Exhibit 99.1

 

		NEWS
		FOR IMMEDIATE RELEASE

KEYCORP REPORTS FOURTH QUARTER 2012

NET INCOME OF $193 MILLION, OR $.21 PER COMMON SHARE AND

FULL YEAR NET INCOME OF $827 MILLION, OR $.88 PER COMMON SHARE

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

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

Average total loans up 6.6% from fourth quarter of 2011 led by

20.7% commercial and industrial loan growth

Average total deposits up 7.3% from fourth quarter of 2011

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

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

incurred during the quarter

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

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

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

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

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 2

 

FOURTH QUARTER 2012 FINANCIAL RESULTS

 

•

Net interest income of $607 million, up $29 million from prior quarter

 

•

Net interest margin of 3.37%, up 14 basis points from prior quarter due to lower funding costs and increased loan fees

 

•

Continued loan growth driven by 6% quarterly increase in commercial, financial and agricultural loans

 

•

Average deposits increased 2% from prior quarter

 

•

Noninterest expense increased $22 million from prior quarter, of which $10 million was associated with Fit for Growth efficiency initiative

 

•

Provision for loan and lease losses decreased $52 million from the third quarter of 2012

 

•

Net loan charge-offs decreased $51 million from prior quarter to .44% of average loans, the lowest level since third quarter of 2007

 

•

Maintained solid balance sheet with Tier 1 common equity of 11.16%

Selected Financial Highlights

 

dollars in millions, except per share data																Change 4Q12 vs.
				4Q12				3Q12				4Q11				3Q12				4Q11
Income (loss) from continuing operations attributable to Key common shareholders				$	193			$	214			$	201				(9.8	)%			(4.0	)%
Income (loss) from continuing operations attributable to Key common shareholders per common share					.21				.23				.21				(8.7	)			—
Return on average total assets from continuing operations					.97	%			1.08	%			1.01	%			N/A				N/A
Tier 1 common equity					11.16				11.30				11.26				N/A				N/A
Book value at period end				$	10.78			$	10.64			$	10.09				1.3	%			6.8	%
Net interest margin (TE) from continuing operations					3.37	%			3.23	%			3.13	%			N/A				N/A

 

TE	= Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

 

dollars in millions																Change 4Q12 vs.
				4Q12				3Q12				4Q11				3Q12				4Q11
Net interest income (TE)				$	607			$	578			$	563				5.0	%			7.8	%
Noninterest income					466				544				414				(14.3	)			12.6
Total revenue				$	1,073			$	1,122			$	977				(4.4	)%			9.8	%

 

TE	= Taxable Equivalent

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 3

 

Noninterest Income

 

dollars in millions																Change 4Q12 vs.
				4Q12				3Q12				4Q11				3Q12				4Q11
Trust and investment services income				$	104			$	106			$	104				(1.9	)%			N/M
Service charges on deposit accounts					75				74				70				1.4				7.1	%
Operating lease income					16				17				25				(5.9	)			(36.0	)
Letter of credit and loan fees					59				52				56				13.5				5.4
Corporate-owned life insurance income					36				26				35				38.5				2.9
Electronic banking fees					18				18				18				N/M				N/M
Gains on leased equipment					2				46				9				(95.7	)			(77.8	)
Insurance income					14				13				11				7.7				27.3
Net gains (losses) from loan sales					57				39				27				46.2				111.1
Net gains (losses) from principal investing					2				11				(8	)			(81.8	)			N/M
Investment banking and capital markets income (loss)					47				38				24				23.7				95.8
Other income					36				104				43				(65.4	)			(16.3	)
Total noninterest income				$	466			$	544			$	414				(14.3	)%			12.6	%

 

N/M	= Not Meaningful

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

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

Noninterest Expense

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Personnel expense		$	433			$	411			$	387				5.4	%			11.9	%
Nonpersonnel expense			323				323				330				N/M				(2.1	)
Total noninterest expense		$	756			$	734			$	717				3.0	%			5.4	%

 

N/M	= Not Meaningful

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 4

 

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

BALANCE SHEET HIGHLIGHTS

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

Average Loans

 

dollars in millions														Change 12-31-12 vs.
		12-31-12				9-30-12				12-31-11				9-30-12				12-31-11
Commercial, financial and agricultural (a)		$	22,436			$	21,473			$	18,590				4.5	%			20.7	%
Other commercial loans			13,494				13,605				15,185				(.8	)			(11.1	)
Total home equity loans			10,218				10,202				9,833				.2				3.9
Other consumer loans			5,711				5,415				5,056				5.5				13.0
Total loans		$	51,859			$	50,695			$	48,664				2.3	%			6.6	%

 

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

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

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

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

Average Deposits

 

dollars in millions														Change 12-31-12 vs.
		12-31-12				9-30-12				12-31-11				9-30-12				12-31-11
Non-time deposits		$	56,229			$	54,098			$	48,800				3.9	%			15.2	%
Certificates of deposits ($100,000 or more)			2,992				3,420				4,275				(12.5	)			(30.0	)
Other time deposits			4,714				5,158				6,505				(8.6	)			(27.5	)
Total deposits		$	63,935			$	62,676			$	59,580				2.0	%			7.3	%
Cost of interest-bearing deposits			.47	%			.57	%			.82	%			N/A				N/A

 

N/A	= Not Applicable

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 5

 

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

ASSET QUALITY

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Net loan charge-offs		$	58			$	109			$	105				(46.8	)%			(44.8	)%
Net loan charge-offs to average loans			.44	%			.86	%			.86	%			N/A				N/A
Nonperforming loans at period end (a)		$	674			$	653			$	727				3.2				(7.3	)
Nonperforming assets at period end			735				718				859				2.4				(14.4	)
Allowance for loan and lease losses			888				888				1,004				—				(11.6	)%
Allowance for loan and lease losses to nonperforming loans			132	%			136	%			138	%			N/A				N/A
Provision (credit) for loan and lease losses		$	57			$	109			$	(22	)			(47.7	)%			N/M

 

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

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

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

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 6

 

CAPITAL

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

Capital Ratios

 

		12-31-12				9-30-12				12-31-11
Tier 1 common equity (a), (b)			11.16	%			11.30	%			11.26	%
Tier 1 risk-based capital (a)			11.94				12.10				12.99
Total risk based capital (a)			14.86				15.17				16.51
Tangible common equity to tangible assets (b)			10.15				10.39				9.88

 

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

(b)

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

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

Summary of Changes in Common Shares Outstanding

 

in thousands														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Shares outstanding at beginning of period			936,195				945,473				952,808				(1.0	)%			(1.7	)%
Common shares repurchased			(10,530	)			(9,639	)			—				N/M				N/M
Shares reissued (returned) under employee benefit plans			104				361				200				(71.2	)			(48.0	)
Shares outstanding at end of period			925,769				936,195				953,008				(1.1	)%			(2.9	)%

 

N/M	= Not Meaningful

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 7

 

LINE OF BUSINESS RESULTS

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

Major Business Segments

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Revenue from continuing operations (TE)
Key Community Bank		$	567			$	576			$	546				(1.6	)%			3.8	%
Key Corporate Bank			424				392				412				8.2				2.9
Other segments			86				160				43				(46.3	)			100.0
Total segments			1,077				1,128				1,001				(4.5	)			7.6
Reconciling items			(4	)			(6	)			(24	)			N/M				N/M
Total		$	1,073			$	1,122			$	977				(4.4	)%			9.8	%
Income (loss) from continuing operations attributable to Key
Key Community Bank		$	31			$	(23	)		$	40				N/M				(22.5	)%
Key Corporate Bank			130				118				156				10.2	%			(16.7	)
Other segments			43				102				23				(57.8	)			87.0
Total segments			204				197				219				3.6				(6.8	)
Reconciling items			(5	)			22				(12	)			N/M				N/M
Total		$	199			$	219			$	207				(9.1	)%			(3.9	)%

 

TE	= Taxable equivalent, N/M = Not Meaningful

Key Community Bank

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Summary of operations
Net interest income (TE)		$	370			$	365			$	365				1.4	%			1.4	%
Noninterest income			197				211				181				(6.6	)			8.8
Total revenue (TE)			567				576				546				(1.6	)			3.8
Provision (credit) for loan and lease losses			23				120				30				(80.8	)			(23.3	)
Noninterest expense			529				512				476				3.3	%			11.1
Income (loss) before income taxes (TE)			15				(56	)			40				N/M				(62.5	)
Allocated income taxes (benefit) and TE adjustments			(16	)			(33	)			—				N/M				N/M
Net income (loss) attributable to Key		$	31			$	(23	)		$	40				N/M				(22.5	)%
Average balances
Loans and leases		$	29,252			$	28,386			$	26,406				3.1	%			10.8	%
Total assets			33,086				32,136				29,867				3.0				10.8
Deposits			50,123				49,537				48,076				1.2				4.3
Assets under management at period end		$	22,334			$	21,988			$	17,938				1.6	%			24.5	%

 

TE	= Taxable Equivalent, N/M = Not Meaningful

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 8

 

Additional Key Community Bank Data

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Noninterest income
Trust and investment services income		$	50			$	51			$	45				(2.0	)%			11.1	%
Service charges on deposit accounts			61				62				59				(1.6	)			3.4
Electronic banking fees			18				18				18				—				—
Other noninterest income			68				80				59				(15.0	)			15.3
Total noninterest income		$	197			$	211			$	181				(6.6	)%			8.8	%
Average deposit balances
NOW and money market deposit accounts		$	25,765			$	25,072			$	22,524				2.8	%			14.4	%
Savings deposits			2,403				2,373				1,959				1.3				22.7
Certificates of deposit ($100,000 or more)			2,623				2,941				3,639				(10.8	)			(27.9	)
Other time deposits			4,703				5,137				6,491				(8.4	)			(27.5	)
Deposits in foreign office			355				344				393				3.2				(9.7	)
Noninterest-bearing deposits			14,274				13,670				13,070				4.4				9.2
Total deposits		$	50,123			$	49,537			$	48,076				1.2	%			4.3	%
Home equity loans
Average balance		$	9,807			$	9,734			$	9,280
Weighted-average loan-to-value ratio (at date of origination)			70	%			71	%			70	%
Percent first lien positions			55				54				53
Other data
Branches			1,088				1,087				1,058
Automated teller machines			1,611				1,620				1,579

Key Community Bank Summary of Operations

 

•

Six consecutive quarters of average loan growth

 

•

Core deposits up $4.9 billion, or 12.8% from the prior year and $1.3 billion, or 3.2% from the prior quarter

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

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

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

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 9

 

Key Corporate Bank

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Summary of operations
Net interest income (TE)		$	188			$	182			$	177				3.3	%			6.2	%
Noninterest income			236				210				235				12.4				.4
Total revenue (TE)			424				392				412				8.2				2.9
Provision (credit) for loan and lease losses			11				(3	)			(61	)			N/M				N/M
Noninterest expense			206				209				228				(1.4	)			(9.6	)
Income (loss) before income taxes (TE)			207				186				245				11.3				(15.5	)
Allocated income taxes and TE adjustments			77				68				89				13.2				(13.5	)
Net income (loss) attributable to Key		$	130			$	118			$	156				10.2	%			(16.7	)%
Average balances
Loans and leases		$	19,477			$	18,886			$	17,784				3.1	%			9.5	%
Loans held for sale			538				441				356				22.0				51.1
Total assets			23,461				22,914				21,811				2.4				7.6
Deposits			13,672				12,873				11,162				6.2				22.5
Assets under management at period end		$	28,340			$	27,682			$	33,794				2.4	%			(16.1	)%

 

TE	= Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

 

dollars in millions														Change 4Q12 vs.
		4Q12				3Q12				4Q11				3Q12				4Q11
Noninterest income
Trust and investment services income		$	55			$	56			$	58				(1.8	)%			(5.2	)%
Investment banking and debt placement fees (a)			109				82				62				32.9				75.8
Operating lease income and other leasing gains (b)			18				20				26				(10.0	)			(30.8	)
Corporate services income (c)			30				27				44				11.1				(31.8	)
Other noninterest income			24				25				45				(4.0	)			(46.7	)
Total noninterest income		$	236			$	210			$	235				12.4	%			.4	%

 

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

(b)	Included in “Operating lease income” and “Gains on leased equipment” on the Consolidated Statements of Income.

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

Key Corporate Bank Summary of Operations

 

•

Investment banking and debt placement fees were $109 million for the fourth quarter of 2012, up $47 million, or 75.8% from the prior year and up $27 million, or 32.9% from the prior quarter

 

•

Average loan balances up 9.5% from the prior year and 3.1% from the prior quarter

 

•

Average deposits up 22.5% from the prior year and 6.2% from the prior quarter

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 10

 

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

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

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

Other Segments

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

*****

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 11

 

CONTACTS:

 

ANALYSTS Vernon L. Patterson 216.689.0520 Vernon_Patterson@KeyBank.com		MEDIA Jack Sparks 720.904.4554 Jack_Sparks@KeyBank.com Twitter: @keybank_news
Kelly L. Lammers 216.689.3133 Kelly_L_Lammers@KeyBank.com
INVESTOR RELATIONS: www.key.com/ir		KEY MEDIA NEWSROOM: www.key.com/newsroom

 

Notes to Editors:

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

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

*****

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 12

 

KeyCorp

Fourth Quarter 2012

Financial Supplement

 

Page
13		Financial Highlights
15		GAAP to Non-GAAP Reconciliation
17		Consolidated Balance Sheets
18		Consolidated Statements of Income
19		Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
21		Noninterest Income
21		Trust and Investment Services Income
21		Investment Banking and Capital Markets Income (Loss)
22		Noninterest Expense
22		Personnel Expense
23		Loan Composition
23		Loans Held for Sale Composition
23		Summary of Changes in Loans Held for Sale
24		Exit Loan Portfolio From Continuing Operations
24		Asset Quality Statistics From Continuing Operations
25		Summary of Loan and Lease Loss Experience From Continuing Operations
26		Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
27		Summary of Changes in Nonperforming Loans From Continuing Operations
27		Summary of Changes in Nonperforming Loans Held for Sale From Continuing Operations
27		Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations
28		Line of Business Results

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 13

 

Financial Highlights

(dollars in millions, except per share amounts)

 

		Three months ended
		12-31-12				9-30-12				12-31-11
Summary of operations
Net interest income (TE)		$	607			$	578			$	563
Noninterest income			466				544				414
Total revenue (TE)			1,073				1,122				977
Provision (credit) for loan and lease losses			57				109				(22	)
Noninterest expense			756				734				717
Income (loss) from continuing operations attributable to Key			199				219				207
Income (loss) from discontinued operations, net of taxes (b)			4				—				(7	)
Net income (loss) attributable to Key			203				219				200
Income (loss) from continuing operations attributable to Key common shareholders		$	193			$	214			$	201
Income (loss) from discontinued operations, net of taxes (b)			4				—				(7	)
Net income (loss) attributable to Key common shareholders			197				214				194
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.21			$	.23			$	.21
Income (loss) from discontinued operations, net of taxes (b)			—				—				(.01	)
Net income (loss) attributable to Key common shareholders (e)			.21				.23				.20
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.21				.23				.21
Income (loss) from discontinued operations, net of taxes — assuming dilution (b)			—				—				(.01	)
Net income (loss) attributable to Key common shareholders — assuming dilution (e)			.21				.23				.20
Cash dividends paid			.05				.05				.03
Book value at period end			10.78				10.64				10.09
Tangible book value at period end			9.67				9.54				9.11
Market price at period end			8.42				8.74				7.69
Performance ratios
From continuing operations:
Return on average total assets			.97	%			1.08	%			1.01	%
Return on average common equity			7.70				8.57				8.26
Return on average tangible common equity (a)			8.59				9.56				9.15
Net interest margin (TE)			3.37				3.23				3.13
Cash efficiency ratio (a)			69.34				64.62				73.29
From consolidated operations:
Return on average total assets			.93	%			1.01	%			.91	%
Return on average common equity			7.86				8.57				7.97
Return on average tangible common equity (a)			8.77				9.56				8.83
Net interest margin (TE)			3.29				3.14				3.04
Loan to deposit (d)			85.77				86.24				87.00
Capital ratios at period end
Key shareholders’ equity to assets			11.51	%			11.79	%			11.16	%
Tangible Key shareholders’ equity to tangible assets			10.48				10.73				10.21
Tangible common equity to tangible assets (a)			10.15				10.39				9.88
Tier 1 common equity (a), (c)			11.16				11.30				11.26
Tier 1 risk-based capital (c)			11.94				12.10				12.99
Total risk-based capital (c)			14.86				15.17				16.51
Leverage (c)			11.37				11.37				11.79
Asset quality — from continuing operations
Net loan charge-offs		$	58			$	109			$	105
Net loan charge-offs to average loans			.44	%			.86	%			.86	%
Allowance for loan and lease losses to annualized net loan charge-offs			384.85				204.78				241.01
Allowance for loan and lease losses		$	888			$	888			$	1,004
Allowance for credit losses			917				931				1,049
Allowance for loan and lease losses to period-end loans			1.68	%			1.73	%			2.03	%
Allowance for credit losses to period-end loans			1.74				1.81				2.12
Allowance for loan and lease losses to nonperforming loans			131.75				135.99				138.10
Allowance for credit losses to nonperforming loans			136.05				142.57				144.29
Nonperforming loans at period end (f)		$	674			$	653			$	727
Nonperforming assets at period end			735				718				859
Nonperforming loans to period-end portfolio loans			1.28	%			1.27	%			1.47	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			1.39				1.39				1.73
Trust and brokerage assets
Assets under management		$	50,674			$	49,670			$	51,732
Nonmanaged and brokerage assets			25,197				24,220				30,639
Other data
Average full-time equivalent employees			15,589				15,833				15,381
Branches			1,088				1,087				1,058
Taxable-equivalent adjustment		$	6			$	6			$	6

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 14

 

Financial Highlights (continued)

(dollars in millions, except per share amounts)

 

 

		Twelve months ended
		12-31-12				12-31-11
Summary of operations
Net interest income (TE)		$	2,288			$	2,292
Noninterest income			1,967				1,808
Total revenue (TE)			4,255				4,100
Provision (credit) for loan and lease losses			229				(60	)
Noninterest expense			2,907				2,790
Income (loss) from continuing operations attributable to Key			849				964
Income (loss) from discontinued operations, net of taxes (b)			9				(44	)
Net income (loss) attributable to Key			858				920
Income (loss) from continuing operations attributable to Key common shareholders		$	827			$	857
Income (loss) from discontinued operations, net of taxes (b)			9				(44	)
Net income (loss) attributable to Key common shareholders			836				813
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.88			$	.92
Income (loss) from discontinued operations, net of taxes (b)			.01				(.05	)
Net income (loss) attributable to Key common shareholders (e)			.89				.87
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.88				.92
Income (loss) from discontinued operations, net of taxes — assuming dilution (b)			.01				(.05	)
Net income (loss) attributable to Key common shareholders — assuming dilution (e)			.89				.87
Cash dividends paid			.18				.10
Performance ratios
From continuing operations:
Return on average total assets			1.05	%			1.17	%
Return on average common equity			8.39				9.26
Net interest margin (TE)			3.21				3.16
From consolidated operations:
Return on average total assets			.99	%			1.04	%
Return on average common equity			8.48				8.79
Net interest margin (TE)			3.13				3.09
Asset quality — from continuing operations
Net loan charge-offs		$	345			$	541
Net loan charge-offs to average loans			.69	%			1.11	%
Other data
Average full-time equivalent employees			15,589				15,381
Taxable-equivalent adjustment		$	24			$	25

 

(a)

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

(b)

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

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

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

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

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 15

 

GAAP to Non-GAAP Reconciliations

(dollars in millions)

 

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

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

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

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

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

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

 

		Three months ended
		12-31-12				9-30-12				12-31-11
Tangible common equity to tangible assets at period end
Key shareholders’ equity (GAAP)		$	10,271			$	10,251			$	9,905
Less: Intangible assets (a)			1,027				1,031				934
Preferred Stock, Series A			291				291				291
Tangible common equity (non-GAAP)		$	8,953			$	8,929			$	8,680
Total assets (GAAP)		$	89,236			$	86,950			$	88,785
Less: Intangible assets (a)			1,027				1,031				934
Tangible assets (non-GAAP)		$	88,209			$	85,919			$	87,851
Tangible common equity to tangible assets ratio (non-GAAP)			10.15	%			10.39	%			9.88	%
Tier 1 common equity at period end
Key shareholders’ equity (GAAP)		$	10,271			$	10,251			$	9,905
Qualifying capital securities			339				339				1,046
Less: Goodwill			979				979				917
Accumulated other comprehensive income (loss) (b)			(172	)			(109	)			(72	)
Other assets (c)			117				121				72
Total Tier 1 capital (regulatory)			9,686				9,599				10,034
Less: Qualifying capital securities			339				339				1,046
Preferred Stock, Series A			291				291				291
Total Tier 1 common equity (non-GAAP)		$	9,056			$	8,969			$	8,697
Net risk-weighted assets (regulatory) (c), (d)		$	81,150			$	79,363			$	77,214
Tier 1 common equity ratio (non-GAAP) (d)			11.16	%			11.30	%			11.26	%
Pre-provision net revenue
Net interest income (GAAP)		$	601			$	572			$	557
Plus: Taxable-equivalent adjustment			6				6				6
Noninterest income			466				544				414
Less: Noninterest expense			756				734				717
Pre-provision net revenue from continuing operations (non-GAAP)		$	317			$	388			$	260

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 16

 

GAAP to Non-GAAP Reconciliations (continued)

(dollars in millions)

 

		Three months ended
		12-31-12				9-30-12				12-31-11
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	10,261			$	10,222			$	9,943
Less: Intangible assets (average) (a)			1,030				1,026				934
Preferred Stock, Series A (average)			291				291				291
Average tangible common equity (non-GAAP)		$	8,940			$	8,905			$	8,718
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	193			$	214			$	201
Average tangible common equity (non-GAAP)			8,940				8,905				8,718
Return on average tangible common equity from continuing operations (non-GAAP)			8.59	%			9.56	%			9.15	%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	197			$	214			$	194
Average tangible common equity (non-GAAP)			8,940				8,905				8,718
Return on average tangible common equity consolidated (non-GAAP)			8.77	%			9.56	%			8.83	%
Cash efficiency ratio
Noninterest expense (GAAP)		$	756			$	734			$	717
Less: Intangible asset amortization on credit cards			8				6				—
Other intangible asset amortization			4				3				1
Adjusted noninterest expense (non-GAAP)		$	744			$	725			$	716
Net interest income (GAAP)		$	601			$	572			$	557
Plus: Taxable-equivalent adjustment			6				6				6
Noninterest income			466				544				414
Total taxable-equivalent revenue (non-GAAP)		$	1,073			$	1,122			$	977
Cash efficiency ratio (non-GAAP)			69.34	%			64.62	%			73.29	%

 

		Three months ended
		12-31-12				9-30-12
Tier 1 common equity under Basel III (estimates)
Tier 1 common equity under Basel I		$	9,056			$	8,969
Adjustments from Basel I to Basel III:
Cumulative other comprehensive income (e)			(197	)			(145	)
Deferred tax assets (f)			(80	)			(72	)
Tier 1 common equity anticipated under Basel III		$	8,779			$	8,752
Total risk-weighted assets under Basel I		$	81,150			$	79,363
Adjustments from Basel I to Basel III:
Market risk impact			1,225				579
Loan commitments less than one year			952				1,127
Residential mortgage and home equity loans			1,855				1,855
Other			1,173				1,119
Total risk-weighted assets under Basel III (g)		$	86,355			$	84,043
Tier 1 common equity ratio under Basel III			10.17	%			10.41	%

 

(a)

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

(b)

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

(c)

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

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

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

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

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

GAAP = U.S. generally accepted accounting principles

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 17

 

Consolidated Balance Sheets

(dollars in millions)

 

		12-31-12				9-30-12				12-31-11
Assets
Loans		$	52,822			$	51,419			$	49,575
Loans held for sale			599				628				728
Securities available for sale			12,094				11,962				16,012
Held-to-maturity securities			3,931				4,153				2,109
Trading account assets			605				663				623
Short-term investments			3,940				2,208				3,519
Other investments			1,064				1,106				1,163
Total earning assets			75,055				72,139				73,729
Allowance for loan and lease losses			(888	)			(888	)			(1,004	)
Cash and due from banks			585				974				694
Premises and equipment			965				942				944
Operating lease assets			288				290				350
Goodwill			979				979				917
Other intangible assets			171				182				17
Corporate-owned life insurance			3,333				3,309				3,256
Derivative assets			693				771				945
Accrued income and other assets			2,801				2,871				3,077
Discontinued assets			5,254				5,381				5,860
Total assets		$	89,236			$	86,950			$	88,785
Liabilities
Deposits in domestic offices:
NOW and money market deposit accounts		$	32,380			$	30,573			$	27,954
Savings deposits			2,433				2,393				1,962
Certificates of deposit ($100,000 or more)			2,879				3,226				4,111
Other time deposits			4,575				4,941				6,243
Total interest-bearing deposits			42,267				41,133				40,270
Noninterest-bearing deposits			23,319				22,486				21,098
Deposits in foreign office — interest-bearing			407				569				588
Total deposits			65,993				64,188				61,956
Federal funds purchased and securities sold under repurchase agreements			1,609				1,746				1,711
Bank notes and other short-term borrowings			287				388				337
Derivative liabilities			584				657				1,026
Accrued expense and other liabilities			1,425				1,238				1,763
Long-term debt			6,847				6,119				9,520
Discontinued liabilities			2,182				2,335				2,550
Total liabilities			78,927				76,671				78,863
Equity
Preferred stock, Series A			291				291				291
Common shares			1,017				1,017				1,017
Capital surplus			4,126				4,118				4,194
Retained earnings			6,913				6,762				6,246
Treasury stock, at cost			(1,952	)			(1,868	)			(1,815	)
Accumulated other comprehensive income (loss)			(124	)			(69	)			(28	)
Key shareholders’ equity			10,271				10,251				9,905
Noncontrolling interests			38				28				17
Total equity			10,309				10,279				9,922
Total liabilities and equity		$	89,236			$	86,950			$	88,785
Common shares outstanding (000)			925,769				936,195				953,008

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 18

 

Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Interest income
Loans		$	563			$	538			$	542			$	2,155			$	2,206
Loans held for sale			5				5				4				20				14
Securities available for sale			85				93				128				399				583
Held-to-maturity securities			19				21				9				69				12
Trading account assets			3				4				5				18				26
Short-term investments			2				1				1				6				6
Other investments			11				9				9				38				42
Total interest income			688				671				698				2,705				2,889
Interest expense
Deposits			49				60				85				257				390
Federal funds purchased and securities sold under repurchase agreements			1				1				1				4				5
Bank notes and other short-term borrowings			2				1				2				7				11
Long-term debt			35				37				53				173				216
Total interest expense			87				99				141				441				622
Net interest income			601				572				557				2,264				2,267
Provision (credit) for loan and lease losses			57				109				(22	)			229				(60	)
Net interest income (expense) after provision for loan and lease losses			544				463				579				2,035				2,327
Noninterest income
Trust and investment services income			104				106				104				421				434
Service charges on deposit accounts			75				74				70				287				281
Operating lease income			16				17				25				75				122
Letter of credit and loan fees			59				52				56				221				213
Corporate-owned life insurance income			36				26				35				122				121
Net securities gains (losses) (a)			—				—				—				—				1
Electronic banking fees			18				18				18				72				114
Gains on leased equipment			2				46				9				111				25
Insurance income			14				13				11				50				53
Net gains (losses) from loan sales			57				39				27				150				75
Net gains (losses) from principal investing			2				11				(8	)			72				78
Investment banking and capital markets income (loss)			47				38				24				165				134
Other income			36				104				43				221				157
Total noninterest income			466				544				414				1,967				1,808
Noninterest expense
Personnel			433				411				387				1,618				1,520
Net occupancy			69				65				66				260				258
Operating lease expense			12				13				18				57				94
Computer processing			39				43				42				166				166
Business services and professional fees			55				49				57				193				186
FDIC assessment			8				7				7				31				52
OREO expense, net			1				1				5				15				13
Equipment			27				27				25				107				103
Marketing			20				18				24				68				60
Provision (credit) for losses on lending-related commitments			(14	)			(8	)			(11	)			(16	)			(28	)
Intangible asset amortization on credit cards			8				6				—				14				—
Other intangible asset amortization			4				3				1				9				4
Other expense			94				99				96				385				362
Total noninterest expense			756				734				717				2,907				2,790
Income (loss) from continuing operations before income taxes			254				273				276				1,095				1,345
Income taxes			55				52				69				239				369
Income (loss) from continuing operations			199				221				207				856				976
Income (loss) from discontinued operations, net of taxes			4				—				(7	)			9				(44	)
Net income (loss)			203				221				200				865				932
Less: Net income (loss) attributable to noncontrolling interests			—				2				—				7				12
Net income (loss) attributable to Key		$	203			$	219			$	200			$	858			$	920
Income (loss) from continuing operations attributable to Key common shareholders		$	193			$	214			$	201			$	827			$	857
Net income (loss) attributable to Key common shareholders			197				214				194				836				813
Per common share
Income (loss) from continuing operations attributable to Key common shareholders		$	.21			$	.23			$	.21			$	.88			$	.92
Income (loss) from discontinued operations, net of taxes			—				—				(.01	)			.01				(.05	)
Net income (loss) attributable to Key common shareholders (b)			.21				.23				.20				.89				.87
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders		$	.21			$	.23			$	.21			$	.88			$	.92
Income (loss) from discontinued operations, net of taxes			—				—				(.01	)			.01				(.05	)
Net income (loss) attributable to Key common shareholders (b)			.21				.23				.20				.89				.87
Cash dividends declared per common share		$	.05			$	.05			$	.03			$	.18			$	.10
Weighted-average common shares outstanding (000)			925,725				936,223				948,658				938,941				931,934
Weighted-average common shares and potential common shares outstanding (000) (c)			930,382				940,764				951,684				943,259				935,801

 

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

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 19

 

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

(dollars in millions)

 

		Fourth Quarter 2012												Third Quarter 2012												Fourth Quarter 2011
		Average												Average												Average
		Balance				Interest (a)				Yield/Rate  (a)				Balance				Interest (a)				Yield/Rate  (a)				Balance				Interest (a)				Yield/Rate  (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural		$	22,436	(h)		$	213				3.77	%		$	21,473	(h)		$	203				3.76	%		$	18,590			$	183				3.90	%
Real estate — commercial mortgage			7,555				82				4.35				7,463				83				4.40				8,090				92				4.48
Real estate — construction			1,070				14				4.94				1,116				12				4.55				1,380				16				4.68
Commercial lease financing			4,869				49				4.01				5,026				39				3.13				5,715				65				4.58
Total commercial loans			35,930				358				3.96				35,078				337				3.83				33,775				356				4.19
Real estate — residential mortgage			2,164				26				4.70				2,092				25				4.80				1,918				24				5.15
Home equity:
Key Community Bank			9,807				98				3.99				9,734				99				4.02				9,280				96				4.10
Other			411				9				8.23				468				9				7.73				553				11				7.68
Total home equity loans			10,218				107				4.16				10,202				108				4.19				9,833				107				4.30
Consumer other — Key Community Bank			1,339				32				9.63				1,297				32				9.65				1,191				30				9.62
Credit cards			714				23				13.15				432				17				15.38				—				—				—
Consumer other:
Marine			1,403				22				6.16				1,493				22				6.28				1,820				29				6.35
Other			91				1				8.25				101				3				8.02				127				2				7.87
Total consumer other			1,494				23				6.29				1,594				25				6.39				1,947				31				6.44
Total consumer loans			15,929				211				5.30				15,617				207				5.26				14,889				192				5.12
Total loans			51,859				569				4.37				50,695				544				4.27				48,664				548				4.47
Loans held for sale			618				5				3.47				532				5				3.28				440				4				3.36
Securities available for sale (b), (e)			11,980				84				2.95				12,608				94				3.07				16,790				128				3.16
Held-to-maturity securities (b)			4,036				19				1.94				4,251				21				1.94				1,648				9				2.12
Trading account assets			606				3				1.91				693				4				2.10				736				5				2.72
Short-term investments			2,090				2				.27				1,868				1				.24				2,929				1				.26
Other investments (e)			1,088				12				4.05				1,134				8				3.08				1,181				9				2.98
Total earning assets			72,277				694				3.85				71,781				677				3.78				72,388				704				3.90
Allowance for loan and lease losses			(898	)											(883	)											(1,057	)
Accrued income and other assets			9,941												9,957												9,942
Discontinued assets — education lending business			5,287												5,421												5,912
Total assets		$	86,607											$	86,276											$	87,185
Liabilities
NOW and money market deposit accounts		$	31,058				14				.18			$	30,176				14				.19			$	27,722				15				.22
Savings deposits			2,408				—				.06				2,378				1				.06				1,964				—				.06
Certificates of deposit ($100,000 or more) (f)			2,992				16				2.15				3,420				22				2.53				4,275				32				2.97
Other time deposits			4,714				18				1.52				5,158				23				1.76				6,505				37				2.24
Deposits in foreign office			874				1				.21				666				—				.21				650				1				.25
Total interest-bearing deposits			42,046				49				.47				41,798				60				.57				41,116				85				.82
Federal funds purchased and securities sold under repurchase agreements			1,702				1				.16				1,822				1				.17				1,747				1				.25
Bank notes and other short-term borrowings			306				2				1.97				390				1				1.53				471				2				1.87
Long-term debt (f), (g)			3,301				35				4.84				3,793				37				4.43				7,020				53				3.21
Total interest-bearing liabilities			47,355				87				.73				47,803				99				.83				50,354				141				1.12
Noninterest-bearing deposits			21,889												20,878												18,464
Accrued expense and other liabilities			1,781												1,928												2,496
Discontinued liabilities — education lending business (d), (g)			5,287												5,421												5,912
Total liabilities			76,312												76,030												77,226
Equity
Key shareholders’ equity			10,261												10,222												9,943
Noncontrolling interests			34												24												16
Total equity			10,295												10,246												9,959
Total liabilities and equity		$	86,607											$	86,276											$	87,185
Interest rate spread (TE)											3.12	%											2.95	%											2.78	%
Net interest income (TE) and net interest margin (TE)							607				3.37	%							578				3.23	%							563				3.13	%
TE adjustment (b)							6												6												6
Net interest income, GAAP basis						$	601											$	572											$	557

 

(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.

(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

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

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

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

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

(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 20

 

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

(dollars in millions)

 

		Twelve months ended December 31, 2012												Twelve months ended December 31, 2011
		Average												Average
		Balance				Interest  (a)				Yield/Rate  (a)				Balance				Interest  (a)				Yield/Rate  (a)
Assets
Loans: (b), (c)
Commercial, financial and agricultural		$	21,141	(h)		$	810				3.83	%		$	17,507			$	705				4.03	%
Real estate — commercial mortgage			7,656				339				4.43				8,437				380				4.50
Real estate — construction			1,171				56				4.74				1,677				73				4.36
Commercial lease financing			5,142				187				3.64				5,846				293				5.01
Total commercial loans			35,110				1,392				3.96				33,467				1,451				4.34
Real estate — residential mortgage			2,049				100				4.86				1,850				97				5.25
Home equity:
Key Community Bank			9,520				384				4.03				9,390				387				4.12
Other			473				37				7.81				598				46				7.66
Total home equity loans			9,993				421				4.21				9,988				433				4.34
Consumer other — Key Community Bank			1,269				121				9.53				1,167				113				9.62
Credit cards			288				40				13.99				—				—				—
Consumer other:
Marine			1,551				97				6.26				1,992				125				6.28
Other			102				8				8.14				142				11				7.87
Total consumer other			1,653				105				6.38				2,134				136				6.38
Total consumer loans			15,252				787				5.16				15,139				779				5.14
Total loans			50,362				2,179				4.33				48,606				2,230				4.59
Loans held for sale			579				20				3.45				387				14				3.58
Securities available for sale (b), (e)			13,422				399				3.08				18,766				584				3.20
Held-to-maturity securities (b)			3,511				69				1.97				514				12				2.35
Trading account assets			718				18				2.48				878				26				2.97
Short-term investments			2,116				6				.27				2,543				6				.25
Other investments (e)			1,141				38				3.27				1,264				42				3.14
Total earning assets			71,849				2,729				3.82				72,958				2,914				4.02
Allowance for loan and lease losses			(919	)											(1,250	)
Accrued income and other assets			9,961												10,385
Discontinued assets — education lending business			5,524												6,203
Total assets		$	86,415											$	88,296
Liabilities
NOW and money market deposit accounts		$	29,673				56				.19			$	27,001				71				.26
Savings deposits			2,218				1				.05				1,958				1				.06
Certificates of deposit ($100,000 or more) (f)			3,574				94				2.64				4,931				149				3.02
Other time deposits			5,386				104				1.92				7,185				166				2.31
Deposits in foreign office			767				2				.23				807				3				.30
Total interest-bearing deposits			41,618				257				.62				41,882				390				.93
Federal funds purchased and securities sold under repurchase agreements			1,814				4				.19				1,981				5				.27
Bank notes and other short-term borrowings			413				7				1.69				619				11				1.84
Long-term debt (f), (g)			4,673				173				4.10				7,293				216				3.18
Total interest-bearing liabilities			48,518				441				.92				51,775				622				1.21
Noninterest-bearing deposits			20,217												17,381
Accrued expense and other liabilities			1,989												2,687
Discontinued liabilities — education lending business (d), (g)			5,524												6,203
Total liabilities			76,248												78,046
Equity
Key shareholders’ equity			10,144												10,133
Noncontrolling interests			23												117
Total equity			10,167												10,250
Total liabilities and equity		$	86,415											$	88,296
Interest rate spread (TE)											2.90	%											2.81	%
Net interest income (TE) and net interest margin (TE)							2,288				3.21	%							2,292				3.16	%
TE adjustment (b)							24												25
Net interest income, GAAP basis						$	2,264											$	2,267

 

(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.

(b)	Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

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

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

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

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

(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 21

 

Noninterest Income

(in millions)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Trust and investment services income (a)		$	104			$	106			$	104			$	421			$	434
Service charges on deposit accounts			75				74				70				287				281
Operating lease income			16				17				25				75				122
Letter of credit and loan fees			59				52				56				221				213
Corporate-owned life insurance income			36				26				35				122				121
Net securities gains (losses)			—				—				—				—				1
Electronic banking fees			18				18				18				72				114
Gains on leased equipment			2				46				9				111				25
Insurance income			14				13				11				50				53
Net gains (losses) from loan sales			57				39				27				150				75
Net gains (losses) from principal investing			2				11				(8	)			72				78
Investment banking and capital markets income (loss) (a)			47				38				24				165				134
Other income			36				104				43				221				157
Total noninterest income		$	466			$	544			$	414			$	1,967			$	1,808

 

(a)	Additional detail provided in tables below.

Trust and Investment Services Income

(in millions)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Brokerage commissions and fee income		$	32			$	34			$	33			$	134			$	132
Personal asset management and custody fees			42				41				38				161				153
Institutional asset management and custody fees			30				31				33				126				149
Total trust and investment services income		$	104			$	106			$	104			$	421			$	434

Investment Banking and Capital Markets Income (Loss)

(in millions)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Investment banking income		$	34			$	32			$	25			$	111			$	92
Income (loss) from other investments			2				2				3				13				21
Dealer trading and derivatives income (loss), proprietary (a), (b)			(1	)			4				(6	)			(2	)			(24	)
Dealer trading and derivatives income (loss), nonproprietary (b)			3				(9	)			(9	)			6				2
Total dealer trading and derivatives income (loss)			2				(5	)			(15	)			4				(22	)
Foreign exchange income			9				9				11				37				43
Total investment banking and capital markets income (loss)		$	47			$	38			$	24			$	165			$	134

 

(a)

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

(b)

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 22

 

Noninterest Expense

(dollars in millions)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Personnel (a)		$	433			$	411			$	387			$	1,618			$	1,520
Net occupancy			69				65				66				260				258
Operating lease expense			12				13				18				57				94
Computer processing			39				43				42				166				166
Business services and professional fees			55				49				57				193				186
FDIC assessment			8				7				7				31				52
OREO expense, net			1				1				5				15				13
Equipment			27				27				25				107				103
Marketing			20				18				24				68				60
Provision (credit) for losses on lending-related commitments			(14	)			(8	)			(11	)			(16	)			(28	)
Intangible asset amortization on credit cards			8				6				—				14				—
Other intangible asset amortization			4				3				1				9				4
Other expense			94				99				96				385				362
Total noninterest expense		$	756			$	734			$	717			$	2,907			$	2,790
Average full-time equivalent employees (b)			15,589				15,833				15,381				15,589				15,381

 

(a)	Additional detail provided in table below.

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

Personnel Expense

(in millions)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Salaries		$	257			$	251			$	234			$	989			$	919
Incentive compensation			87				89				82				313				306
Employee benefits			66				55				55				242				229
Stock-based compensation			13				11				13				51				45
Severance			10				5				3				23				21
Total personnel expense		$	433			$	411			$	387			$	1,618			$	1,520

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 23

 

Loan Composition

(dollars in millions)

 

														Percent change 12-31-12 vs.
		12-31-12				9-30-12				12-31-11				9-30-12				12-31-11
Commercial, financial and agricultural (a)		$	23,242			$	21,979			$	19,759				5.7	%			17.6	%
Commercial real estate:
Commercial mortgage			7,720				7,529				8,037				2.5				(3.9	)
Construction			1,003				1,067				1,312				(6.0	)			(23.6	)
Total commercial real estate loans			8,723				8,596				9,349				1.5				(6.7	)
Commercial lease financing			4,915				4,960				5,674				(.9	)			(13.4	)
Total commercial loans			36,880				35,535				34,782				3.8				6.0
Residential — prime loans:
Real estate — residential mortgage			2,174				2,138				1,946				1.7				11.7
Home equity:
Key Community Bank			9,816				9,768				9,229				.5				6.4
Other			423				409	(d)			535				3.4				(20.9	)
Total home equity loans			10,239				10,177				9,764				.6				4.9
Total residential — prime loans			12,413				12,315				11,710				.8				6.0
Consumer other — Key Community Bank			1,349				1,313				1,192				2.7				13.2
Credit cards			729				710				—				2.7				N/M
Consumer other:
Marine			1,358				1,448				1,766				(6.2	)			(23.1	)
Other			93				98				125				(5.1	)			(25.6	)
Total consumer — indirect loans			1,451				1,546				1,891				(6.1	)			(23.3	)
Total consumer loans			15,942				15,884				14,793				.4				7.8
Total loans (b), (c)		$	52,822			$	51,419			$	49,575				2.7	%			6.5	%
Loans Held for Sale Composition
(dollars in millions)
														Percent change 12-31-12 vs.
		12-31-12				9-30-12				12-31-11				9-30-12				12-31-11
Commercial, financial and agricultural		$	29			$	13			$	19				123.1	%			52.6	%
Real estate — commercial mortgage			477				484				567				(1.4	)			(15.9	)
Real estate — construction			—				10				35				N/M				N/M
Commercial lease financing			8				4				12				100.0				(33.3	)
Real estate — residential mortgage			85				117				95				(27.4	)			(10.5	)
Total loans held for sale		$	599			$	628			$	728				(4.6	)%			(17.7	)%
Summary of Changes in Loans Held for Sale
(dollars in millions)
		4Q12				3Q12				2Q12				1Q12				4Q11
Balance at beginning of period		$	628			$	656			$	511			$	728			$	479
New originations			1,686				1,280				1,308				935				1,235
Transfers from held to maturity, net			38				13				7				19				19
Loan sales			(1,747	)			(1,311	)			(1,165	)			(1,168	)			(932	)
Loan draws (payments), net			(4	)			(9	)			(4	)			(3	)			(72	)
Transfers to OREO / valuation adjustments			(2	)			(1	)			(1	)			—				(1	)
Balance at end of period		$	599			$	628			$	656			$	511			$	728

 

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

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

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

(d)

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

N/M	= Not Meaningful

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 24

 

Exit Loan Portfolio From Continuing Operations

(dollars in millions)

 

		Balance								Change				Net Loan								Balance on
		Outstanding								12-31-12 vs.				Charge-offs								Nonperforming Status
		12-31-12				9-30-12				9-30-12				4Q12				3Q12  (c)				12-31-12				9-30-12
Residential properties — homebuilder		$	24			$	31			$	(7	)		$	1				—			$	10			$	6
Marine and RV floor plan			33				35				(2	)			—			$	(1	)			10				12
Commercial lease financing (a)			997				1,035				(38	)			—				(3	)			6				8
Total commercial loans			1,054				1,101				(47	)			1				(4	)			26				26
Home equity — Other			423				409	(d)			14				11				5				21				18
Marine			1,358				1,448				(90	)			14				6				34				31
RV and other consumer			93				98				(5	)			1				(1	)			2				2
Total consumer loans			1,874				1,955				(81	)			26				10				57				51
Total exit loans in loan portfolio		$	2,928			$	3,056			$	(128	)		$	27			$	6			$	83			$	77
Discontinued operations — education lending business (not included in exit loans above) (b)		$	5,201			$	5,328			$	(127	)		$	15			$	12			$	20			$	22

 

(a)

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

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

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

(d)

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

Asset Quality Statistics From Continuing Operations

(dollars in millions)

 

		4Q12				3Q12				2Q12				1Q12				4Q11
Net loan charge-offs		$	58			$	109			$	77			$	101			$	105
Net loan charge-offs to average loans			.44	%			.86	%			.63	%			.82	%			.86	%
Allowance for loan and lease losses to annualized net loan charge-offs			384.85				204.78				286.74				232.39				241.01
Allowance for loan and lease losses		$	888			$	888			$	888			$	944			$	1,004
Allowance for credit losses (a)			917				931				939				989				1,049
Allowance for loan and lease losses to period-end loans			1.68	%			1.73	%			1.79	%			1.92	%			2.03	%
Allowance for credit losses to period-end loans			1.74				1.81				1.89				2.01				2.12
Allowance for loan and lease losses to nonperforming loans			131.75				135.99				135.16				141.74				138.10
Allowance for credit losses to nonperforming loans			136.05				142.57				142.92				148.50				144.29
Nonperforming loans at period end (b)		$	674			$	653			$	657			$	666			$	727
Nonperforming assets at period end			735				718				751				767				859
Nonperforming loans to period-end portfolio loans			1.28	%			1.27	%			1.32	%			1.35	%			1.47	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			1.39				1.39				1.51				1.55				1.73

 

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

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 25

 

Summary of Loan and Lease Loss Experience From Continuing Operations

(dollars in millions)

 

		Three months ended												Twelve months ended
		12-31-12				9-30-12				12-31-11				12-31-12				12-31-11
Average loans outstanding		$	51,859			$	50,695			$	48,664			$	50,362			$	48,606
Allowance for loan and lease losses at beginning of period		$	888			$	888			$	1,131			$	1,004			$	1,604
Loans charged off:
Commercial, financial and agricultural			15				16				45				80				169
Real estate — commercial mortgage			33				23				24				102				113
Real estate — construction			5				3				2				24				83
Total commercial real estate loans			38				26				26				126				196
Commercial lease financing			7				—				6				27				42
Total commercial loans			60				42				77				233				407
Real estate — residential mortgage (a)			8				6				7				27				29
Home equity:
Key Community Bank (a)			(14	)			65				22				99				100
Other (a)			12				6				10				35				45
Total home equity loans			(2	)			71				32				134				145
Consumer other — Key Community Bank			9				9				11				38				45
Credit cards			9				2				—				11				—
Consumer other:
Marine (a)			18				11				20				59				80
Other (a)			2				—				2				6				9
Total consumer other			20				11				22				65				89
Total consumer loans			44				99				72				275				308
Total loans charged off			104				141				149				508				715
Recoveries:
Commercial, financial and agricultural			23				9				17				63				50
Real estate — commercial mortgage			5				2				1				23				10
Real estate — construction			2				1				8				5				27
Total commercial real estate loans			7				3				9				28				37
Commercial lease financing			4				8				6				22				25
Total commercial loans			34				20				32				113				112
Real estate — residential mortgage			1				—				—				3				3
Home equity:
Key Community Bank			4				3				2				11				11
Other			1				1				1				5				4
Total home equity loans			5				4				3				16				15
Consumer other — Key Community Bank			1				2				2				6				8
Consumer other:
Marine			4				5				6				22				32
Other			1				1				1				3				4
Total consumer other			5				6				7				25				36
Total consumer loans			12				12				12				50				62
Total recoveries			46				32				44				163				174
Net loan charge-offs			(58	)			(109	)			(105	)			(345	)			(541	)
Provision (credit) for loan and lease losses			57				109				(22	)			229				(60	)
Foreign currency translation adjustment			1				—				—				—				1
Allowance for loan and lease losses at end of period		$	888			$	888			$	1,004			$	888			$	1,004
Liability for credit losses on lending-related commitments at beginning of period		$	43			$	51			$	56			$	45			$	73
Provision (credit) for losses on lending-related commitments			(14	)			(8	)			(11	)			(16	)			(28	)
Liability for credit losses on lending-related commitments at end of period (b)		$	29			$	43			$	45			$	29			$	45
Total allowance for credit losses at end of period		$	917			$	931			$	1,049			$	917			$	1,049
Net loan charge-offs to average loans			.44	%			.86	%			.86	%			.69	%			1.11	%
Allowance for loan and lease losses to annualized net loan charge-offs			384.85				204.78				241.01				257.39				185.58
Allowance for loan and lease losses to period-end loans			1.68				1.73				2.03				1.68				2.03
Allowance for credit losses to period-end loans			1.74				1.81				2.12				1.74				2.12
Allowance for loan and lease losses to nonperforming loans			131.75				135.99				138.10				131.75				138.10
Allowance for credit losses to nonperforming loans			136.05				142.57				144.29				136.05				144.29
Discontinued operations — education lending business:
Loans charged off		$	19			$	17			$	31			$	75			$	138
Recoveries			4				5				6				17				15
Net loan charge-offs		$	(15	)		$	(12	)		$	(25	)		$	(58	)		$	(123	)

 

(a)

Further review of the loans subject to updated regulatory guidance in the third quarter of 2012 was performed during the fourth quarter of 2012. This review resulted in a partial home equity loan charge-off reversal and reallocation of the updated charge-off amounts to other consumer loan portfolios. Home equity — Key Community Bank charge-offs were $18 million prior to adjustments made from this review. Prior to reallocation, Real estate — residential mortgage, Home equity — Other, Consumer other — Marine, and Consumer other — Other charge-offs were $3 million, $6 million, $11 million, and $1 million, respectively.

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 26

 

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations

(dollars in millions)

 

		12-31-12				9-30-12				6-30-12				3-31-12				12-31-11
Commercial, financial and agricultural		$	99			$	132			$	141			$	168			$	188
Real estate — commercial mortgage			120				134				172				175				218
Real estate — construction			56				53				68				66				54
Total commercial real estate loans			176				187				240				241				272
Commercial lease financing			16				18				18				22				27
Total commercial loans			291				337				399				431				487
Real estate — residential mortgage (a)			103				83				78				82				87
Home equity:
Key Community Bank			210				171				141				109				108
Other			21				18				17				12				12
Total home equity loans (a)			231				189				158				121				120
Consumer other — Key Community Bank			2				3				2				1				1
Credit cards			11				8				—				—				—
Consumer other:
Marine			34				31				19				30				31
Other			2				2				1				1				1
Total consumer other			36				33				20				31				32
Total consumer loans			383				316				258				235				240
Total nonperforming loans (b)			674				653				657				666				727
Nonperforming loans held for sale			25				19				38				24				46
OREO			22				29				28				61				65
Other nonperforming assets			14				17				28				16				21
Total nonperforming assets		$	735			$	718			$	751			$	767			$	859
Accruing loans past due 90 days or more		$	78			$	89			$	131			$	169			$	164
Accruing loans past due 30 through 89 days			424				354				362				420				441
Restructured loans — accruing and nonaccruing (c)			320				323				274				293				276
Restructured loans included in nonperforming loans (c)			249				217				163				184				191
Nonperforming assets from discontinued operations — education lending business			20				22				18				19				23
Nonperforming loans to period-end portfolio loans			1.28	%			1.27	%			1.32	%			1.35	%			1.47	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			1.39				1.39				1.51				1.55				1.73

 

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

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

(c)

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

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 27

 

Summary of Changes in Nonperforming Loans From Continuing Operations

(in millions)

 

		4Q12				3Q12				2Q12				1Q12				4Q11
Balance at beginning of period		$	653			$	657			$	666			$	727			$	788
Loans placed on nonaccrual status			288				276				350				214				230
Charge-offs			(104	)			(141	)			(131	)			(132	)			(149	)
Loans sold			(44	)			(43	)			(49	)			(27	)			(28	)
Payments			(78	)			(74	)			(110	)			(65	)			(70	)
Transfers to OREO			(7	)			(10	)			(6	)			(15	)			(12	)
Transfers to nonperforming loans held for sale			(8	)			—				(16	)			—				(19	)
Transfers to other nonperforming assets			(1	)			—				(14	)			—				(4	)
Loans returned to accrual status			(25	)			(12	)			(33	)			(36	)			(9	)
Balance at end of period (a)		$	674			$	653			$	657			$	666			$	727

 

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

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

(in millions)

 

		4Q12				3Q12				2Q12				1Q12				4Q11
Balance at beginning of period		$	19			$	38			$	24			$	46			$	42
Transfers in			8				—				16				—				19
Net advances / (payments)			(1	)			(1	)			—				(1	)			(3	)
Loans sold			(1	)			(17	)			(1	)			(1	)			(11	)
Transfers to OREO			—				(1	)			—				—				(1	)
Valuation adjustments			—				—				(1	)			(1	)			—
Loans returned to accrual status / other			—				—				—				(19	)			—
Balance at end of period		$	25			$	19			$	38			$	24			$	46

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

(in millions)

 

		4Q12				3Q12				2Q12				1Q12				4Q11
Balance at beginning of period		$	29			$	28			$	61			$	65			$	63
Properties acquired — nonperforming loans			7				11				6				15				13
Valuation adjustments			(2	)			(2	)			(7	)			(7	)			(4	)
Properties sold			(12	)			(8	)			(32	)			(12	)			(7	)
Balance at end of period		$	22			$	29			$	28			$	61			$	65

 

---

KeyCorp Reports Fourth Quarter 2012 Profit

January 24, 2013

Page 28

 

Line of Business Results

(dollars in millions)

 

																						Percent change 4Q12 vs.
		4Q12				3Q12				2Q12				1Q12				4Q11				3Q12				4Q11
Key Community Bank
Summary of operations
Total revenue (TE)		$	567			$	576			$	537			$	528			$	546				(1.6	)%			3.8	%
Provision (credit) for loan and lease losses			23				120				11				2				30				(80.8	)			(23.3	)
Noninterest expense			529				512				476				457				476				3.3				11.1
Net income (loss) attributable to Key			31				(23	)			41				57				40				N/M				(22.5	)
Average loans and leases			29,252				28,386				27,043				26,617				26,406				3.1				10.8
Average deposits			50,123				49,537				48,253				47,768				48,076				1.2				4.3
Net loan charge-offs			12				93				50				49				71				(87.1	)			(83.1	)
Net loan charge-offs to average loans			.16	%			1.30	%			.74	%			.74	%			1.07	%			N/A				N/A
Nonperforming assets at period end		$	459			$	422			$	401			$	402			$	415				8.8				10.6
Return on average allocated equity			4.13	%			(3.11	)%			5.73	%			7.74	%			5.07	%			N/A				N/A
Average full-time equivalent employees			9,019				9,209				8,757				8,719				8,633				(2.1	)			4.5
Key Corporate Bank
Summary of operations
Total revenue (TE)		$	424			$	392			$	392			$	401			$	412				8.2	%			2.9	%
Provision (credit) for loan and lease losses			11				(3	)			4				13				(61	)			N/M				N/M
Noninterest expense			206				209				218				230				228				(1.4	)			(9.6	)
Net income (loss) attributable to Key			130				118				104				100				156				10.2				(16.7	)
Average loans and leases			19,477				18,886				18,532				18,584				17,784				3.1				9.5
Average loans held for sale			538				441				514				509				356				22.0				51.1
Average deposits			13,672				12,873				12,409				11,556				11,162				6.2				22.5
Net loan charge-offs			21				8				9				25				12				162.5				75.0
Net loan charge-offs to average loans			.43	%			.17	%			.20	%			.54	%			.27	%			N/A				N/A
Nonperforming assets at period end		$	175			$	197			$	248			$	237			$	294				(11.2	)			(40.5	)
Return on average allocated equity			30.97	%			27.61	%			23.53	%			21.24	%			30.03	%			N/A				N/A
Average full-time equivalent employees			2,049				2,146				2,175				2,169				2,204				(4.5	)			(7.0	)
Key Corporate Bank supplementary information (lines of business)
Real Estate Capital and Corporate Banking Services
Total revenue (TE)		$	189			$	166			$	181			$	165			$	184				13.9	%			2.7	%
Provision (credit) for loan and lease losses			14				(3	)			5				—				(31	)			N/M				N/M
Noninterest expense			59				62				67				63				66				(4.8	)			(10.6	)
Net income (loss) attributable to Key			72				67				65				64				94				7.5				(23.4	)
Average loans and leases			7,625				7,342				7,344				7,700				7,446				3.9				2.4
Average loans held for sale			455				359				337				291				216				26.7				110.6
Average deposits			10,538				9,674				9,254				8,279				7,694				8.9				37.0
Net loan charge-offs			26				9				7				16				10				188.9				160.0
Net loan charge-offs to average loans			1.36	%			.49	%			.38	%			.84	%			.53	%			N/A				N/A
Nonperforming assets at period end		$	136			$	142			$	186			$	173			$	209				(4.2	)			(34.9	)
Return on average allocated equity			38.86	%			34.44	%			31.27	%			27.92	%			36.35	%			N/A				N/A
Average full-time equivalent employees			907				929				983				982				983				(2.4	)			(7.7	)
Equipment Finance
Total revenue (TE)		$	53			$	57			$	57			$	64			$	62				(7.0	)%			(14.5	)%
Provision (credit) for loan and lease losses			(6	)			—				6				(2	)			(15	)			N/M				N/M
Noninterest expense			35				35				37				37				48				—				(27.1	)
Net income (loss) attributable to Key			15				14				9				18				18				7.1				(16.7	)
Average loans and leases			5,099				5,159				4,887				4,780				4,681				(1.2	)			8.9
Average loans held for sale			9				7				23				24				10				28.6				(10.0	)
Average deposits			6				6				7				8				9				—				(33.3	)
Net loan charge-offs			4				(1	)			4				5				(1	)			N/M				N/M
Net loan charge-offs to average loans			.31	%			(.08	)%			.33	%			.42	%			(.08	)%			N/A				N/A
Nonperforming assets at period end		$	26			$	30			$	33			$	28			$	41				(13.3	)			(36.6	)
Return on average allocated equity			25.07	%			22.73	%			14.48	%			26.71	%			23.19	%			N/A				N/A
Average full-time equivalent employees			367				383				393				394				442				(4.2	)			(17.0	)
Institutional and Capital Markets
Total revenue (TE)		$	182			$	169			$	154			$	172			$	166				7.7	%			9.6	%
Provision (credit) for loan and lease losses			3				—				(7	)			15				(15	)			N/M				N/M
Noninterest expense			112				112				114				130				114				—				(1.8	)
Net income (loss) attributable to Key			43				37				30				18				44				16.2				(2.3	)
Average loans and leases			6,753				6,385				6,301				6,104				5,657				5.8				19.4
Average loans held for sale			74				75				154				194				130				(1.3	)			(43.1	)
Average deposits			3,128				3,193				3,148				3,269				3,459				(2.0	)			(9.6	)
Net loan charge-offs			(9	)			—				(2	)			4				3				N/M				N/M
Net loan charge-offs to average loans			(.53	)%			—				(.13	)%			.26	%			.21	%			N/A				N/A
Nonperforming assets at period end		$	13			$	25			$	29			$	36			$	44				(48.0	)			(70.5	)
Return on average allocated equity			24.61	%			21.61	%			17.44	%			10.33	%			24.01	%			N/A				N/A
Average full-time equivalent employees			775				834				799				793				779				(7.1	)			(.5	)

 

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