KeyCorp Reports Third Quarter 2013 Net Income Of $229 Million, Or $.25 Per Common Share

Loans up 5% from prior year, driven by an 11% increase in commercial, financial and agricultural

Achieved expense target with $207 million in annualized savings

Credit quality improves, with nonperforming assets down 19% from prior year

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Oct 16, 2013, 06:30 ET

CLEVELAND, Oct. 16, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $229 million, or $.25 per common share, compared to $193 million, or $.21 per common share for the second quarter of 2013, and $211 million, or $.22 per common share for the third quarter of 2012. During the third quarter, Key incurred $41 million, or $.03 per common share of costs related to both its previously announced efficiency initiative and a pension settlement charge.

For the nine months ended September 30, 2013, net income from continuing operations attributable to Key common shareholders was $618 million, or $.67 per common share, compared to $623 million, or $.66 per common share for the same period one year ago. During the nine months ended September 30, 2013, Key incurred $93 million, or $.06 per common share of costs related to both its efficiency initiative and a pension settlement charge.

CURRENT QUARTER DEVELOPMENTS

Executing on growth initiatives

Acquired commercial mortgage servicing portfolio and special servicing business, adding over $1 billion in low-cost funding through escrow deposit balances
Grew and expanded client relationships by executing on Key's relationship model and focusing on targeted client segments

Continued progress on efficiency initiative

Achieved annualized run rate savings of $207 million, focused on further efficiency improvements
Recognized expenses of $41 million, or $.03 per common share, associated with the efficiency initiative and a pension settlement charge during the third quarter of 2013
Consolidated eight branches during the third quarter, reaching 65 total consolidated branches since the launch of the efficiency initiative

Focused on capital management priorities

Completed Victory divestiture on July 31, realizing an after-tax net gain of $92 million in discontinued operations; additional gain may be realized, resulting from consents received through January 2014
Repurchased $198 million of common shares during the third quarter of 2013

"Key's results reflect another quarter of improved performance as we continued to grow our businesses, improve efficiency and execute on our capital priorities," said Chairman and Chief Executive Officer Beth Mooney. "Revenue benefited from solid loan growth, driven by an 11% increase from the prior year in commercial, financial and agricultural loans, as well as improved trends in several of our fee-based businesses. These results reflect the success of our distinctive business model and our progress in implementing our growth initiatives. Expense levels continued to be well-managed. Importantly, we accomplished our goal that we set in June of 2012 to achieve annualized cost savings of $200 million. This is an important milestone for us, and we believe that our cost discipline is now embedded within our culture, which will allow us to drive further efficiency improvements. Credit quality also improved, with net charge-offs to average loans now at their lowest level since the first quarter of 2007."

"We continued to invest in our business, as well as address areas that do not fit our relationship strategy. This quarter, we executed on both parts of our strategy by completing the previously announced acquisition of commercial real estate servicing and the sale of Victory Capital Management," continued Mooney.

THIRD QUARTER 2013 FINANCIAL RESULTS

Compared with Third Quarter of 2012, from continuing operations

Total revenue decreased $53 million
- Taxable-equivalent net interest income of $584 million, up $6 million; third quarter of 2013 included an $8 million write-off of capitalized loan origination costs due to the early termination of leveraged leases compared to $13 million in the third quarter of 2012
- Noninterest income declined $59 million primarily due to a $54 million gain associated with the redemption of trust preferred securities one year ago
Net interest margin of 3.11%, down 12 basis points
Continued average loan growth driven by 11.1% increase in commercial, financial and agricultural loans
Average deposits increased $3.4 billion, or 5.4%, partially attributable to $1 billion in escrow deposit balances from the commercial mortgage servicing portfolio and special servicing business acquisition
Noninterest expense up $4 million, which included a pension settlement charge of $25 million and $16 million associated with the efficiency initiative compared to $9 million one year ago
Net loan charge-offs decreased 66.1% to .28% of average total loans
Maintained solid capital position with Tier 1 common equity of 11.11%

Compared with Second Quarter of 2013, from continuing operations

Total revenue increased $28 million
- Taxable-equivalent net interest income down $2 million, partially due to a write-off of $8 million of capitalized loan origination costs associated with the early termination of leveraged leases
- Noninterest income up $30 million primarily due to a $23 million gain on the early termination of leveraged leases
Net interest margin down two basis points due to the write-off of capitalized loan origination costs associated with the early termination of leveraged leases, resulting in a four basis point decline
Average loans up 1.1% primarily due to an increase in commercial, financial and agricultural loans
Average deposits up slightly due to addition of escrow deposit balances from the commercial mortgage servicing portfolio and special servicing business acquisition
Noninterest expense increased $5 million, which included a pension settlement charge of $25 million partially offset by a $21 million decrease in costs associated with the efficiency initiative
Net loan charge-offs decreased 17.8%

Discontinued Operations

Realized an after-tax gain of $92 million on Victory divestiture; the cash portion of this gain was $72 million
Recognized a net after-tax loss of $48 million related to the fair value of the loans and securities in Key's ten education loan securitization trusts

The remaining discussion pertains only to continuing operations unless otherwise noted.

Selected Financial Highlights

dollars in millions, except per share data											Change 3Q13 vs.
			3Q13			2Q13			3Q12		2Q13		3Q12
Income (loss) from continuing operations attributable to Key common shareholders		$	229		$	193		$	211		18.7	%	8.5	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution			.25			.21			.22		19.0		13.6
Return on average total assets from continuing operations			1.12	%		.95	%		1.06	%	N/A		N/A
Tier 1 common equity^(a)			11.11			11.18			11.30		N/A		N/A
Book value at period end		$	11.05		$	10.89		$	10.64		1.5		3.9	%
Net interest margin (TE) from continuing operations			3.11	%		3.13	%		3.23	%	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 3Q13 vs.
			3Q13			2Q13			3Q12		2Q13		3Q12
Net interest income (TE)		$	584		$	586		$	578		(.3)	%	1.0	%
Noninterest income			459			429			518		7.0		(11.4)
	Total revenue	$	1,043		$	1,015		$	1,096		2.8	%	(4.8)	%


TE = Taxable Equivalent

Taxable-equivalent net interest income was $584 million for the third quarter of 2013, and the net interest margin was 3.11%. These results compare to taxable-equivalent net interest income of $578 million and a net interest margin of 3.23% for the third quarter of 2012. The increase in net interest income was primarily due to a decline of $5 million of recognized unamortized lease origination costs related to the early termination of leveraged leases in the third quarter of 2013 compared to the third quarter of 2012. The decrease in the net interest margin was primarily a result of earning asset yields falling faster than the cost of funds over the past year.

Compared to the second quarter of 2013, taxable-equivalent net interest income decreased by $2 million, and the net interest margin declined by two basis points. The decrease in net interest income was primarily due to the recognition of unamortized lease origination costs of $8 million in connection with the early termination of two leveraged leases in the third quarter of 2013. The decline was partially offset by a higher day count in the third quarter and lower funding costs from the maturity of higher rate debt and certificates of deposit. The decrease in the net interest margin was largely attributable to the recognition of unamortized lease origination costs and lower yields on loans. This decrease was partially offset by a lower cost of funds.

Noninterest Income

dollars in millions								Change 3Q13 vs.
			3Q13		2Q13		3Q12	2Q13		3Q12
Trust and investment services income		$	100	$	100	$	94	—		6.4	%
Investment banking and debt placement fees			86		84		83	2.4	%	3.6
Service charges on deposit accounts			73		71		74	2.8		(1.4)
Operating lease income and other leasing gains			43		19		66	126.3		(34.8)
Corporate services income			44		43		39	2.3		12.8
Cards and payments income			43		42		37	2.4		16.2
Corporate-owned life insurance income			26		31		26	(16.1)		—
Consumer mortgage income			3		6		11	(50.0)		(72.7)
Net gains (losses) from principal investing			17		7		11	142.9		54.5
Other income			24		26		77	(7.7)		(68.8)
	Total noninterest income	$	459	$	429	$	518	7.0	%	(11.4)	%

Key's noninterest income was $459 million for the third quarter of 2013, compared to $518 million for the year-ago quarter. Other income declined $53 million due to a $54 million gain associated with the redemption of trust preferred securities one year ago. Operating lease income and other leasing gains also decreased $23 million, partially due to a $39 million gain on the early termination of leveraged leases one year ago compared to a $23 million gain on the early termination of leveraged leases in the current quarter. These decreases were partially offset by increases in trust and investment services income, cards and payments income, and net gains (losses) from principal investing of $6 million each.

Compared to the second quarter of 2013, noninterest income increased by $30 million. Operating lease income and other leasing gains increased $24 million primarily due to a $23 million gain on the early termination of leveraged leases. Net gains (losses) from principal investing also increased $10 million. These increases were partially offset by a $5 million decline in corporate-owned life insurance income.

Noninterest Expense

dollars in millions								Change 3Q13 vs.
			3Q13		2Q13		3Q12	2Q13		3Q12
Personnel expense		$	414	$	406	$	399	2.0	%	3.8	%
Nonpersonnel expense			302		305		313	(1.0)		(3.5)
	Total noninterest expense	$	716	$	711	$	712	.7	%	.6	%

Key's noninterest expense was $716 million for the third quarter of 2013, compared to $712 million for the same period last year. Excluding the $41 million in expenses related to Key's efficiency initiative and the pension settlement charge compared to the $9 million in efficiency initiative expenses one year ago, noninterest expense was down $28 million from prior year. Personnel expense increased $15 million. Employee benefits, a component of personnel expense, increased $24 million due to a $25 million pension settlement charge as a result of an increase in lump sum payments made from the pension plans. This increase in employee benefits was partially offset by a $5 million decrease in salaries and a $2 million decline in both incentive compensation and stock-based compensation. Nonpersonnel expense decreased $11 million from one year ago primarily due to a decline in business services and professional fees.

Compared to the second quarter of 2013, noninterest expense increased by $5 million. Excluding the $41 million in expenses related to Key's efficiency initiative and the pension settlement charge compared to the $37 million in efficiency initiative expenses last quarter, noninterest expense was up $1 million from the second quarter of 2013. Personnel expense increased $8 million. Employee benefits, a component of personnel expense, increased $22 million due to a $25 million pension settlement charge as a result of an increase in lump sum payments made from the pension plans. Incentive compensation also increased $4 million. These increases were partially offset by a $12 million decline in severance expense and a $5 million decrease in salaries. Nonpersonnel expense declined $3 million from the second quarter of 2013. Net occupancy decreased $6 million, which was partially offset by an increase in marketing expense of $5 million.

BALANCE SHEET HIGHLIGHTS

As of September 30, 2013, Key had total assets of $90.7 billion compared to $90.6 billion at June 30, 2013, and $87.0 billion at September 30, 2012.

Average Loans

dollars in millions								Change 9-30-13 vs.
		9-30-13		6-30-13		9-30-12		6-30-13			9-30-12
Commercial, financial and agricultural^(a)		$	23,864	$	23,480	$	21,473		1.6	%		11.1	%
Other commercial loans			13,281		13,290		13,605		(.1)			(2.4)
Total home equity loans			10,611		10,381		10,202		2.2			4.0
Other consumer loans			5,515		5,545		5,415		(.5)			1.8
	Total loans	$	53,271	$	52,696	$	50,695		1.1	%		5.1	%


(a)	Commercial, financial and agricultural average balance for the three months ended September 30, 2013, June 30, 2013, and September 30, 2012, includes $96 million, $96 million, and $54 million, respectively, of assets from commercial credit cards.

Average loans were $53.3 billion for the third quarter of 2013, an increase of $2.6 billion compared to the third quarter of 2012. Commercial, financial and agricultural loans grew by $2.4 billion over the year-ago quarter, with strong growth across Key's lending to business clients. In addition, home equity loans grew $409 million primarily as a result of lending campaigns launched in the Fall of 2012 and Spring of 2013. Credit cards also increased $268 million as a result of Key's third quarter 2012 credit card portfolio acquisition. Loan growth was partially offset by declines in the equipment lease portfolio, which included the early termination of certain leveraged leases, and run-off of consumer loans in the designated exit portfolio.

Compared to the second quarter of 2013, average loans increased by $575 million. This average loan growth was attributable to an increase in commercial, financial and agricultural loans of $384 million mostly in the Key Equipment Finance and KeyBank Real Estate Capital lines of business. Home equity loans also grew $230 million, benefitting from Key's Spring lending promotion. This growth in loans was partially offset by the impact of the early termination of certain leveraged leases and consumer exit loan run-off.

Average Deposits

dollars in millions												Change 9-30-13 vs.
		9-30-13			6-30-13			9-30-12			6-30-13			9-30-12
Non-time deposits^(a)		$	58,620		$	57,691		$	53,432			1.6	%		9.7	%
Certificates of deposits ($100,000 or more)			2,785			2,975			3,420			(6.4)			(18.6)
Other time deposits			3,957			4,202			5,158			(5.8)			(23.3)
	Total deposits	$	65,362		$	64,868		$	62,010			.8	%		5.4	%

Cost of total deposits^(a)			.22	%		.26	%		.38	%		N/A			N/A


(a)	Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $65.4 billion for the third quarter of 2013, an increase of $3.4 billion compared to the year-ago quarter. The growth was driven by corporate clients and the addition of escrow demand deposits from Key's servicing business acquisition. The overall growth resulted from an increase in demand deposits of $2.5 billion and interest-bearing non-time deposits of $2.7 billion. This deposit growth was partially offset by $1.8 billion of run-off of certificates of deposit and other time deposits.

Compared to the second quarter of 2013, average deposits, excluding deposits in foreign office, increased by $494 million. This deposit growth was primarily due to $1 billion of acquired escrow deposits that were added during the quarter and an increase in interest-bearing commercial deposits. This growth was partially offset by expected money market deposit withdrawals and run-off in certificates of deposit.

ASSET QUALITY

dollars in millions										Change 3Q13 vs.
		3Q13			2Q13			3Q12		2Q13		3Q12
Net loan charge-offs	$	37		$	45		$	109		(17.8)	%	(66.1)	%
Net loan charge-offs to average total loans		.28	%		.34	%		.86	%	N/A		N/A
Nonperforming loans at period end^(a)	$	541		$	652		$	653		(17.0)		(17.2)
Nonperforming assets at period end		579			693			718		(16.5)		(19.4)
Allowance for loan and lease losses		868			876			888		(.9)	%	(2.3)
Allowance for loan and lease losses to nonperforming loans		160.4	%		134.4	%		136.0	%	N/A		N/A
Provision (credit) for loan and lease losses	$	28		$	28		$	109		—		(74.3)	%


(a) September 30, 2013, June 30, 2013, and September 30, 2012 amounts exclude $18 million, $19 million, and $25 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 third quarter of 2013, compared to $28 million for the second quarter of 2013 and $109 million for the year-ago quarter. Key's allowance for loan and lease losses was $868 million, or 1.62% of total period-end loans at September 30, 2013, compared to 1.65% at June 30, 2013, and 1.73% at September 30, 2012. During the third quarter of 2012, Key established an allowance for loan and lease losses for the acquired credit card and branch loans; the allowance for these loan and lease losses was approximately $29 million at September 30, 2012.

Net loan charge-offs for the third quarter of 2013 totaled $37 million, or .28% of average total loans. These results compare to $45 million, or .34% for the second quarter of 2013, and $109 million, or .86% for the same period last year. Net loan charge-offs in the third quarter of 2012 included $45 million of incremental net loan charge-offs reported in accordance with updated regulatory guidance requiring loans discharged through Chapter 7 bankruptcy and not reaffirmed by the borrower to be charged off to the collateral's fair market value less selling costs and classified as nonaccrual regardless of their delinquency status.

At September 30, 2013, Key's nonperforming loans totaled $541 million and represented 1.01% of period-end portfolio loans, compared to 1.23% at June 30, 2013 and 1.27% at September 30, 2012. Nonperforming loans at September 30, 2012 included $38 million that was the net carrying amount of the secured loans reclassified as troubled-debt restructurings under the updated regulatory guidance discussed above. Nonperforming assets at September 30, 2013 totaled $579 million and represented 1.08% of period-end portfolio loans and OREO and other nonperforming assets, compared to 1.30% at June 30, 2013, and 1.39% at September 30, 2012.

CAPITAL

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

Capital Ratios

	9-30-13		6-30-13		9-30-12
Tier 1 common equity^{(a), (b)}	11.11	%	11.18	%	11.30	%
Tier 1 risk-based capital^(a)	11.85		11.93		12.10
Total risk based capital^(a)	14.30		14.65		15.17
Tangible common equity to tangible assets^(b)	9.93		9.96		10.39
Leverage^(a)	11.32		11.25		11.37


(a)	9-30-13 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 September 30, 2013, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.11% and 11.85%, respectively. In addition, the tangible common equity ratio was 9.93% at September 30, 2013.

In July 2013, the Federal banking regulators approved the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). While the Regulatory Capital Rules are effective January 1, 2014, the mandatory compliance date for Key begins on January 1, 2015, and is subject to transitional provisions extending to January 1, 2019. Key's estimated Tier 1 common equity as calculated under the Regulatory Capital Rules was 10.56% at September 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 3Q13 vs.
		3Q13	2Q13	3Q12	2Q13		3Q12
Shares outstanding at beginning of period		912,883	922,581	945,473	(1.1)	%	(3.4)	%
Common shares repurchased		(16,364)	(10,786)	(9,639)	51.7		69.8
Shares reissued (returned) under employee benefit plans		1,302	1,088	361	19.7		260.7
	Shares outstanding at end of period	897,821	912,883	936,195	(1.6)	%	(4.1)	%

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. During the third quarter of 2013, Key completed $198 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 3Q13 vs.
			3Q13			2Q13			3Q12		2Q13		3Q12
Revenue from continuing operations (TE)
Key Community Bank		$	551		$	556		$	575		(.9)	%	(4.2)	%
Key Corporate Bank			377			375			370		.5		1.9
Other Segments			114			86			157		32.6		(27.4)
	Total segments		1,042			1,017			1,102		2.5		(5.4)
Reconciling items			1			(2)			(6)		N/M		N/M
	Total	$	1,043		$	1,015		$	1,096		2.8	%	(4.8)	%

Income (loss) from continuing operations attributable to Key
Key Community Bank		$	54		$	37		$	(16)		45.9	%	N/M
Key Corporate Bank			96			116			109		(17.2)		(11.9)	%
Other Segments			92			70			104		31.4		(11.5)
	Total segments		242			223			197		8.5		22.8
Reconciling items			(7)			(24)			19		N/M		N/M
	Total	$	235		$	199		$	216		18.1	%	8.8	%


TE = Taxable equivalent, N/M = Not Meaningful



Key Community Bank


dollars in millions											Change 3Q13 vs.
			3Q13			2Q13			3Q12		2Q13		3Q12
Summary of operations
Net interest income (TE)		$	357		$	357		$	376		—		(5.1)	%
Noninterest income			194			199			199		(2.5)	%	(2.5)
	Total revenue (TE)		551			556			575		(.9)		(4.2)
Provision (credit) for loan and lease losses			24			41			123		(41.5)		(80.5)
Noninterest expense			441			456			478		(3.3)		(7.7)	%
	Income (loss) before income taxes (TE)		86			59			(26)		45.8		N/M
Allocated income taxes (benefit) and TE adjustments			32			22			(10)		45.5		N/M
	Net income (loss) attributable to Key	$	54		$	37		$	(16)		45.9	%	N/M

Average balances
Loans and leases		$	29,495		$	29,161		$	27,764		1.1	%	6.2	%
Total assets			31,679			31,570			30,305		.3		4.5
Deposits			49,652			49,473			49,269		.4		.8

Assets under management at period end		$	25,574		$	24,395		$	21,988		(100.0)	%	(100.0)	%


TE = Taxable Equivalent, N/M = Not Meaningful



Additional Key Community Bank Data

dollars in millions											Change 3Q13 vs.
			3Q13			2Q13			3Q12		2Q13		3Q12
Noninterest income
Trust and investment services income		$	68		$	68		$	65		—		4.6	%
Service charges on deposit accounts			61			60			62		1.7	%	(1.6)
Cards and payments income			36			37			33		(2.7)		9.1
Other noninterest income			29			34			39		(14.7)		(25.6)
	Total noninterest income	$	194		$	199		$	199		(2.5)	%	(2.5)	%

Average deposit balances
NOW and money market deposit accounts		$	26,564		$	26,341		$	24,991		.8	%	6.3	%
Savings deposits			2,510			2,536			2,368		(1.0)		6.0
Certificates of deposit ($100,000 or more)			2,264			2,443			2,936		(7.3)		(22.9)
Other time deposits			3,949			4,195			5,137		(5.9)		(23.1)
Deposits in foreign office			278			284			292		(2.1)		(4.8)
Noninterest-bearing deposits			14,087			13,674			13,545		3.0		4.0
	Total deposits	$	49,652		$	49,473		$	49,269		.4	%	.8	%

Home equity loans
Average balance		$	10,247		$	9,992		$	9,734
Weighted-average loan-to-value ratio (at date of origination)			71	%		71	%		71	%
Percent first lien positions			58			57			54

Other data
Branches			1,044			1,052			1,087
Automated teller machines			1,350			1,359			1,620

Key Community Bank Summary of Operations

Continued credit card penetration and successful integration of branches in Western New York
Nine consecutive quarters of average loan growth
Core deposits up $2.3 billion, or 5.5% from the prior year

Key Community Bank recorded net income attributable to Key of $54 million for the third quarter of 2013, compared to a net loss attributable to Key of $16 million for the year-ago quarter.

Taxable-equivalent net interest income decreased by $19 million, or 5.1% from the third quarter of 2012 due to declines in the deposit spread in the current period as a result of the continued low-rate environment. Average loans and leases grew 6.2% while average deposits increased .8% from one year ago.

Noninterest income declined by $5 million, or 2.5% from the year-ago quarter. Consumer mortgage income decreased $8 million, and other income declined $3 million. These decreases were partially offset by increases in cards and payments income and trust and investment services income of $3 million each.

The provision for loan and lease losses decreased by $99 million, or 80.5% from the third quarter of 2012. During the third quarter of 2012, the application of updated regulatory guidance related to debts discharged through Chapter 7 bankruptcy increased the provision $45 million, and the acquisition of the credit card portfolio and Western New York branches increased the provision $32 million. Net loan charge-offs decreased $64 million from the same period one year ago, partially due to the application of the updated regulatory guidance in the third quarter of 2012 as discussed above.

Noninterest expense declined by $37 million, or 7.7 % from the year-ago quarter as a result of Key's efficiency initiative. Personnel expense decreased $17 million primarily due to declines in salaries, incentive compensation, and employee benefits. Nonpersonnel expense declined $20 million primarily due to declines in business services and professional fees, computer processing, and internally-allocated costs.

Key Corporate Bank


dollars in millions								Change 3Q13 vs.
			3Q13		2Q13		3Q12	2Q13		3Q12
Summary of operations
Net interest income (TE)		$	188	$	189	$	189	(.5)	%	(.5)	%
Noninterest income			189		186		181	1.6		4.4
	Total revenue (TE)		377		375		370	.5		1.9
Provision (credit) for loan and lease losses			13		(10)		(3)	N/M		N/M
Noninterest expense			217		202		201	7.4		8.0
	Income (loss) before income taxes (TE)		147		183		172	(19.7)		(14.5)
Allocated income taxes and TE adjustments			51		67		63	(23.9)		(19.0)
	Net income (loss) attributable to Key	$	96	$	116	$	109	(17.2)	%	(11.9)	%

Average balances
Loans and leases		$	20,586	$	20,133	$	18,893	2.3	%	9.0	%
Loans held for sale			422		466		441	(9.4)		(4.3)
Total assets			24,487		23,965		22,912	2.2		6.9
Deposits			16,125		15,606		12,879	3.3		25.2

Assets under management at period end		$	—	$	12,331	$	13,599	(100.0)	%	(100.0)	%


TE = Taxable Equivalent, N/M = Not Meaningful



Additional Key Corporate Bank Data

dollars in millions								Change 3Q13 vs.
			3Q13		2Q13		3Q12	2Q13		3Q12
Noninterest income
Trust and investment services income		$	31	$	33	$	31	(6.1)	%	—
Investment banking and debt placement fees			85		82		82	3.7		3.7	%
Operating lease income and other leasing gains			14		13		21	7.7		(33.3)

Corporate services income			34		32		28	6.3		21.4
Service charges on deposit accounts			11		11		12	—		(8.3)
Cards and payments income			6		5		6	20.0		—
	Payments and services income		51		48		46	6.3		10.9

Other noninterest income			8		10		1	(20.0)		700.0
	Total noninterest income	$	189	$	186	$	181	1.6	%	4.4	%

Key Corporate Bank Summary of Operations

Investment banking and debt placement fees increased 3.7% from the prior year
Average loan balances up 9% from the prior year
Average deposits up 25.2% from the prior year

Key Corporate Bank recorded net income attributable to Key of $96 million for the third quarter of 2013, compared to $109 million for the same period one year ago.

Taxable-equivalent net interest income decreased by $1 million, or .5% compared to the third quarter of 2012. Average earning assets increased $1.7 billion, or 8.3% from the year-ago quarter, driving a $7 million increase in earning asset spread. Average deposit balances increased $3.2 billion, or 25.2% from the year-ago quarter, driven by third-party servicing acquisitions and increased 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 $8 million, or 4.4% from the third quarter of 2012. Increases in investment banking and debt placement fees, corporate services, and other income were partially offset by a decrease in operating lease income and other leasing gains compared to the year-ago quarter.

The provision for loan and lease losses was a charge of $13 million compared to a credit of $3 million for the third quarter of 2012 due to loan growth and lower levels of recovery.

Noninterest expense increased by $16 million, or 8% from the third quarter of 2012. This increase was driven by a $2 million charge in the provision (credit) for losses on lending-related commitments compared to a credit of $6 million the third quarter of 2012. Internally-allocated costs were also higher in the current quarter than one year ago.

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 $92 million for the third quarter of 2013, compared to net income attributable to Key of $104 million for the same period last year. These results were primarily attributable to a decrease in other income due to a $54 million gain on the redemption of certain trust preferred securities. The net gain resulting from the early termination of leveraged leases was $15 million (a $23 million gain in operating lease income less an $8 million charge for the write-off of capitalized loan origination costs) in the third quarter of 2013 compared to a net gain of $26 million in the third quarter of 2012, which also contributed to the decline in other segments. These decreases were partially offset by an increase in net interest income of $24 million, adjusted for the impact of the leveraged lease terminations discussed above, and a decline in noninterest expense of $19 million.

Discontinued Operations

On July 31, 2013, Key closed the sale of Victory and completed the divestiture of this business. This sale resulted in an after-tax gain of $92 million; the cash portion of this gain was $72 million. Additional gain may be realized, resulting from consents received through January 2014. The gain on the Victory divestiture was partially offset by a net after-tax loss of $48 million related to the fair value of the loans and securities in Key's ten education loan securitization trusts. During the third quarter, additional market participant information about projected trends for default and recovery rates became available. Based on this information and Key's related internal analysis, certain assumptions related to valuing the loans in these securitization trusts were adjusted.

*****

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 $90.7 billion at September 30, 2013.

Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 13 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 Reports on Form 10-Q for the periods ended March 31, 2013, and June 30, 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 Wednesday, October 16, 2013. An audio replay of the call will be available through October 23, 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.

*****

KeyCorp
Third Quarter 2013
Financial Supplement


Page
14	Financial Highlights
16	GAAP to Non-GAAP Reconciliation
19	Consolidated Balance Sheets
20	Consolidated Statements of Income
21	Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
23	Noninterest Expense
23	Personnel Expense
24	Loan Composition
24	Loans Held for Sale Composition
24	Summary of Changes in Loans Held for Sale
25	Exit Loan Portfolio From Continuing Operations
25	Asset Quality Statistics From Continuing Operations
26	Summary of Loan and Lease Loss Experience From Continuing Operations
27	Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
28	Summary of Changes in Nonperforming Loans From Continuing Operations
28	Summary of Changes in Nonperforming Loans Held for Sale From Continuing Operations
28	Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
29	Line of Business Results

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

			Three months ended
			9-30-13			6-30-13			9-30-12
Summary of operations
	Net interest income (TE)		$	584		$	586		$	578
	Noninterest income			459			429			518
		Total revenue (TE)		1,043			1,015			1,096
	Provision (credit) for loan and lease losses			28			28			109
	Noninterest expense			716			711			712
	Income (loss) from continuing operations attributable to Key			235			199			216
	Income (loss) from discontinued operations, net of taxes^(a)			37			5			3
	Net income (loss) attributable to Key			272			204			219

	Income (loss) from continuing operations attributable to Key common shareholders		$	229		$	193		$	211
	Income (loss) from discontinued operations, net of taxes^(a)			37			5			3
	Net income (loss) attributable to Key common shareholders			266			198			214

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.25		$	.21		$	.23
	Income (loss) from discontinued operations, net of taxes ^(a)			.04			.01			—
	Net income (loss) attributable to Key common shareholders ^(b)			.29			.22			.23

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.25			.21			.22
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)			.04			.01			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)			.29			.22			.23

	Cash dividends paid			.055			.055			.05
	Book value at period end			11.05			10.89			10.64
	Tangible book value at period end			9.92			9.77			9.54
	Market price at period end			11.40			11.04			8.74

Performance ratios
	From continuing operations:
	Return on average total assets			1.12	%		.95	%		1.06	%
	Return on average common equity			9.13			7.72			8.45
	Return on average tangible common equity ^(c)			10.18			8.60			9.43
	Net interest margin (TE)			3.11			3.13			3.23
	Cash efficiency ratio ^(c)			67.5			69.1			64.1

	From consolidated operations:
	Return on average total assets			1.22	%		.92	%		1.01	%
	Return on average common equity			10.61			7.92			8.57
	Return on average tangible common equity ^(c)			11.82			8.82			9.56
	Net interest margin (TE)			3.06			3.07			3.14
	Loan to deposit ^(d)			83.8			83.6			86.2

Capital ratios at period end
	Key shareholders' equity to assets			11.25	%		11.29	%		11.79	%
	Key common shareholders' equity to assets			10.94			10.96			11.45
	Tangible common equity to tangible assets ^(c)			9.93			9.96			10.39
	Tier 1 common equity ^{(c), (e)}			11.11			11.18			11.30
	Tier 1 risk-based capital ^(e)			11.85			11.93			12.10
	Total risk-based capital ^(e)			14.30			14.65			15.17
	Leverage ^(e)			11.32			11.25			11.37

Asset quality — from continuing operations
	Net loan charge-offs		$	37		$	45		$	109
	Net loan charge-offs to average loans			.28	%		.34	%		.86	%
	Allowance for loan and lease losses to annualized net loan charge-offs			591.3			485.3			204.8
	Allowance for loan and lease losses		$	868		$	876		$	888
	Allowance for credit losses			908			913			931
	Allowance for loan and lease losses to period-end loans			1.62	%		1.65	%		1.73	%
	Allowance for credit losses to period-end loans			1.69			1.72			1.81
	Allowance for loan and lease losses to nonperforming loans			160.4			134.4			136.0
	Allowance for credit losses to nonperforming loans			167.8			140.0			142.6
	Nonperforming loans at period end ^(f)		$	541		$	652		$	653
	Nonperforming assets at period end			579			693			718
	Nonperforming loans to period-end portfolio loans			1.01	%		1.23	%		1.27	%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			1.08			1.30			1.39

Trust and brokerage assets
	Assets under management		$	-		$	35,544		$	35,587
	Nonmanaged and brokerage assets			-			37,759			34,322

Other data
	Average full-time equivalent employees			14,555			14,999			15,833
	Branches			1,044			1,052			1,087

Taxable-equivalent adjustment			$	6		$	5		$	6

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

			Nine months ended
			9-30-13			9-30-12
Summary of operations
	Net interest income (TE)		$	1,759		$	1,681
	Noninterest income			1,313			1,417
		Total revenue (TE)		3,072			3,098
	Provision (credit) for loan and lease losses			111			172
	Noninterest expense			2,108			2,084
	Income (loss) from continuing operations attributable to Key			635			639
	Income (loss) from discontinued operations, net of taxes ^(a)			45			16
	Net income (loss) attributable to Key			680			655

	Income (loss) from continuing operations attributable to Key common shareholders		$	618		$	623
	Income (loss) from discontinued operations, net of taxes ^(a)			45			16
	Net income (loss) attributable to Key common shareholders			663			639

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.68		$	.66
	Income (loss) from discontinued operations, net of taxes ^(a)			.05			.02
	Net income (loss) attributable to Key common shareholders ^(b)			.73			.68

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.67			.66
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)			.05			.02
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)			.72			.67

	Cash dividends paid			.16			.13

Performance ratios
	From continuing operations:
	Return on average total assets			1.02	%		1.06	%
	Return on average common equity			8.27			8.48
	Return on average tangible common equity ^(c)			9.22			9.40
	Net interest margin (TE)			3.16			3.15
	Cash efficiency ratio ^(c)			67.5			66.9

	From consolidated operations:
	Return on average total assets			1.03	%		1.01	%
	Return on average common equity			8.88			8.70
	Return on average tangible common equity ^(c)			9.89			9.64
	Net interest margin (TE)			3.10			3.07

Asset quality — from continuing operations
	Net loan charge-offs		$	131		$	287
	Net loan charge-offs to average total loans			.33	%		.77	%

Other data
	Average full-time equivalent employees			14,980			15,565

Taxable-equivalent adjustment			$	17		$	18


(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)	9-30-13 ratio is estimated.

(f)	September 30, 2013, June 30, 2013, and September 30, 2012 amounts exclude $18 million, $19 million, and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

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

GAAP to Non-GAAP Reconciliations

(dollars in millions)

The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," "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
			9-30-13			6-30-13			9-30-12
Tangible common equity to tangible assets at period end
	Key shareholders' equity (GAAP)		$	10,206		$	10,229		$	10,251
	Less:	Intangible assets ^(a)		1,017			1,021			1,031
		Preferred Stock, Series A ^(b)		282			282			291
		Tangible common equity (non-GAAP)	$	8,907		$	8,926		$	8,929

	Total assets (GAAP)		$	90,708		$	90,639		$	86,950
	Less:	Intangible assets ^(a)		1,017			1,021			1,031
		Tangible assets (non-GAAP)	$	89,691		$	89,618		$	85,919

	Tangible common equity to tangible assets ratio (non-GAAP)			9.93	%		9.96	%		10.39	%

Tier 1 common equity at period end
	Key shareholders' equity (GAAP)		$	10,206		$	10,229		$	10,251
	Qualifying capital securities			339			339			339
	Less:	Goodwill		979			979			979
		Accumulated other comprehensive income (loss) ^(c)		(409)			(359)			(109)
		Other assets ^(d)		97			101			121
		Total Tier 1 capital (regulatory)		9,878			9,847			9,599
	Less:	Qualifying capital securities		339			339			339
		Preferred Stock, Series A ^(b)		282			282			291
		Total Tier 1 common equity (non-GAAP)	$	9,257		$	9,226		$	8,969

	Net risk-weighted assets (regulatory) ^{(d), (e)}		$	83,335		$	82,528		$	79,363

	Tier 1 common equity ratio (non-GAAP) ^(e)			11.11	%		11.18	%		11.30	%

Pre-provision net revenue
	Net interest income (GAAP)		$	578		$	581		$	572
	Plus:	Taxable-equivalent adjustment		6			5			6
		Noninterest income (GAAP)		459			429			518
	Less:	Noninterest expense (GAAP)		716			711			712
	Pre-provision net revenue from continuing operations (non-GAAP)		$	327		$	304		$	384

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)

			Three months ended
			9-30-13			6-30-13			9-30-12
Average tangible common equity
	Average Key shareholders' equity (GAAP)		$	10,237		$	10,314		$	10,222
	Less:	Intangible assets (average)^(f)		1,019			1,023			1,026
		Preferred Stock, Series A (average)		291			291			291
		Average tangible common equity (non-GAAP)	$	8,927		$	9,000		$	8,905

Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	229		$	193		$	211
	Average tangible common equity (non-GAAP)			8,927			9,000			8,905

	Return on average tangible common equity from continuing operations (non-GAAP)			10.18	%		8.60	%		9.43	%

Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	266		$	198		$	214
	Average tangible common equity (non-GAAP)			8,927			9,000			8,905

	Return on average tangible common equity consolidated (non-GAAP)			11.82	%		8.82	%		9.56	%

Cash efficiency ratio
	Noninterest expense (GAAP)		$	716		$	711		$	712
	Less:	Intangible asset amortization on credit cards (GAAP)		8			7			6
		Other intangible asset amortization (GAAP)		4			3			3
		Adjusted noninterest expense (non-GAAP)	$	704		$	701		$	703

	Net interest income (GAAP)		$	578		$	581		$	572
	Plus:	Taxable-equivalent adjustment		6			5			6
		Noninterest income (GAAP)		459			429			518
		Total taxable-equivalent revenue (non-GAAP)	$	1,043		$	1,015		$	1,096

	Cash efficiency ratio (non-GAAP)			67.5	%		69.1	%		64.1	%

Adjusted cash efficiency ratio net of efficiency initiative charges
	Adjusted noninterest expense (non-GAAP)		$	704		$	701		$	703
	Less:	Efficiency initiative and pension settlement charges (non-GAAP)		41			37			9
		Net adjusted noninterest expense (non-GAAP)	$	663		$	664		$	694

	Total taxable-equivalent revenue (non-GAAP)		$	1,043		$	1,015		$	1,096

	Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP)			63.6	%		65.4	%		63.3	%

			Three months ended
			9-30-13			6-30-13
Tier 1 common equity under the Regulatory Capital Rules (estimates)
	Tier 1 common equity under current regulatory rules		$	9,257		$	9,226
	Adjustments from current regulatory rules to the Regulatory Capital Rules:
		Deferred tax assets and other^(g)		(140)			(62)
		Tier 1 common equity anticipated under the Regulatory Capital Rules^(h)	$	9,117		$	9,164

	Net risk-weighted assets under current regulatory rules		$	83,335		$	82,528
	Adjustments from current regulatory rules to the Regulatory Capital Rules:
		Loan commitments less than one year		496			826
		Past due loans		244			253
		Mortgage servicing assets⁽ⁱ⁾		576			487
		Deferred tax assets⁽ⁱ⁾		240			279
		Other		1,451			1,029
		Total risk-weighted assets anticipated under the Regulatory Capital Rules	$	86,342		$	85,402

	Tier 1 common equity ratio under the Regulatory Capital Rules^(h)			10.56	%		10.73	%

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)

			Nine months ended
			9-30-13			9-30-12
Pre-provision net revenue
	Net interest income (GAAP)		$	1,742		$	1,663
	Plus:	Taxable-equivalent adjustment		17			18
		Noninterest income (GAAP)		1,313			1,417
	Less:	Noninterest expense (GAAP)		2,108			2,084
	Pre-provision net revenue from continuing operations (non-GAAP)		$	964		$	1,014

Average tangible common equity
	Average Key shareholders' equity (GAAP)		$	10,277		$	10,105
	Less:	Intangible assets (average)^(j)		1,023			964
		Preferred Stock, Series A (average)		291			291
		Average tangible common equity (non-GAAP)	$	8,963		$	8,850

Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	618		$	623
	Average tangible common equity (non-GAAP)			8,963			8,850

	Return on average tangible common equity from continuing operations (non-GAAP)			9.22	%		9.40	%

Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	663		$	639
	Average tangible common equity (non-GAAP)			8,963			8,850

	Return on average tangible common equity consolidated (non-GAAP)			9.89	%		9.64	%

Cash efficiency ratio
	Noninterest expense (GAAP)		$	2,108		$	2,084
	Less:	Intangible asset amortization on credit cards (GAAP)		23			6
		Other intangible asset amortization (GAAP)		11			5
		Adjusted noninterest expense (non-GAAP)	$	2,074		$	2,073

	Net interest income (GAAP)		$	1,742		$	1,663
	Plus:	Taxable-equivalent adjustment		17			18
		Noninterest income (GAAP)		1,313			1,417
		Total taxable-equivalent revenue (non-GAAP)	$	3,072		$	3,098

	Cash efficiency ratio (non-GAAP)			67.5	%		66.9	%

Adjusted cash efficiency ratio net of efficiency initiative charges
	Adjusted noninterest expense (non-GAAP)		$	2,074		$	2,073
	Less:	Efficiency initiative and pension settlement charges (non-GAAP)		93			9
		Net adjusted noninterest expense (non-GAAP)	$	1,981		$	2,064

	Total taxable-equivalent revenue (non-GAAP)		$	3,072		$	3,098

	Adjusted cash efficiency ratio net of efficiency initiative charges (non-GAAP)			64.5	%		66.6	%


(a)	Three months ended September 30, 2013, June 30, 2013, and September 30, 2012 exclude $99 million, $107 million, and $130 million, respectively, of period end purchased credit card receivable intangible assets.

(b)	Net of capital surplus for the three months ended September 30, 2013 and June 30, 2013.

(c)	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.

(d)	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 September 30, 2013, June 30, 2013, and September 30, 2012.

(e)	9-30-13 amount is estimated.

(f)	Three months ended September 30, 2013, June 30, 2013 and September 30, 2012 exclude $103 million, $110 million, and $86 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 anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies' Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the "standardized approach."

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

(j)	Nine months ended September 30, 2013 and September 30, 2012 excludes $110 million and $29 million, respectively, of average ending purchased credit card receivable intangible assets.

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(dollars in millions)

			9-30-13		6-30-13		9-30-12
Assets
	Loans		$	53,597	$	53,101	$	51,419
	Loans held for sale			699		402		628
	Securities available for sale			12,606		13,253		11,962
	Held-to-maturity securities			4,835		4,750		4,153
	Trading account assets			806		592		663
	Short-term investments			3,535		3,582		2,208
	Other investments			1,007		1,037		1,106
		Total earning assets		77,085		76,717		72,139
	Allowance for loan and lease losses			(868)		(876)		(888)
	Cash and due from banks			748		696		973
	Premises and equipment			890		900		942
	Operating lease assets			293		303		290
	Goodwill			979		979		979
	Other intangible assets			137		149		182
	Corporate-owned life insurance			3,384		3,362		3,309
	Derivative assets			475		461		771
	Accrued income and other assets			2,747		2,864		2,853
	Discontinued assets			4,838		5,084		5,400
		Total assets	$	90,708	$	90,639	$	86,950

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	33,132	$	32,689	$	30,573
		Savings deposits		2,489		2,542		2,393
		Certificates of deposit ($100,000 or more)		2,698		2,918		3,226
		Other time deposits		3,833		4,089		4,941
		Total interest-bearing deposits		42,152		42,238		41,133
		Noninterest-bearing deposits		25,778		24,939		22,486
	Deposits in foreign office — interest-bearing			605		544		569
		Total deposits		68,535		67,721		64,188
	Federal funds purchased and securities sold under repurchase agreements			1,455		1,647		1,746
	Bank notes and other short-term borrowings			466		298		388
	Derivative liabilities			450		456		657
	Accrued expense and other liabilities			1,375		1,421		1,205
	Long-term debt			6,154		6,666		6,119
	Discontinued liabilities			2,037		2,169		2,368
		Total liabilities		80,472		80,378		76,671

Equity
	Preferred stock, Series A			291		291		291
	Common shares			1,017		1,017		1,017
	Capital surplus			4,029		4,045		4,118
	Retained earnings			7,431		7,214		6,762
	Treasury stock, at cost			(2,193)		(2,020)		(1,868)
	Accumulated other comprehensive income (loss)			(369)		(318)		(69)
		Key shareholders' equity		10,206		10,229		10,251
	Noncontrolling interests			30		32		28
		Total equity		10,236		10,261		10,279
Total liabilities and equity			$	90,708	$	90,639	$	86,950

Common shares outstanding (000)				897,821		912,883		936,195

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

			Three months ended						Nine months ended
			9-30-13		6-30-13		9-30-12		9-30-13		9-30-12
Interest income
	Loans		$	532	$	539	$	538	$	1,619	$	1,592
	Loans held for sale			5		5		5		14		15
	Securities available for sale			76		80		93		236		314
	Held-to-maturity securities			22		20		21		60		50
	Trading account assets			5		4		4		15		15
	Short-term investments			1		1		1		4		4
	Other investments			6		8		9		23		27
		Total interest income		647		657		671		1,971		2,017

Interest expense
	Deposits			37		42		60		124		208
	Federal funds purchased and securities sold under repurchase agreements			1		—		1		2		3
	Bank notes and other short-term borrowings			2		2		1		5		5
	Long-term debt			29		32		37		98		138
		Total interest expense		69		76		99		229		354

Net interest income				578		581		572		1,742		1,663
Provision (credit) for loan and lease losses				28		28		109		111		172
Net interest income (expense) after provision for loan and lease losses				550		553		463		1,631		1,491

Noninterest income
	Trust and investment services income			100		100		94		295		280
	Investment banking and debt placement fees			86		84		83		249		217
	Service charges on deposit accounts			73		71		74		213		212
	Operating lease income and other leasing gains			43		19		66		85		176
	Corporate services income			44		43		39		132		127
	Cards and payments income			43		42		37		122		97
	Corporate-owned life insurance income			26		31		26		87		86
	Consumer mortgage income			3		6		11		16		29
	Net gains (losses) from principal investing			17		7		11		32		70
	Other income ^(a)			24		26		77		82		123
		Total noninterest income		459		429		518		1,313		1,417

Noninterest expense
	Personnel			414		406		399		1,211		1,148
	Net occupancy			66		72		65		202		191
	Computer processing			38		39		42		116		126
	Business services and professional fees			37		37		48		109		136
	Equipment			25		27		27		78		80
	Operating lease expense			14		11		13		37		45
	Marketing			16		11		18		33		48
	FDIC assessment			7		8		7		23		23
	Intangible asset amortization on credit cards			8		7		6		23		6
	Other intangible asset amortization			4		3		3		11		5
	Provision (credit) for losses on lending-related commitments			3		5		(8)		11		(2)
	OREO expense, net			1		1		1		5		14
	Other expense			83		84		91		249		264
		Total noninterest expense		716		711		712		2,108		2,084
Income (loss) from continuing operations before income taxes				293		271		269		836		824
	Income taxes			59		72		51		201		178
Income (loss) from continuing operations				234		199		218		635		646
	Income (loss) from discontinued operations, net of taxes			37		5		3		45		16
Net income (loss)				271		204		221		680		662
	Less: Net income (loss) attributable to noncontrolling interests			(1)		—		2		—		7
Net income (loss) attributable to Key			$	272	$	204	$	219	$	680	$	655

Income (loss) from continuing operations attributable to Key common shareholders			$	229	$	193	$	211	$	618	$	623
Net income (loss) attributable to Key common shareholders				266		198		214		663		639

Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.25	$	.21	$	.23	$	.68	$	.66
Income (loss) from discontinued operations, net of taxes				.04		.01		—		.05		.02
Net income (loss) attributable to Key common shareholders ^(b)				.29		.22		.23		.73		.68

Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.25	$	.21	$	.22	$	.67	$	.66
Income (loss) from discontinued operations, net of taxes				.04		.01		—		.05		.02
Net income (loss) attributable to Key common shareholders ^(b)				.29		.22		.23		.72		.67

Cash dividends declared per common share			$	.055	$	.055	$	.05	$	.16	$	.13

Weighted-average common shares outstanding (000)				901,904		913,736		936,223		911,918		943,378

Weighted-average common shares and potential common shares outstanding (000) ^(c)				928,854		918,628		940,764		917,579		947,582


(a)	For the three months ended September 30, 2013, June 30, 2013, and September 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)

			Third Quarter 2013								Second Quarter 2013								Third 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^(d)		$	23,864	$	213			3.54	%	$	23,480	$	212			3.63	%	$	21,473	$	203			3.76	%
	Real estate — commercial mortgage			7,575		77			4.06			7,494		78			4.14			7,463		83			4.40
	Real estate — construction			1,073		12			4.24			1,049		11			4.30			1,116		12			4.55
	Commercial lease financing			4,633		36			3.14			4,747		48			3.96			5,026		39			3.13
		Total commercial loans		37,145		338			3.61			36,770		349			3.80			35,078		337			3.83
	Real estate — residential mortgage			2,193		25			4.43			2,176		24			4.53			2,092		25			4.80
	Home equity:
		Key Community Bank		10,247		101			3.92			9,992		98			3.93			9,734		99			4.02
		Other		364		7			7.72			389		7			7.66			468		9			7.73
		Total home equity loans		10,611		108			4.05			10,381		105			4.07			10,202		108			4.19
	Consumer other — Key Community Bank			1,435		26			7.24			1,392		26			7.35			1,297		32			9.65
	Credit cards			700		21			11.77			697		20			11.91			432		17			15.38
	Consumer other:
		Marine		1,120		17			6.26			1,206		20			6.24			1,493		22			6.28
		Other		67		2			8.72			74		1			8.58			101		3			8.02
		Total consumer other		1,187		19			6.40			1,280		21			6.37			1,594		25			6.39
		Total consumer loans		16,126		199			4.93			15,926		196			4.94			15,617		207			5.26
		Total loans		53,271		537			4.00			52,696		545			4.15			50,695		544			4.27
	Loans held for sale			456		5			4.06			513		5			3.93			532		5			3.28
	Securities available for sale^{(b), (e)}			12,926		77			2.37			13,296		79			2.47			12,608		94			3.07
	Held-to-maturity securities^(b)			4,796		22			1.84			4,144		20			1.87			4,251		21			1.94
	Trading account assets			747		5			2.52			749		4			2.31			693		4			2.10
	Short-term investments			1,615		1			.20			2,722		1			.23			1,868		1			.24
	Other investments^(e)			1,022		6			2.67			1,048		8			2.61			1,134		8			3.01
		Total earning assets		74,833		653			3.49			75,168		662			3.54			71,781		677			3.78
	Allowance for loan and lease losses			(873)								(890)								(883)
	Accrued income and other assets			9,549								9,770								9,907
	Discontinued assets			5,061								5,096								5,471
		Total assets	$	88,570							$	89,144							$	86,276

Liabilities
	NOW and money market deposit accounts		$	32,736		13			.15		$	32,849		14			.17		$	30,176		14			.19
	Savings deposits			2,520		—			.04			2,545		—			.04			2,378		1			.06
	Certificates of deposit ($100,000 or more)^(f)			2,785		12			1.67			2,975		13			1.79			3,420		22			2.53
	Other time deposits			3,957		12			1.24			4,202		14			1.35			5,158		23			1.76
	Deposits in foreign office			621		—			.20			573		1			.24			666		—			.21
		Total interest-bearing deposits		42,619		37			.35			43,144		42			.39			41,798		60			.57
	Federal funds purchased and securities sold under repurchase agreements			1,837		1			.08			1,845		—			.14			1,822		1			.17
	Bank notes and other short-term borrowings			383		2			1.98			367		2			1.84			390		1			1.53
	Long-term debt^{(f), (g)}			3,504		29			3.41			4,401		32			3.25			3,793		37			4.43
		Total interest-bearing liabilities		48,343		69			.56			49,757		76			.62			47,803		99			.83
	Noninterest-bearing deposits			23,364								22,297								20,878
	Accrued expense and other liabilities			1,626								1,653								1,900
	Discontinued liabilities^(g)			4,968								5,089								5,449
		Total liabilities		78,301								78,796								76,030

Equity
	Key shareholders' equity			10,237								10,314								10,222
	Noncontrolling interests			32								34								24
		Total equity		10,269								10,348								10,246

		Total liabilities and equity	$	88,570							$	89,144							$	86,276

Interest rate spread (TE)									2.93	%							2.92	%							2.95	%

Net interest income (TE) and net interest margin (TE)						584			3.11	%				586			3.13	%				578			3.23	%
TE adjustment^(b)						6								5								6
	Net interest income, GAAP basis				$	578							$	581							$	572


(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 September 30, 2013, June 30, 2013, and September 30, 2012 includes $96 million, $96 million, and $54 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)


			Nine months ended September 30, 2013								Nine months ended September 30, 2012
			Average								Average
			Balance		Interest		^(a)	Yield/Rate		^(a)	Balance		Interest		^(a)	Yield/ Rate		^(a)
Assets
	Loans:^{(b), (c)}
	Commercial, financial and agricultural ^(d)		$	23,556	$	643			3.65	%	$	20,706	$	597			3.85	%
	Real estate — commercial mortgage			7,561		234			4.15			7,689		257			4.46
	Real estate — construction			1,053		34			4.27			1,205		42			4.69
	Commercial lease financing			4,740		131			3.68			5,234		138			3.52
		Total commercial loans		36,910		1,042			3.77			34,834		1,034			3.97
	Real estate — residential mortgage			2,181		74			4.51			2,011		74			4.92
	Home equity:
		Key Community Bank		10,011		295			3.94			9,423		286			4.05
		Other		388		22			7.69			494		28			7.69
	Total home equity loans			10,399		317			4.08			9,917		314			4.23
	Consumer other — Key Community Bank			1,390		77			7.38			1,246		89			9.49
	Credit cards			700		63			12.10			145		17			15.38
	Consumer other:
		Marine		1,212		57			6.27			1,601		75			6.29
		Other		75		5			8.40			106		7			8.11
		Total consumer other		1,287		62			6.39			1,707		82			6.40
	Total consumer loans			15,957		593			4.95			15,026		576			5.11
	Total loans			52,867		1,635			4.14			49,860		1,610			4.31
	Loans held for sale			479		14			3.75			566		15			3.45
	Securities available for sale^{(b), (e)}			12,766		237			2.52			13,906		315			3.12
	Held-to-maturity securities^(b)			4,256		60			1.88			3,335		50			1.98
	Trading account assets			735		15			2.74			756		15			2.63
	Short-term investments			2,440		4			.22			2,124		4			.27
	Other investments^(e)			1,043		23			2.96			1,160		26			3.02
	Total earning assets			74,586		1,988			3.56			71,707		2,035			3.81
	Allowance for loan and lease losses			(886)								(926)
	Accrued income and other assets			9,727								9,923
	Discontinued assets			5,124								5,647
	Total assets		$	88,551							$	86,351

Liabilities
	NOW and money market deposit accounts		$	32,513		41			.17		$	29,207		42			.19
	Savings deposits			2,513		1			.05			2,154		1			.05
	Certificates of deposit ($100,000 or more)^(f)			2,890		39			1.82			3,770		78			2.77
	Other time deposits			4,202		42			1.34			5,611		86			2.04
	Deposits in foreign office			550		1			.23			731		1			.23
		Total interest-bearing deposits		42,668		124			.39			41,473		208			.67

	Federal funds purchased and securities sold under repurchase agreements			1,865		2			.12			1,851		3			.19
	Bank notes and other short-term borrowings			379		5			1.86			449		5			1.62
	Long-term debt^{(f), (g)}			4,187		98			3.39			5,134		138			3.95
		Total interest-bearing liabilities		49,099		229			.63			48,907		354			.98
	Noninterest-bearing deposits			22,361								19,656
	Accrued expense and other liabilities			1,692								2,030
	Discontinued liabilities^(g)			5,089								5,633
	Total liabilities			78,241								76,226

Equity
	Key shareholders' equity			10,277								10,105
	Noncontrolling interests			33								20
	Total equity			10,310								10,125

	Total liabilities and equity		$	88,551							$	86,351

Interest rate spread (TE)									2.93	%							2.83	%

Net interest income (TE) and net interest margin (TE)						1,759			3.16	%				1,681			3.15	%
TE adjustment^(b)						17								18
	Net interest income, GAAP basis				$	1,742							$	1,663


(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 nine months ended September 30, 2013 and September 30, 2012 includes $95 million and $18 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

Noninterest Expense
(dollars in millions)

	Three months ended						Nine months ended
	9-30-13		6-30-13		9-30-12		9-30-13		9-30-12
Personnel ^(a)	$	414	$	406	$	399	$	1,211	$	1,148
Net occupancy		66		72		65		202		191
Computer processing		38		39		42		116		126
Business services and professional fees		37		37		48		109		136
Equipment		25		27		27		78		80
Operating lease expense		14		11		13		37		45
Marketing		16		11		18		33		48
FDIC assessment		7		8		7		23		23
Intangible asset amortization on credit cards		8		7		6		23		6
Other intangible asset amortization		4		3		3		11		5
Provision (credit) for losses on lending-related commitments		3		5		(8)		11		(2)
OREO expense, net		1		1		1		5		14
Other expense		83		84		91		249		264
Total noninterest expense	$	716	$	711	$	712	$	2,108	$	2,084

Average full-time equivalent employees ^(b)		14,555		14,999		15,833		14,980		15,565

(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						Nine months ended
	9-30-13		6-30-13		9-30-12		9-30-13		9-30-12
Salaries	$	222	$	227	$	227	$	671	$	674
Technology contract labor, net		19		19		20		56		45
Incentive compensation		81		77		83		231		209
Employee benefits		78		56		54		193		172
Stock-based compensation		8		9		10		27		36
Severance		6		18		5		33		12
Total personnel expense	$	414	$	406	$	399	$	1,211	$	1,148

Loan Composition
(dollars in millions)

										Percent change 9-30-13 vs.
			9-30-13		6-30-13		9-30-12			6-30-13			9-30-12
Commercial, financial and agricultural ^(a)			$	24,317	$	23,715	$	21,979			2.5	%		10.6	%
Commercial real estate:
	Commercial mortgage			7,544		7,474		7,529			.9			.2
	Construction			1,058		1,060		1,067			(.2)			(.8)
	Total commercial real estate loans			8,602		8,534		8,596			.8			.1
Commercial lease financing				4,550		4,774		4,960			(4.7)			(8.3)
	Total commercial loans			37,469		37,023		35,535			1.2			5.4
Residential — prime loans:
	Real estate — residential mortgage			2,198		2,176		2,138			1.0			2.8
	Home equity:
		Key Community Bank		10,285		10,173		9,768			1.1			5.3
		Other		353		375		409	^(d)		(5.9)			(13.7)
	Total home equity loans			10,638		10,548		10,177			.9			4.5
Total residential — prime loans				12,836		12,724		12,315			.9			4.2
Consumer other — Key Community Bank				1,440		1,424		1,313			1.1			9.7
Credit cards				698		701		710			(.4)			(1.7)
Consumer other:
	Marine			1,083		1,160		1,448			(6.6)			(25.2)
	Other			71		69		98			2.9			(27.6)
	Total consumer other			1,154		1,229		1,546			(6.1)			(25.4)
	Total consumer loans			16,128		16,078		15,884			.3			1.5
	Total loans^{(b), (c)}		$	53,597	$	53,101	$	51,419			.9	%		4.2	%



Loans Held for Sale Composition
(dollars in millions)

										Percent change 9-30-13 vs.
			9-30-13		6-30-13		9-30-12			6-30-13			9-30-12
Commercial, financial and agricultural			$	68	$	22	$	13			209.1	%		423.1	%
Real estate — commercial mortgage				608		318		484			91.2			25.6
Real estate — construction				—		—		10			N/M			N/M
Commercial lease financing				—		14		4			N/M			N/M
Real estate — residential mortgage				23		48		117			(52.1)			(80.3)
	Total loans held for sale		$	699	$	402	$	628			73.9	%		11.3	%



Summary of Changes in Loans Held for Sale
(dollars in millions)

			3Q13		2Q13		1Q13			4Q12			3Q12
Balance at beginning of period			$	402	$	434	$	599		$	628		$	656
	New originations			1,467		1,241		1,075			1,686			1,280
	Transfers from held to maturity, net			15		17		19			38			13
	Loan sales			(1,181)		(1,292)		(1,257)			(1,747)			(1,311)
	Loan draws (payments), net			(4)		—		—			(4)			(9)
	Transfers to OREO / valuation adjustments			—		2		(2)			(2)			(1)
Balance at end of period			$	699	$	402	$	434		$	599		$	628


(a)	September 30, 2013, June 30, 2013 and September 30, 2012 loan balances include $96 million, $96 million, and $88 million, respectively, of commercial credit card balances.

(b)	Excluded at September 30, 2013, June 30, 2013, and September 30, 2012 are loans in the amount of $4.7 billion, $5.0 billion, and $5.3 billion, respectively, related to the discontinued operations of the education lending business.

(c)	September 30, 2013 loan balance includes purchased loans of $176 million of which $18 million were purchased credit impaired. June 30, 2013 loan balance includes purchased loans of $187 million of which $19 million were purchased credit impaired. September 30, 2012 includes purchased loans of $231 million of which $25 million were purchased credit impaired.

(d)	This loan category was impacted by $45 million in net loan charge-offs taken during the third quarter of 2012 related to updated regulatory guidance.

N/M = Not Meaningful

Exit Loan Portfolio From Continuing Operations
(dollars in millions)

	Balance				Change		Net Loan						Balance on
	Outstanding				9-30-13 vs.		Charge-offs						Nonperforming Status
	9-30-13		6-30-13		6-30-13		3Q13		^(c)	2Q13		^(c)	9-30-13		6-30-13
Residential properties — homebuilder	$	26	$	26		—		—		$	1		$	8	$	8
Marine and RV floor plan		25		28	$	(3)		—			—			6		7
Commercial lease financing^(a)		796		931		(135)	$	(2)			(2)			1		1
Total commercial loans		847		985		(138)		(2)			(1)			15		16
Home equity — Other		353		375		(22)		2			5			14		16
Marine		1,083		1,160		(77)		1			5			25		31
RV and other consumer		71		69		2		—			1			2		—
Total consumer loans		1,507		1,604		(97)		3			11			41		47
Total exit loans in loan portfolio	$	2,354	$	2,589	$	(235)	$	1		$	10		$	56	$	63

Discontinued operations — education lending business (not included in exit loans above)^(b)	$	4,738	$	4,992	$	(254)	$	9		$	7		$	23	$	19


(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)

		3Q13			2Q13			1Q13			4Q12			3Q12
Net loan charge-offs	$	37		$	45		$	49		$	58		$	109
Net loan charge-offs to average total loans		.28	%		.34	%		.38	%		.44	%		.86	%
Allowance for loan and lease losses to annualized net loan charge-offs		591.3			485.3			449.4			384.9			204.8
Allowance for loan and lease losses	$	868		$	876		$	893		$	888		$	888
Allowance for credit losses^(a)		908			913			925			917			931
Allowance for loan and lease losses to period-end loans		1.62	%		1.65	%		1.70	%		1.68	%		1.73	%
Allowance for credit losses to period-end loans		1.69			1.72			1.76			1.74			1.81
Allowance for loan and lease losses to nonperforming loans		160.4			134.4			137.4			131.8			136.0
Allowance for credit losses to nonperforming loans		167.8			140.0			142.3			136.1			142.6
Nonperforming loans at period end^(b)	$	541		$	652		$	650		$	674		$	653
Nonperforming assets at period end		579			693			705			735			718
Nonperforming loans to period-end portfolio loans		1.01	%		1.23	%		1.24	%		1.28	%		1.27	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets		1.08			1.30			1.34			1.39			1.39

(a)

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

(b)

September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $18 million, $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									Nine months ended
	9-30-13			6-30-13			9-30-12			9-30-13			9-30-12
Average loans outstanding	$	53,271		$	52,696		$	50,695		$	52,867		$	49,860

Allowance for loan and lease losses at beginning of period	$	876		$	893		$	888		$	888		$	1,004
Loans charged off:
Commercial, financial and agricultural		15			15			16			44			65

Real estate — commercial mortgage		2			3			23			18			69
Real estate — construction		—			1			3			2			19
Total commercial real estate loans		2			4			26			20			88
Commercial lease financing		17			2			—			25			20
Total commercial loans		34			21			42			89			173
Real estate — residential mortgage		3			4			6			13			19
Home equity:
Key Community Bank		14			18			65			50			113
Other		4			6			6			16			23
Total home equity loans		18			24			71			66			136
Consumer other — Key Community Bank		8			7			9			24			29
Credit cards		9			8			2			25			2
Consumer other:
Marine		5			9			11			22			41
Other		1			1			—			3			4
Total consumer other		6			10			11			25			45
Total consumer loans		44			53			99			153			231
Total loans charged off		78			74			141			242			404
Recoveries:
Commercial, financial and agricultural		11			7			9			30			40

Real estate — commercial mortgage		10			5			2			20			18
Real estate — construction		6			—			1			14			3
Total commercial real estate loans		16			5			3			34			21
Commercial lease financing		2			4			8			10			18
Total commercial loans		29			16			20			74			79
Real estate — residential mortgage		1			—			—			1			2
Home equity:
Key Community Bank		2			4			3			8			7
Other		2			1			1			5			4
Total home equity loans		4			5			4			13			11
Consumer other — Key Community Bank		1			2			2			5			5
Credit cards		1			2			—			3			—
Consumer other:
Marine		4			4			5			13			18
Other		1			—			1			2			2
Total consumer other		5			4			6			15			20
Total consumer loans		12			13			12			37			38
Total recoveries		41			29			32			111			117
Net loan charge-offs		(37)			(45)			(109)			(131)			(287)
Provision (credit) for loan and lease losses		28			28			109			111			172
Foreign currency translation adjustment		1			—			—			—			(1)
Allowance for loan and lease losses at end of period	$	868		$	876		$	888		$	868		$	888

Liability for credit losses on lending-related commitments at beginning of period	$	37		$	32		$	51		$	29		$	45
Provision (credit) for losses on lending-related commitments		3			5			(8)			11			(2)
Liability for credit losses on lending-related commitments at end of period^(a)	$	40		$	37		$	43		$	40		$	43

Total allowance for credit losses at end of period	$	908		$	913		$	931		$	908		$	931

Net loan charge-offs to average total loans		.28	%		.34	%		.86	%		.33	%		.77	%
Allowance for loan and lease losses to annualized net loan charge-offs		591.3			485.3			204.8			495.6			231.6
Allowance for loan and lease losses to period-end loans		1.62			1.65			1.73			1.62			1.73
Allowance for credit losses to period-end loans		1.69			1.72			1.81			1.69			1.81
Allowance for loan and lease losses to nonperforming loans		160.4			134.4			136.0			160.4			136.0
Allowance for credit losses to nonperforming loans		167.8			140.0			142.6			167.8			142.6

Discontinued operations — education lending business:
Loans charged off	$	14		$	12		$	17		$	42		$	56
Recoveries		5			5			5			14			13
Net loan charge-offs	$	(9)		$	(7)		$	(12)		$	(28)		$	(43)

(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)

	9-30-13			6-30-13			3-31-13			12-31-12			9-30-12
Commercial, financial and agricultural	$	102		$	146		$	142		$	99		$	132

Real estate — commercial mortgage		58			106			114			120			134
Real estate — construction		17			26			27			56			53
Total commercial real estate loans		75			132			141			176			187
Commercial lease financing		22			14			12			16			18
Total commercial loans		199			292			295			291			337
Real estate — residential mortgage^(a)		98			94			96			103			83
Home equity:
Key Community Bank		198			205			199			210			171
Other		13			16			18			21			18
Total home equity loans^(a)		211			221			217			231			189
Consumer other — Key Community Bank		2			3			3			2			3
Credit cards		4			11			13			11			8
Consumer other:
Marine		25			30			25			34			31
Other		2			1			1			2			2
Total consumer other		27			31			26			36			33
Total consumer loans		342			360			355			383			316
Total nonperforming loans^(b)		541			652			650			674			653
Nonperforming loans held for sale		13			14			23			25			19
OREO		15			18			21			22			29
Other nonperforming assets		10			9			11			14			17
Total nonperforming assets	$	579		$	693		$	705		$	735		$	718

Accruing loans past due 90 days or more	$	90		$	80		$	83		$	78		$	89
Accruing loans past due 30 through 89 days		288			251			368			424			354
Restructured loans — accruing and nonaccruing^(c)		349			311			294			320			323
Restructured loans included in nonperforming loans^(c)		228			195			178			249			217
Nonperforming assets from discontinued operations — education lending business		23			19			15			20			22
Nonperforming loans to period-end portfolio loans		1.01	%		1.23	%		1.24	%		1.28	%		1.27	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets		1.08			1.30			1.34			1.39			1.39


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

(b)	September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $18 million, $19 million, $22 million, $23 million, and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.

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

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

	3Q13		2Q13		1Q13		4Q12		3Q12
Balance at beginning of period	$	652	$	650	$	674	$	653	$	657
Loans placed on nonaccrual status		161		160		278		288		276
Charge-offs		(78)		(74)		(91)		(104)		(141)
Loans sold		(61)		(5)		(42)		(44)		(43)
Payments		(43)		(36)		(83)		(78)		(74)
Transfers to OREO		(2)		(7)		(7)		(7)		(10)
Transfers to nonperforming loans held for sale		—		—		—		(8)		—
Transfers to other nonperforming assets		—		—		—		(1)		—
Loans returned to accrual status		(88)		(36)		(79)		(25)		(12)
Balance at end of period^(a)	$	541	$	652	$	650	$	674	$	653

(a) September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012 amounts exclude $18 million, $19 million, $22 million, $23 million, and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.


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

	3Q13		2Q13		1Q13		4Q12		3Q12
Balance at beginning of period	$	14	$	23	$	25	$	19	$	38
Transfers in		—		—		—		8		—
Net advances / (payments)		(1)		(1)		—		(1)		(1)
Loans sold		—		(8)		—		(1)		(17)
Transfers to OREO		—		—		—		—		(1)
Valuation adjustments		—		—		(2)		—		—
Balance at end of period	$	13	$	14	$	23	$	25	$	19




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

	3Q13		2Q13		1Q13		4Q12		3Q12
Balance at beginning of period	$	18	$	21	$	22	$	29	$	28
Properties acquired — nonperforming loans		2		7		7		7		11
Valuation adjustments		(1)		(2)		(3)		(2)		(2)
Properties sold		(4)		(8)		(5)		(12)		(8)
Balance at end of period	$	15	$	18	$	21	$	22	$	29

Line of Business Results
(dollars in millions)

																Percent change 3Q13 vs.
	3Q13			2Q13			1Q13			4Q12			3Q12			2Q13			3Q12
Key Community Bank
Summary of operations
Total revenue (TE)	$	551		$	556		$	549		$	580		$	575			(.9)	%		(4.2)	%
Provision (credit) for loan and lease losses		24			41			59			26			123			(41.5)			(80.5)
Noninterest expense		441			456			439			502			478			(3.3)			(7.7)
Net income (loss) attributable to Key		54			37			32			33			(16)			45.9			N/M
Average loans and leases		29,495			29,161			28,977			28,629			27,764			1.1			6.2
Average deposits		49,652			49,473			49,349			49,839			49,269			.4			.8
Net loan charge-offs		27			42			47			12			91			(35.7)			(70.3)
Net loan charge-offs to average total loans		.36	%		.58	%		.66	%		.17	%		1.30	%		N/A			N/A
Nonperforming assets at period end	$	382		$	475		$	495		$	459		$	422			(19.6)			(9.5)
Return on average allocated equity		7.49	%		5.16	%		4.53	%		4.56	%		(2.25)	%		N/A			N/A
Average full-time equivalent employees		7,990			8,316			8,709			8,869			9,064			(3.9)			(11.8)


Key Corporate Bank
Summary of operations
Total revenue (TE)	$	377		$	375		$	379		$	402		$	370			.5	%		1.9	%
Provision (credit) for loan and lease losses		13			(10)			4			11			(3)			N/M			N/M
Noninterest expense		217			202			210			207			201			7.4			8.0
Net income (loss) attributable to Key		96			116			105			115			109			(17.2)			(11.9)
Average loans and leases		20,586			20,133			20,044			19,481			18,893			2.3			9.0
Average loans held for sale		422			466			409			538			441			(9.4)			(4.3)
Average deposits		16,125			15,606			13,968			13,681			12,879			3.3			25.2
Net loan charge-offs		7			(6)			(1)			21			8			N/M			(12.5)
Net loan charge-offs to average total loans		.13	%		(.12)	%		(.02)	%		.43	%		.17	%		N/A			N/A
Nonperforming assets at period end	$	119		$	136		$	136		$	175		$	197			(12.5)			(39.6)
Return on average allocated equity		23.31	%		28.54	%		26.35	%		28.02	%		26.06	%		N/A			N/A
Average full-time equivalent employees		2,018			1,955			1,930			1,920			2,009			3.2			.4

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