Company: KEY-PI
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0000091576-25-000110
Chunk: 12

Company: KEYCORP /NEW/
Filing Date: 2025-08-05
Form: 10-Q
Item: Item 2
Chunk 12
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such as loans and securities) and loan-related fee income, and interest expense paid on deposits and borrowings. There are several factors that affect net interest income, including:

•the volume, pricing, mix, and maturity of earning assets 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.

11

Net interest income (TE) was $1.15 billion for the second quarter of 2025 and the net interest margin was 2.66%. Compared to the second quarter of 2024, net interest income (TE) increased $251 million and net interest margin increased by 62 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 repricing 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 of certain earning assets and lower loan balances.

For the six months ended June 30, 2025, net interest income (TE) increased $470 million from the same period last year and net interest margin increased by 59 basis points. Net interest income (TE) benefited from a decline in funding costs, including interest-bearing deposit costs, the reinvestment of maturing low-yielding investments, 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 of certain earning assets and