KeyCorp (KEY) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. So rounding off the corporate presentation today, we have KeyCorp. And we had Ken Gavrity. He is the Head of the Commercial Bank. And before he sits down with me for a fireside chat, he wanted to share a few slides. Ken, thank you for coming.

Perfect. Well, thanks for having me, Erika, pleased to be here, of course. So as Erika said, I lead Key's Commercial Banking business, which includes our Middle Market business segment as well as our Commercial Payments platform, and as a reminder, we define the middle market segment as companies with annual revenue size from $10 million in revenue, up to as high as $1 billion in revenue. And our commercial payments organization serves a broader range of customers that goes all the way down from small business through middle market, up to our corporate and institutional clients as well. So before I jump into the slides, I've been asked to read the following in the back of today's presentation, which you can find in the Investor Relations section of key.com website. You'll find our statements on forward-looking disclosures. These statements cover our presentation and related comments as well as the question-and-answer segment of today's webcast. Forward-looking statements speak only as of today, February 9, 2026. So with that, okay, I'm going to start on Slide 2, overview of the Commercial Bank. So from a size and scale perspective, you can see on the right-hand side of the page, it's a significant portion of Key's overall revenue and core liquidity. In 2025, the Commercial Bank contributed $2.1 billion of revenue, a little less than 1/3 of Key's overall total, and drove meaningful low-cost funding for Key accounting for roughly 40% of our overall deposits. The 2 primary components that make up the Commercial Bank, as I talked about before, the Middle Market business, where we have a national reach and teams in 30 markets today and roughly 5,000 clients. And our Payments business, where we have a scaled national franchise that serves clients in all 50 states and a steady source of growth for us over the last decade. While the performance has been strong across both of these areas, the opportunity continues to be meaningful. There are 200,000 middle-market companies across the U.S. that represent 1/3 of private sector GDP. And with less than a 3% market share today, we really like our runway for growth. On the Payment side, getting core operating accounts of our clients is truly embedded in our culture, is driving meaningful growth and the natural tailwinds in this industry make the forward look very compelling. All in, our Commercial Banking platform is an efficient, high-return growth business. Our middle market franchise has consistently generated a return on equity in the high teens to low 20s. And our Commercial Payments revenue has grown 9% annually over the past 5 years, showing the sticky, recurring, high-value nature of that income. Underpinning the strength of our business is our end-to-end operating model, everything from business development teams, product teams, onboarding and servicing all under one roof. It's a really important part of the differentiation, and it's why the client experience feels so connected for our customers. And it's what allows us to drive productivity and scalability through the value chain, more effectively deploying analytics, automation and process improvement through the entire client journey. Moving to Slide 3. Our Middle Market presence spans across the U.S., a significantly wider scope than our consumer business. We operate in 11 of the top 20 MSAs for Middle Market companies, and we're actively serving clients in all 50 states. It's an attractive footprint with meaningful opportunities to continue to build density in our existing markets, but we've also shown that this model travels well, and we'll continue to selectively expand our presence when we find talent with deep market ties or deep vertical expertise. Last year, I talked about onboarding 2 new teams in Chicago and Southern California. Those teams, which have now been fully integrated onto our platform have already driven significant new customer growth, core deposits and loan production at roughly 2x the rate of the rest of our portfolio. Earlier today, I announced a new team that we've onboarded based in Kansas City that focuses solely on family offices nationally, a high-growth part of the market and one that is very well suited for our integrated model. The primary takeaway is that we have an attractive platform for both clients and bankers, our holistic offering of capital markets, payments, wealth and lending all built to specifically serve this Middle Market space in an authentic relationship-driven culture. It's what allows us to show up in a way that feels very different to customers and allows the best bankers to be more successful on our platform. The net result, period-end loans -- period-end C&I loan balances grew at 9% in 2025. Clients grew at 4%. And pipelines continue to remain strong, up more than 50% from this time last year, all while credit quality within the portfolio remains healthy with net charge-offs and NPLs at the low end of our targeted range for the Middle Market. And the quality of the relationship is equally as important with 98% of middle-market deposits coming from clients with an operating account and significant payments product penetration with 90% having at least one deposit repayment product and more than 50% of clients having 3-plus products. Simply said, Middle Market clients want a holistic relationship. Moving to Slide 4. Payments has been a focus for ours for quite some time, and we recognize early that payments got us closer to our clients, allows us to integrate into everyday business operations and creates durable, high-value income streams that have become a real growth engine for us. You can see in the bottom left chart, gross payment fees have been growing at an 8% CAGR for us over the last 6 years and grew 9% in 2025. This compares very favorably, it appears, and we maintain our belief that we can grow Commercial Payment fees at a high single-digit, low double-digit rate moving forward. Our conviction is supported by 3 strategic areas: First, our continued focus on Primacy across the commercial segment in Key, including Business Bank, Middle Market, all the way up through the institutional bank. It's built into our sales motions, our incentives and our measurement, we expect to get payments when we use our balance sheet with clients. It's cultural for us. It's driven by our CEO on down through the organization. And now 1/3 of new commercial clients are payment and deposit led, where we're winning with industry experience or expertise and service. Second, we've continued to increase investments in our product development simplifying and streamlining core capabilities like treasury, liquidity, FX and card services, making it easier to do business with Key, while enhancing the innovative capabilities that we've been talking about now for over a decade, including payments automation and virtual ledgering, supported by our fintech strategy where we built a very strong brand and a partnership model that creates very meaningful opportunities for growth. With recent examples like our partnership with Qolo, Versapay and RevSpring, places where we've identified a clear client need and a provider with best-in-class software solutions. Finally, we're continuing to scale our embedded banking strategy, where the tailwinds continue to be meaningful as more technology companies look to connect with a banking partner that combines a deep understanding of their industry, a platform that they can grow with over time and the service model that moves at their pace. We've clearly shown that our value proposition resonates. We doubled this business in 2025 and look to do the same again in 2026 as we continue to attract clients like our recent win with a pharmacy software platform that has boarded as many merchant clients in a month is our entire branch network. We're early in the journey. This will continue to become a more meaningful part of our growth strategy -- our growth story. And overall, our full suite of Commercial Payment capabilities and industry expertise is a truly differentiated offering, that has sustained success and a place that we continue to invest to scale the business. So Slide 5. This shows the growth in Middle Market and Payments from a pre-pandemic view through last year and why we believe our strategy is working, which supports continued investment to drive outsized growth in these areas. In the Middle Market over the last 6 years, our revenues are up meaningfully with a strong trajectory headed into 2026. Deposits, up approximately $5 billion, while the quality has increased with operating deposits now making up 88% of the total for this segment. While coupled with an attractive return profile, this growth is meaningfully accretive to our overall business. And across Commercial Payments, you can see the meaningful growth in deposits, while maintaining a high-quality mix as well. 80% of overall balances in operating deposits and slightly higher than that in the fourth quarter. And during the most recent down rate cycle, a cumulative deposit beta of approximately 70%, which outperformed our high 60s beta during the rate hiking cycle, driven by our index deposit strategy, the operational and analytical rigor that we've built around this business. On the fee side, we show a breakout of our gross payment fees and diversity that we continue to build in these income streams, with FER that continues to grow as we increase Middle Market clients and drive Primacy across the business and a merchant income stream that will continue to benefit as we build the Embedded Banking business. So as we look forward, our strategy remains the same. We're going to continue to add more bankers to our platform, continue to invest in our products and drive scalability and productivity across the Commercial Bank. On the Banker Opportunities, we said last year that we would add 10% to our banker account. We achieved that goal and plan to target a similar increase again this year, with more emphasis on building our own talent internally, while continuing to target select geographies to build density or continue to expand. As I previously said, our holistic platform is very attractive to bankers, and we really like our pipeline of talent. Second, we'll continue investing for the future through continuous innovation across our payment platform and a digital refresh this year that will be visible and impactful to our customers and scaling our embedded banking strategy, as I discussed earlier, collectively, a set of strategies that we know well, we've shown we can deliver against, in targeting high single-digit, low double-digit growth in commercial payment fees. Finally, we're going to drive scalability and productivity across the platform, driving meaningful improvement in banker production and our cost to serve, adding workflow tools, streamlined process across our credit originations to free up banker capacity and building on the success we had in 2025, driving self-service adoption with targeted areas for automation and artificial intelligence that will drive results in 2026. So in closing, our Commercial Bank model delivers real, tangible value to customers and strong sustainable returns for shareholders. Our strategy has been consistent, put in place over many years and it's very hard to replicate. And our priorities are very clear across the business, positioning us for outperformance and meaningful opportunity to scale. So with that, I'll turn it back to you, Erika.

Yes, Ken. Do you want to get comfortable and join me for the fireside chat.

Thank you.

So thank you for the update on your business. If we could just pull up for a second. Obviously, we're in the crosshairs of geopolitical and macro uncertainty. But what are your clients saying as we think about the macro environment for 2026? And specifically for your business, how do they feel about tariff policy today versus a year ago? And also, how much of an impact will the Big Beautiful Bill really have in terms of CapEx spend?

Great question. So I think for just a little bit of context for everybody. I think just understanding what the last 5 to 6 years has been like for a Middle Market client and everybody has experienced this, but if you're a midsized company and you go through the pandemic and you have a supply chain disruption that was truly an existential event, will I be able to continue to deliver product? That was a huge shock to the organization. followed by the inflation that we know in double digits across that. And then a year later, the interest rate increases, all of them materially affecting the bottom line. And so the reason that that matters is through that period of time those Middle Market customers grew, on average, double-digit rates on the revenue side through '21, '22, '23, '24. So this is a very resilient group. And so -- if you read the headlines and you look at all the news around tariffs and what it could potentially do to our economy, I think the view of this particular cohort was we've seen bigger shocks than this. And so I don't think anybody is thrilled about it. We've done plenty of surveys out to the customer base to say it had to be a top priority to react to it, but they've seen bigger shocks. They want to make sure that it's a very level playing field. They want to make sure that corporates -- larger corporates didn't have any loopholes or exclusions that made an unfair advantage. But as long as we have a level playing field, they felt optimistic about their ability to respond, and we've done a Middle Market client survey. We haven't released their results yet, but will be coming out next year. The topline of that was when asked what's your view on the macro economy, it was fairly neutral. It was a little north of 50%. When asked about their individual businesses, 77% of them said that they were very positive about their own business. And I think it reflects everything we talked about a little bit more of the adversity they had gone through, the dexterity they had built, they also saw 100 basis points of decrease in interest rates. They start to see the benefits of technology and operation investments they had made during the supply chain crisis. So they're seeing all that play through and now they're looking at a one Big Beautiful Bill that clearly benefits with accelerated depreciation, the investment in property, plant and equipment, and now they're looking at use cases around artificial intelligence that they're not forecasting for this year, but they see the long-term benefits and they're investing there as well. So I think it's a balanced sort of cautious optimism, but with a lot of reasons to believe that they're going to see near-term cash flow benefits.

So let's unpack that for a little bit. Are there any key themes for CapEx for the Middle Market companies as we think about this year and next year?

I think it really -- across the Middle Market where we're serving every single industry, it's a little bit different industry by industry. But generally, it's adding the new production line. It's adding new geographies. You don't see too much adding brand new products, but I also see a lot more interest in M&A. And I know that's another topic we want to get to today, but there is a lot more of a view of I've had an eye on targets for a while. The bid-ask spread between buyers and sellers is getting a little bit more narrow. I want to make sure that I'm getting the debt capacity to be able to do some of these roll-ups.

So I just want to call out some of the numbers that you put up on the screen and tie that back to this year's guidance. 9% end of period commercial loan growth. 54% pipeline growth on the loan side, and the AHA Data, which we discussed earlier today, is better than seasonal. I think for the large bank cohort, which Key is a part, it's one standard deviation above the seasonal trend. So given that your guide for the full year for '26, is a little bit more conservative, closer to 5% to 6%. How should we think about that in this context? And what type of growth are you expecting in the Middle Market?

It's a great question. And I'll start with maybe the headline of we expect to outperform the market. And so it's a bit of a relative comparison, and it's about how do we see the year playing out. And so if I think about what we saw in '23 and '24, all banks generally were pulling back in the marketplace on asset generation and so you had this pent-up client demand. And I think in the second half of '24 and early '25, we were really good in mobilizing, getting in front of clients, getting in front of prospects, as I said before, 4% new client growth. So we were knocking on a lot of doors, but there was a pent-up demand, and I think that helped us quite a bit in getting to the 9%. So as I look to a more normalized level, clearly, it's a more favorable start to the year and the projection out in the marketplace anywhere depending on estimates, 3% to 5% C&I loan growth, we expect to do north of that, but also embedded in that forecast is a view of a pickup in M&A in the middle market. And so while we'll benefit from that on the fee side of the business, it likely will be a little bit of a headwind against balance build as it targets the companies that we're bringing on as relationship. So we like the 5% to 6% that we put out there, but we do expect to outperform the market.

So let's maybe talk about competition in your business, either from banks or for private capital. So tell us what are the primary considerations for Middle Market companies to choose on-balance sheet bank financing versus other alternatives? And are client expectations changing in terms of product, pricing, any of that?

Yes. I'll unpack that a little bit. So I'll talk about competing about the banks differently than maybe some of the private markets. I think from a bank perspective, everything I talked about in that presentation, our value proposition still really holds. And so this notion of bringing industry expertise in our capital markets platform and our payments platform, but specifically dedicated towards serving this middle market customer base that's very different than what you can get out in the marketplace. So if you're talking to -- if you're looking at a G-SIB, they're going to have every product that we have. But generally, they find it very hard to coordinate that full platform toward a Middle Market $250 million industrial client. They're set up to be able to serve that to a United Airlines, a Google and Amazon or Costco, but it's not well coordinated. There's just diseconomies of scale when you're that large, to be able to show up in a really high-quality way in front of that smaller client. So our expertise and the ability to have a QB with a relationship wrapper around that, but then true sophistication in terms of the number of people or the quality of people we put in the room with them does show up differently. And when you compare that to the regionals, they just haven't been as committed to building out the space the way that we have. They certainly love the C&I lending, but they don't have the scale and sophistication of the capital markets and the payments business that we built over time, and we've done that for a decade at this point. We have several hundred investment bankers specific by vertical that are calling on these companies, and there's a lot of depth to that, and it shows up differently. On the private capital side, I think a really important call out is that, we still don't see them competing for our core commercial customer. It's a trend that we're very close to. We've seen the $2 trillion of capital that's available in the space. But the reality is these are single product funds that need to be able to get a higher return, so they go after the high-end leverage in the market. They're going after 5, 6, 7 turns on EBITDA. That's something we're generally not putting on our balance sheet anyway. They're not interested in the low leverage revolver and getting the payments business. And that's core to who we are. So we're certainly following the trend. We see it out in the marketplace that if I have a client who has that particular need, let's say, maybe for an M&A transaction, we're happy to make the introduction. And generally, as we've heard in the corporate and institutional bank, we put only 15% to 20% of client originations on our balance sheet, the rest we find out in the marketplace. There are a lot of private capital solutions that we can offer those customers.

So given the momentum in this business, and we just heard you describe it as national. Tell us about what you want to do in terms of continuing to fill out the footprint and the magnitude and the speed at which you're trying to expand.

Yes. The reality is it's targeting high-quality bankers. And so we have -- I think about it really in a three-pronged strategy where we have existing markets, particularly in places like Chicago and Southern California that we just got into where we know we want to add density or places like New York and Colorado. These are fantastic markets. We have great momentum. We have a great brand, but we don't have the density that we want to be at yet. And the more that we continue to attract a talent, there's a lot of runway to build in those existing markets that we love. Then there are the expansion markets. And I talked about in the presentation being in 11 of the top 20 MSAs, we will selectively continue to expand. There is no pace at which I need to see all 20 boxes checked. It's going to be around finding the right team in those markets, but places like the Southeast that clearly have hubs and places like Atlanta, where Middle Market business customer concentration is fairly high we're going to find the right teams in those markets, and then we'll continue to build density the way we have everywhere else. Maybe one last piece to that strategy and maybe a little less heralded is that there are these micro markets that we tend to target. And I call this strategy follow great bankers, which is -- these are markets that wouldn't show up on any screen that we're looking at, whether it's a Toledo and Akron, Northern Indiana, places that aren't going to show up in a place where you'd say the demographics are the reason I want to get there. But if you can find the top talent in those markets, it's incredibly profitable business when they're able to go in and take material share in a place like that. So that's how we think about it methodically. Generally, that shows up in about 10% target that we're going to add, but we'll be above that or below that based on the quality of the pipeline, and we really like our pipeline of talent right now.

So to that end, follow great bankers. I don't think in my nearly 25 years of covering banks has never been competitive, it's always been a competitive environment for hiring. But given sort of that base level of competition, what is it like to try to hire those great bankers today? Is it more intense than over the past few years? So unpack that for us? And when you approach a banker or a banker team, how does your brand resonate with them?

Yes. No, it's a great question. And I would say there's almost no top 20 bank that hasn't announced the plan to increase their Middle Market.

Even in micro markets, by the way.

Absolutely true. There's a great line in -- for people who have been around the Middle Market space for a while, including the customers that I'll say the middle market has a 100-year memory. And that's a very true statement. And so the customer base knows when you're in and out of the segment, overtime. So I think the most important thing we always start with is this is the core part of our commercial franchise. This is what we're differentiated in at KeyBank, we have full conviction from the board, to the CEO on down. We are going to grow in the middle market. We love it. We built our platform around it. When you start with that conviction, it already shows up differently. And then when we talk about how the G-SIBs are in when there aren't really big fees in the corporate space, then they're out when they are they've seen that, like you don't have to tell a customer that they've seen it and they've seen it through different crises over time. They know when banks left them. So I think that credibility matters most. And then when you get into the model that I talked about before, how holistic it is, recognizing that the most important thing those bankers have is their brand and reputation in the marketplace. They want to know the quality of who you're going to bring in the room is going to inure to their benefit that they believe it's going to make them look good. And then the final piece is, and can I be productive on this platform. And I think what we've shown -- what we've heard over time, what we've clearly shown is that you can be more productive on this platform because of the way that we incentivize. And so what I mean by that is there are a lot of our competitors, whether it's the larger ones or even other regionals, we're bringing in an investment banker in the room is a nice check of the box on the scorecard or bringing the wealth team in the room is, I filled out my responsibilities. We're a direct drive model. If you bring an investment banking opportunity, they know how they're going to get paid for that. If you have a Middle Market company that ultimately is going through the first wealth transition in selling their business, and we get to step in and manage that wealth, they know exactly how they're going to get paid for that. And so I think it's a really important part of our model. They're allowed to monetize anything that they can bring to that client when we know it's the right thing to do for the customer, we want to make sure they know that they get taken care of for.

So the 10% growth in bankers that you talked about during your presentation, how is that cohort performing overall? And is it in line with your expectations?

It's been better than our expectations. So I shared the number in the presentation where in the new markets that we entered, in particular, in Chicago and Southern California, it's been at 2x the rate of the standard portfolio, and that's generally what we built the business case around. So we're thrilled to see that. But the second part of it is if you just look at any bankers we've brought onto the platform over the last 2 years and a really great stat is 93% of them brought on business within the first 3 months. And that's part of what we're trying to show is there's a lot of operational rigor around how we source that talent, how we board them. When I say board, it's how we connect them to the thought leaders across the platform, how we make them understand in a fairly early way, how do you originate credit? How do you make sure that you're delivering the payment side? Who do you need to know to make sure as you're getting through any obstacles, what phone call do you need to make to be able to dislodge those. So we're really focused around that. And then ultimately, the performance management ramp on the back end. We expect to have these bankers ramped 12 to 18 months, be at the same level of new client origination, same level of loan production as someone who's been on the platform longer than that. So at the average of the portfolio within the first 12 to 18 months, and then they get to fee level of production usually around 18 to 24 months, so a little bit longer than that. But I have to tell you, in the last 2 years, it's ramped even a little bit faster than that.

So let's talk about that. You said 12- to 18-month ramp. I'm sure you've been hiring throughout 2025. How long is the tailwind in terms of how these new hires are contributing to growth?

The reality is like back to the stat I gave before. It's -- they're more productive earlier than we would have expected. And I think there's a level of conviction we've built around this strategy to continue to do that. So what I'm going to keep my eye on in managing the business is when is there too many people that are in the less than 2 years bucket, that we've got to make sure that the quality of onboarding, the quality of the ramp is still where we want it to be. So we'll move at a pace that makes sense. We're not going to add bodies just to add bodies. We have to have the same level of operating performance.

Got it. And I do want to touch on payments, but before I do that, just a housekeeping item for the audience. If you want to ask a question to Ken, you have the QR code and input your question and I'm going to receive it in this fancy iPad over here. So in terms of payments, this is a consistent focus for KeyCorp for some time. Can you give us some context on the 10% payment fee growth outlook, where is this coming from? Who are you taking this from? And broadly speaking, you talked about your competitors, how do your payment offerings compare to the G-SIBs, for example?

Yes. No, great question. So I think overall, when we think about that number, we showed -- what we're so proud of as an organization is just the methodical growth of that over time. And we could have extended that graph back further years, and you'd see the same thing, right? So it's been a good 10-year ramp for us to be able to methodically add it. The core of that philosophy is just our focus on payments attachment. And I talked about it a little bit in the presentation, just this notion that when we're using our balance sheet, and we're lending to a customer. We expect to get the operating count, core treasury, merchant, card. So it's not just a view of, I hope to get Payments business, and it's not a, I want just a portion of the wallet share. The reality is that Middle Market customer truly does want a holistic relationship. And it's for a very simple reason. They tend to have all the same needs that a large corporate customer has. They just don't have the finance staff to really do it in-house. So they're looking to their external vendors to say, who can be a real partner, who can proactively bring the ideas and if you can come to the table showing me a way to take cost out of my working capital cycle, whether it's through financial operations or through the lending side, I'm all ears. And a lot of times, we even help CFOs building their Board presentation of, okay, here's the change that I want to make, help me sell it to my Board, right? So it's a very integrated relationship and that payments attachment piece of making sure that we are measuring very specifically by bank, by region, by portfolio, are we getting the product that we would expect to get. I think the stat that I used in the presentation of 90% of middle market clients have at least one product and more than 50% have 3. So it tells you, and if you were to look at those numbers, 5 to 10 years ago, those were very different, and we have methodically built that rhythm, overtime. So we're going to continue to do that. But we also have industry expertise. And again, that's one of the things I think differentiates us puts us closer to the way the G-SIBs go to market. But when we show up to a middle market customer and we have an oil and gas team, we have a power and utilities team, real estate team, a tech team, health care team, the level of commitment that we've built around building client segment expertise is truly differentiated. And when you're in the room with the client, you're using their language, you understand the metrics that they're being measured on, it truly does resonate. And so that's an area where you start to see us use more software, more automation, some of our fintech partnerships. And so we're seeing a really good tailwind behind that. And then the last piece, the embedded banking, if you just think about the example that I gave in that presentation, or actually, let me just remind everybody, embedded banking just means our -- the existing payment and reporting capabilities that we have today, and putting an API wrapper around those. It's allowing our clients to interact with us the way they want to. Instead of going to our digital portal, they can take an API and put it into their own technology roadmap. So we have several hundred commercial clients today that are tech-forward and using our capabilities that way. But the real power of that strategy is to go after a software platform like the pharmacy software I talked about in the presentation, and I could have done dental software, logistics software. Like there's so many of these areas that we're looking at, where I can go to one platform and then get access to their several hundred, sometimes several thousand clients underneath. And so the power of that stat in 1 month in December, that 1 client originated as many merchant mids as our entire branch network shows you the power and the scale of that strategy. So you put all those 3 ways together, and that's why we see not only the 8% long-term growth we've seen, we're starting to see a little bit of an uptick in why we've talked about high single digit, low double-digit growth in that space.

And just to reclarify similar to how you mentioned the incentive structure, for example, in terms of bringing wealth management or someone from Randy Paine's team in the room given -- to give capital markets advice or sell product, the same incentive structure is in place for payments, I presume.

Absolutely I mean it's so important to start with the fact that the client wants a holistic relationship. They want the proactive advice what we have really built rigor around is making sure that we're not only making it easy to deliver the whole thing, but we're allowing the best bankers that know how to talk through the whole product set, making it easy for them to monetize their relationships.

I wanted to touch on one of the slides that you put up and you were highlighting some of the investments that you've made in your platform. Now would you characterize these investments as differentiating, like driving differentiation versus your regional peers? Or is it closing existing gaps? And of course, I have to ask you the AI question I would like to unpack how you're thinking about the AI use case in your business.

Yes. So a couple of things. I think when you have a platform as wide as our commercial payments platform, you're going to have a mix of both, right? You're always going to have some parity that you're working on. And the reality is you don't want to be differentiated everywhere. And I think the prioritization that we put around understanding, where does the client just need good enough and that's all they care about versus where do they want it to be differentiated. We spent a lot of time in market research and talking to customers, building our backlogs and our prioritization methodology. So that's incredibly important, and we're always going to invest around making sure that we're not falling behind in any area. But places like digital where the experience they expect is constantly evolving. You're going to see from us later this year and clients will feel a full digital refresh across our platform. It will be enhanced analytics and reporting. They're going to see different payment modules. They're going to see much easier way for them to access information across their business and their accounts. So these are the type of things that we know start to set us apart. And then the vertical strategy is being able to invest in the type of partnerships that I talked about in the presentation, where we start with the client need, work backwards and say, if we don't have that capability today, are we the best builder of it? If the answer is no, then I'm going to go find one out in the marketplace, and that's generally how we started 10 years ago, our fintech strategy, that's been a very profitable good growth business for us. So we'll continue to lean in there. And then Embedded Banking, as I said before, it's just a place where we see tremendous tailwinds. We like how we're positioned there and we'll continue to lean in. And the AI. The AI piece. Look, there's tremendous potential in AI. And I will tell you, talking to my clients and then looking inside the bank itself, I've never seen a technology, in my career, get this pervasive, this fast. Our clients have proof-of-concepts in their own businesses, regardless if they're metal bender, they're a law firm, a real estate firm. Everybody is already starting to ring-fence use cases. In our own business, commercial servicing is a place where when you think through the number of manual touch points to take a request in from a customer, and get all the way into our back-end systems. There is so much latency in that. There's so many manual decisions that are occurring there. And I can tell you, we are live in production with multiple agents right now in a proof-of-concept to be able to start to take some of the friction out of that. So it will take time to make sure that we do it right. Service and expertise is how we win in the marketplace. So we're not going to make a mistake here, but I think the upside is pretty interesting.

Ken, you also showed us some impressive stats on operating deposits, deposit growth. There's been a lot of us around stable coins and tokenized deposits. What is your focus here? And what's both the short-term and the long-term impact and outlook for the industry and particularly for the Middle Market Key customer base.

Yes. I'm afraid I don't have a great answer here, but I think the time that we've spent in the payments ecosystem as long as we have, we know the thought leaders in this space. We know the big VC firms, we know the CEOs of the scaled fintechs that have grown up over the last decade, the processors, the networks. We have this ongoing conversation with all of them. So we're doing our market research around that. We're involved in the consortiums that are out there where groups are trying to create some critical mass around it. But everything we do starts from solving a customer problem and working backwards. And I think there's some conviction starting to build around cross-border payments and a notion of where you could take expense out in that process. you're starting to see more view of could it be more efficient in settlements and workflow, in the mid-office and the back office for payments more broadly. But I can tell you it's early days. And I think a lot more of the focus has been around the legislation, rightfully so, it creates the rules of the game. So there's been a lot of energy there. But I still think we're early days in creating an outcome that fundamentally changes business for a Middle Market client. There's not a single Middle Market client that's asking for this, and most of them don't know what it is. Now that's not to say, therefore, put your head in the sand. We're doing all of the right things in all the right conversations. We were very early to the fintech game. But I need to see more conviction around true value delivery in this space before I start putting more chips on some of these use cases.

So I have to ask you before I ask you for some concluding remarks. There have been, obviously, the Cockroach episode over the fourth quarter and 2025 and then you had the Software Panic of last week. Are there any sectors that you're watching a little bit more closely from a credit standpoint?

Yes. I mean I think what we love about the Middle Market book is it's just highly diversified, right? We're in every industry in a bunch of different geographies. So when we look across our business, I can tell you that I don't feel like there are any concentrations that I need to be worried about. That said, right, we're constantly looking through the book. We're running analytics on the book. The areas that still have some pressure are the ones that have had pressure over the last year or 2. Agriculture because of commodity prices, health care because of reimbursement rates and consumer responsibility and some of the bad debt associated with that. And probably consumer goods, where it's just a lower margin industry generally, and you have more components coming from overseas. So they've had a little bit more impact on the tariff side. But I think those are the areas we're watching. But again, when I look at my criticized assets, when I look at NPLs and I look at charge-offs, all trending in a really good direction even those industries, although they're a little bit higher than some of the others.

So concluding question, and I'll see if there's any questions from the audience. You laid out a very sort of organized and neat thought process for investors to take away from the -- for the Commercial Banking business. But what do you think is the top one or two most underrated things about your business that you wish resonated better with investors.

I think if I brought you all out into the marketplace in front of a bunch of our Middle Market customers, you'd realize how good this platform is. A lot of people say that in these investor presentations, but you have to talk to a CEO of a multigenerational business to understand how we've helped them grow, overtime, in a material way, but we've also given them the capabilities they need when they need it. So they never outgrow us. There isn't a level of sophistication that we can't deliver. It's about giving them what they need in the right time.

Great. And I think we may have time for one question for Ken. Any questions in the room? I don't see any on the iPad. All right, Ken. That was nice to me. Thank you so much for joining us.

Thank you for the invitation.

Absolutely.