Company: KEY-PI
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001628280-25-048757
Chunk: 12

Company: KEYCORP /NEW/
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 2
Chunk 12
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 derivative instruments to manage interest rate risk;

•interest rate fluctuations and competitive conditions within the marketplace;

•asset quality; and

•fair value accounting of acquired earning assets and interest-bearing liabilities.

To make it easier to compare both the results across several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in this discussion on a “TE basis” (i.e., as if all income were taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100.

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Net interest income (TE) was $1.19 billion for the third quarter of 2025 and the net interest margin was 2.75%. Compared to the third quarter of 2024, net interest income (TE) increased $229 million and net interest margin increased by 58 basis points. These increases primarily reflect lower deposit costs, the reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, and the repositioning of the available-for-sale portfolio during the third and fourth quarters of 2024. Additionally, the balance sheet composition shifted to reflect a more favorable mix of higher-yielding commercial and industrial loans, and an improved funding mix as lower-cost deposits increased while wholesale borrowings declined. These benefits were partially offset by the impact of lower interest rates on variable-rate earning assets.

For the nine months ended September 30, 2025, net interest income (TE) increased $699 million from the same period last year and net interest margin increased by 58 basis points. Net interest income (TE) benefited from a decline in funding costs, including interest-bearing deposit costs, the reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, the repositioning of the available-for-sale portfolio during the third and fourth quarters of 2024, and the favorable shift in the balance sheet composition. These benefits were partially offset by the impact of lower interest rates on variable-rate earning assets.

Average loans were $106.2 billion for the third quarter of 2025, a decrease of $17 million compared to the third quarter of 2024. Average commercial loans increased by $2.3 billion, primarily driven by an increase in commercial and industrial loans.  Average consumer loans declined by $