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Asset Quality

12 Months Ended

Dec. 31, 2023

5. Asset Quality

ALLL

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 ("Basis of Presentation and Accounting Policies") under the heading "Allowance for Loan and Lease Losses" of this report.

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

Twelve Months Ended December 31, 2023:


Dollars in millions	December 31, 2022		Provision			Charge-offs		Recoveries		December 31, 2023
Commercial and Industrial	$	601	$	99		$	(188)	$	44	$	556
Commercial real estate:
Real estate — commercial mortgage	203		253			(39)		2		419
Real estate — construction	28		23			—		1		52
Total commercial real estate loans	231		276			(39)		3		471
Commercial lease financing	32		(4)			—		5		33
Total commercial loans	864		371			(227)		52		1,060
Real estate — residential mortgage	196		(37)			(1)		4		162
Home equity loans	98		(13)			(2)		3		86
Consumer direct loans	111		53			(50)		7		121
Credit cards	66		42			(37)		7		78
Consumer indirect loans	2		(1)			(1)		1		1
Total consumer loans	473		44			(91)		22		448
Total ALLL — continuing operations	1,337		415		(a)	(318)		74		1,508
Discontinued operations	21		(2)			(4)		1		16
Total ALLL — including discontinued operations	$	1,358	$	413		$	(322)	$	75	$	1,524

(a)Excludes a provision related to reserves on lending-related commitments of $74 million.

Twelve Months Ended December 31, 2022:


Dollars in millions	December 31, 2021		Provision			Charge-offs		Recoveries		December 31, 2022
Commercial and Industrial	$	445	$	259		$	(153)	$	50	$	601
Commercial real estate:
Real estate — commercial mortgage	182		39			(23)		5		203
Real estate — construction	29		(2)			—		1		28
Total commercial real estate loans	211		37			(23)		6		231
Commercial lease financing	32		(2)			(2)		4		32
Total commercial loans	688		294			(178)		60		864
Real estate — residential mortgage	95		94			2		5		196
Home equity loans	110		(14)			(1)		3		98
Consumer direct loans	105		32			(34)		8		111
Credit cards	61		29			(30)		6		66
Consumer indirect loans	2		2			(4)		2		2
Total consumer loans	373		143			(67)		24		473
Total ALLL — continuing operations	1,061		437		(a)	(245)		84		1,337
Discontinued operations	28		(3)			(6)		2		21
Total ALLL — including discontinued operations	$	1,089	$	434		$	(251)	$	86	$	1,358

(a)Excludes a provision related to reserves on lending-related commitments of $65 million.

Twelve Months Ended December 31, 2021


Dollars in millions	December 31, 2020		Provision			Charge-offs		Recoveries		December 31, 2021
Commercial and industrial	$	678	$	(142)		$	(174)	$	83	$	445
Commercial real estate:
Real estate — commercial mortgage	327		(114)			(40)		9		182
Real estate — construction	47		(18)			—		—		29
Total commercial real estate loans	374		(132)			(40)		9		211
Commercial lease financing	47		(16)			(6)		7		32
Total commercial loans	1,099		(290)			(220)		99		688
Real estate — residential mortgage	102		(12)			2		3		95
Home equity loans	171		(57)			(9)		5		110
Consumer direct loans	128		(2)			(29)		8		105
Credit cards	87		(7)			(27)		8		61
Consumer indirect loans	39		(13)			(39)		15		2
Total consumer loans	527		(91)			(102)		39		373
Total ALLL — continuing operations	1,626		(381)		(a)	(322)		138		1,061
Discontinued operations	36		(6)			(4)		2		28
Total ALLL — including discontinued operations	$	1,662	$	(387)		$	(326)	$	140	$	1,089

(a)Excludes a credit related to reserves on lending-related commitments of $37 million.

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

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


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

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

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

Economic Outlook

As of December 31, 2023, economic uncertainty remained elevated. 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 higher interest rates have made an impact. Commercial real estate values remain under pressure, with office being the most vulnerable asset class. We utilized the Moody’s November 2023 Consensus forecast as our baseline forecast to estimate our expected credit losses as of December 31, 2023. We determined such forecast to be a reasonable view of the outlook for the economy given all available information at year end.

The baseline scenario reflects continued economic resiliency, but weaknesses remain and the economy is forecasted to slow down in 2024. U.S. GDP is expected to grow at an annual rate of approximately 1.1% and 1.6% for 2024 and 2025, respectively, down from 2.4% in 2023. The expected national unemployment rate was 3.8% in the fourth quarter of 2023 and forecasted to peak at 4.5% in late 2024. The forecast assumes the Fed Funds rate begins easing mid-2024. The U.S. Consumer Price Index annualized rate is forecasted at 2.7% for 2024. The national home price index is expected to remain generally stable over 2024, while the commercial real estate price index is forecasted to drop approximately 7%.

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 December 31, 2023 assumptions.

Commercial Loan Portfolio

The commercial ALLL increased by $196 million, or 22.7%, from December 31, 2022, through December 31, 2023. The overall increase is driven by changes in portfolio activity and the economic outlook.

The reserve levels are reflective of the inflationary and elevated interest rate environment as of December 31, 2023. The reserve increase from the prior year is concentrated in the commercial real estate portfolio, and reflects changes in portfolio factors and deterioration in the economic conditions for this segment. Offsetting these drivers was a decrease in the reserve for the commercial & industrial portfolio, largely due to planned balance sheet optimization efforts in the current year, partly offset by portfolio migration.

Consumer Loan Portfolio

The consumer ALLL decreased $25 million, or 5.3%, from December 31, 2022, through December 31, 2023. The overall decrease in the allowance is primarily driven by changes in the economic outlook.

The most meaningful change to the economic forecast year-over-year is the improvement in the home price index outlook, which contributes to reserve decreases for both the residential mortgage and home equity portfolios.

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 scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of

the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category and Vintage (a)


As of 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 $383 million, presented in “Accrued income and other assets” on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.

Consumer Credit Exposure

Credit Risk Profile by FICO Score and Vintage (a)


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
Consumer direct loans
FICO Score:
750 and above	185		1,187		1,457		660		277		98		97		—		3,961
660 to 749	150		365		342		171		83		50		199		—		1,360
Less than 660	24		64		65		32		17		12		57		—		271
No Score	30		33		17		11		10		12		185		—		298
Total consumer direct loans	389		1,649		1,881		874		387		172		538		—		5,890
Current period gross write-offs	1		12		10		6		5		2		14		—		50
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
Consumer indirect loans
FICO Score:
750 and above	—		—		(2)		—		—		14		—		—		12
660 to 749	—		—		—		—		—		10		—		—		10
Less than 660	—		—		—		—		—		4		—		—		4
No Score	—		—		—		—		—		—		—		—		—
Total consumer indirect loans	—		—		(2)		—		—		28		—		—		26
Current period gross write-offs	—		—		—		—		—		1		—		—		1
Total consumer loans	$	1,295	$	8,602	$	12,343	$	4,151	$	1,277	$	2,131	$	4,747	$	469	$	35,015
Total consumer loan current period gross write-offs	$	—	$	12	$	10	$	6	$	5	$	6	$	51	$	1	$	91

(a)Accrued interest of $139 million, presented in “Accrued income and other assets” on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.

Nonperforming and Past Due Loans

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

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

Aging Analysis of Loan Portfolio(a)


December 31, 2023	Current		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		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
Consumer direct loans	5,853		15		10		9		3		37		5,890
Credit cards	974		6		5		12		5		28		1,002
Consumer indirect loans	24		1		—		—		1		2		26
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.


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

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

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

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

At December 31, 2023, the carrying amount of our commercial nonperforming loans outstanding represented 72% of their original contractual amount owed, total nonperforming loans outstanding represented 77% of their original contractual amount owed, and nonperforming assets in total were carried at 80% of their original contractual amount owed.

Nonperforming loans reduced expected interest income by $37 million, $17 million, and $17 million for each of the twelve months ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

The amortized cost basis of nonperforming loans on nonaccrual status for which there is no related allowance for credit losses was $301 million at December 31, 2023.

As of December 31, 2023, 51% of our nonperforming loans were contractually current versus 41% as of December 31, 2022.

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 December 31, 2023 and December 31, 2022, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $89 million and $156 million, respectively.

There were no significant changes in the extent to which collateral secures our collateral-dependent financial assets during 2023.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

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

Modifications for Borrowers Experiencing Financial Difficulty

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 table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty since the adoption of ASU 2022-02 on January 1, 2023, disaggregated by class of loan and type of concession granted. The table does not include those modifications that only resulted in an insignificant payment delay. The table does not include consumer loans that are still within a trial modification period. Trial modifications may be done for consumer borrowers where a trial payment plan period is offered in advance of a permanent loan modification. As of December 31, 2023, there were 121 loans totaling $15 million in a trial modification period.

Commitments outstanding to lend additional funds to borrowers experiencing financial difficulty whose loans were modified were $61 million at December 31, 2023.


As of December 31, 2023	Interest Rate Reduction		Term Extension	Other		Combination(b)	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	$	—		$	180		$	49	$	34	$	263	0.47	%
Commercial real estate:
Commercial mortgage	—			4			2		—		6		0.04
Construction	—			—			—		—		—		—
Total commercial real estate loans	—			4			2		—		6		0.03
Commercial lease financing	—			—			—		—		—		—
Total commercial loans	$	—		$	184		$	51	$	34	$	269	0.35	%
Real estate — residential mortgage	—			—			1		9		10		0.05
Home equity loans	2			1			1		5		9		0.13
Consumer direct loans	—			1			—		2		3		0.05
Credit cards	—			—			—		4		4		0.40
Consumer indirect loans(a)	—			—			—		—		—		—
Total consumer loans	2			2			2		20		26		0.07
Total loans	$	2		$	186		$	53	$	54	$	295	0.26	%

(a)The amortized cost amount as of December 31, 2023, for Consumer indirect loans modified for borrowers experiencing financial difficulty totaled less than $1 million.

(b)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 during the three and twelve months ended December 31, 2023.


Three months ended December 31, 2023	Weighted-average Interest Rate Change		Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial	(14.58)	%	0.38



Real estate — residential mortgage	(1.82)	%	7.75
Home equity loans	(2.48)	%	7.74
Consumer direct loans	(1.17)	%	0.38
Credit cards	(13.76)	%	0.25
Consumer indirect loans	—	%	0.42


Twelve months ended December 31, 2023	Weighted-average Interest Rate Change		Weighted-average Term Extension (in years)
LOAN TYPE
Commercial and Industrial	(5.69)	%	0.59
Commercial mortgage	—	%	1.37


Real estate — residential mortgage	(1.97)	%	7.58
Home equity loans	(4.02)	%	6.87
Consumer direct loans	(3.62)	%	1.01
Credit cards	(14.90)	%	1.00
Consumer indirect loans	(3.05)	%	0.51

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

There were $1 million of Commercial mortgage loans that were modified for borrowers experiencing financial difficulty that received modifications and subsequently defaulted during the three-month period ended December 31, 2023. There were $11 million of loans that were modified for borrowers experiencing financial difficulty that received modifications and subsequently defaulted during the twelve-month period ended December 31, 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 in the past 12 months.


As of December 31, 2023	Current		30-89 Days Past Due		90 and Greater Days Past Due		Total
Dollars in millions
LOAN TYPE
Commercial and Industrial	$	238	$	25	$	—	$	263
Commercial real estate
Commercial mortgage	6		—		—		6
Construction	—		—		—		—
Total commercial real estate loans	244		25		—		269
Commercial lease financing	—		—		—		—
Total commercial loans	244		25		—		269
Real estate — residential mortgage	9		1		—		10
Home equity loans	8		—		1		9
Consumer direct loans	3		—		—		3
Credit cards	3		1		—		4
Consumer indirect loans	—		—		—		—
Total consumer loans	$	23	$	2	$	1	$	26
Total loans	$	267	$	27	$	1	$	295

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:


	Twelve months ended December 31,
Dollars in millions		2023		2022



Balance at beginning of period		$	225	$	160
Provision (credit) for losses on off balance sheet exposures		74		65
Other		(3)		—
Balance at end of period		$	296	$	225

TDR Disclosures Prior to the Adoption of ASU 2022-02

Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. See Note 1 (“Summary of Significant Accounting Policies”) in this report for more information on TDR accounting and disclosure requirements.

Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs were $10 million at December 31, 2022.

The consumer TDR other concession category in the table below primarily includes those borrowers’ debts that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed.

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


December 31,
Dollars in millions	2022
Commercial loans:


Extension of Maturity Date	$	36



Total	$	36
Consumer loans:
Interest rate reduction	$	13

Other	20
Total	$	33
Total TDRs	$	69

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


December 31,
Dollars in millions	2022
Balance at beginning of the period	$	220
Additions	79
Payments	(45)
Charge-offs	(18)
Balance at end of period	$	236

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


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

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

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During 2022, there were 12 commercial loan TDRs and 191 consumer loan TDRs with a combined recorded investment of $12 million that experienced payment defaults after modifications resulting in TDR status during 2021.