 2024 Form 10-K.

MTRM backtests the VaR model on a daily basis to evaluate its predictive power. The test compares VaR model results at the 99% confidence level to daily held profit and loss (the profit/loss resulting from changes in risk factors applied to the previous trading day’s closing positions; held profit and loss excludes fees, commissions, reserves, net interest income, and intraday trading). Backtesting exceptions occur when daily held profit and loss exceeds VaR. There were five backtesting exceptions for KeyCorp during the past 250 trading days ended June 30, 2025, generally caused by large moves in rates. The total number of VaR backtesting breaches for KeyCorp over the preceding 250 trading days is used to determine the multiplier for the VaR based capital requirement under the Market Risk Rule. The multiplier increases from a minimum of 3.0 to a maximum of 4.0, depending on the number of backtesting exceptions. All KeyCorp backtesting exceptions are thoroughly reviewed in the context of VaR model use and performance. The backtesting multiplier for KeyCorp increased from 3.0 for March 31, 2025 to 3.4 for June 30, 2025. We do not engage in correlation trading or utilize the internal model approach for measuring default

and credit migration risk. Our net VaR approach incorporates diversification, but our VaR calculation does not include the impact of counterparty risk and our own credit spreads on derivatives.

The aggregate VaR at the 99% confidence level with a one day holding period for all covered positions was $2.4 million at June 30, 2025, and $2.6 million at June 30, 2024. Figure 20 summarizes our VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended June 30, 2025, and June 30, 2024.

Figure 20. VaR for Significant Portfolios of Covered Positions

20252024
Three months ended June 30,Three months ended June 30,
Dollars in millionsHighLowMeanJune 30,HighLowMeanJune 30,
Trading account assets:
Fixed income$2.3$1.2$1.7$2.1$1.3$0.7$0.9$0.9
Derivatives:
Interest rate$0.2$0.1$0.1$0.2$0.3$0.1$0.2$0.2

Stressed VaR is calculated by running the portfolios through a predetermined stress period which is approved by the Market Risk Committee and is calculated at the 99% confidence level using the same model and assumptions used for general VaR. The aggregate stressed VaR for all covered positions was $4.4 million at June 30, 2025, and $10.8 million at June 30, 2024. Figure 21 summarizes our stressed VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended June 30, 2025, and June 30, 2024. Changes in VaR are dependent on portfolio composition, inventory levels, and other market factors.

Figure 21. Stressed VaR for Significant Portfolios of Covered Positions

20252024
Three months ended June 30,Three months ended June 30,
Dollars in millionsHighLowMeanJune 30,HighLowMeanJune 30,
Trading account assets:
Fixed income$5.2$2.9$3.7$4.0$4.6$2.6$3.3$3.7
Derivatives:
Interest rate$0.2$0.1$0.1$0.2$0.4$0.2$0.2$0.2

Market risk is a component of our internal capital adequacy assessment. Our risk-weighted assets include a market risk-equivalent asset amount, which consists of a VaR component, stressed VaR component, a de minimis exposure amount, and a specific risk add-on including the securitization positions. The aggregate market value of the securitization positions as defined by the Market Risk Rule was $22 million at June 30, 2025, all of which were mortgage-backed security positions. Specific risk is the price risk of individual financial instruments, which is not accounted for by changes in broad market risk factors and is measured through a standardized approach. Market risk weighted assets, including the specific risk calculations, are run quarterly by MTRM in accordance with the Market Risk Rule, and approved by the Chief Market & Treasury Risk Officer.

Nontrading market risk

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

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

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

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

  • “Option risk”** is the exposure to a customer or counterparty’s ability to take advantage of the interest rate environment and terminate or reprice one of our assets, liabilities, or off-balance sheet instruments prior to contractual maturity. Option risk occurs when exposures to customer and counterparty early withdrawals or prepayments are not mitigated with an offsetting position or appropriate compensation.

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

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

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

Figure 22 presents the results of the simulation analysis at June 30, 2025, and June 30, 2024. At June 30, 2025, our simulated exposure to changes in interest rates was neutral. The exposure to declining rates has changed from (1.79)% as of June 30, 2024 to (0.48)% as of June 30, 2025, while the exposure to rising rates has changed from (0.15)% as of June 30, 2024 to 0.78% as of June 30, 2025. The modest shift toward asset sensitivity was caused principally by the adoption of a new pricing model for indeterminate maturity interest-bearing deposits in the first quarter. The new deposit beta model incorporates more historical data and features that we believe more accurately reflect the behavior of our clients in rising and declining interest rate cycles. In addition, since the beginning of the second quarter, Key now measures simulated change in net interest income relative to implied forwards in a baseline scenario. Previously, metrics were calculated against a flat-rate assumption in the baseline scenario.

We are actively managing the balance sheet to maintain desired IRR positioning in the current environment. Tolerance levels for risk management require the development of remediation plans to maintain residual risk within tolerance if simulation modeling demonstrates that a gradual, parallel 200 basis point increase or 200 basis point decrease in interest rates over the next 12 months would adversely affect net interest income over the same period by more than 5.0%, revised from 5.5% to reflect tighter risk management. Current modeled exposure is within Board-approved tolerances.

Figure 22. Simulated Change in Net Interest Income

June 30, 2025June 30, 2024
Basis point change assumption-200+200-200+200
Tolerance level(5.00)%(5.00)%(5.50)%(5.50)%
Interest rate risk assessment(0.48)%0.78%(1.79)%(0.15)%

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

Regular stress tests and sensitivity analyses are performed on the model inputs that could materially change the resulting risk assessments. Assessments are performed using different yield curve shapes, including steepenings or flattenings of the curve, immediate changes in market interest rates, and changes in the relationship of money market interest rates. Assessments are also performed on changes to the following assumptions: loan and deposit balances, the pricing of deposits without contractual maturities, changes in lending spreads, prepayments on loans and securities, investment, funding and hedging activities, and liquidity and capital management strategies.

The results of additional assessments indicate that net interest income could increase or decrease from the base simulation results presented in Figure 22. Net interest income is highly dependent on the timing, magnitude, frequency, and path of interest rate changes and the associated assumptions for deposit repricing relationships, lending spreads, and the balance behavior of transaction accounts. If fixed-rate assets increase by $1 billion, or fixed-rate liabilities decrease by $1 billion, then the potential benefit to declining rates would increase by approximately 22 basis points. A five percentage point increase or decrease in the interest-bearing deposit beta assumption changes the current simulation results by approximately 99 basis points.

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

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

Economic value of equity modeling. EVE complements net interest income simulation analysis as it estimates risk exposure beyond 12-, 24-, and 36-month horizons. EVE modeling measures the extent to which the economic values of assets, liabilities, and off-balance sheet instruments may change in response to fluctuations in interest rates. EVE is calculated by subjecting the balance sheet to an immediate increase or decrease in interest rates, measuring the resulting change in the values of assets, liabilities, and off-balance sheet instruments, and comparing those amounts with the base case of the current interest rate environment. EVE policy limits are measured against a +/-200 basis point scenario subject to a floor on market interest rates at zero. This analysis is highly dependent upon assumptions applied to assets and liabilities with non-contractual maturities. Those assumptions are based on historical behaviors, as well as forward expectations. Remediation plans are similarly developed if the analysis indicates that the EVE will decrease by 15% or more in response to an instantaneous increase or decrease in interest rates. The position is within these guidelines as of June 30, 2025.

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

Figure 23 shows all swap positions held for A/LM purposes. These positions are used to convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index. For example, fixed-rate debt is converted to a floating rate through a “receive fixed/pay variable” interest rate swap. The volume, maturity, and mix of portfolio swaps change frequently to reflect broader A/LM objectives and the balance sheet positions to be hedged. For more information about how interest rate swaps are used to manage the risk profile, see Note 7 (“Derivatives and Hedging Activities”).

Figure 23. Portfolio Swaps by Interest Rate Risk Management Strategy

June 30, 2025
Weighted-AverageDecember 31, 2024
Dollars in millionsNotional AmountFair ValueMaturity (Years)Receive RatePay RateNotional AmountFair Value
Receive fixed/pay variable — conventional loans$23,525$(193)1.62.9%4.4%$18,750$(442)
Receive fixed/pay variable — conventional debt10,782(241)3.82.84.49,818(470)
Receive fixed/pay variable — forward loans14,4751843.03.84.419,200(114)
Receive fixed/pay variable — forward debt—————950(22)
Pay fixed/receive variable — conventional debt50—3.04.73.6501
Pay fixed/receive variable — securities9,420(110)2.44.44.19,4055
Total portfolio swaps$58,252$(360)(a)2.53.3%4.4%$58,173$(1,042)(a)
Floors — forward purchased$3,250$10.6—%—%$3,250$2
Floors — forward sold3,250—0.6——3,250(1)
Total floors$6,500$1——%—%$6,500$1

(a)Excludes accrued interest of $86 million at June 30, 2025, and accrued interest of $51 million at December 31, 2024.

Liquidity risk management

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

Governance structure

We manage liquidity for all of our affiliates on a consolidated basis. This approach considers the funding sources available to each entity, as well as each entity’s capacity to manage through adverse conditions.

The management of consolidated liquidity risk is centralized within Corporate Treasury. Oversight and governance is provided by the Board, the ERM Committee, the ALCO, the TROC, and the Chief Risk Officer. The Asset Liability Management Policy provides the framework for the oversight and management of liquidity risk and is administered by the ALCO. The Corporate Treasury Oversight group within the MTRM, as the second line of defense, provides additional oversight. Our current liquidity risk management practices are in compliance with the Federal Reserve Board’s Enhanced Prudential Standards.

These committees mentioned above regularly review liquidity and funding summaries, liquidity trends, peer comparisons, variance analyses, liquidity projections, internal liquidity stress tests, and goal tracking reports. The reviews generate a discussion of positions, trends, and directives on liquidity risk and shape a number of our decisions. When liquidity pressure is elevated, positions are monitored more closely and reporting is more intensive. To ensure that emerging issues are identified, we monitor an extensive set of systemic and idiosyncratic early warning indicators daily.

Factors affecting liquidity

Our liquidity could be adversely affected by both direct and indirect events. An example of a direct event would be a downgrade in our credit ratings by a rating agency. Examples of indirect events (events unrelated to us) that could impair our access to liquidity would be an act of terrorism or war, natural disasters, global pandemics, political events, or the default or bankruptcy of a major corporation, mutual fund, or hedge fund. Similarly, market speculation, or rumors about us or the banking industry in general, may adversely affect the cost and availability of normal funding sources. For a discussion of certain risks which may impact our liquidity, see Part I, Item 1A. "Risk Factors" on pages 24-42 of our 2024 Form 10-K. For more information on recent liquidity activity, see the header "Our liquidity position and recent activity" in this report below.

Our credit ratings and rating agency outlooks at June 30, 2025, are shown in Figure 24. While we believe these credit ratings, under normal conditions in the capital markets, will enable KeyCorp or KeyBank to issue fixed income securities to investors, downgrades in our credit ratings could increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us.

Figure 24. Credit Ratings

June 30, 2025OutlookShort-Term BorrowingsLong-Term Deposits (a)Senior Long-Term DebtSubordinated Long-Term DebtCapital SecuritiesPreferred Stock
KEYCORP
Standard & Poor’sStableA-2N/ABBBBBB-BBBB
Moody’sStableP-2N/ABaa2Baa2Baa3Ba1
Fitch Ratings, Inc.PositiveF2N/ABBB+N/ABBBB
DBRS, Inc.StableR-1 (low)N/AA (low)BBB (high)BBB (high)BBB (low)
KEYBANK
Standard & Poor’sStableA-2N/ABBB+BBBN/AN/A
Moody’sStableP-2P-1/A2Baa1Baa2N/AN/A
Fitch Ratings, Inc.PositiveF2F2/A-BBB+BBBN/AN/A
DBRS, Inc.StableR-1 (low)AAA (low)N/AN/A

(a)P-1 rating assigned by Moody’s is specific to KeyBank’s short-term bank deposit ratings. F2 assigned by Fitch Ratings, Inc. is specific to KeyBank’s short-term deposit ratings.

Managing liquidity risk

Most of our liquidity risk is derived from our business model, which involves taking in deposits, many of which can be withdrawn at any time, and lending them out in the form of illiquid loan assets. The assessments of liquidity risk are measured under the assumption of normal operating conditions as well as under stressed environments. We manage these exposures in accordance with our risk appetite, and within Board-approved policy limits.

We regularly monitor our liquidity position and funding sources and measure our capacity to obtain funds in a variety of hypothetical scenarios in an effort to maintain an appropriate mix of available and affordable funding. In the normal course of business, we perform a monthly internal liquidity stress test at the consolidated KeyCorp level. From time to time, we may conduct internal liquidity stress tests more frequently, and use assumptions to reflect the changed market environment. Our testing incorporates estimates for loan and deposit lives based on our historical studies. Internal liquidity stress tests analyze potential liquidity scenarios under various funding constraints and time periods. Ultimately, they determine the periodic effects that major direct and indirect events would have on our access to funding markets and our ability to fund our normal operations. To compensate for the effect of these assumed liquidity pressures, we consider alternative sources of liquidity and maturities over different time periods to project how funding needs would be managed.

Our primary source of funding for KeyBank are customer deposits resulting in a consolidated loan-to-deposit ratio of 73% as of June 30, 2025. If the cash flows needed to support operating and investing activities are not satisfied by deposit balances, we rely on wholesale funding or on-balance sheet liquid reserves. Additionally, excess cash generated by operating, investing, and deposit-gathering activities may be used to repay outstanding debt or invest in liquid assets.

We maintain a Contingency Funding Plan that outlines the process for addressing a liquidity crisis. As part of the plan, we maintain on-balance sheet liquid reserves referred to as our liquid asset portfolio, which consists of high quality liquid assets. During a stress period, that reserve could be used as a source of funding to provide time to develop and execute a longer-term strategy. Figure 25 shows our available contingent liquidity at June 30, 2025, and December 31, 2024. As of June 30, 2025, our secured term borrowings were $2.3 billion, a slight increase compared to the fourth quarter of 2024.

Figure 25. Available Contingent Liquidity

Dollars in billionsJune 30, 2025December 31, 2024
Available contingent liquidity:
Unpledged securities$27.4$25.5
Net balances of federal funds sold and balances in our Federal Reserve account11.517.4
Unused secured borrowing capacity at the Federal Reserve Bank of Cleveland39.036.7
Unused secured borrowing capacity at the FHLB17.218.9
Total$95.1$98.5

Liquidity programs

We have several liquidity programs, which are described in Note 20 (“Long-term Debt”) beginning on page 170 of our 2024 Form 10-K, that are designed to enable KeyCorp and KeyBank to raise funds in the public and private debt markets. The proceeds from most of these programs can be used for general corporate purposes, including

acquisitions. These liquidity programs are reviewed from time to time by the Board and are renewed and replaced, as necessary. There are no restrictive financial covenants in any of these programs.

Liquidity for KeyCorp

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

We use a parent cash coverage months metric as the primary measure to assess parent company liquidity. The parent cash coverage months metric measures the number of months into the future where projected obligations can be met with the current quantity of liquidity. We generally issue term debt to supplement dividends from KeyBank to manage our liquidity position at or above our targeted levels. The parent company generally maintains cash and short-term investments in an amount sufficient to meet projected debt maturities over at least the next 24 months. At June 30, 2025, KeyCorp held $5.0 billion in cash and short-term investments, which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing debt obligations for the periods prescribed by our risk tolerance.

Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank, supplemented with the proceeds from term debt issuance. Federal banking law limits the amount of capital distributions that a bank can make to its holding company without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several factors, including net profits (as defined by statute) for the two previous calendar years and for the current year, up to the date of dividend declaration. During the second quarter of 2025, KeyBank paid $350 million cash dividends to KeyCorp. As of June 30, 2025, KeyBank had regulatory capacity to pay $639 million in dividends to KeyCorp without prior regulatory approval.

Our liquidity position and recent activity

Our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, continues to exceed the amount that we estimate would be necessary to manage through an adverse liquidity event by providing sufficient time to develop and execute a longer-term solution.

From time to time, KeyCorp or KeyBank may seek to retire, repurchase, or exchange outstanding debt, capital securities, preferred shares, or common shares through cash purchase, privately negotiated transactions or other means. Additional information on repurchases of Common Shares by KeyCorp is included in Part II, Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities beginning on page 47 of our 2024 Form 10-K and Part II, Item 2 of this report. Such transactions depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, regulatory requirements, and other factors. The amounts involved may be material, individually or collectively.

The Consolidated Statements of Cash Flows summarize our sources and uses of cash by type of activity for the six-month periods ended June 30, 2025, and June 30, 2024.

For more information regarding liquidity governance structure, management of liquidity risk at KeyBank and KeyCorp, long-term liquidity strategies, and other liquidity programs, see “Liquidity Risk Management” beginning on page 83 of our 2024 Form 10-K as well as the disclosure included in Part II, Item 1A. “Risk Factors” of this report.

Credit risk management

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

Credit policy, approval, and evaluation

We manage credit risk exposure through a multifaceted program. The Credit Risk Committee approves management credit policies and recommends significant credit policies to the Enterprise Risk Management Committee, the KeyBank Board, and the Risk Committee of the Board for approval. These policies are communicated throughout the organization to foster a consistent approach to granting credit.

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

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

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

Allowance for loan and lease losses

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology used is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 112 of our 2024 Form 10-K. Briefly, the ALLL estimate uses various models and estimation techniques based on our historical loss experience, current borrower characteristics, current economic conditions, reasonable and supportable forecasts, and other relevant factors. The ALLL at June 30, 2025, represents our best estimate of the lifetime expected credit losses inherent in the loan portfolio at that date.

As shown in Figure 26, our ALLL from continuing operations increased by $37 million, or 2.6%, from December 31, 2024. The commercial ALLL increased by $49 million, or 4.7%, from December 31, 2024, through June 30, 2025. Our consumer ALLL decreased $12 million, or 3.2%, from December 31, 2024, through June 30, 2025. Refer to Note 4 (“Asset Quality”) within this report for further discussion of changes in the ALLL.

Figure 26. Allocation of the Allowance for Loan and Lease Losses

June 30, 2025December 31, 2024
Dollars in millionsAmountPercent of Allowance to Total AllowancePercent of Loan Type to Total LoansAmountPercent of Allowance to Total AllowancePercent of Loan Type to Total Loans
Commercial and industrial$67846.8%52.7%$63945.4%50.7%
Commercial real estate:
Commercial mortgage31922.113.032022.712.8
Construction574.02.7513.62.8
Total commercial real estate loans37626.115.737126.315.6
Commercial lease financing322.22.3271.92.6
Total commercial loans1,08675.170.71,03773.668.9
Real estate — residential mortgage684.718.2906.419.1
Home equity loans694.85.6705.06.1
Other consumer loans1419.74.61369.65.0
Credit cards825.70.9765.40.9
Total consumer loans36024.929.337226.431.1
Total ALLL — continuing operations (a)$1,446100.0%100.0%$1,409100.0%100.0%

(a)Excludes allocations of the ALLL related to the discontinued operations of the education lending business in the amount of $12 million at June 30, 2025, and $13 million at December 31, 2024.

Net loan charge-offs

Figure 27 shows the trend in our net loan charge-offs by loan type, while the composition of loan charge-offs and recoveries by type of loan is presented in Figure 29. Figure 28 shows the ratios of net charge-offs by loan category as a percentage of the respective average loan balance.

Net loan charge-offs for the three months ended June 30, 2025, increased $11 million compared to the year-ago quarter.

Figure 27. Net Loan Charge-offs (Recoveries) from Continuing Operations

20252024
Dollars in millionsSecondFirstFourthThirdSecond
Commercial and industrial$75$52$72$124$55
Commercial real estate:
Commercial mortgage5361869
Construction—————
Total commercial real estate loans5361869
Commercial lease financing2—1—3
Total commercial loans82889113067
Real estate — residential mortgage(1)——(1)—
Home equity loans(1)————
Other consumer loans1112131514
Credit cards1110101010
Total consumer loans2022232424
Total net loan charge-offs$102$110$114$154$91
Net loan charge-offs to average loans.39%.43%.43%.58%.34%
Net loan charge-offs from discontinued operations — education lending business$1$1$1$1$—

Figure 28. Net Loan Charge-offs (Recoveries) to Average Loans from Continuing Operations

20252024
Dollars in millionsSecondFirstFourthThirdSecond
Commercial and industrial0.54%0.40%0.54%0.93%0.41%
Commercial real estate:
Commercial mortgage0.181.090.520.170.25
Construction—————
Total commercial real estate loans0.150.890.430.140.21
Commercial lease financing0.27(0.01)0.03—0.38
Total commercial loans0.440.490.500.710.36
Real estate — residential mortgage(0.02)—0.01(0.02)—
Home equity loans(0.02)(0.02)———
Other consumer loans0.920.981.001.101.01
Credit cards4.244.694.504.334.31
Total consumer loans0.250.290.290.290.29
Total net loan charge-offs0.39%0.43%0.43%0.58%0.34%

Figure 29. Summary of Loan and Lease Loss Experience from Continuing Operations

Three months ended June 30,Six months ended June 30,
Dollars in millions2025202420252024
Average loans outstanding$105,715$108,961$105,039$109,997
Allowance for loan and lease losses at beginning of period$1,429$1,542$1,409$1,508
Loans charged off:
Commercial and industrial$94$86$156$148
Commercial real estate:
Commercial mortgage6104215
Construction————
Total commercial real estate loans(a)610
Commercial lease financing2626
Total commercial loans102102200169
Real estate — residential mortgage—112
Home equity loans——11
Other consumer loans13162732
Credit cards12122424
Total consumer loans25295359
Total loans charged off127131253228
Recoveries:
Commercial and industrial19312939
Commercial real estate:
Commercial mortgage1111
Construction————
Total commercial real estate loans(a)1111
Commercial lease financing—3—5
Total commercial loans20353045
Real estate — residential mortgage1123
Home equity loans1—21
Other consumer loans2244
Credit cards1233
Total consumer loans551111
Total recoveries25404156
Net loan charge-offs(102)(91)(212)(172)
Provision (credit) for loan and lease losses11996249211
Allowance for loan and lease losses at end of period$1,446$1,547$1,446$1,547
Liability for credit losses on lending-related commitments at beginning of period$278$281$290$296
Provision (credit) for losses on lending-related commitments1947(10)
Other—1——
Liability for credit losses on lending-related commitments at end of period(b)$297$286$297$286
Total allowance for credit losses at end of period$1,743$1,833$1,743$1,833
Net loan charge-offs to average total loans0.39%0.34%0.41%0.31%
Allowance for loan and lease losses to period-end loans1.361.441.361.44
Allowance for credit losses to period-end loans1.641.711.641.71
Allowance for loan and lease losses to nonperforming loans207.8217.9207.8217.9
Allowance for credit losses to nonperforming loans250.4258.2250.4258.2
Discontinued operations — education lending business:
Loans charged off$1$1$1$2
Recoveries—1—1
Net loan charge-offs$(1)$—$(1)$(1)

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

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

Nonperforming assets

Figure 30 shows the composition of our nonperforming assets. As shown in Figure 30, nonperforming assets at June 30, 2025, decreased $65 million from December 31, 2024.

See Note 1 (“Summary of Significant Accounting Policies”) of our 2024 Form 10-K under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” for a summary of our nonaccrual and charge-off policies.

Figure 30. Summary of Nonperforming Assets and Past Due Loans from Continuing Operations

Dollars in millionsJune 30, 2025March 31, 2025December 31, 2024September 30, 2024June 30, 2024
Commercial and industrial$280$288$322$365$358
Commercial real estate:
Commercial mortgage226206243176173
Construction—————
Total commercial real estate loans(a)226206243176173
Commercial lease financing————1
Total commercial loans(b)506494565541532
Real estate — residential mortgage9594928777
Home equity loans8487899091
Other consumer loans44544
Credit cards77766
Total consumer loans190192193187178
Total nonperforming loans696686758728710
OREO1114141317
Nonperforming loans held for sale—————
Other nonperforming assets—————
Total nonperforming assets$707$700$772$741$727
Accruing loans past due 90 days or more$74$86$90$166$137
Accruing loans past due 30 through 89 days266281206184282
Nonperforming assets from discontinued operations — education lending business21223
Nonperforming loans to period-end portfolio loans0.65%0.65%0.73%0.69%0.66%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets0.660.670.740.700.68

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

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

Figure 31 shows the activity that caused the change in our nonperforming loan balance during each of the last five quarters.

Figure 31. Summary of Changes in Nonperforming Loans from Continuing Operations

20252024
Dollars in millionsSecondFirstFourthThirdSecond
Balance at beginning of period$686$758$728$710$658
Loans placed on nonaccrual status233170309271317
Charge-offs(127)(126)(131)(167)(131)
Loans sold——(13)(32)(22)
Payments(74)(57)(111)(37)(76)
Transfers to OREO(1)(2)(2)(1)(1)
Loans returned to accrual status(21)(57)(22)(16)(35)
Balance at end of period$696$686$758$728$710

Operational and compliance risk management

Like all businesses, we are subject to operational risk, which is the risk of loss resulting from human error or malfeasance, inadequate or failed internal processes and systems, and external events. These events include, among other things, threats to our cybersecurity, as we are reliant upon information systems and the internet to conduct our business activities. Operational risk intersects with compliance risk, which is the risk of loss from violations of, or noncompliance with, laws, rules and regulations, prescribed practices, and ethical standards. Under the Dodd-Frank Act, large financial companies like Key are subject to heightened prudential standards and regulation. This heightened level of regulation has increased our operational risk. While operational and compliance risk are separate risk disciplines in KeyCorp’s ERM framework, losses and/or additional regulatory compliance costs

are included in operational loss reporting and could take the form of explicit charges, increased operational costs, or harm to our reputation.

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

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

Cybersecurity

For information on our cybersecurity risk management and governance practices, please see Item 1C. Cybersecurity beginning on page 43 of our 2024 Form 10-K.

GAAP to Non-GAAP Reconciliations

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

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

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

of results as reported under GAAP.

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

Three months endedSix months ended
Dollars in millions6/30/20253/31/202512/31/20249/30/20246/30/20246/30/20256/30/2024
Tangible common equity to tangible assets at period-end
Key shareholders’ equity (GAAP)$19,484$19,003$18,176$16,852$14,789
Less:Intangible assets2,7702,7742,7792,7862,793
Preferred Stock (a)2,4462,4462,4462,4462,446
Tangible common equity (non-GAAP)$14,268$13,783$12,951$11,620$9,550
Total assets (GAAP)$185,499$188,691$187,168$189,763$187,450
Less:Intangible assets2,7702,7742,7792,7862,793
Tangible assets (non-GAAP)$182,729$185,917$184,389$186,977$184,657
Tangible common equity to tangible assets ratio (non-GAAP)7.8%7.4%7.0%6.2%5.2%
Average tangible common equity
Average Key shareholders’ equity (GAAP)$19,268$18,632$16,732$15,759$14,474$18,952$14,561
Less:Intangible assets (average)2,7722,7772,7832,7892,7962,7742,798
Preferred Stock (average)2,5002,5002,5002,5002,5002,5002,500
Average tangible common equity (non-GAAP)$13,996$13,355$11,449$10,470$9,178$13,678$9,263
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)$387$370$(279)$(447)$237$757$420
Average tangible common equity (non-GAAP)13,99613,35511,44910,4709,17813,6789,263
Return on average tangible common equity from continuing operations (non-GAAP)11.1%11.2%(9.7)%(17.0)%10.4%11.16%9.12%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)$389$369$(279)$(446)$238$758$421
Average tangible common equity (non-GAAP)13,99613,35511,44910,4709,17813,6789,263
Return on average tangible common equity consolidated (non-GAAP)11.1%11.2%(9.7)%(16.9)%10.4%11.18%9.14%
Pre-provision net revenue
Net interest income (GAAP)$1,141$1,096$1,051$952$887$2,237$1,762
Plus:Taxable-equivalent adjustment991012121823
Noninterest income690668(196)(269)6271,3581,274
Less:Noninterest expense1,1541,1311,2291,0941,0792,2852,222
Pre-provision net revenue from continuing operations (non-GAAP)$686$642$(364)$(399)$447$1,328$837

(a)Net of capital surplus.

Adjusted noninterest expense and adjusted noninterest income are non-GAAP measures in that they are adjusted to exclude the impact of significant or unusual items. Management believes adjusting for significant or unusual items provide investors with useful information to gain a better understanding of ongoing operations and enhance comparability of results with prior periods, as well as demonstrate the effects of the financial impacts related to those selected items.

Three months endedSix months ended
Dollars in millions6/30/20253/31/202512/31/20249/30/20246/30/20246/30/20256/30/2024
Adjusted noninterest expense
Noninterest expense (GAAP)$1,154$1,131$1,229$1,094$1,079$2,285$2,222
Adjustments:
FDIC special assessment (other expense)——36(5)—(34)
Adjusted noninterest expense (non-GAAP)$1,154$1,131$1,232$1,100$1,074$2,285$2,188
Adjusted noninterest income
Noninterest income (GAAP)$690$668$(196)$(269)$627$1,358$1,274
Adjustments:
Loss on sale of securities for securities repositioning——915918———
Scotiabank investment agreement valuation (other income)——3————
Adjusted noninterest income (non-GAAP)$690$668$722$649$627$1,358$1,274

Critical Accounting Policies and Estimates

Our business is dynamic and complex. Consequently, we must exercise judgment in choosing and applying accounting policies and methodologies. These choices are critical – not only are they necessary to comply with GAAP, they also reflect our view of the appropriate way to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Significant Accounting Policies”) beginning on page 110 of our 2024 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. Note 1 (“Basis of Presentation and Accounting Policies”) of this report should also be reviewed for more information on accounting standards that have been adopted during the period.

In our opinion, some accounting policies are more likely than others to have a critical effect on our financial results and to expose those results to potentially greater volatility. These policies apply to areas of relatively greater business importance, or require us to exercise judgment and to make assumptions and estimates that affect

amounts reported in the financial statements. Because these assumptions and estimates are based on current circumstances, they may prove to be inaccurate, or we may find it necessary to change them.

We rely heavily on the use of judgment, assumptions, and estimates to make a number of core decisions, including accounting for the ALLL; contingent liabilities, guarantees and income taxes; derivatives and related hedging activities; and assets and liabilities that involve valuation methodologies. In addition, we may employ outside valuation experts to assist us in determining fair values of certain assets and liabilities. A brief discussion of each of these areas appears on pages 92 through 97 of our 2024 Form 10-K. During the three months ended June 30, 2025, we did not significantly alter the manner in which we applied our critical accounting policies or developed related assumptions and estimates.

Accounting and Reporting Developments

Accounting Guidance Pending Adoption at June 30, 2025

StandardRequired AdoptionDescriptionEffect on Financial Statements or Other Significant Matters
ASU 2024-03 and ASU 2025-01 Income Statement— Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220-40)January 1, 2027 Early adoption is permitted.The guidance requires public companies disclose additional information about certain types of costs and expenses. The guidance could be applied on a prospective or retrospective basis.The guidance is not expected to have a material impact on Key’s disclosures.

Previous: Cover and table of contents · Next: Item 1. Financial Statements