KEYCORP NEW

Figure 7. Breakdown of Loans at March 31, 2024

(a)Consumer loans include Consumer loans and Credit cards. See Note 3 (“Loan Portfolio”) in Item 1. Financial Statements of this report.

At March 31, 2024, total loans outstanding from continuing operations were $109.9 billion, compared to $112.6 billion at December 31, 2023. For more information on balance sheet carrying value, see Note 1 (“Summary of Significant Accounting Policies”) under the headings “Loans” and “Loans Held for Sale” starting on page 107 of our 2023 Form 10-K.

Commercial loan portfolio

Commercial loans outstanding were $75.7 billion at March 31, 2024, a decrease of $1.9 billion, or 2.5%, compared to December 31, 2023, driven by a decline in commercial and industrial loans and commercial real estate loans.

Figure 8 provides our commercial loan portfolios by industry classification at March 31, 2024, and December 31, 2023.

Figure 8. Commercial Loans by Industry

Commercial and industrial. Commercial and industrial loans are the largest component of our loan portfolio, representing 50% of our total loan portfolio at March 31, 2024, and 50% at December 31, 2023. This portfolio is approxima tely 88%variable rate and consists of loans originated primarily to large corporate, middle market, and small business clients.

Commercial and industrial loans totaled $54.8 billion at March 31, 2024, a decrease of $1.0 billion, or 1.8%, compared to December 31, 2023. The decrease was broad-based across most industry categories and reflects the competitive environment, low client demand, and the residual impact of our balance sheet optimization efforts during the second half of 2023.

Commercial real estate loans. Our commercial real estate portfolio includes project loans primarily focused in market-rate and affordable multi-family housing loans, owner-occupied commercial and industrial operating company buildings, and community center grocer-anchored retail centers. These three commercial real estate segments make up 75% of our commercial real estate portfolio. Our non-owner-occupied portfolio is focused on operators of commercial real estate who not only utilize our loan products, but also utilize our broader industry-focused products and services and provide consistent pipelines into our agency, CMBS, and other long-term market take out products. This focus ensures our relationship clients foster and build portfolios with stable, recurring cash flows, with adequate, balanced cash reserves to support our balance sheet exposures through the economic cycle.

At March 31, 2024, commercial real estate loans totaled $17.6 billion, which includes $14.5 billion of mortgage loans and $3.0 billion of construction loans. Compared to December 31, 2023, this portfolio decreased $700 million, or 3.8%, driven by decreases in nonowner-occupied. Nonowner-occupied properties, generally properties for which at least 50% of the debt service is provided by rental income from nonaffiliated third parties, represented 80% of total commercial real estate loans outstanding at March 31, 2024.

Since the global financial crisis in 2008, we have limited our construction business and reduced our overall construction loans from 45% to 17% of commercial real estate loans as of March 31, 2024. Construction loans provide a stream of funding for properties not fully leased at origination to support debt service payments over the term of the contract or project. As of March 31, 2024, 79% of our construction portfolio are multi-family project loans. Our office exposure only represents 5% of commercial real estate loans at period end.

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

Figure 9. Commercial Real Estate Loans

Consumer loan portfolio

Consumer loans outstanding as of March 31, 2024, totaled $34.2 billion, a decrease of $781 million, or 2.2%, from December 31, 2023. The decrease was driven by declines across all consumer loan categories and reflect the higher interest rate environment and our focus on originating salable loans.

The residential mortgage portfolio is comprised of loans originated by our Consumer Bank and is the largest segment of our consumer loan portfolio as of March 31, 2024, represen ting 60% of consumer loans outstanding. This is followed by our home equity portfolio representing 20% of consumer loans outstanding at March 31, 2024.

We held the first lien position for approxim ately 64% of the home equity portfolio at March 31, 2024, and 64% at December 31, 2023. For loans with real estate collateral, we track borrower performance monthly. Regardless of the lien position, credit metrics are refreshed quarterly, including recent FICO scores as well as updated loan-to-value ratios. This information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” of our 2023 Form 10-K.

Figure 10 presents our consumer loans by geography.

Figure 10. Consumer Loans by State

Figure 11 summarizes our loan sales for the three months ended March 31, 2024, and all of 2023.

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

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

Figure 12. Loans Administered or Serviced

In the event of default by a borrower, we are subject to recourse with respect to approx imately$7.6 billion of the$520.1 billion of loans administered or serviced at March 31, 2024. Additional information about this recourse arrangement is included in Note 17 (“Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with FNMA.”

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