Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 52

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 52
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 financing loan classes. The consumer lending segment is composed of residential mortgage, home equity, consumer direct, credit card, student lending and consumer indirect loan classes.The ALLL represents our current estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date. In determining the ALLL, we estimate expected future losses for the loan's entire contractual term adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications.The ALLL is the sum of three components: (i) asset specific/ individual loan reserves; (ii) quantitative (formulaic or pooled) reserves; and (iii) qualitative (judgmental) reserves.

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Asset Specific / Individual ComponentLoans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. We have elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any costs to sell, when foreclosure is not probable, when repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.Individual reserves are determined as follows:•     For commercial non-accruing loans greater than or equal to a defined dollar threshold, individual reserves     are determined based on an analysis of the present value of the loan's expected future cash flows or the fair      value of the collateral less costs to sell.•     For commercial non-accruing loans below the defined dollar threshold, an established LGD percentage is     multiplied by the loan balance and the results are aggregated for purposes of measuring specific reserve impairment.•     The population of individually assessed consumer loans includes loans deemed collateral dependent. These loans are written down based on the collateral's fair market value less costs to sell.Quantitative ComponentWe use a non-DCF factor-based approach to estimate expected credit losses that include component PD/LGD/EADmodels as well as less complex estimation methods for smaller loan portfolios.•     PD: This component model is used to estimate the likelihood that a borrower will cease making payments as agreed. The major contributors to this are the borrower credit attributes and macro-economic trends. The objective of the PD model is to produce default likelihood forecasts based on the observed loan-level information and projected paths of macroeconomic variables.•     LGD: This component model is used to estimate the loss on a loan once a loan is in default.•     E