KEYCORP /NEW/KEY
KEYCORP /NEW/ Leases Disclosure
9. Leases
As a lessee, we enter into leases of land, buildings, and equipment. Our real estate leases primarily relate to bank branches and office space. The leases of equipment principally relate to technology assets for data processing and data storage. As a lessor, we primarily provide financing through our equipment leasing business.
Lessee
Our leases are classified as either operating or financing and have remaining terms ranging from 1 to 20 years with the exception of certain ground leases that have terms over 30 years although certain leases have extension or termination options. Lease payments are discounted using Key’s incremental borrowing rate, consistent with what Key would pay to borrow on a collateralized basis over a term similar to each lease. Certain lease payments are variable and are based on a contractually defined index or transaction volume.
Operating lease expense is recognized in "net occupancy" and "equipment" on the income statement. The components of lease expense and cash flows related to leases are summarized as follows:
| Dollars in millions | December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||
| Operating lease cost | $ | 118 | $ | 118 | $ | 122 | |||||
| Variable lease cost | 20 | 21 | 19 | ||||||||
| Finance lease cost | — | 1 | 1 | ||||||||
| Total lease cost | $ | 138 | $ | 140 | $ | 142 | |||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | 129 | $ | 134 | $ | 136 | |||||
| Right-of-use assets obtained in exchange for lease obligations | 91 | 70 | 65 | ||||||||
Additional balance sheet information related to leases is summarized as follows:
| Dollars in millions | Balance sheet classification | December 31, 2025 | December 31, 2024 | ||||||||
| Right-of-use assets | $ | 444 | $ | 453 | |||||||
| Operating lease liabilities | 484 | 506 | |||||||||
Information pertaining to the lease term and weighted-average discount rate, and maturities of operating lease liabilities are summarized as follows:
| Dollars in millions | December 31, 2025 | ||||
| 2026 | $ | 127 | |||
| 2027 | 117 | ||||
| 2028 | 95 | ||||
| 2029 | 72 | ||||
| 2030 | 49 | ||||
| Thereafter | 78 | ||||
| Total lease payments | $ | 538 | |||
| Less imputed interest | 54 | ||||
| Total operating lease liabilities | $ | 484 | |||
| December 31, 2025 | December 31, 2024 | ||||||||||
| Weighted-average remaining lease term (years) | 5.37 | 5.42 | |||||||||
| Weighted-average discount rate | 3.72 | % | 3.40 | % | |||||||
Lessor Equipment Leasing
Leases may have fixed or floating rate terms. Variable payments are based on an index or other specified rate and are included in rental payments. Certain leases contain an option to extend the lease term or the option to terminate at the discretion of the lessee. Under certain conditions, lease agreements may also contain the option for a lessee to purchase the underlying asset.
Interest income from sales-type and direct financing leases is recognized in "interest income — loans" on the Consolidated Statements of Income. Income related to operating leases is recognized in “operating lease income and other leasing gains” on the Consolidated Statements of Income. The components of equipment leasing income are summarized in the table below:
| Dollars in millions | December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||
| Sales-type and direct financing leases | |||||||||||
| Interest income on lease receivable | $ | 54 | $ | 69 | $ | 78 | |||||
| Interest income related to accretion of unguaranteed residual asset | 7 | 9 | 13 | ||||||||
| Interest income on deferred fees and costs | 21 | 20 | 4 | ||||||||
| Total sales-type and direct financing lease income | 82 | 98 | 95 | ||||||||
| Operating leases | |||||||||||
| Operating lease income related to lease payments | 43 | 68 | 84 | ||||||||
| Other operating leasing gains and (losses) | — | 8 | 8 | ||||||||
| Total operating lease income and other leasing gains | 43 | 76 | 92 | ||||||||
| Total lease income | $ | 125 | $ | 174 | $ | 187 | |||||
Equipment leasing receivables relate to sales-type and direct financing leases. The composition of the net investment in sales-type and direct financing leases is as follows:
| Dollars in millions | December 31, 2025 | December 31, 2024 | ||||||
| Lease receivables | $ | 1,916 | $ | 2,345 | ||||
| Unearned income | (276) | (270) | ||||||
| Unguaranteed residual value | 454 | 421 | ||||||
| Deferred fees and costs | 5 | 1 | ||||||
| Net investment in sales-type and direct financing leases | $ | 2,099 | $ | 2,497 | ||||
The residual value component of a lease represents the fair value of the leased asset at the end of the lease term. We rely on industry data, historical experience, independent appraisals and the experience of the equipment leasing asset management team to value lease residuals. Relationships with a number of equipment vendors give the asset management team insight into the life cycle of the leased equipment, pending product upgrades and competing products. Key assesses net investments in leases, including residual values, for impairment and recognizes any impairment losses in accordance with the impairment guidance for financial instruments. The carrying amount of residual assets covered by residual value guarantees at December 31, 2025, and December 31, 2024, was $269 million and $238 million, respectively.
At December 31, 2025, minimum future lease payments to be received for leases are as follows:
| Dollars in millions | Sales-type and direct financing lease payments | Operating lease payments | ||||||
| 2026 | $ | 583 | $ | 27 | ||||
| 2027 | 410 | 19 | ||||||
| 2028 | 256 | 10 | ||||||
| 2029 | 182 | 5 | ||||||
| 2030 | 141 | 4 | ||||||
| Thereafter | 344 | 14 | ||||||
| Total lease payments | $ | 1,916 | $ | 79 | ||||
The carrying amount of operating lease assets at December 31, 2025 and December 31, 2024, was $153 million and $224 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 26, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.