Company: KEY-PI
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000091576-25-000058
Chunk: 13

Company: KEYCORP /NEW/
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 2
Chunk 13
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 and interest-bearing liabilities;

•the volume and value of net free funds, such as noninterest-bearing deposits and equity capital;

•the use of 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 $1.1 billion for the first quarter of 2025 and the net interest margin was 2.58%. Compared to the first quarter of 2024, net interest income (TE) increased $219 million and net interest margin increased by 56 basis points. These increases primarily reflect the impact of lower deposit costs, reinvestment of proceeds from maturing low-yielding investment securities, fixed rate loans and swaps into higher yielding investments, the repositioning of the available-for-sale portfolio during the third and fourth quarters of 2024, 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 repricing earning assets and lower loan balances.

Average loans were $104.4 billion for the first quarter of 2025, a decrease of $6.7 billion compared to the first quarter of 2024,  generally reflective of tepid client loan demand. Average commercial loans declined by $4.1 billion and average consumer loans declined by $2.6 billion, reflective of broad-based declines across all loan categories.

Average deposits totaled $148.5 billion for the first quarter of 2025, an increase of $5.7 billion compared to the year-ago quarter, reflecting growth in both consumer and commercial deposits.

Figure 3 shows the various components of our balance sheet that affect interest income and expense and their respective yields or rates for the current period and comparative year ago period. This figure also presents a reconciliation of TE net interest income to net interest income reported in accordance with GAAP for each of those quarters. The net interest margin, which