Company: KEY-PI
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000091576-25-000058
Chunk: 202

Company: KEYCORP /NEW/
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 8
Chunk 202
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, our future loss estimates may vary considerably from our March 31, 2025 assumptions.Commercial Loan Portfolio The ALLL from continuing operations for the commercial segment increased by $20 million, or 1.9%, from December 31, 2024. The change in the reserve levels is reflective of a reserve build due to economic uncertainty as a result of the ongoing U.S. policy changes, which impact all portfolio segments. These reserve increases are partly offset by ongoing favorable portfolio credit migration, largely concentrated in the commercial real estate portfolio. Consumer Loan Portfolio The ALLL from continuing operations for the consumer segment was unchanged from December 31, 2024. The overall stable levels in the consumer allowance are driven by reserve increases due to economic uncertainty, which are offset by reserve decreases due to continued loan runoff.

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Credit Risk ProfileThe 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