Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2025

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 115 of our 2024 Form 10-K. Our derivative strategies and related risk management objectives are described in Note 8 (“Derivatives and Hedging Activities”) beginning on page 144 of our 2024 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 September 30, 2025, and December 31, 2024. 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:

	September 30, 2025						December 31, 2024
			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	$	63,050	$	17	$	—	$	64,701	$	(4)	$	3
Derivatives not designated as hedging instruments:
Interest rate	74,725		147		574		72,215		114		962
Foreign exchange	5,809		102		96		6,516		124		117
Commodity	6,083		276		263		8,778		363		343
Credit	78		—		8		60		—		—
Other (b)	6,123		17		30		3,145		15		14
Total derivatives not designated as hedging instruments:	92,818		542		971		90,714		616		1,436
Total derivatives	155,868		559		971		155,415		612		1,439
Netting adjustments (c)	—		(329)		(334)		—		(363)		(411)
Net derivatives in the balance sheet	155,868		230		637		155,415		249		1,028
Other collateral (d)	—		(3)		(1)		—		—		(1)
Net derivative amounts	$	155,868	$	227	$	636	$	155,415	$	249	$	1,027

(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 September 30, 2025, excess collateral that has not been offset against net derivative instrument positions totaled $175 million of cash collateral and $207 million of securities collateral posted as well as $8 million of cash collateral and $114 million of securities collateral held. As of December 31, 2024, excess collateral that has not been offset against net derivative instrument positions totaled $168 million of cash collateral and $215 million of securities collateral posted as well as $13 million of cash collateral and $32 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 nine months ended September 30, 2025, 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 September 30, 2025, and December 31, 2024, related to cumulative basis adjustments for fair value hedges.

	September 30, 2025
Dollars in millions	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment - active hedges		Hedge accounting basis adjustment - discontinued hedges
Interest rate contracts	Long-term debt	$	9,436	$	(200)	$	(4)
Interest rate contracts	Securities Available for Sale(b)	12,407		(113)		15
	December 31, 2024
	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment - active hedges		Hedge accounting basis adjustment - discontinued hedges
Interest rate contracts	Long-term debt	$	10,249	$	(490)	$	(4)
Interest rate contracts	Securities Available for Sale(b)	12,097		5		17

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

(b)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 September 30, 2025, and December 31, 2024, the amortized costs of the closed portfolios in these hedging relationships was $6.1 billion and $5 billion, respectively, of which $4.5 billion and 4 billion were designated in a portfolio layer hedging relationship. At September 30, 2025, and December 31, 2024, the cumulative basis adjustments associated with these amounts totaled $44 million and $41 million, respectively, which is comprised of $59 million and $24 million in active hedging relationships and $15 million and $17 million for discontinued hedging relationships.

Cash flow hedges. During the nine-month period ended September 30, 2025, 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 September 30, 2025, we expect to reclassify an estimated $92 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 expect to reclassify approximately $3 million of net losses 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 September 30, 2025. As of September 30, 2025, the maximum length of time over which we hedge forecasted transactions is 4.01 years.

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three- and nine-month periods ended September 30, 2025, and September 30, 2024.

	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 September 30, 2025
Total amounts presented in the consolidated statement of income	$	(181)	$	1,466	$	408	$	184
Net gains (losses) on fair value hedging relationships
Interest rate contracts
Recognized on hedged items	$	(42)	$	—	$	3	$	—
Recognized on derivatives designated as hedging instruments	(2)		—		4		—
Net income (expense) recognized on fair value hedges	$	(44)	$	—	$	7	$	—
Net gain (loss) on cash flow hedging relationships
Interest rate contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	—	$	(98)	$	—	$	—
Net income (expense) recognized on cash flow hedges	$	—	$	(98)	$	—	$	—
Three months ended September 30, 2024
Total amounts presented in the consolidated statement of income	$	(292)	$	1,516	$	298	$	171
Net gains (losses) on fair value hedging relationships
Interest rate contracts
Recognized on hedged items	$	(333)	$	—	$	329	$	—
Recognized on derivatives designated as hedging instruments	258		—		(285)		—
Net income (expense) recognized on fair value hedges	$	(75)	$	—	$	44	$	—
Net gain (loss) on cash flow hedging relationships
Interest rate contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	—	$	(184)	$	—	$	(3)
Net income (expense) recognized on cash flow hedges	$	—	$	(184)	$	—	$	(3)

	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
Nine months ended September 30, 2025
Total amounts presented in the consolidated statement of income	$	(572)	$	4,310	$	1,211	$	537
Net gains (losses) on fair value hedging relationships
Interest rate contracts
Recognized on hedged items	$	(294)	$	—	$	118	$	—
Recognized on derivatives designated as hedging instruments	157		—		(98)		—
Net income (expense) recognized on fair value hedges	$	(137)	$	—	$	20	$	—
Net gain (loss) on cash flow hedging relationships
Interest rate contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(2)	$	(281)	$	—	$	—
Net income (expense) recognized on cash flow hedges	$	(2)	$	(281)	$	—	$	—
Nine months ended September 30, 2024
Total amounts presented in the consolidated statement of income	$	(952)	$	4,578	$	789	$	467
Net gains (losses) on fair value hedging relationships
Interest rate contracts
Recognized on hedged items	$	(198)	$	—	$	156	$	—
Recognized on derivatives designated as hedging instruments	(22)		—		(47)		—
Net income (expense) recognized on fair value hedges	$	(220)	$	—	$	109	$	—
Net gain (loss) on cash flow hedging relationships
Interest rate contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	(599)	$	—	$	(2)
Net income (expense) recognized on cash flow hedges	$	(1)	$	(599)	$	—	$	(2)

The following table summarizes the pre-tax net gains (losses) on our cash flow hedges for the three- and nine-month periods ended September 30, 2025, and September 30, 2024, and where they are recorded on the income statement. The table includes net gains (losses) recognized in AOCI during the period and net gains (losses) reclassified from AOCI 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 September 30, 2025
Cash Flow Hedges
Interest rate	$	(30)	Interest income — Loans	$	(98)
Interest rate	—		Interest expense — Long-term debt	—
Interest rate	—		Investment banking and debt placement fees	—
Total	$	(30)		$	(98)
Three months ended September 30, 2024
Cash Flow Hedges
Interest rate	$	410	Interest income — Loans	$	(184)
Interest rate	—		Interest expense — Long-term debt	—
Interest rate	(5)		Investment banking and debt placement fees	(3)
Total	$	405		$	(187)

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)
Nine months ended September 30, 2025
Cash Flow Hedges
Interest rate	$	333	Interest income — Loans	$	(281)
Interest rate	(1)		Interest expense — Long-term debt	(2)
Interest rate	—		Investment banking and debt placement fees	—
Total	$	332		$	(283)
Nine months ended September 30, 2024
Cash Flow Hedges
Interest rate	$	49	Interest income — Loans	$	(599)
Interest rate	1		Interest expense — Long-term debt	(1)
Interest rate	(4)		Investment banking and debt placement fees	(2)
Total	$	46		$	(602)

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 nine-month periods ended September 30, 2025, and September 30, 2024, and where they are recorded on the income statement.

	Three months ended September 30, 2025								Three months ended September 30, 2024
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	$	15	$	—	$	—	$	15	$	8	$	—	$	3	$	11
Foreign exchange	8		—		—		8		13		—		—		13
Commodity	1		—		—		1		4		—		—		4
Credit	—		—		(14)		(14)		—		—		(22)		(22)
Other	—		(1)		2		1		—		—		3		3
Total net gains (losses)	$	24	$	(1)	$	(12)	$	11	$	25	$	—	$	(16)	$	9

	Nine months ended September 30, 2025								Nine months ended September 30, 2024
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	$	36	$	—	$	6	$	42	$	27	$	—	$	4	$	31
Foreign exchange	35		—		—		35		39		—		—		39
Commodity	5		—		—		5		9		—		—		9
Credit	—		—		(33)		(33)		1		—		(36)		(35)
Other	—		(1)		(7)		(8)		—		1		9		10
Total net gains (losses)	$	76	$	(1)	$	(34)	$	41	$	76	$	1	$	(23)	$	54

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 $77 million was netted against derivative assets on the balance sheet at September 30, 2025, compared to $75 million of cash collateral netted against derivative assets at December 31, 2024. The cash collateral netted against derivative liabilities totaled $82 million at September 30, 2025, and $124 million at December 31, 2024. Our means of mitigating and managing exposure to credit risk on derivative contracts is described in Note 8 (“Derivatives and Hedging Activities”) beginning on page 144 of our 2024 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 millions	September 30, 2025		December 31, 2024
Interest rate	$	115	$	58
Foreign exchange	68		81
Commodity	107		170
Credit	—		—
Other	17		15
Derivative assets before collateral	307		324
Plus(Less): Related collateral	(77)		(75)
Total derivative assets	$	230	$	249

We enter into derivative transactions with two primary groups: broker-dealers and banks, and clients. Given that these groups have different economic characteristics, we have different methods for managing counterparty credit exposure and credit risk.

We enter into transactions with broker-dealers and banks for various risk management purposes. These types of

transactions are primarily high dollar volume. We enter into bilateral collateral and master netting agreements with

these counterparties. We clear certain types of derivative transactions with these counterparties, whereby central

clearing organizations become the counterparties to our derivative contracts. In addition, we enter into derivative

contracts through swap execution facilities. Swap clearing and swap execution facilities reduce our exposure to

counterparty credit risk. At September 30, 2025, we had gross exposure of $235 million to broker-dealers and banks and a net exposure of $44 million after the application of master netting agreements and cash collateral, where such qualifying agreements exist. We held no additional collateral in the form of securities. At December 31, 2024, we had gross exposure of $247 million to broker-dealers and banks, a net exposure of $42 million after the application

of master netting agreements and cash collateral, where such qualifying agreements exist, and held no additional collateral in the form of securities against this net exposure.

We enter into transactions using master netting agreements with clients to accommodate their business needs. In

most cases, we mitigate our credit exposure by cross-collateralizing these transactions to the underlying loan collateral. For transactions that are not clearable, we mitigate our market risk by buying and selling U.S. Treasuries and SOFR futures or entering into offsetting positions. Due to the cross-collateralization to the underlying loan, we typically do not exchange cash or marketable securities collateral in connection with these transactions. To address the risk of default associated with these contracts, we have established a CVA reserve (included in “accrued income and other assets”). At September 30, 2025, and December 31, 2024, our CVA reserve was $6 million and $4 million, respectively. The CVA is calculated from potential future exposures, expected recovery rates, and market-implied probabilities of default. At September 30, 2025, we had gross exposure of $206 million to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements. We had net exposure of $186 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve. At December 31, 2024, we had gross exposure of $239 million to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements and had net exposure of $207 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve. 

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 nominal net liability position as of September 30, 2025 and December 31, 2024. 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 8 (“Derivatives and Hedging Activities”) beginning on page 144 of our 2024 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 September 30, 2025, and December 31, 2024. 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.

	September 30, 2025					December 31, 2024
Dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	10	4.09	1.74	%	$	2	7.64	2.03	%
Total credit derivatives sold	$	10	—	—		$	2	—	—

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 September 30, 2025, 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 millions	September 30, 2025		December 31, 2024
Net derivative liabilities with credit-risk contingent features	$	(62)	$	(83)
Collateral posted	58		80

As of September 30, 2025, and December 31, 2024, 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 September 30, 2025, and December 31, 2024, only KeyBank held derivative contracts with credit risk contingent features.