Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024, and December 31, 2023. 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, 2024						December 31, 2023
			Fair Value(a)						Fair Value(a)
Dollars in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	53,125	$	4	$	9	$	44,621	$	39	$	12
Derivatives not designated as hedging instruments:
Interest rate	72,120		128		1,077		78,051		134		973
Foreign exchange	6,577		94		74		6,034		89		73
Commodity	10,255		531		510		11,611		721		698
Credit	81		—		1		121		—		1
Other (b)	2,546		5		5		2,683		16		20
Total derivatives not designated as hedging instruments:	91,579		758		1,667		98,500		960		1,765
Netting adjustments (c)	—		(532)		(466)		—		(818)		(473)
Net derivatives in the balance sheet	144,704		230		1,210		143,121		181		1,304
Other collateral (d)	—		(7)		—		—		(1)		(18)
Net derivative amounts	$	144,704	$	223	$	1,210	$	143,121	$	180	$	1,286

    

(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, 2024, excess collateral that has not been offset against net derivative instrument positions totaled $176 million of cash collateral and $296 million of securities collateral posted as well as $9 million of cash collateral and $63 million of securities collateral held. As of December 31, 2023, excess collateral that has not been offset against net derivative instrument positions totaled $161 million of cash collateral and $269 million of securities collateral posted as well as $16 million of cash collateral and $212 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.

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, 2024, and December 31, 2023, related to cumulative basis adjustments for fair value hedges.

	June 30, 2024
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	$	10,165	$	(572)
Interest rate contracts	Securities Available for Sale(c)	10,654		29
	December 31, 2023
	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	$	9,919	$	(437)
Interest rate contracts	Securities Available for Sale(c)	8,655		(152)

(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 $5 million and $5 million at June 30, 2024, and December 31, 2023, respectively.

(c)Certain amounts are designed 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, 2024, and December 31, 2023, the amortized costs of the closed portfolios in these hedging relationships was $12.5 billion and $12.8 billion, respectively, of which $7.2 billion were designated in a portfolio layer hedging relationship for both period ends. At June 30, 2024, and December 31, 2023, the cumulative basis adjustments associated with these amounts totaled $19 million and $(147) 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, 2024, and June 30, 2023.

	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, 2024
Total amounts presented in the consolidated statement of income	$	(332)	$	1,524	$	259	$	126
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	7	$	—	$	(22)	$	—
Recognized on derivatives designated as hedging instruments	(80)		—		56		—
Net income (expense) recognized on fair value hedges	$	(73)	$	—	$	34	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	(199)	$	—	$	—
Net income (expense) recognized on cash flow hedges	$	(1)	$	(199)	$	—	$	—
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)	$	(215)	$	—	$	—

	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, 2024
Total amounts presented in the consolidated statement of income	$	(660)	$	3,062	$	491	$	296
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	135	$	—	$	(173)	$	—
Recognized on derivatives designated as hedging instruments	(280)		—		238		—
Net income (expense) recognized on fair value hedges	$	(145)	$	—	$	65	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	(415)	$	—	$	1
Net income (expense) recognized on cash flow hedges	$	(1)	$	(415)	$	—	$	1
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)	$	—	$	—

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, 2024, and June 30, 2023, 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, 2024
Cash Flow Hedges
Interest rate	$	(78)	Interest income — Loans	$	(199)
Interest rate	—		Interest expense — Long-term debt	(1)
Interest rate	—		Investment banking and debt placement fees	—
Total	$	(78)		$	(200)
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)

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, 2024
Cash Flow Hedges
Interest rate	$	(361)	Interest income — Loans	$	(415)
Interest rate	1		Interest expense — Long-term debt	(1)
Interest rate	1		Investment banking and debt placement fees	1
Total	$	(359)		$	(415)
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)

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, 2024, and June 30, 2023, and where they are recorded on the income statement.

	Three months ended June 30, 2024								Three months ended June 30, 2023
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	$	9	$	—	$	1	$	10	$	13	$	—	$	1	$	14
Foreign exchange	14		—		—		14		13		—		—		13
Commodity	2		—		—		2		7		—		—		7
Credit	1		—		(3)		(2)		2		—		(17)		(15)
Other	—		(2)		3		1		—		2		(3)		(1)
Total net gains (losses)	$	26	$	(2)	$	1	$	25	$	35	$	2	$	(19)	$	18

	Six months ended June 30, 2024								Six months ended June 30, 2023
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	$	19	$	—	$	1	$	20	$	25	$	—	$	(1)	$	24
Foreign exchange	26		—		—		26		26		—		—		26
Commodity	5		—		—		5		14		—		—		14
Credit	1		—		(14)		(13)		2		—		(31)		(29)
Other	—		1		6		7		—		3		(5)		(2)
Total net gains (losses)	$	51	$	1	$	(7)	$	45	$	67	$	3	$	(37)	$	33

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 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 millions	June 30, 2024		December 31, 2023
Interest rate	$	99	$	123
Foreign exchange	39		42
Commodity	310		409
Credit	—		—
Other	5		15
Derivative assets before collateral	453		589
Plus(Less): Related collateral	(223)		(408)
Total derivative assets	$	230	$	181

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, 2024, and December 31, 2023. 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, 2024					December 31, 2023
Dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	2	11.04	3.24	%	$	4	10.69	4.86	%
Total credit derivatives sold	$	2	—	—		$	4	—	—

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, 2024		December 31, 2023
Net derivative liabilities with credit-risk contingent features	$	(121)	$	(45)
Collateral posted	117		42