Asset Quality

6 Months Ended

Jun. 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 June 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 June 30, 2024:

Dollars in millions	March 31, 2024		Provision			Charge-offs		Recoveries		June 30, 2024
Commercial and Industrial	$	653	$	84		$	(86)	$	31	$	682
Commercial real estate:
Real estate — commercial mortgage	389		3			(10)		1		383
Real estate — construction	61		5			—		—		66
Total commercial real estate loans	450		8			(10)		1		449
Commercial lease financing	28		4			(6)		3		29
Total commercial loans	1,131		96			(102)		35		1,160
Real estate — residential mortgage	121		(6)			(1)		1		115
Home equity loans	79		(8)			—		—		71
Other consumer loans	133		9			(16)		2		128
Credit cards	78		5			(12)		2		73
Total consumer loans	411		—			(29)		5		387
Total ALLL — continuing operations	1,542		96		(a)	(131)		40		1,547
Discontinued operations	15		(1)			(1)		1		14
Total ALLL — including discontinued operations	$	1,557	$	95		$	(132)	$	41	$	1,561

(a)Excludes a provision for losses on lending-related commitments of $4 million.

Three months ended June 30, 2023:

Dollars in millions	March 31, 2023		Provision			Charge-offs		Recoveries		June 30, 2023
Commercial and Industrial	$	605	$	21		$	(42)	$	15	$	599
Commercial real estate:
Real estate — commercial mortgage	218		105			(9)		1		315
Real estate — construction	28		11			—		—		39
Total commercial real estate loans	246		116			(9)		1		354
Commercial lease financing	33		(1)			(1)		2		33
Total commercial loans	884		136			(52)		18		986
Real estate — residential mortgage	212		(12)			(1)		1		200
Home equity loans	96		1			(2)		1		96
Other consumer loans	117		19			(12)		2		126
Credit cards	71		8			(9)		2		72
Total consumer loans	496		16			(24)		6		494
Total ALLL — continuing operations	1,380		152		(a)	(76)		24		1,480
Discontinued operations	19		—			(2)		1		18
Total ALLL — including discontinued operations	$	1,399	$	152		$	(78)	$	25	$	1,498

(a)Excludes a provision for losses on lending-related commitments of $15 million.

Six months ended June 30, 2024:

Dollars in millions	December 31, 2023		Provision			Charge-offs		Recoveries		June 30, 2024
Commercial and Industrial	$	556	$	235		$	(148)	$	39	$	682
Commercial real estate:
Real estate — commercial mortgage	419		(22)			(15)		1		383
Real estate — construction	52		14			—		—		66
Total commercial real estate loans	471		(8)			(15)		1		449
Commercial lease financing	33		(3)			(6)		5		29
Total commercial loans	1,060		224			(169)		45		1,160
Real estate — residential mortgage	162		(48)			(2)		3		115
Home equity loans	86		(15)			(1)		1		71
Other consumer loans	122		34			(32)		4		128
Credit cards	78		16			(24)		3		73
Total consumer loans	448		(13)			(59)		11		387
Total ALLL — continuing operations	1,508		211		(a)	(228)		56		1,547
Discontinued operations	16		(1)			(2)		1		14
Total ALLL — including discontinued operations	$	1,524	$	210		$	(230)	$	57	$	1,561

(a)Excludes a credit for losses on lending-related commitments of $10 million.

Six months ended June 30, 2023:

Dollars in millions	December 31, 2022		Provision			Charge-offs		Recoveries		June 30, 2023
Commercial and Industrial	$	601	$	52		$	(77)	$	23	$	599
Commercial real estate:
Real estate — commercial mortgage	203		125			(14)		1		315
Real estate — construction	28		11			—		—		39
Total commercial real estate loans	231		136			(14)		1		354
Commercial lease financing	32		(2)			—		3		33
Total commercial loans	864		186			(91)		27		986
Real estate — residential mortgage	196		3			(1)		2		200
Home equity loans	98		(1)			(3)		2		96
Other consumer loans	113		31			(23)		5		126
Credit cards	66		21			(18)		3		72
Total consumer loans	473		54			(45)		12		494
Total ALLL — continuing operations	1,337		240		(a)	(136)		39		1,480
Discontinued operations	21		(1)			(3)		1		18
Total ALLL — including discontinued operations	$	1,358	$	239		$	(139)	$	40	$	1,498

(a)Excludes a provision for losses on lending-related commitments of $66 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.

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

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

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

Economic Outlook

As of June 30, 2024, unemployment rates remain at relatively low levels, but job growth is moderating. Inflation, in the United States, has eased as the restrictive monetary policy and a higher for longer interest rate environment has made an impact, but inflation remains above the Federal Reserve’s target. Commercial real estate values remain under pressure, with office being the most vulnerable asset class. Furthermore, economic uncertainty remains elevated as geopolitical tensions, the presidential election cycle and the timing of the Federal Reserve’s first rate cut are adding uncertainty into the forecast. We utilized the Moody’s May 2024 Consensus forecast as our baseline forecast to estimate our expected credit losses as of June 30, 2024. We determined such forecast to be a reasonable view of the outlook for the economy given all available information at quarter end.

The baseline scenario reflects continued economic resiliency, but weaknesses remain and the economy is forecasted to slow down in the second half of 2024. U.S. GDP is expected to grow at an annual rate of approximately 2.4% and 1.7% for 2024 and 2025, respectively, down from 2.5% in 2023. The expected national unemployment rate is expected to peak at 4.1% in the fourth quarter of 2024 and remain at that level into mid-2025. The forecast assumes the Fed Funds rate starts to decline in late 2024, but specific timing remains uncertain. The U.S. Consumer Price Index annualized rate is forecasted at 3.0% for 2024. The outlook for the national home price index has improved to reflect a 3.1% growth through 2024, while the commercial real estate price index is forecasted to drop approximately 5% 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 June 30, 2024 assumptions.

Commercial Loan Portfolio

The ALLL from continuing operations for the commercial segment increased by $29 million, or 2.6%, from March 31, 2024. The overall increase in the commercial allowance was driven by fluctuations in portfolio activity, partly offset by economic changes and the impact of balance sheet optimization efforts.

The reserve levels continue to reflect portfolio migration, considering the extended period of higher interest rates and the current inflationary environment. The increase in reserves from the previous quarter is concentrated in the commercial and industrial portfolio, reflecting downgrades and higher criticized levels. The reserve increase was offset by continued economic resiliency.

Consumer Loan Portfolio

The ALLL from continuing operations for the consumer segment decreased by $24 million, or 5.8%, from March 31, 2024. The overall decrease in the consumer allowance was driven by improvement in the economic forecast and the impact of balance sheet optimization efforts, partly offset by credit quality normalization post-pandemic.

Reserve movements largely reflect favorable changes in the economic outlook quarter-over-quarter for home prices.

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 June 30, 2024	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
	Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions	2024		2023		2022		2021		2020		Prior						Total
Commercial and Industrial
Risk Rating:
Pass	$	2,469	$	3,479	$	8,119	$	4,902	$	2,104	$	4,912	$	22,751	$	119	$	48,855
Criticized (Accruing)	64		218		782		498		248		450		1,609		47		3,916
Criticized (Nonaccruing)	18		18		69		71		3		57		122		—		358
Total commercial and industrial	2,551		3,715		8,970		5,471		2,355		5,419		24,482		166		53,129
Current period gross write-offs	(2)		4		29		46		3		17		51		—		148
Real estate — commercial mortgage
Risk Rating:
Pass	405		790		3,329		2,525		687		3,525		924		51		12,236
Criticized (Accruing)	3		68		754		437		63		460		20		4		1,809
Criticized (Nonaccruing)	—		—		23		70		3		47		30		—		173
Total real estate — commercial mortgage	408		858		4,106		3,032		753		4,032		974		55		14,218
Current period gross write-offs	—		—		—		—		—		14		1		—		15
Real estate — construction
Risk Rating:
Pass	21		659		1,157		624		69		108		28		2		2,668
Criticized (Accruing)	—		15		92		161		73		68		—		—		409
Criticized (Nonaccruing)	—		—		—		—		—		—		—		—		—
Total real estate — construction	21		674		1,249		785		142		176		28		2		3,077
Current period gross write-offs	—		—		—		—		—		—		—		—		—
Commercial lease financing
Risk Rating:
Pass	139		517		712		455		290		890		—		—		3,003
Criticized (Accruing)	—		30		37		5		9		16		—		—		97
Criticized (Nonaccruing)	—		—		—		—		—		1		—		—		1
Total commercial lease financing	139		547		749		460		299		907				—		3,101
Current period gross write-offs	—		—		—		—		—		6		—		—		6
Total commercial loans	$	3,119	$	5,794	$	15,074	$	9,748	$	3,549	$	10,534	$	25,484	$	223	$	73,525
Total commercial loan current period gross write-offs	$	(2)	$	4	$	29	$	46	$	3	$	37	$	52	$	—	$	169

As of December 31, 2023	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
	Amortized Cost Basis by Origination Year and Internal Risk Rating
Dollars in millions	2023		2022		2021		2020		2019		Prior						Total
Commercial and Industrial
Risk Rating:
Pass	$	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 industrial	4,118		10,555		6,618		2,774		2,219		3,774		25,619		138		55,815
Current period gross write-offs	1		7		35		8		11		21		105		—		188
Real estate — commercial mortgage
Risk Rating:
Pass	1,084		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 period gross write-offs	—		1		1		11		2		21		3		—		39
Real estate — construction
Risk Rating:
Pass	401		1,185		912		157		62		48		31		8		2,804
Criticized (Accruing)	10		40		60		64		41		47		—		—		262
Criticized (Nonaccruing)	—		—		—		—		—		—		—		—		—
Total real estate — construction	411		1,225		972		221		103		95		31		8		3,066
Current period gross write-offs	—		—		—		—		—		—		—		—		—
Commercial lease financing
Risk Rating:
Pass	520		878		575		352		307		808		—		—		3,440
Criticized (Accruing)	11		30		9		9		8		16		—		—		83
Criticized (Nonaccruing)	—		—		—		—		—		—		—		—		—
Total commercial lease financing	531		908		584		361		315		824		—		—		3,523
Current period 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 period gross write-offs	$	1	$	8	$	36	$	19	$	13	$	42	$	108	$	—	$	227

(a)Accrued interest of $365 million and $383 million as of June 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 six months ended June 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 June 30, 2024	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
	Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions	2024		2023		2022		2021		2020		Prior						Total
Real estate — residential mortgage
FICO Score:
750 and above	$	64	$	707	$	5,889	$	7,411	$	2,331	$	1,613	$	—	$	—	$	18,015
660 to 749	23		123		647		727		214		299		—		—		2,033
Less than 660	1		18		71		56		21		143		—		—		310
No Score	—		2		1		1		1		16		1		—		22
Total real estate — residential mortgage	88		850		6,608		8,195		2,567		2,071		1		—		20,380
Current period gross write-offs	1		—		—		—		—		1		—		—		2
Home equity loans
FICO Score:
750 and above	16		35		150		819		656		785		1,955		290		4,706
660 to 749	8		21		57		206		136		214		811		95		1,548
Less than 660	1		4		14		38		28		89		270		26		470
No Score	—		—		—		—		—		1		4		—		5
Total home equity loans	25		60		221		1,063		820		1,089		3,040		411		6,729
Current period gross write-offs	—		—		—		—		—		1		—		—		1
Other consumer loans
FICO Score:
750 and above	50		168		1,233		1,304		600		290		89		—		3,734
660 to 749	29		125		309		302		141		119		187		—		1,212
Less than 660	3		25		62		60		31		31		56		—		268
No Score	15		20		22		16		8		17		202		—		300
Total consumer direct loans	97		338		1,626		1,682		780		457		534		—		5,514
Current period gross write-offs	—		3		8		6		4		3		8		—		32
Credit cards
FICO Score:
750 and above	—		—		—		—		—		—		450		—		450
660 to 749	—		—		—		—		—		—		372		—		372
Less than 660	—		—		—		—		—		—		107		—		107
No Score	—		—		—		—		—		—		1		—		1
Total credit cards	—		—		—		—		—		—		930		—		930
Current period gross write-offs	—		—		—		—		—		—		24		—		24
Total consumer loans	$	210	$	1,248	$	8,455	$	10,940	$	4,167	$	3,617	$	4,505	$	411	$	33,553
Total consumer loan current period gross write-offs	$	1	$	3	$	8	$	6	$	4	$	5	$	32	$	—	$	59

As of December 31, 2023	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
	Amortized Cost Basis by Origination Year and FICO Score
Dollars in millions	2023		2022		2021		2020		2019		Prior						Total
Real estate — residential mortgage
FICO Score:
750 and above	$	680	$	5,992	$	7,785	$	2,392	$	586	$	923	$	—	$	—	$	18,358
660 to 749	180		739		780		248		90		240		—		—		2,277
Less than 660	15		58		56		22		17		130		—		—		298
No Score	2		1		1		1		—		18		2		—		25
Total real estate — residential mortgage	877		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 749	24		65		229		152		66		164		886		107		1,693
Less than 660	3		13		38		27		17		77		281		31		487
No Score	2		—		—		—		—		1		4		—		7
Total home equity loans	29		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 above	185		1,187		1,455		660		277		112		97		—		3,973
660 to 749	150		365		342		171		83		60		199		—		1,370
Less than 660	24		64		65		32		17		16		57		—		275
No Score	30		33		17		11		10		12		185		—		298
Total consumer direct loans	389		1,649		1,879		874		387		200		538		—		5,916
Current period gross write-offs	1		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 $137 million and $139 million as of June 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 six months ended June 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 June 30, 2024, and December 31, 2023, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio(a)

As of June 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	$	52,576	$	76	$	28	$	91	$	358	$	553	$	53,129
Commercial real estate:
Commercial mortgage	13,939		78		10		18		173		279		14,218
Construction	3,071		2		2		2		—		6		3,077
Total commercial real estate loans	17,010		80		12		20		173		285		17,295
Commercial lease financing	3,097		3		—		—		1		4		3,101
Total commercial loans	$	72,683	$	159	$	40	$	111	$	532	$	842	$	73,525
Real estate — residential mortgage	$	20,283	$	10	$	6	$	4	$	77	$	97	$	20,380
Home equity loans	6,607		21		7		3		91		122		6,729
Other consumer loans	5,475		16		11		8		4		39		5,514
Credit cards	901		7		5		11		6		29		930
Total consumer loans	$	33,266	$	54	$	29	$	26	$	178	$	287	$	33,553
Total loans	$	105,949	$	213	$	69	$	137	$	710	$	1,129	$	107,078

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

(b)Accrued interest of $502 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 $105 million in Commercial mortgage and $4 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 mortgage	15,049		25		3		10		100		138		15,187
Construction	3,065		1		—		—		—		1		3,066
Total commercial real estate loans	18,114		26		3		10		100		139		18,253
Commercial lease financing	3,520		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 loans	7,001		27		10		4		97		138		7,139
Other consumer loans	5,877		16		10		9		4		39		5,916
Credit cards	974		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 June 30, 2024, the approximate carrying amount of our commercial nonperforming loans outstanding represented 78% of their original contractual amount owed, total nonperforming loans outstanding represented 81% of their original contractual amount owed, and nonperforming assets in total were carried at 84% of their original contractual amount owed.

Nonperforming loans reduced expected interest income by $13 million and $27 million for the three and six months ended June 30, 2024, respectively, and $8 million and $16 million for the three and six months ended June 30, 2023, respectively.

The amortized cost basis of nonperforming loans on nonaccrual status for which there is no related allowance for credit losses was $291 million at June 30, 2024 and $301 million at December 31, 2023. As of June 30, 2024, 42% 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. When appropriate we also consider the enterprise value of the borrower as a repayment source for collateral-dependent loans. Our consumer loans have collateral that includes residential real estate, automobiles, boats, and RVs.

At June 30, 2024 and June 30, 2023, the recorded investment of consumer residential mortgage and home equity loans in the process of foreclosure was approximately $76 million and $94 million, respectively.

There were no significant changes in the extent to which collateral secures our collateral-dependent financial assets during the three months ended June 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 June 30, 2024, there were 117 loans totaling $19 million in a trial modification period. As of June 30, 2023, there were 93 loans totaling $10 million in a trial modification period.

Commitments outstanding to lend additional funds to borrowers experiencing financial difficulty whose loans were modified were $36 million and $38 million at June 30, 2024 and June 30, 2023, respectively.

As of June 30, 2024	Interest Rate Reduction		Term Extension		Other		Combination		Total
Dollars in millions	Amortized Cost Basis		Amortized Cost Basis		Amortized Cost Basis		Amortized Cost Basis		Amortized Cost Basis		% of Total Loan Type
LOAN TYPE
Commercial and Industrial	$	—	$	73	$	40	$	33	$	146	0.27	%
Commercial real estate:
Commercial mortgage	28		10		4		—		42		0.30
Construction	—		30		—		—		30		0.97
Total commercial real estate loans	28		40		4		—		72		0.42
Commercial lease financing	—		—		—		—		—		—
Total commercial loans	$	28	$	113	$	44	$	33	$	218	0.30	%
Real estate — residential mortgage	1		—		—		9		10		0.05
Home equity loans	3		1		1		6		11		0.16
Other consumer loans	—		1		—		3		4		0.07
Credit cards	—		—		—		4		4		0.43
Total consumer loans	4		2		1		22		29		0.09
Total loans	$	32	$	115	$	45	$	55	$	247	0.23	%

As of June 30, 2023	Interest Rate Reduction		Term Extension		Other		Combination		Total
Dollars in millions	Amortized Cost Basis		Amortized Cost Basis		Amortized Cost Basis		Amortized Cost Basis		Amortized Cost Basis		% of Total Loan Type
LOAN TYPE
Commercial and Industrial	$	—	$	144	$	19	$	5	$	168	0.28	%
Commercial real estate:
Commercial mortgage	—		7		—		—		7		0.04
Construction	—		—		—		—		—		—
Total commercial real estate loans	—		7		—		—		7		0.04
Commercial lease financing	—		—		—		—		—		—
Total commercial loans	$	—	$	151	$	19	$	5	$	175	0.21	%
Real estate — residential mortgage	—		—		1		5		6		0.03
Home equity loans	1		—		1		3		5		0.07
Other consumer loans	—		1		—		1		2		0.03
Credit cards	—		—		—		2		2		0.20
Total consumer loans	1		1		2		11		15		0.04
Total loans	$	1	$	152	$	21	$	16	$	190	0.16	%

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 June 30, 2024	Weighted-average Interest Rate Change		Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial	(10.83)	%	4.16
Commercial mortgage	—	%	0.04
Construction	—	%	0.29
Real estate — residential mortgage	(1.26)	%	4.49
Home equity loans	(3.22)	%	4.36
Other consumer loans	(5.01)	%	0.54
Credit cards	(11.96)	%	0.25

Six months ended June 30, 2024	Weighted-average Interest Rate Change		Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial	(11.75)	%	2.96
Commercial mortgage	(1.91)	%	0.37
Construction	—	%	2.88
Real estate — residential mortgage	(1.65)	%	7.63
Home equity loans	(3.56)	%	5.36
Other consumer loans	(3.29)	%	0.66
Credit cards	(14.38)	%	0.50

Three months ended June 30, 2023	Weighted-average Interest Rate Change		Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial	(2.02)	%	0.17
Commercial mortgage	—	%	0.09
Real estate — residential mortgage	(2.15)	%	6.11
Home equity loans	(4.16)	%	6.78
Other consumer loans	(4.54)	%	0.66
Credit cards	(9.36)	%	0.66

Six months ended June 30, 2023	Weighted-average Interest Rate Change		Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial	(3.85)	%	0.31
Commercial mortgage	—	%	1.01
Real estate — residential mortgage	(2.06)	%	6.36
Home equity loans	(4.26)	%	6.65
Other consumer loans	(4.05)	%	0.72
Credit cards	(12.82)	%	0.50

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 June 30, 2024
Dollars in millions	Interest Rate Reduction		Term Extension		Other		Combination		Total
LOAN TYPE
Home equity loans	$	—	$	—	$	—	$	1	$	1
Total consumer loans	$	—	$	—	$	—	$	1	$	1
Total loans	$	—	$	—	$	—	$	1	$	1

Six months ended June 30, 2024
Dollars in millions	Interest Rate Reduction		Term Extension		Other		Combination		Total
LOAN TYPE
Commercial and Industrial	$	—	$	50	$	1	$	—	$	51
Total commercial loans	—		50		1		—		51
Home equity loans	—		—		—		1		1
Total consumer loans	$	—	$	—	$	—	$	1	$	1
Total loans	$	—	$	50	$	1	$	1	$	52

There were $7 million of Commercial and Industrial loans that were modified for borrowers experiencing financial difficulty that received term extension modifications and subsequently defaulted during the three- and six-month period ended June 30, 2023.

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 June 30, 2024	Current		30-89 Days Past Due		90 and Greater Days Past Due		Total
Dollars in millions
LOAN TYPE
Commercial and Industrial	$	134	$	10	$	2	$	146
Commercial real estate
Commercial mortgage	11		28		3		42
Construction	30		—		—		30
Total commercial real estate loans	175		38		5		218
Commercial lease financing	—		—		—		—
Total commercial loans	175		38		5		218
Real estate — residential mortgage	10		—		—		10
Home equity loans	9		1		1		11
Other consumer loans	3		1		—		4
Credit cards	4		—		—		4
Total consumer loans	$	26	$	2	$	1	$	29
Total loans	$	201	$	40	$	6	$	247

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 June 30, 2023.

As of June 30, 2023	Current		30-89 Days Past Due		90 and Greater Days Past Due		Total
Dollars in millions
LOAN TYPE
Commercial and Industrial	$	156	$	5	$	7	$	168
Commercial real estate
Commercial mortgage	7		—		—		7
Construction	—		—		—		—
Total commercial real estate loans	163		5		7		175
Commercial lease financing	—		—		—		—
Total commercial loans	163		5		7		175
Real estate — residential mortgage	5		—		1		6
Home equity loans	5		—		—		5
Other consumer loans	2		—		—		2
Credit cards	2		—		—		2
Total consumer loans	$	14	$	—	$	1	$	15
Total loans	$	177	$	5	$	8	$	190

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 June 30,				Six months ended June 30,
Dollars in millions	2024		2023		2024		2023
Balance at beginning of period	$	281	$	276	$	296	$	225
Provision (credit) for losses on off balance sheet exposures	4		15		(10)		66
Other	1		—		—		—
Balance at end of period	$	286	$	291	$	286	$	291