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Asset Quality
 9 Months Ended
Sep. 30, 2024
Credit Loss [Abstract]  
Asset Quality
4. Asset Quality

ALLL

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 ("Summary of Significant Accounting Policies") under the heading "Allowance for Loan and Lease Losses" beginning on page 109 of our 2023 Form 10-K.

The ALLL at September 30, 2024, represents our current estimate of lifetime credit losses inherent in the loan portfolio at that date. The changes in the ALLL by loan category for the periods indicated are as follows:

Three months ended September 30, 2024:
Dollars in millionsJune 30, 2024ProvisionCharge-offsRecoveriesSeptember 30, 2024
Commercial and Industrial $682 $101 $(131)$7 $659 
Commercial real estate:
Real estate — commercial mortgage383 (19)(7)1 358 
Real estate — construction66 (2)— — 64 
Total commercial real estate loans449 (21)(7)1 422 
Commercial lease financing29 — — — 29 
Total commercial loans1,160 80 (138)8 1,110 
Real estate — residential mortgage115 (5)— 1 111 
Home equity loans71 1 (1)1 72 
Other consumer loans128 15 (17)2 128 
Credit cards73 10 (11)1 73 
Total consumer loans387 21 (29)5 384 
Total ALLL — continuing operations1,547 101 
(a)
(167)13 1,494 
Discontinued operations14 — (1)— 13 
Total ALLL — including discontinued operations$1,561 $101 $(168)$13 $1,507 
(a)Excludes a credit for losses on lending-related commitments of $6 million.


Three months ended September 30, 2023:
Dollars in millionsJune 30, 2023ProvisionCharge-offsRecoveriesSeptember 30, 2023
Commercial and Industrial $599 $29 $(62)$10 $576 
Commercial real estate:
Real estate — commercial mortgage315 46 (1)— 360 
Real estate — construction39 9 — — 48 
Total commercial real estate loans354 55 (1)— 408 
Commercial lease financing33 (2)— 1 32 
Total commercial loans986 82 (63)11 1,016 
Real estate — residential mortgage200 (20)— 1 181 
Home equity loans96 (5)(1)1 91 
Other consumer loans126 11 (14)2 125 
Credit cards72 11 (9)1 75 
Total consumer loans494 (3)(24)5 472 
Total ALLL — continuing operations1,480 79 
(a)
(87)16 1,488 
Discontinued operations18 (1)— — 17 
Total ALLL — including discontinued operations$1,498 $78 $(87)$16 $1,505 
(a)Excludes a provision for losses on lending-related commitments of $2 million.
Nine months ended September 30, 2024:
Dollars in millionsDecember 31, 2023ProvisionCharge-offsRecoveriesSeptember 30, 2024
Commercial and Industrial $556 $336 $(279)$46 $659 
Commercial real estate:
Real estate — commercial mortgage419 (41)(22)2 358 
Real estate — construction52 12 — — 64 
Total commercial real estate loans471 (29)(22)2 422 
Commercial lease financing33 (3)(6)5 29 
Total commercial loans1,060 304 (307)53 1,110 
Real estate — residential mortgage162 (53)(2)4 111 
Home equity loans86 (14)(2)2 72 
Other consumer loans122 49 (49)6 128 
Credit cards78 26 (35)4 73 
Total consumer loans448 8 (88)16 384 
Total ALLL — continuing operations1,508 312 
(a)
(395)69 1,494 
Discontinued operations16 (1)(3)1 13 
Total ALLL — including discontinued operations$1,524 $311 $(398)$70 $1,507 
(a)Excludes a credit for losses on lending-related commitments of $16 million.

Nine months ended September 30, 2023:
Dollars in millionsDecember 31, 2022ProvisionCharge-offsRecoveriesSeptember 30, 2023
Commercial and Industrial $601 $81 $(139)$33 $576 
Commercial real estate:
Real estate — commercial mortgage203 171 (15)1 360 
Real estate — construction28 20 — — 48 
Total commercial real estate loans231 191 (15)1 408 
Commercial lease financing32 (4)— 4 32 
Total commercial loans864 268 (154)38 1,016 
Real estate — residential mortgage196 (17)(1)3 181 
Home equity loans98 (6)(4)3 91 
Other consumer loans113 42 (37)7 125 
Credit cards66 32 (27)4 75 
Total consumer loans473 51 (69)17 472 
Total ALLL — continuing operations1,337 319 
(a)
(223)55 1,488 
Discontinued operations21 (2)(3)1 17 
Total ALLL — including discontinued operations$1,358 $317 $(226)$56 $1,505 
(a)Excludes a provision for losses on lending-related commitments of $68 million.

As described in Note 1 ("Summary of Significant Accounting Policies"), under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2023 Form 10-K, we estimate the ALLL using relevant available information, from internal and external sources, relating to past events, current economic and portfolio conditions, and reasonable and supportable forecasts. In our estimation of expected credit losses, we use a two year reasonable and supportable period across all products. Following this two year period in which supportable forecasts can be generated, for all modeled loan portfolios, we revert expected credit losses to a level that is consistent with our historical information by reverting the macroeconomic variables (model inputs) to their long run average. We revert to historical loss rates for less complex estimation methods for smaller portfolios. A 20-year fixed length look back period is used to calculate the long run average of the macroeconomic variables. A four quarter reversion period is used where the macroeconomic variables linearly revert to their long run average following the two year reasonable and supportable period.

We develop our reasonable and supportable forecasts using relevant data including, but not limited to, changes in economic output, unemployment rates, property values, and other factors associated with the credit losses on financial assets. Some macroeconomic variables apply to all portfolio segments, while others are more portfolio specific. The following table discloses key macroeconomic variables for each loan portfolio.
SegmentPortfolio
Key Macroeconomic Variables (a)
CommercialCommercial and industrialBBB corporate bond rate (spread), fixed investment, business bankruptcies, GDP, industrial production, unemployment rate, and Producer Price Index
Commercial real estateProperty & real estate price indices, unemployment rate, business bankruptcies, GDP, and SOFR
Commercial lease financingBBB corporate bond rate (spread), GDP, and unemployment rate
ConsumerReal estate — residential mortgageGDP, home price index, unemployment rate, and 30 year mortgage rate
Home equityHome price index, unemployment rate, and 30 year mortgage rate
Other consumerUnemployment rate and U.S. household income
Credit cardsUnemployment rate and U.S. household income
Discontinued operationsUnemployment rate
(a)Variables include all transformations and interactions with other risk drivers. Additionally, variables may have varying impacts at different points in the economic cycle.

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

Economic Outlook

As of September 30, 2024, the unemployment rate remained at a relatively low level, although job growth has moderated. Inflation has eased, largely due to restrictive monetary policy and a higher interest rate environment. Commercial real estate values continue to be under pressure, with the office class showing the most vulnerability. Economic uncertainty remains elevated, primarily due to geopolitical tensions and uncertainty surrounding the upcoming U.S. presidential election. We used the Moody’s August 2024 Consensus forecast as the baseline forecast to estimate expected credit losses as of September 30, 2024. We determined this forecast to be a reasonable view of the economic outlook, based on all available information at quarter end.

The baseline scenario reflects continued economic resiliency, but slower growth for the remainder of 2024 and into 2025 as higher rates continue to take their toll. U.S. GDP is expected to grow at an annual rate of approximately 2.6% and 1.8% for 2024 and 2025, respectively, compared to 2.5% in 2023. The National Unemployment Rate was 4.2% in the third quarter of 2024, will remain steady into late-2025 according to the forecast. The forecast also assumes the Federal Funds rate begins to ease in the third quarter 2024, while the U.S. Consumer Price Index is forecasted at 3.0% for all of 2024. The outlook for the National Home Price Index has improved, now reflecting 3.3% growth through 2024, while the Commercial Real Estate Price Index is forecasted to drop 4% by the end of 2024.

To the extent we identified credit risk considerations that were not captured by the third-party economic forecast, we addressed the risk through management’s qualitative adjustments to the ALLL. As a result of the current economic uncertainty, our future loss estimates may vary considerably from our September 30, 2024 assumptions.

Commercial Loan Portfolio

The ALLL from continuing operations for the commercial segment decreased by $50 million, or 4.3%, from June 30, 2024. The overall decrease in the commercial allowance was driven by changes in portfolio activity, including the effects of continuing balance sheet optimization efforts, partly offset by economic changes.

The reserve decrease reflects strategic and ongoing loan attrition mostly within the C&I portfolio. The reserve decrease is offset by credit portfolio migration as well as impacts from the extended period of higher interest rates and the current inflationary environment.

Consumer Loan Portfolio

The ALLL from continuing operations for the consumer segment decreased by $3 million, or 0.8%, from June 30, 2024. The overall decrease in the consumer allowance was driven by the impact of balance sheet optimization efforts, partly offset by credit quality normalization post-pandemic.
Credit Risk Profile

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

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category and Vintage (a)(b)
As of September 30, 2024Term LoansRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost Basis
Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions20242023202220212020PriorTotal
Commercial and Industrial
Risk Rating:
Pass$4,215 $3,330 $7,612 $4,309 $1,895 $4,090 $22,943 $117 $48,511 
Criticized (Accruing)76 224 664 442 261 414 1,779 38 3,898 
Criticized (Nonaccruing)22 19 106 35 3 43 137 — 365 
Total commercial and industrial4,313 3,573 8,382 4,786 2,159 4,547 24,859 155 52,774 
Current year gross write-offs— 6 40 105 4 25 99 — 279 
Real estate — commercial mortgage
Risk Rating:
Pass623 808 3,127 2,344 629 3,338 865 42 11,776 
Criticized (Accruing)19 66 705 372 87 406 22 11 1,688 
Criticized (Nonaccruing)— — 55 71 2 43 2 — 173 
Total real estate — commercial mortgage
642 874 3,887 2,787 718 3,787 889 53 13,637 
Current year gross write-offs— — — — — 21 1 — 22 
Real estate — construction
Risk Rating:
Pass60 757 1,172 466 88 93 35 2 2,673 
Criticized (Accruing)— 16 116 142 68 78 — — 420 
Criticized (Nonaccruing)— — — — — — — — — 
Total real estate — construction60 773 1,288 608 156 171 35 2 3,093 
Current year gross write-offs— — — — — — — — — 
Commercial lease financing
Risk Rating:
Pass235 465 685 415 255 777 — — 2,832 
Criticized (Accruing)2 30 17 10 8 14 — — 81 
Criticized (Nonaccruing)— — — — — — — — — 
Total commercial lease financing237 495 702 425 263 791 — 2,913 
Current year gross write-offs— — — — — 6 — — 6 
Total commercial loans$5,252 $5,715 $14,259 $8,606 $3,296 $9,296 $25,783 $210 $72,417 
Total commercial loan current year gross write-offs$— $6 $40 $105 $4 $52 $100 $— $307 

As of December 31, 2023Term LoansRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost Basis
Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions20232022202120202019PriorTotal
Commercial and Industrial
Risk Rating:
Pass$4,020 $10,145 $6,141 $2,539 $2,064 $3,534 $24,395 $123 $52,961 
Criticized (Accruing)84 361 427 233 127 170 1,140 15 2,557 
Criticized (Nonaccruing)14 49 50 2 28 70 84 — 297 
Total commercial and industrial4,118 10,555 6,618 2,774 2,219 3,774 25,619 138 55,815 
Current year gross write-offs1 7 35 8 11 21 105 — 188 
Real estate — commercial mortgage
Risk Rating:
Pass1,084 3,664 2,922 804 1,545 2,507 1,017 66 13,609 
Criticized (Accruing)6 646 411 15 186 193 20 1 1,478 
Criticized (Nonaccruing)— — 1 3 7 55 34 — 100 
Total real estate — commercial mortgage
1,090 4,310 3,334 822 1,738 2,755 1,071 67 15,187 
Current year gross write-offs— 1 1 11 2 21 3 — 39 
Real estate — construction
Risk Rating:
Pass401 1,185 912 157 62 48 31 8 2,804 
Criticized (Accruing)10 40 60 64 41 47 — — 262 
Criticized (Nonaccruing)— — — — — — — — — 
Total real estate — construction411 1,225 972 221 103 95 31 8 3,066 
Current year gross write-offs— — — — — — — — — 
Commercial lease financing
Risk Rating:
Pass520 878 575 352 307 808 — — 3,440 
Criticized (Accruing)11 30 9 9 8 16 — — 83 
Criticized (Nonaccruing)— — — — — — — — — 
Total commercial lease financing531 908 584 361 315 824 — — 3,523 
Current year gross write-offs$— $— $— $— $— $— $— $— $— 
Total commercial loans$6,150 $16,998 $11,508 $4,178 $4,375 $7,448 $26,721 $213 $77,591 
Total commercial loan current year gross write-offs$1 $8 $36 $19 $13 $42 $108 $— $227 
(a)Accrued interest of $344 million and $383 million as of September 30, 2024, and December 31, 2023, respectively, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in these tables.
(b)Gross write-off information is presented on a year-to-date basis for the nine months ended September 30, 2024 and the twelve months ended December 31, 2023.
Consumer Credit Exposure
Credit Risk Profile by FICO Score and Vintage (a)(b)
As of September 30, 2024Term LoansRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost Basis
Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions20242023202220212020PriorTotal
Real estate — residential mortgage
FICO Score:
750 and above$159 $692 $5,786 $7,290 $2,275 $1,566 $— $— $17,768 
660 to 74952 119 628 697 218 289 — — 2,003 
Less than 6602 15 82 64 26 140 — — 329 
No Score1 2 1 1 1 15 1 — 22 
Total real estate — residential mortgage214 828 6,497 8,052 2,520 2,010 1 — 20,122 
Current period gross write-offs1 — — — — 1 — — 2 
Home equity loans
FICO Score:
750 and above26 33 142 798 631 758 1,926 269 4,583 
660 to 74914 20 54 191 134 198 792 88 1,491 
Less than 6601 5 16 40 30 87 272 25 476 
No Score— — — — — 1 4 — 5 
Total home equity loans41 58 212 1,029 795 1,044 2,994 382 6,555 
Current period gross write-offs— — — — — 1 1 — 2 
Other consumer loans
FICO Score:
750 and above76 157 1,192 1,258 560 268 90 — 3,601 
660 to 74951 115 291 284 137 113 185 — 1,176 
Less than 6607 25 60 59 31 28 56 — 266 
No Score26 18 17 16 7 14 197 — 295 
Total consumer direct loans160 315 1,560 1,617 735 423 528 — 5,338 
Current period gross write-offs— 5 13 9 5 5 12 — 49 
Credit cards
FICO Score:
750 and above— — — — — — 438 — 438 
660 to 749— — — — — — 368 — 368 
Less than 660— — — — — — 107 — 107 
No Score— — — — — — 1 — 1 
Total credit cards— — — — — — 914 — 914 
Current period gross write-offs— — — — — — 35 — 35 
Total consumer loans$415 $1,201 $8,269 $10,698 $4,050 $3,477 $4,437 $382 $32,929 
Total consumer loan current period gross write-offs$1 $5 $13 $9 $5 $7 $48 $— $88 
As of December 31, 2023Term LoansRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost Basis
Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions20232022202120202019PriorTotal
Real estate — residential mortgage
FICO Score:
750 and above$680 $5,992 $7,785 $2,392 $586 $923 $— $— $18,358 
660 to 749180 739 780 248 90 240 — — 2,277 
Less than 66015 58 56 22 17 130 — — 298 
No Score2 1 1 1 — 18 2 — 25 
Total real estate — residential mortgage877 6,790 8,622 2,663 693 1,311 2 — 20,958 
Current period gross write-offs— — — — — 1 — — 1 
Home equity loans
FICO Score:
750 and above— 85 1,575 435 114 378 2,034 331 4,952 
660 to 74924 65 229 152 66 164 886 107 1,693 
Less than 6603 13 38 27 17 77 281 31 487 
No Score2 — — — — 1 4 — 7 
Total home equity loans29 163 1,842 614 197 620 3,205 469 7,139 
Current period gross write-offs(1)— — — — 2 — 1 2 
Other consumer loans
FICO Score:
750 and above185 1,187 1,455 660 277 112 97 — 3,973 
660 to 749150 365 342 171 83 60 199 — 1,370 
Less than 66024 64 65 32 17 16 57 — 275 
No Score30 33 17 11 10 12 185 — 298 
Total consumer direct loans389 1,649 1,879 874 387 200 538 — 5,916 
Current period gross write-offs1 12 10 6 5 3 14 — 51 
Credit cards
FICO Score:
750 and above— — — — — — 489 — 489 
660 to 749— — — — — — 400 — 400 
Less than 660— — — — — — 112 — 112 
No Score— — — — — — 1 — 1 
Total credit cards— — — — — — 1,002 — 1,002 
Current period gross write-offs— — — — — — 37 — 37 
Total consumer loans$1,295 $8,602 $12,343 $4,151 $1,277 $2,131 $4,747 $469 $35,015 
Total consumer current period gross write-offs$— $12 $10 $6 $5 $6 $51 $1 $91 
(a)Accrued interest of $135 million and $139 million as of September 30, 2024, and December 31, 2023, respectively, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.
(b)Gross write-off information is presented on a year-to-date basis for the nine months ended September 30, 2024 and the twelve months ended December 31, 2023.


Nonperforming and Past Due Loans

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2023 Form 10-K.
The following aging analysis of past due and current loans as of September 30, 2024, and December 31, 2023, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio(a)
As of September 30, 2024
Current (b)(c)
30-59
Days Past
Due (b)
60-89
Days Past
Due (b)
90 and
Greater
Days Past
Due (b)
Non-performing
Loans
Total Past
Due and
Non-performing
Loans (b)
Total
Loans (d)
Dollars in millions
LOAN TYPE
Commercial and industrial$52,258 $41 $37 $73 $365 $516 $52,774 
Commercial real estate:
Commercial mortgage13,369 23 4 65 176 268 13,637 
Construction3,091 — — 2 — 2 3,093 
Total commercial real estate loans16,460 23 4 67 176 270 16,730 
Commercial lease financing2,913 — — — — — 2,913 
Total commercial loans$71,631 $64 $41 $140 $541 $786 $72,417 
Real estate — residential mortgage$20,022 $7 $6 $— $87 $100 $20,122 
Home equity loans6,431 22 8 4 90 124 6,555 
Other consumer loans5,299 16 9 10 4 39 5,338 
Credit cards885 6 5 12 6 29 914 
Total consumer loans$32,637 $51 $28 $26 $187 $292 $32,929 
Total loans$104,268 $115 $69 $166 $728 $1,078 $105,346 
(a)Amounts in table represent amortized cost and exclude loans held for sale.
(b)Accrued interest of $480 million presented in “Accrued income and other assets” on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.
(c)Includes balances of $100 million in Commercial mortgage and $5 million in Real estate - residential mortgage associated with loans sold to GNMA where Key has the right but not the obligation to repurchase.
(d)Net of unearned income, net of deferred fees and costs, and unamortized discounts and premiums.

As of December 31, 2023
Current (b)
30-59
Days Past
Due (b)
60-89
Days Past
Due (b)
90 and
Greater
Days Past
Due (b)
Non-performing
Loans
Total Past
Due and
Non-performing
Loans (b)
Total
Loans (c)
Dollars in millions
LOAN TYPE
Commercial and industrial$55,354 $62 $30 $72 $297 $461 $55,815 
Commercial real estate:
Commercial mortgage15,049 25 3 10 100 138 15,187 
Construction3,065 1 — — — 1 3,066 
Total commercial real estate loans18,114 26 3 10 100 139 18,253 
Commercial lease financing3,520 2 1 — — 3 3,523 
Total commercial loans$76,988 $90 $34 $82 $397 $603 $77,591 
Real estate — residential mortgage$20,863 $17 $7 $— $71 $95 $20,958 
Home equity loans7,001 27 10 4 97 138 7,139 
Other consumer loans5,877 16 10 9 4 39 5,916 
Credit cards974 6 5 12 5 28 1,002 
Total consumer loans$34,715 $66 $32 $25 $177 $300 $35,015 
Total loans$111,703 $156 $66 $107 $574 $903 $112,606 
(a)Amounts in table represent amortized cost and exclude loans held for sale.
(b)Accrued interest of $522 million presented in “Accrued income and other assets” on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.
(c)Net of unearned income, net of deferred fees and costs, and unamortized discounts and premiums.


At September 30, 2024, the carrying amount of our commercial nonperforming loans outstanding represented 83% of their original contractual amount owed, total nonperforming loans outstanding represented 86% of their original contractual amount owed, and nonperforming assets in total were carried at 89% of their original contractual amount owed.

Nonperforming loans reduced expected interest income by $14 million and $41 million for the three and nine months ended September 30, 2024, respectively, and $10 million and $26 million for the three and nine months ended September 30, 2023, respectively.

The amortized cost basis of nonperforming loans on nonaccrual status for which there is no related allowance for credit losses was $370 million at September 30, 2024 and $301 million at December 31, 2023. As of September 30, 2024, 37% of our nonperforming loans were contractually current versus 41% as of December 31, 2023.

Collateral-dependent Financial Assets

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

At September 30, 2024 and September 30, 2023, the recorded investment of consumer residential mortgage and home equity loans in the process of foreclosure was approximately $73 million and $92 million, respectively.

There were no significant changes in the extent to which collateral secures our collateral-dependent financial assets during the three months ended September 30, 2024.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

The ALLL for loans modified for borrowers experiencing financial difficulty is determined based on Key’s ALLL policy as described within Note 1 (“Summary of Significant Accounting Policies”) of our 2023 Form 10-K.

Modifications for Borrowers Experiencing Financial Difficulty

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

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

The following tables show the amortized cost basis at the end of the noted reporting periods of the loans modified to borrowers experiencing financial difficulty within the past 12 months or since the adoption of ASU 2022-02 for the reporting period in 2023. The tables do not include those modifications that only resulted in an insignificant payment delay. The tables do not include consumer loans that are still within a trial modification period. Trial modifications may be done for consumer borrowers where a trial payment plan period is offered in advance of a permanent loan modification. As of September 30, 2024, there were 110 loans totaling $19 million in a trial modification period. As of September 30, 2023, there were 115 loans totaling $17 million in a trial modification period.

Commitments outstanding to lend additional funds to borrowers experiencing financial difficulty whose loans were modified were $29 million and $67 million at September 30, 2024 and September 30, 2023, respectively.

As of September 30, 2024Interest Rate ReductionTerm ExtensionOtherCombinationTotal
Dollars in millionsAmortized Cost BasisAmortized Cost BasisAmortized Cost BasisAmortized Cost BasisAmortized Cost Basis% of Total Loan Type
LOAN TYPE
Commercial and Industrial$— $126 $11 $16 $153 0.29 %
Commercial real estate:
Commercial mortgage28 189 3 — 220 1.61 
Construction— 27 — — 27 0.87 
Total commercial real estate loans28 216 3 — 247 1.48 
Commercial lease financing— — — — — — 
Total commercial loans$28 $342 $14 $16 $400 0.55 %
Real estate — residential mortgage1 — — 11 12 0.06 
Home equity loans3 1 1 6 11 0.17 
Other consumer loans— 1 — 2 3 0.06 
Credit cards— — — 4 4 0.44 
Total consumer loans4 2 1 23 30 0.09 
Total loans$32 $344 $15 $39 $430 0.41 %
As of September 30, 2023Interest Rate ReductionTerm ExtensionOtherCombinationTotal
Dollars in millionsAmortized Cost BasisAmortized Cost BasisAmortized Cost BasisAmortized Cost BasisAmortized Cost Basis% of Total Loan Type
LOAN TYPE
Commercial and Industrial$— $158 $46 $31 $235 0.41 %
Commercial real estate:
Commercial mortgage— 7 — — 7 0.05 
Construction— — — — — — 
Total commercial real estate loans— 7 — — 7 0.04 
Commercial lease financing— — — — — — 
Total commercial loans$— $165 $46 $31 $242 0.30 %
Real estate — residential mortgage1 — 7 8 0.04 
Home equity loans1 — 1 5 7 0.10 
Other consumer loans— 1 — 1 2 0.03 
Credit cards— — — 3 3 0.30 
Total consumer loans2 1 1 16 20 0.06 
Total loans$2 $166 $47 $47 $262 0.23 %

Combination modifications consist primarily of loans modified with both an interest rate reduction and a term extension.
Financial Effects of Modifications to Borrowers Experiencing Financial Difficulty

The following table summarizes the financial impacts of loan modifications made to specific loans for the noted periods.
Three months ended September 30, 2024Weighted-average Interest Rate ChangeWeighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial(17.00)%0.42
Commercial mortgage— %0.43
Real estate — residential mortgage(1.85)%2.47
Home equity loans(4.68)%5.60
Other consumer loans(4.18)%0.40
Credit cards(12.13)%0.25

Nine months ended September 30, 2024Weighted-average Interest Rate ChangeWeighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial(6.29)%1.14
Commercial mortgage(1.91)%0.20
Construction— %3.20
Real estate — residential mortgage(1.73)%5.77
Home equity loans(3.75)%6.44
Other consumer loans(3.90)%0.62
Credit cards(15.21)%0.75

Three months ended September 30, 2023Weighted-average Interest Rate ChangeWeighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial0.21 %0.85
Real estate — residential mortgage(1.55)%12.24
Home equity loans(3.71)%5.56
Other consumer loans(4.65)%1.32
Credit cards(11.52)%0.75

Nine months ended September 30, 2023Weighted-average Interest Rate ChangeWeighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial0.34 %0.54
Commercial mortgage— %1.08
Real estate — residential mortgage(2.03)%7.56
Home equity loans(4.13)%6.15
Other consumer loans(4.38)%0.99
Credit cards(14.05)%0.75

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Key considers modifications to borrowers experiencing financial difficulty that subsequently become 90 days or more past due under modified terms as subsequently defaulted. The following table presents the amortized cost of
modified loans of borrowers experiencing financial difficulty in the past twelve months that subsequently defaulted within the noted periods.

Three months ended September 30, 2024
Dollars in millionsInterest Rate ReductionTerm ExtensionOtherCombinationTotal
LOAN TYPE
Commercial and Industrial$— $1 $— $— $1 
Commercial real estate
Commercial mortgage28 — — 1 29 
Construction— — — — — 
Total commercial real estate loans28 — — 1 29 
Total commercial loans28 1 — 1 30 
Home equity loans$— $— $— $— $— 
Total consumer loans$— $— $— $— $— 
Total loans$28 $1 $— $1 $30 

Nine months ended September 30, 2024
Dollars in millionsInterest Rate ReductionTerm ExtensionOtherCombinationTotal
LOAN TYPE
Commercial and Industrial$— $17 $— $1 $18 
Commercial real estate
Commercial mortgage28 — 1 29 
Construction— — — — — 
Total commercial real estate loans28 — — 1 29 
Total commercial loans28 17 — 2 47 
Home equity loans— — — 1 1 
Total consumer loans$— $— $— $1 $1 
Total loans$28 $17 $— $3 $48 

There were $3 million and $10 million of loans that were modified for borrowers experiencing financial difficulty that received modifications and subsequently defaulted during the three and nine months ended September 30, 2023, respectively.

Key closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified for borrowers experiencing financial difficulty within the past 12 months.

As of September 30, 2024Current30-89 Days 
Past Due		90 and Greater
Days Past Due		Total
Dollars in millions
LOAN TYPE
Commercial and Industrial$132 $18 $3 $153 
Commercial real estate
Commercial mortgage189 — 31 220 
Construction27 — — 27 
Total commercial real estate loans348 18 34 400 
Commercial lease financing— — — — 
Total commercial loans348 18 34 400 
Real estate — residential mortgage9 3 — 12 
Home equity loans9 1 1 11 
Other consumer loans3 — — 3 
Credit cards4 — — 4 
Total consumer loans$25 $4 $1 $30 
Total loans$373 $22 $35 $430 
The following table depicts the performance of loans that have been modified for borrowers experiencing financial difficulty since the adoption of ASU 2022-02 on January 1, 2023 through September 30, 2023.

As of September 30, 2023Current30-89 Days 
Past Due		90 and Greater
Days Past Due		Total
Dollars in millions
LOAN TYPE
Commercial and Industrial$231 $1 $3 $235 
Commercial real estate
Commercial mortgage7 — — 7 
Construction— — — — 
Total commercial real estate loans238 1 3 242 
Commercial lease financing— — — — 
Total commercial loans238 1 3 242 
Real estate — residential mortgage8 — — 8 
Home equity loans7 — — 7 
Other consumer loans2 — — 2 
Credit cards3 — — 3 
Total consumer loans$20 $— $— $20 
Total loans$258 $1 $3 $262 

Liability for Credit Losses on Off Balance Sheet Exposures

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

Changes in the liability for credit losses for off balance sheet exposures are summarized as follows:
 Three months ended September 30,Nine months ended September 30,
Dollars in millions2024202320242023
Balance at beginning of period$286 $291 $296 $225 
Provision (credit) for losses on off balance sheet exposures(6)2 (16)68 
Other— (3)— (3)
Balance at end of period$280 $290 $280 $290