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What changed in KeyCorp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KeyCorp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+564 added−610 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-22)

Top changes in KeyCorp's 2023 10-K

564 paragraphs added · 610 removed · 384 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+55 added−137 removed104 unchanged
Biggest changeOn March 4, 2020, the Federal Reserve adopted a final rule integrating certain aspects of the Federal Reserve’s Regulatory Capital Rules with CCAR and the stress test rules in order to simplify the overall capital framework that is currently applicable to BHCs that have $100 billion or more in total consolidated assets (including KeyCorp).
Biggest changeOn March 4, 2020, the Federal Reserve adopted a final rule integrating certain aspects of the Federal Reserve’s Regulatory Capital Rules with CCAR and the stress test rules in order to simplify the overall capital framework that is currently applicable to BHCs that have $100 billion or more in total consolidated assets (including KeyCorp). 16 Table of contents Under the final rule, the Federal Reserve amended the capital conservation buffer requirement under the Regulatory Capital Rules by replacing the static risk-weighted assets component of the buffer with a new measure, the stress capital buffer, which will be based on the results of an individual BHC’s supervisory stress test and cannot be less than 2.5 percent of risk-weighted assets.
The Consumer Bank serves individuals and small businesses throughout our 15-state branch footprint and through our Laurel Road digital lending business by offering a variety of deposit and investment products, personal finance and financial wellness services, lending, student loan refinancing, mortgage and home equity, credit card, treasury services, and business advisory services.
The Consumer Bank serves individuals and small businesses throughout our 15-state branch footprint and through our Laurel Road digital brand by offering a variety of deposit and investment products, personal finance and financial wellness services, lending, student loan refinancing, mortgage and home equity, credit card, treasury services, and business advisory services.
Volcker Rule The Volcker Rule implements Section 619 of the Dodd-Frank Act, which prohibits “banking entities,” such as KeyCorp, KeyBank and their affiliates and subsidiaries, from owning, sponsoring, or having certain relationships with hedge funds and private equity funds (referred to as “covered funds”) and engaging in short-term proprietary trading of financial instruments, including securities, derivatives, commodity futures and options on these instruments. 22 Table of contents The Volcker Rule excepts certain transactions from the general prohibition against proprietary trading, including transactions in government securities (e.g., U.S.
Volcker Rule The Volcker Rule implements Section 619 of the Dodd-Frank Act, which prohibits “banking entities,” such as KeyCorp, KeyBank and their affiliates and subsidiaries, from owning, sponsoring, or having certain relationships with hedge funds and private equity funds (referred to as “covered funds”) and engaging in short-term proprietary trading of financial instruments, including securities, derivatives, commodity futures and options on these instruments. 20 Table of contents The Volcker Rule excepts certain transactions from the general prohibition against proprietary trading, including transactions in government securities (e.g., U.S.
The revisions seek to restore credibility in the calculation of risk-weighted assets (“RWAs”) and improve the comparability of regulatory capital ratios across banking organizations by: (1) enhancing the robustness and risk-sensitivity of the standardized approach for credit risk, credit valuation adjustment, and operational risk; (2) constraining the use of internal models by placing limits on certain inputs used to calculate capital requirements under the internal ratings-based approach for credit risk (used by advanced approaches banking organizations) and removing the ability to use an internal model for purposes of determining the capital charge for credit valuation adjustment (“CVA”) risk and operational risk; (3) introducing a leverage ratio buffer to further limit the leverage of global systemically-important banks; and (4) replacing the existing Basel II output floor with a more robust, risk-sensitive floor based on the Basel III standardized approach.
The revisions seek to restore credibility in the calculation of risk-weighted assets and improve the comparability of regulatory capital ratios across banking organizations by: (1) enhancing the robustness and risk-sensitivity of the standardized approach for credit risk, credit valuation adjustment, and operational risk; (2) constraining the use of internal models by placing limits on certain inputs used to calculate capital requirements under the internal ratings-based approach for credit risk (used by advanced approaches banking organizations) and removing the ability to use an internal model for purposes of determining the capital charge for CVA risk and operational risk; (3) introducing a leverage ratio buffer to further limit the leverage of global systemically-important banks; and (4) replacing the existing Basel II output floor with a more robust, risk-sensitive floor based on the Basel III standardized approach.
The Commercial operating segment is a full-service, commercial banking platform that focuses primarily on serving the borrowing, cash 7 Table of contents management, and capital markets needs of middle market clients within Key’s 15-state branch footprint. It is also a significant, national, commercial real estate lender and third-party servicer of commercial mortgage loans and special servicer of CMBS.
The Commercial operating segment is a full-service, commercial banking platform that focuses primarily on serving the borrowing, cash 6 Table of contents management, and capital markets needs of middle market clients within Key’s 15-state branch footprint. It is also a significant, national, commercial real estate lender and third-party servicer of commercial mortgage loans and special servicer of CMBS.
We compete by offering quality products and innovative services at competitive prices, and by maintaining our product and service offerings to keep pace with customer preferences and industry standards. 8 Table of contents Human Capital Engaging a diverse and talented team is a top strategic priority for Key.
We compete by offering quality products and innovative services at competitive prices, and by maintaining our product and service offerings to keep pace with customer preferences and industry standards. 7 Table of contents Human Capital Engaging a diverse and talented team is a top strategic priority for Key.
With respect to pay, we design our compensation programs to balance risk and reward and align with the guidance of our regulators, and we regularly monitor these programs to remain within our risk tolerances. We subject all discretionary incentives paid to our employees to a robust risk adjustment process that begins before grant and extends beyond payment.
We design our compensation programs to balance risk and reward and align with the guidance of our regulators, and we regularly monitor these programs to remain within our risk tolerances. We subject all discretionary incentives paid to our employees to a robust risk adjustment process that begins before grant and extends beyond payment.
Warder has been Head of Digital Banking since January 2019 and became an executive officer of KeyCorp in May 2021. Prior to this, Mr. Warder served as Head of Business Banking and Investment Services from 2017 to 2019. James L. Waters (56) - Mr. Waters became the General Counsel and Secretary and an executive officer of KeyCorp in July 2021.
Warder has been Head of Digital Banking since January 2019 and became an executive officer of KeyCorp in May 2021. Prior to this, Mr. Warder served as Head of Business Banking and Investment Services from 2017 to 2019. James L. Waters (57) - Mr. Waters became the General Counsel and Secretary and an executive officer of KeyCorp in July 2021.
Under the final rule, the increase in rates will begin with the first quarterly assessment period of 2023 and will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% reserve ratio.
Under the final rule, the increase in rates began with the first quarterly assessment period of 2023 and will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% reserve ratio.
On October 18, 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase the initial base deposit insurance assessment rate schedules uniformly by two basis points consistent with the Amended Restoration Plan approved by the FDIC on June 21, 2022.
On October 18, 2022, the FDIC adopted a final rule, applicable to all insured depository institutions (including KeyBank), to increase the initial base deposit insurance assessment rate schedules uniformly by two basis points consistent with the Amended Restoration Plan approved by the FDIC on June 21, 2022.
EGRRCPA gave the Federal Reserve the authority, following notice and comment procedures, to continue to apply EPSs to any BHCs having at least $100 billion but less than $250 billion in total consolidated assets (like KeyCorp) if it determines that the application of the EPS is appropriate to prevent or mitigate risks to financial stability or to promote the safety and soundness of the BHC or BHCs, taking into consideration the BHC’s or BHCs’ capital structure, riskiness, complexity, financial activities, size, and other relevant factors.
EGRRCPA gave the Federal Reserve the authority to continue to apply EPSs to any BHCs having at least $100 billion but less than $250 billion in total consolidated assets (like KeyCorp) if it determines that the application of the EPS is appropriate to prevent or mitigate risks to financial stability or to promote the safety and soundness of the BHC or BHCs, taking into consideration the BHC’s or BHCs’ capital structure, riskiness, complexity, financial activities, size, and other relevant factors.
The rate charged depends on KeyBank’s performance on the FDIC’s “large and highly complex institution” risk-assessment scorecard, which includes factors such as KeyBank’s regulatory rating, its ability to withstand asset and funding-related stress, and the relative magnitude of potential losses to the FDIC in the event of KeyBank’s failure.
The rate charged depends on 17 Table of contents KeyBank’s performance on the FDIC’s “large and highly complex institution” risk-assessment scorecard, which includes factors such as KeyBank’s regulatory rating, its ability to withstand asset and funding-related stress, and the relative magnitude of potential losses to the FDIC in the event of KeyBank’s failure.
This determination must come after supermajority recommendations by the Federal Reserve and the FDIC, and consultation between the U.S. Treasury Secretary and the President. 20 Table of contents If the FDIC is appointed as receiver under the OLA, its powers and the rights and obligations of creditors and other relevant parties would be determined exclusively under the OLA.
This determination must come after supermajority recommendations by the Federal Reserve and the FDIC, and consultation between the U.S. Treasury Secretary and the President. If the FDIC is appointed as receiver under the OLA, its powers and the rights and obligations of creditors and other relevant parties would be determined exclusively under the OLA.
In addition, these provisions require that a credit extension to an affiliate remain secured in accordance with the collateral requirements at all times that it is outstanding, rather than the previous requirement of only at the inception or upon material modification of the transaction.
In addition, 21 Table of contents these provisions require that a credit extension to an affiliate remain secured in accordance with the collateral requirements at all times that it is outstanding, rather than the previous requirement of only at the inception or upon material modification of the transaction.
The Federal Reserve has conducted a supervisory stress test on KeyCorp, pursuant to which the Federal Reserve projects revenues, expenses, losses, and resulting post-stress capital levels and regulatory capital ratios under conditions that affect the U.S. economy or the financial condition of KeyCorp, including supervisory baseline and severely adverse scenarios (and through 2018, an adverse scenario), that are determined by the Federal Reserve.
The Federal Reserve has conducted a supervisory stress test on KeyCorp, pursuant to which the Federal Reserve projects revenues, expenses, losses, and resulting post-stress capital levels and regulatory capital ratios under conditions that affect the U.S. economy or the financial condition of KeyCorp, including supervisory baseline and severely adverse scenarios, that are determined by the Federal Reserve.
The FDIC also has certain, more limited regulatory, supervisory, and examination authority over KeyBank and KeyCorp under the FDIA and the Dodd-Frank Act. 12 Table of contents We have other financial services subsidiaries that are subject to regulation, supervision, and examination by the Federal Reserve, as well as other state and federal regulatory agencies and self-regulatory organizations.
The FDIC also has certain, more limited regulatory, supervisory, and examination authority over KeyBank and KeyCorp under the FDIA and the Dodd-Frank Act. We have other financial services subsidiaries that are subject to regulation, supervision, and examination by the Federal Reserve, as well as other state and federal regulatory agencies and self-regulatory organizations.
The FDIC may also transfer any asset or liability of the insolvent institution without obtaining approval or consent from the institution’s shareholders or creditors. These provisions would apply to obligations and liabilities of KeyCorp’s insured depository institution subsidiaries, such as KeyBank, including obligations under senior or subordinated debt issued to public investors.
The FDIC may also transfer any asset or liability of the insolvent institution without obtaining approval or consent from the institution’s shareholders or creditors. These provisions would apply to obligations and liabilities of KeyCorp’s insured depository institution subsidiary, KeyBank, including obligations under senior or subordinated debt issued to public investors.
As a FHC, KeyCorp is subject to regulation, supervision, and examination by the Federal Reserve under the BHCA. Our national bank subsidiaries and their subsidiaries are subject to regulation, supervision, and examination by the OCC. At December 31, 2022, we operated one full-service, FDIC-insured national bank subsidiary, KeyBank, and one national bank subsidiary that is limited to fiduciary activities.
As an FHC, KeyCorp is subject to regulation, supervision, and examination by the Federal Reserve under the BHCA. Our national bank subsidiaries and their subsidiaries are subject to regulation, supervision, and examination by the OCC. At December 31, 2023, we operated one full-service, FDIC-insured national bank subsidiary, KeyBank, and one national bank subsidiary that is limited to fiduciary activities.
In addition, federal law provides that in the bankruptcy of a BHC, any commitment by the BHC to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
In addition, 11 Table of contents federal law provides that in the bankruptcy of a BHC, any commitment by the BHC to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
Prudential standards were required to include enhanced risk-based capital requirements and leverage limits, liquidity requirements, risk-management and risk committee requirements, resolution plan requirements, credit exposure report requirements, single counterparty credit limits (“SCCL”), supervisory and company-run stress test requirements and, for certain financial companies, a debt-to- 23 Table of contents equity limit.
Prudential standards were required to include enhanced risk-based capital requirements and leverage limits, liquidity requirements, risk-management and risk committee requirements, resolution plan requirements, credit exposure report requirements, single counterparty credit limits (“SCCL”), supervisory and company-run stress test requirements and, for certain financial companies, a debt-to-equity limit.
These provisions also raise significantly the procedural and substantive 24 Table of contents hurdles required to obtain a regulatory exemption from the affiliate transaction requirements. While these provisions became effective on July 21, 2012, the Federal Reserve has not yet issued a proposed rule to implement them.
These provisions also raise significantly the procedural and substantive hurdles required to obtain a regulatory exemption from the affiliate transaction requirements. While these provisions became effective on July 21, 2012, the Federal Reserve has not yet issued a proposed rule to implement them.
He also serves as President of KeyBanc Capital Markets Inc., a role he has held since 2013. He became an executive officer of KeyCorp in 2016. Douglas M. Schosser (52) - Mr. Schosser has been the Chief Accounting Officer and an executive officer of KeyCorp since May 2015. Jaime Warder (49) - Mr.
He also serves as President of KeyBanc Capital Markets Inc., a role he has held since 2013. He became an executive officer of KeyCorp in 2016. Douglas M. Schosser (53) - Mr. Schosser has been the Chief Accounting Officer and an executive officer of KeyCorp since May 2015. Jaime Warder (50) - Mr.
In 2020 and again in 2022, KeyCorp was required to participate in the Federal Reserve’s CCAR process and was subject to a supervisory stress test conducted by the Federal Reserve.
In 2020 and again in 2022, KeyCorp was required to participate in the Federal Reserve’s CCAR process and was subject to a supervisory stress test conducted by the Federal Reserve. In 2024, KeyCorp will again be required to participate in the Federal Reserve’s CCAR process and will be subject to a supervisory stress test conducted by the Federal Reserve.
Revised prompt corrective action framework The federal prompt corrective action framework established under the FDIA groups FDIC-insured depository institutions into one of five prompt corrective action capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” In addition to implementing the Basel III capital framework in the U.S., the Regulatory Capital Rules also revised the prompt corrective action capital category threshold ratios applicable to FDIC-insured depository institutions such as KeyBank, with an effective date of January 1, 2015.
Revised prompt corrective action framework The federal prompt corrective action (“PCA”) framework under the FDIA groups FDIC-insured depository institutions into one of five prompt corrective action capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” In addition to implementing the Basel III capital framework in the United States, the Regulatory Capital Rules also revised the PCA capital category threshold ratios applicable to FDIC-insured depository institutions such as KeyBank, with an effective date of January 1, 2015.
The operating segment includes the KBCM platform which provides a broad suite of capital markets products and services including syndicated finance, debt and equity capital markets, derivatives, foreign exchange, financial advisory, and public finance. Additionally, KBCM provides fixed income and equity sales and trading services to investor clients.
The operating segment includes the KBCM platform which provides a broad suite of capital markets products and services including syndicated finance, debt and equity capital markets, derivatives, foreign exchange, financial advisory, public finance, commercial payments, equipment finance, and commercial mortgage banking. Additionally, KBCM provides fixed income and equity sales and trading services to investor clients.
As of December 31, 2022, these services were provided across the country through KeyBank’s 972 full-service retail banking branches and a network of 1,265 ATMs in 15 states, as well as additional offices, online and mobile banking capabilities, including our national digital bank, Laurel Road, and a telephone banking call center.
As of December 31, 2023, these services were provided across the country through KeyBank’s 959 full-service retail banking branches and a network of 1,217 ATMs in 15 states, as well as additional offices, online and mobile banking capabilities, including our national digital bank, Laurel Road, and a telephone banking call center.
Our Board of Directors is 46% diverse (six of our 13 total Directors are diverse, with four women, one of whom is also a minority, and two male minorities) and our Executive Leadership Team is 36% diverse (four women and one minority out of 14 total executives).
Our Board of Directors is 46% diverse (six of our 13 total Directors are diverse, with four women, one of whom is also a minority, and two male minorities) and our Executive Leadership Team is 42% diverse (four women and one minority out of 12 total executives).
ITEM 1. BUSINESS Overview KeyCorp, organized in 1958 under the laws of the State of Ohio, is headquartered in Cleveland, Ohio. We are a BHC under the BHCA and one of the nation’s largest bank-based financial services companies, with consolidated total assets of approximately $189.8 billion at December 31, 2022.
ITEM 1. BUSINESS Overview KeyCorp, organized in 1958 under the laws of the State of Ohio, is headquartered in Cleveland, Ohio. We are a BHC under the BHCA and one of the nation’s largest bank-based financial services companies, with consolidated total assets of approximately $188.3 billion at December 31, 2023.
On March 20, 2020, the federal banking agencies published an interim final rule that revises the definition of eligible retained income as that term is used in the agencies’ Regulatory Capital Rules. The revised definition applies to all buffer requirements applicable to a banking organization, including the stress capital buffer requirement adopted by the Federal Reserve on March 4, 2020.
On August 26, 2020, the federal banking agencies issued a final rule that revises the definition of eligible retained income as that term is used in the agencies’ Regulatory Capital Rules. The revised definition applies to all buffer requirements applicable to a banking organization, including the stress capital buffer requirement adopted by the Federal Reserve on March 4, 2020.
The financial services industry has not yet adopted a standardized methodology for banks to use to quantitatively measure indirect emissions from a bank’s value chain, such as financed emissions. Accordingly, this proposal would require many banks to quantify and disclose financed emissions on a comprehensive scale for the first time.
The financial services industry has not yet adopted a standardized methodology for banks to use to quantitatively measure indirect emissions from a bank’s value chain, such as financed emissions. Accordingly, this proposal would require many banks to quantify and disclose financed emissions on a comprehensive scale for the first time. We are awaiting issuance of the final rule.
Because James Waters has been employed at KeyCorp for less than five years, information is being provided concerning his prior business experience. There are no family relationships among the directors or the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected. Victor B.
Because Darrin Benhart and James Waters have been employed at KeyCorp for less than five years, information is being provided concerning their prior business experience. There are no family relationships among the directors or the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected.
The revised definition of eligible retained income will make any automatic limitations on capital distributions that could apply under the agencies’ capital rules more gradual with the objective of promoting continued lending during a period of stress, including the period of stress resulting from the COVID-19 pandemic.
The revised definition of eligible retained income will make any automatic limitations on capital distributions that could apply under the agencies’ capital rules more gradual with the objective of promoting continued lending during a period of stress.
“Well Capitalized” and “Adequately Capitalized” Capital Category Ratios under Revised Prompt Corrective Action Framework Prompt Corrective Action Capital Category Ratio Well Capitalized (a) Adequately Capitalized Common Equity Tier 1 Risk-Based 6.5 % 4.5 % Tier 1 Risk-Based 8.0 6.0 Total Risk-Based 10.0 8.0 Tier 1 Leverage (b) 5.0 4.0 (a) A “well capitalized” institution also must not be subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure.
The Revised PCA framework table below identifies the capital category threshold ratios for a “well capitalized” and an “adequately capitalized” institution under the Prompt Corrective Action Framework. 13 Table of contents “Well Capitalized” and “Adequately Capitalized” Capital Category Ratios under Revised Prompt Corrective Action Framework Prompt Corrective Action Capital Category Ratio Well Capitalized (a) Adequately Capitalized Common Equity Tier 1 Risk-Based 6.5 % 4.5 % Tier 1 Risk-Based 8.0 6.0 Total Risk-Based 10.0 8.0 Tier 1 Leverage (b) 5.0 4.0 (a) A “well capitalized” institution also must not be subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure.
Key elected to adopt CECL as planned in the 15 Table of contents first quarter of 2020 and exercise the option to use a five-year transition to measure CECL’s effects on regulatory capital.
Key elected to adopt CECL as planned in the first quarter of 2020 and exercised the option to use a five-year transition to measure CECL’s effects on regulatory capital.
The final rule became effective on October 1, 2020. Enhanced prudential standards and early remediation requirements As enacted in 2010, the Dodd-Frank Act required the Federal Reserve to impose EPSs upon BHCs, like KeyCorp, with at least $50 billion in total consolidated assets.
Enhanced prudential standards and early remediation requirements As enacted in 2010, the Dodd-Frank Act required the Federal Reserve to impose EPSs upon BHCs, like KeyCorp, with at least $50 billion in total consolidated assets.
Liquidity requirements U.S. banking organizations are subject to regulatory liquidity requirements based on international liquidity standards established by the Basel Committee in 2010, and subsequently revised between 2013 and 2014 (as revised, the “Basel III liquidity framework”).
Comments on this proposal were due by January 16, 2024. Liquidity requirements U.S. banking organizations are subject to regulatory liquidity requirements based on international liquidity standards established by the Basel Committee in 2010, and subsequently revised between 2013 and 2014 (as revised, the “Basel III liquidity framework”).
On June 25, 2021, the FDIC issued a statement describing the modified approach that it plans to take in implementing certain aspects of its resolution plan rule with respect to IDIs with $100 billion or more in total assets (including KeyBank).
Under this final rule, KeyCorp is no longer subject to resolution planning requirements. On June 25, 2021, the FDIC issued a statement describing the modified approach that it plans to take in implementing certain aspects of its resolution plan rule with respect to IDIs with $100 billion or more in total assets (including KeyBank).
Minimum Capital Ratios and KeyCorp Ratios Under Regulatory Capital Rules Ratios (including stress capital buffer) Regulatory Minimum Requirement Stress Capital Buffer (b) Regulatory Minimum With Stress Capital Buffer KeyCorp December 31, 2022 (c) Common Equity Tier 1 4.50 % 2.50 % 7.00 % 9.10 % Tier 1 Capital 6.00 2.50 8.50 10.60 Total Capital 8.00 2.50 10.50 12.79 Leverage (a) 4.00 N/A 4.00 8.88 (a) As a standardized approach banking organization, KeyCorp is not subject to the 3% supplemental leverage ratio requirement, which became effective January 1, 2018.
Minimum Capital Ratios and KeyCorp Ratios Under Regulatory Capital Rules Ratios (including stress capital buffer) Regulatory Minimum Requirement Stress Capital Buffer (b) Regulatory Minimum With Stress Capital Buffer KeyCorp December 31, 2023 (c) Common Equity Tier 1 4.50 % 2.50 % 7.00 % 10.02 % Tier 1 Capital 6.00 2.50 8.50 11.67 Total Capital 8.00 2.50 10.50 14.15 Leverage (a) 4.00 N/A 4.00 9.03 (a) As a standardized approach banking organization, KeyCorp is not subject to the 3% supplementary leverage ratio requirement, which became effective January 1, 2018.
Other Regulatory Developments The Bank Secrecy Act The BSA requires all financial institutions (including banks and securities broker-dealers) to, among other things, maintain a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
Comments on the proposal were due by November 30, 2023. Other Regulatory Requirements and Developments The Bank Secrecy Act The BSA requires all financial institutions (including banks and securities broker-dealers) to, among other things, maintain a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
On March 21, 2022, the SEC issued for public comment a proposal to amend its rules under the Securities Act of 1933 and the Securities Exchange Act of 1934 to require public companies (including KeyCorp) to provide detailed climate-related information in their registration statements and periodic reports.
KeyBank is subject to the final rule. 22 Table of contents Developments relating to climate change On March 21, 2022, the SEC issued for public comment a proposal to amend its rules under the Securities Act of 1933 and the Securities Exchange Act of 1934 to require public companies (including KeyCorp) to provide detailed climate-related information in their registration statements and periodic reports.
Liquidity Coverage Rules established a minimum LCR for certain internationally active bank and nonbank financial companies (excluding KeyCorp), and a modified version of the LCR (“Modified LCR”) for BHCs and other depository institution holding companies with over $50 billion in consolidated assets that are not internationally active (including KeyCorp).
Consistent with the Basel III LCR, the final rules implementing the Basel III LCR for U.S. banking organizations (the “Liquidity Coverage Rules”) established a minimum LCR for certain internationally active bank and nonbank financial companies (excluding KeyCorp), and a modified version of the LCR (“Modified LCR”) for BHCs and other depository institution holding companies with over $50 billion in consolidated assets that are not internationally active (including KeyCorp).
In October 2019, the federal banking agencies issued two final rules related to the implementation of EGRRCPA (“Tailoring Rules”). The final rules established four risk-based categories of banking organizations with $100 billion or more in total consolidated assets and applied tailored regulatory requirements to each respective category.
Final rules related to the implementation of EGRRCPA (“Tailoring Rules”) became effective on December 31, 2019. The Tailoring Rules established four risk-based categories of banking organizations with $100 billion or more in total consolidated assets and applied tailored regulatory requirements to each respective category.
The Regulatory Capital Rules provide additional requirements for large banking organizations with over $250 billion in total consolidated assets or $10 billion in foreign exposure, but those additional requirements do not apply to KeyCorp or KeyBank.
The Regulatory Capital Rules provide additional requirements for large banking organizations with over $250 billion in total consolidated assets or $10 billion in foreign exposure, but those additional requirements do not apply to KeyCorp or KeyBank. However, some of those additional requirements will apply to KeyCorp and KeyBank if proposed revisions to the Regulatory Capital Rules are adopted.
The Federal Reserve and FDIC make available on their websites the public sections of resolution plans for the companies, including KeyCorp and KeyBank, that submitted plans. The public sections of the resolution plans of KeyCorp and KeyBank are available at http://www.federalreserve.gov/supervisionreg/resolution-plans.htm and https://www.fdic.gov/regulations/reform/resplans/. KeyCorp’s last resolution plan was submitted in 2017, and KeyBank’s last resolution plan was submitted in 2022.
The Federal Reserve and FDIC make available on their websites the public sections of resolution plans for the companies, including KeyCorp and KeyBank, that submitted plans. The public sections of the resolution plans of KeyCorp and KeyBank are available at http://www.federalreserve.gov/supervisionreg/resolution-plans.htm and 19 Table of contents https://www.fdic.gov/regulations/reform/resplans/.
FDIA, Resolution Authority and Financial Stability Deposit insurance and assessments The DIF provides insurance coverage for domestic deposits funded through assessments on insured depository institutions like KeyBank.
FDIA, Resolution Authority and Financial Stability Deposit insurance and assessments The DIF provides insurance coverage for domestic deposits funded through assessments on insured depository institutions like KeyBank. The amount of deposit insurance coverage for each depositor’s deposits is $250,000 per depository.
In March 2014, the Federal Reserve published a final rule to implement certain of the EPSs required under the Dodd-Frank Act, including: (i) the incorporation of the Regulatory Capital Rules through the Federal Reserve’s previously finalized rules on capital planning and stress tests; (ii) liquidity requirements; (iii) the risk management framework, the risk committee, and the chief risk officer as well as the corporate governance requirements as they relate to liquidity risk management; and (iv) a 15-to-1 debt-to-equity limit for companies that the FSOC determines pose a “grave threat” to U.S. financial stability.
Since 2010, the Federal Rule has implemented the following EPSs required under the Dodd-Frank Act: (i) the resolution plan requirements (through a joint final rule adopted with the FDIC), (ii) stress test requirements, (iii) the incorporation of the Regulatory Capital Rules through the Federal Reserve’s previously finalized rules on capital planning and stress tests; (iv) liquidity requirements; (v) the risk management framework, including requirements around the risk committee and the chief risk officer as well as the corporate governance requirements as they relate to liquidity risk management; and (vi) a 15-to-1 debt-to-equity, limit for companies that the FSOC determines pose a “grave threat” to U.S. financial stability.
Set forth below are the names and ages of the executive officers of KeyCorp as of December 31, 2022, the positions held by each at KeyCorp during the past five years, and the year each first became an executive officer of KeyCorp.
Set forth below are the names and ages of the executive officers of KeyCorp as of December 31, 2023, the positions held by each at KeyCorp during the past five years, and the year each first became an executive officer of KeyCorp. On January 1, 2024, Darrin J. Benhart became Chief Risk Officer.
This guidance, which was proposed by the Federal Reserve on January 4, 2018, would support the supervisory evaluation under the governance and controls component of the LFI Rating System, together with the above-mentioned guidance regarding the effectiveness of a firm’s board of directors.
This guidance would support the supervisory evaluation under the governance and controls component of the LFI Rating System, together with the above-mentioned guidance regarding the effectiveness of a firm’s board of directors.
Under this final rule, BHCs with less than $250 billion in total consolidated assets will no longer be required to submit a resolution plan unless they have $75 billion or more in certain risk-based indicators. Under this final rule, KeyCorp is no longer subject to resolution planning requirements.
In October 2019, the Federal Reserve and FDIC adopted a final rule to modify the resolution planning requirements applicable to large BHCs. Under this final rule, BHCs with less than $250 billion in total consolidated assets will no longer be required to submit a resolution plan unless they have $75 billion or more in certain risk-based indicators.
She became an executive officer of KeyCorp in 2016. Mark W. Midkiff (60) - Mr. Midkiff became Chief Risk Officer and an executive officer of KeyCorp in January 2018. Andrew J. Paine III (53) - Mr. Paine is the Head of Institutional Bank. He previously served as Co-Head of Key Corporate Bank from 2016 to May 2019.
Midkiff was Chief Risk Officer and an executive officer of KeyCorp since January 2018. Andrew J. Paine III (54) - Mr. Paine has been the Head of Institutional Bank since 2019. He previously served as Co-Head of Key Corporate Bank from 2016 to May 2019.
KeyCorp was required to comply with the final rule starting on January 1, 2015. EGRRCPA, enacted on May 24, 2018, raised the asset threshold above which the Federal Reserve is required to apply EPSs to BHCs from $50 billion to $250 billion.
EGRRCPA, enacted on May 24, 2018, raised the asset threshold above which the Federal Reserve is required to apply EPSs to BHCs from $50 billion to $250 billion.
Prior to 2018, he was a partner of the law firm Haynes and Boone, LLP. 11 Table of contents Supervision and Regulation The regulatory framework applicable to BHCs and banks is intended primarily to protect consumers, the DIF, taxpayers and the banking system as a whole, rather than to protect the security holders and creditors of financial services companies.
Supervision and Regulation The regulatory framework applicable to BHCs and banks is intended primarily to protect consumers, the DIF, taxpayers and the banking system as a whole, rather than to protect the security holders and creditors of financial services companies.
Gavrity served as Head of Commercial Payments from 2016 to 2019. Christopher M. Gorman (62) - Mr. Gorman has been Chairman, Chief Executive Officer, and President of KeyCorp since May 1, 2020. Mr. Gorman previously served as President and Chief Operating Officer from September 2019 to May 2020 and President of Banking and Vice Chairman from 2017 to September 2019.
Gavrity served as Head of Enterprise Payments from January 2019 to November 2023 and Head of Commercial Payments from 2016 to 2019. Christopher M. Gorman (63) - Mr. Gorman has been Chairman, Chief Executive Officer, and President of KeyCorp since May 1, 2020. Mr.
From 2018 to 2021, he served as General Counsel and Corporate Secretary of Cullen/Frost Bankers, Inc., a financial holding company.
From 2018 to 2021, he served as General Counsel and Corporate Secretary of Cullen/Frost Bankers, Inc., a financial holding company. Prior to 2018, he was a partner of the law firm Haynes and Boone, LLP.
KeyCorp began complying with these disclosure requirements for the calendar quarter beginning October 1, 2018. Large BHCs, like KeyCorp, are also subject to liquidity requirements contained in regulations adopted pursuant to the Dodd-Frank Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”).
Large BHCs, like KeyCorp, are also subject to liquidity requirements contained in regulations adopted pursuant to the Dodd-Frank Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”).
In March 2014, the Federal Reserve published a final rule to implement certain of the EPSs required under the Dodd-Frank Act, including liquidity requirements relating to cash flow projections, a contingency funding plan, liquidity risk limits, the monitoring of liquidity risks (with respect to collateral, legal entities, currencies, business lines, and intraday exposures), liquidity stress testing, a liquidity buffer, and liquidity risk management requirements, including requirements that apply to the board of directors, the risk committee, senior management, and the independent review function.
As a result of the Federal Reserve’s implementation of certain of the EPSs, KeyCorp is subject to requirements relating to cash flow projections, a contingency funding plan, liquidity risk limits, the monitoring of liquidity risks (with respect to collateral, legal entities, currencies, business lines, and intraday exposures), liquidity stress testing, a liquidity buffer, and liquidity risk management requirements, including requirements that apply to the board of directors, the risk committee, senior management, and the independent review function.
The four new tests under which large banks would be evaluated are a retail lending test, a retail services and products test, a community development financing test, and a community development services test. Various metrics and performance standards would be applied under these tests. Comments on this proposal were due by August 5, 2022.
The four new tests under which large banks will be evaluated are a retail lending test, a retail services and products test, a community development financing test, and a community development services test. Various metrics and performance standards will be applied under these tests.
Comprehensive reform of the legislative and regulatory environment for financial services companies occurred in 2010 and remains ongoing. We cannot predict changes in applicable laws, regulations or regulatory agency policies, but any such changes may materially affect our business, financial condition, results of operations, or access to liquidity or credit.
We cannot predict changes in applicable laws, regulations or regulatory agency policies, but any such changes may materially affect our business, financial condition, results of operations, or access to liquidity or credit.
Our analysis is based on total compensation (base salary and all discretionary incentives) covering all teammates eligible for a discretionary incentive, other than our Executive Leadership Team whose pay is set by our Board of Directors. More information about our commitment to pay equity and our commitment to increasing diversity is available at www.key.com/about/diversity/pay-equity-commitment.jsp.
Our analysis is based on total compensation (base salary and all discretionary incentives) covering all teammates eligible for a discretionary incentive, other than our Executive Leadership Team whose pay is set by our Board of Directors.
As of December 31, 2022, our overall workforce was 58.7% female. In addition, as of December 31, 2022, our workforce was also 75.3% White, 9.1% Black/African American, 6.9% Hispanic/Latino, 6.1% Asian and 2.7% other.
In addition, as of December 31, 2023, our workforce was also 74.9% White, 9.0% Black/African American, 7.0% Hispanic/Latino, 6.4% Asian and 2.7% other.
The Federal Reserve indicated that it intends to use the board effectiveness guidance in informing its assessment of governance and controls at all firms subject to the LFI Rating System (including KeyCorp).
The final guidance regarding supervisory expectations for boards of directors was issued by the Federal Reserve on February 26, 2021. The Federal Reserve indicated that it intends to use the board effectiveness guidance in informing its assessment of governance and controls at all firms subject to the LFI Rating System (including KeyCorp).
Alexander (43) - Mr. Alexander has been KeyCorp’s Head of Consumer Bank and an executive officer of KeyCorp since January 2020. Prior to that time, he served as the Head of Home Lending from October 2018 to January 2020 and Treasurer from July 2017 to October 2018. 10 Table of contents Amy G. Brady (56) - Ms.
Victor B. Alexander (44) - Mr. Alexander has been KeyCorp’s Head of Consumer Bank and an executive officer of KeyCorp since January 2020. Prior to that time, he served as the Head of Home Lending from October 2018 to January 2020 and Treasurer from July 2017 to October 2018. Darrin L. Benhart (58) - Mr.
The Tailoring Rules are discussed further under the headings “Regulatory capital requirements - Liquidity requirements” and “Regulatory capital requirements - Capital planning and stress testing.” Bank transactions with affiliates Federal banking law and regulation imposes qualitative standards and quantitative limitations upon certain transactions by a bank with its affiliates, including the bank’s parent BHC and certain companies the parent BHC may be deemed to control for these purposes.
Bank transactions with affiliates Federal banking law and regulation imposes qualitative standards and quantitative limitations upon certain transactions by a bank with its affiliates, including the bank’s parent BHC and certain companies the parent BHC may be deemed to control for these purposes.
On May 5, 2022, the federal banking agencies issued for public comment a proposal to strengthen and modernize their regulations implementing the CRA to better achieve the purposes of the law, adapt to changes in the banking industry, and provide clarity and consistency in the application of their regulations.
On October 24, 2023, the federal banking agencies adopted a final rule to strengthen and modernize their regulations implementing the CRA to better achieve the purposes of the law, adapt to changes in the banking industry, and provide clarity and consistency in the application of their regulations.
In addition, we are committed to pay equity as a foundational element of our culture. As of February 2022, at KeyBank women earn on average more than 99% of what their male teammates earn, and people of color earn on average more than 99% of what their white teammates earn, after taking into account an employee’s job.
As of February 2023 , at KeyBank women earn on average more than 99% of what their male teammates earn, and people of color earn on average more than 99% of what their white teammates earn, after taking into account an employee’s job.
The increase in assessment rates will apply to KeyBank. Conservatorship and receivership of insured depository institutions Upon the insolvency of an insured depository institution, the FDIC will be appointed as receiver or, in rare circumstances, conservator for the insolvent institution under the FDIA.
The FDIC updates these projections at least semiannually. 18 Table of contents Conservatorship and receivership of insured depository institutions Upon the insolvency of an insured depository institution, the FDIC will be appointed as receiver or, in rare circumstances, conservator for the insolvent institution under the FDIA.
For example, the minimum total risk-based capital ratio requirement for a banking organization subject to the market risk capital rule equals the ratio of the banking organization’s total capital to the sum of its credit risk-weighted assets and market risk-weighted assets. Only KeyCorp is subject to the market risk capital rule, as KeyBank does not engage in substantial trading activity.
For example, the minimum total risk-based capital ratio requirement for a banking organization subject to the market risk capital rule equals the ratio of the banking organization’s total capital to the sum of its credit risk-weighted assets and market 12 Table of contents risk-weighted assets.
Under this rule, Category IV Firms will no longer be required to conduct and publicly disclose the results of company-run stress tests and will be subject to a supervisory stress test conducted by the Federal Reserve every other year rather than every year as has been the case.
KeyCorp has been required to report the results of its mid-cycle stress test to the Federal Reserve. Under one of the Tailoring Rules, KeyCorp is no longer required to conduct and publicly disclose the results of company-run stress tests and is subject to a supervisory stress test conducted by the Federal Reserve every other year rather than every year.
Kimble as Chief Financial Officer of KeyCorp effective upon Mr. Kimble’s retirement. Allyson M. Kidik (43) - Ms. Kidik has been the Chief Risk Review Officer and General Auditor and an executive officer of KeyCorp since July 2022. Ms. Kidik previously served as Senior Deputy General Auditor from 2018 to 2022 and Deputy General Auditor from 2015 to 2018.
Kidik has been the Chief Risk Review Officer and General Auditor and an executive officer of KeyCorp since July 2022. Ms. Kidik previously served as Senior Deputy General Auditor from 2018 to 2022 and Deputy General Auditor from 2015 to 2018. 10 Table of contents Angela G. Mago (58) - Ms.
Creating a Fair and Inclusive Culture Key’s purpose is to help our clients, colleagues, and communities thrive. We remain committed to attracting a talented and diverse workforce and supplier base that represents the clients and communities we serve.
We remain committed to attracting a talented and diverse workforce and supplier base that represents the clients and communities we serve.
Accordingly, for purposes of the Regulatory Capital Rules, KeyCorp and KeyBank are treated as “standardized approach” banking organizations. 13 Table of contents Under the Regulatory Capital Rules, standardized approach banking organizations, such as KeyCorp and KeyBank, are required to meet the minimum capital and leverage ratios set forth in the following table.
Under the Regulatory Capital Rules, standardized approach banking organizations, such as KeyCorp and KeyBank, are required to meet the minimum capital and leverage ratios set forth in the following table. At December 31, 2023, KeyCorp’s ratios under the fully phased-in Regulatory Capital Rules are set forth in the following table.
In 2022, we continued to focus on increasing minority representation in management and leadership roles, expanding our overall recruiting focus, developing diverse candidate slates and pipelines, increasing supplier diversity, providing mentorship opportunities, offering implicit bias training, and leveraging our existing employee resource groups to strengthen both engagement and inclusion.
In 2023 , we continued to focus on increasing minority representation in management and leadership roles, expanding our overall recruiting focus, developing diverse candidate pipelines, increasing supplier diversity, providing mentorship opportunities, offering implicit bias training, and leveraging our KBINGs to strengthen both engagement and inclusion. 8 Table of contents In addition, we are committed to pay equity as a foundational element of our culture.
For more information about our diversity and inclusion efforts, a more detailed breakdown of employee diversity by EEO-1 categories, and information about how we work every day and in every way to help our clients, colleagues, and communities thrive, please see our website and our Corporate Responsibility report at https://investor.key.com/esg-information/corporate-responsibility/. 9 Table of contents Key’s Workforce Key had an average of 17,660 full time equivalent employees in 2022 .
For more information about our diversity and inclusion efforts, a more detailed breakdown of employee diversity by EEO-1 categories, and information about how we work every day and in every way to help our clients, colleagues, and communities thrive, please see our website and our annual Environmental, Social, and Governance report at https://www.key.com/about/diversity/diversity-and-inclusion.html.
The NSFR final rule, which became effective on July 1, 2021, requires certain banking organizations with more than $100 billion in total assets to maintain minimum amounts of stable funding to support their assets, commitments, and derivatives exposures over a one-year time horizon.
Under the final rules adopted by the federal banking agencies to implement the Basel III NSFR for U.S. banking organizations, certain banking organizations with more than $100 billion in total assets must maintain minimum amounts of stable funding to support their assets, commitments, and derivatives exposures over a one-year time horizon.
Technological advances may diminish the importance of depository institutions and other financial institutions. Mergers and acquisitions have also led to increased concentration in the banking industry, placing added competitive pressure on Key’s core banking products and services as we see competitors enter some of our markets or offer similar products.
For more information on competition and related risks, see Item 1A. Risk Factors - “ We operate in a highly competitive industry.” Mergers and acquisitions have also led to increased concentration in the banking industry, placing added competitive pressure on Key’s core banking products and services as we see competitors enter some of our markets or offer similar products.
KeyCorp was required to comply with the final rule starting on January 1, 2015. EGRRCPA, which was enacted on May 24, 2018, raised, from $50 billion to $250 billion, the asset threshold above which the Federal Reserve is required to apply EPSs to BHCs.
EGRRCPA, enacted on May 24, 2018, raised the asset threshold above which the Federal Reserve is required to apply EPSs to BHCs from $50 billion to $250 billion and gave the Federal Reserve the authority to apply EPSs to BHCs with at least $100 billion in assets.
Among other things, the proposal (1) would revise the community development definitions to clarify eligibility criteria for a broad range of community development activities, (2) would adopt four new tests under which large banks with more than $10 billion in assets (including KeyBank) would be evaluated, (3) would apply a new framework for assigning conclusions and ratings to banks, (4) would require the evaluation of a large bank’s performance in retail lending assessment areas in addition to facility-based assessment areas, and (5) would impose new data collection and reporting requirements on large banks.
Among other things, the final rule (1) clarifies what activities constitute eligible community development activities, (2) adopts four new tests under which large banks with more than $2 billion in assets (including KeyBank) will be evaluated, (3) applies a new framework for assigning conclusions and ratings to banks, (4) updates requirements for delineating facility-based assessment areas, (5) provides for the evaluation of certain large banks in retail lending assessment areas as well as facility-based assessment areas, and (6) imposes new data collection and reporting requirements.
On December 2, 2022, the Federal Reserve issued for public comment proposed principles that would provide a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations supervised by the Federal Reserve, including BHCs with over $100 billion in total consolidated assets (such as KeyCorp).
On October 24, 2023, the federal banking agencies issued a set of principles that provide a high-level framework for the safe and sound management of exposures to climate-related financial risks for financial institutions with over $100 billion in total consolidated assets.
KeyCorp is no longer required to submit a resolution plan because of the rule change discussed below while KeyBank remains subject to resolution plan requirements as discussed below. In October 2019, the Federal Reserve and FDIC adopted a final rule to modify the resolution planning requirements applicable to large BHCs.
KeyCorp’s last resolution plan was submitted in 2017, and KeyBank’s last resolution plan was submitted in 2022. KeyCorp is no longer required to submit a resolution plan because of the rule change discussed below while KeyBank remains subject to resolution plan requirements as discussed below.
Competitive Rewards We make investments to hire the people we need to serve our customers and communities and regularly review our pay practices to reflect changing market and economic conditions. We have steadily increased our starting minimum wage since 2015 and made other adjustments responding to market trends, competitive pressures and a dynamic market for talent.
Competitive Rewards We make investments to hire and retain the people we need to serve our customers and communities and regularly review our pay practices to reflect changing market and economic conditions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese and other natural disasters could affect Key directly (for example, by interrupting our systems, damaging our facilities or otherwise preventing us from conducting our business in the ordinary course) or indirectly (for example, by damaging or destroying customer businesses or otherwise impairing customers’ ability to repay their loans, or by damaging or destroying property pledged as collateral for loans made by Key).
Biggest changeAdditionally, these events can indirectly impact us by damaging or destroying customer businesses, impairing their ability to repay loans, or causing damage to properties pledged as collateral for loans made by Key. Although preventative measures may help to mitigate damage, such measures could be costly, and any disaster could adversely affect our ability to conduct our business as usual.
Asset price deterioration has a negative effect on the valuation of certain of the asset categories represented on our balance sheet and reduces our ability to sell assets at prices we deem acceptable. The most recent recession, resulting from the impact of the COVID-19 pandemic, did not have significant lasting impact on collateral value.
Asset price deterioration has a negative effect on the valuation of collateral and certain of the asset categories represented on our balance sheet and reduces our ability to sell assets at prices we deem acceptable. The most recent recession, resulting from the impact of the COVID-19 pandemic, did not have significant lasting impact on collateral value.
The results of these processes are difficult to predict due, among other things, to the Federal Reserve’s use of proprietary stress models that differ from our internal models and may result in the Federal Reserve imposing capital requirements in excess of our expectations which could require us, as applicable, to revise our stress-testing or capital management approaches, resubmit our capital plan or postpone, cancel, or alter or planned capital actions.
The results of these processes are difficult to predict due to, among other things, the Federal Reserve’s use of proprietary stress models that differ from our internal models and may result in the Federal Reserve imposing capital requirements in excess of our expectations which could require us, as applicable, to revise our stress-testing or capital management approaches, resubmit our capital plan or postpone, cancel, or alter our planned capital actions.
We are also involved, from time to time, in other information-gathering requests, reviews, investigations, and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, including, among other things, accounting, compliance, and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions, or other relief which, if significant, could adversely affect our business, results of operations and/or financial condition.
We are also involved, from time to time, in other information-gathering requests, reviews, investigations, and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, including, among other things, accounting, compliance, and operational matters, which may result in adverse judgments, settlements, fines, penalties, injunctions, or other relief which, if significant, could adversely affect our business, results of operations and/or financial condition.
We may also face criticism or a loss of confidence, with accompanying reputational risk, from our perceived action or inaction to deliver on our ESG-related commitments. Investors and other stakeholders, including U.S. institutional investors, are increasingly considering how corporations are incorporating ESG matters, including climate change, into their business strategy when analyzing the expected risk and return of potential investments.
We may face criticism or a loss of confidence, with accompanying reputational risk, from our perceived action or inaction to deliver on our ESG-related commitments. Investors and other stakeholders, including U.S. institutional investors, are increasingly considering how corporations are incorporating ESG matters, including climate change, into their business strategy when analyzing the expected risk and return of potential investments.
In addition, the liquidity standards require us to hold high-quality liquid assets, may require us to change our future mix of investment alternatives, and may impact future business relationships with certain customers. Additionally, support of liquidity standards may be satisfied through the use of term wholesale borrowings, which tend to have a higher cost than that of traditional core deposits.
In addition, regulatory liquidity standards require us to hold high-quality liquid assets, may require us to change our future mix of investment alternatives, and may impact future business relationships with certain customers. Additionally, support of liquidity standards may be satisfied through the use of term wholesale borrowings, which tend to have a higher cost than that of traditional core deposits.
While marginal relief from certain capital and liquidity standards has been afforded to Key (such as relief from LCR disclosure requirements), overall capital and liquidity management practices and expectations will remain unchanged for the foreseeable future. Moreover, Key has not experienced significant changes to its overall liquidity and capital levels or composition as a result of the final rules.
While marginal relief from certain capital and liquidity standards has been afforded to Key (such as relief from LCR disclosure requirements), overall capital and liquidity management practices and expectations will remain unchanged for the foreseeable future. Moreover, Key has not experienced significant changes to its overall liquidity and capital levels or composition as a result of these final rules.
Our business is dependent on our ability to process and monitor large numbers of daily transactions in compliance with legal, regulatory, and internal standards and specifications. In addition, a significant portion of our operations relies heavily on the secure processing, storage, and transmission of personal and confidential information, such as the personal information of our customers and clients.
Our business is dependent on our ability to process and monitor large numbers of daily transactions in compliance with legal, regulatory, and internal standards and specifications. In addition, a significant portion of our operations relies heavily on the secure processing, storage, and transmission of personal and confidential information, such as the personal information of our employees, customers, and clients.
Maintaining or increasing our market share depends upon our ability to adapt our products and services to evolving industry standards and consumer preferences, while maintaining competitive prices. The continuous, widespread adoption of new technologies requires us to evaluate our product and service offerings to ensure they remain competitive.
Maintaining or increasing our market share depends upon our ability to adapt our products and services to evolving industry standards and consumer preferences, while maintaining competitive products and services. The continuous, widespread adoption of new technologies requires us to evaluate our product and service offerings to ensure they remain competitive.
In addition, any unanticipated interruption, delay, or degradation in the performance and delivery of our services could negatively impact our customer relationships. Additionally, some of our outsourcing arrangements are located overseas and, therefore, are subject to risks unique to the regions in which they operate.
Any unanticipated interruption, delay, or degradation in the performance and delivery of our services could negatively impact our customer relationships. Additionally, some of our outsourcing arrangements are located overseas and, therefore, are subject to risks unique to the regions in which they operate.
Actions by the financial services industry generally or by certain members or individuals in the industry as well as legislative or regulatory actions that target or negatively impact the industry may also have a significant adverse effect on our reputation.
Additionally, actions by the financial services industry generally or by certain members or individuals in the industry as well as legislative or regulatory actions that target or negatively impact the industry may also have a significant adverse effect on our reputation.
We rely on our employees to design, manage, and operate our systems and controls to assure that we properly enter into, record and manage processes, transactions and other relationships with customers, suppliers and other parties with whom we do business.
We rely on our employees to design, manage, and operate our systems and controls to assure that we properly enter into, record and manage processes, transactions and other relationships with customers, vendors, suppliers, and other parties with whom we do business.
Changes in economic conditions affecting borrowers, the softening of certain macroeconomic variables that we are more susceptible to, such as GDP, unemployment, SOFR, producer price index, industrial production, interest rates and real estate values, along with updated information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may indicate the need for an increase in the ALLL.
Changes in economic conditions affecting borrowers, the softening of certain macroeconomic variables that we are more susceptible to, such as GDP, unemployment, SOFR and other interest rates, the producer price index, and real estate values, along with updated information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may indicate the need for an increase in the ALLL.
In particular, we face the following risks, and other unforeseeable risks, in connection with a downturn in the economic and market environment or in the face of downside shocks or a recession, whether in the United States or internationally: • A loss of confidence in the financial services industry and the debt and equity markets by investors, placing pressure on the price of Key’s common shares or decreasing the credit or liquidity available to Key; • A decrease in consumer and business confidence levels generally, decreasing credit usage and investment or increasing delinquencies and defaults; • A decrease in household or corporate incomes, reducing demand for Key’s products and services; • A decrease in the value of collateral securing loans to Key’s borrowers or a decrease in the quality of Key’s loan portfolio, increasing loan charge-offs and reducing Key’s net income; • A decrease in our ability to liquidate positions at acceptable market prices; • An increase in competition or consolidation in the financial services industry; • Increased concern over and scrutiny of the capital and liquidity levels of financial institutions generally, and those of our transaction counterparties specifically; • A decrease in confidence in the creditworthiness of the United States or other issuers whose securities we hold; and • An increase in limitations on or the regulation of financial services companies like Key.
In particular, we face the following risks, and other unforeseeable risks, in connection with a downturn in the economic and market environment or in the face of downside shocks or a recession, whether in the United States or internationally: • A loss of confidence in the financial services industry and the debt and equity markets by investors, placing pressure on the price of Key’s common shares, decreasing the credit or liquidity available to Key, or leading to an increase in depositors withdrawing funds; • A decrease in consumer and business confidence levels generally, decreasing credit usage and investment or increasing delinquencies and defaults; • A decrease in household or corporate incomes, reducing demand for Key’s products and services; • A decrease in the value of collateral securing loans to Key’s borrowers or a decrease in the quality of Key’s loan portfolio, increasing loan charge-offs and reducing Key’s net income; • A decrease in our ability to liquidate positions at acceptable market prices; • An increase in competition or consolidation in the financial services industry; • Increased concern over and scrutiny of the capital and liquidity levels of financial institutions generally, and those of our transaction counterparties specifically; • A decrease in confidence in the creditworthiness of the United States or other issuers whose securities we hold; and • An increase in limitations on or the regulation of financial services companies like Key.
The inaccuracy of that information or those representations affects our ability to accurately evaluate the default risk of a counterparty or client. Given the Dodd-Frank legislative mandate to centrally clear eligible derivative contracts, we rely on central clearing counterparties to remain open and operationally viable at all times.
The inaccuracy of that information or those representations affects our ability to accurately evaluate the default risk of a counterparty or client. In addition, given the Dodd-Frank legislative mandate to centrally clear eligible derivative contracts, we rely on central clearing counterparties to remain open and operationally viable at all times.
Our ability to compete successfully depends on a number of factors, including: our ability to develop and execute strategic plans and initiatives; our ability to develop, maintain, and build long-term customer relationships based on quality service and competitive prices; our ability to develop competitive products and technologies demanded by our customers, while maintaining our high ethical standards and an effective compliance program and keeping our assets safe and sound; our ability to attract, retain, and develop a highly competent employee workforce; and industry and general economic trends.
Our ability to compete successfully depends on a number of factors, including: our ability to develop and execute strategic plans and initiatives; our ability to develop, maintain, and build long-term customer relationships based on quality service and competitive prices; our ability to develop competitive products and technologies demanded by 39 Table of contents our customers, while maintaining our high ethical standards and an effective compliance program and keeping our assets safe and sound; our ability to attract, retain, and develop a highly competent employee workforce; and industry and general economic trends.
When the Federal Reserve raises interest rates, the behavior of national money market rate indices, the correlation of consumer deposit rates to financial market interest rates, and the setting of benchmark rates may not follow historical relationships, which could influence net interest income and net interest margin.
When the Federal Reserve raises or reduces interest rates, the behavior of national money market rate indices, the correlation of consumer deposit rates to financial market interest rates, and the setting of benchmark rates may not follow historical relationships, which could influence net interest income and net interest margin.
Acquiring other banks, bank branches, or other businesses involves various risks commonly associated with acquisitions or partnerships, including exposure to unknown or contingent liabilities of the acquired company; diversion of our management’s time and attention; significant integration risk with respect to employees, accounting systems, and technology platforms; increased regulatory scrutiny; and the possible loss of key employees and customers of the acquired company.
Acquiring other banks, bank branches, or other businesses involves various risks commonly associated with acquisitions or partnerships, including exposure to unknown or contingent liabilities of the acquired company; diversion of our management’s time and attention; significant integration risk with respect to employees, accounting 40 Table of contents systems, and technology platforms; increased regulatory scrutiny; and the possible loss of key employees and customers of the acquired company.
Should an adverse event affecting another company’s systems occur, we may not have indemnification or other protection from the other company sufficient to fully compensate us or otherwise protect us or our clients from the consequences.
In addition, should an adverse event affecting another company’s systems occur, we may not have indemnification or other protection from the other company sufficient to fully compensate us or otherwise protect us or our clients from the consequences.
The systems may not work as 34 Table of contents intended or be circumvented by employees, third parties, or others outside of Key. Additionally, instruments, systems, and strategies used to hedge or otherwise manage exposure to various types of market compliance, credit, liquidity, operational, and business risks and enterprise-wide risk could be less effective than anticipated.
The systems may not work as intended or be circumvented by employees, third parties, or others outside of Key. Additionally, instruments, systems, and strategies used to hedge or otherwise manage exposure to various types of market compliance, credit, liquidity, operational, and business risks and enterprise-wide risk could be less effective than anticipated.
Our success depends, in part, on our ability to adapt our products and services, as well as our distribution of them, to evolving industry standards and consumer preferences. New technologies have altered consumer behavior by allowing consumers to complete transactions such as paying bills or transferring 41 Table of contents funds directly without the assistance of banks.
Our success depends, in part, on our ability to adapt our products and services, as well as our distribution of them, to evolving industry standards and consumer preferences. New technologies have altered consumer behavior by allowing consumers to complete transactions such as paying bills or transferring funds directly without the assistance of banks.
We operate in a highly competitive industry. We face substantial competition in all areas of our operations from a variety of competitors, some of which are larger and may have more financial resources than us. Our competitors primarily include national and super-regional banks as well as smaller community banks within the various geographic regions in which we operate.
We face substantial competition in all areas of our operations from a variety of competitors, some of which are larger and may have more financial resources than us. Our competitors primarily include national and super-regional banks as well as smaller community banks within the various geographic regions in which we operate.
Operational risk includes the risk of fraud by employees or others outside of Key, clerical and record-keeping errors, nonperformance by vendors, threats from cyber activity, and computer/telecommunications malfunctions. Fraudulent activity has escalated, become more sophisticated, and is ever evolving as there are more options to access financial services.
Operational risk includes the risk of fraud by employees or others outside of Key, clerical and recordkeeping errors, nonperformance by vendors, threats from cyber activity, and computer/telecommunications malfunctions. Fraudulent activity has escalated, become more sophisticated, and is ever evolving as there are more options to access financial services.
Credit Risk We have concentrated credit exposure in commercial and industrial loans, commercial real estate loans, and commercial leases. As of December 31, 2022, approximately 69% of our loan portfolio consisted of commercial and industrial loans, commercial real estate loans, including commercial mortgage and construction loans, and commercial leases.
Credit Risk We have concentrated credit exposure in commercial and industrial loans, commercial real estate loans, and commercial leases. As of December 31, 2023, approximately 69% of our loan portfolio consisted of commercial and industrial loans, commercial real estate loans, including commercial mortgage and construction loans, and commercial leases.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, the competitive environment within our markets, consumer preferences for specific loan and deposit products, and policies of various governmental and regulatory agencies, in particular, the Federal Reserve.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, the competitive environment within our markets, consumer preferences for specific loan and deposit products, and policies of various governmental and regulatory 36 Table of contents agencies, in particular, the Federal Reserve.
Therefore, some dilution of our tangible book value and net income per common share could occur in connection with any future transaction. 42 Table of contents VIII. Model Risk We rely on quantitative models to manage certain accounting, risk management, capital planning, and treasury functions.
Therefore, some dilution of our tangible book value and net income per common share could occur in connection with any future transaction. VIII. Model Risk We rely on quantitative models to manage certain accounting, risk management, capital planning, and treasury functions.
The failure or inadequacy of a model may result in increased regulatory scrutiny on us or may result in an enforcement action or proceeding against us by one of our regulators. 43 Table of contents
The failure or inadequacy of a model may result in increased regulatory scrutiny on us or may result in an enforcement action or proceeding against us by one of our regulators. 41 Table of contents
We are also exposed to operational risk through our outsourcing arrangements, and the effect that changes in circumstances or capabilities of our outsourcing vendors can have on our ability to continue to perform operational functions necessary to our business, such as certain loan processing functions.
We are also exposed to operational risk through our outsourcing arrangements, and the effect that changes in circumstances or capabilities of our outsourcing vendors can have on our ability to continue to perform operational functions necessary to our business, 29 Table of contents such as certain loan processing functions.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions.
The soundness of other financial institutions could adversely affect us. Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions.
A correction in the real estate markets could impact the ability of borrowers to make debt service payments on loans or to refinance the loans at maturity. A relatively small portion of our commercial real estate loans are construction loans. New construction and value-add or rehabilitation construction projects are 29 Table of contents not fully leased at loan origination.
A correction in the real estate markets could impact the ability of borrowers to make debt service payments on loans or to refinance the loans at maturity. A 26 Table of contents relatively small portion of our commercial real estate loans are construction loans. New construction and value-add or rehabilitation construction projects may not be fully leased at loan origination.
For example, we are required to deliver a substantial portion of the variable compensation of certain teammates in the form of awards tied to our financial performance. A sustained decline in our share price could impact our ability to retain those individuals.
For example, we are required to deliver a substantial portion of the variable compensation of certain teammates in the form of awards tied to our financial performance. The decline in our share price we experienced in 2023 could impact our ability to retain those individuals.
U.S. financial service 32 Table of contents institutions and companies have reported breaches in the security of their websites or other systems and several financial institutions, including Key, have had third parties on which they rely experience such breaches.
U.S. financial service institutions and companies have reported breaches in the security of their websites or other systems and several financial institutions, including Key, have had third parties on which they rely experience such breaches.
The level of the allowance at December 31, 2022 represents management’s estimate of expected credit losses over the contractual life of our existing loan portfolio.
The level of the allowance at December 31, 2023 represents management’s estimate of expected credit losses over the contractual life of our existing loan portfolio.
Recent and persistent interest rate increases and a slowing economy have presented a challenge for the industry, including Key, and affects business and financial performance.
Recent and persistent interest rate increases and a slowing economy have presented a challenge for the industry, including Key, and affected business and financial performance.
The increase in remote work has resulted in an expanded potential attack surface and heightened operational risks and may negatively impact our ability, and the ability of our third-party service providers (including their downstream service providers), to perform services efficiently, securely, and without interruptions.
The increase in remote work over the past several years has resulted in an expanded potential attack surface and heightened operational risks and may negatively impact our ability, and the ability of our third-party service providers (including their downstream service providers), to perform services efficiently, securely, and without interruptions.
In particular, a cyber security event impacting Key or our customers’ data could negatively impact our reputation and customer confidence in Key and our data security procedures. We could also suffer significant reputational harm if we fail to properly identify and manage potential conflicts of interest.
In particular, a cybersecurity event impacting Key or our customers’ data or personal information could negatively impact our reputation and customer confidence in Key and our data security procedures. We could also suffer significant reputational harm if we fail to properly identify and manage potential conflicts of interest.
Significant harm to our reputation can arise from various sources, including inappropriate behavior or misconduct of employees, actual or perceived unethical behavior, litigation or regulatory outcomes, inadequate or ineffective risk management practices, failing to deliver minimum or required standards of service and quality, corporate governance and regulatory compliance failures, disclosure of confidential information, significant or numerous failures, interruptions or breaches of our information systems, failure to meet external commitments and goals, including financial and ESG-related commitments, and the activities of our clients, customers and counterparties, including vendors.
Significant harm to our reputation can arise from various sources, including inappropriate behavior or misconduct of employees, actual or perceived unethical behavior, litigation or regulatory outcomes, inadequate or ineffective risk management practices, failing to deliver minimum or required standards of service and quality, corporate governance and regulatory compliance failures, disclosure of confidential information, significant or numerous failures, interruptions or breaches of our information systems, failure to meet external commitments and goals, including financial and ESG-related commitments, the activities of our clients, customers and counterparties, including vendors, and actions taken by shareholder activists and community organizations.
This 40 Table of contents can be true regardless of whether we are perceived by some as not having done enough to address activist concerns or by others as having inappropriately yielded to activist pressures.
This can be true regardless of whether we are perceived by some as not having done enough to address activist concerns or by others as having inappropriately yielded to activist pressures.
We have experienced, and may continue to experience, disruption related to remote work, which disruptions could adversely impact our business, and could result in legal liability, regulatory penalties, litigation expenses, remediation costs, or reputational harm. 35 Table of contents IV.
We have experienced, and may continue to experience, disruption related to remote work, which disruptions could adversely impact our business, and could result in legal liability, regulatory penalties, litigation expenses, remediation costs, or reputational harm. IV.
Evolving capital standards resulting from the Dodd-Frank Act and the Regulatory Capital Rules adopted by our regulators have had and will continue to have a significant impact on banks and BHCs, including Key.
Evolving capital standards resulting from the Dodd-Frank Act and the Regulatory Capital Rules adopted by our 33 Table of contents regulators have had and will continue to have a significant impact on banks and BHCs, including Key.
Adverse conditions in a geographic region such as inflation, unemployment, recession, natural disasters, impact of the COVID-19 pandemic, or other factors beyond our control could impact the ability of borrowers in these regions to repay their loans, decrease the value of collateral securing loans made in these regions, or affect the ability of our customers in these regions to continue conducting business with us.
Adverse conditions in a geographic region such as inflation, unemployment, recession, natural disasters, impact of public health crises, or other factors beyond our control could impact the ability of borrowers in these regions to repay their loans, decrease the value of collateral securing loans made in these regions, or affect the ability of our customers in these regions to continue conducting business with us.
New and/or more stringent regulatory requirements could materially affect our results by requiring us to take costly measures to comply with any new laws or regulations related to climate change that may be forthcoming. Consumers and businesses also may change their own behavior as a result of these concerns.
New and/or more stringent regulatory requirements could materially affect our results by requiring us to take costly measures to comply with any new laws or regulations related to climate change that may be adopted by federal, state, and local governments. Consumers and businesses also may change their own behavior as a result of these concerns.
As new privacy-related laws and regulations, such as the California Consumer Privacy Act, are implemented in jurisdictions in which KeyBank operates, the time and resources needed for us to comply with such laws and regulations, as well as our potential liability for noncompliance and reporting obligations in the case of data breaches, may significantly increase.
As new privacy-related laws and regulations, and judicially-created frameworks, are implemented in jurisdictions in which KeyBank operates, the time and resources needed for us to comply with such laws and regulations, as well as our potential liability for noncompliance and reporting obligations in the case of data breaches, may significantly increase.
Key’s non-owner occupied office and retail exposures are 12% of our total commercial real estate exposure. Substantial deterioration in property market fundamentals could negatively impact our portfolio, with a large portion of our clients active in real estate but in the comparatively better performing multifamily space.
Key’s non-owner occupied office exposures are 5% of our total commercial real estate exposure. Substantial deterioration in property market fundamentals could negatively impact our portfolio, with a large portion of our clients active in real estate but in the comparatively better performing multifamily space over the cycle.
An economic downturn or recession in one or more geographic regions where we conduct our business, or any significant or prolonged impact on the profitability of one or more of the market segments with which we conduct significant business activity, could adversely affect the demand for our products and services, the ability of our customers to repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources. 39 Table of contents The soundness of other financial institutions could adversely affect us.
An economic downturn or recession in one or more geographic regions where we conduct our business, or any significant or prolonged impact on the profitability of one or more of the market segments with which we conduct significant business activity, could adversely affect the demand for our products and services, the ability of our customers to repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources.
Capitalization rates are rising, and property value appreciation has slowed or ceased altogether. In many markets within Key’s footprint, property values have begun to decrease. Multifamily and industrial properties continue to remain stable, but office, retail, hospitality, and single family detached properties are beginning to show early signs of potential deterioration.
Capitalization rates are rising, and property value appreciation has slowed or is now declining. In many markets within Key’s footprint, property values have begun to decrease. Industrial and retail properties continue to remain stable, but multifamily, office, hospitality, and single family detached properties are beginning to show signs of deterioration.
Disclosures of risks should not be interpreted to imply that the risks have not already materialized. Our ERM program incorporates risk management throughout our organization to identify, understand, and manage the risks presented by our business activities.
The risks and uncertainties described below are not the only risks we face. Disclosures of risks should not be interpreted to imply that the risks have not already materialized. Our ERM program incorporates risk management throughout our organization to identify, understand, and manage the risks presented by our business activities.
Financial services companies, including Key, face increasing criticism from social and environmental activists who target companies, including Key, for engaging in business with clients engaged in industries such activists perceive to be harmful to communities or the environment. Such criticism directed at Key could generate dissatisfaction among our stakeholders.
Views about ESG-related issues are diverse, dynamic, and rapidly changing. Financial services companies, including Key, face increasing criticism from social and environmental activists who target companies, including Key, for engaging in business with clients engaged in industries such activists perceive to be harmful to communities or the environment. Such criticism directed at Key could generate dissatisfaction among our stakeholders.
These shifts in investing priorities may result in adverse effects on the trading price of KeyCorp’s common stock if investors determine that Key has not made sufficient progress on ESG matters or is not aligned with the investors’ ESG-related priorities. VII. Strategic Risk We may not realize the expected benefits of our strategic initiatives.
These shifts in investing priorities may result in adverse effects on the trading price of KeyCorp’s common stock if investors determine that Key has not made sufficient progress on ESG matters or is not aligned with the investors’ ESG-related priorities.
In addition, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. We are subject to liquidity risk, which could negatively affect our funding levels.
Such a situation could result in Key losing access to alternative wholesale funding sources. In addition, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. We are subject to liquidity risk, which could negatively affect our funding levels.
We maintain an ALLL (a reserve established through a provision for loan and lease losses charged to expense) that represents our estimate of losses based on our evaluation of risks within our existing portfolio of loans.
Various factors may cause our allowance for loan and lease losses to increase or to be inadequate. We maintain an ALLL (a reserve established through a provision for loan and lease losses charged to expense) that represents our estimate of losses based on our evaluation of risks within our existing portfolio of loans.
We are subject to the risk of defaults by our loan clients and counterparties. Many of our routine transactions expose us to credit risk, including the risk of default of our counterparty or client.
We are subject to the risk of defaults by our loan clients and counterparties. Many of our routine transactions expose us to credit risk, including the risk of default of our counterparties, which include other financial institutions, or clients.
To date, our losses and costs related to these breaches have not been material, but other similar events in the future could have a significant impact on us. In addition, our customers routinely use Key-issued credit and debit cards to pay for transactions conducted with businesses in person and over the internet.
To date, our losses and costs related to these breaches have not been material, but other similar events in the future could have a material impact on our business strategy, results of operations, or financial condition. 30 Table of contents In addition, our customers routinely use Key-issued credit and debit cards to pay for transactions conducted with businesses in person and over the internet.
These risks include: • A correction in equity or housing markets; • Additional surges in COVID-19 cases leading to a decrease in economic activity; • Further supply chain issues such as closed factories and disrupted port activity as well as the impact of the Russia-Ukraine conflict on transportation and availability of materials; • Labor-supply constraints could continue longer than anticipated, leading to slowing job growth and boosting wages along with inflation (wage-price spiral); and • Negative GDP, as a result of, in part, the Federal Reserve’s monetary policy efforts to arrest inflationary pressures within the broader economy. 30 Table of contents II.
These risks include: • A correction in equity or housing markets; • Supply chain issues such as closed factories and disrupted port activity, as well as the impact of the Russia-Ukraine war and the Israel-Hamas war on global transportation and the availability of materials; • Labor-supply constraints, leading to slowing job growth and boosting wages along with inflation (wage-price spiral); and 27 Table of contents • Negative GDP growth, as a result of, in part, the Federal Reserve’s monetary policy efforts to arrest inflationary pressures within the broader economy.
For a detailed explanation of the capital and liquidity rules that became effective for us on a phased-in basis on January 1, 2015, see the section titled “Regulatory capital requirements” under the heading “Supervision and Regulation” in Item 1 of this report.
For a detailed explanation of the capital and liquidity rules that apply to us, see the section titled “Regulatory capital requirements” under the heading “Supervision and Regulation” in Item 1 of this report.
In addition, our credit risk may be affected when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of our loan or derivatives exposure.
In addition, many of our transactions with other financial institutions expose us to credit risk in the event of default of a counterparty or client. Our credit risk may be affected when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of our loan or derivatives exposure.
Any system of controls and any system to reduce risk exposure, however well designed, operated, and tested, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Additionally, our internal audit function provides an independent assessment and testing of Key’s internal controls, policies, and procedures. Any system of controls and any system to reduce risk exposure, however well designed, operated, and tested, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
In the event of a failure, interruption, or breach of our information systems or that of a third party that provides services to us or our customers, we may be unable to avoid impact to our customers. Such a failure, interruption, or breach could result in legal liability, remediation costs, regulatory action, or reputational harm.
In the event of a failure, interruption, or breach of our information systems, or that of a third party that provides services to us or our customers, we may be unable to avoid impact to our customers.
As market conditions evolve and respond to the influence of these government agency initiatives, or lack thereof, the slope of the yield curve will shift and influence our loan and deposit rates and value of investments.
Further as market conditions evolve and respond to the influence of these government agency initiatives, or lack thereof, the slope of the yield curve will shift and influence our loan and deposit rates and value of investments. The actions of federal agencies are not fully predictable which contributes to market volatility and changes to the slope of the yield curve.
Additionally, some of our third parties outsource aspects of their operations to downstream service providers. These parties are subject to similar risks as Key relating to cybersecurity and breakdowns or failures of their own systems, internal processes and controls, or employees.
These parties are subject to similar risks as Key relating to cybersecurity and breakdowns or failures of their own systems, internal processes and controls, or employees.
Described below are the material risks and uncertainties that if realized could have a material and adverse effect on our business, financial condition, results of operations or cash flows, and our access to liquidity. The risks and uncertainties described below are not the only risks we face.
As a financial services organization, we are subject to a number of risks inherent in our transactions and present in the business decisions we make. Described below are the material risks and uncertainties that if realized could have a material and adverse effect on our business, financial condition, results of operations or cash flows, and our access to liquidity.
A rating downgrade of the securities of KeyCorp or KeyBank could adversely affect our access to liquidity and could significantly increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us, reducing our ability to generate income.
The impact of the recent downgrades to KeyCorp's or KeyBank's credit ratings, or further downgrades, could adversely affect our access to liquidity and could significantly increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us, reducing our ability to generate income.
Development and construction continue, but at muted levels, and deliveries of additional units into the market have been supported. Oversupply of multifamily housing is a concern in certain urban and gateway markets. However, our exposures in those markets are limited. The most severely impacted commercial real estate segments have been in office and retail.
Development and construction continue, but at muted levels, and deliveries of additional units into the market have been supported. Oversupply of multifamily housing is a concern in certain urban and gateway markets.
In recent years, there has been an increase in the number of investigations and proceedings in the financial services industry. A violation of law or regulation by another financial institution may give rise to an inquiry or investigation by regulators or other authorities of the same or similar practices by Key.
A violation of law or regulation by another financial institution may give rise to an inquiry or investigation by regulators or other authorities of the same or similar practices by Key.
Additionally, the increasing use of third-party financial data aggregators and emerging technologies, including the use of automation, artificial intelligence and robotics, introduces new information security risks and exposure.
Additionally, the increasing use of third-party financial data aggregators and emerging technologies, including the use of automation, artificial intelligence and robotics, introduces new information security risks and exposure for us and for our third party service providers; such technologies could also result in increasingly sophisticated cyberattacks.
With the exception of cash that we may raise from debt and equity issuances, we receive substantially all of our funding from dividends by our subsidiaries. Dividends by our subsidiaries are the principal source of funds for the dividends we pay on our common and preferred stock and interest and principal payments on our debt.
We rely on dividends by our subsidiaries for most of our funds. We are a legal entity separate and distinct from our subsidiaries. With the exception of cash that we may raise from debt and equity issuances, we receive substantially all of our funding from dividends by our subsidiaries.
Conversely, earnings could also be adversely affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on deposits and other borrowings. Uncertainty surrounding the transition from LIBOR to an alternate reference rate may adversely affect our business.
Conversely, earnings could also be adversely affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on deposits and other borrowings.
Societal responses to climate change could adversely affect Key’s business and performance, including indirectly through impacts on Key’s customers. Concerns over the long-term impacts of climate change have led and may continue to lead to governmental efforts around the world to mitigate those impacts.
Concerns over the long-term impacts of climate change have led and may continue to lead to governmental efforts around the world to mitigate those impacts.
Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputational damage, or restrictions on our business. Moreover, different government administrations may have different regulatory priorities, which may impact the level of regulation of financial institutions and the enforcement environment.
Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputational damage, or restrictions on our business.
Such changes may also impact consumer behavior, limit the types of financial services and products we may offer, affect the investments we make, and change the manner in which we operate.
Such changes may subject us to additional costs, adversely impact our income, and increase our litigation risk should we fail to appropriately comply and may also impact consumer behavior, limit the types of financial services and products we may offer, affect the investments we make, and change the manner in which we operate.
Hardware, software, or applications developed by Key or received from third parties may contain exploitable vulnerabilities, bugs, or defects in design, maintenance or manufacture or other issues that could unpredictably compromise information and cybersecurity.
Hardware, software, or applications developed by Key or received from third parties may contain exploitable vulnerabilities, bugs, or defects in design, maintenance or manufacture or other issues that could unpredictably compromise information and cybersecurity. We depend on third party service providers and their downstream service providers to implement adequate controls and safeguards to protect against and report cyber incidents.
The success of these initiatives can be subject to changes in the macroeconomic environment which is beyond our control. In addition, our inability to execute on or achieve the anticipated outcomes of our strategic priorities, or to do so in the expected timeframe, may affect how the market perceives us and could impede our growth and profitability.
In addition, our inability to execute on or achieve the anticipated outcomes of our strategic priorities, or to do so in the expected timeframe, may affect how the market perceives us and could impede our growth and profitability. We operate in a highly competitive industry.
While we do maintain cyber information security and business interruption insurance, losses from a major interruption may exceed our coverage and there can be no assurance that liabilities or losses we may incur will be covered under such policies. We rely on third parties to perform significant operational services for us. Third parties perform significant operational services on our behalf.
While we do maintain cyber information security and business interruption insurance, losses from a major interruption may exceed our coverage and there can be no assurance that liabilities or losses we may incur will be covered under such policies, that such insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
Additionally, regulatory guidance adopted by federal banking regulators related to how banks select, engage, and manage their third parties affects the circumstances and conditions under which we work with third parties and the cost of managing such relationships. We are subject to claims and litigation, which could result in significant financial liability and/or reputational risk.
Additionally, regulatory guidance adopted by federal banking regulators related to how banks select, contract with, evaluate, engage with, and manage their third parties, including such third parties’ use of subcontractors, affects the 31 Table of contents circumstances and conditions under which we work with third parties and their subcontractors and the cost of managing such relationships.
The Federal Reserve’s capital standards require Key to maintain more and higher quality capital and could limit our business activities (including lending) and our ability to expand organically or through acquisitions.
Regulatory capital standards require Key to maintain significant amounts of high-quality capital (e.g., common equity) and could limit our business activities (including lending) and our ability to expand organically or through acquisitions.
A large percentage of our workforce works remotely, and our third-party service providers (including their downstream service providers) may utilize personnel who work remotely. Increased levels of remote access create additional cybersecurity risk and opportunities for cybercriminals to exploit vulnerabilities. For example, cybercriminals have increased their attempts to compromise business emails, including an increase of phishing attempts.
In addition to some of our workforce working remotely periodically or on a full-time basis, our third-party service providers (including their downstream service providers) may utilize personnel who work remotely. Increased levels of remote access create additional cybersecurity risk and opportunities for cybercriminals to exploit vulnerabilities.
The actual or perceived failure to adequately address conflicts of interest could affect the willingness of clients to deal with us, which could adversely affect our businesses, and could give rise to litigation or enforcement actions.
The actual or perceived failure to adequately address conflicts of interest could affect the willingness of clients to deal with us, which could adversely affect our businesses, and could give rise to litigation or enforcement actions. 38 Table of contents Key is subject to environmental, social, and governance (ESG) risks that could adversely affect our reputation, the trading price of our common stock and/or our business and results of operations.
The results may also lead to limits on Key’s ability to make distributions, including paying out dividends or buying back shares. For more information, see the section titled “Regulatory capital requirements” under the heading “Supervision and Regulation” in Item 1 of this report. In addition, certain regulatory rule changes related to tailoring outlined in EGRRCPA have been finalized.
The results may also lead to limits on Key’s ability to make distributions, including paying out dividends or buying back shares. In addition, certain regulatory rule changes related to tailoring outlined in the EGRRCPA were finalized in 2019.
These effects include increased market and interest rate volatility, higher debt yields, an inverted slope to the yield curve, and unanticipated changes to quality spread premiums that may not follow historical relationships or patterns.
These initiatives have impacted financial markets and our business and caused increased market and interest rate volatility, higher debt yields, an inverted slope to the yield curve, and unanticipated changes to quality spread premiums that may not follow historical relationships or patterns. In early 2023, a series of bank failures, including SVB and Signature, lead the U.S.
From time to time, customers, vendors, or other parties may make claims and take legal action against us. We maintain reserves for certain claims when deemed appropriate based upon our assessment that a loss is probable, estimable, and consistent with applicable accounting guidance.
We maintain reserves for certain claims when deemed appropriate based upon our assessment that a loss is probable, estimable, and consistent with applicable accounting guidance. At any given time, we have a variety of legal actions asserted against us in various stages of litigation. Resolution of a legal action can often take years.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES The headquarters of KeyCorp and KeyBank are located at 127 Public Square, Cleveland, Ohio 44114-1306 in the Key Center. At December 31, 2022, Key leased approximately 418,812 square feet of the complex, encompassing the first floor branch, the 2nd through 9th office floors, the 12th floor, and the 54th through 56th floors of the 57-story Key Center.
Biggest changeAt December 31, 2023, Key leased approximately 375,414 square feet of the complex, encompassing the first floor branch, the 2nd, 3rd and 5th through 9th office floors, the 12th floor, and the 54th through 56th floors of the 57-story Key Center.
In addition, Key owned two buildings in Brooklyn, Ohio, with office space that it operated from and totaling 586,616 square feet at December 31, 2022. Our office space is used by all of our segments. As of the same date, KeyBank owned 428 branches and leased 571 branches.
In addition, Key owned two buildings in Brooklyn, Ohio, with office space that it operated from and totaling 584,930 square feet at December 31, 2023. Our office space is used by all of our segments. As of the same date, KeyBank owned 415 branches and leased 544 branches.
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ITEM 2. PROPERTIES The headquarters of KeyCorp and KeyBank are located at 127 Public Square, Cleveland, Ohio 44114-1306 in the Key Center.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBased on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition.
Biggest changeBased on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and any liabilities that may arise from outstanding legal proceedings will not have a material adverse effect on our consolidated financial condition.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe amounts involved may be material. As part of our previous 2021 capital plan, which was effective through the third quarter of 2022, the Board had authorized the repurchase of up to $1.5 billion of our Common Shares. In September 2022, the Board approved the extension of the previous authorization through the third quarter of 2023.
Biggest changeThe amounts involved may be material. In July 2021, the Board of Directors authorized the repurchase of up to $1.5 billion of our Common Shares, effective the third quarter of 2021 through the third quarter of 2022. In September 2022, the Board of Directors approved the extension of the previous authorization through the third quarter of 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations are incorporated herein by reference: Page(s) Discussion of dividends in the section captioned “Capital — Dividends” 68 Discussion of our common shares, shareholder information, and repurchase activities in the section captioned “Capital — Common Shares outstanding” 68 The following graph compares the price performance of our Common Shares (based on an initial investment of $100 on December 31, 2017, and assuming reinvestment of dividends) with that of the S&P 500 Index and a group of other banks that constitute our peer group.
Management’s Discussion and Analysis of Financial Condition and Results of Operations are incorporated herein by reference: Page(s) Discussion of dividends in the section captioned “Capital — Dividends” 68 Discussion of our common shares, shareholder information, and repurchase activities in the section captioned “Capital — Common Shares outstanding” 68 The following graph compares the price performance of our Common Shares (based on an initial investment of $100 on December 31, 2018, and assuming reinvestment of dividends) with that of the S&P 500 Index and a group of other banks that constitute our peer group.
Calendar month Total number of shares repurchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (a) Dollar value of shares that may yet be purchased as part of publicly announced plans or programs October 1 - 31 — $ — — $ 745,991,117 November 1 - 30 — — — 745,991,117 December 1 - 31 2,401 17.89 2,401 745,948,169 Total 2,401 $ 17.89 2,401 (a) Includes Common Shares deemed surrendered by employees in connection with our stock compensation and benefit plans to satisfy tax obligations. 45 Table of contents
Calendar month Total number of shares repurchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Dollar value of shares that may yet be purchased as part of publicly announced plans or programs (b) October 1 - 31 — $ — — $ — November 1 - 30 — — — — December 1 -31 1,744 13.73 — — Total 1,744 $ 13.73 — (a) Includes Common Shares deemed surrendered by employees in connection with our stock compensation and benefit plans to satisfy tax obligations.
The following table summarizes our repurchases of our Common Shares for the three months ended December 31, 2022.
This authorization expired as of September 30, 2023. During the fourth quarter of 2023, Key repurchased less than $1 million of shares related to equity compensation programs. The following table summarizes our repurchases of our Common Shares for the three months ended December 31, 2023.
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We did not complete any open market share repurchases in the fourth quarter of 2023. (b) Our previous share purchase authorization expired as of September 30, 2023 46 Table of contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCommercial Real Estate Loans Geographic Region Dollars in millions West Southwest Central Midwest Southeast Northeast National Total Percent of Total Construction Commercial Mortgage December 31, 2022 Nonowner-occupied: Diversified $ 9 $ — $ — $ 4 $ — $ 24 $ 231 $ 268 1.4 % $ — $ 268 Industrial 75 25 101 135 220 284 52 892 4.7 203 689 Land & Residential 1 3 3 3 3 24 — 37 .2 15 22 Lodging 58 — 10 4 20 72 41 205 1.1 22 183 Medical Office 47 — 43 9 19 98 25 241 1.3 64 177 Multifamily 1,083 533 1,388 1,264 2,813 1,370 438 8,889 47.1 1,705 7,184 Office 189 1 173 113 128 300 95 999 5.3 — 999 Retail 282 35 112 183 69 395 235 1,311 6.9 106 1,205 Self Storage 85 13 50 20 79 37 202 486 2.6 4 482 Senior Housing 150 57 144 76 118 120 235 900 4.8 194 706 Skilled Nursing — — — 52 — 239 143 434 2.3 — 434 Student Housing — — — 53 199 13 — 265 1.4 39 226 Other 24 4 9 79 42 83 195 436 2.3 2 434 Total nonowner-occupied 2,003 671 2,033 1,995 3,710 3,059 1,892 15,363 81.4 2,354 13,009 Owner-occupied 1,149 5 364 580 128 1,293 — 3,519 18.6 176 3,343 Total $ 3,152 $ 676 $ 2,397 $ 2,575 $ 3,838 $ 4,352 $ 1,892 $ 18,882 100.0 % $ 2,530 $ 16,352 Nonowner-occupied: Nonperforming loans $ — $ — $ — $ 2 $ — $ 7 $ 12 $ 21 N/M $ — $ 21 Accruing loans past due 90 days or more — — — — — 8 — 8 N/M — 8 Accruing loans past due 30 through 89 days — — 1 11 — 6 — 18 N/M — 18 December 31, 2021 Nonowner-occupied: Diversified $ 18 $ — $ — $ 1 $ — $ 40 $ 183 $ 242 1.5 % $ — $ 242 Industrial 47 25 44 44 218 224 114 716 4.4 90 626 Land & Residential 13 3 4 2 5 29 — 56 .3 33 23 Lodging 75 — 21 4 30 101 28 259 1.6 27 232 Medical Office 46 — 44 5 6 95 — 196 1.2 24 172 Multifamily 855 490 1,166 941 1,651 1,392 239 6,734 41.5 1,249 5,485 Office 213 — 199 122 133 372 46 1,085 6.7 17 1,068 Retail 247 36 131 226 95 409 192 1,336 8.2 87 1,249 Self Storage 44 5 44 13 39 50 74 269 1.7 5 264 Senior Housing 115 32 109 57 107 198 222 840 5.2 114 726 Skilled Nursing — 39 19 2 13 271 164 508 3.1 — 508 Student Housing 10 — 36 65 124 14 — 249 1.5 86 163 Other 20 — 6 77 33 120 89 345 2.1 2 343 Total nonowner-occupied 1,703 630 1,823 1,559 2,454 3,315 1,351 12,835 79.0 1,734 11,101 Owner-occupied 1,065 — 293 592 124 1,331 — 3,405 21.0 262 3,143 Total $ 2,768 $ 630 $ 2,116 $ 2,151 $ 2,578 $ 4,646 $ 1,351 $ 16,240 100.0 % $ 1,996 $ 14,244 Nonperforming loans $ — $ — $ — $ 2 $ — $ 17 $ 25 $ 44 N/M $ — $ 44 Accruing loans past due 90 days or more 1 — 1 — — 6 — 8 N/M 1 7 Accruing loans past due 30 through 89 days — — 5 1 24 5 — 35 N/M 16 19 West – Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington, and Wyoming Southwest – Arizona, Nevada, and New Mexico Central – Arkansas, Colorado, Oklahoma, Texas, and Utah Midwest – Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin Southeast – Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington, D.C., and West Virginia Northeast – Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont National – Accounts in three or more regions 63 Table of contents Consumer loan portfolio Consumer loans outstanding at December 31, 2022, totaled $36.9 billion, an increase of $5.9 billion, or 19.1%, from one year ago .
Biggest changeCommercial Real Estate Loans Geographic Region Dollars in millions West Southwest Central Midwest Southeast Northeast National Total Percent of Total Construction Commercial Mortgage December 31, 2023 Nonowner-occupied: Diversified $ 3 $ — $ — $ 3 $ — $ 16 $ 164 $ 186 1.0 % $ — $ 186 Industrial 58 24 80 110 230 280 20 802 4.4 168 634 Land & Residential 5 3 3 5 3 21 — 40 .2 18 22 Lodging 48 — 3 4 46 66 55 222 1.2 5 217 Medical Office 37 — 42 1 21 97 75 273 1.5 27 246 Multifamily 1,237 552 1,271 1,272 2,707 1,370 444 8,853 48.5 2,389 6,464 Office 142 — 153 76 118 285 50 824 4.5 — 824 Retail 213 6 84 183 102 297 213 1,098 6.0 75 1,023 Self Storage 62 — 45 15 72 32 171 397 2.2 4 393 Senior Housing 124 22 143 88 65 120 213 775 4.2 126 649 Skilled Nursing — — — 66 — 202 215 483 2.6 — 483 Student Housing — — — 27 158 — — 185 1.0 59 126 Other 1 12 8 35 37 67 160 320 1.8 — 320 Total nonowner-occupied 1,930 619 1,832 1,885 3,559 2,853 1,780 14,458 79.2 2,871 11,587 Owner-occupied 1,141 1 414 720 167 1,352 — 3,795 20.8 195 3,600 Total $ 3,071 $ 620 $ 2,246 $ 2,605 $ 3,726 $ 4,205 $ 1,780 $ 18,253 100.0 % $ 3,066 $ 15,187 Nonowner-occupied: Nonperforming loans $ 1 $ — $ 46 $ 1 $ 9 $ 5 $ 38 $ 100 N/M $ — $ 100 Accruing loans past due 90 days or more 1 — — 6 — 3 — 10 N/M — 10 Accruing loans past due 30 through 89 days 3 — 12 — 7 7 — 29 N/M — 29 December 31, 2022 Nonowner-occupied: Diversified $ 9 $ — $ — $ 4 $ — $ 24 $ 231 $ 268 1.4 % $ — $ 268 Industrial 75 25 101 135 220 284 52 892 4.7 203 689 Land & Residential 1 3 3 3 3 24 — 37 .2 15 22 Lodging 58 — 10 4 20 72 41 205 1.1 22 183 Medical Office 47 — 43 9 19 98 25 241 1.3 64 177 Multifamily 1,083 533 1,388 1,264 2,813 1,370 438 8,889 47.1 1,705 7,184 Office 189 1 173 113 128 300 95 999 5.3 — 999 Retail 282 35 112 183 69 395 235 1,311 6.9 106 1,205 Self Storage 85 13 50 20 79 37 202 486 2.6 4 482 Senior Housing 150 57 144 76 118 120 235 900 4.8 194 706 Skilled Nursing — — — 52 — 239 143 434 2.3 — 434 Student Housing — — — 53 199 13 — 265 1.4 39 226 Other 24 4 9 79 42 83 195 436 2.3 2 434 Total nonowner-occupied 2,003 671 2,033 1,995 3,710 3,059 1,892 15,363 81.4 2,354 13,009 Owner-occupied 1,149 5 364 580 128 1,293 — 3,519 18.6 176 3,343 Total $ 3,152 $ 676 $ 2,397 $ 2,575 $ 3,838 $ 4,352 $ 1,892 $ 18,882 100.0 % $ 2,530 $ 16,352 Nonperforming loans $ — $ — $ — $ 2 $ — $ 7 $ 12 $ 21 N/M $ — $ 21 Accruing loans past due 90 days or more — — — — — 8 — 8 N/M — 8 Accruing loans past due 30 through 89 days — — 1 11 — 6 — 18 N/M — 18 West – Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington, and Wyoming Southwest – Arizona, Nevada, and New Mexico Central – Arkansas, Colorado, Oklahoma, Texas, and Utah Midwest – Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin Southeast – Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington, D.C., and West Virginia Northeast – Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont National – Accounts in three or more regions 64 Table of contents Consumer loan portfolio Consumer loans outstanding at December 31, 2023, totaled $35.0 billion, a decrease of $1.9 billion, or 5.2%, from one year ago .
Anticipating our clients’ needs not only today, but for tomorrow and into the future, has become one of the biggest challenges for the banking industry. We view these challenges as an opportunity to help our current client base meet their own goals, as well as attract new and diverse clients.
Anticipating our clients’ needs not only today, but also for tomorrow and into the future, has become one of the biggest challenges for the banking industry. We view these challenges as an opportunity to help our current client base meet their own goals, as well as attract new and diverse clients.
This approach considers the unique funding sources available to each entity, as well as each entity’s capacity to manage through adverse conditions. The approach also recognizes that adverse market conditions or other events that could negatively affect the availability or cost of liquidity will affect the access of all affiliates to sufficient wholesale funding.
This approach considers the funding sources available to each entity, as well as each entity’s capacity to manage through adverse conditions. The approach also recognizes that adverse market conditions or other events that could negatively affect the availability or cost of liquidity will affect the access of all affiliates to sufficient wholesale funding.
Results of back testing are provided to the Market Risk Committee. Back testing exceptions occur when trading losses exceed VaR. We do not engage in correlation trading or utilize the internal model approach for measuring default and credit migration risk.
Results of back testing are provided to the Market Risk Committee. Backtesting exceptions occur when trading losses exceed VaR. We do not engage in correlation trading or utilize the internal model approach for measuring default and credit migration risk.
Further information about our loan commitments at December 31, 2022, is presented in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Commitments to Extend Credit or Funding.” Other off-balance sheet arrangements Other off-balance sheet arrangements include financial instruments that do not meet the definition of a guarantee in accordance with the applicable accounting guidance, and other relationships, such as liquidity support provided to asset-backed commercial paper conduits, indemnification agreements and intercompany guarantees.
Further information about our loan commitments at December 31, 2023, is presented in Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Commitments to Extend Credit or Funding.” Other off-balance sheet arrangements Other off-balance sheet arrangements include financial instruments that do not meet the definition of a guarantee in accordance with the applicable accounting guidance, and other relationships, such as liquidity support provided to asset-backed commercial paper conduits, indemnification agreements and intercompany guarantees.
The management of consolidated liquidity risk is centralized within Corporate Treasury. Oversight and governance is provided by the Board, the ERM Committee, the ALCO, and the Chief Risk Officer. The Asset Liability Management Policy provides the framework for the oversight and management of liquidity risk and is administered by the ALCO.
The management of consolidated liquidity risk is centralized within Corporate Treasury. Oversight and governance is provided by the Board, the ERM Committee, the ALCO, the TROC, and the Chief Risk Officer. The Asset Liability Management Policy provides the framework for the oversight and management of liquidity risk and is administered by the ALCO.
Additional information regarding the nature of VIEs and our involvement with them is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Principles of Consolidation and Basis of Presentation” and in Note 13 (“Variable Interest Entities”). 71 Table of contents Commitments to extend credit or funding Loan commitments provide for financing on predetermined terms as long as the client continues to meet specified criteria.
Additional information regarding the nature of VIEs and our involvement with them is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Principles of Consolidation and Basis of Presentation” and in Note 13 (“Variable Interest Entities”). 73 Table of contents Commitments to extend credit or funding Loan commitments provide for financing on predetermined terms as long as the client continues to meet specified criteria.
Information regarding our fair value policies, procedures, and methodologies is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” and Note 6 (“Fair Value Measurements”) in this report. 74 Table of contents Trading market risk Key incurs market risk as a result of trading activities that are used in support of client facilitation and hedging activities, principally within our investment banking and capital markets businesses.
Information regarding our fair value policies, procedures, and methodologies is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” and Note 6 (“Fair Value Measurements”) in this report. 76 Table of contents Trading market risk Key incurs market risk as a result of trading activities that are used in support of client facilitation and hedging activities, principally within our investment banking and capital markets businesses.
Those assumptions are based on historical behaviors, as well as forward expectations. Remediation plans are similarly developed if this analysis indicates that our EVE will decrease by more than 15% in response to an immediate increase or decrease in interest rates. The position is within these guidelines as of December 31, 2022. Management of interest rate exposure.
Those assumptions are based on historical behaviors, as well as forward expectations. Remediation plans are similarly developed if this analysis indicates that our EVE will decrease by more than 15% in response to an immediate increase or decrease in interest rates. The position is within these guidelines as of December 31, 2023. Management of interest rate exposure.
The table below depicts our risk management hierarchy and associated responsibilities and activities of each group. 73 Table of contents Group Overview and Responsibilities Activities Board of Directors – Oversight capacity – Ensure Key’s risks are managed in a manner that is not only effective and balanced, but also has a fiduciary duty to the shareholders – Understands Key's risk philosophy – Approves the risk appetite – Inquires about risk practices – Reviews the portfolio of risks – Compares the actual risks to the risk appetite – Is apprised of significant risks, both actual and emerging, and determines whether management is responding appropriately – Challenges management and ensures accountability Board of Directors Audit Committee (a) – Oversight of financial statement integrity, regulatory and legal requirements, independent auditors’ qualifications and independence, and the performance of the internal audit function and independent auditors – Financial reporting, legal matters, and fraud risk – Meets with management and approves significant policies relating to the risk areas overseen by the Audit Committee – Receives reports on enterprise risk – Meets bi-monthly – Convenes to discuss the content of our financial disclosures and quarterly earnings releases Board of Directors Risk Committee (a) – Assist the Board in oversight of strategies, policies, procedures, and practices relating to the assessment and management of enterprise-wide risk, including credit, market, liquidity, model, operational, compliance, reputation, and strategic risks – Assist the Board in overseeing risks related to capital adequacy, capital planning, and capital actions – Reviews and provides oversight of management’s activities related to the enterprise-wide risk management framework, which includes an annual review of the ERM Policy, including the Risk Appetite Statement, and management and ERM reports – Approves any material changes to the charter of the ERM Committee and significant policies relating to risk management, including corporate risk tolerances for major risk categories ERM Committee – Chaired by the Chief Executive Officer and comprising other senior level executives – Manage risk and ensure that the corporate risk profile is managed in a manner consistent with our risk appetite – Oversees the ERM Program, which encompasses our risk philosophy, policy, framework, and governance structure for the management of risks across the entire company – Approves and manages the risk-adjusted capital framework we use to manage risks Disclosure Committee – Includes representatives from each of the Three Lines of Defense – Meets quarterly to review recent internal and external events to determine whether all appropriate disclosures have been made in reports filed with the SEC – Convenes quarterly to discuss the content of our 10-Q and 10-K Tier 2 Risk Governance Committees – Include attendees from each of the Three Lines of Defense – The First Line of Defense is the line of business primarily responsible to accept, own, proactively identify, monitor, and manage risk – The Second Line of Defense comprises Risk Management representatives who provide independent, centralized oversight over all risk categories by aggregating, analyzing, and reporting risk information – Risk Review, our internal audit function, provides the Third Line of Defense.
The table below depicts our risk management hierarchy and associated responsibilities and activities of each group. 75 Table of contents Group Overview and Responsibilities Activities Board of Directors – Oversight capacity – Oversees that Key’s risks are managed in a manner that is effective and balanced – Fiduciary duty to Key’s shareholders – Understands Key's risk philosophy – Approves the risk appetite – Inquires about risk practices – Reviews the portfolio of risks – Compares the actual risks to the risk appetite – Is apprised of significant risks, both actual and emerging, and determines whether management is responding appropriately – Challenges management and promotes accountability Board of Directors Audit Committee (a) – Oversight of financial statement integrity, regulatory and legal requirements, independent auditors’ qualifications and independence, and the performance of the internal audit function and independent auditors – Financial reporting, legal matters, and fraud risk – Meets with management and approves significant policies relating to the risk areas overseen by the Audit Committee – Receives reports on enterprise risk – Meets bi-monthly – Convenes to discuss the content of our financial disclosures and quarterly earnings releases Board of Directors Risk Committee (a) – Assist the Board in oversight of strategies, policies, procedures, and practices relating to the assessment and management of enterprise-wide risk, including credit, market, liquidity, model, operational, compliance, reputation, and strategic risks – Assist the Board in overseeing risks related to capital adequacy, capital planning, and capital actions – Reviews and provides oversight of management’s activities related to the enterprise-wide risk management framework, which includes an annual review of the ERM Policy, including the Risk Appetite Statement, and management and ERM reports – Approves any material changes to the charter of the ERM Committee and significant policies relating to risk management, including corporate risk tolerances for major risk categories ERM Committee – Chaired by the Chief Executive Officer and comprising other senior level executives – Manage risk and ensure that the corporate risk profile is managed in a manner consistent with our risk appetite – Oversees the ERM Program, which encompasses our risk philosophy, policy, framework, and governance structure for the management of risks across the entire company – Approves and manages the risk-adjusted capital framework we use to manage risks Disclosure Committee – Includes representatives from each of the Three Lines of Defense – Meets quarterly to review recent internal and external events to determine whether all appropriate disclosures have been made in reports filed with the SEC – Convenes quarterly to discuss the content of our 10-Q and 10-K Tier 2 Risk Governance Committees – Include attendees from each of the Three Lines of Defense – The First Line of Defense is the line of business primarily responsible to accept, own, proactively identify, monitor, and manage risk – The Second Line of Defense comprises Risk Management representatives who provide independent, centralized oversight over all risk categories by aggregating, analyzing, and reporting risk information – Risk Review, our internal audit function, provides the Third Line of Defense.
(h) Average balances presented are based on daily average balances over the respective stated period. 52 Table of contents Figure 2 shows how the changes in yields or rates and average balances from the prior year affected net interest income. The section entitled “Financial Condition” contains additional discussion about changes in earning assets and funding sources. Figure 2.
(h) Average balances presented are based on daily average balances over the respective stated period. 53 Table of contents Figure 2 shows how the changes in yields or rates and average balances from the prior year affected net interest income. The section entitled “Financial Condition” contains additional discussion about changes in earning assets and funding sources. Figure 2.
At December 31, 2022, we did not have any re-securitization positions. We maintain modest trading inventories to facilitate customer flow, make markets in securities, and hedge certain risks including but not limited to credit risk and interest rate risk. The risks associated with these activities are mitigated in accordance with the Market Risk hedging policy.
At December 31, 2023, we did not have any re-securitization positions. We maintain modest trading inventories to facilitate customer flow, make markets in securities, and hedge certain risks including but not limited to credit risk and interest rate risk. The risks associated with these activities are mitigated in accordance with the Market Risk hedging policy.
There is a risk that our actual future payments in the event of a default by the guaranteed party could exceed the recorded amount. See Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) for a comparison of the liability recorded and the maximum potential undiscounted future payments for the various types of guarantees that we had outstanding at December 31, 2022.
There is a risk that our actual future payments in the event of a default by the guaranteed party could exceed the recorded amount. See Note 22 (“Commitments, Contingent Liabilities, and Guarantees”) for a comparison of the liability recorded and the maximum potential undiscounted future payments for the various types of guarantees that we had outstanding at December 31, 2023.
Federal banking regulators continue to emphasize with financial institutions the importance of relating capital management strategy to the level of risk at each institution. We believe our internal risk management processes help us achieve and maintain capital levels that are commensurate with our business activities and risks, and 72 Table of contents conform to regulatory expectations.
Federal banking regulators continue to emphasize with financial institutions the importance of relating capital management strategy to the level of risk at each institution. We believe our internal risk management processes help us achieve and maintain capital levels that are commensurate with our business activities and risks, and 74 Table of contents conform to regulatory expectations.
Figure 16 shows the composition, TE yields, and remaining maturities of our securities available for sale. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 7 (“Securities”). 67 Table of contents Figure 16. Securities Available for Sale Dollars in millions U.S.
Figure 16 shows the composition, TE yields, and remaining maturities of our securities available for sale. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 7 (“Securities”). 68 Table of contents Figure 16. Securities Available for Sale Dollars in millions U.S.
Results of Operations Earnings Overview The following chart provides a reconciliation of net income from continuing operations attributable to Key common shareholders for the year ended December 31, 2021, to the year ended December 31, 2022 (dollars in millions): (a) Includes Preferred dividends. Net interest income One of our principal sources of revenue is net interest income.
Results of Operations Earnings Overview The following chart provides a reconciliation of net income from continuing operations attributable to Key common shareholders for the year ended December 31, 2022, to the year ended December 31, 2023 (dollars in millions): (a) Includes Preferred dividends. Net interest income One of our principal sources of revenue is net interest income.
For individual obligors, we employ a sliding scale of exposure, known as hold limits, which is dictated by the type of loan and strength of the borrower. 83 Table of contents Allowance for loan and lease losses We estimate the appropriate level of the ALLL on at least a quarterly basis.
For individual obligors, we employ a sliding scale of exposure, known as hold limits, which is dictated by the type of loan and strength of the borrower. Allowance for loan and lease losses 85 Table of contents We estimate the appropriate level of the ALLL on at least a quarterly basis.
The difference between these two scenarios would have driven an increase of approximately 1.6x for commercial and 1.5x for the consumer modeled allowance results. Similarly, deteriorating conditions for portfolio factors were also considered by moderately stressing key portfolio drivers, relative to the baseline portfolio conditions.
The difference between these two scenarios would have driven an increase of approximately 1.7x for commercial and 1.6x for the consumer modeled allowance results. Similarly, deteriorating conditions for portfolio factors were also considered by moderately stressing key portfolio drivers, relative to the baseline portfolio conditions.
The MRM as well as the LOB that trades securitization positions monitor the positions, the portfolio composition and the risks identified in this section on a daily basis consistent with the Market Risk policies and procedures. At December 31, 2022, covered positions did not include any re-securitization positions.
The MRM as well as the LOB that trades securitization positions monitor the positions, the portfolio composition and the risks identified in this section on a daily basis consistent with the Market Risk policies and procedures. At December 31, 2023, covered positions did not include any re-securitization positions.
Financial Statements and Supplementary Data of this report. 54 Table of contents Trust and investment services income Trust and investment services income consists of brokerage commissions, trust and asset management commissions, and insurance income. The assets under management or administration that primarily generate these revenues are shown in Figure 4.
Financial Statements and Supplementary Data of this report. 55 Table of contents Trust and investment services income Trust and investment services income consists of brokerage commissions, trust and asset management commissions, and insurance income. The assets under management or administration that primarily generate these revenues are shown in Figure 4.
VaR for Significant Portfolios of Covered Positions 2022 2021 Three months ended December 31, Three months ended December 31, Dollars in millions High Low Mean December 31, High Low Mean December 31, Trading account assets: Fixed income $ 1.1 $ .4 $ .7 $ .4 $ 1.5 $ .8 $ 1.2 $ .9 Derivatives: Interest rate $ .7 $ .2 $ .3 $ .6 $ .2 $ .1 $ .1 $ .1 Stressed VaR is calculated by running the portfolios through a predetermined stress period which is approved by the Market Risk Committee and is calculated at the 99% confidence level using the same model and assumptions used for general VaR.
VaR for Significant Portfolios of Covered Positions 2023 2022 Three months ended December 31, Three months ended December 31, Dollars in millions High Low Mean December 31, High Low Mean December 31, Trading account assets: Fixed income $ 1.3 $ .7 $ 1.1 $ 1.1 $ 1.1 $ .4 $ .7 $ .4 Derivatives: Interest rate $ .5 $ .3 $ .4 $ .4 $ .7 $ .2 $ .3 $ .6 Stressed VaR is calculated by running the portfolios through a predetermined stress period which is approved by the Market Risk Committee and is calculated at the 99% confidence level using the same model and assumptions used for general VaR.
Our actions to not reinvest the monthly security cash flows at various times served to provide the liquidity necessary to address our funding requirements. These funding requirements included ongoing loan growth and occasional debt maturities.
Our actions to not reinvest the monthly security cash flows at various times served to provide the liquidity necessary to address our funding requirements. These funding requirements included periodic loan growth and occasional debt maturities.
The MRM calculates VaR and stressed VaR 75 Table of contents on a daily basis, and the results are distributed to appropriate management. VaR and stressed VaR results are also provided to our regulators and utilized in regulatory capital calculations.
The MRM calculates VaR and stressed VaR 77 Table of contents on a daily basis, and the results are distributed to appropriate management. VaR and stressed VaR results are also provided to our regulators and utilized in regulatory capital calculations.
Considerable judgment may be involved in determining the amount that is most representative of fair value. For assets and liabilities recorded at fair value, our policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those items where there is an active market.
Considerable judgment may be involved in determining the amount that is most representative of fair value. 92 Table of contents For assets and liabilities recorded at fair value, our policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those items where there is an active market.
The net interest margin, which is an indicator of the profitability of our earning assets less the cost of funding, is calculated by dividing taxable-equivalent net interest income by average earning assets. 51 Table of contents Figure 1.
The net interest margin, which is an indicator of the profitability of our earning assets less the cost of funding, is calculated by dividing taxable-equivalent net interest income by average earning assets. 52 Table of contents Figure 1.
We have provided tax reserves that we believe are adequate to absorb potential adjustments that such challenges may necessitate. However, if our judgment later proves to be inaccurate, the tax reserves may need to be adjusted, which could have an adverse effect on our results of operations and capital.
We have provided tax reserves that we believe are adequate to absorb potential 94 Table of contents adjustments that such challenges may necessitate. However, if our judgment later proves to be inaccurate, the tax reserves may need to be adjusted, which could have an adverse effect on our results of operations and capital.
However, if our assessments prove incorrect, they could have a material adverse effect on our results of operations in the period in 93 Table of contents which they occur. For further information on our accounting for income taxes, see Note 1 (“Summary of Significant Accounting Policies”) and Note 14 (“Income Taxes”).
However, if our assessments prove incorrect, they could have a material adverse effect on our results of operations in the period in which they occur. For further information on our accounting for income taxes, see Note 1 (“Summary of Significant Accounting Policies”) and Note 14 (“Income Taxes”).
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 202 1 Form 10-K filed with the SEC on February 22, 2022, which discussion is incorporated herein by reference. 47 Table of contents Long-term financial targets (a) See the section entitled “GAAP to non-GAAP Reconciliations,” which presents the computations of certain financial measures related to “cash efficiency.” The section includes tables that reconcile the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2022 Form 10-K filed with the SEC on February 22, 2023, which discussion is incorporated herein by reference. 48 Table of contents Long-term financial targets (a) See the section entitled “GAAP to non-GAAP Reconciliations,” which presents the computations of certain financial measures related to “cash efficiency.” The section includes tables that reconcile the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $8 million and $16 million at December 31, 2022, and December 31, 2021, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 20 (“Long-Term Debt”).
(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $7 million and $8 million at December 31, 2023, and December 31, 2022, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 20 (“Long-Term Debt”).
At December 31, 2022, KeyCorp held $3.2 billion in cash and short-term investments, which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing debt obligations for the periods prescribed by our risk tolerance. Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank, supplemented with term debt.
At December 31, 2023, KeyCorp held $2.7 billion in cash and short-term investments, which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing debt obligations for the periods prescribed by our risk tolerance. Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank, supplemented with term debt.
For further information, see the Consolidated Statements of Changes in Equity and Note 24 (“Shareholders' Equity”). 69 Table of contents (a) Common Share repurchases were suspended during the second quarter of 2020 in response to the COVID-19 pandemic and resumed in the first quarter of 2021.
For further information, see the Consolidated Statements of Changes in Equity and Note 24 (“Shareholders' Equity”). (a) Common Share repurchases were suspended during the second quarter of 2020 in response to the COVID-19 pandemic and resumed in the first quarter of 2021.
We seek to mitigate operational risk through identification and measurement of risk, alignment of business strategies with risk appetite and tolerance, and a system of internal controls and reporting. We continuously strive to strengthen our system of internal controls to improve the oversight of our operational risk and to ensure compliance 87 Table of contents with laws, rules, and regulations.
We seek to mitigate operational risk through identification and measurement of risk, alignment of business strategies with risk appetite and tolerance, and a system of internal controls and reporting. We continuously strive to strengthen our system of internal controls to improve the oversight of our operational risk and to ensure compliance with laws, rules, and regulations.
Capital adequacy Capital adequacy is an important indicator of financial stability and performance. All of our capital ratios remained in excess of regulatory requirements at December 31, 2022.
Capital adequacy Capital adequacy is an important indicator of financial stability and performance. All of our capital ratios remained in excess of regulatory requirements at December 31, 2023.
(b) Net of capital surplus. (c) For the years ended December 31, 2022, December 31, 2021, and December 31, 2020, average intangible assets exclude $2 million, $4 million, and $6 million, respectively, of average purchased credit card relationships. The cash efficiency ratio is a ratio of two non-GAAP performance measures, adjusted noninterest expense and total taxable-equivalent revenue.
(b) Net of capital surplus. (c) For the years ended December 31, 2023, December 31, 2022, and December 31, 2021, average intangible assets exclude $1 million, $2 million, and $4 million, respectively, of average purchased credit card relationships. The cash efficiency ratio is a ratio of two non-GAAP performance measures, adjusted noninterest expense and total taxable-equivalent revenue.
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.
Our ALLL models were designed to capture the correlation between economic and portfolio changes. As such, evaluating 91 Table of contents shifts in individual portfolio attributes and macroeconomic variables in isolation may not be indicative of past or future performance.
Our net VaR approach incorporates diversification, but our VaR calculation does not include the impact of counterparty risk and our own credit spreads on derivatives. The aggregate VaR at the 99% confidence level with a one day holding period for all covered positions was $1.1 million at December 31, 2022, and $1.0 million at December 31, 2021.
Our net VaR approach incorporates diversification, but our VaR calculation does not include the impact of counterparty risk and our own credit spreads on derivatives. The aggregate VaR at the 99% confidence level with a one day holding period for all covered positions was $1.6 million at December 31, 2023, and $1.1 million at December 31, 2022.
(c) For purposes of these computations, nonaccrual loans are included in average loan balances. (d) Commercial and industrial average loan balances include $157 million, $134 million, and $130 million of assets from commercial credit cards for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively. (e) Yield is calculated on the basis of amortized cost.
(c) For purposes of these computations, nonaccrual loans are included in average loan balances. (d) Commercial and industrial average loan balances include $196 million, $157 million, and $134 million of assets from commercial credit cards for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively. (e) Yield is calculated on the basis of amortized cost.
The aggregate market value of the securitization positions as defined by the Market Risk Rule was $13 million at December 31, 2022, all of which were mortgage-backed security positions. Specific risk is the price risk of individual financial instruments, which is not accounted for by changes in broad market risk factors and is measured through a standardized approach.
The aggregate market value of the securitization positions as defined by the Market Risk Rule was $6 million at December 31, 2023, all of which were mortgage-backed security positions. Specific risk is the price risk of individual financial instruments, which is not accounted for by changes in broad market risk factors and is measured through a standardized approach.
Breakdown of Loans (a) Other consumer loans include Consumer direct loans, Credit cards, and Consumer indirect loans. See Note 4 (“Loan Portfolio”) Item 8. Financial Statements of this report. 60 Table of contents Figure 8 shows the composition of our loan portfolio at December 31 for each of the past two years. Figure 8.
Breakdown of Loans as of December 31, 2023 (a) Other consumer loans include Consumer direct loans, Credit cards, and Consumer indirect loans. See Note 4 (“Loan Portfolio”) Item 8. Financial Statements of this report. 61 Table of contents Figure 8 shows the composition of our loan portfolio at December 31 for each of the past two years. Figure 8.
The assessments of liquidity risk are measured under the assumption of normal operating conditions as well as under a stressed environment. We manage these exposures in accordance with our risk appetite, and within Board-approved policy limits.
The assessments of liquidity risk are measured under the assumption of normal operating conditions as well as under stressed environments. We manage these exposures in accordance with our risk appetite, and within Board-approved policy limits.
Stressed VaR for Significant Portfolios of Covered Positions 2022 2021 Three months ended December 31, Three months ended December 31, Dollars in millions High Low Mean December 31, High Low Mean December 31, Trading account assets: Fixed income $ 2.4 $ 1.1 $ 1.6 $ 1.1 $ 6.5 $ 3.4 $ 5.4 $ 3.6 Derivatives: Interest rate $ .7 $ .2 $ .3 $ .6 $ .6 $ .3 $ .3 $ .5 Internal capital adequacy assessment.
Stressed VaR for Significant Portfolios of Covered Positions 2023 2022 Three months ended December 31, Three months ended December 31, Dollars in millions High Low Mean December 31, High Low Mean December 31, Trading account assets: Fixed income $ 4.7 $ 1.9 $ 3.1 $ 3.6 $ 2.4 $ 1.1 $ 1.6 $ 1.1 Derivatives: Interest rate $ .4 $ .2 $ .3 $ .3 $ .7 $ .2 $ .3 $ .6 Internal capital adequacy assessment.
To review our financial condition and results of operations for 2020 and a comparison between the 2020 and 2021 results, see Item 7.
To review our financial condition and results of operations for 2021 and a comparison between the 2021 and 2022 results, see Item 7.
Additional information about our mortgage servicing assets is included in Note 9 (“Mortgage Servicing Assets”). 65 Table of contents Maturities and sensitivity of certain loans to changes in interest rates Figure 14 shows the remaining maturities of our loan portfolio and the sensitivity of certain loans to changes in interest rates as of December 31, 2022. Figure 14.
Additional information about our mortgage servicing assets is included in Note 9 (“Mortgage Servicing Assets”). 66 Table of contents Maturities and sensitivity of certain loans to changes in interest rates Figure 14 shows the remaining maturities of our loan portfolio and the sensitivity of certain loans to changes in interest rates as of December 31, 2023. Figure 14.
In 2022, our federal tax expense and effective tax rate differ from the amount that would be calculated using the federal statutory tax rate primarily due to investments in tax-advantaged assets, such as corporate-owned life insurance, tax credits associated with energy related projects and low-income housing investments, and periodic adjustments to our tax reserves as described in Note 14 (“Income Taxes”).
In 2023, our federal tax expense and effective tax rate differ from the amount that would be calculated using the federal statutory tax rate primarily due to investments in tax-advantaged assets, such as corporate-owned life insurance, and tax credits associated with low-income housing investments, and periodic adjustments to our tax reserves as described in Note 14 (“Income Taxes”).
Actual losses for the total covered positions did not exceed aggregate daily VaR on any day during the quarters ended December 31, 2022, and December 31, 2021. The MRM back tests our VaR model on a daily basis to evaluate its predictive power. The test compares VaR model results at the 99% confidence level to daily held profit and loss.
Actual losses for the total covered positions did not exceed aggregate daily VaR for any day during the quarters ended December 31, 2023, and December 31, 2022. The MRM backtests our VaR model on a daily basis to evaluate its predictive power. The test compares VaR model results at the 99% confidence level to daily held profit and loss.
Our liquidity position and recent activity Over the past 12 months, our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, has decreased primarily due to a reduction in Key's cash position and unencumbered securities portfolio.
Our liquidity position and recent activity Over the past 12 months, our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, has increased primarily due to an increase in Key's cash position.
F1 assigned by Fitch Ratings, Inc. is specific to KeyBank’s short-term deposit ratings. Managing liquidity risk Most of our liquidity risk is derived from our business model, which involves taking in deposits, many of which can be withdrawn at anytime, and lending them out in the form of illiquid loan assets.
F2 assigned by Fitch Ratings, Inc. is specific to KeyBank’s short-term deposit ratings. Managing liquidity risk Most of our liquidity risk is derived from our business model, which involves taking in deposits, many of which can be withdrawn at any time, and lending them out in the form of illiquid loan assets.
Regardless of the lien position, credit metrics are refreshed quarterly, including recent FICO scores as well as original and 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.” Figure 11.
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.” Figure 11 presents our consumer loans by geography. Figure 11.
The maximum difference in the quarterly macroeconomic variables between the base and downside scenarios over the two year reasonable and supportable period includes an approximate 7% decline in GDP annualized growth and an approximate 3% increase in the U.S. unemployment rate.
The maximum difference in the quarterly macroeconomic variables between the base and downside scenarios over the two year reasonable and supportable period includes an approximate 4 percentage point decline in GDP annualized growth and an approximate 3 percentage point increase in the U.S. unemployment rate.
(b) See Figure 9 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio. (c) Included in “accrued expense and other liabilities” on the balance sheet. Nonperforming assets Figure 32 shows the composition of our nonperforming assets.
(b) See Figure 9 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio. (c) Included in “accrued expense and other liabilities” on the balance sheet. 87 Table of contents Nonperforming assets Figure 33 shows the composition of our nonperforming assets.
(b) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year. Held-to-maturity securities The majority of our held-to-maturity portfolio consists of Federal Agency CMOs and mortgage-backed securities.
(b) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year. Held-to-maturity securities The majority of our held-to-maturity portfolio consists of Federal Agency CMOs and mortgage-backed securities. The portfolio is also comprised of asset-backed securities and foreign bonds.
For more information on share repurchases activity, see Note 24 (“Shareholders' Equity”). At December 31, 2022, we had 323.4 million treasury shares, compared to 327.9 million treasury shares at December 31, 2021. Going forward, we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes.
For more information on share repurchases activity, see Note 24 (“Shareholders' Equity”). At December 31, 2023, we had 320.1 million treasury shares, compared to 323.4 million treasury shares at December 31, 2022. Going forward, we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes.
Figure 22 summarizes our VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended December 31, 2022, and December 31, 2021. Figure 22.
Figure 23 summarizes our VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended December 31, 2023, and December 31, 2022. Figure 23.
Commercial and industrial loans are the largest component of our loan portfolio, representing 50% of our total loan portfolio at December 31, 2022, and 51% at December 31, 2021. This portfolio is approximately 86% variable rate and consists of loans primarily to large corporate, middle market, and small business clients.
Commercial and industrial loans are the largest component of our loan portfolio, representing 50% of our total loan portfolio at December 31, 2023, and 50% at December 31, 2022. This portfolio is approximately 88% variable rate and consists of loans primarily to large corporate, middle market, and small business clients.
While operational and compliance risk are separate risk disciplines in KeyCorp’s ERM framework, losses and/or additional regulatory compliance costs are included in operational loss reporting and could take the form of explicit charges, increased operational costs, harm to our reputation, or foregone opportunities.
While operational and compliance 88 Table of contents risk are separate risk disciplines in KeyCorp’s ERM framework, losses and/or additional regulatory compliance costs are included in operational loss reporting and could take the form of explicit charges, increased operational costs, or harm to our reputation.
We believe our strong risk management practices will allow us to continue supporting our clients, while maintaining our moderate risk profile, and will position Key to perform well through all business cycles. Financial Return A retur n on average tangible common equity in the range of 16.0% to 19.0%.
We believe our strong risk management practices will allow us to continue supporting our clients, while maintaining our moderate risk profile, and will position Key to perform well through all business cycles. Financial Return A retur n on average tangible common equity in the range of 16.0% to 19.0%. Our full-year dividend for 2023 was $.82.
We use the loan-to-deposit ratio as a metric to monitor these strategies. Our target loan-to-deposit ratio is 90-100% (at December 31, 2022, our loan-to-deposit ratio was 84.7%), which we calculate as the sum of total loans, loans held for sale, and nonsecuritized discontinued loans divided by deposits.
We use the loan-to-deposit ratio as a metric to monitor these strategies. Our target loan-to-deposit ratio is 90-100% (at December 31, 2023, our loan-to-deposit ratio was 77.9%), which we calculate as the sum of total loans, loans held for sale, and nonsecuritized discontinued loans divided by deposits.
Credit Ratings December 31, 2022 Short-Term Borrowings Long-Term Deposits (a) Senior Long-Term Debt Subordinated Long-Term Debt Capital Securities Preferred Stock KEYCORP (THE PARENT COMPANY) Standard & Poor’s A-2 N/A BBB+ BBB BB+ BB+ Moody’s P-2 N/A Baa1 Baa1 Baa2 Baa3 Fitch F1 N/A A- N/A BB+ BB+ DBRS R-1 (low) N/A A A (low) A (low) BBB KEYBANK Standard & Poor’s A-2 N/A A- BBB+ N/A N/A Moody’s P-2 P-1/A1 A3 Baa1 N/A N/A Fitch F1 F1/A A- BBB+ N/A N/A DBRS R-1 (middle) A (high) A (high) A N/A N/A (a) P-1 rating assigned by Moody’s is specific to KeyBank’s short-term bank deposit ratings.
Credit Ratings December 31, 2023 Short-Term Borrowings Long-Term Deposits (a) Senior Long-Term Debt Subordinated Long-Term Debt Capital Securities Preferred Stock KEYCORP (THE PARENT COMPANY) Standard & Poor’s A-2 N/A BBB BBB- BB BB Moody’s P-2 N/A Baa2 Baa2 Baa3 Ba1 Fitch F2 N/A BBB+ N/A BB BB DBRS R-1 (low) N/A A A (low) A (low) BBB KEYBANK Standard & Poor’s A-2 N/A BBB+ BBB N/A N/A Moody’s P-2 P-1/A2 Baa1 Baa2 N/A N/A Fitch F2 F2/A- BBB+ BBB N/A N/A DBRS R-1 (middle) A (high) A (high) A N/A N/A (a) P-1 rating assigned by Moody’s is specific to KeyBank’s short-term bank deposit ratings.
The aggregate stressed VaR for all covered positions was $1.9 million at December 31, 2022, and $4.3 million at December 31, 2021. Figure 23 summarizes our stressed VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended December 31, 2022, and December 31, 2021.
The aggregate stressed VaR for all covered positions was $4.0 million at December 31, 2023, and $1.9 million at December 31, 2022. Figure 24 summarizes our stressed VaR at the 99% confidence level with a one day holding period for significant portfolios of covered positions for the three months ended December 31, 2023, and December 31, 2022.
Figure 33 shows the types of activity that caused the change in our nonperforming loans during each of the last four quarters and the years ended December 31, 2022, and December 31, 2021. Figure 33.
Figure 34 shows the types of activity that caused the change in our nonperforming loans during each of the last four quarters and the years ended December 31, 2023, and December 31, 2022. Figure 34.
This is followed by our home equity portfolio comprising approximately 22% of consumer loans outstanding at year end. We held the first lien position for approximately 66% of the Consumer Bank home equity portfolio at December 31, 2022, and 71% at December 31, 2021. For loans with real estate collateral, we track borrower performance monthly.
This is followed by our home equity portfolio comprising approximately 20% of consumer loans outstanding at year end. We held the first lien position for approximately 64% of the home equity portfolio at December 31, 2023, and 66% at December 31, 2022. For loans with real estate collateral, we track borrower performance monthly.
Additional information about this recourse arrangement is included in Note 22 (“Commitments, 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.
These are primarily associated with commercial real estate loans administered or serviced. Additional information about this recourse arrangement is included in Note 22 (“Commitments, 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.
Sales of loans classified as held for sale generated net gains of $151 million during 2022. Figure 12 summarizes our loan sales during 2022 and 2021. Figure 12.
Sales of loans classified as held for sale generated net gains of $135 million during 2023. Figure 12 summarizes our loan sales during 2023 and 2022. Figure 12.
The ALLL includes $21 million and $28 million of allowance classified as “discontinued assets” on the balance sheet at December 31, 2022, and December 31, 2021, respectively.
The ALLL includes $16 million and $21 million of allowance classified as “discontinued assets” on the balance sheet at December 31, 2023, and December 31, 2022, respectively.
Net Loan Charge-offs to Average Loans from Continuing Operations Year ended December 31, 2022 2021 Commercial and industrial 0.19 % 0.18 % Real estate — commercial mortgage 0.12 0.24 Real estate — construction (0.04) — Commercial lease financing (a) (0.05) (0.02) Total commercial loans 0.15 0.17 Real estate — residential mortgage (a) (0.04) (0.04) Home equity loans (0.02) 0.04 Consumer direct loans 0.40 0.41 Credit cards 2.50 2.05 Consumer indirect loans 3.23 0.85 Total consumer loans 0.12 0.21 Total net loan charge-offs 0.14 % 0.18 % (a) Credit amounts indicate that recoveries exceeded charge-offs. 85 Table of contents Figure 31.
Net Loan Charge-offs to Average Loans from Continuing Operations Year ended December 31, 2023 2022 Commercial and industrial 0.24 % 0.19 % Real estate — commercial mortgage 0.23 0.12 Real estate — construction (0.04) (0.04) Commercial lease financing (a) (0.14) (0.05) Total commercial loans 0.21 0.15 Real estate — residential mortgage (a) (0.01) (0.04) Home equity loans (0.01) (0.02) Consumer direct loans 0.69 0.40 Credit cards 3.04 2.50 Consumer indirect loans — 3.23 Total consumer loans 0.19 0.12 Total net loan charge-offs 0.21 % 0.14 % (a) Credit amounts indicate that recoveries exceeded charge-offs.
Loans Administered or Serviced December 31, Dollars in millions 2022 2021 2020 2019 2018 Commercial real estate loans $ 488,478 $ 444,131 $ 371,016 $ 347,186 $ 291,158 Residential mortgage 11,026 10,312 8,311 6,146 5,209 Education loans 312 415 516 625 766 Commercial lease financing 1,646 1,236 1,359 1,047 916 Commercial loans 723 750 684 591 549 Consumer direct 509 699 1,711 2,243 — Consumer indirect 1,536 2,714 — — — Total $ 504,230 $ 460,257 $ 383,597 $ 357,838 $ 298,598 In the event of default by a borrower, we are subject to recourse with respect to approximately $6.8 billion of the $504.2 billion of loans administered or serviced at December 31, 2022.
Loans Administered or Serviced December 31, Dollars in millions 2023 2022 2021 2020 2019 Commercial real estate loans $ 499,449 $ 488,478 $ 444,131 $ 371,016 $ 347,186 Residential mortgage 11,193 11,026 10,312 8,311 6,146 Education loans 248 312 415 516 625 Commercial lease financing 1,946 1,646 1,236 1,359 1,047 Commercial loans 667 723 750 684 591 Consumer direct 408 509 699 1,711 2,243 Consumer indirect 792 1,536 2,714 — — Total $ 514,703 $ 504,230 $ 460,257 $ 383,597 $ 357,838 In the event of default by a borrower, we are subject to recourse with respect to approximately $7.5 billion of the $514.7 billion of loans administered or serviced at December 31, 2023.
At December 31, 2022, our Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.10% and 10.60%, respectively. • We remained committed to our strategy to engage a high-performing, talented, and diverse workforce.
At December 31, 2023, our Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.02% and 11.67%, respectively. • We remained committed to our strategy to engage a high-performing, talented, and diverse workforce.
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.” Commercial loan portfolio Commercial loans outstanding were $82.5 billion at December 31, 2022, an increase of $11.6 billion, or 16.4%, compared to December 31, 2021 .
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.” Commercial loan portfolio Commercial loans outstanding were $77.6 billion at December 31, 2023, a decrease of $4.9 billion, or 5.9%, compared to December 31, 2022 .
(b) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year. 68 Table of contents Deposits and other sources of funds Figure 18. Breakdown of Deposits at December 31, 2022 Deposits are our primary source of funding.
(b) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate in effect that calendar year. 69 Table of contents Deposits and other sources of funds Figure 18.
(c) Total loans exclude loans of $434 million at December 31, 2022, and $567 million at December 31, 2021, related to the discontinued operations of the education lending business. At December 31, 2022, total loans outstanding from continuing operations were $119.4 billion, compared to $101.9 billion at the end of 2021.
(c) Total loans exclude loans of $339 million at December 31, 2023, and $434 million at December 31, 2022, related to the discontinued operations of the education lending business. At December 31, 2023, total loans outstanding from continuing operations were $112.6 billion, compared to $119.4 billion at the end of 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page Number Introduction 47 Long-term financial targets 48 Corporate strategy 49 Strategic developments 49 Results of Operations 50 Earnings overview 50 Net interest income 50 Provision for credit losses 53 Noninterest income 53 Noninterest expense 55 Income taxes 57 Business Segment Results 57 Consumer Bank 57 Commercial Bank 58 Financial Condition 60 Loans and loans held for sale 60 Securities 66 Deposits and other sources of funds 69 Capital 69 Off-Balance Sheet Arrangements and Aggregate Contractual Obligations 71 Off-balance sheet arrangements 71 Guarantees 72 Risk Management 72 Overview 72 Market risk management 74 Liquidity risk management 80 Credit risk management 83 Operational and compliance risk management 87 GAAP to Non-GAAP Reconciliations 89 Critical Accounting Policies and Estimates 90 Allowance for loan and lease losses 90 Valuation methodologies 91 Derivatives and hedging 93 Contingent liabilities, guarantees and income taxes 93 Accounting and reporting developments 94 46 Table of contents Introduction This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for 2022 and 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page Number Introduction 48 Long-term financial targets 49 Corporate strategy 50 Strategic developments 50 Results of Operations 51 Earnings overview 51 Net interest income 51 Provision for credit losses 54 Noninterest income 54 Noninterest expense 56 Income taxes 58 Business Segment Results 58 Consumer Bank 58 Commercial Bank 59 Financial Condition 61 Loans and loans held for sale 61 Securities 67 Deposits and other sources of funds 70 Capital 71 Off-Balance Sheet Arrangements and Aggregate Contractual Obligations 73 Off-balance sheet arrangements 73 Guarantees 74 Risk Management 74 Overview 74 Market risk management 76 Liquidity risk management 82 Credit risk management 85 Operational and compliance risk management 88 GAAP to Non-GAAP Reconciliations 89 Critical Accounting Policies and Estimates 90 Allowance for loan and lease losses 91 Valuation methodologies 92 Derivatives and hedging 94 Contingent liabilities, guarantees and income taxes 94 Accounting and reporting developments 95 47 Table of contents Introduction This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for 2023 and 2022.
For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100. 50 Table of contents Net interest income (TE) for 2022 was $4.6 billion, and the net interest margin was 2.64%.
For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100. 51 Table of contents Net interest income (TE) for 2023 was $3.9 billion, and the net interest margin was 2.17%.
The Credit Risk Committee approves management credit policies and recommends significant credit policies to the Enterprise Risk Management Committee, the KeyBank Board, and the Risk Committee of the Board for approval. These policies are communicated throughout the organization to foster a consistent approach to granting credit.
Credit policy, approval, and evaluation We manage credit risk exposure through a multifaceted program. The Credit Risk Committee approves management credit policies and recommends significant credit policies to the Enterprise Risk Management Committee, the KeyBank Board, and the Risk Committee of the Board for approval. These policies are communicated throughout the organization to foster a consistent approach to granting credit.
As shown in Figure 32, nonperforming assets decreased $69 million during 2022. See Note 1 (“Summary of Significant Accounting Policies”) under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” for a summary of our nonaccrual and charge-off policies. 86 Table of contents Figure 32.
As shown in Figure 33, nonperforming assets increased $171 million during 2023. See Note 1 (“Summary of Significant Accounting Policies”) under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” for a summary of our nonaccrual and charge-off policies. Figure 33.
Net Loan Charge-offs from Continuing Operations Year ended December 31, Dollars in millions 2022 2021 Commercial and industrial $ 103 $ 91 Real estate — commercial mortgage 18 31 Real estate — construction (1) — Commercial lease financing (a) (2) (1) Total commercial loans 118 121 Real estate — residential mortgage (a) (7) (5) Home equity loans (2) 4 Consumer direct loans 26 21 Credit cards 24 19 Consumer indirect loans 2 24 Total consumer loans 43 63 Total net loan charge-offs $ 161 $ 184 Net loan charge-offs to average loans .14 % .18 % Net loan charge-offs from discontinued operations — education lending business $ 4 $ 2 (a) Credit amounts indicate that recoveries exceeded charge-offs.
Net Loan Charge-offs from Continuing Operations Year ended December 31, Dollars in millions 2023 2022 Commercial and industrial $ 144 $ 103 Real estate — commercial mortgage 37 18 Real estate — construction (1) (1) Commercial lease financing (a) (5) (2) Total commercial loans 175 118 Real estate — residential mortgage (a) (3) (7) Home equity loans (1) (2) Consumer direct loans 43 26 Credit cards 30 24 Consumer indirect loans — 2 Total consumer loans 69 43 Total net loan charge-offs $ 244 $ 161 Net loan charge-offs to average loans .21 % .14 % Net loan charge-offs from discontinued operations — education lending business $ 3 $ 4 (a) Credit amounts indicate that recoveries exceeded charge-offs. 86 Table of contents Figure 31.
The minimum capital and leverage ratios under the Regulatory Capital Rules together with the estimated ratios of KeyCorp at December 31, 2022, calculated on a fully phased-in basis, are set forth under the heading “Basel III” in the “Supervision and Regulation” section in Item 1 of this report. 70 Table of contents Figure 21 represents the details of our regulatory capital positions at December 31, 2022, and December 31, 2021, under the Regulatory Capital Rules.
The minimum capital and leverage ratios under the Regulatory Capital Rules together with the estimated ratios of KeyCorp at December 31, 2023, calculated on a fully phased-in basis, are set forth under the heading “Basel III” in the “Supervision and Regulation” section in Item 1 of this report.
Simulated Change in Net Interest Income December 31, 2022 December 31, 2021 Basis point change assumption -200 +200 -200 +200 Assumed floor in market rates (in basis points) — N/A — N/A Rising rate beta N/A Mid 40s N/A High 20s Tolerance level (5.50) % (5.50) % (5.50) % (5.50) % Interest rate risk assessment (1.66) % (2.61) % (3.86) % 5.15 % +200 NII at risk beta sensitivity December 31, 2022 Beta assumption Mid 40s Low 40s Mid 30s Low 30s Interest rate risk assessment (2.61) % (1.60) % (0.59) % 0.42 % Simulation analysis produces a sophisticated estimate of interest rate exposure based on assumptions inputs within the model.
Simulated Change in Net Interest Income December 31, 2023 December 31, 2022 Basis point change assumption -200 +200 -200 +200 Assumed floor in market rates (in basis points) — N/A — N/A Rising rate beta N/A Mid 50s N/A Mid 40s Tolerance level (5.50) % (5.50) % (5.50) % (5.50) % Interest rate risk assessment (0.01) % (2.08) % (1.66) % (2.61) % +200 NII at risk beta sensitivity December 31, 2023 Beta assumption Mid 60s Low 60s Mid 50s Low 50s Interest rate risk assessment (4.65) % (3.36) % (2.08) % (0.85) % Simulation analysis produces a sophisticated estimate of interest rate exposure based on assumptions inputs within the model.
Summary of Nonperforming Assets and Past Due Loans from Continuing Operations December 31, Dollars in millions 2022 2021 Commercial and industrial $ 174 $ 191 Real estate — commercial mortgage 21 44 Real estate — construction — — Total commercial real estate loans (a) 21 44 Commercial lease financing 1 4 Total commercial loans (b) 196 239 Real estate — residential mortgage 77 72 Home equity loans 107 135 Consumer direct loans 3 4 Credit cards 3 3 Consumer indirect loans 1 1 Total consumer loans 191 215 Total nonperforming loans 387 454 Nonperforming loans held for sale 20 24 OREO 13 8 Other nonperforming assets — 3 Total nonperforming assets $ 420 $ 489 Accruing loans past due 90 days or more $ 60 $ 68 Accruing loans past due 30 through 89 days 180 165 Restructured loans — accruing and nonaccruing (c) 236 220 Restructured loans included in nonperforming loans (c) 118 99 Nonperforming assets from discontinued operations — education lending business 3 4 Nonperforming loans to period-end portfolio loans .32 % .45 % Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (c) .35 .48 (a) See Figure 10 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.
Summary of Nonperforming Assets and Past Due Loans from Continuing Operations December 31, Dollars in millions 2023 2022 Commercial and industrial $ 297 $ 174 Real estate — commercial mortgage 100 21 Real estate — construction — — Total commercial real estate loans (a) 100 21 Commercial lease financing — 1 Total commercial loans (b) 397 196 Real estate — residential mortgage 71 77 Home equity loans 97 107 Consumer direct loans 3 3 Credit cards 5 3 Consumer indirect loans 1 1 Total consumer loans 177 191 Total nonperforming loans 574 387 Nonperforming loans held for sale — 20 OREO 17 13 Other nonperforming assets — — Total nonperforming assets $ 591 $ 420 Accruing loans past due 90 days or more $ 107 $ 60 Accruing loans past due 30 through 89 days 222 180 Restructured loans — accruing and nonaccruing (c) N/A 236 Restructured loans included in nonperforming loans (c) N/A 118 Nonperforming assets from discontinued operations — education lending business 3 3 Nonperforming loans to period-end portfolio loans .51 % .32 % Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (c) .52 .35 (a) See Figure 10 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.
Mortgage-Backed Securities by Issuer December 31, Dollars in millions 2022 2021 FHLMC & FNMA $ 25,371 $ 28,461 GNMA 11,620 12,469 Total (a) $ 36,991 $ 40,930 (a) Includes securities held in the available-for-sale and held-to-maturity portfolios. 66 Table of contents Securities available for sale The majority of our securities available-for-sale portfolio consists of Federal Agency CMOs and mortgage-backed securities.
Mortgage-Backed Securities by Issuer December 31, Dollars in millions 2023 2022 FHLMC & FNMA $ 24,302 $ 25,371 GNMA 11,665 11,620 Total (a) $ 35,967 $ 36,991 (a) Includes securities held in the available-for-sale and held-to-maturity portfolios. 67 Table of contents Securities available for sale The majority of our securities available-for-sale portfolio consists of Federal Agency CMOs and mortgage-backed securities.
The policy decline scenario is equal to the current Fed Target Rate 79 Table of contents capped at 200 basis points. As of December 31, 2022, the policy decline scenario is minus 200 basis points. This analysis is highly dependent upon assumptions applied to assets and liabilities with non-contractual maturities.
The resulting rate in the policy decline scenario is equal to the greater of the current fed funds target and zero. As of December 31, 2023, the policy decline scenario is minus 200 basis points. This analysis is highly dependent upon assumptions applied to assets and liabilities with non-contractual maturities.

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Other KEY 10-K year-over-year comparisons