KEYCORP /NEW/

One of our principal sources of revenue is net interest income. Net interest income is the difference between interest income received on earning assets (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.

Net interest income (TE) for 2025 was $4.7 billion, and the net interest margin was 2.69%. Compared to 2024, net interest income (TE) increased $861 million, and the net interest margin increased by 53 basis points. These increases primarily reflect lower interest-bearing deposit costs, the reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans, and swaps into higher-yielding investments, and the repositioning of the available-for-sale portfolio during the second half of 2024, which involved the sale and reinvestment of approximately $10.0 billion of lower-yielding mortgaged-backed securities into higher-yielding investments. 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.

Average loans totaled $105.7 billion for 2025, compared to $107.7 billion in 2024. The $2.1 billion decrease was driven by the intentional run-off of low-yielding consumer loans, which decreased $2.4 billion. Average commercial loans increased $380 million, primarily driven by a mix shift to commercial and industrial loans.

Average deposits totaled $149.3 billion for 2025, an increase of $3.1 billion compared to 2024, reflecting growth in consumer deposits.

Figure 1 shows the various components of our balance sheet that affect interest income and expense and their respective yields or rates over the past three years. This figure also presents a reconciliation of TE net interest income to net interest income reported in accordance with GAAP for each of those years. The net interest margin, which is an indicator of the profitability of our earning assets less the cost of funding, is calculated by dividing taxable-equivalent net interest income by average earning assets.

Figure 1. Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates and Components of Net Interest Income Changes from Continuing Operations(g)

(a)Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (f) below, calculated using a matched funds transfer pricing methodology.

(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% in effect that calendar year.

(c)For purposes of these computations, nonaccrual loans are included in average loan balances.

(d)Commercial and industrial average loan balances include $214 million, $196 million, and $157 million of assets from commercial credit cards for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively.

(e)Yield presented is calculated on the basis of amortized cost excluding fair value hedge basis adjustments. The average amortized cost for securities available for sale was $42.9 billion and $42.2 billion for the twelve months ended December 31, 2025, and December 31, 2024, respectively. Yield based on the fair value of securities available for sale was 3.99% and 3.08% for the twelve months ended December 31, 2025, and December 31, 2024, respectively.

(f)A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

(g)Average balances presented are based on daily average balances over the respective stated period.

Figure 2 shows how the changes in yields or rates and average balances from the prior year affected net interest income. The section entitled “Financial Condition” contains additional discussion about changes in earning assets and funding sources.

Figure 2. Components of Net Interest Income Changes from Continuing Operations

(a)The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.