OR $.54 PER DILUTED COMMON SHARE

    CLEVELAND, July 21, 2022 - KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $504 million, or $.54 per diluted common share for the second quarter of 2022. This compared to $420 million, or $.45 per diluted common share, for the first quarter of 2022 and $698 million, or $.72 per diluted common share, for the second quarter of 2021.

(a)The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Return on average tangible common equity from continuing operations.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(b)June 30, 2022 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

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

Compared to the first quarter of 2022, taxable-equivalent net interest income increased by $84 million and the net interest margin increased by 15 basis points. Net interest income and the net interest margin benefited from a favorable balance sheet mix and higher interest rates, partly offset by lower loan fees related to the PPP and higher interest-bearing deposit costs. Net interest income also benefited from one additional day in the quarter.

    

    Compared to the second quarter of 2021, noninterest income decreased by $62 million. The decrease was largely due to investment banking and debt placement fees, down $68 million, reflecting a slowdown in capital markets activity. Other drivers for the decrease include cards and payments income and consumer mortgage income, down $28 million and $12 million, respectively. Cards and payments income decreased as a result of lower levels of prepaid card activity. Consumer mortgage income decreased reflecting higher balance sheet retention as well as lower gain on sale margins. Partially offsetting the decrease was a $33 million increase in corporate services income, due to higher derivatives trading income.

Compared to the first quarter of 2022, noninterest income increased by $12 million. The primary drivers were other income, which increased $15 million, reflecting market-related adjustments in the prior quarter and commercial mortgage servicing, up $9 million, as a result of higher special servicing fees. Partially offsetting the increase was a $14 million decrease in investment banking and debt placement fees, related to a slowdown in capital markets activity.

    Key’s noninterest expense was $1.1 billion for the second quarter of 2022, an increase of $2 million from the year-ago period. Nonpersonnel expense increased $18 million, including an increase in other expense, due to higher travel and entertainment, as well as an increase in computer processing expense. Personnel expense decreased $16 million, driven by lower incentive and stock-based compensation, reflecting lower production related incentives, partially offset by an increase in salaries and contract labor, as a result of higher merit increases and technology contract labor.

    Compared to the first quarter of 2022, noninterest expense increased $8 million. The increase was driven by nonpersonnel expense, which increased $31 million, largely due to higher other expense, reflecting increased travel and entertainment. Other contributing factors for the linked quarter increase include higher marketing expense and net occupancy expense. Partially offsetting the linked quarter increase was a $23 million decrease in personnel expense. The decrease was related to lower incentive and stock-based compensation as a result of lower production-related incentives and lower employee benefits expense.

(a)Commercial and industrial average loan balances include $153 million, $141 million, and $132 million of assets from commercial credit cards at June 30, 2022, March 31, 2022, and June 30, 2021, respectively.

    

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

Compared to the first quarter of 2022, average loans increased by $5.4 billion. Commercial loans increased $2.9 billion, reflecting strength in commercial and industrial loans and commercial mortgage real estate loans. Consumer loans increased $2.5 billion, driven by continued strength in Key's consumer mortgage business and Laurel Road.

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

Compared to the first quarter of 2022, average deposits decreased by $2.7 billion, largely reflecting seasonal commercial outflows and public sector deposit outflows related to stimulus funds.

    

    Key's provision for credit losses was $45 million, compared to a net benefit of $222 million in the second quarter of 2021 and provision of $83 million in the first quarter of 2022.

    Net loan charge-offs for the second quarter of 2022 totaled $44 million, or .16% of average total loans. These results compare to $22 million, or .09%, for the second quarter of 2021 and $33 million, or .13%, for the first quarter of 2022. Key’s allowance for credit losses was $1.3 billion, or 1.13% of total period-end loans at June 30, 2022, compared to 1.36% at June 30, 2021, and 1.19% at March 31, 2022.

    At June 30, 2022, Key’s nonperforming loans totaled $429 million, which represented .38% of period-end portfolio loans. These results compare to .69% at June 30, 2021, and .41% at March 31, 2022. Nonperforming assets at June 30, 2022, totaled $463 million, and represented .41% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .73% at June 30, 2021, and .44% at March 31, 2022.

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at June 30, 2022.

(a)June 30, 2022 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(b)The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “tangible common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

Key's capital position remained strong in the second quarter of 2022. As shown in the preceding table, at June 30, 2022, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.2% and 10.4%, respectively. Key's tangible common equity ratio was 5.3% at June 30, 2022.

    Key elected the CECL phase-in option provided by regulatory guidance which delayed for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. Effective for the first quarter 2022, Key is now in the three-year transition period. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by 12 basis points.

    

    During the second quarter of 2022, Key declared a dividend of $.195 per common share.

    The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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KeyCorp's roots trace back nearly 200 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $187.0 billion at June 30, 2022.

Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,000 branches and approximately 1,300 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 8:00 a.m. ET, on July 21, 2022. A replay of the call will be available through July 30, 2022.

For up-to-date company information, media contacts, and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

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(a)Earnings per share may not foot due to rounding.

(b)The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(c)Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.

(d)June 30, 2022, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.

(Dollars in millions)

The table below presents certain non-GAAP financial measures related to “tangible common equity,” “return on average tangible common equity,” “pre-provision net revenue," and “cash efficiency ratio."

The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key’s intangible asset amortization from the calculation. Management believes this ratio provide greater consistency and comparability between Key’s results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.

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, or as a substitute for analyses of results as reported under GAAP.

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

(b)Net of capital surplus.

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

GAAP = U.S. generally accepted accounting principles

(a)Earnings per share may not foot due to rounding.

(b)Assumes conversion of common share options and other stock awards, as applicable.