KeyCorp Reports Fourth Quarter 2012 Net Income of $193 Million, or $.21 per Common Share and Full Year Net Income of $827 Million, or $.88 per Common Share

Jan 24, 2013, 06:15 ET from KeyCorp

Net interest income up 7.8% from fourth quarter of 2011 to $607 million

Net interest margin expands 24 basis points to 3.37% from fourth quarter of 2011

Average total loans up 6.6% from fourth quarter of 2011 led by 20.7% commercial and industrial loan growth

Average total deposits up 7.3% from fourth quarter of 2011

Net loan charge-offs decline to 44 basis points of average total loans

Ongoing Fit for Growth efficiency initiative charges of $16 million, or $.01 per share incurred during the quarter

CLEVELAND, Jan. 24, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $193 million, or $.21 per common share, compared to $214 million, or $.23 per common share for the third quarter of 2012, and $201 million, or $.21 per common share for the fourth quarter of 2011. During the fourth quarter Key incurred $16 million, or $.01 per common share of costs associated with its previously announced Fit for Growth efficiency initiative. For 2012, net income from continuing operations attributable to Key common shareholders was $827 million, or $.88 per common share, compared to $857 million, or $.92 per common share for 2011. For 2012, Key incurred $25 million, or $.02 per common share of costs associated with its Fit for Growth efficiency initiative.

"We had a good finish to 2012," said Chairman and Chief Executive Officer Beth E. Mooney. "Our full-year results reflect success in executing on our strategies to grow loans, add additional payment capabilities to our product line in the form of credit cards and improved mobile banking, and moving forward on our efficiency initiative."

Mooney added: "Our momentum continued in the most recent quarter. The net interest margin was up 14 basis points versus the prior quarter driven by ongoing liability repricing and growth in both commercial and consumer loan balances. We also experienced significant revenue growth in our Corporate Bank from both our investment banking and commercial mortgage businesses."

"Progress continues on our efficiency initiative," said Mooney. "We ended the year with run rate savings of approximately $60 million annualized. We also continued to invest in the future revenue growth of our company by continuing to upgrade our technology to meet the needs of our clients. We remain committed to deliver on our goal of achieving an efficiency ratio in the range of 60% to 65%."

FOURTH QUARTER 2012 FINANCIAL RESULTS

  • Net interest income of $607 million, up $29 million from prior quarter
  • Net interest margin of 3.37%, up 14 basis points from prior quarter due to lower funding costs and increased loan fees
  • Continued loan growth driven by 6% quarterly increase in commercial, financial and agricultural loans
  • Average deposits increased 2% from prior quarter
  • Noninterest expense increased $22 million from prior quarter, of which $10 million was associated with Fit for Growth efficiency initiative
  • Provision for loan and lease losses decreased $52 million from the third quarter of 2012
  • Net loan charge-offs decreased $51 million from prior quarter to .44% of average loans, the lowest level since third quarter of 2007
  • Maintained solid balance sheet with Tier 1 common equity of 11.16%

Selected Financial Highlights

dollars in millions, except per share data

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Income (loss) from continuing operations attributable to Key common shareholders

$

193

$

214

$

201

(9.8)

%

(4.0)

%

Income (loss) from continuing operations attributable to Key common shareholders per

common share

.21

.23

.21

(8.7)

-

Return on average total assets from continuing operations

.97

%

1.08

%

1.01

%

N/A

N/A

Tier 1 common equity

11.16

11.30

11.26

N/A

N/A

Book value at period end

$

10.78

$

10.64

$

10.09

1.3

%

6.8

%

Net interest margin (TE) from continuing operations

3.37

%

3.23

%

3.13

%

N/A

N/A

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Net interest income (TE)

$

607

$

578

$

563

5.0

%

7.8

%

Noninterest income

466

544

414

(14.3)

12.6

Total revenue

$

1,073

$

1,122

$

977

(4.4)

%

9.8

%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $607 million for the fourth quarter of 2012, and the net interest margin was 3.37%. These results compare to taxable-equivalent net interest income of $563 million and a net interest margin of 3.13% for the fourth quarter of 2011. The increase in net interest income and the net interest margin was primarily a result of a change in funding mix from the redemption of certain trust preferred securities, maturity of long-term debt, and maturity of higher-costing certificates of deposit during the past year.

Compared to the third quarter of 2012, taxable-equivalent net interest income increased by $29 million, and the net interest margin improved by 14 basis points. The improvement was driven largely by lower funding costs, resulting from an increase in demand and non-time interest-bearing deposits, and maturity of higher rate certificates of deposit. In addition, Key experienced an increase in loan-related fees compared to the third quarter when the Company wrote-off capitalized loan origination costs of $13 million as a result of the early termination of leveraged leases.

Noninterest Income

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Trust and investment services income

$

104

$

106

$

104

(1.9)

%

N/M

Service charges on deposit accounts

75

74

70

1.4

7.1

%

Operating lease income

16

17

25

(5.9)

(36.0)

Letter of credit and loan fees

59

52

56

13.5

5.4

Corporate-owned life insurance income

36

26

35

38.5

2.9

Electronic banking fees

18

18

18

N/M

N/M

Gains on leased equipment

2

46

9

(95.7)

(77.8)

Insurance income

14

13

11

7.7

27.3

Net gains (losses) from loan sales

57

39

27

46.2

111.1

Net gains (losses) from principal investing

2

11

(8)

(81.8)

N/M

Investment banking and capital markets income (loss)

47

38

24

23.7

95.8

Other income

36

104

43

(65.4)

(16.3)

Total noninterest income

$

466

$

544

$

414

(14.3)

%

12.6

%

N/M = Not Meaningful

Key's noninterest income was $466 million for the fourth quarter of 2012, compared to $414 million for the year-ago quarter. Net gains (losses) from loan sales increased $30 million from the year-ago quarter due to an increase in volume in Key's commercial mortgage banking business. Investment banking and capital markets income also increased $23 million from one year ago. The fourth quarter of 2011 included a $24 million charge resulting from VISA's announcement of a planned increase to its litigation escrow deposit.

Compared to the third quarter of 2012, noninterest income decreased by $78 million. Other income declined $68 million, primarily due to a $54 million gain associated with the redemption of certain trust preferred securities in the third quarter of 2012. Gains on leased equipment also decreased $44 million, primarily related to the early terminations of leveraged leases in the third quarter of 2012. These decreases in noninterest income were partially offset by increases in net gains (losses) from loan sales of $18 million, corporate-owned life insurance income of $10 million, investment banking and capital markets income of $9 million, and letter of credit and loan fees of $7 million.

Noninterest Expense

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Personnel expense

$

433

$

411

$

387

5.4

%

11.9

%

Nonpersonnel expense

323

323

330

N/M

(2.1)

Total noninterest expense

$

756

$

734

$

717

3.0

%

5.4

%

N/M = Not Meaningful

Key's noninterest expense was $756 million for the fourth quarter of 2012, compared to $717 million for the same period last year. Personnel expense increased $46 million due to several factors - an increase in contract labor for technology investments attributable to the previously announced credit card portfolio acquisitions and related implementation of new payment systems and merchant services processing; higher employee benefits due to an increase in medical claims expense and an adjustment to the annual retirement contribution accrual; and severance expense associated with Key's Fit for Growth efficiency initiative. Nonpersonnel expense decreased $7 million from one year ago. Operating lease expense, other real estate owned (OREO) and marketing expense decreased from the year ago quarter. These declines were partially offset by an increase of $11 million related to the amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously announced credit card portfolio as well as the branches in Western New York.

Compared to the third quarter of 2012, noninterest expense increased by $22 million due to increases in personnel expense. Salaries were up due to the previously discussed technology investment spend along with an increase in employee benefits due to higher medical claims expense and an adjustment to the annual retirement contribution accrual. Severance expense also increased as a result of Key's Fit for Growth efficiency initiative. Nonpersonnel expense in total was unchanged from the third quarter of 2012.

BALANCE SHEET HIGHLIGHTS

As of December 31, 2012, Key had total assets of $89.2 billion compared to $87.0 billion at September 30, 2012, and $88.8 billion at December 31, 2011.

Average Loans

dollars in millions

Change 12-31-12 vs.

12-31-12

9-30-12

12-31-11

9-30-12

12-31-11

Commercial, financial and agricultural (a)

$

22,436

$

21,473

$

18,590

4.5

%

20.7

%

Other commercial loans

13,494

13,605

15,185

(.8)

(11.1)

Total home equity loans

10,218

10,202

9,833

.2

3.9

Other consumer loans

5,711

5,415

5,056

5.5

13.0

Total loans

$

51,859

$

50,695

$

48,664

2.3

%

6.6

%

(a) Commercial, financial and agricultural average balance for the three months ended December 31, 2012 and September 30, 2012 includes $90 million and $54 million of assets from commercial credit cards, respectively.

Average loans were $51.9 billion for the fourth quarter of 2012, an increase of $3.2 billion compared to the fourth quarter of 2011. Commercial, financial and agricultural loans grew by $3.8 billion over the year-ago quarter, with strong growth across Key's corporate and middle market segments. In addition, the third quarter 2012 credit card portfolio and Western New York branch acquisitions added $1 billion of mostly consumer loans. This growth was partially offset by managed declines in the commercial real estate portfolio, the equipment lease portfolio, which included the early termination of certain leveraged leases in the exit portfolio, and run-off of consumer loans in the designated exit portfolio.

Compared to the third quarter of 2012, average loans increased by $1.2 billion. Much of the growth in loans was attributable to a $759 million increase in commercial and industrial lending within the commercial, financial and agricultural loan category. In addition, the full fourth quarter impact of the third quarter 2012 credit card portfolio acquisitions added $257 million to average loans.

Key originated approximately $10.2 billion in new or renewed lending commitments to consumers and businesses during the fourth quarter of 2012 and $37.8 billion for 2012.

Average Deposits

dollars in millions

Change 12-31-12 vs.

12-31-12

9-30-12

12-31-11

9-30-12

12-31-11

Non-time deposits

$

56,229

$

54,098

$

48,800

3.9

%

15.2

%

Certificates of deposits ($100,000 or more)

2,992

3,420

4,275

(12.5)

(30.0)

Other time deposits

4,714

5,158

6,505

(8.6)

(27.5)

Total deposits

$

63,935

$

62,676

$

59,580

2.0

%

7.3

%

Cost of interest-bearing deposits

.47

%

.57

%

.82

%

N/A

N/A

N/A = Not Applicable

Average deposits totaled $63.9 billion for the fourth quarter of 2012, an increase of $4.4 billion compared to the year-ago quarter. The growth reflects an increase in demand deposits of $3.4 billion and the impact of Key's third quarter 2012 Western New York branch acquisition, which added $2 billion of mostly interest-bearing non-time deposits.

Compared to the third quarter of 2012, average deposits increased by $1.3 billion. The growth was largely due to an increase of $1 billion in demand deposits.

ASSET QUALITY

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Net loan charge-offs

$

58

$

109

$

105

(46.8)

%

(44.8)

%

Net loan charge-offs to average loans

.44

%

.86

%

.86

%

N/A

N/A

Nonperforming loans at period end (a)

$

674

$

653

$

727

3.2

(7.3)

Nonperforming assets at period end

735

718

859

2.4

(14.4)

Allowance for loan and lease losses

888

888

1,004

-

(11.6)

%

Allowance for loan and lease losses to nonperforming loans

132

%

136

%

138

%

N/A

N/A

Provision (credit) for loan and lease losses

$

57

$

109

$

(22)

(47.7)

%

N/M

(a) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

N/A = Not Applicable, N/M = Not Meaningful

Key's provision for loan and lease losses was $57 million for the fourth quarter of 2012, compared to $109 million for the third quarter of 2012 and a credit of $22 million for the year-ago quarter. Key's allowance for loan and lease losses was $888 million, or 1.68% of total period-end loans at December 31, 2012, compared to 1.73% at September 30, 2012, and 2.03% at December 31, 2011.

Net loan charge-offs for the fourth quarter of 2012 totaled $58 million, or .44% of average loans. These results compare to $109 million, or .86% for the third quarter of 2012, and $105 million, or .86% for the same period last year. The third quarter of 2012 included $45 million of incremental net loan charge-offs reported in accordance with updated regulatory guidance. Further review of the loans subject to this updated regulatory guidance was performed during the fourth quarter of 2012 and resulted in a partial home equity loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer loan portfolios.

At December 31, 2012, Key's nonperforming loans totaled $674 million and represented 1.28% of period-end portfolio loans, compared to 1.27% at September 30, 2012 and 1.47% at December 31, 2011. Nonperforming loans at December 31, 2012 included $46 million of loans related to the regulatory guidance issued in the second and third quarters of 2012. Nonperforming assets at December 31, 2012, totaled $735 million and represented 1.39% of portfolio loans and OREO and other nonperforming assets, compared to 1.39% at September 30, 2012, and 1.73% at December 31, 2011.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2012.

Capital Ratios

12-31-12

9-30-12

12-31-11

Tier 1 common equity (a), (b)

11.16

%

11.30

%

11.26

%

Tier 1 risk-based capital (a)

11.94

12.10

12.99

Total risk based capital (a)

14.86

15.17

16.51

Tangible common equity to tangible assets (b)

10.15

10.39

9.88

(a) 12-31-12 ratio is estimated.

(b) The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

As shown in the preceding table, at December 31, 2012, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.16% and 11.94%, respectively. In addition, the tangible common equity ratio was 10.15% at December 31, 2012.

Summary of Changes in Common Shares Outstanding

in thousands

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Shares outstanding at beginning of period

936,195

945,473

952,808

(1.0)

%

(1.7)

%

Common shares repurchased

(10,530)

(9,639)

-

N/M

N/M

Shares reissued (returned) under employee benefit plans

104

361

200

(71.2)

(48.0)

Shares outstanding at end of period

925,769

936,195

953,008

(1.1)

%

(2.9)

%

N/M = Not Meaningful

As previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2012 capital plan submitted to the Federal Reserve and not objected to by the Federal Reserve, Key had authority to repurchase up to $344 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs.

During the fourth quarter of 2012, Key completed $89 million of Common Share repurchases. Following completion of these repurchases, Key has remaining authority to repurchase up to $88 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs. Key's existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.

Major Business Segments

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Revenue from continuing operations (TE)

Key Community Bank

$

567

$

576

$

546

(1.6)

%

3.8

%

Key Corporate Bank

424

392

412

8.2

2.9

Other segments

86

160

43

(46.3)

100.0

Total segments

1,077

1,128

1,001

(4.5)

7.6

Reconciling items

(4)

(6)

(24)

N/M

N/M

Total

$

1,073

$

1,122

$

977

(4.4)

%

9.8

%

Income (loss) from continuing operations attributable to Key

Key Community Bank

$

31

$

(23)

$

40

N/M

(22.5)

%

Key Corporate Bank

130

118

156

10.2

%

(16.7)

Other segments

43

102

23

(57.8)

87.0

Total segments

204

197

219

3.6

(6.8)

Reconciling items

(5)

22

(12)

N/M

N/M

Total

$

199

$

219

$

207

(9.1)

%

(3.9)

%

TE = Taxable equivalent, N/M = Not Meaningful

Key Community Bank

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Summary of operations

Net interest income (TE)

$

370

$

365

$

365

1.4

%

1.4

%

Noninterest income

197

211

181

(6.6)

8.8

Total revenue (TE)

567

576

546

(1.6)

3.8

Provision (credit) for loan and lease losses

23

120

30

(80.8)

(23.3)

Noninterest expense

529

512

476

3.3

%

11.1

Income (loss) before income taxes (TE)

15

(56)

40

N/M

(62.5)

Allocated income taxes (benefit) and TE adjustments

(16)

(33)

-

N/M

N/M

Net income (loss) attributable to Key

$

31

$

(23)

$

40

N/M

(22.5)

%

Average balances

Loans and leases

$

29,252

$

28,386

$

26,406

3.1

%

10.8

%

Total assets

33,086

32,136

29,867

3.0

10.8

Deposits

50,123

49,537

48,076

1.2

4.3

Assets under management at period end

$

22,334

$

21,988

$

17,938

1.6

%

24.5

%

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Community Bank Data

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Noninterest income

Trust and investment services income

$

50

$

51

$

45

(2.0)

%

11.1

%

Service charges on deposit accounts

61

62

59

(1.6)

3.4

Electronic banking fees

18

18

18

-

-

Other noninterest income

68

80

59

(15.0)

15.3

Total noninterest income

$

197

$

211

$

181

(6.6)

%

8.8

%

Average deposit balances

NOW and money market deposit accounts

$

25,765

$

25,072

$

22,524

2.8

%

14.4

%

Savings deposits

2,403

2,373

1,959

1.3

22.7

Certificates of deposit ($100,000 or more)

2,623

2,941

3,639

(10.8)

(27.9)

Other time deposits

4,703

5,137

6,491

(8.4)

(27.5)

Deposits in foreign office

355

344

393

3.2

(9.7)

Noninterest-bearing deposits

14,274

13,670

13,070

4.4

9.2

Total deposits

$

50,123

$

49,537

$

48,076

1.2

%

4.3

%

Home equity loans

Average balance

$

9,807

$

9,734

$

9,280

Weighted-average loan-to-value ratio (at date of origination)

70

%

71

%

70

%

Percent first lien positions

55

54

53

Other data

Branches

1,088

1,087

1,058

Automated teller machines

1,611

1,620

1,579

Key Community Bank Summary of Operations

  • Six consecutive quarters of average loan growth
  • Core deposits up $4.9 billion, or 12.8% from the prior year and $1.3 billion, or 3.2% from the prior quarter

Key Community Bank recorded net income attributable to Key of $31 million for the fourth quarter of 2012, compared to $40 million for the year-ago quarter.

Taxable-equivalent net interest income increased by $5 million, or 1.4% from the fourth quarter of 2011. Average loans and leases grew 10.8% while average deposits increased 4.3% from one year ago. The Western New York branch and credit card portfolio acquisitions contributed $33 million to net interest income, $1 billion to average loans and leases, and $2 billion to deposits. The positive contribution to net interest income from the acquisitions was partially offset by a lower earnings credit applied to deposits in the current period compared to the same period one year ago.

Noninterest income increased by $16 million, or 8.8% from the year-ago quarter. Credit card and merchant fees increased $9 million due to the acquisition of the credit card portfolio in the third quarter of 2012. Trust and investment services income increased $5 million, primarily due to an increase in assets under management resulting from market appreciation and increased production. Service charges on deposit accounts also increased $2 million.

The provision for loan and lease losses decreased by $7 million, or 23.3% compared to the fourth quarter of 2011, primarily as a result of lower net loan charge-offs from the same period one year ago. Net loan charge-offs were $12 million for the fourth quarter of 2012, down $59 million from the same period one year ago.

Noninterest expense increased by $53 million, or 11.1% from the year-ago quarter. Key's third quarter 2012 Western New York branch and credit card portfolio acquisitions contributed $30 million to the increase in noninterest expense spread across several expense categories, including personnel, loan servicing and intangible amortization expense, which increased $11 million. Personnel expense, excluding the impact of acquisitions, was $8 million higher than one year ago. Various other miscellaneous expenses also increased from the same period one year ago.

Key Corporate Bank

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Summary of operations

Net interest income (TE)

$

188

$

182

$

177

3.3

%

6.2

%

Noninterest income

236

210

235

12.4

.4

Total revenue (TE)

424

392

412

8.2

2.9

Provision (credit) for loan and lease losses

11

(3)

(61)

N/M

N/M

Noninterest expense

206

209

228

(1.4)

(9.6)

Income (loss) before income taxes (TE)

207

186

245

11.3

(15.5)

Allocated income taxes and TE adjustments

77

68

89

13.2

(13.5)

Net income (loss) attributable to Key

$

130

$

118

$

156

10.2

%

(16.7)

%

Average balances

Loans and leases

$

19,477

$

18,886

$

17,784

3.1

%

9.5

%

Loans held for sale

538

441

356

22.0

51.1

Total assets

23,461

22,914

21,811

2.4

7.6

Deposits

13,672

12,873

11,162

6.2

22.5

Assets under management at period end

$

28,340

$

27,682

$

33,794

2.4

%

(16.1)

%

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

dollars in millions

Change 4Q12 vs.

4Q12

3Q12

4Q11

3Q12

4Q11

Noninterest income

Trust and investment services income

$

55

$

56

$

58

(1.8)

%

(5.2)

%

Investment banking and debt placement fees (a)

109

82

62

32.9

75.8

Operating lease income and other leasing gains (b)

18

20

26

(10.0)

(30.8)

Corporate services income (c)

30

27

44

11.1

(31.8)

Other noninterest income

24

25

45

(4.0)

(46.7)

Total noninterest income

$

236

$

210

$

235

12.4

%

.4

%

(a)

Included in "Investment banking and capital markets income (loss)," "Net gains (losses) from loan sales," and "Letter of credit and loan fees" on the Consolidated Statements of Income.

(b)

Included in "Operating lease income" and "Gains on leased equipment" on the Consolidated Statements of Income.

(c)

Included in "Service charges on deposit accounts," "Letter of credit and loan fees," and "Investment banking and capital markets income (loss)" on the Consolidated Statements of Income.

Key Corporate Bank Summary of Operations

  • Investment banking and debt placement fees were $109 million for the fourth quarter of 2012, up $47 million, or 75.8% from the prior year and up $27 million, or 32.9% from the prior quarter
  • Average loan balances up 9.5% from the prior year and 3.1% from the prior quarter
  • Average deposits up 22.5% from the prior year and 6.2% from the prior quarter

Key Corporate Bank recorded net income attributable to Key of $130 million for the fourth quarter of 2012, compared to $156 million for the same period one year ago.

Taxable-equivalent net interest income increased by $11 million, or 6.2% compared to the fourth quarter of 2011. Average earning assets increased $1.7 billion, or 8.9% from the year-ago quarter, and average deposit balances increased $2.5 billion, or 22.5% from the year-ago quarter, contributing to the improvement in net interest income.

Noninterest income increased by $1 million, or .4% from the fourth quarter of 2011. Net gains (losses) from loan sales from commercial mortgage banking activities in the Real Estate Capital line of business increased $30 million. This increase was offset by a $23 million decline in other income due to gains realized in the fourth quarter of 2011 related to the disposition of certain investments held by the Real Estate Capital line of business and a $7 million decrease in operating lease revenue compared to the year-ago quarter.

The provision for loan and lease losses in the fourth quarter of 2012 was a charge of $11 million compared to a credit of $61 million for the same period one year ago. Net loan charge-offs were $21 million for the fourth quarter of 2012, up $9 million from the same period one year ago.

Noninterest expense decreased by $22 million, or 9.6% from the fourth quarter of 2011. Contributing to the decline in noninterest expense were decreases in personnel expense of $7 million, operating lease expense of $4 million, and other miscellaneous expenses of $8 million. In addition, the provision (credit) for losses on lending-related commitments was a credit of $16 million compared to a credit of $10 million one year ago.

Other Segments

Other Segments consist of Corporate Treasury, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $43 million for the fourth quarter of 2012, compared to net income attributable to Key of $23 million for the same period last year. These results were primarily attributable to increases in net interest income of $31 million and net gains (losses) from principal investing of $10 million, partially offset by an increase in the loan and lease loss provision of $16 million.

*****

KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key had assets of approximately $89.2 billion at December 31, 2012.

Key provides deposit, lending, cash management and investment services to individuals, small and mid-sized businesses in 14 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control. Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Annual Report on Form 10-K for the year ended December 31, 2011, its Quarterly Reports on Form 10-Q for the periods ended March 31, 2012, June 30, 2012, and September 30, 2012, each of which have been filed with the Securities and Exchange Commission and are available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Notes to Editors:

A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, January 24, 2013. An audio replay of the call will be available through January 31, 2013.

For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

*****

Financial Highlights

(dollars in millions, except per share amounts)

Three months ended

12-31-12

9-30-12

12-31-11

Summary of operations

Net interest income (TE)

$

607

$

578

$

563

Noninterest income

466

544

414

Total revenue (TE)

1,073

1,122

977

Provision (credit) for loan and lease losses

57

109

(22)

Noninterest expense

756

734

717

Income (loss) from continuing operations attributable to Key

199

219

207

Income (loss) from discontinued operations, net of taxes (b)

4

-

(7)

Net income (loss) attributable to Key

203

219

200

Income (loss) from continuing operations attributable to Key common shareholders

$

193

$

214

$

201

Income (loss) from discontinued operations, net of taxes (b)

4

-

(7)

Net income (loss) attributable to Key common shareholders

197

214

194

Per common share

Income (loss) from continuing operations attributable to Key common shareholders

$

.21

$

.23

$

.21

Income (loss) from discontinued operations, net of taxes (b)

-

-

(.01)

Net income (loss) attributable to Key common shareholders (e)

.21

.23

.20

Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution

.21

.23

.21

Income (loss) from discontinued operations, net of taxes - assuming dilution (b)

-

-

(.01)

Net income (loss) attributable to Key common shareholders - assuming dilution (e)

.21

.23

.20

Cash dividends paid

.05

.05

.03

Book value at period end

10.78

10.64

10.09

Tangible book value at period end

9.67

9.54

9.11

Market price at period end

8.42

8.74

7.69

Performance ratios

From continuing operations:

Return on average total assets

.97

%

1.08

%

1.01

%

Return on average common equity

7.70

8.57

8.26

Return on average tangible common equity (a)

8.59

9.56

9.15

Net interest margin (TE)

3.37

3.23

3.13

Cash efficiency ratio (a)

69.34

64.62

73.29

From consolidated operations:

Return on average total assets

.93

%

1.01

%

.91

%

Return on average common equity

7.86

8.57

7.97

Return on average tangible common equity (a)

8.77

9.56

8.83

Net interest margin (TE)

3.29

3.14

3.04

Loan to deposit (d)

85.77

86.24

87.00

Capital ratios at period end

Key shareholders' equity to assets

11.51

%

11.79

%

11.16

%

Tangible Key shareholders' equity to tangible assets

10.48

10.73

10.21

Tangible common equity to tangible assets (a)

10.15

10.39

9.88

Tier 1 common equity (a), (c)

11.16

11.30

11.26

Tier 1 risk-based capital (c)

11.94

12.10

12.99

Total risk-based capital (c)

14.86

15.17

16.51

Leverage (c)

11.37

11.37

11.79

Asset quality - from continuing operations

Net loan charge-offs

$

58

$

109

$

105

Net loan charge-offs to average loans

.44

%

.86

%

.86

%

Allowance for loan and lease losses to annualized net loan charge-offs

384.85

204.78

241.01

Allowance for loan and lease losses

$

888

$

888

$

1,004

Allowance for credit losses

917

931

1,049

Allowance for loan and lease losses to period-end loans

1.68

%

1.73

%

2.03

%

Allowance for credit losses to period-end loans

1.74

1.81

2.12

Allowance for loan and lease losses to nonperforming loans

131.75

135.99

138.10

Allowance for credit losses to nonperforming loans

136.05

142.57

144.29

Nonperforming loans at period end (f)

$

674

$

653

$

727

Nonperforming assets at period end

735

718

859

Nonperforming loans to period-end portfolio loans

1.28

%

1.27

%

1.47

%

Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets

1.39

1.39

1.73

Trust and brokerage assets

Assets under management

$

50,674

$

49,670

$

51,732

Nonmanaged and brokerage assets

25,197

24,220

30,639

Other data

Average full-time equivalent employees

15,589

15,833

15,381

Branches

1,088

1,087

1,058

Taxable-equivalent adjustment

$

6

$

6

$

6

Financial Highlights (continued)

(dollars in millions, except per share amounts)

Twelve months ended

12-31-12

12-31-11

Summary of operations

Net interest income (TE)

$

2,288

$

2,292

Noninterest income

1,967

1,808

Total revenue (TE)

4,255

4,100

Provision (credit) for loan and lease losses

229

(60)

Noninterest expense

2,907

2,790

Income (loss) from continuing operations attributable to Key

849

964

Income (loss) from discontinued operations, net of taxes (b)

9

(44)

Net income (loss) attributable to Key

858

920

Income (loss) from continuing operations attributable to Key common shareholders

$

827

$

857

Income (loss) from discontinued operations, net of taxes (b)

9

(44)

Net income (loss) attributable to Key common shareholders

836

813

Per common share

Income (loss) from continuing operations attributable to Key common shareholders

$

.88

$

.92

Income (loss) from discontinued operations, net of taxes (b)

.01

(.05)

Net income (loss) attributable to Key common shareholders (e)

.89

.87

Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution

.88

.92

Income (loss) from discontinued operations, net of taxes - assuming dilution (b)

.01

(.05)

Net income (loss) attributable to Key common shareholders - assuming dilution (e)

.89

.87

Cash dividends paid

.18

.10

Performance ratios

From continuing operations:

Return on average total assets

1.05

%

1.17

%

Return on average common equity

8.39

9.26

Net interest margin (TE)

3.21

3.16

From consolidated operations:

Return on average total assets

.99

%

1.04

%

Return on average common equity

8.48

8.79

Net interest margin (TE)

3.13

3.09

Asset quality - from continuing operations

Net loan charge-offs

$

345

$

541

Net loan charge-offs to average loans

.69

%

1.11

%

Other data

Average full-time equivalent employees

15,589

15,381

Taxable-equivalent adjustment

$

24

$

25

(a) The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity," "Tier 1 common equity," and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(b) In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. As a result of these decisions, Key has accounted for these businesses as discontinued operations.

(c) 12-31-12 ratio is estimated.

(d) Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).

(e) Earnings per share may not foot due to rounding.

(f) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

GAAP to Non-GAAP Reconciliations

(dollars in millions)

The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," and "cash efficiency ratio."

The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories.

Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors to assist in the development of their earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

Three months ended

12-31-12

9-30-12

12-31-11

Tangible common equity to tangible assets at period end

Key shareholders' equity (GAAP)

$

10,271

$

10,251

$

9,905

Less:

Intangible assets (a)

1,027

1,031

934

Preferred Stock, Series A

291

291

291

Tangible common equity (non-GAAP)

$

8,953

$

8,929

$

8,680

Total assets (GAAP)

$

89,236

$

86,950

$

88,785

Less:

Intangible assets (a)

1,027

1,031

934

Tangible assets (non-GAAP)

$

88,209

$

85,919

$

87,851

Tangible common equity to tangible assets ratio (non-GAAP)

10.15

%

10.39

%

9.88

%

Tier 1 common equity at period end

Key shareholders' equity (GAAP)

$

10,271

$

10,251

$

9,905

Qualifying capital securities

339

339

1,046

Less:

Goodwill

979

979

917

Accumulated other comprehensive income (loss) (b)

(172)

(109)

(72)

Other assets (c)

117

121

72

Total Tier 1 capital (regulatory)

9,686

9,599

10,034

Less:

Qualifying capital securities

339

339

1,046

Preferred Stock, Series A

291

291

291

Total Tier 1 common equity (non-GAAP)

$

9,056

$

8,969

$

8,697

Net risk-weighted assets (regulatory) (c), (d)

$

81,150

$

79,363

$

77,214

Tier 1 common equity ratio (non-GAAP) (d)

11.16

%

11.30

%

11.26

%

Pre-provision net revenue

Net interest income (GAAP)

$

601

$

572

$

557

Plus:

Taxable-equivalent adjustment

6

6

6

Noninterest income

466

544

414

Less:

Noninterest expense

756

734

717

Pre-provision net revenue from continuing operations (non-GAAP)

$

317

$

388

$

260

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

Three months ended

12-31-12

9-30-12

12-31-11

Average tangible common equity

Average Key shareholders' equity (GAAP)

$

10,261

$

10,222

$

9,943

Less:

Intangible assets (average) (a)

1,030

1,026

934

Preferred Stock, Series A (average)

291

291

291

Average tangible common equity (non-GAAP)

$

8,940

$

8,905

$

8,718

Return on average tangible common equity from continuing operations

Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)

$

193

$

214

$

201

Average tangible common equity (non-GAAP)

8,940

8,905

8,718

Return on average tangible common equity from continuing operations (non-GAAP)

8.59

%

9.56

%

9.15

%

Return on average tangible common equity consolidated

Net income (loss) attributable to Key common shareholders (GAAP)

$

197

$

214

$

194

Average tangible common equity (non-GAAP)

8,940

8,905

8,718

Return on average tangible common equity consolidated (non-GAAP)

8.77

%

9.56

%

8.83

%

Cash efficiency ratio

Noninterest expense (GAAP)

$

756

$

734

$

717

Less:

Intangible asset amortization on credit cards

8

6

-

Other intangible asset amortization

4

3

1

Adjusted noninterest expense (non-GAAP)

$

744

$

725

$

716

Net interest income (GAAP)

$

601

$

572

$

557

Plus:

Taxable-equivalent adjustment

6

6

6

Noninterest income

466

544

414

Total taxable-equivalent revenue (non-GAAP)

$

1,073

$

1,122

$

977

Cash efficiency ratio (non-GAAP)

69.34

%

64.62

%

73.29

%

Three months ended

12-31-12

9-30-12

Tier 1 common equity under Basel III (estimates)

Tier 1 common equity under Basel I

$

9,056

$

8,969

Adjustments from Basel I to Basel III:

Cumulative other comprehensive income (e)

(197)

(145)

Deferred tax assets (f)

(80)

(72)

Tier 1 common equity anticipated under Basel III

$

8,779

$

8,752

Total risk-weighted assets under Basel I

$

81,150

$

79,363

Adjustments from Basel I to Basel III:

Market risk impact

1,225

579

Loan commitments less than one year

952

1,127

Residential mortgage and home equity loans

1,855

1,855

Other

1,173

1,119

Total risk-weighted assets under Basel III (g)

$

86,355

$

84,043

Tier 1 common equity ratio under Basel III

10.17

%

10.41

%

(a) Three months ended December 31, 2012 and September 30, 2012 exclude $123 million and $130 million, respectively, of period end purchased credit card receivable intangible assets. Three months ended December 31, 2012 and September 30, 2012 exclude $126 million and $86 million, respectively, of average ending purchased credit card receivable intangible assets.

(b) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans.

(c) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at December 31, 2012, September 30, 2012, and December 31, 2011.

(d) 12-31-12 amount is estimated.

(e) Includes AFS mark-to-market, cash flow hedges on items recognized at fair value on the balance sheet, and defined benefit pension liability.

(f) Deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards.

(g) The amount of regulatory capital and risk-weighted assets estimated under Basel III (as fully phased-in on January 1, 2019) is based upon the federal banking agencies' notice of proposed rulemaking, which implement Basel III and the Standardized Approach.

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets

(dollars in millions)

12-31-12

9-30-12

12-31-11

Assets

Loans

$

52,822

$

51,419

$

49,575

Loans held for sale

599

628

728

Securities available for sale

12,094

11,962

16,012

Held-to-maturity securities

3,931

4,153

2,109

Trading account assets

605

663

623

Short-term investments

3,940

2,208

3,519

Other investments

1,064

1,106

1,163

Total earning assets

75,055

72,139

73,729

Allowance for loan and lease losses

(888)

(888)

(1,004)

Cash and due from banks

585

974

694

Premises and equipment

965

942

944

Operating lease assets

288

290

350

Goodwill

979

979

917

Other intangible assets

171

182

17

Corporate-owned life insurance

3,333

3,309

3,256

Derivative assets

693

771

945

Accrued income and other assets

2,801

2,871

3,077

Discontinued assets

5,254

5,381

5,860

Total assets

$

89,236

$

86,950

$

88,785

Liabilities

Deposits in domestic offices:

NOW and money market deposit accounts

$

32,380

$

30,573

$

27,954

Savings deposits

2,433

2,393

1,962

Certificates of deposit ($100,000 or more)

2,879

3,226

4,111

Other time deposits

4,575

4,941

6,243

Total interest-bearing deposits

42,267

41,133

40,270

Noninterest-bearing deposits

23,319

22,486

21,098

Deposits in foreign office - interest-bearing

407

569

588

Total deposits

65,993

64,188

61,956

Federal funds purchased and securities

sold under repurchase agreements

1,609

1,746

1,711

Bank notes and other short-term borrowings

287

388

337

Derivative liabilities

584

657

1,026

Accrued expense and other liabilities

1,425

1,238

1,763

Long-term debt

6,847

6,119

9,520

Discontinued liabilities

2,182

2,335

2,550

Total liabilities

78,927

76,671

78,863

Equity

Preferred stock, Series A

291

291

291

Common shares

1,017

1,017

1,017

Capital surplus

4,126

4,118

4,194

Retained earnings

6,913

6,762

6,246

Treasury stock, at cost

(1,952)

(1,868)

(1,815)

Accumulated other comprehensive income (loss)

(124)

(69)

(28)

Key shareholders' equity

10,271

10,251

9,905

Noncontrolling interests

38

28

17

Total equity

10,309

10,279

9,922

Total liabilities and equity

$

89,236

$

86,950

$

88,785

Common shares outstanding (000)

925,769

936,195

953,008

Consolidated Statements of Income

(dollars in millions, except per share amounts)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Interest income

Loans

$

563

$

538

$

542

$

2,155

$

2,206

Loans held for sale

5

5

4

20

14

Securities available for sale

85

93

128

399

583

Held-to-maturity securities

19

21

9

69

12

Trading account assets

3

4

5

18

26

Short-term investments

2

1

1

6

6

Other investments

11

9

9

38

42

Total interest income

688

671

698

2,705

2,889

Interest expense

Deposits

49

60

85

257

390

Federal funds purchased and securities sold under repurchase agreements

1

1

1

4

5

Bank notes and other short-term borrowings

2

1

2

7

11

Long-term debt

35

37

53

173

216

Total interest expense

87

99

141

441

622

Net interest income

601

572

557

2,264

2,267

Provision (credit) for loan and lease losses

57

109

(22)

229

(60)

Net interest income (expense) after provision for loan and lease losses

544

463

579

2,035

2,327

Noninterest income

Trust and investment services income

104

106

104

421

434

Service charges on deposit accounts

75

74

70

287

281

Operating lease income

16

17

25

75

122

Letter of credit and loan fees

59

52

56

221

213

Corporate-owned life insurance income

36

26

35

122

121

Net securities gains (losses) (a)

-

-

-

-

1

Electronic banking fees

18

18

18

72

114

Gains on leased equipment

2

46

9

111

25

Insurance income

14

13

11

50

53

Net gains (losses) from loan sales

57

39

27

150

75

Net gains (losses) from principal investing

2

11

(8)

72

78

Investment banking and capital markets income (loss)

47

38

24

165

134

Other income

36

104

43

221

157

Total noninterest income

466

544

414

1,967

1,808

Noninterest expense

Personnel

433

411

387

1,618

1,520

Net occupancy

69

65

66

260

258

Operating lease expense

12

13

18

57

94

Computer processing

39

43

42

166

166

Business services and professional fees

55

49

57

193

186

FDIC assessment

8

7

7

31

52

OREO expense, net

1

1

5

15

13

Equipment

27

27

25

107

103

Marketing

20

18

24

68

60

Provision (credit) for losses on lending-related commitments

(14)

(8)

(11)

(16)

(28)

Intangible asset amortization on credit cards

8

6

-

14

-

Other intangible asset amortization

4

3

1

9

4

Other expense

94

99

96

385

362

Total noninterest expense

756

734

717

2,907

2,790

Income (loss) from continuing operations before income taxes

254

273

276

1,095

1,345

Income taxes

55

52

69

239

369

Income (loss) from continuing operations

199

221

207

856

976

Income (loss) from discontinued operations, net of taxes

4

-

(7)

9

(44)

Net income (loss)

203

221

200

865

932

Less: Net income (loss) attributable to noncontrolling interests

-

2

-

7

12

Net income (loss) attributable to Key

$

203

$

219

$

200

$

858

$

920

Income (loss) from continuing operations attributable to Key common shareholders

$

193

$

214

$

201

$

827

$

857

Net income (loss) attributable to Key common shareholders

197

214

194

836

813

Per common share

Income (loss) from continuing operations attributable to Key common shareholders

$

.21

$

.23

$

.21

$

.88

$

.92

Income (loss) from discontinued operations, net of taxes

-

-

(.01)

.01

(.05)

Net income (loss) attributable to Key common shareholders (b)

.21

.23

.20

.89

.87

Per common share - assuming dilution

Income (loss) from continuing operations attributable to Key common shareholders

$

.21

$

.23

$

.21

$

.88

$

.92

Income (loss) from discontinued operations, net of taxes

-

-

(.01)

.01

(.05)

Net income (loss) attributable to Key common shareholders (b)

.21

.23

.20

.89

.87

Cash dividends declared per common share

$

.05

$

.05

$

.03

$

.18

$

.10

Weighted-average common shares outstanding (000)

925,725

936,223

948,658

938,941

931,934

Weighted-average common shares and potential common shares outstanding (000) (c)

930,382

940,764

951,684

943,259

935,801

(a)

For the three months ended December 31, 2012, September 30, 2012, and December 31, 2011, Key did not have any impairment losses related to securities.

(b)

Earnings per share may not foot due to rounding.

(c)

Assumes conversion of stock options and/or Preferred Series A shares, as applicable.

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)

Fourth Quarter 2012

Third Quarter 2012

Fourth Quarter 2011

Average

Average

Average

Balance

Interest

(a)

Yield/Rate

(a)

Balance

Interest

(a)

Yield/Rate

(a)

Balance

Interest

(a)

Yield/Rate

(a)

Assets

Loans: (b), (c)

Commercial, financial and agricultural

$

22,436

(h)

$

213

3.77

%

$

21,473

(h)

$

203

3.76

%

$

18,590

$

183

3.90

%

Real estate - commercial mortgage

7,555

82

4.35

7,463

83

4.40

8,090

92

4.48

Real estate - construction

1,070

14

4.94

1,116

12

4.55

1,380

16

4.68

Commercial lease financing

4,869

49

4.01

5,026

39

3.13

5,715

65

4.58

Total commercial loans

35,930

358

3.96

35,078

337

3.83

33,775

356

4.19

Real estate - residential mortgage

2,164

26

4.70

2,092

25

4.80

1,918

24

5.15

Home equity:

Key Community Bank

9,807

98

3.99

9,734

99

4.02

9,280

96

4.10

Other

411

9

8.23

468

9

7.73

553

11

7.68

Total home equity loans

10,218

107

4.16

10,202

108

4.19

9,833

107

4.30

Consumer other - Key Community Bank

1,339

32

9.63

1,297

32

9.65

1,191

30

9.62

Credit cards

714

23

13.15

432

17

15.38

-

-

-

Consumer other:

Marine

1,403

22

6.16

1,493

22

6.28

1,820

29

6.35

Other

91

1

8.25

101

3

8.02

127

2

7.87

Total consumer other

1,494

23

6.29

1,594

25

6.39

1,947

31

6.44

Total consumer loans

15,929

211

5.30

15,617

207

5.26

14,889

192

5.12

Total loans

51,859

569

4.37

50,695

544

4.27

48,664

548

4.47

Loans held for sale

618

5

3.47

532

5

3.28

440

4

3.36

Securities available for sale (b), (e)

11,980

84

2.95

12,608

94

3.07

16,790

128

3.16

Held-to-maturity securities (b)

4,036

19

1.94

4,251

21

1.94

1,648

9

2.12

Trading account assets

606

3

1.91

693

4

2.10

736

5

2.72

Short-term investments

2,090

2

.27

1,868

1

.24

2,929

1

.26

Other investments (e)

1,088

12

4.05

1,134

8

3.08

1,181

9

2.98

Total earning assets

72,277

694

3.85

71,781

677

3.78

72,388

704

3.90

Allowance for loan and lease losses

(898)

(883)

(1,057)

Accrued income and other assets

9,941

9,957

9,942

Discontinued assets - education lending business

5,287

5,421

5,912

Total assets

$

86,607

$

86,276

$

87,185

Liabilities

NOW and money market deposit accounts

$

31,058

14

.18

$

30,176

14

.19

$

27,722

15

.22

Savings deposits

2,408

-

.06

2,378

1

.06

1,964

-

.06

Certificates of deposit ($100,000 or more) (f)

2,992

16

2.15

3,420

22

2.53

4,275

32

2.97

Other time deposits

4,714

18

1.52

5,158

23

1.76

6,505

37

2.24

Deposits in foreign office

874

1

.21

666

-

.21

650

1

.25

Total interest-bearing deposits

42,046

49

.47

41,798

60

.57

41,116

85

.82

Federal funds purchased and securities

sold under repurchase agreements

1,702

1

.16

1,822

1

.17

1,747

1

.25

Bank notes and other short-term borrowings

306

2

1.97

390

1

1.53

471

2

1.87

Long-term debt (f), (g)

3,301

35

4.84

3,793

37

4.43

7,020

53

3.21

Total interest-bearing liabilities

47,355

87

.73

47,803

99

.83

50,354

141

1.12

Noninterest-bearing deposits

21,889

20,878

18,464

Accrued expense and other liabilities

1,781

1,928

2,496

Discontinued liabilities - education lending business (d), (g)

5,287

5,421

5,912

Total liabilities

76,312

76,030

77,226

Equity

Key shareholders' equity

10,261

10,222

9,943

Noncontrolling interests

34

24

16

Total equity

10,295

10,246

9,959

Total liabilities and equity

$

86,607

$

86,276

$

87,185

Interest rate spread (TE)

3.12

%

2.95

%

2.78

%

Net interest income (TE) and net interest margin (TE)

607

3.37

%

578

3.23

%

563

3.13

%

TE adjustment (b)

6

6

6

Net interest income, GAAP basis

$

601

$

572

$

557

(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) 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 35%.

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

(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.

(e) Yield is calculated on the basis of amortized cost.

(f) Rate calculation excludes basis adjustments related to fair value hedges.

(g) 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.

(h) Commercial, financial and agricultural average balance for the three months ended December 31, 2012, and September 30, 2012, includes $90 million and 54 million, respectively, of assets from commercial credit cards.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations

(dollars in millions)

Twelve months ended December 31, 2012

Twelve months ended December 31, 2011

Average

Average

Balance

Interest

(a)

Yield/Rate

(a)

Balance

Interest

(a)

Yield/ Rate

(a)

Assets

Loans: (b), (c)

Commercial, financial and agricultural

$

21,141

(h)

$

810

3.83

%

$

17,507

$

705

4.03

%

Real estate - commercial mortgage

7,656

339

4.43

8,437

380

4.50

Real estate - construction

1,171

56

4.74

1,677

73

4.36

Commercial lease financing

5,142

187

3.64

5,846

293

5.01

Total commercial loans

35,110

1,392

3.96

33,467

1,451

4.34

Real estate - residential mortgage

2,049

100

4.86

1,850

97

5.25

Home equity:

Key Community Bank

9,520

384

4.03

9,390

387

4.12

Other

473

37

7.81

598

46

7.66

Total home equity loans

9,993

421

4.21

9,988

433

4.34

Consumer other - Key Community Bank

1,269

121

9.53

1,167

113

9.62

Credit cards

288

40

13.99

-

-

-

Consumer other:

Marine

1,551

97

6.26

1,992

125

6.28

Other

102

8

8.14

142

11

7.87

Total consumer other

1,653

105

6.38

2,134

136

6.38

Total consumer loans

15,252

787

5.16

15,139

779

5.14

Total loans

50,362

2,179

4.33

48,606

2,230

4.59

Loans held for sale

579

20

3.45

387

14

3.58

Securities available for sale (b), (e)

13,422

399

3.08

18,766

584

3.20

Held-to-maturity securities (b)

3,511

69

1.97

514

12

2.35

Trading account assets

718

18

2.48

878

26

2.97

Short-term investments

2,116

6

.27

2,543

6

.25

Other investments (e)

1,141

38

3.27

1,264

42

3.14

Total earning assets

71,849

2,729

3.82

72,958

2,914

4.02

Allowance for loan and lease losses

(919)

(1,250)

Accrued income and other assets

9,961

10,385

Discontinued assets - education lending business

5,524

6,203

Total assets

$

86,415

$

88,296

Liabilities

NOW and money market deposit accounts

$

29,673

56

.19

$

27,001

71

.26

Savings deposits

2,218

1

.05

1,958

1

.06

Certificates of deposit ($100,000 or more) (f)

3,574

94

2.64

4,931

149

3.02

Other time deposits

5,386

104

1.92

7,185

166

2.31

Deposits in foreign office

767

2

.23

807

3

.30

Total interest-bearing deposits

41,618

257

.62

41,882

390

.93

Federal funds purchased and securities

sold under repurchase agreements

1,814

4

.19

1,981

5

.27

Bank notes and other short-term borrowings

413

7

1.69

619

11

1.84

Long-term debt (f), (g)

4,673

173

4.10

7,293

216

3.18

Total interest-bearing liabilities

48,518

441

.92

51,775

622

1.21

Noninterest-bearing deposits

20,217

17,381

Accrued expense and other liabilities

1,989

2,687

Discontinued liabilities - education lending business (d), (g)

5,524

6,203

Total liabilities

76,248

78,046

Equity

Key shareholders' equity

10,144

10,133

Noncontrolling interests

23

117

Total equity

10,167

10,250

Total liabilities and equity

$

86,415

$

88,296

Interest rate spread (TE)

2.90

%

2.81

%

Net interest income (TE) and net interest margin (TE)

2,288

3.21

%

2,292

3.16

%

TE adjustment (b)

24

25

Net interest income, GAAP basis

$

2,264

$

2,267

(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) 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 35%.

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

(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.

(e) Yield is calculated on the basis of amortized cost.

(f) Rate calculation excludes basis adjustments related to fair value hedges.

(g) 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.

(h) Commercial, financial and agricultural average balance includes $36 million of assets from commercial credit cards.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

Noninterest Income

(in millions)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Trust and investment services income (a)

$

104

$

106

$

104

$

421

$

434

Service charges on deposit accounts

75

74

70

287

281

Operating lease income

16

17

25

75

122

Letter of credit and loan fees

59

52

56

221

213

Corporate-owned life insurance income

36

26

35

122

121

Net securities gains (losses)

-

-

-

-

1

Electronic banking fees

18

18

18

72

114

Gains on leased equipment

2

46

9

111

25

Insurance income

14

13

11

50

53

Net gains (losses) from loan sales

57

39

27

150

75

Net gains (losses) from principal investing

2

11

(8)

72

78

Investment banking and capital markets income (loss) (a)

47

38

24

165

134

Other income

36

104

43

221

157

Total noninterest income

$

466

$

544

$

414

$

1,967

$

1,808

(a)

Additional detail provided in tables below.

Trust and Investment Services Income

(in millions)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Brokerage commissions and fee income

$

32

$

34

$

33

$

134

$

132

Personal asset management and custody fees

42

41

38

161

153

Institutional asset management and custody fees

30

31

33

126

149

Total trust and investment services income

$

104

$

106

$

104

$

421

$

434

Investment Banking and Capital Markets Income (Loss)

(in millions)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Investment banking income

$

34

$

32

$

25

$

111

$

92

Income (loss) from other investments

2

2

3

13

21

Dealer trading and derivatives income (loss), proprietary (a), (b)

(1)

4

(6)

(2)

(24)

Dealer trading and derivatives income (loss), nonproprietary (b)

3

(9)

(9)

6

2

Total dealer trading and derivatives income (loss)

2

(5)

(15)

4

(22)

Foreign exchange income

9

9

11

37

43

Total investment banking and capital markets income (loss)

$

47

$

38

$

24

$

165

$

134

(a)

For the quarter ended December 31, 2012, income related to foreign exchange derivatives trading and interest rate derivative trading was less than $1 million and was offset by losses from Key's credit portfolio management activities. For the quarters ended September 30, 2012, and December 31, 2011, fixed income securities trading comprised the vast majority of this amount. In these quarters, income related to foreign exchange derivative trading and interest rate derivative trading was less than $1 million and was offset by losses from Key's credit portfolio management activities.

(b)

The allocation between proprietary and nonproprietary is made based upon whether the trade is conducted for the benefit of Key or Key's clients rather than based upon the proposed rulemakings under the Volcker Rule. The prohibitions and restrictions on proprietary trading activities contemplated by the Volcker Rule and the rules proposed thereunder are not yet final. Therefore, the ultimate impact of the rules proposed under the Volcker Rule is not yet known.

Noninterest Expense

(dollars in millions)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Personnel (a)

$

433

$

411

$

387

$

1,618

$

1,520

Net occupancy

69

65

66

260

258

Operating lease expense

12

13

18

57

94

Computer processing

39

43

42

166

166

Business services and professional fees

55

49

57

193

186

FDIC assessment

8

7

7

31

52

OREO expense, net

1

1

5

15

13

Equipment

27

27

25

107

103

Marketing

20

18

24

68

60

Provision (credit) for losses on lending-related commitments

(14)

(8)

(11)

(16)

(28)

Intangible asset amortization on credit cards

8

6

-

14

-

Other intangible asset amortization

4

3

1

9

4

Other expense

94

99

96

385

362

Total noninterest expense

$

756

$

734

$

717

$

2,907

$

2,790

Average full-time equivalent employees (b)

15,589

15,833

15,381

15,589

15,381

(a) Additional detail provided in table below.

(b) The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Personnel Expense

(in millions)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Salaries

$

257

$

251

$

234

$

989

$

919

Incentive compensation

87

89

82

313

306

Employee benefits

66

55

55

242

229

Stock-based compensation

13

11

13

51

45

Severance

10

5

3

23

21

Total personnel expense

$

433

$

411

$

387

$

1,618

$

1,520

Loan Composition

(dollars in millions)

Percent change 12-31-12 vs.

12-31-12

9-30-12

12-31-11

9-30-12

12-31-11

Commercial, financial and agricultural (a)

$

23,242

$

21,979

$

19,759

5.7

%

17.6

%

Commercial real estate:

Commercial mortgage

7,720

7,529

8,037

2.5

(3.9)

Construction

1,003

1,067

1,312

(6.0)

(23.6)

Total commercial real estate loans

8,723

8,596

9,349

1.5

(6.7)

Commercial lease financing

4,915

4,960

5,674

(.9)

(13.4)

Total commercial loans

36,880

35,535

34,782

3.8

6.0

Residential - prime loans:

Real estate - residential mortgage

2,174

2,138

1,946

1.7

11.7

Home equity:

Key Community Bank

9,816

9,768

9,229

.5

6.4

Other

423

409

(d)

535

3.4

(20.9)

Total home equity loans

10,239

10,177

9,764

.6

4.9

Total residential - prime loans

12,413

12,315

11,710

.8

6.0

Consumer other - Key Community Bank

1,349

1,313

1,192

2.7

13.2

Credit cards

729

710

-

2.7

N/M

Consumer other:

Marine

1,358

1,448

1,766

(6.2)

(23.1)

Other

93

98

125

(5.1)

(25.6)

Total consumer - indirect loans

1,451

1,546

1,891

(6.1)

(23.3)

Total consumer loans

15,942

15,884

14,793

.4

7.8

Total loans (b), (c)

$

52,822

$

51,419

$

49,575

2.7

%

6.5

%

Loans Held for Sale Composition

(dollars in millions)

Percent change 12-31-12 vs.

12-31-12

9-30-12

12-31-11

9-30-12

12-31-11

Commercial, financial and agricultural

$

29

$

13

$

19

123.1

%

52.6

%

Real estate - commercial mortgage

477

484

567

(1.4)

(15.9)

Real estate - construction

-

10

35

N/M

N/M

Commercial lease financing

8

4

12

100.0

(33.3)

Real estate - residential mortgage

85

117

95

(27.4)

(10.5)

Total loans held for sale

$

599

$

628

$

728

(4.6)

%

(17.7)

%

Summary of Changes in Loans Held for Sale

(dollars in millions)

4Q12

3Q12

2Q12

1Q12

4Q11

Balance at beginning of period

$

628

$

656

$

511

$

728

$

479

New originations

1,686

1,280

1,308

935

1,235

Transfers from held to maturity, net

38

13

7

19

19

Loan sales

(1,747)

(1,311)

(1,165)

(1,168)

(932)

Loan draws (payments), net

(4)

(9)

(4)

(3)

(72)

Transfers to OREO / valuation adjustments

(2)

(1)

(1)

-

(1)

Balance at end of period

$

599

$

628

$

656

$

511

$

728

(a) December 31, 2012 and September 30, 2012 loan balances include $90 million and $88 million of commercial credit card balances, respectively.

(b) Excluded at December 31, 2012, September 30, 2012, and December 31, 2011, are loans in the amount of $5.2 billion, $5.3 billion, and $5.8 billion, respectively, related to the discontinued operations of the education lending business.

(c) December 31, 2012 includes purchased loans of $217 million of which $23 million were purchased credit impaired. September 30, 2012 includes purchased loans of $231 million of which $25 million were purchased credit impaired.

(d) This loan category was impacted by the $45 million in net loan charge-offs taken in the third quarter of 2012 related to the updated regulatory guidance. During the fourth quarter of 2012, updated charge-off amounts were reallocated to other loan categories. This amount would have been $454 million exclusive of the above-referenced net loan charge-offs at September 30, 2012.

N/M = Not Meaningful

Exit Loan Portfolio From Continuing Operations

(dollars in millions)

Balance

Change

Net Loan

Balance on

Outstanding

12-31-12 vs.

Charge-offs

Nonperforming Status

12-31-12

9-30-12

9-30-12

4Q12

3Q12

(c)

12-31-12

9-30-12

Residential properties - homebuilder

$

24

$

31

$

(7)

$

1

-

$

10

$

6

Marine and RV floor plan

33

35

(2)

-

$

(1)

10

12

Commercial lease financing (a)

997

1,035

(38)

-

(3)

6

8

Total commercial loans

1,054

1,101

(47)

1

(4)

26

26

Home equity - Other

423

409

(d)

14

11

5

21

18

Marine

1,358

1,448

(90)

14

6

34

31

RV and other consumer

93

98

(5)

1

(1)

2

2

Total consumer loans

1,874

1,955

(81)

26

10

57

51

Total exit loans in loan portfolio

$

2,928

$

3,056

$

(128)

$

27

$

6

$

83

$

77

Discontinued operations - education

lending business (not included in exit loans above) (b)

$

5,201

$

5,328

$

(127)

$

15

$

12

$

20

$

22

(a) Includes (1) the business aviation, commercial vehicle, office products, construction and industrial leases; (2) Canadian lease financing portfolios; and (3) all remaining balances related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases.

(b) Includes loans in Key's consolidated education loan securitization trusts.

(c) Credit amounts indicate recoveries exceeded charge-offs.

(d) This loan category was impacted by the $45 million in net loan charge-offs taken in the third quarter of 2012 related to the updated regulatory guidance. During the fourth quarter of 2012, updated charge-off amounts were reallocated to other loan categories. This amount would have been $454 million exclusive of the above-referenced net loan charge-offs at September 30, 2012.

Asset Quality Statistics From Continuing Operations

(dollars in millions)

4Q12

3Q12

2Q12

1Q12

4Q11

Net loan charge-offs

$

58

$

109

$

77

$

101

$

105

Net loan charge-offs to average loans

.44

%

.86

%

.63

%

.82

%

.86

%

Allowance for loan and lease losses to annualized net loan charge-offs

384.85

204.78

286.74

232.39

241.01

Allowance for loan and lease losses

$

888

$

888

$

888

$

944

$

1,004

Allowance for credit losses (a)

917

931

939

989

1,049

Allowance for loan and lease losses to period-end loans

1.68

%

1.73

%

1.79

%

1.92

%

2.03

%

Allowance for credit losses to period-end loans

1.74

1.81

1.89

2.01

2.12

Allowance for loan and lease losses to nonperforming loans

131.75

135.99

135.16

141.74

138.10

Allowance for credit losses to nonperforming loans

136.05

142.57

142.92

148.50

144.29

Nonperforming loans at period end (b)

$

674

$

653

$

657

$

666

$

727

Nonperforming assets at period end

735

718

751

767

859

Nonperforming loans to period-end portfolio loans

1.28

%

1.27

%

1.32

%

1.35

%

1.47

%

Nonperforming assets to period-end portfolio loans plus

OREO and other nonperforming assets

1.39

1.39

1.51

1.55

1.73

(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.

(b) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)

Three months ended

Twelve months ended

12-31-12

9-30-12

12-31-11

12-31-12

12-31-11

Average loans outstanding

$

51,859

$

50,695

$

48,664

$

50,362

$

48,606

Allowance for loan and lease losses at beginning of period

$

888

$

888

$

1,131

$

1,004

$

1,604

Loans charged off:

Commercial, financial and agricultural

15

16

45

80

169

Real estate - commercial mortgage

33

23

24

102

113

Real estate - construction

5

3

2

24

83

Total commercial real estate loans

38

26

26

126

196

Commercial lease financing

7

-

6

27

42

Total commercial loans

60

42

77

233

407

Real estate - residential mortgage (a)

8

6

7

27

29

Home equity:

Key Community Bank (a)

(14)

65

22

99

100

Other (a)

12

6

10

35

45

Total home equity loans

(2)

71

32

134

145

Consumer other - Key Community Bank

9

9

11

38

45

Credit cards

9

2

-

11

-

Consumer other:

Marine (a)

18

11

20

59

80

Other (a)

2

-

2

6

9

Total consumer other

20

11

22

65

89

Total consumer loans

44

99

72

275

308

Total loans charged off

104

141

149

508

715

Recoveries:

Commercial, financial and agricultural

23

9

17

63

50

Real estate - commercial mortgage

5

2

1

23

10

Real estate - construction

2

1

8

5

27

Total commercial real estate loans

7

3

9

28

37

Commercial lease financing

4

8

6

22

25

Total commercial loans

34

20

32

113

112

Real estate - residential mortgage

1

-

-

3

3

Home equity:

Key Community Bank

4

3

2

11

11

Other

1

1

1

5

4

Total home equity loans

5

4

3

16

15

Consumer other - Key Community Bank

1

2

2

6

8

Consumer other:

Marine

4

5

6

22

32

Other

1

1

1

3

4

Total consumer other

5

6

7

25

36

Total consumer loans

12

12

12

50

62

Total recoveries

46

32

44

163

174

Net loan charge-offs

(58)

(109)

(105)

(345)

(541)

Provision (credit) for loan and lease losses

57

109

(22)

229

(60)

Foreign currency translation adjustment

1

-

-

-

1

Allowance for loan and lease losses at end of period

$

888

$

888

$

1,004

$

888

$

1,004

Liability for credit losses on lending-related commitments at beginning of period

$

43

$

51

$

56

$

45

$

73

Provision (credit) for losses on lending-related commitments

(14)

(8)

(11)

(16)

(28)

Liability for credit losses on lending-related commitments at end of period (b)

$

29

$

43

$

45

$

29

$

45

Total allowance for credit losses at end of period

$

917

$

931

$

1,049

$

917

$

1,049

Net loan charge-offs to average loans

.44

%

.86

%

.86

%

.69

%

1.11

%

Allowance for loan and lease losses to annualized net loan charge-offs

384.85

204.78

241.01

257.39

185.58

Allowance for loan and lease losses to period-end loans

1.68

1.73

2.03

1.68

2.03

Allowance for credit losses to period-end loans

1.74

1.81

2.12

1.74

2.12

Allowance for loan and lease losses to nonperforming loans

131.75

135.99

138.10

131.75

138.10

Allowance for credit losses to nonperforming loans

136.05

142.57

144.29

136.05

144.29

Discontinued operations - education lending business:

Loans charged off

$

19

$

17

$

31

$

75

$

138

Recoveries

4

5

6

17

15

Net loan charge-offs

$

(15)

$

(12)

$

(25)

$

(58)

$

(123)

(a) Further review of the loans subject to updated regulatory guidance in the third quarter of 2012 was performed during the fourth quarter of 2012. This review resulted in a partial home equity

loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer loan portfolios. Home equity - Key Community Bank charge-offs were $18 million prior to

adjustments made from this review. Prior to reallocation, Real estate - residential mortgage, Home equity - Other, Consumer other - Marine, and Consumer other - Other charge-offs

were $3 million, $6 million, $11 million, and $1 million, respectively.

(b) Included in "accrued expense and other liabilities" on the balance sheet.

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)

12-31-12

9-30-12

6-30-12

3-31-12

12-31-11

Commercial, financial and agricultural

$

99

$

132

$

141

$

168

$

188

Real estate - commercial mortgage

120

134

172

175

218

Real estate - construction

56

53

68

66

54

Total commercial real estate loans

176

187

240

241

272

Commercial lease financing

16

18

18

22

27

Total commercial loans

291

337

399

431

487

Real estate - residential mortgage (a)

103

83

78

82

87

Home equity:

Key Community Bank

210

171

141

109

108

Other

21

18

17

12

12

Total home equity loans (a)

231

189

158

121

120

Consumer other - Key Community Bank

2

3

2

1

1

Credit cards

11

8

-

-

-

Consumer other:

Marine

34

31

19

30

31

Other

2

2

1

1

1

Total consumer other

36

33

20

31

32

Total consumer loans

383

316

258

235

240

Total nonperforming loans (b)

674

653

657

666

727

Nonperforming loans held for sale

25

19

38

24

46

OREO

22

29

28

61

65

Other nonperforming assets

14

17

28

16

21

Total nonperforming assets

$

735

$

718

$

751

$

767

$

859

Accruing loans past due 90 days or more

$

78

$

89

$

131

$

169

$

164

Accruing loans past due 30 through 89 days

424

354

362

420

441

Restructured loans - accruing and nonaccruing (c)

320

323

274

293

276

Restructured loans included in nonperforming loans (c)

249

217

163

184

191

Nonperforming assets from discontinued operations -

education lending business

20

22

18

19

23

Nonperforming loans to period-end portfolio loans

1.28

%

1.27

%

1.32

%

1.35

%

1.47

%

Nonperforming assets to period-end portfolio loans

plus OREO and other nonperforming assets

1.39

1.39

1.51

1.55

1.73

(a) All of the increase in Real estate - residential mortgage and $26 million of the increase in Total home equity loans from September 30, 2012 to December 31, 2012 was related to regulatory guidance issued in the second and third quarters of 2012.

(b) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

(c) Restructured loans (i.e., troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance. The majority of the increase in restructured loans included in nonperforming loans from September 30, 2012 to December 31, 2012 was a result of updated regulatory guidance in the third quarter of 2012.

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

4Q12

3Q12

2Q12

1Q12

4Q11

Balance at beginning of period

$

653

$

657

$

666

$

727

$

788

Loans placed on nonaccrual status

288

276

350

214

230

Charge-offs

(104)

(141)

(131)

(132)

(149)

Loans sold

(44)

(43)

(49)

(27)

(28)

Payments

(78)

(74)

(110)

(65)

(70)

Transfers to OREO

(7)

(10)

(6)

(15)

(12)

Transfers to nonperforming loans held for sale

(8)

-

(16)

-

(19)

Transfers to other nonperforming assets

(1)

-

(14)

-

(4)

Loans returned to accrual status

(25)

(12)

(33)

(36)

(9)

Balance at end of period (a)

$

674

$

653

$

657

$

666

$

727

(a) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

Summary of Changes in Nonperforming Loans Held For Sale From Continuing Operations

(in millions)

4Q12

3Q12

2Q12

1Q12

4Q11

Balance at beginning of period

$

19

$

38

$

24

$

46

$

42

Transfers in

8

-

16

-

19

Net advances / (payments)

(1)

(1)

-

(1)

(3)

Loans sold

(1)

(17)

(1)

(1)

(11)

Transfers to OREO

-

(1)

-

-

(1)

Valuation adjustments

-

-

(1)

(1)

-

Loans returned to accrual status / other

-

-

-

(19)

-

Balance at end of period

$

25

$

19

$

38

$

24

$

46

Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations

(in millions)

4Q12

3Q12

2Q12

1Q12

4Q11

Balance at beginning of period

$

29

$

28

$

61

$

65

$

63

Properties acquired - nonperforming loans

7

11

6

15

13

Valuation adjustments

(2)

(2)

(7)

(7)

(4)

Properties sold

(12)

(8)

(32)

(12)

(7)

Balance at end of period

$

22

$

29

$

28

$

61

$

65

Line of Business Results

(dollars in millions)

Percent change 4Q12 vs.

4Q12

3Q12

2Q12

1Q12

4Q11

3Q12

4Q11

Key Community Bank

Summary of operations

Total revenue (TE)

$

567

$

576

$

537

$

528

$

546

(1.6)

%

3.8

%

Provision (credit) for loan and lease losses

23

120

11

2

30

(80.8)

(23.3)

Noninterest expense

529

512

476

457

476

3.3

11.1

Net income (loss) attributable to Key

31

(23)

41

57

40

N/M

(22.5)

Average loans and leases

29,252

28,386

27,043

26,617

26,406

3.1

10.8

Average deposits

50,123

49,537

48,253

47,768

48,076

1.2

4.3

Net loan charge-offs

12

93

50

49

71

(87.1)

(83.1)

Net loan charge-offs to average loans

.16

%

1.30

%

.74

%

.74

%

1.07

%

N/A

N/A

Nonperforming assets at period end

$

459

$

422

$

401

$

402

$

415

8.8

10.6

Return on average allocated equity

4.13

%

(3.11)

%

5.73

%

7.74

%

5.07

%

N/A

N/A

Average full-time equivalent employees

9,019

9,209

8,757

8,719

8,633

(2.1)

4.5