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Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of 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, 2023, and December 31, 2022. 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, 2023						December 31, 2022
			Fair Value(a)						Fair Value(a)
Dollars in millions	Notional Amount(e)		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	80,392	$	35	$	11	$	41,200	$	114	$	3


Derivatives not designated as hedging instruments:
Interest rate	186,746		172		1,310		80,772		189		1,304
Foreign exchange	9,707		141		123		9,507		136		131
Commodity	14,576		867		842		16,176		1,328		1,304
Credit	150		—		9		95		1		3
Other (b)	2,659		8		4		940		13		5
Total derivatives not designated as hedging instruments:	213,838		1,188		2,288		107,490		1,667		2,747
Netting adjustments (c)	—		(967)		(751)		—		(757)		(1,262)
Net derivatives in the balance sheet	294,230		256		1,548		148,690		1,024		1,488
Other collateral (d)	—		—		(16)		—		—		(5)
Net derivative amounts	$	294,230	$	256	$	1,532	$	148,690	$	1,024	$	1,483

(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. Excess collateral that has not been offset against net derivative instrument positions totaled $163 million of cash collateral and $248 million of securities collateral posted as well as $45 million of cash collateral and $179 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.

(e)Notional values as of June 30, 2023 reflect the impact of LIBOR transition and include $127 billion of short-dated swaps, with the majority expected to mature prior to September 30, 2023

Schedule of Pre-Tax Net Gains (Losses) on Fair Value Hedges

The following tables summarize the amounts that were recorded on the balance sheet as of June 30, 2023, and December 31, 2022, related to cumulative basis adjustments for fair value hedges.


	June 30, 2023
Dollars in millions	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	8,618	$	(598)
Interest rate contracts	Securities Available for Sale(c)	1,705		61



	December 31, 2022
	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	10,411	$	(552)
Interest rate contracts	Securities Available for Sale(c)	405		48

(a)The carrying amount represents the portion of the asset or liability designated as the hedged item.

(b)Basis adjustments related to de-designated hedged items that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $6 million and $6 million at June 30, 2023, and December 31, 2022, respectively.

(c)Certain amounts are designed as fair value hedges under the last-of-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, 2023, and December 31, 2022, the amortized costs of the closed portfolios in these hedging relationships was $688 million and $708 million, respectively.

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location

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, 2023, and June 30, 2022.


	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 debt		Interest income – loans		Interest Income - securities		Investment banking and debt placement fees
Three months ended June 30, 2023
Total amounts presented in the consolidated statement of income	$	(349)	$	1,576	$	194	$	120

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	377	$	—	$	(24)	$	—
Recognized on derivatives designated as hedging instruments	(427)		—		32		—
Net income (expense) recognized on fair value hedges	$	(50)	$	—	$	8	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	(245)	$	—	$	—
Net income (expense) recognized on cash flow hedges	$	(1)	$	(245)	$	—	$	—

Three months ended June 30, 2022
Total amounts presented in the consolidated statement of income	$	(61)	$	923	$	188	$	149

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	145	$	—	$	(51)	$	—
Recognized on derivatives designated as hedging instruments	(126)		—		52		—
Net income (expense) recognized on fair value hedges	$	19	$	—	$	1	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	19	$	—	$	5

Net income (expense) recognized on cash flow hedges	$	(1)	$	19	$	—	$	5


	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 debt		Interest income – loans		Interest Income - Securities		Investment banking and debt placement fees
Six months ended June 30, 2023
Total amounts presented in the consolidated statement of income	$	(624)	$	3,052	$	388	$	265

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	223	$	—	$	(18)	$	—
Recognized on derivatives designated as hedging instruments	(320)		—		30		—
Net income (expense) recognized on fair value hedges	$	(97)	$	—	$	12	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	(460)	$	—	$	—
Net income (expense) recognized on cash flow hedges	$	(1)	$	(460)	$	—	$	—

Six months ended June 30, 2022
Total amounts presented in the consolidated statement of income	$	(110)	$	1,760	$	361	$	312

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	385	$	—	$	(328)	$	—
Recognized on derivatives designated as hedging instruments	(342)		—		334		—
Net income (expense) recognized on fair value hedges	$	43	$	—	$	6	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(2)	$	82	$	—	$	7

Net income (expense) recognized on cash flow hedges	$	(2)	$	82	$	—	$	7

Schedule of Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following tables summarize the pre-tax net gains (losses) on our cash flow hedges for the three- and six-month periods ended June 30, 2023, and June 30, 2022, and where they are recorded on the income statement. The table includes net gains (losses) recognized in OCI during the period and net gains (losses) reclassified from OCI into income during the current period.


Dollars in millions	Net Gains (Losses) Recognized in OCI		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income	Net Gains (Losses) Reclassified From OCI Into Income
Three months ended June 30, 2023
Cash Flow Hedges
Interest rate	$	(465)	Interest income — Loans	$	(245)
Interest rate	(4)		Interest expense — Long-term debt	(1)
Interest rate	2		Investment banking and debt placement fees	—


Total	$	(467)		$	(246)
Three months ended June 30, 2022
Cash Flow Hedges
Interest rate	$	(241)	Interest income — Loans	$	19
Interest rate	1		Interest expense — Long-term debt	(1)
Interest rate	3		Investment banking and debt placement fees	5


Total	$	(237)		$	23


Dollars in millions	Net Gains (Losses) Recognized in OCI		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income	Net Gains (Losses) Reclassified From OCI Into Income(a)
Six months ended June 30, 2023
Cash Flow Hedges
Interest rate	$	(356)	Interest income — Loans	$	(460)
Interest rate	(5)		Interest expense — Long-term debt	(1)
Interest rate	1		Investment banking and debt placement fees	—


Total	$	(360)		$	(461)
Six months ended June 30, 2022
Cash Flow Hedges
Interest rate	$	(911)	Interest income — Loans	$	82
Interest rate	4		Interest expense — Long-term debt	(2)
Interest rate	12		Investment banking and debt placement fees	7


Total	$	(895)		$	87

Schedule of Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging 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, 2023, and June 30, 2022, and where they are recorded on the income statement.


	Three months ended June 30, 2023								Three months ended June 30, 2022
Dollars in millions	Corporate services income		Consumer mortgage income		Other income		Total			Corporate services income		Consumer mortgage income		Other income		Total
NET GAINS (LOSSES)
Interest rate	$	13	$	—	$	1	$	13		$	14	$	—	$	(2)	$	12
Foreign exchange	13		—		—		13			13		—		—		13
Commodity	7		—		—		7			5		—		—		5
Credit	2		—		(17)		(16)			1		—		(7)		(6)
Other	—		2		(3)		(1)			—		2		8		10
Total net gains (losses)	$	35	$	2	$	(20)	$	17		$	33	$	2	$	(1)	$	34


	Six months ended June 30, 2023								Six months ended June 30, 2022
Dollars in millions	Corporate services income		Consumer mortgage income		Other income		Total			Corporate services income		Consumer mortgage income		Other income		Total
NET GAINS (LOSSES)
Interest rate	$	25	$	—	$	(1)	$	24		$	27	$	—	$	7	$	34
Foreign exchange	26		—		—		26			25		—		—		25
Commodity	14		—		—		14			10		—		—		10
Credit	2		—		(31)		(29)			3		—		(17)		(14)
Other	—		3		(5)		(2)			—		(2)		15		13
Total net gains (losses)	$	67	$	3	$	(37)	$	33		$	65	$	(2)	$	5	$	68

Schedule of Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross 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 millions	June 30, 2023		December 31, 2022
Interest rate	$	146	$	136
Foreign exchange	64		67
Commodity	366		820
Credit	—		—
Other	8		11
Derivative assets before collateral	584		1,034
Plus(Less): Related collateral	(328)		(10)
Total derivative assets	$	256	$	1,024

Schedule of Credit Derivatives Sold and Held

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at June 30, 2023, and December 31, 2022. 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, 2023					December 31, 2022
Dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk

Other	$	1	8.43	6.03	%	$	1	15.17	5.10	%
Total credit derivatives sold	$	1	—	—		$	1	—	—

Schedule of Credit Risk Contingent Feature

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 millions	June 30, 2023		December 31, 2022


Net derivative liabilities with credit-risk contingent features	$	(101)	$	(612)
Collateral posted	90		534

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

+ References + Details