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

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





















































































































Key Corporate Bank























Summary of operations























Total revenue (TE)


$

424


$

392


$

392


$

401


$

412



8.2

%


2.9

%

Provision (credit) for loan and lease losses



11



(3)



4



13



(61)



N/M



N/M


Noninterest expense



206



209



218



230



228



(1.4)



(9.6)


Net income (loss) attributable to Key



130



118



104



100



156



10.2



(16.7)


Average loans and leases



19,477



18,886



18,532



18,584



17,784



3.1



9.5


Average loans held for sale



538



441



514



509



356



22.0



51.1


Average deposits



13,672



12,873



12,409



11,556



11,162



6.2



22.5


Net loan charge-offs



21



8



9



25



12



162.5



75.0


Net loan charge-offs to average loans



.43

%


.17

%


.20

%


.54

%


.27

%


N/A



N/A


Nonperforming assets at period end


$

175


$

197


$

248


$

237


$

294



(11.2)



(40.5)


Return on average allocated equity



30.97

%


27.61

%


23.53

%


21.24

%


30.03

%


N/A



N/A


Average full-time equivalent employees



2,049



2,146



2,175



2,169



2,204



(4.5)



(7.0)

























Key Corporate Bank supplementary information (lines of business)

















Real Estate Capital and Corporate Banking Services























Total revenue (TE)


$

189


$

166


$

181


$

165


$

184



13.9

%


2.7

%

Provision (credit) for loan and lease losses



14



(3)



5



-



(31)



N/M



N/M


Noninterest expense



59



62



67



63



66



(4.8)



(10.6)


Net income (loss) attributable to Key



72



67



65



64



94



7.5



(23.4)


Average loans and leases



7,625



7,342



7,344



7,700



7,446



3.9



2.4


Average loans held for sale



455



359



337



291



216



26.7



110.6


Average deposits



10,538



9,674



9,254



8,279



7,694



8.9



37.0


Net loan charge-offs



26



9



7



16



10



188.9



160.0


Net loan charge-offs to average loans



1.36

%


.49

%


.38

%


.84

%


.53

%


N/A



N/A


Nonperforming assets at period end


$

136


$

142


$

186


$

173


$

209



(4.2)



(34.9)


Return on average allocated equity



38.86

%


34.44

%


31.27

%


27.92

%


36.35

%


N/A



N/A


Average full-time equivalent employees



907



929



983



982



983



(2.4)



(7.7)

























Equipment Finance























Total revenue (TE)


$

53


$

57


$

57


$

64


$

62



(7.0)

%


(14.5)

%

Provision (credit) for loan and lease losses



(6)



-



6



(2)



(15)



N/M



N/M


Noninterest expense



35



35



37



37



48



-



(27.1)


Net income (loss) attributable to Key



15



14



9



18



18



7.1



(16.7)


Average loans and leases



5,099



5,159



4,887



4,780



4,681



(1.2)



8.9


Average loans held for sale



9



7



23



24



10



28.6



(10.0)


Average deposits



6



6



7



8



9



-



(33.3)


Net loan charge-offs



4



(1)



4



5



(1)



N/M



N/M


Net loan charge-offs to average loans



.31

%


(.08)

%


.33

%


.42

%


(.08)

%


N/A



N/A


Nonperforming assets at period end


$

26


$

30


$

33


$

28


$

41



(13.3)



(36.6)


Return on average allocated equity



25.07

%


22.73

%


14.48

%


26.71

%


23.19

%


N/A



N/A


Average full-time equivalent employees



367



383



393



394



442



(4.2)



(17.0)

























Institutional and Capital Markets























Total revenue (TE)


$

182


$

169


$

154


$

172


$

166



7.7

%


9.6

%

Provision (credit) for loan and lease losses



3



-



(7)



15



(15)



N/M



N/M


Noninterest expense



112



112



114



130



114



-



(1.8)


Net income (loss) attributable to Key



43



37



30



18



44



16.2



(2.3)


Average loans and leases



6,753



6,385



6,301



6,104



5,657



5.8



19.4


Average loans held for sale



74



75



154



194



130



(1.3)



(43.1)


Average deposits



3,128



3,193



3,148



3,269



3,459



(2.0)



(9.6)


Net loan charge-offs



(9)



-



(2)



4



3



N/M



N/M


Net loan charge-offs to average loans



(.53)

%


-



(.13)

%


.26

%


.21

%


N/A



N/A


Nonperforming assets at period end


$

13


$

25


$

29


$

36


$

44



(48.0)



(70.5)


Return on average allocated equity



24.61

%


21.61

%


17.44

%


10.33

%


24.01

%


N/A



N/A


Average full-time equivalent employees



775



834



799



793



779



(7.1)



(.5)

























TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful






















SOURCE KeyCorp



RELATED LINKS
http://www.key.com

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