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Derivatives and Hedging Activities
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities
7. Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. The primary derivatives that we use are interest rate swaps, caps, floors, forwards, and futures; foreign exchange contracts; commodity derivatives; and credit derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in our loan portfolio, hedge against changes in foreign currency exchange rates, and facilitate client financing and hedging needs.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives and Hedging” beginning on page 113 of our 2025 Form 10-K. Our derivative strategies and related risk management objectives are described in Note 7 (“Derivatives and Hedging Activities”) beginning on page 139 of our 2025 Form 10-K.

Fair Values, Volume of Activity, and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of June 30, 2026, and December 31, 2025. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the Consolidated Balance Sheets, as follows:
June 30, 2026December 31, 2025
Fair Value(a)
Fair Value(a)
Dollars in millionsNotional
Amount
Derivative
Assets
Derivative
Liabilities
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Derivatives designated as hedging instruments:
Interest rate$62,787 $(22)$10 $64,228 $(13)$4 
Derivatives not designated as hedging instruments:
Interest rate74,644 126 625 74,994 145 573 
Foreign exchange6,437 99 95 5,767 83 80 
Commodity6,058 284 273 5,553 249 237 
Credit88 — 5 107 — 8 
Other (b)
5,409 56 9 4,217 8 25 
Total derivatives not designated as hedging instruments:92,636 565 1,007 90,638 485 923 
Total derivatives155,423 543 1,017 154,866 472 927 
Netting adjustments (c)
— (347)(323)— (297)(274)
Net derivatives in the balance sheet155,423 196 694 154,866 175 653 
Other collateral (d)
— — — — (22)(1)
Net derivative amounts$155,423 $196 $694 $154,866 $153 $652 
(a)We take into account bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related cash collateral when recognizing derivative assets and liabilities. As a result, we could have derivative contracts with negative fair values included in derivative assets and contracts with positive fair values included in derivative liabilities.
(b)Other derivatives include interest rate lock commitments related to our residential and commercial banking activities, forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when-issued securities, and other customized derivative contracts.
(c)Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. As of June 30, 2026, excess collateral that has not been offset against net derivative instrument positions totaled $122 million of cash collateral and $225 million of securities collateral posted as well as $11 million of cash collateral held. As of December 31, 2025, excess collateral that has not been offset against net derivative instrument positions totaled $165 million of cash collateral and $218 million of securities collateral posted as well as $3 million of cash collateral and $78 million of securities collateral held.
(d)Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Fair value hedges. During the six months ended June 30, 2026, we did not exclude any portion of fair value hedging instruments from the assessment of hedge effectiveness.

The following tables summarize the amounts that were recorded on the balance sheet as of June 30, 2026, and December 31, 2025, related to cumulative basis adjustments for fair value hedges.
June 30, 2026
Dollars in millionsBalance sheet line item in which the hedge item is included
Carrying amount of hedged item (a)
Hedge accounting basis adjustment - active hedgesHedge accounting basis adjustment - discontinued hedges
Interest rate contractsLong-term debt$8,609 $(292)$(3)
Interest rate contracts
Securities Available for Sale(b)
12,830 25 14 
December 31, 2025
Balance sheet line item in which the hedge item is included
Carrying amount of hedged item (a)
Hedge accounting basis adjustment - active hedgesHedge accounting basis adjustment - discontinued hedges
Interest rate contractsLong-term debt$8,504 $(199)$(3)
Interest rate contracts
Securities Available for Sale(b)
12,843 (100)14 
(a)The carrying amount represents the portion of the asset or liability designated as the hedged item.
(b)Certain amounts are designated as fair value hedges under the portfolio layer method. The carrying amount represents the amortized costs basis of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the relationship. At June 30, 2026, and December 31, 2025, the amortized costs of the closed portfolios in these hedging relationships was $8.1 billion and $6.7 billion, respectively, of which $5.8 billion and $4.9 billion, respectively, were designated in a portfolio layer hedging relationship. At June 30, 2026, the cumulative basis adjustments associated with these amounts totaled $46 million, which is comprised of $32 million in active hedging relationships and $14 million for discontinued hedging relationships. At December 31, 2025, the cumulative basis adjustments associated with these amounts totaled $(35) million, which is comprised of $(50) million in active hedging relationships and $14 million for discontinued hedging relationships.

Cash flow hedges. During the six-month period ended June 30, 2026, we did not exclude any portion of cash flow hedging instruments from the assessment of hedge effectiveness.

Considering the interest rates, yield curves, and notional amounts as of June 30, 2026, we expect to reclassify an estimated $136 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI to income during the next 12 months. In addition, we do not expect to reclassify any net gains related to terminated cash flow hedges from AOCI to income during the next 12 months. These reclassified amounts could differ from actual amounts recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to June 30, 2026. As of June 30, 2026, the maximum length of time over which we hedge forecasted transactions is 4.30 years.

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three- and six-month periods ended June 30, 2026, and June 30, 2025.
Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
Dollars in millionsInterest expense – long-term debtInterest income – loansInterest Income - securitiesInvestment banking and debt placement fees
Three months ended June 30, 2026
Total amounts presented in the consolidated statement of income$(155)$1,463 $367 $169 
Net gains (losses) on fair value hedging relationships
Interest rate contracts
Recognized on hedged items$64 $— $(64)$— 
Recognized on derivatives designated as hedging instruments(84)— 54 — 
Net income (expense) recognized on fair value hedges$(20)$— $(10)$— 
Net gain (loss) on cash flow hedging relationships
Interest rate contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income$— $(28)$— $1 
Net income (expense) recognized on cash flow hedges$— $(28)$— $1 
Three months ended June 30, 2025
Total amounts presented in the consolidated statement of income$(198)$1,443 $411 $178 
Net gains (losses) on fair value hedging relationships
Interest rate contracts
Recognized on hedged items$(99)$— $37 $— 
Recognized on derivatives designated as hedging instruments51 — (31)— 
Net income (expense) recognized on fair value hedges$(48)$— $6 $— 
Net gain (loss) on cash flow hedging relationships
Interest rate contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income$(1)$(90)$— $— 
Net income (expense) recognized on cash flow hedges$(1)$(90)$— $— 

Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships

Dollars in millions
Interest expense – long-term debtInterest income – loansInterest Income - securitiesInvestment banking and debt placement fees
Six Months Ended June 30, 2026
Total amounts presented in the consolidated statement of income$(306)$2,879 $737 $366 
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items$93 $— $(125)$— 
Recognized on derivatives designated as hedging instruments(135)— 105 — 
Net income (expense) recognized on fair value hedges$(42)$— $(20)$— 
Net gain (loss) on cash flow hedging relationships
Realized gains (losses) (pre-tax) reclassified from AOCI into net income
Interest contracts$(1)$(64)$— $1 
Net income (expense) recognized on cash flow hedges$(1)$(64)$— $1 
Six Months Ended June 30, 2025
Total amounts presented in the consolidated statement of income$(391)$2,844 $803 $353 
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items$(252)$— $115 $— 
Recognized on derivatives designated as hedging instruments159 — (102)— 
Net income (expense) recognized on fair value hedges$(93)$— $13 $— 
Net gain (loss) on cash flow hedging relationships
Realized gains (losses) (pre-tax) reclassified from AOCI into net income
Interest contracts$(2)$(183)$— $— 
Net income (expense) recognized on cash flow hedges$(2)$(183)$— $— 
The following table summarizes the pre-tax effect of our cash flow hedges for the three- and six-month periods ended June 30, 2026, and June 30, 2025.

Three months ended,
Dollars in millions
June 30, 2026June 30, 2025
Net Gains (Losses) Recognized in OCI
Interest income — Loans$(202)$122 
Investment banking and debt placement fees1 — 
Total$(201)$122 
Net Gains (Losses) Reclassified From AOCI Into Income
Interest income — Loans$(28)$(90)
Interest expense — Long-term debt— (1)
Investment banking and debt placement fees1 — 
Total$(27)$(91)

Six months ended,
Dollars in millions
June 30, 2026June 30, 2025
Net Gains (Losses) Recognized in OCI
Interest income — Loans$247 $363 
Interest expense — Long-term debt2 (1)
Investment banking and debt placement fees1 — 
Total$250 $362 
Net Gains (Losses) Reclassified From AOCI Into Income
Interest income — Loans$(64)$(183)
Interest expense — Long-term debt(1)(2)
Investment banking and debt placement fees1 — 
Total$(64)$(185)

Nonhedging instruments. The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three- and six-month periods ended June 30, 2026, and June 30, 2025, and where they are recorded on the income statement.

Three months ended June 30, 2026Three months ended June 30, 2025
Dollars in millions
Corporate
services
income
Consumer mortgage incomeOther incomeTotalCorporate services incomeConsumer mortgage incomeOther incomeTotal
NET GAINS (LOSSES)
Interest rate$13 $— $— $13 $13 $— $— $13 
Foreign exchange12 — — 12 15 — — 15 
Commodity1 — — 1 2 — — 2 
Credit— — (10)(10)— — (7)(7)
Other— (2)17 15 — — (14)(14)
Total net gains (losses)$26 $(2)$7 $31 $30 $— $(21)$9 

Six months ended June 30, 2026Six months ended June 30, 2025
Dollars in millions
Corporate
services
income
Consumer mortgage incomeOther incomeTotalCorporate services incomeConsumer mortgage incomeOther incomeTotal
NET GAINS (LOSSES)
Interest rate$21 $— $— $21 $21 $— $6 $27 
Foreign exchange25 — — 25 27 — — 27 
Commodity3 — — 3 4 — — 4 
Credit— — (18)(18)— — (19)(19)
Other— — 67 67 — — (9)(9)
Total net gains (losses)$49 $— $49 $98 $52 $— $(22)$30 

Counterparty Credit Risk

We hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises, or GNMA. Cash collateral of $134 million was netted against derivative assets on the balance sheet at June 30, 2026, compared to $103 million of cash collateral netted against derivative assets at December 31, 2025. The cash collateral netted against derivative liabilities totaled $110 million at June 30, 2026,
and $80 million at December 31, 2025. Our means of mitigating and managing exposure to credit risk on derivative contracts is described in Note 7 (“Derivatives and Hedging Activities”) beginning on page 139 of our 2025 Form 10-K under the heading “Counterparty Credit Risk.”

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our net exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

Dollars in millionsJune 30, 2026December 31, 2025
Interest rate$33 $82 
Foreign exchange62 39 
Commodity179 149 
Other56 8 
Derivative assets before collateral330 278 
Plus(Less): Related collateral(134)(103)
Total derivative assets$196 $175 

Credit Derivatives

We are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. Our credit derivative portfolio was in a net liability position as of June 30, 2026 and December 31, 2025. Our credit derivative portfolio consists of traded credit default swap indices and risk participation agreements. Additional descriptions of our credit derivatives are provided in Note 7 (“Derivatives and Hedging Activities”) beginning on page 139 of our 2025 Form 10-K under the heading “Credit Derivatives.”

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at June 30, 2026, and December 31, 2025. The notional amount represents the amount that the seller could
be required to pay. The payment/performance risk shown in the table represents a weighted average of the default
probabilities for all reference entities in the respective portfolios. These default probabilities are implied from observed credit indices in the credit default swap market, which are mapped to reference entities based on Key’s internal risk rating.
June 30, 2026December 31, 2025
Dollars in millionsNotional
Amount
Average
Term
(Years)
Payment /
Performance
Risk
Notional
Amount
Average
Term
(Years)
Payment /
Performance
Risk
Other$3 5.513.73 %$9 3.621.76 %
Total credit derivatives sold$3 — — $9 — — 

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At June 30, 2026, KeyBank’s rating was “Baa1” with Moody’s and “BBB+” with S&P, and KeyCorp’s rating was “Baa2” with Moody’s and “BBB” with S&P. Refer to the table below for the aggregate fair value of all derivative contracts with credit risk contingent features held by KeyBank that were in a net liability position.

Dollars in millionsJune 30, 2026December 31, 2025
Net derivative liabilities with credit-risk contingent features

$(54)$(49)
Collateral posted43 49 

As of June 30, 2026, and December 31, 2025, the fair value of additional collateral that could be required to be posted as a result of the credit risk related contingent features being triggered was immaterial to Key’s consolidated
financial statements. At June 30, 2026, and December 31, 2025, only KeyBank held derivative contracts with credit risk contingent features.