2014

KeyCorp Reports Second Quarter 2013 Net Income of $193 Million, or $.21 Per Common Share Efficiency initiative results in achieved annualized run rate savings of approximately $171 million through the second quarter of 2013

CLEVELAND, July 18, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $193 million, or $.21 per common share, compared to $196 million, or $.21 per common share for the first quarter of 2013, and $217 million, or $.23 per common share for the second quarter of 2012.   During the second quarter, Key incurred $37 million, or $.03 per common share of costs associated with its previously announced efficiency initiative.

For the six months ended June 30, 2013, net income from continuing operations attributable to Key common shareholders was $389 million, or $.42 per common share, compared to $412 million, or $.43 per common share for the same period one year ago. During the first half of 2013, Key incurred $52 million, or $.04 per common share of costs related to its efficiency initiative.

CURRENT QUARTER DEVELOPMENTS

Executing on growth initiatives

  • Acquiring a commercial mortgage servicing portfolio and special servicing business, building scale and becoming one of the top three largest named servicers of commercial/multifamily loans in the U.S. and the fifth largest special servicer of CMBS (Initial closing completed in June; final closing expected in July)
  • Expanded mobile offering with the launch of new remote deposit capabilities for both consumer and commercial clients

Continued progress on efficiency initiative

  • Achieved annualized run rate savings of approximately $171 million through the second quarter of 2013
  • Recognized expenses of $37 million, or $.03 per common share associated with efficiency initiative during the second quarter of 2013
  • Cash efficiency ratio of 69.06%, and adjusted cash efficiency ratio net of efficiency initiative charges of 65.42% for the second quarter of 2013
  • Consolidated 33 branches during the second quarter of 2013
  • Realigned Community Bank organization around core relationship strategy to drive profitability

Focused on capital management priorities

  • Repurchased $112 million of common shares during the second quarter of 2013
  • Increased common share dividend by 10% to $.055 per common share

"During the second quarter, the strength of our business model continued to drive results. Key made clear progress implementing growth initiatives, improving its cost structure and executing capital priorities," said Chairman and Chief Executive Officer Beth Mooney.

"Compared to the first quarter, cautious client behavior led to slower loan growth, higher levels of liquidity for Key and greater than anticipated pressure on our net interest margin. Despite the challenging economic backdrop, Key was able to produce slight increases in both loans and revenue and control expenses. Further, we stayed true to our commitment of disciplined capital management by repurchasing $112 million in common shares and increasing our dividend by 10%," continued Mooney.

Mooney added: "To maintain and enhance our growth, we also continued to invest in our businesses. We are in the process of acquiring a commercial mortgage servicing portfolio and special servicing business that will significantly enhance our scale and presence in the market. We also launched new mobile capabilities that add accessibility and functionality for both our consumer and commercial clients. Our efficiency initiative, which began in June 2012, remains on target to reach our goal of $200 million in annualized savings by the end of the year. Through the second quarter of 2013, we have achieved approximately $171 million of the targeted savings."

SECOND QUARTER 2013 FINANCIAL RESULTS

Compared with Second Quarter of 2012

  • Total revenue increased $14 million
    • Taxable-equivalent net interest income of $586 million, up $42 million, or 7.7%, which included $30 million associated with Key's third quarter 2012 branch and credit card portfolio acquisitions
    • Noninterest income declined $28 million, or 6.1% primarily due to a gain on the early terminations of leveraged leases one year ago and a reduction in net gains (losses) from principal investing; noninterest income included $14 million associated with Key's acquisitions noted above
  • Net interest margin of 3.13%, up 7 basis points
  • Continued average loan growth driven by 13.9% increase in commercial, financial and agricultural loans
  • Average deposits increased $4.6 billion, or 7.6%, which included $2 billion of deposits from Key's third quarter 2012 Western New York branch acquisition
  • Noninterest expense up $18 million, which included $37 million associated with the efficiency initiative and $26 million associated with Key's acquisitions noted above
  • Net loan charge-offs decreased 41.6% to .34% of average total loans
  • Maintained solid capital position with Tier 1 common equity of 11.25%

Compared with First Quarter of 2013

  • Total revenue relatively stable
    • Taxable-equivalent net interest income down $3 million
    • Noninterest income up $4 million
  • Net interest margin down 11 basis points
  • Average loans remained flat
  • Average deposits increased $1.7 billion, or 2.7%, driven by growth in commercial balances
  • Noninterest expense increased $30 million, which included a $22 million increase in costs associated with the efficiency initiative in the second quarter of 2013
  • Net loan charge-offs decreased 8.2%















Selected Financial Highlights
































dollars in millions, except per share data











Change 2Q13 vs.





2Q13



1Q13



2Q12



1Q13



2Q12


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

$

193


$

196


$

217



(1.5)

%


(11.1)

%

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

     common share — assuming dilution


.21



.21



.23





(8.7)


Return on average total assets from continuing operations


.95

%


.99

%


1.10

%


N/A



N/A


Tier 1 common equity (a)


11.25



11.40



11.63



N/A



N/A


Book value at period end

$

10.89


$

10.89


$

10.43





4.4

%

Net interest margin (TE) from continuing operations


3.13

%


3.24

%


3.06

%


N/A



N/A




















































 (a)

The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "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.



















TE = Taxable Equivalent, N/A = Not Applicable

































INCOME STATEMENT HIGHLIGHTS

































Revenue

































dollars in millions











Change 2Q13 vs.





2Q13



1Q13



2Q12



1Q13



2Q12


Net interest income (TE)

$

586


$

589


$

544



(.5)

%


7.7

%

Noninterest income


429



425



457



.9



(6.1)



Total revenue

$

1,015


$

1,014


$

1,001



.1

%


1.4

%



































TE = Taxable Equivalent
































Taxable-equivalent net interest income was $586 million for the second quarter of 2013, and the net interest margin was 3.13%.  These results compare to taxable-equivalent net interest income of $544 million and a net interest margin of 3.06% for the second quarter of 2012.  The increase in 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 over the past year.

Compared to the first quarter of 2013, taxable-equivalent net interest income decreased by $3 million, and the net interest margin declined by 11 basis points.  The decrease in net interest income was primarily due to lower replacement yields on new loans and investments as compared to the yield on maturing loans and investments.  This decline was partially offset by an increase in average earning asset balances and a higher day count in the second quarter.  The decline in the net interest margin was largely attributable to a six basis point impact from lower loan yields and fees as well as a five basis point impact from higher levels of liquidity and securities. The net interest margin was also negatively impacted by approximately two basis points from the termination and maturity of $4.4 billion of interest rate swaps that were not replaced, as Key continues to increase its asset sensitivity to be better positioned for a rise in short-term interest rates.


















Noninterest Income



































dollars in millions












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Trust and investment services income


$

100


$

95


$

90



5.3

%


11.1

%

Investment banking and debt placement fees



84



79



73



6.3



15.1


Service charges on deposit accounts



71



69



70



2.9



1.4


Operating lease income and other leasing gains



19



23



58



(17.4)



(67.2)


Corporate services income



43



45



44



(4.4)



(2.3)


Cards and payments income



42



37



31



13.5



35.5


Corporate-owned life insurance income



31



30



30



3.3



3.3


Consumer mortgage income



6



7



9



(14.3)



(33.3)


Net gains (losses) from principal investing



7



8



24



(12.5)



(70.8)


Other income



26



32



28



(18.8)



(7.1)



Total noninterest income


$

429


$

425


$

457



.9

%


(6.1)

%





































Key's noninterest income was $429 million for the second quarter of 2013, compared to $457 million for the year-ago quarter.  Operating lease income and other leasing gains decreased $39 million primarily due to a $31 million gain on the early terminations of leveraged leases one year ago, and net gains (losses) from principal investing decreased by $17 million.  These decreases were partially offset by increases in investment banking and debt placement fees and cards and payments income of $11 million each, and trust and investment services income of $10 million.

Compared to the first quarter of 2013, noninterest income increased by $4 million.  Trust and investment services income, investment banking and debt placement fees, and cards and payments income each increased $5 million. These increases in noninterest income were partially offset by declines in operating lease income and other leasing gains of $4 million and other income of $6 million.


















Noninterest Expense



































dollars in millions












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Personnel expense


$

406


$

391


$

377



3.8

%


7.7

%

Nonpersonnel expense



305



290



316



5.2



(3.5)



Total noninterest expense


$

711


$

681


$

693



4.4

%


2.6

%





































Key's noninterest expense was $711 million for the second quarter of 2013, compared to $693 million for the same period last year.  Excluding the $37 million in expenses related to Key's efficiency initiative and the $26 million in incremental costs associated with acquisitions, noninterest expense was down $45 million compared to the prior year.  Personnel expense increased $29 million due to an increase in severance expense primarily associated with Key's efficiency initiative and higher incentive compensation expense accruals.  Nonpersonnel expense decreased $11 million from one year ago.  Business services and professional fees declined $14 million, and marketing expense and other real estate owned (OREO) expense each decreased $6 million.  These declines were partially offset by an increase in net occupancy of $10 million primarily due to charges related to the consolidation of 33 branches during the second quarter of 2013.   Intangible asset amortization on credit cards and other intangible asset amortization associated with the third quarter 2012 acquisitions of the credit card portfolio and the branches in Western New York also increased $9 million in total.

Compared to the first quarter of 2013, noninterest expense increased by $30 million.  Personnel expense increased $15 million as severance expense was $9 million higher; annual merit and incentive compensation also contributed to the increase.  Nonpersonnel expense also increased $15 million from the first quarter of 2013.  Net occupancy increased $8 million primarily due to charges related to the consolidation of 33 branches during the second quarter of 2013.  Marketing expense also increased $5 million.

BALANCE SHEET HIGHLIGHTS

As of June 30, 2013, Key had total assets of $90.6 billion compared to $89.2 billion at March 31, 2013, and $86.5 billion at June 30, 2012.


















Average Loans



































dollars in millions











Change 6-30-13 vs.





6-30-13


3-31-13


6-30-12


3-31-13


6-30-12


Commercial, financial and agricultural (a)


$

23,480


$

23,317


$

20,606



.7

%


13.9

%

Other commercial loans



13,290



13,493



14,055



(1.5)



(5.4)


Total home equity loans



10,381



10,200



9,852



1.8



5.4


Other consumer loans



5,545



5,616



4,933



(1.3)



12.4



Total loans


$

52,696


$

52,626


$

49,446



.1

%


6.6

%





















(a)   

Commercial, financial and agricultural average balance for the three months ended June 30, 2013 and March 31, 2013 includes $96 million and $91 million, respectively, of assets from commercial credit cards.



Average loans were $52.7 billion for the second quarter of 2013, an increase of $3.3 billion compared to the second quarter of 2012.  Commercial, financial and agricultural loans grew by $2.9 billion over the year-ago quarter, with strong growth across Key's business 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 declines in the commercial real estate portfolio, the equipment lease portfolio, which included the early termination of certain leveraged leases in the exit portfolio in 2012, and run-off of consumer loans in the designated exit portfolio. 

Compared to the first quarter of 2013, average loans increased by $70 million.  This average loan growth was attributable to an increase in commercial, financial and agricultural loans and home equity loans, which benefitted from Key's second quarter lending promotion.  This growth in loans was partially offset by a decrease in commercial real estate, commercial lease financing, and other consumer loans.


















Average Deposits



































dollars in millions











Change 6-30-13 vs.





6-30-13


3-31-13


6-30-12


3-31-13


6-30-12


Non-time deposits (a)


$

57,691


$

55,819


$

50,801



3.4

%


13.6

%

Certificates of deposits ($100,000 or more)



2,975



2,911



3,858



2.2



(22.9)


Other time deposits



4,202



4,451



5,645



(5.6)



(25.6)



Total deposits


$

64,868


$

63,181


$

60,304



2.7

%


7.6

%



















Cost of total deposits (a)



.26

%


.29

%


.47

%


N/A



N/A






































(a)   Excludes deposits in foreign office.























N/A = Not Applicable


































Average deposits, excluding deposits in foreign office, totaled $64.9 billion for the second quarter of 2013, an increase of $4.6 billion compared to the year-ago quarter.  The growth reflects an increase in demand deposits of $2.7 billion and interest-bearing non-time deposits of $4.2 billion (including the impact of Key's third quarter 2012 Western New York branch acquisition, which added $2 billion of mostly interest-bearing non-time deposits).  This deposit growth was partially offset by $2.3 billion of run-off from one year ago in certificates of deposit and other time deposits.

Compared to the first quarter of 2013, average deposits, excluding deposits in foreign office, increased by $1.7 billion.  This deposit growth was primarily due to an increase in business demand and interest-bearing commercial deposits, reflecting deposits made by some of Key's larger clients.


















ASSET QUALITY


































dollars in millions












Change 2Q13 vs.





2Q13



1Q13



2Q12



1Q13



2Q12


Net loan charge-offs


$

45


$

49


$

77



(8.2)

%


(41.6)

%

Net loan charge-offs to average total loans



.34

%


.38

%


.63

%


N/A



N/A


Nonperforming loans at period end (a)


$

652


$

650


$

657



.3



(.8)


Nonperforming assets at period end



693



705



751



(1.7)



(7.7)


Allowance for loan and lease losses



876



893



888



(1.9)



(1.4)


Allowance for loan and lease losses to nonperforming loans



134.36

%


137.38

%


135.16

%


N/A



N/A


Provision (credit) for loan and lease losses


$

28


$

55


$

21



(49.1)

%


33.3

%



































(a)  June 30, 2013 and March 31, 2013 amounts exclude $19 million and $22 million, respectively, of purchased credit impaired loans acquired in July 2012.


















N/A = Not Applicable


































Key's provision for loan and lease losses was $28 million for the second quarter of 2013, compared to $55 million for the first quarter of 2013 and $21 million for the year-ago quarter.  The decline in the provision for loan and lease losses from the prior quarter reflects Key's current asset quality measures and the quality of its new loan originations.

Key's allowance for loan and lease losses was $876 million, or 1.65% of total period-end loans at June 30, 2013, compared to 1.70% at March 31, 2013, and 1.79% at June 30, 2012.

Net loan charge-offs for the second quarter of 2013 totaled $45 million, or .34% of average total loans.  These results compare to $49 million, or .38% for the first quarter of 2013, and $77 million, or .63% for the same period last year. 

At June 30, 2013, Key's nonperforming loans totaled $652 million and represented 1.23% of period-end portfolio loans, compared to 1.24% at March 31, 2013 and 1.32% at June 30, 2012.  Nonperforming assets at June 30, 2013, totaled $693 million and represented 1.30% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.34% at March 31, 2013, and 1.51% at June 30, 2012.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2013.











Capital Ratios






















6-30-13



3-31-13



6-30-12


Tier 1 common equity (a), (b)


11.25

%


11.40

%


11.63

%

Tier 1 risk-based capital (a)


12.01



12.19



12.45


Total risk based capital (a)


14.75



15.02



15.83


Tangible common equity to tangible assets (b)


9.96



10.24



10.44


Leverage (a)


11.21



11.36



11.35














(a)   

6-30-13 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 June 30, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.25% and 12.01%, respectively.  In addition, the tangible common equity ratio was 9.96% at June 30, 2013.

On July 2, 2013 and July 9, 2013, the Federal Reserve and the OCC, respectively, approved a final rule that will implement the Basel III regulatory capital reforms and certain changes required by the Dodd-Frank Act. Consistent with the proposed rule published in August 2012, the final rule increases minimum requirements for both the quantity and quality of capital held by banking organizations and emphasizes Tier 1 common equity.  While the final rule becomes effective in January 2014, the mandatory compliance date for Key begins in January 2015 and is subject to transitional provisions extending to January 2019. Key's estimated Tier 1 common equity as calculated under this final rule was 10.81% at June 30, 2013.  This exceeds the fully phased-in required minimum Tier 1 common equity (including capital conservation buffer) of 7.00%.












Summary of Changes in Common Shares Outstanding


























in thousands












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Shares outstanding at beginning of period



922,581



925,769



956,102



(.3)

%


(3.5)

%

Common shares repurchased



(10,786)



(6,790)



(10,468)



58.9



3.0


Shares reissued (returned) under employee benefit plans



1,088



3,602



(161)



(69.8)



N/M



Shares outstanding at end of period



912,883



922,581



945,473



(1.1)

%


(3.4)

%





































N/M = Not Meaningful


































As previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2013 capital plan submitted to and not objected to by the Federal Reserve, Key has authority to repurchase up to $426 million of its common shares.  Common share repurchases under the 2013 capital plan authorization are expected to be executed through the first quarter of 2014.  

The after-tax gain on the previously announced Victory divestiture is now expected to be lower than originally projected and in the range of $100 million to $115 million. The cash portion of this gain will be between $75 million and $90 million, and Key has received no objection from the Federal Reserve to use these cash proceeds for common share repurchases.

During the second quarter of 2013, Key completed $112 million of common share repurchases on the open market under Key's share repurchase program. 

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 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Revenue from continuing operations (TE)

















Key Community Bank


$

555


$

549


$

537



1.1

%


3.4

%

Key Corporate Bank



376



379



371



(.8)



1.3


Other Segments



86



83



94



3.6



(8.5)



Total segments



1,017



1,011



1,002



.6



1.5


Reconciling items



(2)



3



(1)



N/M



N/M



Total


$

1,015


$

1,014


$

1,001



.1

%


1.4

%



















Income (loss) from continuing operations attributable to Key

















Key Community Bank


$

36


$

31


$

54



16.1

%


(33.3)

%

Key Corporate Bank



117



105



95



11.4



23.2


Other Segments



70



68



49



2.9



42.9



Total segments



223



204



198



9.3



12.6


Reconciling items



(24)



(3)



24



N/M



N/M



Total


$

199


$

201


$

222



(1.0)

%


(10.4)

%





































TE = Taxable equivalent, N/M = Not Meaningful


































 


















Key Community Bank





















































dollars in millions












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Summary of operations

















Net interest income (TE)


$

357


$

361


$

356



(1.1)

%


.3

%

Noninterest income



198



188



181



5.3



9.4



Total revenue (TE)



555



549



537



1.1



3.4


Provision (credit) for loan and lease losses



41



59



(4)



(30.5)



N/M


Noninterest expense



456



440



455



3.6



.2



Income (loss) before income taxes (TE)



58



50



86



16.0



(32.6)


Allocated income taxes (benefit) and TE adjustments



22



19



32



15.8



(31.3)



Net income (loss) attributable to Key


$

36


$

31


$

54



16.1

%


(33.3)

%



















Average balances

















Loans and leases


$

29,161


$

28,977


$

26,413



.6

%


10.4

%

Total assets



31,570



31,473



28,695



.3



10.0


Deposits



49,473



49,349



47,946



.3



3.2




















Assets under management at period end


$

23,213


$

23,867


$

21,116



(2.7)

%


9.9

%





































TE = Taxable Equivalent, N/M = Not Meaningful


































 


















Additional Key Community Bank Data



































dollars in millions












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Noninterest income

















Trust and investment services income


$

67


$

65


$

60



3.1

%


11.7

%

Service charges on deposit accounts



60



58



59



3.4



1.7


Cards and payments income



37



33



26



12.1



42.3


Other noninterest income



34



32



36



6.3



(5.6)



Total noninterest income


$

198


$

188


$

181



5.3

%


9.4

%



















Average deposit balances

















NOW and money market deposit accounts


$

26,341


$

26,109


$

23,824



.9

%


10.6

%

Savings deposits



2,536



2,463



2,074



3.0



22.3


Certificates of deposit ($100,000 or more)



2,443



2,498



3,269



(2.2)



(25.3)


Other time deposits



4,195



4,445



5,629



(5.6)



(25.5)


Deposits in foreign office



284



270



270



5.2



5.2


Noninterest-bearing deposits



13,674



13,564



12,880



.8



6.2



Total deposits


$

49,473


$

49,349


$

47,946



.3

%


3.2

%



















Home equity loans

















Average balance


$

9,992


$

9,787


$

9,359








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



71

%


70

%


71

%







Percent first lien positions



57



55



54


























Other data

















Branches



1,052



1,084



1,062








Automated teller machines



1,359



1,482



1,576


























Key Community Bank Summary of Operations

  • Realigned Community Bank structure and organization and closed 33 branches, resulting in expenses of $11 million in the second quarter of 2013
  • Continued credit card penetration and successful integration of branches in Western New York
  • Eight consecutive quarters of average loan growth
  • Core deposits up $3.8 billion, or 9.7% from the prior year

Key Community Bank recorded net income attributable to Key of $36 million for the second quarter of 2013, compared to $54 million for the year-ago quarter.

Taxable-equivalent net interest income increased by $1 million, or .3% from the second quarter of 2012.  Average loans and leases grew 10.4% while average deposits increased 3.2% from one year ago.  The Western New York branch and credit card portfolio acquisitions contributed $30 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 as a result of the continued low-rate environment.

Noninterest income increased by $17 million, or 9.4% from the year-ago quarter.  Cards and payments income increased $11 million as a result of the third quarter 2012 credit card portfolio acquisition.  Trust and investment services income increased $7 million, primarily due to an increase in assets under management resulting from strong market performance and increased production.

The provision for loan and lease losses was a charge of $41 million compared to a credit of $4 million for the second quarter of 2012.  Net loan charge-offs, including the 2012 credit card portfolio acquisition, decreased $4 million from the same period one year ago.

Noninterest expense increased by $1 million, or .2% from the year-ago quarter.  Expense reductions resulting from Key's efficiency initiative substantially offset the increase in expenses associated with Key's third quarter 2012 Western New York branch and credit card portfolio acquisitions.


















Key Corporate Bank





















































dollars in millions












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Summary of operations

















Net interest income (TE)


$

189


$

187


$

190



1.1

%


(.5)

%

Noninterest income



187



192



181



(2.6)



3.3



Total revenue (TE)



376



379



371



(.8)



1.3


Provision (credit) for loan and lease losses



(10)



4



4



N/M



N/M


Noninterest expense



202



210



213



(3.8)



(5.2)



Income (loss) before income taxes (TE)



184



165



154



11.5



19.5


Allocated income taxes and TE adjustments



67



60



56



11.7



19.6



Net income (loss)



117



105



98



11.4



19.4


Less: Net income (loss) attributable to noncontrolling interests







3



N/M



N/M



Net income (loss) attributable to Key


$

117


$

105


$

95



11.4

%


23.2

%



















Average balances

















Loans and leases 


$

20,133


$

20,044


$

18,541



.4

%


8.6

%

Loans held for sale 



466



409



514



13.9



(9.3)


Total assets



23,965



23,864



22,709



.4



5.5


Deposits



15,606



13,968



12,414



11.7



25.7




















Assets under management at period end


$

12,331


$

11,847


$

14,032



4.1

%


(12.1)

%





































TE = Taxable Equivalent, N/M = Not Meaningful


































 


















Additional Key Corporate Bank Data



































dollars in millions












Change 2Q13 vs.






2Q13



1Q13



2Q12



1Q13



2Q12


Noninterest income

















Trust and investment services income


$

33


$

31


$

31



6.5

%


6.5

%

Investment banking and debt placement fees



82



78



69



5.1



18.8


Operating lease income and other leasing gains



13



17



21



(23.5)



(38.1)




















Corporate services income



32



30



34



6.7



(5.9)


Service charges on deposit accounts



11



11



11






Cards and payments income



5



4



5



25.0





Payments and services income



48



45



50



6.7



(4.0)




















Other noninterest income



11



21



10



(47.6)



10.0



Total noninterest income


$

187


$

192


$

181



(2.6)

%


3.3

%





































Key Corporate Bank Summary of Operations

  • Investment banking and debt placement fees were up $13 million, or 18.8% from the prior year
  • Average loan balances up 8.6% from the prior year
  • Average deposits up 25.7% from the prior year

Key Corporate Bank recorded net income attributable to Key of $117 million for the second quarter of 2013, compared to $95 million for the same period one year ago. 

Taxable-equivalent net interest income decreased by $1 million, or .5% compared to the second quarter of 2012.  Average earning assets increased $1.5 billion, or 7.2% from the year-ago quarter, driving a $2 million increase in earning asset spread.  Average deposit balances increased $3.2 billion, or 25.7% from the year-ago quarter, driven by the continued execution of health care strategies and increase in public sector deposits.  However, these increases in balances were offset by declines in the deposit spread as a result of the continued low-rate environment.    

Noninterest income increased by $6 million, or 3.3% from the second quarter of 2012.  Investment banking and debt placement fees increased $13 million, partially offset by a decrease in operating lease income and other leasing gains of $8 million compared to the year-ago quarter. 

The provision for loan and lease losses was a credit of $10 million compared to a charge of $4 million for the second quarter of 2012.  There were net loan recoveries of $6 million for the second quarter of 2013 compared to net loan charge-offs of $9 million for the same period one year ago.

Noninterest expense decreased by $11 million, or 5.2% from the second quarter of 2012.  This decline was driven by decreases in professional fees, operating lease expense, and the provision (credit) for losses on lending-related commitments compared to the second quarter of 2012. 

Other Segments

Other Segments consist of Corporate Treasury, Community Development, Key's Principal Investing unit, and various exit portfolios.  Other Segments generated net income attributable to Key of $70 million for the second quarter of 2013, compared to net income attributable to Key of $49 million for the same period last year.  These results were primarily attributable to an increase in net interest income of $44 million and a decrease in the provision for loan and lease losses of $25 million.  These improvements were partially offset by a decline in noninterest income of $52 million primarily due to decreases in operating lease income and other leasing gains of $32 million and net gains (losses) from principal investing of $17 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 $90.6 billion at June 30, 2013.

Key provides deposit, lending, cash management and investment services to individuals and 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, and profitability. Forward-looking statements can be identified by words such as "expect," "believe," and "anticipate," and other similar references to future periods.  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 Form 10-K for the year ended December 31, 2012, and its Quarterly Report on Form 10-Q for the period ended March 31, 2013, each of which has been filed with the Securities and Exchange Commission and is available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov).  These factors may include, among others: continued strain on the global financial markets as a result of economic slowdowns and concerns; current regulatory initiatives in the U.S., including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, subjecting us to a variety of new and more stringent legal and regulatory requirements and increased scrutiny from our regulators; adverse behaviors in securities, public debt, and capital markets, including changes in market liquidity and volatility; and our ability to timely and effectively implement our strategic initiatives.  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, July 18, 2013. An audio replay of the call will be available through July 25, 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





6-30-13



3-31-13



6-30-12


Summary of operations













Net interest income (TE)

$

586



$

589



$

544



Noninterest income


429




425




457




Total revenue (TE)


1,015




1,014




1,001



Provision (credit) for loan and lease losses


28




55




21



Noninterest expense


711




681




693



Income (loss) from continuing operations attributable to Key


199




201




222



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


5




3




14



Net income (loss) attributable to Key 


204




204




236

















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

$

193



$

196



$

217



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


5




3




14



Net income (loss) attributable to Key common shareholders


198




199




231
















Per common share













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

$

.21



$

.21



$

.23



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


.01







.01



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


.22




.22




.24

















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


.21




.21




.23



Income (loss) from discontinued operations, net of taxes — assuming dilution (a)


.01







.01



Net income (loss) attributable to Key common shareholders — assuming dilution  (b)


.22




.21




.24

















Cash dividends paid


.055




.05




.05



Book value at period end


10.89




10.89




10.43



Tangible book value at period end


9.77




9.78




9.45



Market price at period end


11.04




9.96




7.74
















Performance ratios













From continuing operations:













Return on average total assets


.95

%



.99

%



1.10

%


Return on average common equity


7.72




7.96




8.90



Return on average tangible common equity (c)


8.60




8.87




9.83



Net interest margin (TE)


3.13




3.24




3.06



Cash efficiency ratio (c)


69.06




65.98




69.13

















From consolidated operations:













Return on average total assets


.92

%



.94

%



1.10

%


Return on average common equity


7.92




8.08




9.47



Return on average tangible common equity (c)


8.82




9.01




10.46



Net interest margin (TE)


3.07




3.16




2.99



Loan to deposit (d)


83.63




86.95




86.38
















Capital ratios at period end













Key shareholders' equity to assets


11.29

%



11.59

%



11.74

%


Key common shareholders' equity to assets


10.96




11.27




11.40



Tangible common equity to tangible assets (c)


9.96




10.24




10.44



Tier 1 common equity (c), (e)


11.25




11.40




11.63



Tier 1 risk-based capital (e)


12.01




12.19




12.45



Total risk-based capital (e)


14.75




15.02




15.83



Leverage (e)


11.21




11.36




11.35
















Asset quality — from continuing operations













Net loan charge-offs

$

45



$

49



$

77



Net loan charge-offs to average loans


.34

%



.38

%



.63

%


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


485.33




449.37




286.74



Allowance for loan and lease losses

$

876



$

893



$

888



Allowance for credit losses


913




925




939



Allowance for loan and lease losses to period-end loans


1.65

%



1.70

%



1.79

%


Allowance for credit losses to period-end loans


1.72




1.76




1.89



Allowance for loan and lease losses to nonperforming loans


134.36




137.38




135.16



Allowance for credit losses to nonperforming loans


140.03




142.31




142.92



Nonperforming loans at period end (f)

$

652



$

650



$

657



Nonperforming assets at period end


693




705




751



Nonperforming loans to period-end portfolio loans


1.23

%



1.24

%



1.32

%


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


1.30




1.34




1.51
















Trust and brokerage assets













Assets under management

$

35,544



$

35,714



$

35,148



Nonmanaged and brokerage assets


37,759




37,115




33,803
















Other data













Average full-time equivalent employees


14,999




15,396




15,455



Branches


1,052




1,084




1,062
















Taxable-equivalent adjustment

$

5



$

6



$

6


 

 

Financial Highlights (continued)

(dollars in millions, except per share amounts)














Six months ended





6-30-13



6-30-12


Summary of operations









Net interest income (TE)

$

1,175



$

1,103



Noninterest income


854




899




Total revenue (TE)


2,029




2,002



Provision (credit) for loan and lease losses


83




63



Noninterest expense


1,392




1,372



Income (loss) from continuing operations attributable to Key


400




423



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


8




13



Net income (loss) attributable to Key 


408




436













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

$

389



$

412



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


8




13



Net income (loss) attributable to Key common shareholders


397




425












Per common share









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

$

.42



$

.44



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


.01




.01



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


.43




.45













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


.42




.43



Income (loss) from discontinued operations, net of taxes — assuming dilution (a)


.01




.01



Net income (loss) attributable to Key common shareholders — assuming dilution  (b)


.43




.45













Cash dividends paid


.105




.08












Performance ratios









From continuing operations:









Return on average total assets


.97

%



1.05

%


Return on average common equity


7.84




8.49



Return on average tangible common equity  (c)


8.73




9.39



Net interest margin (TE)


3.18




3.11



Cash efficiency ratio (c)


67.52




68.43













From consolidated operations:









Return on average total assets


.93

%



1.01

%


Return on average common equity


8.00




8.76



Return on average tangible common equity  (c)


8.91




9.69



Net interest margin (TE)


3.12




3.03












Asset quality — from continuing operations









Net loan charge-offs

$

94



$

178



Net loan charge-offs to average total loans


.36

%



.72

%











Other data









Average full-time equivalent employees


15,197




15,430












Taxable-equivalent adjustment

$

11



$

12




(a)

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.  In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund.  As a result of these decisions, Key has accounted for these businesses as discontinued operations.



(b)

Earnings per share may not foot due to rounding.



(c)

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.



(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)

6-30-13 ratio is estimated.



(f)

June 30, 2013 and March 31, 2013 amounts exclude $19 million and $22 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," "cash efficiency ratio," and "adjusted 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 and the adjusted cash efficiency ratio are ratios of two non-GAAP performance measures. As such, there are no directly comparable GAAP performance measures.  The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation.  The adjusted cash efficiency ratio further removes the impact of the efficiency initiative charges.  Management believes these ratios provide greater consistency and comparability between Key's results and those of its peer banks.  Additionally, these ratios are used by analysts and investors as they develop 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





6-30-13



3-31-13



6-30-12


Tangible common equity to tangible assets at period end













Key shareholders' equity (GAAP)

$

10,229



$

10,340



$

10,155



Less:

Intangible assets  (a)


1,021




1,024




932




Preferred Stock, Series A (d) 


282




291




291




Tangible common equity (non-GAAP) 

$

8,926



$

9,025



$

8,932

















Total assets (GAAP)

$

90,639



$

89,198



$

86,523



Less:

Intangible assets  (a)


1,021




1,024




932




Tangible assets (non-GAAP)

$

89,618



$

88,174



$

85,591

















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


9.96

%



10.24

%



10.44

%















Tier 1 common equity at period end













Key shareholders' equity (GAAP)

$

10,229



$

10,340



$

10,155



Qualifying capital securities


339




339




339



Less:

Goodwill


979




979




917




Accumulated other comprehensive income (loss) (b)


(359)




(204)




(109)




Other assets (c)


102




106




71




Total Tier 1 capital (regulatory)


9,846




9,798




9,615



Less:

Qualifying capital securities


339




339




339




Preferred Stock, Series A (d)


282




291




291




Total Tier 1 common equity (non-GAAP) 

$

9,225



$

9,168



$

8,985

















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

$

81,964



$

80,400



$

77,236

















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


11.25

%



11.40

%



11.63

%















Pre-provision net revenue













Net interest income (GAAP)

$

581



$

583



$

538



Plus:

Taxable-equivalent adjustment


5




6




6




Noninterest income (GAAP)


429




425




457



Less:

Noninterest expense (GAAP)


711




681




693



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

$

304



$

333



$

308


 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)


















Three months ended





6-30-13



3-31-13



6-30-12


Average tangible common equity













Average Key shareholders' equity (GAAP)

$

10,314



$

10,279



$

10,100



Less:

Intangible assets (average) (f)


1,023




1,027




931




Preferred Stock, Series A (average)


291




291




291




Average tangible common equity (non-GAAP)

$

9,000



$

8,961



$

8,878
















Return on average tangible common equity from continuing operations













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

$

193



$

196



$

217



Average tangible common equity (non-GAAP)


9,000




8,961




8,878

















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


8.60

%



8.87

%



9.83

%















Return on average tangible common equity consolidated













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

$

198



$

199



$

231



Average tangible common equity (non-GAAP)


9,000




8,961




8,878

















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


8.82

%



9.01

%



10.46

%















Cash efficiency ratio













Noninterest expense (GAAP)

$

711



$

681



$

693



Less:

Intangible asset amortization on credit cards (GAAP)


7




8







Other intangible asset amortization (GAAP)


3




4




1




Adjusted noninterest expense (non-GAAP)

$

701



$

669



$

692

















Net interest income (GAAP)

$

581



$

583



$

538



Plus:

Taxable-equivalent adjustment


5




6




6




Noninterest income (GAAP)


429




425




457




Total taxable-equivalent revenue (non-GAAP)

$

1,015



$

1,014



$

1,001

















Cash efficiency ratio (non-GAAP)


69.06

%



65.98

%



69.13

%















Cash efficiency ratio net of efficiency initiative charges













Adjusted noninterest expense (non-GAAP)

$

701



$

669



$

692



Less:

Efficiency initiative charges (non-GAAP)


37




15







Net adjusted noninterest expense (non-GAAP)

$

664



$

654



$

692

















Total taxable-equivalent revenue (non-GAAP)

$

1,015



$

1,014



$

1,001

















Cash efficiency ratio net of efficiency initiative charges (non-GAAP)


65.42

%



64.50

%



69.13

%


















Three months

ended













6-30-13









Tier 1 common equity under Basel III (estimates)













Tier 1 common equity under current regulatory rules

$

9,225











Adjustments from current regulatory rules to Basel III:














Deferred tax assets and other (g)


(62)












Tier 1 common equity anticipated under Basel III (h)

$

9,163

























Net risk-weighted assets under current regulatory rules

$

81,964











Adjustments from current regulatory rules to Basel III:














Loan commitments less than one year


826












Past due loans


253












Mortgage servicing assets (i)


292












Deferred tax assets (i)


279












Other


1,151












Total risk-weighted assets under Basel III

$

84,765

























Tier 1 common equity ratio under Basel III


10.81

%









 

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)






















Six months ended









6-30-13



6-30-12


Pre-provision net revenue













Net interest income (GAAP)





$

1,164



$

1,091



Plus:

Taxable-equivalent adjustment






11




12




Noninterest income (GAAP)






854




899



Less:

Noninterest expense (GAAP)






1,392




1,372



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





$

637



$

630
















Average tangible common equity













Average Key shareholders' equity (GAAP)





$

10,297



$

10,046



Less:

Intangible assets (average) (j)






1,025




932




Preferred Stock, Series A (average)






291




291




Average tangible common equity (non-GAAP)





$

8,981



$

8,823
















Return on average tangible common equity from continuing operations













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





$

389



$

412



Average tangible common equity (non-GAAP)






8,981




8,823

















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






8.73

%



9.39

%















Return on average tangible common equity consolidated













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





$

397



$

425



Average tangible common equity (non-GAAP)






8,981




8,823

















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






8.91

%



9.69

%















Cash efficiency ratio













Noninterest expense (GAAP)





$

1,392



$

1,372



Less:

Intangible asset amortization on credit cards (GAAP)






15







Other intangible asset amortization (GAAP)






7




2




Adjusted noninterest expense (non-GAAP)





$

1,370



$

1,370

















Net interest income (GAAP)





$

1,164



$

1,091



Plus:

Taxable-equivalent adjustment






11




12




Noninterest income (GAAP)






854




899




Total taxable-equivalent revenue (non-GAAP)





$

2,029



$

2,002

















Cash efficiency ratio (non-GAAP)






67.52

%



68.43

%















Adjusted cash efficiency ratio net of efficiency initiative charges













Adjusted noninterest expense (non-GAAP)





$

1,370



$

1,370



Less:

Efficiency initiative charges (non-GAAP)






52







Net adjusted noninterest expense (non-GAAP)





$

1,318



$

1,370

















Total taxable-equivalent revenue (non-GAAP)





$

2,029



$

2,002

















Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP)






64.96

%



68.43

%



(a)

Three months ended June 30, 2013 and March 31, 2013 exclude $107 million and $114 million, respectively, of period end 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 June 30, 2013, March 31, 2013, and June 30, 2012.



(d)

Net of capital surplus for the three months ended June 30, 2013.



(e)

6-30-13 amount is estimated.



(f)

Three months ended June 30, 2013 and March 31, 2013 exclude $110 million and $118 million, respectively, of average ending purchased credit card receivable intangible assets. 



(g)

Includes the deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards.



(h)

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' final Basel III rule, which implements Basel III under the Standardized Approach.



(i)

Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.



(j)

Six months ended June 30, 2013 excludes $114 million of average ending purchased credit card receivable intangible assets.



GAAP = U.S. generally accepted accounting principles

 

Consolidated Balance Sheets

(dollars in millions)



















6-30-13



3-31-13



6-30-12

Assets













Loans


$

53,101



$

52,574



$

49,605


Loans held for sale



402




434




656


Securities available for sale



13,253




13,496




13,205


Held-to-maturity securities



4,750




3,721




4,352


Trading account assets



592




701




679


Short-term investments



3,582




3,081




2,216


Other investments



1,037




1,059




1,186



Total earning assets



76,717




75,066




71,899


Allowance for loan and lease losses



(876)




(893)




(888)


Cash and due from banks



696




621




716


Premises and equipment



900




930




931


Operating lease assets



303




309




318


Goodwill



979




979




917


Other intangible assets



149




159




15


Corporate-owned life insurance



3,362




3,352




3,285


Derivative assets



461




609




818


Accrued income and other assets



2,864




2,884




2,967


Discontinued assets



5,084




5,182




5,545



Total assets


$

90,639



$

89,198



$

86,523















Liabilities













Deposits in domestic offices:














NOW and money market deposit accounts


$

32,689



$

32,700



$

28,957



Savings deposits



2,542




2,546




2,103



Certificates of deposit ($100,000 or more)



2,918




2,998




3,669



Other time deposits



4,089




4,324




5,385



     Total interest-bearing deposits



42,238




42,568




40,114



Noninterest-bearing deposits



24,939




21,564




21,435


Deposits in foreign office — interest-bearing



544




522




618



     Total deposits



67,721




64,654




62,167


Federal funds purchased and securities

       sold under repurchase agreements



1,647




1,950




1,716


Bank notes and other short-term borrowings



298




378




362


Derivative liabilities



456




524




763


Accrued expense and other liabilities



1,421




1,352




1,390


Long-term debt



6,666




7,785




7,521


Discontinued liabilities



2,169




2,176




2,428



Total liabilities



80,378




78,819




76,347















Equity













Preferred stock, Series A



291




291




291


Common shares



1,017




1,017




1,017


Capital surplus



4,045




4,059




4,120


Retained earnings



7,214




7,065




6,595


Treasury stock, at cost



(2,020)




(1,930)




(1,796)


Accumulated other comprehensive income (loss)



(318)




(162)




(72)



Key shareholders' equity



10,229




10,340




10,155


Noncontrolling interests



32




39




21



Total equity



10,261




10,379




10,176

Total liabilities and equity


$

90,639



$

89,198



$

86,523















Common shares outstanding (000)



912,883




922,581




945,473

 

Consolidated Statements of Income 

(dollars in millions, except per share amounts)























Three months ended



Six months ended




6-30-13


3-31-13


6-30-12



6-30-13



6-30-12

Interest income


















Loans

$

539


$

548


$

518



$

1,087



$

1,054


Loans held for sale


5



4



5




9




10


Securities available for sale


80



80



105




160




221


Held-to-maturity securities


20



18



17




38




29


Trading account assets


4



6



5




10




11


Short-term investments


1



2



2




3




3


Other investments


8



9



10




17




18



Total interest income


657



667



662




1,324




1,346




















Interest expense


















Deposits


42



45



71




87




148


Federal funds purchased and securities sold under repurchase agreements




1



1




1




2


Bank notes and other short-term borrowings


2



1



2




3




4


Long-term debt


32



37



50




69




101



Total interest expense


76



84



124




160




255




















Net interest income


581



583



538




1,164




1,091

Provision (credit) for loan and lease losses


28



55



21




83




63

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


553



528



517




1,081




1,028




















Noninterest income


















Trust and investment services income


100



95



90




195




186


Investment banking and debt placement fees


84



79



73




163




134


Service charges on deposit accounts


71



69



70




140




138


Operating lease income and other leasing gains


19



23



58




42




110


Corporate services income


43



45



44




88




88


Cards and payments income


42



37



31




79




60


Corporate-owned life insurance income


31



30



30




61




60


Consumer mortgage income


6



7



9




13




18


Net gains (losses) from principal investing


7



8



24




15




59


Other income (a)


26



32



28




58




46



Total noninterest income


429



425



457




854




899




















Noninterest expense


















Personnel


406



391



377




797




749


Net occupancy


72



64



62




136




126


Computer processing


39



39



43




78




84


Business services and professional fees


37



35



51




72




88


Equipment


27



26



27




53




53


Operating lease expense


11



12



15




23




32


Marketing


11



6



17




17




30


FDIC assessment


8



8



8




16




16


Intangible asset amortization on credit cards


7



8






15





Other intangible asset amortization


3



4



1




7




2


Provision (credit) for losses on lending-related commitments


5



3



6




8




6


OREO expense, net


1



3



7




4




13


Other expense


84



82



79




166




173



Total noninterest expense


711



681



693




1,392




1,372

Income (loss) from continuing operations before income taxes


271



272



281




543




555


Income taxes


72



70



54




142




127

Income (loss) from continuing operations


199



202



227




401




428


Income (loss) from discontinued operations, net of taxes


5



3



14




8




13

Net income (loss)


204



205



241




409




441


Less:  Net income (loss) attributable to noncontrolling interests 




1



5




1




5

Net income (loss) attributable to Key

$

204


$

204


$

236



$

408



$

436




















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

$

193


$

196


$

217



$

389



$

412

Net income (loss) attributable to Key common shareholders 


198



199



231




397




425




















Per common share

















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

$

.21


$

.21


$

.23



$

.42



$

.44

Income (loss) from discontinued operations, net of taxes


.01





.01




.01




.01

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


.22



.22



.24




.43




.45




















Per common share — assuming dilution

















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

$

.21


$

.21


$

.23



$

.42



$

.43

Income (loss) from discontinued operations, net of taxes


.01





.01




.01




.01

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


.22



.21



.24




.43




.45




















Cash dividends declared per common share

$

.055


$

.05


$

.05



$

.105



$

.08




















Weighted-average common shares outstanding (000)


913,736



920,316



944,648




917,008




946,995


















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


918,628



926,051



948,087




922,319




951,029







































(a)

For the three months ended June 30, 2013, March 31, 2013, and June 30, 2012, 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)






































Second Quarter 2013



First Quarter 2013



Second Quarter 2012






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


$

23,480

(d)

$

212



3.63

%


$

23,317

(d)

$

218



3.78

%


$

20,606


$

196



3.82

%


Real estate — commercial mortgage



7,494



78



4.14




7,616



79



4.24




7,613



85



4.50



Real estate — construction



1,049



11



4.30




1,034



11



4.27




1,216



14



4.64



Commercial lease financing



4,747



48



3.96




4,843



47



3.92




5,226



45



3.45




    Total commercial loans



36,770



349



3.80




36,810



355



3.92




34,661



340



3.94



Real estate — residential mortgage



2,176



24



4.53




2,173



25



4.58




1,990



24



4.91



Home equity:

































Key Community Bank



9,992



98



3.93




9,787



96



3.97




9,359



94



4.04




Other



389



7



7.66




413



8



7.70




493



9



7.66




    Total home equity loans



10,381



105



4.07




10,200



104



4.12




9,852



103



4.23



Consumer other — Key Community Bank



1,392



26



7.35




1,343



25



7.58




1,247



29



9.20



Credit cards



697



20



11.91




704



22



12.61










Consumer other:

































Marine



1,206



20



6.24




1,311



20



6.29




1,595



26



6.29




Other



74



1



8.58




85



2



7.98




101



2



8.49




    Total consumer other 



1,280



21



6.37




1,396



22



6.39




1,696



28



6.42




    Total consumer loans



15,926



196



4.94




15,816



198



5.00




14,785



184



4.99




    Total loans



52,696



545



4.15




52,626



553



4.26




49,446



524



4.26



Loans held for sale



513



5



3.93




469



4



3.27




585



5



3.43



Securities available for sale (b), (e)



13,296



79



2.47




12,065



81



2.74




13,865



105



3.13



Held-to-maturity securities (b)



4,144



20



1.87




3,816



18



1.94




3,493



17



1.98



Trading account assets



749



4



2.31




710



6



3.44




768



5



3.01



Short-term investments



2,722



1



.23




2,999



2



.22




2,608



2



.29



Other investments (e)



1,048



8



2.61




1,059



9



3.59




1,177



10



3.21




    Total earning assets



75,168



662



3.54




73,744



673



3.67




71,942



668



3.74



Allowance for loan and lease losses



(890)










(896)










(928)









Accrued income and other assets



9,770










9,867










9,866









Discontinued assets



5,096










5,216










5,673










    Total assets


$

89,144









$

87,931









$

86,553









































Liabilities
































NOW and money market deposit accounts


$

32,849



14



.17



$

31,946



14



.18



$

29,106



13



.18



Savings deposits



2,545





.04




2,473



1



.05




2,085





.03



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



2,975



13



1.79




2,911



14



1.99




3,858



27



2.85



Other time deposits



4,202



14



1.35




4,451



16



1.42




5,645



30



2.13



Deposits in foreign office



573



1



.24




454





.25




759



1



.24




    Total interest-bearing deposits



43,144



42



.39




42,235



45



.43




41,453



71



.69



Federal funds purchased and securities

        sold under repurchase agreements



1,845





.14




1,913



1



.15




1,880



1



.20



Bank notes and other short-term borrowings



367



2



1.84




387



1



1.75




468



2



1.80



Long-term debt (f), (g)



4,401



32



3.25




4,671



37



3.51




5,463



50



4.01




    Total interest-bearing liabilities



49,757



76



.62




49,206



84



.70




49,264



124



1.02



Noninterest-bearing deposits



22,297










21,400










19,610









Accrued expense and other liabilities



1,653










1,799










1,902









Discontinued liabilities (g)



5,089










5,213










5,658










    Total liabilities



78,796










77,618










76,434









































Equity
































Key shareholders' equity



10,314










10,279










10,100









Noncontrolling interests



34










34










19










    Total equity



10,348










10,313










10,119











































    Total liabilities and equity


$

89,144









$

87,931









$

86,553









































Interest rate spread (TE)









2.92

%









2.97

%









2.72

%


































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






586



3.13

%






589



3.24

%






544



3.06

%

TE adjustment (b)






5










6










6






Net interest income, GAAP basis





$

581









$

583









$

538







(a)

Results are from continuing operations.  Interest excludes the interest associated with the liabilities referred to in (g) 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)

Commercial, financial and agricultural average balance for the three months ended June 30, 2013 and March 31, 2013 includes $96 million and $91 million, respectively, of assets from commercial credit cards.



(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.



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)

















































Six months ended June 30, 2013



Six months ended June 30, 2012





Average







Average









Balance


Interest

 (a)

Yield/Rate

 (a)


Balance


Interest

 (a)

Yield/ Rate

 (a)

Assets





















Loans: (b), (c)





















Commercial, financial and agricultural

$

23,399

(d)

$

430



3.71

%


$

20,318


$

394



3.90

%


Real estate — commercial mortgage


7,554



157



4.19




7,803



174



4.49



Real estate — construction


1,042



22



4.28




1,250



30



4.75



Commercial lease financing


4,795



95



3.94




5,340



99



3.70




    Total commercial loans


36,790



704



3.86




34,711



697



4.03



Real estate — residential mortgage


2,174



49



4.55




1,970



49



4.98



Home equity:






















Key Community Bank


9,890



194



3.95




9,266



187



4.06




Other


401



15



7.68




507



19



7.67



         Total home equity loans


10,291



209



4.10




9,773



206



4.25



Consumer other — Key Community Bank


1,368



51



7.46




1,220



57



9.40



Credit cards


700



42



12.26










Consumer other:






















Marine


1,258



40



6.27




1,655



53



6.29




Other


80



3



8.26




109



4



8.11




   Total consumer other 


1,338



43



6.38




1,764



57



6.40



         Total consumer loans


15,871



394



4.97




14,727



369



5.03



         Total loans


52,661



1,098



4.21




49,438



1,066



4.33



Loans held for sale


491



9



3.61




583



10



3.52



Securities available for sale (b), (e)


12,684



160



2.59




14,562



221



3.14



Held-to-maturity securities (b)


3,981



38



1.90




2,872



29



2.02



Trading account assets


729



10



2.86




788



11



2.86



Short-term investments


2,860



3



.22




2,253



3



.29



Other investments (e)


1,054



17



3.10




1,173



18



2.99



         Total earning assets


74,460



1,335



3.60




71,669



1,358



3.83



Allowance for loan and lease losses


(893)










(948)









Accrued income and other assets


9,818










9,931









Discontinued assets


5,156










5,736









         Total assets

$

88,541









$

86,388






























Liabilities





















NOW and money market deposit accounts

$

32,400



28



.17



$

28,717



28



.20



Savings deposits


2,509



1



.05




2,041





.04



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


2,943



27



1.89




3,947



56



2.88



Other time deposits


4,326



30



1.39




5,840



63



2.16



Deposits in foreign office


514



1



.25




764



1



.24




    Total interest-bearing deposits


42,692



87



.41




41,309



148



.72
























Federal funds purchased and securities

     sold under repurchase agreements


1,879



1



.15




1,865



2



.20



Bank notes and other short-term borrowings


377



3



1.80




479



4



1.66



Long-term debt (f), (g)


4,535



69



3.38




5,812



101



3.80




    Total interest-bearing liabilities


49,483



160



.66




49,465



255



1.05



Noninterest-bearing deposits


21,851










19,038









Accrued expense and other liabilities


1,725










2,095









Discontinued liabilities (d), (g)


5,151










5,726









         Total liabilities


78,210










76,324






























Equity





















Key shareholders' equity


10,297










10,046









Noncontrolling interests


34










18









         Total equity


10,331










10,064































         Total liabilities and equity

$

88,541









$

86,388






























Interest rate spread (TE)








2.94

%









2.78

%























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





1,175



3.18

%






1,103



3.11

%

TE adjustment (b)





11










12






Net interest income, GAAP basis




$

1,164









$

1,091







(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)

Commercial, financial and agricultural average balance for the six months ended June 30, 2013 includes $94 million of assets from commercial credit cards.



(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.



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

 

Noninterest Expense

(dollars in millions)

















Three months ended


Six months ended


6-30-13


3-31-13


6-30-12


6-30-13


6-30-12

Personnel (a)

$

406


$

391


$

377


$

797


$

749

Net occupancy


72



64



62



136



126

Computer processing


39



39



43



78



84

Business services and professional fees


37



35



51



72



88

Equipment


27



26



27



53



53

Operating lease expense


11



12



15



23



32

Marketing


11



6



17



17



30

FDIC assessment


8



8



8



16



16

Intangible asset amortization on credit cards


7



8





15



Other intangible asset amortization


3



4



1



7



2

Provision (credit) for losses on lending-related commitments


5



3



6



8



6

OREO expense, net


1



3



7



4



13

Other expense


84



82



79



166



173

     Total noninterest expense

$

711


$

681


$

693


$

1,392


$

1,372
















Average full-time equivalent employees (b)


14,999



15,396



15,455



15,197



15,430
















(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


Six months ended


6-30-13


3-31-13


6-30-12


6-30-13


6-30-12

Salaries

$

227


$

222


$

228


$

449


$

447

Technology contract labor, net


19



18



13



37



25

Incentive compensation


77



73



66



150



126

Employee benefits


56



59



54



115



118

Stock-based compensation


9



10



13



19



26

Severance


18



9



3



27



7

     Total personnel expense

$

406


$

391


$

377


$

797


$

749

 

Loan Composition


(dollars in millions)


































Percent change 6-30-13 vs.






6-30-13


3-31-13


6-30-12


3-31-13


6-30-12


Commercial, financial and agricultural  (a)

$

23,715


$

23,412


$

20,916



1.3

%


13.4

%

Commercial real estate:

















Commercial mortgage


7,474



7,544



7,409



(.9)



.9



Construction


1,060



1,057



1,172



.3



(9.6)



     Total commercial real estate loans


8,534



8,601



8,581



(.8)



(.5)


Commercial lease financing


4,774



4,796



5,106



(.5)



(6.5)



     Total commercial loans


37,023



36,809



34,603



.6



7.0


Residential — prime loans:

















Real estate — residential mortgage


2,176



2,176



2,016





7.9



Home equity:


















Key Community Bank


10,173



9,809



9,601



3.7



6.0




Other


375



401



479



(6.5)



(21.7)



Total home equity loans


10,548



10,210



10,080



3.3



4.6


Total residential — prime loans


12,724



12,386



12,096



2.7



5.2


Consumer other — Key Community Bank


1,424



1,353



1,263



5.2



12.7


Credit cards


701



693





1.2



N/M


Consumer other:

















Marine


1,160



1,254



1,542



(7.5)



(24.8)



Other


69



79



101



(12.7)



(31.7)



     Total consumer other


1,229



1,333



1,643



(7.8)



(25.2)



     Total consumer loans


16,078



15,765



15,002



2.0



7.2



Total loans (b), (c)

$

53,101


$

52,574


$

49,605



1.0

%


7.0

%


























































Loans Held for Sale Composition


(dollars in millions)


































Percent change 6-30-13 vs.






6-30-13


3-31-13


6-30-12


3-31-13


6-30-12


Commercial, financial and agricultural

$

22


$

180


$

18



(87.8)

%


22.2

%

Real estate — commercial mortgage


318



196



523



62.2



(39.2)


Real estate — construction






12



N/M



N/M


Commercial lease financing


14



9



13



55.6



7.7


Real estate — residential mortgage


48



49



90



(2.0)



(46.7)



Total loans held for sale

$

402


$

434


$

656



(7.4)

%


(38.7)

%


























































Summary of Changes in Loans Held for Sale


(dollars in millions)

























2Q13


1Q13


4Q12


3Q12


2Q12


Balance at beginning of period

$

434


$

599


$

628


$

656


$

511



New originations


1,241



1,075



1,686



1,280



1,308



Transfers from held to maturity, net


17



19



38



13



7



Loan sales


(1,292)



(1,257)



(1,747)



(1,311)



(1,165)



Loan draws (payments), net






(4)



(9)



(4)



Transfers to OREO / valuation adjustments


2



(2)



(2)



(1)



(1)


Balance at end of period

$

402


$

434


$

599


$

628


$

656


(a)

June 30, 2013 and March 31, 2013 loan balances include $96 million and $93 million of commercial credit card balances, respectively.



(b)

Excluded at June 30, 2013, March 31, 2013, and June 30, 2012 are loans in the amount of $5.0 billion, $5.1 billion, and $5.5 billion, respectively, related to the discontinued operations of the education lending business.



(c)

June 30, 2013 includes purchased loans of $187 million of which $19 million were purchased credit impaired.  March 31, 2013 includes purchased loans of $204 million of which $22 million were purchased credit impaired. 



N/M = Not Meaningful

Exit Loan Portfolio From Continuing Operations

(dollars in millions)























Balance


Change


Net Loan


Balance on


Outstanding


6-30-13 vs.


Charge-offs


Nonperforming Status


6-30-13


3-31-13


3-31-13


2Q13

 (c)

1Q13

 (c)

6-30-13


3-31-13

Residential properties — homebuilder

$

26


$

29


$

(3)


$

1




$

8


$

10

Marine and RV floor plan


28



29



(1)




$

(3)



7



6

Commercial lease financing (a)


931



966



(35)



(2)



(5)



1



6

     Total commercial loans


985



1,024



(39)



(1)



(8)



16



22

Home equity — Other


375



401



(26)



5



4



16



18

Marine


1,160



1,254



(94)



5



3



31



26

RV and other consumer


69



79



(10)



1







     Total consumer loans


1,604



1,734



(130)



11



7



47



44

     Total exit loans in loan portfolio

$

2,589


$

2,758


$

(169)


$

10


$

(1)


$

63


$

66






















Discontinued operations — education

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

$

4,992


$

5,086


$

(94)


$

7


$

12


$

19


$

15
























(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.

 

Asset Quality Statistics From Continuing Operations


(dollars in millions)






















2Q13



1Q13



4Q12



3Q12



2Q12


Net loan charge-offs

$

45


$

49


$

58


$

109


$

77


Net loan charge-offs to average total loans


.34

%


.38

%


.44

%


.86

%


.63

%

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


485.33



449.37



384.85



204.78



286.74


Allowance for loan and lease losses

$

876


$

893


$

888


$

888


$

888


Allowance for credit losses (a)


913



925



917



931



939


Allowance for loan and lease losses to period-end loans


1.65

%


1.70

%


1.68

%


1.73

%


1.79

%

Allowance for credit losses to period-end loans


1.72



1.76



1.74



1.81



1.89


Allowance for loan and lease losses to nonperforming loans


134.36



137.38



131.75



135.99



135.16


Allowance for credit losses to nonperforming loans


140.03



142.31



136.05



142.57



142.92


Nonperforming loans at period end (b)

$

652


$

650


$

674


$

653


$

657


Nonperforming assets at period end


693



705



735



718



751


Nonperforming loans to period-end portfolio loans


1.23

%


1.24

%


1.28

%


1.27

%


1.32

%

Nonperforming assets to period-end portfolio loans plus

       OREO and other nonperforming assets


1.30



1.34



1.39



1.39



1.51






















(a)

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



















(b)

June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $19 million, $22 million, $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


Six months ended



6-30-13


3-31-13


6-30-12


6-30-13


6-30-12


Average loans outstanding

$

52,696


$

52,626


$

49,446


$

52,661


$

49,438


















Allowance for loan and lease losses at beginning of period 

$

893


$

888


$

944


$

888


$

1,004


Loans charged off: 
















     Commercial, financial and agricultural 


15



14



23



29



49


















     Real estate — commercial mortgage 


3



13



23



16



46


     Real estate — construction  


1



1



5



2



16


              Total commercial real estate loans


4



14



28



18



62


     Commercial lease financing 


2



6



16



8



20


              Total commercial loans 


21



34



67



55



131


     Real estate — residential mortgage 


4



6



7



10



13


     Home equity:
















          Key Community Bank


18



18



23



36



48


          Other


6



6



9



12



17


              Total home equity loans


24



24



32



48



65


     Consumer other — Key Community Bank


7



9



10



16



20


     Credit cards


8



8





16




     Consumer other:
















          Marine


9



8



13



17



30


          Other


1



1



2



2



4


              Total consumer other 


10



9



15



19



34


              Total consumer loans 


53



56



64



109



132


              Total loans charged off


74



90



131



164



263


Recoveries: 
















     Commercial, financial and agricultural 


7



12



20



19



31


















     Real estate — commercial mortgage 


5



5



14



10



16


     Real estate — construction




8



1



8



2


              Total commercial real estate loans 


5



13



15



18



18


     Commercial lease financing


4



4



6



8



10


              Total commercial loans 


16



29



41



45



59


     Real estate — residential mortgage






1





2


     Home equity:
















          Key Community Bank


4



2



2



6



4


          Other


1



2



2



3



3


              Total home equity loans


5



4



4



9



7


     Consumer other — Key Community Bank


2



2



2



4



3


     Credit cards


2







2




     Consumer other:
















          Marine


4



5



6



9



13


          Other




1





1



1


              Total consumer other  


4



6



6



10



14


              Total consumer loans 


13



12



13



25



26


              Total recoveries 


29



41



54



70



85


Net loan charge-offs


(45)



(49)



(77)



(94)



(178)


Provision (credit) for loan and lease losses


28



55



21



83



63


Foreign currency translation adjustment




(1)





(1)



(1)


Allowance for loan and lease losses at end of period

$

876


$

893


$

888


$

876


$

888


















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

$

32


$

29


$

45


$

29


$

45


Provision (credit) for losses on lending-related commitments


5



3



6



8



6


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

$

37


$

32


$

51


$

37


$

51


















Total allowance for credit losses at end of period

$

913


$

925


$

939


$

913


$

939


















Net loan charge-offs to average total loans


.34

%


.38

%


.63

%


.36

%


.72

%

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


485.33



449.37



286.74



462.13



248.08


Allowance for loan and lease losses to period-end loans


1.65



1.70



1.79



1.65



1.79


Allowance for credit losses to period-end loans


1.72



1.76



1.89



1.72



1.89


Allowance for loan and lease losses to nonperforming loans


134.36



137.38



135.16



134.36



135.16


Allowance for credit losses to nonperforming loans


140.03



142.31



142.92



140.03



142.92


















Discontinued operations — education lending business:
















     Loans charged off

$

12


$

16


$

16


$

28


$

39


     Recoveries


5



4



4



9



8


     Net loan charge-offs

$

(7)


$

(12)


$

(12)


$

(19)


$

(31)