KeyCorp Reports Second Quarter 2010 Profit

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Jul 22, 2010, 06:18 ET

CLEVELAND, July 22 /PRNewswire-FirstCall/ --

Net income from continuing operations of $56 million, or $.06 per common share
Net interest margin of 3.17%
Nonperforming loans decrease by $362 million from first quarter of 2010 to 3.19% of period-end loans
Loan loss reserve at 4.16% of total period-end loans
Tier 1 common equity and Tier 1 risk-based capital ratios of 8.01% and 13.55%, respectively
$7.6 billion in new or renewed lending commitments originated

KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $56 million, or $.06 per common share. These results compare to a net loss from continuing operations attributable to Key common shareholders of $394 million, or $.68 per common share, for the second quarter of 2009, which was negatively impacted by an $823 million loan loss provision. Second quarter net income attributable to Key common shareholders was $29 million compared to a net loss attributable to Key common shareholders of $390 million for the second quarter of 2009. Net loss attributable to Key common shareholders for the six-month period ended June 30, 2010 was $67 million compared to a net loss attributable to Key common shareholders of $926 million for the same period one year ago.

Key's second quarter earnings improvement results from a lower provision for loan losses, higher fee income, and well-controlled expenses when compared to the first quarter of 2010. Credit quality continued to improve across the majority of the loan portfolios in both Community Banking and National Banking. Net charge-offs declined by $87 million, and nonperforming loans decreased by $362 million from March 31, 2010.

"These results are encouraging and the return to profitability represents an important step forward for our company," said Chief Executive Officer Henry L. Meyer III. "Continued improvement in credit quality across most of our businesses was the principal contributor to the quarterly performance."

Meyer continued: "Key is now focusing on opportunities in a gradually improving economy. That said, some uncertainty remains in the markets, and consumer and business loan demand is soft. Recognizing current economic conditions, we remain focused on investing in our relationship businesses, maintaining our strong capital and liquidity positions, reducing risk, and careful expense control as we navigate through the economic cycle."

At June 30, 2010, Key's estimated Tier 1 common equity ratio was 8.01% compared to 7.51% at March 31, 2010, and estimated Tier 1 risk-based capital ratio was 13.55% up from 12.92% one quarter ago.

Key's strong capital and liquidity positions enable the Company to support the borrowing needs of clients. The Company originated approximately $7.6 billion in new or renewed lending commitments to consumers and businesses during the quarter.

Meyer also noted that Key opened 18 new branches during the first six months and expects to open an additional 22 new branches during the remainder of 2010, increasing its market presence in selected markets of its 14-state branch network. In addition, Key continues with its plans to modernize its existing branches.

The following table shows Key's continuing and discontinued operating results for the comparative quarters and for the six-month periods ended June 30, 2010 and 2009.

Results of Operations
		Three months ended			Six months ended
in millions, except per share amounts		6-30-10	3-31-10	6-30-09	6-30-10	6-30-09
Summary of operations
Income (loss) from continuing operations attributable to Key		$ 97	$ (57)	$ (230)	$ 40	$ (689)
Income (loss) from discontinued operations, net of taxes ^(a)		(27)	2	4	(25)	(25)
Net income (loss) attributable to Key		$ 70	$ (55)	$ (226)	$ 15	$ (714)

Income (loss) from continuing operations attributable to Key		$ 97	$ (57)	$ (230)	$ 40	$ (689)
Less:	Dividends on Series A Preferred Stock	6	6	15	12	27
	Noncash deemed dividend — common shares exchanged for Series A Preferred Stock	--	--	114	--	114
	Cash dividends on Series B Preferred Stock	31	31	31	62	63
	Amortization of discount on Series B Preferred Stock	4	4	4	8	8
Income (loss) from continuing operations attributable to Key common shareholders		56	(98)	(394)	(42)	(901)
Income (loss) from discontinued operations, net of taxes ^(a)		(27)	2	4	(25)	(25)
Net income (loss) attributable to Key common shareholders		$ 29	$ (96)	$ (390)	$ (67)	$ (926)

Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders		$ .06	$ (.11)	$ (.68)	$ (.05)	$ (1.68)
Income (loss) from discontinued operations, net of taxes ^(a)		(.03)	--	.01	(.03)	(.05)
Net income (loss) attributable to Key common shareholders ^(b)		$ .03	$ (.11)	$ (.68)	$ (.08)	$ (1.73)

(a) In September 2009, management made the decision to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In April 2009, management made the decision to curtail the operations of Austin Capital Management, Ltd., an investment subsidiary that specializes in managing hedge fund investments for its institutional customer base. As a result of these decisions, Key has accounted for these businesses as discontinued operations. The loss from discontinued operations for the six- month period ended June 30, 2010 was primarily attributable to fair value adjustments related to the education lending securitization trusts. Included in the loss from discontinued operations for the six-month period ended June 30, 2009, is a $23 million after tax, or $.05 per common share, charge for intangible assets impairment related to Austin Capital Management. (b) Earnings per share may not foot due to rounding.

SUMMARY OF CONTINUING OPERATIONS

Taxable-equivalent net interest income was $623 million for the second quarter of 2010, and the net interest margin was 3.17%. These results compare to taxable-equivalent net interest income of $575 million and a net interest margin of 2.70% for the second quarter of 2009. The increase in the net interest margin is primarily attributable to lower funding costs. The Company continues to experience an improvement in the mix of deposits by reducing the level of higher costing certificates of deposit and increasing lower costing transaction accounts. The Company expects this change in funding mix to continue through the second half of 2010 as certificates of deposit mature and re-price to lower current market rates. Over the past year, funding costs were also reduced by maturities of long-term debt and the 2009 exchanges of capital securities for Key common shares. Key also experienced improved spreads on loan renewals.

Compared to the first quarter of 2010, taxable-equivalent net interest income decreased by $9 million, and the net interest margin fell by two basis points. Although there was a benefit from the improvement in the mix of deposits, the decline in the net interest margin was largely the result of funds from loan pay downs being reinvested in lower yielding investment securities.

Key's noninterest income was $492 million for the second quarter of 2010, compared to $706 million for the year-ago quarter. The second quarter of 2009 included a $125 million net gain from the sale of collateralized mortgage obligations, a $95 million gain related to the exchange of common shares for capital securities, and a $32 million gain from the sale of Key's claim associated with the Lehman Brothers' bankruptcy. Additionally, net gains on leased equipment during the second quarter of 2010 declined by $34 million from the year-ago quarter. Partially offsetting this decline in noninterest income were net gains of $25 million from loan sales, and net gains of $17 million from principal investing (including results attributable to noncontrolling interests) in the second quarter of 2010, compared to net losses of $3 million and $6 million for the same period last year, as well as an increase in investment banking and capital markets income of $17 million during the second quarter of 2010.

The major components of Key's fee-based income for the past five quarters are shown in the following table.

Fee-based Income – Major Components
in millions	2Q10	1Q10	4Q09	3Q09	2Q09
Trust and investment services income	$112	$114	$117	$113	$119
Service charges on deposit accounts	80	76	82	83	83
Operating lease income	43	47	52	55	59
Letter of credit and loan fees	42	40	52	46	44
Corporate-owned life insurance income	28	28	36	26	25
Electronic banking fees	29	27	27	27	27
Insurance income	19	18	16	18	16
Net gains (losses) from principal investing	17	37	80	(6)	(6)
Investment banking and capital markets income (loss)	31	9	(47)	(26)	14

Compared to the first quarter of 2010, noninterest income increased by $42 million. This increase in noninterest income resulted from an increase of $22 million in investment banking and capital markets income, a $21 million increase in net gains from loan sales, and increases in various other miscellaneous income components. These gains were partially offset by a $20 million decline in net gains from principal investing (including results attributable to noncontrolling interests).

Key's noninterest expense was $769 million for the second quarter of 2010, compared to $855 million for the same period last year. FDIC deposit insurance premiums decreased by $37 million from the second quarter of 2009 as a result of a special assessment imposed during that time period. Key also recorded a credit of $10 million to the provision for losses on lending-related commitments during the second quarter of 2010, compared to a charge to the provision of $11 million in the year-ago quarter. Additionally, in the second quarter of 2009, Key recognized a $16 million charge to the provision for losses on low-income housing tax credit ("LIHTC") guaranteed funds and incurred $14 million more in operating lease expense than in the current quarter.

Compared to the first quarter of 2010, noninterest expense decreased by $16 million. Nonpersonnel expense decreased by $39 million, reflecting a decrease in other real estate owned ("OREO") expense of $10 million, an increase in the credit to the provision for losses on lending-related commitments of $8 million, and reductions in various other miscellaneous expense items. These items were partially offset by a $23 million increase in personnel expense due primarily to compensation accruals on increases in fee-related revenues and improved profitability.

ASSET QUALITY

Key's provision for loan losses was $228 million for the second quarter of 2010, compared to $823 million for the year-ago quarter and $413 million for the first quarter of 2010. Key's allowance for loan losses was $2.2 billion, or 4.16% of total loans, at June 30, 2010, compared to 4.34% at March 31, 2010, and 3.48% at June 30, 2009.

Selected asset quality statistics for Key for each of the past five quarters are presented in the following table.

Selected Asset Quality Statistics from Continuing Operations
dollars in millions	2Q10		1Q10		4Q09		3Q09		2Q09
Net loan charge-offs	$ 435		$ 522		$ 708		$ 587		$ 502
Net loan charge-offs to average loans	3.18	%	3.67	%	4.64	%	3.59	%	2.93	%
Allowance for loan losses	$ 2,219		$ 2,425		$2,534		$ 2,485		$ 2,339
Allowance for credit losses (a)	2,328		2,544		2,655		2,579		2,404
Allowance for loan losses to period-end loans	4.16	%	4.34	%	4.31	%	4.00	%	3.48	%
Allowance for credit losses to period-end loans	4.36		4.55		4.52		4.15		3.58
Allowance for loan losses to nonperforming loans	130.30		117.43		115.87		108.52		107.05
Allowance for credit losses to nonperforming loans	136.70		123.20		121.40		112.62		110.02
Nonperforming loans at period end	$ 1,703		$ 2,065		$ 2,187		$ 2,290		$ 2,185
Nonperforming assets at period end	2,086		2,428		2,510		2,799		2,548
Nonperforming loans to period-end portfolio loans	3.19	%	3.69	%	3.72	%	3.68	%	3.25	%
Nonperforming assets to period-end portfolio loans plus
OREO and other nonperforming assets	3.88		4.31		4.25		4.46		3.77
(a) Includes the allowance for loan losses plus the liability for credit losses on lending-related commitments.

Net loan charge-offs for the quarter totaled $435 million, or 3.18% of average loans. These results compare to $502 million, or 2.93%, for the same period last year and $522 million, or 3.67%, for the previous quarter. Management expects net charge-offs to remain elevated in 2010 but continue to show improvement in future quarters.

Key's net loan charge-offs by loan type for each of the past five quarters are shown in the following table.

Net Loan Charge-offs from Continuing Operations
dollars in millions	2Q10		1Q10		4Q09		3Q09		2Q09
Commercial, financial and agricultural	$ 136		$ 126		$ 218		$ 168		$ 168
Real estate --- commercial mortgage	126		106		165		81		87
Real estate --- construction	75		157		181		216		133
Commercial lease financing	14		21		39		27		22
Total commercial loans	351		410		603		492		410
Home equity --- Community Banking	25		30		27		25		24
Home equity --- Other	16		17		19		20		18
Marine	19		38		33		25		29
Other	24		27		26		25		21
Total consumer loans	84		112		105		95		92
Total net loan charge-offs	$ 435		$ 522		$ 708		$ 587		$ 502

Net loan charge-offs to average loans from continuing operations	3.18	%	3.67	%	4.64	%	3.59	%	2.93	%

Net loan charge-offs from discontinued operations --- education lending business	$ 31		$ 36		$ 36		$ 38		$ 37

Compared to the first quarter of 2010, net loan charge-offs in the commercial loan portfolio decreased by $59 million. The decrease was primarily attributable to a decline in the real estate construction loan portfolio. The level of net charge-offs in the consumer portfolio also declined by $28 million. As shown in the table on page 6, Key's exit loan portfolio accounted for $114 million, or 26.21%, of Key's total net loan charge-offs for the second quarter of 2010. Net charge-offs in the exit loan portfolio decreased by $39 million from the first quarter of 2010, primarily driven by improvements in the residential properties – homebuilder and marine portfolios.

At June 30, 2010, Key's nonperforming loans totaled $1.7 billion and represented 3.19% of period-end portfolio loans, compared to 3.69% at March 31, 2010, and 3.25% at June 30, 2009. Nonperforming assets at June 30, 2010 totaled $2.1 billion and represented 3.88% of portfolio loans, OREO and other nonperforming assets, compared to 4.31% at March 31, 2010, and 3.77% at June 30, 2009. The following table illustrates the trend in Key's nonperforming assets by loan type over the past five quarters.

Nonperforming Assets from Continuing Operations
dollars in millions	2Q10		1Q10		4Q09		3Q09		2Q09
Commercial, financial and agricultural	$ 489		$ 558		$ 586		$ 679		$ 700
Real estate — commercial mortgage	404		579		614		566		454
Real estate — construction	473		607		641		702		716
Commercial lease financing	83		99		113		131		122
Total consumer loans	254		222		233		212		193
Total nonperforming loans	1,703		2,065		2,187		2,290		2,185
Nonperforming loans held for sale	221		195		116		304		145
OREO and other nonperforming assets	162		168		207		205		218
Total nonperforming assets	$ 2,086		$ 2,428		$ 2,510		$ 2,799		$ 2,548

Restructured loans included in nonperforming loans ^(a)	$ 213		$ 226		$ 364		$ 65		$ 7
Nonperforming assets from discontinued operations — education lending business	40		43		14		12		3
Nonperforming loans to period-end portfolio loans	3.19	%	3.69	%	3.72	%	3.68	%	3.25	%
Nonperforming assets to period-end portfolio loans, plus OREO and other nonperforming assets	3.88		4.31		4.25		4.46		3.77
(a) Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

Nonperforming assets continued to decrease during the second quarter of 2010, representing the third consecutive quarterly decline. Most of the reduction came from nonperforming loans in the commercial real estate and commercial, financial and agricultural portfolios. These reductions were offset in part by an increase in nonperforming loans held for sale and consumer loans. As shown in the following table, Key's exit loan portfolio accounted for $385 million, or 18.46%, of Key's total nonperforming assets at June 30, 2010, compared to $499 million, or 20.55%, at March 31, 2010.

Shown in the following table are the composition of Key's exit loan portfolio at June 30, 2010, and March 31, 2010, the net charge-offs recorded on this portfolio for the first and second quarters of 2010, and the nonperforming status of these loans at June 30, 2010, and March 31, 2010.

Exit Loan Portfolio from Continuing Operations
	Balance Outstanding		Change 6-30-10 vs.	Net Loan Charge-offs		Balance on Nonperforming Status
in millions	6-30-10	3-31-10	3-31-10	2Q10	1Q10	6-30-10	3-31-10
Residential properties --- homebuilder	$ 195	$ 269	$ (74)	$ 20	$ 44	$ 109	$ 167
Residential properties --- held for sale	25	40	(15)	-	-	25	40
Total residential properties	220	309	(89)	20	44	134	207
Marine and RV floor plan	268	339	(71)	14	28	59	66
Commercial lease financing (a)	2,437	2,685	(248)	44	22	133	191
Total commercial loans	2,925	3,333	(408)	78	94	326	464
Home equity --- Other	753	795	(42)	16	17	17	18
Marine	2,491	2,636	(145)	19	38	41	16
RV and other consumer	188	201	(13)	1	4	1	1
Total consumer loans	3,432	3,632	(200)	36	59	59	35
Total exit loans in loan portfolio	$ 6,357	$ 6,965	$ (608)	$ 114	$ 153	$ 385	$ 499


Discontinued operations --- education lending business (not included in exit loans above) (b)	$ 6,686	$ 6,268	$ 418	$ 31	$ 36	$ 40	$ 42
(a) Includes the business aviation, commercial vehicle, office products, construction and industrial leases, and Canadian lease financing portfolios; and all remaining balances related to lease in, lease out; sale in, sale out; service contract leases; and qualified technological equipment leases. (b) Includes loans in Key's education loan securitization trusts consolidated upon the adoption of new consolidation accounting guidance on January 1, 2010.

CAPITAL

Key's risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2010.

Capital Ratios
	6-30-10		3-31-10		12-31-09		9-30-09		6-30-09
Tier 1 common equity ^{(a) (b)}	8.01	%	7.51	%	7.50	%	7.64	%	7.36	%
Tier 1 risk-based capital ^(a)	13.55		12.92		12.75		12.61		12.57
Total risk-based capital^(a)	17.58		17.07		16.95		16.65		16.67
Tangible common equity to tangible assets ^(b)	7.65		7.37		7.56		7.58		7.35
(a) June 30, 2010 ratio is estimated. (b) The table entitled "GAAP to Non-GAAP Reconciliations" 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, 2010, Key had an estimated Tier 1 common equity ratio of 8.01%, an estimated Tier 1 risk-based capital ratio of 13.55%, and a tangible common equity ratio of 7.65%.

Transactions that caused the change in Key's outstanding common shares over the past five quarters are summarized in the following table.

Summary of Changes in Common Shares Outstanding
in thousands	2Q10	1Q10	4Q09	3Q09	2Q09
Shares outstanding at beginning of period	879,052	878,535	878,559	797,246	498,573
Common shares exchanged for capital securities	^-	^-	^-	81,278	46,338
Common shares exchanged for Series A Preferred Stock	^-	^-	^-	^-	46,602
Common shares issued	^-	^-	^-	^-	205,439
Shares reissued (returned) under employee benefit plans	1,463	517	(24)	35	294
Shares outstanding at end of period	880,515	879,052	878,535	878,559	797,246

During each of the first and second quarters of 2010, Key made a $31 million cash dividend payment to the U.S. Treasury Department as a participant in the U.S. Treasury's Capital Purchase Program. During 2009, Key made four quarterly dividend payments aggregating $125 million to the U.S. Treasury Department.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business group to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. The specific lines of business that comprise each of the major business groups are described under the heading "Line of Business Descriptions." During the first quarter of 2010, Key re-aligned its reporting structure for its business groups. Prior to 2010, Consumer Finance consisted mainly of portfolios which were identified as exit or run-off portfolios and were included in Key's National Banking segment. Effective for all periods presented, Key is reflecting the results of these exit portfolios in Other Segments. The automobile dealer floor plan business, previously included in Consumer Finance, has been re-aligned with the Commercial Banking line of business within the Community Banking segment. In addition, other previously identified exit portfolios included in the National Banking segment have been moved to Other Segments. For more detailed financial information pertaining to each business group and its respective lines of business, see the tables at the end of this release.

Major Business Groups
				Percent change 2Q10 vs.
dollars in millions	2Q10	1Q10	2Q09	1Q10		2Q09
Revenue from continuing operations (TE)
Community Banking	$ 607	$ 599	$ 630	1.3	%	(3.7)	%
National Banking	409	376	445	8.8		(8.1)
Other Segments ^(a)	86	96	187	(10.4)		(54.0)
Total Segments	1,102	1,071	1,262	2.9		(12.7)
Reconciling Items^(b)	13	11	19	18.2		(31.6)
Total	$ 1,115	$ 1,082	$ 1,281	3.0	%	(13.0)	%

Income (loss) from continuing operations
attributable to Key
Community Banking	$ 32	$ 6	$ (30)	433.3	%	N/M
National Banking	33	(33)	(211)	N/M		N/M
Other Segments ^(a)	29	(47)	8	N/M		262.5	%
Total Segments	94	(74)	(233)	N/M		N/M
Reconciling Items^(b)	3	17	3	(82.4)		___
Total	$ 97	$ (57)	$ (230)	N/M		N/M

(a) Other Segments' results for the second quarter of 2009 include net gains of $125 million ($78 million after tax) in connection with the repositioning of the securities portfolio and a $95 million ($59 million after tax) gain related to the exchange of Key common shares for capital securities. (b) Reconciling Items for the second quarter of 2009 include a $32 million ($20 million after tax) gain from the sale of Key's claim associated with the Lehman Brothers' bankruptcy. TE = Taxable Equivalent, N/M = Not Meaningful

Community Banking
				Percent change 2Q10 vs.
dollars in millions	2Q10	1Q10	2Q09	1Q10		2Q09
Summary of operations
Net interest income (TE)	$ 408	$ 412	$ 437	(1.0)	%	(6.6)	%
Noninterest income	199	187	193	6.4		3.1
Total revenue (TE)	607	599	630	1.3		(3.7)
Provision for loan losses	121	142	199	(14.8)		(39.2)
Noninterest expense	455	467	496	(2.6)		(8.3)
Income (loss) before income taxes (TE)	31	(10)	(65)	N/M		N/M
Allocated income taxes and TE adjustments	(1)	(16)	(35)	93.8		97.1	%
Net income (loss) attributable to Key	$ 32	$ 6	$ (30)	433.3	%	N/M

Average balances
Loans and leases	$ 27,218	$ 27,769	$ 30,305	(2.0)	%	(10.2)	%
Total assets	30,292	30,873	33,162	(1.9)		(8.7)
Deposits	50,421	51,459	52,786	(2.0)		(4.5)

Assets under management at period end	$ 16,980	$ 18,248	$ 15,815	(6.9)	%	7.4	%
TE = Taxable Equivalent, N/M = Not Meaningful

Additional Community Banking Data
							Percent change 2Q10 vs.
dollars in millions	2Q10		1Q10		2Q09		1Q10		2Q09
Average deposits outstanding
NOW and money market deposit accounts	$ 19,418		$ 18,650		$ 17,367		4.1	%	11.8	%
Savings deposits	1,870		1,814		1,785		3.1		4.8
Certificates of deposit ($100,000 or more)	6,597		7,363		8,975		(10.4)		(26.5)
Other time deposits	11,248		12,559		14,898		(10.4)		(24.5)
Deposits in foreign office	421		502		549		(16.1)		(23.3)
Noninterest-bearing deposits	10,867		10,571		9,212		2.8		18.0
Total deposits	$ 50,421		$ 51,459		$ 52,786		(2.0)	%	(4.5)	%

Home equity loans
Average balance	$ 9,837		$ 9,967		$ 10,291
Weighted-average loan-to-value ratio (at date of origination)	70	%	70	%	70	%
Percent first lien positions	52		53		53
Other data
Branches	1,019		1,014		993
Automated teller machines	1,511		1,501		1,485

Community Banking Summary of Operations

Community Banking recorded net income attributable to Key of $32 million for the second quarter of 2010, compared to a net loss attributable to Key of $30 million for the year-ago quarter. Decreases in the provision for loan losses and noninterest expense and an increase in noninterest income contributed to the improvement in the second quarter of 2010.

Taxable-equivalent net interest income declined by $29 million, or 7%, from the second quarter of 2009, due to declines in average earning assets and average deposits. Average earning assets decreased $3 billion, or 10%, from the year-ago quarter, reflecting reductions in the commercial loan and home equity loan portfolios. Average deposits declined by $2 billion, or 5%. The mix of deposits continues to change from the prior period as higher-costing certificates of deposit originated in prior years mature, partially offset by growth in noninterest-bearing deposits and NOW and money market deposit accounts.

Noninterest income increased by $6 million, or 3%, from the year-ago quarter, due to higher income from trust and investment services, electronic banking fees, and a reduction in the provision for credit losses from client derivatives. The increase in trust and investment services income reflects increased performance in our Key Private Bank, as well as growth in our branch based investment services. These factors were partially offset by lower service charges on deposits, increased net losses on securities from a Community Development lending investment, and decreases in various other components of noninterest income.

The provision for loan losses declined by $78 million, or 39%, compared to the second quarter of 2009 due to the improved economic conditions from one year ago and lower loan balances.

Noninterest expense declined by $41 million, or 8%, from the year-ago quarter. FDIC deposit insurance premiums decreased $29 million from the second quarter of 2009 as a result of a special assessment imposed during that time period, and a credit of $4 million was recorded to the provision for losses on lending-related commitments compared to a charge of $4 million recorded in the second quarter of 2009. These decreases were partially offset by increases in personnel expense and professional fees.

National Banking
				Percent change 2Q10 vs.
dollars in millions	2Q10	1Q10	2Q09	1Q10		2Q09
Summary of operations
Net interest income (TE)	$ 199	$ 197	$ 234	1.0	%	(15.0)	%
Noninterest income	210	179	211	17.3		(.5)
Total revenue (TE)	409	376	445	8.8		(8.1)
Provision for loan losses	99	161	494	(38.5)		(80.0)
Noninterest expense	259	271	292	(4.4)		(11.3)
Income (loss) before income taxes (TE)	51	(56)	(341)	N/M		N/M
Allocated income taxes and TE adjustments	18	(23)	(129)	N/M		N/M
Net income (loss)	33	(33)	(212)	N/M		N/M
Less: Net income (loss) attributable to noncontrolling interests	--	--	(1)	N/M		(100.0)
Net income (loss) attributable to Key	$ 33	$ (33)	$ (211)	N/M		N/M

Average balances
Loans and leases	$ 20,948	$ 22,440	$ 28,586	(6.6)	%	(26.7)	%
Loans held for sale	381	240	393	58.8		(3.1)
Total assets	24,781	26,269	34,798	(5.7)		(28.8)
Deposits	12,474	12,416	13,019	.5		(4.2)

Assets under management at period end	$ 41,882	$ 47,938	$ 47,567	(12.6)	%	(12.0)	%
TE = Taxable Equivalent, N/M = Not Meaningful

National Banking Summary of Operations

National Banking recorded net income attributable to Key of $33 million for the second quarter of 2010, compared to a $211 million net loss attributable to Key for the same period one year ago. This improvement in the second quarter of 2010 was a result of a substantial decrease in the provision for loan losses.

Taxable-equivalent net interest income decreased by $35 million, or 15%, from the second quarter of 2009, primarily due to lower earning assets, partially offset by improved earning asset yields. Average earning assets decreased by $8 billion, or 26%, from the year-ago quarter.

Noninterest income declined $1 million from the second quarter of 2009. Investment banking and capital markets income increased $18 million, and net gains from loan sales were $9 million, compared to net losses from loan sales of $7 million for the same period one year ago. These gains were offset by decreases in brokerage commissions and fee income of $13 million, operating lease revenue of $8 million, and various other miscellaneous income items from the second quarter of 2009.

The provision for loan losses in the second quarter of 2010 was $99 million compared to $494 million for the same period one year ago. National Banking continued to experience improved asset quality for the third quarter in a row.

Noninterest expense decreased by $33 million, or 11%, from the second quarter of 2009 as a result of a credit of $6 million to the provision for losses on lending-related commitments compared to a charge of $13 million in the year-ago quarter. Operating lease expense, the provision for losses on LIHTC guaranteed funds, and FDIC deposit insurance premiums also declined from the second quarter of 2009. These improvements were partially offset by an increase in personnel costs and higher costs associated with OREO.

Other Segments

Other Segments consist of Corporate Treasury, Key's Principal Investing unit and various exit portfolios which were previously included within the National Banking segment. These exit portfolios were moved to Other Segments during the first quarter of 2010. Prior periods have been adjusted to conform with the current reporting of the financial information for each segment. Other Segments generated net income attributable to Key of $29 million for the second quarter of 2010, compared to net income attributable to Key of $8 million for the same period last year. These results reflect an increase in net interest income from the second quarter of 2009 as well as a decrease in the provision for loan losses. In addition, net gains from principal investing attributable to Key were $12 million during the current quarter, compared to net losses of $10 million in the year-ago quarter. Compared to the same period in the prior year, the impact of the above items was partially offset by net gains of $125 million recorded in connection with the repositioning of the securities portfolio as well as a $95 million gain related to the exchange of Key common shares for capital securities during the second quarter of 2009.

Line of Business Descriptions

Community Banking

Regional Banking provides individuals with branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans. This line of business also provides small businesses with deposit, investment and credit products, and business advisory services.

Regional Banking also offers financial, estate and retirement planning, and asset management services to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving and related needs.

Commercial Banking provides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.

National Banking

Real Estate Capital and Corporate Banking Services consists of two business units, Real Estate Capital and Corporate Banking Services.

Real Estate Capital is a national business that provides construction and interim lending, permanent debt placements and servicing, equity and investment banking, and other commercial banking products and services to developers, brokers and owner-investors. This unit deals primarily with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from nonaffiliated third parties). Real Estate Capital emphasizes providing clients with finance solutions through access to the capital markets.

Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to clients served by both the Community Banking and National Banking groups. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a full array of commercial banking products and services to government and not-for-profit entities, and to community banks. A variety of cash management services, including the processing of tuition payments for private schools, are provided through the Global Treasury Management unit.

Equipment Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets, and Commercial Banking) if those businesses are principally responsible for maintaining the relationship with the client.

Institutional and Capital Markets, through its KeyBanc Capital Markets unit, provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.

Through its Victory Capital Management unit, Institutional and Capital Markets also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals. These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.

Cleveland-based KeyCorp (NYSE: KEY) is one of the nation's largest bank-based financial services companies, with assets of approximately $94 billion at June 30, 2010. Key companies provide investment management, retail and commercial banking, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. In 2009, KeyBank was awarded its seventh consecutive "Outstanding" rating for economic development achievements under the Community Reinvestment Act, the only national bank among the 50 largest in the United States to achieve this distinction from the Office of the Comptroller of the Currency. Key has also been recognized for excellence in numerous areas of the multi-channel customer banking experience, including Corporate Insight's 2009 Bank Monitor for online service. For more information about Key, visit https://www.key.com/.

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 22, 2010. An audio replay of the call will be available through July 29, 2010.

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.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only 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 Key's Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the period ended March 31, 2010, which have been filed with the Securities and Exchange Commission and are available on Key's website (www.key.com) and on the Securities and Exchange Commission's website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Financial Highlights
(dollars in millions, except per share amounts)

			Three months ended
			6-30-10		3-31-10		6-30-09
Summary of operations
	Net interest income (TE)		$ 623		$ 632		$ 575
	Noninterest income		492		450		706
		Total revenue (TE)	1,115		1,082		1,281
	Provision for loan losses		228		413		823
	Noninterest expense		769		785		855
	Income (loss) from continuing operations attributable to Key		97		(57)		(230)
	Income (loss) from discontinued operations, net of taxes (b)		(27)		2		4
	Net income (loss) attributable to Key		70		(55)		(226)

	Income (loss) from continuing operations attributable to Key common shareholders		$ 56		$ (98)		$ (394)
	Income (loss) from discontinued operations, net of taxes (b)		(27)		2		4
	Net income (loss) attributable to Key common shareholders		29		(96)		(390)

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$ .06		$ (.11)		$ (.68)
	Income (loss) from discontinued operations, net of taxes (b)		(.03)		--		.01
	Net income (loss) attributable to Key common shareholders		.03		(.11)		(.68)

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.06		(.11)		(.68)
	Income (loss) from discontinued operations, net of taxes — assuming dilution (b)		(.03)		--		.01
	Net income (loss) attributable to Key common shareholders — assuming dilution		.03		(.11)		(.68)

	Cash dividends paid		.01		.01		.01
	Book value at period end		9.19		9.01		10.21
	Tangible book value at period end		8.10		7.91		8.93
	Market price at period end		7.69		7.75		5.24

Performance ratios
	From continuing operations:
	Return on average total assets		.44	%	(.26)	%	(.96)	%
	Return on average common equity		2.84		(4.95)		(15.54)
	Net interest margin (TE)		3.17		3.19		2.70

	From consolidated operations:
	Return on average total assets		.30	%	(.23)	%	(.90)	%
	Return on average common equity		1.47		(4.85)		(15.32)
	Net interest margin (TE)		3.12		3.13		2.67
	Loan to deposit		93.43		93.44		107.24

Capital ratios at period end
	Key shareholders' equity to assets		11.49	%	11.17	%	11.10	%
	Tangible Key shareholders' equity to tangible assets		10.58		10.26		10.16
	Tangible common equity to tangible assets (a)		7.65		7.37		7.35
	Tier 1 common equity (a) (c)		8.01		7.51		7.36
	Tier 1 risk-based capital (c)		13.55		12.92		12.57
	Total risk-based capital (c)		17.58		17.07		16.67
	Leverage (c)		11.99		11.60		12.26

Asset quality — from continuing operations
	Net loan charge-offs		$ 435		$ 522		$ 502
	Net loan charge-offs to average loans		3.18	%	3.67	%	2.93	%
	Allowance for loan losses		$ 2,219		$ 2,425		$ 2,339
	Allowance for credit losses		2,328		2,544		2,404
	Allowance for loan losses to period-end loans		4.16	%	4.34	%	3.48	%
	Allowance for credit losses to period-end loans		4.36		4.55		3.58
	Allowance for loan losses to nonperforming loans		130.30		117.43		107.05
	Allowance for credit losses to nonperforming loans		136.70		123.20		110.02
	Nonperforming loans at period end		$ 1,703		$ 2,065		$ 2,185
	Nonperforming assets at period end		2,086		2,428		2,548
	Nonperforming loans to period-end portfolio loans		3.19	%	3.69	%	3.25	%
	Nonperforming assets to period-end portfolio loans plus
		OREO and other nonperforming assets	3.88		4.31		3.77

Trust and brokerage assets
	Assets under management		$ 58,862		$ 66,186		$ 63,382
	Nonmanaged and brokerage assets		27,189		27,809		23,261

Other data
	Average full-time equivalent employees		15,665		15,772		16,937
	Branches		1,019		1,014		993

Taxable-equivalent adjustment			$ 6		$ 7		$ 6


			Six months ended
			6-30-10		6-30-09
Summary of operations
	Net interest income (TE)		$ 1,255		$ 1,170
	Noninterest income		942		1,184
		Total revenue (TE)	2,197		2,354
	Provision for loan losses		641		1,670
	Noninterest expense		1,554		1,782
	Income (loss) from continuing operations attributable to Key		40		(689)
	Income (loss) from discontinued operations, net of taxes (b)		(25)		(25)
	Net income (loss) attributable to Key		15		(714)

	Income (loss) from continuing operations attributable to Key common shareholders		$ (42)		$ (901)
	Income (loss) from discontinued operations, net of taxes (b)		(25)		(25)
	Net income (loss) attributable to Key common shareholders		(67)		(926)

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$ (.05)		$ (1.68)
	Income (loss) from discontinued operations, net of taxes (b)		(.03)		(.05)
	Net income (loss) attributable to Key common shareholders		(.08)		(1.73)

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		(.05)		(1.68)
	Income (loss) from discontinued operations, net of taxes — assuming dilution (b)		(.03)		(.05)
	Net income (loss) attributable to Key common shareholders — assuming dilution		(.08)		(1.73)

	Cash dividends paid		.02		.0725

Performance ratios
	From continuing operations:
	Return on average total assets		.09	%	(1.42)	%
	Return on average common equity		(1.06)		(21.88)
	Net interest margin (TE)		3.18		2.75

	From consolidated operations:
	Return on average total assets		.03	%	(1.41)	%
	Return on average common equity		(1.70)		(22.58)
	Net interest margin (TE)		3.13		2.72

Asset quality — from continuing operations
	Net loan charge-offs		$ 957		$ 962
	Net loan charge-offs to average loans		3.43	%	2.77	%

Other data
	Average full-time equivalent employees		15,718		17,201

Taxable-equivalent adjustment			$ 13		$ 12

(a) The following table entitled "GAAP to Non-GAAP Reconciliations" 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.

(b) In September 2009, management made the decision to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In April 2009, management made the decision to curtail the operations of Austin Capital Management, Ltd., an investment subsidiary that specializes in managing hedge fund investments for its institutional customer base. As a result of these decisions, Key has accounted for these businesses as discontinued operations.

(c) 6-30-10 ratio is estimated.

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

GAAP to Non-GAAP Reconciliations
(dollars in millions, except per share amounts)

The table below presents the computations of certain financial measures related to "tangible common equity" and "Tier 1 common equity." The tangible common equity ratio has become a focus of some investors, and management believes that this ratio may assist investors in analyzing Key's capital position absent 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 composition of capital, the calculation of which is prescribed in federal banking regulations. As a result of the Supervisory Capital Assessment Program, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 capital, known as Tier 1 common equity. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 capital, such a focus is consistent with existing capital adequacy guidelines and does not imply a new or ongoing capital standard.

Because the 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 provide investors the ability to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components and to ensure that Key's performance is properly reflected to facilitate period-to-period comparisons. Although these non-GAAP financial measures are frequently used by investors in the evaluation of 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
			6-30-10		3-31-10		6-30-09
Tangible common equity to tangible assets at period end
	Key shareholders' equity (GAAP)		$ 10,820		$ 10,641		$ 10,851
	Less:	Intangible assets	959		963		1,021
		Preferred Stock, Series B	2,438		2,434		2,422
		Preferred Stock, Series A	291		291		291
		Tangible common equity (non-GAAP)	$ 7,132		$ 6,953		$ 7,117

	Total assets (GAAP)		$ 94,167		$ 95,303		$ 97,792
	Less:	Intangible assets	959		963		1,021
		Tangible assets (non-GAAP)	$ 93,208		$ 94,340		$ 96,771

	Tangible common equity to tangible assets ratio (non-GAAP)		7.65	%	7.37	%	7.35	%

Tier 1 common equity at period end
	Key shareholders' equity (GAAP)		$ 10,820		$ 10,641		$ 10,851
	Qualifying capital securities		1,791		1,791		2,290
	Less:	Goodwill	917		917		917
		Accumulated other comprehensive income (loss) (a)	127		(25)		(20)
		Other assets (b)	517		765		172
		Total Tier 1 capital (regulatory)	11,050		10,775		12,072
	Less:	Qualifying capital securities	1,791		1,791		2,290
		Preferred Stock, Series B	2,438		2,434		2,422
		Preferred Stock, Series A	291		291		291
		Total Tier 1 common equity (non-GAAP)	$ 6,530		$ 6,259		$ 7,069

	Net risk-weighted assets (regulatory) (b), (c)		$ 81,572		$ 83,362		$ 96,006

	Tier 1 common equity ratio (non-GAAP) (c)		8.01	%	7.51	%	7.36	%

(a) 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 December 31, 2006, adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.
(b) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed deferred tax assets of $405 million at June 30, 2010, and $651 million at March 31, 2010, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments.
(c) 6-30-10 amount or ratio is estimated.

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(dollars in millions)


			6-30-10	3-31-10	6-30-09
Assets
	Loans		$ 53,334	$ 55,913	$ 67,167
	Loans held for sale		699	556	761
	Securities available for sale		19,773	16,553	11,988
	Held-to-maturity securities		19	22	25
	Trading account assets		1,014	1,034	771
	Short-term investments		1,984	4,345	3,487
	Other investments		1,415	1,525	1,450
		Total earning assets	78,238	79,948	85,649
	Allowance for loan losses		(2,219)	(2,425)	(2,339)
	Cash and due from banks		591	619	706
	Premises and equipment		872	872	858
	Operating lease assets		589	652	842
	Goodwill		917	917	917
	Other intangible assets		42	46	104
	Corporate-owned life insurance		3,109	3,087	3,016
	Derivative assets		1,153	1,063	1,182
	Accrued income and other assets		4,061	4,150	2,775
	Discontinued assets		6,814	6,374	4,082
		Total assets	$ 94,167	$ 95,303	$ 97,792

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$ 25,526	$ 25,068	$ 23,939
		Savings deposits	1,883	1,873	1,795
		Certificates of deposit ($100,000 or more)	8,476	10,188	13,486
		Other time deposits	10,430	12,010	15,055
		Total interest-bearing deposits	46,315	49,139	54,275
		Noninterest-bearing deposits	15,226	15,364	12,873
	Deposits in foreign office — interest-bearing		834	646	632
		Total deposits	62,375	65,149	67,780
	Federal funds purchased and securities sold under repurchase agreements		2,836	1,927	1,530
	Bank notes and other short-term borrowings		819	446	1,710
	Derivative liabilities		1,321	1,103	528
	Accrued expense and other liabilities		2,154	2,089	1,600
	Long-term debt		10,451	11,177	13,462
	Discontinued liabilities		3,139	2,490	122
		Total liabilities	83,095	84,381	86,732

Equity
	Preferred stock, Series A		291	291	291
	Preferred stock, Series B		2,438	2,434	2,422
	Common shares		946	946	865
	Common stock warrant		87	87	87
	Capital surplus		3,701	3,724	3,292
	Retained earnings		5,118	5,098	5,878
	Treasury stock, at cost		(1,914)	(1,958)	(1,984)
	Accumulated other comprehensive income (loss)		153	19	--
		Key shareholders' equity	10,820	10,641	10,851
	Noncontrolling interests		252	281	209
		Total equity	11,072	10,922	11,060
Total liabilities and equity			$ 94,167	$ 95,303	$ 97,792

Common shares outstanding (000)			880,515	879,052	797,246

Consolidated Statements of Income
(dollars in millions, except per share amounts)

			Three months ended					Six months ended
			6-30-10		3-31-10		6-30-09	6-30-10	6-30-09
Interest income
	Loans		$ 677		$ 710		$ 819	$ 1,387	$ 1,659
	Loans held for sale		5		4		8	9	16
	Securities available for sale		154		150		89	304	189
	Held-to-maturity securities		--		1		--	1	1
	Trading account assets		10		11		13	21	26
	Short-term investments		2		2		3	4	6
	Other investments		13		14		13	27	25
		Total interest income	861		892		945	1,753	1,922

Interest expense
	Deposits		188		212		296	400	596
	Federal funds purchased and securities sold under repurchase agreements		2		1		1	3	2
	Bank notes and other short-term borrowings		4		3		4	7	10
	Long-term debt		50		51		75	101	156
		Total interest expense	244		267		376	511	764

Net interest income			617		625		569	1,242	1,158
Provision for loan losses			228		413		823	641	1,670
Net interest income (expense) after provision for loan losses			389		212		(254)	601	(512)

Noninterest income
	Trust and investment services income		112		114		119	226	229
	Service charges on deposit accounts		80		76		83	156	165
	Operating lease income		43		47		59	90	120
	Letter of credit and loan fees		42		40		44	82	82
	Corporate-owned life insurance income		28		28		25	56	52
	Net securities gains (losses)		(2)	(a)	3	(a)	125	1	111
	Electronic banking fees		29		27		27	56	51
	Gains on leased equipment		2		8		36	10	62
	Insurance income		19		18		16	37	34
	Net gains (losses) from loan sales		25		4		(3)	29	4
	Net gains (losses) from principal investing		17		37		(6)	54	(78)
	Investment banking and capital markets income (loss)		31		9		14	40	31
	Gain from sale/redemption of Visa Inc. shares		--		--		--	--	105
	Gain (loss) related to exchange of common shares for capital securities		--		--		95	--	95
	Other income		66		39		72	105	121
		Total noninterest income	492		450		706	942	1,184

Noninterest expense
	Personnel		385		362		375	747	734
	Net occupancy		64		66		63	130	129
	Operating lease expense		35		39		49	74	99
	Computer processing		47		47		48	94	95
	Professional fees		41		38		46	79	80
	FDIC assessment		33		37		70	70	100
	OREO expense, net		22		32		15	54	21
	Equipment		26		24		25	50	47
	Marketing		16		13		17	29	31
	Provision (credit) for losses on lending-related commitments		(10)		(2)		11	(12)	11
	Intangible assets impairment		--		--		--	--	196
	Other expense		110		129		136	239	239
		Total noninterest expense	769		785		855	1,554	1,782
Income (loss) from continuing operations before income taxes			112		(123)		(403)	(11)	(1,110)
	Income taxes		11		(82)		(176)	(71)	(414)
Income (loss) from continuing operations			101		(41)		(227)	60	(696)
	Income (loss) from discontinued operations, net of taxes		(27)		2		4	(25)	(25)
Net income (loss)			74		(39)		(223)	35	(721)
	Less: Net income (loss) attributable to noncontrolling interests		4		16		3	20	(7)
Net income (loss) attributable to Key			$ 70		$ (55)		$ (226)	$ 15	$ (714)

Income (loss) from continuing operations attributable to Key common shareholders			$ 56		$ (98)		$ (394)	$ (42)	$ (901)
Net income (loss) attributable to Key common shareholders			29		(96)		(390)	(67)	(926)

Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$ .06		$ (.11)		$ (.68)	$ (.05)	$ (1.68)
Income (loss) from discontinued operations, net of taxes			(.03)		--		.01	(.03)	(.05)
Net income (loss) attributable to Key common shareholders			.03		(.11)		(.68)	(.08)	(1.73)

Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$ .06		$ (.11)		$ (.68)	$ (.05)	$ (1.68)
Income (loss) from discontinued operations, net of taxes			(.03)		--		.01	(.03)	(.05)
Net income (loss) attributable to Key common shareholders			.03		(.11)		(.68)	(.08)	(1.73)

Cash dividends declared per common share			$ .01		$ .01		$ .01	$ .02	$ .0725

Weighted-average common shares outstanding (000)			874,664		874,386		576,883	874,526	535,080
Weighted-average common shares and potential common shares outstanding (000)			874,664		874,386		576,883	874,526	535,080
(a) For the three months ended June 30, 2010, Key had $4 million in impairment losses related to securities while for the three months ended March 31, 2010, Key did not have impairment losses related to securities.

Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)

				Second Quarter 2010					First Quarter 2010					Second Quarter 2009
				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			$ 17,725	$ 209		4.74	%	$ 18,796	$ 222		4.78	%	$ 24,468	$ 273		4.48	%
	Real estate — commercial mortgage			10,354	124		4.78		10,430	128		4.98		11,892	144		4.83
	Real estate — construction			3,773	41		4.31		4,537	45		4.07		6,264	76		4.89
	Commercial lease financing			6,759	90		5.33		7,195	93		5.19		8,432	90		4.26
			Total commercial loans	38,611	464		4.81		40,958	488		4.82		51,056	583		4.58
	Real estate — residential mortgage			1,829	25		5.60		1,803	26		5.65		1,750	26		5.96
	Home equity:
		Community Banking		9,837	103		4.21		9,967	105		4.26		10,291	112		4.36
		Other		773	15		7.62		816	15		7.57		972	18		7.49
			Total home equity loans	10,610	118		4.45		10,783	120		4.51		11,263	130		4.63
	Consumer other — Community Banking			1,145	33		11.57		1,162	36		12.63		1,207	31		10.41
	Consumer other:
		Marine		2,563	39		6.21		2,713	42		6.15		3,178	49		6.23
		Other		195	4		7.80		209	4		7.76		256	6		7.96
			Total consumer other	2,758	43		6.32		2,922	46		6.27		3,434	55		6.36
			Total consumer loans	16,342	219		5.40		16,670	228		5.51		17,654	242		5.49
			Total loans	54,953	683		4.99		57,628	716		5.02		68,710	825		4.81
	Loans held for sale			516	5		3.50		390	4		4.43		635	8		4.92
	Securities available for sale (b), (e)			17,285	154		3.63		16,312	151		3.73		8,360	89		4.37
	Held-to-maturity securities (b)			22	--		11.46		23	1		8.20		25	--		9.75
	Trading account assets			1,048	10		3.71		1,186	11		3.86		1,217	13		4.09
	Short-term investments			3,830	2		.23		2,806	2		.28		5,195	3		.26
	Other investments (e)			1,445	13		3.11		1,498	14		3.32		1,463	13		3.19
			Total earning assets	79,099	867		4.40		79,843	899		4.54		85,605	951		4.45
	Allowance for loan losses			(2,356)					(2,603)					(2,211)
	Accrued income and other assets			11,133					11,454					13,094
	Discontinued assets — education lending business			6,389					6,884					4,370
			Total assets	$ 94,265					$ 95,578					$ 100,858

Liabilities
	NOW and money market deposit accounts			$ 25,270	24		.39		$ 24,722	23		.37		$ 24,058	32		.52
	Savings deposits			1,883	1		.06		1,828	--		.06		1,806	1		.07
	Certificates of deposit ($100,000 or more) (f)			9,485	77		3.28		10,538	88		3.39		13,555	124		3.69
	Other time deposits			11,309	85		3.01		12,611	100		3.23		14,908	139		3.74
	Deposits in foreign office			818	1		.36		693	1		.30		579	--		.26
			Total interest-bearing deposits	48,765	188		1.55		50,392	212		1.71		54,906	296		2.15

	Federal funds purchased and securities sold under repurchase agreements			1,841	2		.33		1,790	1		.32		1,627	1		.31
	Bank notes and other short-term borrowings			539	4		3.06		490	3		2.41		1,821	4		.79
	Long-term debt (f)			7,031	50		3.09		7,001	51		3.16		10,132	75		3.23
			Total interest-bearing liabilities	58,176	244		1.70		59,673	267		1.83		68,486	376		2.22
	Noninterest-bearing deposits			15,644					14,941					12,457
	Accrued expense and other liabilities			3,151					3,064					5,140
	Discontinued liabilities — education lending business (d)			6,389					6,884					4,370
			Total liabilities	83,360					84,562					90,453

Equity
	Key shareholders' equity			10,646					10,747					10,201
	Noncontrolling interests			259					269					204
			Total equity	10,905					11,016					10,405

			Total liabilities and equity	$ 94,265					$ 95,578					$ 100,858

Interest rate spread (TE)							2.70	%				2.71	%				2.23	%

Net interest income (TE) and net interest margin (TE)					623		3.17	%		632		3.19	%		575		2.70	%
TE adjustment (b)					6					7					6
	Net interest income, GAAP basis				$ 617					$ 625					$ 569
Average balances have not been adjusted prior to the third quarter of 2009 to reflect Key's January 1, 2008, adoption of the applicable accounting guidance related to the offsetting of certain derivative contracts on the consolidated balance sheet. (a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology. (b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. (c) For purposes of these computations, nonaccrual loans are included in average loan balances. (d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business. (e) Yield is calculated on the basis of amortized cost. (f) Rate calculation excludes basis adjustments related to fair value hedges. 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, 2010					Six months ended June 30, 2009
			Average					Average
			Balance	Interest	(a)	Yield/Rate	(a)	Balance		Interest	(a)	Yield/Rate	(a)
Assets
	Loans: (b),(c)
	Commercial, financial and agricultural		$ 18,257	$ 431		4.76	%	$ 25,442		$ 551		4.37	%
	Real estate — commercial mortgage		10,392	252		4.88		11,431	(d)	284		5.01
	Real estate — construction		4,153	86		4.18		6,884	(d)	160		4.70
	Commercial lease financing		6,976	183		5.25		8,610		184		4.27
		Total commercial loans	39,778	952		4.82		52,367		1,179		4.54
	Real estate — residential mortgage		1,816	51		5.62		1,763		53		5.98
	Home equity:
		Community Banking	9,902	208		4.23		10,284		226		4.42
		Other	794	30		7.58		1,004		37		7.50
		Total home equity loans	10,696	238		4.48		11,288		263		4.70
	Consumer other — Community Banking		1,153	69		12.10		1,216		63		10.48
	Consumer other:
		Marine	2,637	81		6.18		3,254		101		6.23
		Other	202	8		7.78		265		11		7.97
		Total consumer other	2,839	89		6.29		3,519		112		6.36
		Total consumer loans	16,504	447		5.45		17,786		491		5.55
		Total loans	56,282	1,399		5.00		70,153		1,670		4.79
	Loans held for sale		454	9		3.90		660		16		4.91
	Securities available for sale (b), (g)		16,801	305		3.68		8,244		190		4.70
	Held-to-maturity securities (b)		22	1		9.79		25		1		9.79
	Trading account assets		1,117	21		3.79		1,282		26		4.03
	Short-term investments		3,321	4		.25		3,830		6		.33
	Other investments (g)		1,471	27		3.22		1,493		25		3.00
		Total earning assets	79,468	1,766		4.47		85,687		1,934		4.54
	Allowance for loan losses		(2,478)					(2,054)
	Accrued income and other assets		11,293					14,265
	Discontinued assets — education lending business		6,635					4,430
		Total assets	$ 94,918					$ 102,328

Liabilities
	NOW and money market deposit accounts		$ 24,997	47		.38		$ 24,008		70		.58
	Savings deposits		1,855	1		.06		1,775		1		.08
	Certificates of deposit ($100,000 or more) (g)		10,009	165		3.34		13,008		245		3.80
	Other time deposits		11,957	185		3.12		14,823		279		3.79
	Deposits in foreign office		756	2		.33		917		1		.25
		Total interest-bearing deposits	49,574	400		1.63		54,531		596		2.20
	Federal funds purchased and securities
		sold under repurchase agreements	1,816	3		.32		1,586		2		.31
	Bank notes and other short-term borrowings		515	7		2.75		3,106		10		.64
	Long-term debt (g)		7,002	101		3.13		10,281		156		3.31
		Total interest-bearing liabilities	58,907	511		1.76		69,504		764		2.24
	Noninterest-bearing deposits		15,308					11,779
	Accrued expense and other liabilities		3,108					6,134
	Discontinued liabilities — education lending business (e)		6,635					4,430
		Total liabilities	83,958					91,847

Equity
	Key shareholders' equity		10,696					10,276
	Noncontrolling interests		264					205
		Total equity	10,960					10,481

		Total liabilities and equity	$ 94,918					$ 102,328

Interest rate spread (TE)						2.71	%					2.30	%

Net interest income (TE) and net interest margin (TE)				1,255		3.18	%			1,170		2.75	%
TE adjustment (b)				13		.				12
	Net interest income, GAAP basis			$ 1,242						$ 1,158


Average balances have not been adjusted prior to the third quarter of 2009 to reflect Key's January 1, 2008, adoption of the applicable accounting guidance related to the offsetting of certain derivative contracts on the consolidated balance sheet. (a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (e) 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) In late March 2009, Key transferred $1.5 billion of loans from the construction portfolio to the commercial mortgage portfolio in accordance with regulatory guidelines pertaining to the classification of loans that have reached a completed status. (e) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business. (f) Yield is calculated on the basis of amortized cost. (g) Rate calculation excludes basis adjustments related to fair value hedges. TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

Noninterest Income
(in millions)

		Three months ended			Six months ended
		6-30-10	3-31-10	6-30-09	6-30-10	6-30-09
Trust and investment services income (a)		$ 112	$ 114	$ 119	$ 226	$ 229
Service charges on deposit accounts		80	76	83	156	165
Operating lease income		43	47	59	90	120
Letter of credit and loan fees		42	40	44	82	82
Corporate-owned life insurance income		28	28	25	56	52
Net securities gains (losses)		(2)	3	125	1	111
Electronic banking fees		29	27	27	56	51
Gains on leased equipment		2	8	36	10	62
Insurance income		19	18	16	37	34
Net gains (losses) from loan sales		25	4	(3)	29	4
Net gains (losses) from principal investing		17	37	(6)	54	(78)
Investment banking and capital markets income (loss) (a)		31	9	14	40	31
Gain from sale/redemption of Visa Inc. shares		--	--	--	--	105
Gain (loss) related to exchange of common shares for capital securities		--	--	95	--	95
Other income:
	Gain from sale of Key's claim associated with the Lehman Brothers' Bankruptcy	--	--	32	--	32
	Credit card fees	3	3	3	6	6
	Miscellaneous income	63	36	37	99	83
Total other income		66	39	72	105	121
Total noninterest income		$ 492	$ 450	$ 706	$ 942	$ 1,184

(a) Additional detail provided in tables below.

Trust and Investment Services Income
(in millions)

	Three months ended			Six months ended
	6-30-10	3-31-10	6-30-09	6-30-10	6-30-09
Brokerage commissions and fee income	$ 35	$ 33	$ 45	$ 68	$ 83
Personal asset management and custody fees	37	37	36	74	69
Institutional asset management and custody fees	40	44	38	84	77
Total trust and investment services income	$ 112	$ 114	$ 119	$ 226	$ 229

Investment Banking and Capital Markets Income (Loss)
(in millions)

		Three months ended			Six months ended
		6-30-10	3-31-10	6-30-09	6-30-10	6-30-09
Investment banking income		$ 25	$ 16	$ 21	$ 41	$ 32
Income (loss) from other investments		3	1	(6)	4	(14)
Dealer trading and derivatives income (loss)		(8)	(16)	(14)	(24)	(13)
Foreign exchange income		11	8	13	19	26
	Total investment banking and capital markets income (loss)	$ 31	$ 9	$ 14	$ 40	$ 31

Noninterest Expense
(dollars in millions)

	Three months ended			Six months ended
	6-30-10	3-31-10	6-30-09	6-30-10	6-30-09
Personnel (a)	$ 385	$ 362	$ 375	$ 747	$ 734
Net occupancy	64	66	63	130	129
Operating lease expense	35	39	49	74	99
Computer processing	47	47	48	94	95
Professional fees	41	38	46	79	80
FDIC assessment	33	37	70	70	100
OREO expense, net	22	32	15	54	21
Equipment	26	24	25	50	47
Marketing	16	13	17	29	31
Provision (credit) for losses on lending-related commitments	(10)	(2)	11	(12)	11
Intangible assets impairment	--	--	--	--	196
Other expense:
Postage and delivery	8	7	8	15	16
Franchise and business taxes	6	7	9	13	18
Telecommunications	5	6	6	11	13
Provision for losses on LIHTC guaranteed funds	--	--	16	--	16
Miscellaneous expense	91	109	97	200	176
Total other expense	110	129	136	239	239
Total noninterest expense	$ 769	$ 785	$ 855	$ 1,554	$ 1,782

Average full-time equivalent employees (b)	15,665	15,772	16,937	15,718	17,201

(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
	6-30-10	3-31-10	6-30-09	6-30-10	6-30-09
Salaries	$ 229	$ 222	$ 225	$ 451	$ 448
Incentive compensation	65	47	52	112	88
Employee benefits	71	74	69	145	152
Stock-based compensation	15	14	15	29	24
Severance	5	5	14	10	22
Total personnel expense	$ 385	$ 362	$ 375	$ 747	$ 734

Loan Composition
(dollars in millions)

					Percent change 6-30-10 vs.
		6-30-10	3-31-10	6-30-09	3-31-10		6-30-09
Commercial, financial and agricultural		$ 17,113	$ 18,015	$ 23,542	(5.0)	%	(27.3)	%
Commercial real estate:
	Commercial mortgage	9,971	10,467	11,761	(4.7)		(15.2)
	Construction	3,430	3,990	6,119	(14.0)		(43.9)
	Total commercial real estate loans	13,401	14,457	17,880	(7.3)		(25.1)
Commercial lease financing		6,620	6,964	8,263	(4.9)		(19.9)
	Total commercial loans	37,134	39,436	49,685	(5.8)		(25.3)
Real estate — residential mortgage		1,846	1,812	1,753	1.9		5.3
Home equity:
	Community Banking	9,775	9,892	10,250	(1.2)		(4.6)
	Other	753	795	940	(5.3)		(19.9)
	Total home equity loans	10,528	10,687	11,190	(1.5)		(5.9)
Consumer other — Community Banking		1,147	1,141	1,199	.5		(4.3)
Consumer other:
	Marine	2,491	2,636	3,095	(5.5)		(19.5)
	Other	188	201	245	(6.5)		(23.3)
	Total consumer other	2,679	2,837	3,340	(5.6)		(19.8)
	Total consumer loans	16,200	16,477	17,482	(1.7)		(7.3)
	Total loans (a)	$ 53,334	$ 55,913	$ 67,167	(4.6)	%	(20.6)	%

Loans Held for Sale Composition
(dollars in millions)

							Percent change 6-30-10 vs.
		6-30-10		3-31-10		6-30-09	3-31-10		6-30-09
Commercial, financial and agricultural		$ 255		$ 25		$ 51	920.0	%	400.0	%
Real estate — commercial mortgage		235		265		288	(11.3)		(18.4)
Real estate — construction		112		147		146	(23.8)		(23.3)
Commercial lease financing		16		27		30	(40.7)		(46.7)
Real estate — residential mortgage		81		92		245	(12.0)		(66.9)
Automobile		--		--		1	N/M		(100.0)
	Total loans held for sale (b)	$ 699	(c)	$ 556	(c)	$ 761	25.7	%	(8.1)	%

(a) Excluded at June 30, 2010, March 31, 2010, and June 30, 2009, are loans in the amount of $6.6 billion, $6.0 billion and $3.6 billion, respectively, related to the discontinued operations of the education lending business.

(b) Excluded at June 30, 2010, March 31, 2010, and June 30, 2009, are loans held for sale in the amount of $92 million, $246 million, and $148 million, respectively, related to the discontinued operations of the education lending business.

(c) The beginning balance at March 31, 2010 of $556 million increased by new originations in the amount of $812 million and net transfers from held to maturity in the amount of $65 million, and decreased by loan sales of $712 million, transfers to OREO/valuation adjustments of $6 million and loan payments of $16 million, for an ending balance of $699 million at June 30, 2010.

N/M = Not Meaningful

Summary of Loan Loss Experience from Continuing Operations
(dollars in millions)

		Three months ended						Six months ended
		6-30-10		3-31-10		6-30-09		6-30-10		6-30-09
Average loans outstanding		$ 54,953		$ 57,628		$ 68,710		$ 56,282		$ 70,153

Allowance for loan losses at beginning of period		$ 2,425		$ 2,534		$ 2,016		$ 2,534		$ 1,629
Loans charged off:
Commercial, financial and agricultural		152		139		182		291		426

Real estate -- commercial mortgage		128		109		87		237		109
Real estate -- construction		86		157		135		243		239
Total commercial real estate loans		214		266		222		480		348
Commercial lease financing		21		25		29		46		51
Total commercial loans		387		430		433		817		825
Real estate -- residential mortgage		11		7		4		18		7
Home equity:
Community Banking		28		31		25		59		43
Other		17		18		19		35		34
Total home equity loans		45		49		44		94		77
Consumer other -- Community Banking		15		18		17		33		31
Consumer other:
Marine		31		48		39		79		78
Other		3		5		3		8		9
Total consumer other		34		53		42		87		87
Total consumer loans		105		127		107		232		202
Total loans charged off		492		557		540		1,049		1,027
Recoveries:
Commercial, financial and agricultural		16		13		14		29		26

Real estate -- commercial mortgage		2		3		--		5		1
Real estate -- construction		11		--		2		11		2
Total commercial real estate loans		13		3		2		16		3
Commercial lease financing		7		4		7		11		11
Total commercial loans		36		20		23		56		40
Real estate -- residential mortgage		1		--		--		1		--
Home equity:
Community Banking		3		1		1		4		2
Other		1		1		1		2		1
Total home equity loans		4		2		2		6		3
	Consumer other -- Community Banking	2		2		2		4		3
Consumer other:
Marine		12		10		10		22		17
Other		2		1		1		3		2
Total consumer other		14		11		11		25		19
Total consumer loans		21		15		15		36		25
Total recoveries		57		35		38		92		65
Net loan charge-offs		(435)		(522)		(502)		(957)		(962)
Provision for loan losses		228		413		823		641		1,670
Foreign currency translation adjustment		1		--		2		1		2
Allowance for loan losses at end of period		$ 2,219		$ 2,425		$ 2,339		$ 2,219		$ 2,339

Liability for credit losses on lending-related commitments at beginning of period		$ 119		$ 121		$ 54		$ 121		$ 54
Provision (credit) for losses on lending-related commitments		(10)		(2)		11		(12)		11
Liability for credit losses on lending-related commitments at end of period (a)		$ 109		$ 119		$ 65		$ 109		$ 65

Total allowance for credit losses at end of period		$ 2,328		$ 2,544		$ 2,404		$ 2,328		$ 2,404

Net loan charge-offs to average loans		3.18	%	3.67	%	2.93	%	3.43	%	2.77	%
Allowance for loan losses to period-end loans		4.16		4.34		3.48		4.16		3.48
Allowance for credit losses to period-end loans		4.36		4.55		3.58		4.36		3.58
Allowance for loan losses to nonperforming loans		130.30		117.43		107.05		130.30		107.05
Allowance for credit losses to nonperforming loans		136.70		123.20		110.02		136.70		110.02

Discontinued operations --- education lending business:
Loans charged off		$ 32		$ 37		$ 38		$ 69		$ 71
Recoveries		1		1		1		2		2
Net loan charge-offs		$ (31)		$ (36)		$ (37)		$ (67)		$ (69)

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

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)

	6-30-10		3-31-10		12-31-09		9-30-09		6-30-09
Commercial, financial and agricultural	$ 489		$ 558		$ 586		$ 679		$ 700

Real estate — commercial mortgage	404		579		614		566		454
Real estate — construction	473		607		641		702		716
Total commercial real estate loans	877		1,186		1,255		1,268		1,170
Commercial lease financing	83		99		113		131		122
Total commercial loans	1,449		1,843		1,954		2,078		1,992
Real estate — residential mortgage	77		72		73		68		46
Home equity:
Community Banking	112		111		107		103		101
Other	17		18		21		21		20
Total home equity loans	129		129		128		124		121
Consumer other — Community Banking	5		4		4		4		5
Consumer other:
Marine	41		16		26		15		19
Other	2		1		2		1		2
Total consumer other	43		17		28		16		21
Total consumer loans	254		222		233		212		193
Total nonperforming loans	1,703		2,065		2,187		2,290		2,185

Nonperforming loans held for sale	221		195		116		304		145

OREO	200		175		191		187		182
Allowance for OREO losses	(64)		(45)		(23)		(40)		(11)
OREO, net of allowance	136		130		168		147		171

Other nonperforming assets	26		38		39		58		47
Total nonperforming assets	$ 2,086		$ 2,428		$ 2,510		$ 2,799		$ 2,548

Accruing loans past due 90 days or more	$ 240		$ 434		$ 331		$ 375		$ 552
Accruing loans past due 30 through 89 days	610		639		933		1,071		1,081
Restructured loans included in nonperforming loans (a)	213		226		364		65		7
Nonperforming assets from discontinued operations -- education lending business	40		43		14		12		3
Nonperforming loans to period-end portfolio loans	3.19	%	3.69	%	3.72	%	3.68	%	3.25	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets	3.88		4.31		4.25		4.46		3.77


(a) Restructured loans (i.e. troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)

	2Q10	1Q10	4Q09	3Q09	2Q09
Balance at beginning of period	$ 2,065	$ 2,187	$ 2,290	$ 2,185	$ 1,735
Loans placed on nonaccrual status	682	746	1,141	1,160	1,227
Charge-offs	(492)	(557)	(750)	(619)	(540)
Loans sold	(136)	(15)	(70)	(4)	(12)
Payments	(185)	(102)	(237)	(294)	(142)
Transfers to OREO	(66)	(20)	(98)	(91)	(45)
Transfers to nonperforming loans held for sale	(82)	(59)	(23)	(5)	(30)
Transfers to other nonperforming assets	(36)	(3)	(4)	(29)	--
Loans returned to accrual status	(47)	(112)	(62)	(13)	(8)
Balance at end of period	$ 1,703	$ 2,065	$ 2,187	$ 2,290	$ 2,185

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

	2Q10	1Q10	4Q09	3Q09	2Q09
Balance at beginning of period	$ 195	$ 116	$ 304	$ 145	$ 72
Transfers in	86	129	71	216	79
Loans sold	(53)	(38)	(228)	(45)	(1)
Transfers to OREO	(6)	(6)	--	--	(1)
Valuation adjustments	(1)	(6)	(15)	(10)	(4)
Loans returned to accrual status / other	--	--	(16)	(2)	--
Balance at end of period	$ 221	$ 195	$ 116	$ 304	$ 145

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

	2Q10	1Q10	4Q09	3Q09	2Q09
Balance at beginning of period	$ 130	$ 168	$ 147	$ 171	$ 143
Properties acquired — nonperforming loans	72	26	98	91	46
Valuation adjustments	(24)	(28)	(12)	(36)	(9)
Properties sold	(42)	(36)	(65)	(79)	(9)
Balance at end of period	$ 136	$ 130	$ 168	$ 147	$ 171

Line of Business Results
(dollars in millions)

Community Banking
											Percent change 2Q10 vs.
	2Q10		1Q10		4Q09		3Q09		2Q09		1Q10		2Q09
Summary of operations
Total revenue (TE)	$ 607		$ 599		$ 628		$ 630		$ 630		1.3	%	(3.7)	%
Provision for loan losses	121		142		230		160		199		(14.8)		(39.2)
Noninterest expense	455		467		492		490		496		(2.6)		(8.3)
Net income (loss) attributable to Key	32		6		(41)		(1)		(30)		433.3		N/M
Average loans and leases	27,218		27,769		28,321		29,126		30,305		(2.0)		(10.2)
Average deposits	50,421		51,459		52,640		53,068		52,786		(2.0)		(4.5)
Net loan charge-offs	148		116		148		103		114		27.6		29.8
Net loan charge-offs to average loans	2.18	%	1.69	%	2.07	%	1.40	%	1.51	%	N/A		N/A
Nonperforming assets at period end	$ 561		$ 597		$ 544		$ 559		$ 512		(6.0)		9.6
Return on average allocated equity	3.46	%	.65	%	(4.52)	%	(.11)	%	(3.30)	%	N/A		N/A
Average full-time equivalent employees	8,246		8,187		8,227		8,472		8,709		.7		(5.3)


Supplementary information (lines of business)
Regional Banking
Total revenue (TE)	$ 494		$ 490		$ 511		$ 526		$ 527		.8	%	(6.3)	%
Provision for loan losses	57		115		139		93		166		(50.4)		(65.7)
Noninterest expense	409		420		429		429		439		(2.6)		(6.8)
Net income (loss) attributable to Key	30		(16)		(18)		14		(38)		N/M		N/M
Average loans and leases	18,405		18,753		19,076		19,347		19,745		(1.9)		(6.8)
Average deposits	45,234		46,197		47,569		48,551		48,717		(2.1)		(7.1)
Net loan charge-offs	82		96		82		78		72		(14.6)		13.9
Net loan charge-offs to average loans	1.79	%	2.08	%	1.71	%	1.60	%	1.46	%	N/A		N/A
Nonperforming assets at period end	$ 339		$ 327		$ 319		$ 289		$ 245		3.7		38.4
Return on average allocated equity	4.90	%	(2.66)	%	(3.07)	%	2.40	%	(6.60)	%	N/A		N/A
Average full-time equivalent employees	7,891		7,836		7,877		8,120		8,339		.7		(5.4)

Commercial Banking
Total revenue (TE)	$ 113		$ 109		$ 117		$ 104		$ 103		3.7	%	9.7	%
Provision for loan losses	64		27		91		67		33		137.0		93.9
Noninterest expense	46		47		63		61		57		(2.1)		(19.3)
Net income (loss) attributable to Key	2		22		(23)		(15)		8		(90.9)		(75.0)
Average loans and leases	8,813		9,016		9,245		9,779		10,560		(2.3)		(16.5)
Average deposits	5,187		5,262		5,071		4,517		4,069		(1.4)		27.5
Net loan charge-offs	66		20		66		25		42		230.0		57.1
Net loan charge-offs to average loans	3.00	%	.90	%	2.83	%	1.01	%	1.60	%	N/A		N/A
Nonperforming assets at period end	$ 222		$ 270		$ 225		$ 270		$ 267		(17.8)		(16.9)
Return on average allocated equity	.64	%	6.98	%	(7.19)	%	(4.54)	%	2.39	%	N/A		N/A
Average full-time equivalent employees	355		351		350		352		370		1.1		(4.1)

National Banking
											Percent change 2Q10 vs.
	2Q10		1Q10		4Q09		3Q09		2Q09		1Q10		2Q09
Summary of operations
Total revenue (TE)	$ 409		$ 376		$ 340		$ 381		$ 445		8.8	%	(8.1)	%
Provision for loan losses	99		161		382		439		494		(38.5)		(80.0)
Noninterest expense	259		271		297		323		292		(4.4)		(11.3)
Net income (loss) attributable to Key	33		(33)		(212)		(235)		(211)		N/M		N/M
Average loans and leases	20,948		22,440		24,011		26,716		28,586		(6.6)		(26.7)
Average loans held for sale	381		240		431		368		393		58.8		(3.1)
Average deposits	12,474		12,416		13,257		13,305		13,019		.5		(4.2)
Net loan charge-offs	173		251		411		357		252		(31.1)		(31.3)
Net loan charge-offs to average loans	3.31	%	4.54	%	6.79	%	5.30	%	3.54	%	N/A		N/A
Nonperforming assets at period end	$ 1,089		$ 1,285		$ 1,326		$ 1,510		$ 1,217		(15.3)		(10.5)
Return on average allocated equity	3.92	%	(3.89)	%	(22.76)	%	(24.00)	%	(21.47)	%	N/A		N/A
Average full-time equivalent employees	2,327		2,370		2,400		2,473		2,545		(1.8)		(8.6)


Supplementary information (lines of business)
Real Estate Capital and Corporate Banking Services
Total revenue (TE)	$ 176		$ 145		$ 92		$ 135		$ 191		21.4	%	(7.9)	%
Provision for loan losses	77		145		304		336		414		(46.9)		(81.4)
Noninterest expense	106		115		113		97		113		(7.8)		(6.2)
Net income (loss) attributable to Key	(4)		(72)		(203)		(184)		(209)		94.4		98.1
Average loans and leases	11,465		12,340		13,256		14,322		15,145		(7.1)		(24.3)
Average loans held for sale	194		115		228		201		182		68.7		6.6
Average deposits	9,811		9,835		10,602		10,848		10,678		(.2)		(8.1)
Net loan charge-offs	142		207		381		276		212		(31.4)		(33.0)
Net loan charge-offs to average loans	4.97	%	6.80	%	11.40	%	7.65	%	5.61	%	N/A		N/A
Nonperforming assets at period end	$ 867		$ 1,067		$ 1,094		$ 1,184		$ 1,023		(18.7)		(15.2)
Return on average allocated equity	(.78)	%	(14.08)	%	(35.62)	%	(30.66)	%	(34.43)	%	N/A		N/A
Average full-time equivalent employees	1,052		1,078		1,093		1,110		1,125		(2.4)		(6.5)

Equipment Finance
Total revenue (TE)	$ 61		$ 61		$ 66		$ 59		$ 65		--		(6.2)	%
Provision for loan losses	10		4		65		75		42		150.0	%	(76.2)
Noninterest expense	49		46		57		86		60		6.5		(18.3)
Net income (loss) attributable to Key	1		7		(35)		(64)		(23)		(85.7)		N/M
Average loans and leases	4,478		4,574		4,610		5,010		5,051		(2.1)		(11.3)
Average loans held for sale	16		1		--		20		18		N/M		(11.1)
Average deposits	5		6		7		6		9		(16.7)		(44.4)
Net loan charge-offs	18		18		21		30		29		--		(37.9)
Net loan charge-offs to average loans	1.61	%	1.60	%	1.81	%	2.38	%	2.30	%	N/A		N/A
Nonperforming assets at period end	$ 106		$ 111		$ 122		$ 118		$ 105		(4.5)		1.0
Return on average allocated equity	1.14	%	7.71	%	(37.94)	%	(65.95)	%	(25.07)	%	N/A		N/A
Average full-time equivalent employees	549		563		586		619		637		(2.5)		(13.8)

Institutional and Capital Markets
Total revenue (TE)	$ 172		$ 170		$ 182		$ 187		$ 189		1.2	%	(9.0)	%
Provision for loan losses	12		12		13		28		38		--		(68.4)
Noninterest expense	104		110		127		140		119		(5.5)		(12.6)
Net income (loss) attributable to Key	36		32		26		13		21		12.5		71.4
Average loans and leases	5,005		5,526		6,145		7,384		8,390		(9.4)		(40.3)
Average loans held for sale	171		124		203		147		193		37.9		(11.4)
Average deposits	2,658		2,575		2,648		2,451		2,332		3.2		14.0
Net loan charge-offs	13		26		9		51		11		(50.0)		18.2
Net loan charge-offs to average loans	1.04	%	1.91	%	.58	%	2.74	%	.53	%	N/A		N/A
Nonperforming assets at period end	$ 116		$ 107		$ 110		$ 208		$ 89		8.4		30.3
Return on average allocated equity	14.92	%	12.96	%	9.66	%	4.61	%	7.40	%	N/A		N/A
Average full-time equivalent employees	726		729		721		744		783		(.4)		(7.3)

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