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Press release from PR Newswire

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

Thursday, January 24, 2013

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 Share06:15 EST Thursday, January 24, 2013Net interest income up 7.8% from fourth quarter of 2011 to $607 millionNet interest margin expands 24 basis points to 3.37% from fourth quarter of 2011Average total loans up 6.6% from fourth quarter of 2011 led by 20.7% commercial and industrial loan growthAverage total deposits up 7.3% from fourth quarter of 2011Net loan charge-offs decline to 44 basis points of average total loansOngoing Fit for Growth efficiency initiative charges of $16 million, or $.01 per share incurred during the quarterCLEVELAND, Jan. 24, 2013 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $193 million, or $.21 per common share, compared to $214 million, or $.23 per common share for the third quarter of 2012, and $201 million, or $.21 per common share for the fourth quarter of 2011. During the fourth quarter Key incurred $16 million, or $.01 per common share of costs associated with its previously announced Fit for Growth efficiency initiative. For 2012, net income from continuing operations attributable to Key common shareholders was $827 million, or $.88 per common share, compared to $857 million, or $.92 per common share for 2011. For 2012, Key incurred $25 million, or $.02 per common share of costs associated with its Fit for Growth efficiency initiative."We had a good finish to 2012," said Chairman and Chief Executive Officer Beth E. Mooney. "Our full-year results reflect success in executing on our strategies to grow loans, add additional payment capabilities to our product line in the form of credit cards and improved mobile banking, and moving forward on our efficiency initiative."Mooney added: "Our momentum continued in the most recent quarter. The net interest margin was up 14 basis points versus the prior quarter driven by ongoing liability repricing and growth in both commercial and consumer loan balances. We also experienced significant revenue growth in our Corporate Bank from both our investment banking and commercial mortgage businesses.""Progress continues on our efficiency initiative," said Mooney. "We ended the year with run rate savings of approximately $60 million annualized. We also continued to invest in the future revenue growth of our company by continuing to upgrade our technology to meet the needs of our clients. We remain committed to deliver on our goal of achieving an efficiency ratio in the range of 60% to 65%."FOURTH QUARTER 2012 FINANCIAL RESULTSNet 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 Highlightsdollars in millions, except per share dataChange 4Q12 vs.4Q123Q124Q113Q124Q11Income (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/AN/ATier 1 common equity11.1611.3011.26N/AN/ABook value at period end$10.78$10.64$10.091.3%6.8%Net interest margin (TE) from continuing operations3.37%3.23%3.13%N/AN/ATE = Taxable Equivalent, N/A = Not ApplicableINCOME STATEMENT HIGHLIGHTSRevenuedollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Net interest income (TE)$607$578$5635.0%7.8%Noninterest income466544414(14.3)12.6Total revenue$1,073$1,122$977(4.4)%9.8%TE = Taxable EquivalentTaxable-equivalent net interest income was $607 million for the fourth quarter of 2012, and the net interest margin was 3.37%. These results compare to taxable-equivalent net interest income of $563 million and a net interest margin of 3.13% for the fourth quarter of 2011. The increase in net interest income and the net interest margin was primarily a result of a change in funding mix from the redemption of certain trust preferred securities, maturity of long-term debt, and maturity of higher-costing certificates of deposit during the past year. Compared to the third quarter of 2012, taxable-equivalent net interest income increased by $29 million, and the net interest margin improved by 14 basis points. The improvement was driven largely by lower funding costs, resulting from an increase in demand and non-time interest-bearing deposits, and maturity of higher rate certificates of deposit. In addition, Key experienced an increase in loan-related fees compared to the third quarter when the Company wrote-off capitalized loan origination costs of $13 million as a result of the early termination of leveraged leases.Noninterest Incomedollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Trust and investment services income$104$106$104(1.9)%N/MService charges on deposit accounts7574701.47.1%Operating lease income161725(5.9)(36.0)Letter of credit and loan fees59525613.55.4Corporate-owned life insurance income36263538.52.9Electronic banking fees181818N/MN/MGains on leased equipment2469(95.7)(77.8)Insurance income1413117.727.3Net gains (losses) from loan sales57392746.2111.1Net gains (losses) from principal investing211(8)(81.8)N/MInvestment banking and capital markets income (loss)47382423.795.8Other income3610443(65.4)(16.3)Total noninterest income$466$544$414(14.3)%12.6%N/M = Not MeaningfulKey'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 Expensedollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Personnel expense$433$411$3875.4%11.9%Nonpersonnel expense323323330N/M(2.1)Total noninterest expense$756$734$7173.0%5.4%N/M = Not MeaningfulKey's noninterest expense was $756 million for the fourth quarter of 2012, compared to $717 million for the same period last year. Personnel expense increased $46 million due to several factors ? an increase in contract labor for technology investments attributable to the previously announced credit card portfolio acquisitions and related implementation of new payment systems and merchant services processing; higher employee benefits due to an increase in medical claims expense and an adjustment to the annual retirement contribution accrual; and severance expense associated with Key's Fit for Growth efficiency initiative. Nonpersonnel expense decreased $7 million from one year ago. Operating lease expense, other real estate owned (OREO) and marketing expense decreased from the year ago quarter. These declines were partially offset by an increase of $11 million related to the amortization of the intangible assets associated with the third quarter 2012 acquisitions of the previously announced credit card portfolio as well as the branches in Western New York. Compared to the third quarter of 2012, noninterest expense increased by $22 million due to increases in personnel expense. Salaries were up due to the previously discussed technology investment spend along with an increase in employee benefits due to higher medical claims expense and an adjustment to the annual retirement contribution accrual. Severance expense also increased as a result of Key's Fit for Growth efficiency initiative. Nonpersonnel expense in total was unchanged from the third quarter of 2012. BALANCE SHEET HIGHLIGHTSAs 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 Loansdollars in millionsChange 12-31-12 vs.12-31-129-30-1212-31-119-30-1212-31-11Commercial, financial and agricultural (a)$22,436$21,473$18,5904.5%20.7%Other commercial loans13,49413,60515,185(.8)(11.1)Total home equity loans10,21810,2029,833.23.9Other consumer loans5,7115,4155,0565.513.0Total loans$51,859$50,695$48,6642.3%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 Depositsdollars in millionsChange 12-31-12 vs.12-31-129-30-1212-31-119-30-1212-31-11Non-time deposits$56,229$54,098$48,8003.9%15.2%Certificates of deposits ($100,000 or more)2,9923,4204,275(12.5)(30.0)Other time deposits4,7145,1586,505(8.6)(27.5)Total deposits$63,935$62,676$59,5802.0%7.3%Cost of interest-bearing deposits.47%.57%.82%N/AN/AN/A = Not ApplicableAverage deposits totaled $63.9 billion for the fourth quarter of 2012, an increase of $4.4 billion compared to the year-ago quarter. The growth reflects an increase in demand deposits of $3.4 billion and the impact of Key's third quarter 2012 Western New York branch acquisition, which added $2 billion of mostly interest-bearing non-time deposits. Compared to the third quarter of 2012, average deposits increased by $1.3 billion. The growth was largely due to an increase of $1 billion in demand deposits.ASSET QUALITYdollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Net loan charge-offs$58$109$105(46.8)%(44.8)%Net loan charge-offs to average loans.44%.86%.86%N/AN/ANonperforming loans at period end (a)$674$653$7273.2(7.3)Nonperforming assets at period end7357188592.4(14.4)Allowance for loan and lease losses8888881,004?(11.6)%Allowance for loan and lease losses to nonperforming loans132%136%138%N/AN/AProvision (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 MeaningfulKey'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. CAPITALKey's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2012.Capital Ratios12-31-129-30-1212-31-11Tier 1 common equity (a), (b)11.16%11.30%11.26%Tier 1 risk-based capital (a)11.9412.1012.99Total risk based capital (a)14.8615.1716.51Tangible common equity to tangible assets (b)10.1510.399.88(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 Outstandingin thousandsChange 4Q12 vs.4Q123Q124Q113Q124Q11Shares outstanding at beginning of period936,195945,473952,808(1.0)%(1.7)%Common shares repurchased(10,530)(9,639)?N/MN/MShares reissued (returned) under employee benefit plans104361200(71.2)(48.0)Shares outstanding at end of period925,769936,195953,008(1.1)%(2.9)%N/M = Not MeaningfulAs previously reported and as authorized by Key's Board of Directors and pursuant to Key's 2012 capital plan submitted to the Federal Reserve and not objected to by the Federal Reserve, Key had authority to repurchase up to $344 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs. During the fourth quarter of 2012, Key completed $89 million of Common Share repurchases. Following completion of these repurchases, Key has remaining authority to repurchase up to $88 million of its Common Shares for general repurchase and repurchases in connection with employee elections under its compensation and benefit programs. Key's existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013. LINE OF BUSINESS RESULTS The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release. Major Business Segmentsdollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Revenue from continuing operations (TE)Key Community Bank$567$576$546(1.6)%3.8%Key Corporate Bank4243924128.22.9Other segments8616043(46.3)100.0Total segments1,0771,1281,001(4.5)7.6Reconciling items(4)(6)(24)N/MN/MTotal$1,073$1,122$977(4.4)%9.8%Income (loss) from continuing operations attributable to KeyKey Community Bank$31$(23)$40N/M(22.5)%Key Corporate Bank13011815610.2%(16.7)Other segments4310223(57.8)87.0Total segments2041972193.6(6.8)Reconciling items(5)22(12)N/MN/MTotal$199$219$207(9.1)%(3.9)%TE = Taxable equivalent, N/M = Not MeaningfulKey Community Bankdollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Summary of operationsNet interest income (TE)$370$365$3651.4%1.4%Noninterest income197211181(6.6)8.8Total revenue (TE)567576546(1.6)3.8Provision (credit) for loan and lease losses2312030(80.8)(23.3)Noninterest expense5295124763.3%11.1Income (loss) before income taxes (TE) 15(56)40N/M(62.5)Allocated income taxes (benefit) and TE adjustments(16)(33)?N/MN/MNet income (loss) attributable to Key$31$(23)$40N/M(22.5)%Average balancesLoans and leases$29,252$28,386$26,4063.1%10.8%Total assets33,08632,13629,8673.010.8Deposits50,12349,53748,0761.24.3Assets under management at period end$22,334$21,988$17,9381.6%24.5%TE = Taxable Equivalent, N/M = Not MeaningfulAdditional Key Community Bank Datadollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Noninterest incomeTrust and investment services income$50$51$45(2.0)%11.1%Service charges on deposit accounts616259(1.6)3.4Electronic banking fees181818??Other noninterest income688059(15.0)15.3Total noninterest income$197$211$181(6.6)%8.8%Average deposit balancesNOW and money market deposit accounts$25,765$25,072$22,5242.8%14.4%Savings deposits2,4032,3731,9591.322.7Certificates of deposit ($100,000 or more) 2,6232,9413,639(10.8)(27.9)Other time deposits4,7035,1376,491(8.4)(27.5)Deposits in foreign office3553443933.2(9.7)Noninterest-bearing deposits14,27413,67013,0704.49.2Total deposits$50,123$49,537$48,0761.2%4.3%Home equity loansAverage balance$9,807$9,734$9,280Weighted-average loan-to-value ratio (at date of origination)70%71%70%Percent first lien positions555453Other dataBranches1,0881,0871,058Automated teller machines1,6111,6201,579Key Community Bank Summary of OperationsSix 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 quarterKey Community Bank recorded net income attributable to Key of $31 million for the fourth quarter of 2012, compared to $40 million for the year-ago quarter. Taxable-equivalent net interest income increased by $5 million, or 1.4% from the fourth quarter of 2011. Average loans and leases grew 10.8% while average deposits increased 4.3% from one year ago. The Western New York branch and credit card portfolio acquisitions contributed $33 million to net interest income, $1 billion to average loans and leases, and $2 billion to deposits. The positive contribution to net interest income from the acquisitions was partially offset by a lower earnings credit applied to deposits in the current period compared to the same period one year ago.Noninterest income increased by $16 million, or 8.8% from the year-ago quarter. Credit card and merchant fees increased $9 million due to the acquisition of the credit card portfolio in the third quarter of 2012. Trust and investment services income increased $5 million, primarily due to an increase in assets under management resulting from market appreciation and increased production. Service charges on deposit accounts also increased $2 million. The provision for loan and lease losses decreased by $7 million, or 23.3% compared to the fourth quarter of 2011, primarily as a result of lower net loan charge-offs from the same period one year ago. Net loan charge-offs were $12 million for the fourth quarter of 2012, down $59 million from the same period one year ago.Noninterest expense increased by $53 million, or 11.1% from the year-ago quarter. Key's third quarter 2012 Western New York branch and credit card portfolio acquisitions contributed $30 million to the increase in noninterest expense spread across several expense categories, including personnel, loan servicing and intangible amortization expense, which increased $11 million. Personnel expense, excluding the impact of acquisitions, was $8 million higher than one year ago. Various other miscellaneous expenses also increased from the same period one year ago.Key Corporate Bankdollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Summary of operationsNet interest income (TE)$188$182$1773.3%6.2%Noninterest income23621023512.4.4Total revenue (TE)4243924128.22.9Provision (credit) for loan and lease losses11(3)(61)N/MN/MNoninterest expense206209228(1.4)(9.6)Income (loss) before income taxes (TE)20718624511.3(15.5)Allocated income taxes and TE adjustments77688913.2(13.5)Net income (loss) attributable to Key$130$118$15610.2%(16.7)%Average balancesLoans and leases $19,477$18,886$17,7843.1%9.5%Loans held for sale 53844135622.051.1Total assets23,46122,91421,8112.47.6Deposits13,67212,87311,1626.222.5Assets under management at period end$28,340$27,682$33,7942.4%(16.1)%TE = Taxable Equivalent, N/M = Not MeaningfulAdditional Key Corporate Bank Datadollars in millionsChange 4Q12 vs.4Q123Q124Q113Q124Q11Noninterest incomeTrust and investment services income$55$56$58(1.8)%(5.2)%Investment banking and debt placement fees (a)109826232.975.8Operating lease income and other leasing gains (b)182026(10.0)(30.8)Corporate services income (c)30274411.1(31.8)Other noninterest income242545(4.0)(46.7)Total noninterest income$236$210$23512.4%.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 OperationsInvestment 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 quarterKey Corporate Bank recorded net income attributable to Key of $130 million for the fourth quarter of 2012, compared to $156 million for the same period one year ago. Taxable-equivalent net interest income increased by $11 million, or 6.2% compared to the fourth quarter of 2011. Average earning assets increased $1.7 billion, or 8.9% from the year-ago quarter, and average deposit balances increased $2.5 billion, or 22.5% from the year-ago quarter, contributing to the improvement in net interest income. Noninterest income increased by $1 million, or .4% from the fourth quarter of 2011. Net gains (losses) from loan sales from commercial mortgage banking activities in the Real Estate Capital line of business increased $30 million. This increase was offset by a $23 million decline in other income due to gains realized in the fourth quarter of 2011 related to the disposition of certain investments held by the Real Estate Capital line of business and a $7 million decrease in operating lease revenue compared to the year-ago quarter. The provision for loan and lease losses in the fourth quarter of 2012 was a charge of $11 million compared to a credit of $61 million for the same period one year ago. Net loan charge-offs were $21 million for the fourth quarter of 2012, up $9 million from the same period one year ago.Noninterest expense decreased by $22 million, or 9.6% from the fourth quarter of 2011. Contributing to the decline in noninterest expense were decreases in personnel expense of $7 million, operating lease expense of $4 million, and other miscellaneous expenses of $8 million. In addition, the provision (credit) for losses on lending-related commitments was a credit of $16 million compared to a credit of $10 million one year ago. Other SegmentsOther Segments consist of Corporate Treasury, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $43 million for the fourth quarter of 2012, compared to net income attributable to Key of $23 million for the same period last year. These results were primarily attributable to increases in net interest income of $31 million and net gains (losses) from principal investing of $10 million, partially offset by an increase in the loan and lease loss provision of $16 million.*****KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key had assets of approximately $89.2 billion at December 31, 2012. Key provides deposit, lending, cash management and investment services to individuals, small and mid-sized businesses in 14 states under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control. Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Annual Report on Form 10-K for the year ended December 31, 2011, its Quarterly Reports on Form 10-Q for the periods ended March 31, 2012, June 30, 2012, and September 30, 2012, each of which have been filed with the Securities and Exchange Commission and are available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.Notes to Editors:A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, January 24, 2013. An audio replay of the call will be available through January 31, 2013.For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.*****Financial Highlights(dollars in millions, except per share amounts)Three months ended12-31-129-30-1212-31-11Summary of operationsNet interest income (TE)$607$578$563Noninterest income466544414Total revenue (TE)1,0731,122977Provision (credit) for loan and lease losses57109(22)Noninterest expense756734717Income (loss) from continuing operations attributable to Key199219207Income (loss) from discontinued operations, net of taxes (b)4?(7)Net income (loss) attributable to Key 203219200Income (loss) from continuing operations attributable to Key common shareholders$193$214$201Income (loss) from discontinued operations, net of taxes (b)4?(7)Net income (loss) attributable to Key common shareholders197214194Per common shareIncome (loss) from continuing operations attributable to Key common shareholders$.21$.23$.21Income (loss) from discontinued operations, net of taxes (b)??(.01)Net income (loss) attributable to Key common shareholders (e).21.23.20Income (loss) from continuing operations attributable to Key common shareholders ? assuming dilution .21.23.21Income (loss) from discontinued operations, net of taxes ? assuming dilution (b)??(.01)Net income (loss) attributable to Key common shareholders ? assuming dilution (e).21.23.20Cash dividends paid.05.05.03Book value at period end10.7810.6410.09Tangible book value at period end9.679.549.11Market price at period end8.428.747.69Performance ratiosFrom continuing operations:Return on average total assets.97%1.08%1.01%Return on average common equity7.708.578.26Return on average tangible common equity (a)8.599.569.15Net interest margin (TE)3.373.233.13Cash efficiency ratio (a)69.3464.6273.29From consolidated operations:Return on average total assets.93%1.01%.91%Return on average common equity7.868.577.97Return on average tangible common equity (a)8.779.568.83Net interest margin (TE)3.293.143.04Loan to deposit (d)85.7786.2487.00Capital ratios at period endKey shareholders' equity to assets 11.51%11.79%11.16%Tangible Key shareholders' equity to tangible assets10.4810.7310.21Tangible common equity to tangible assets (a)10.1510.399.88Tier 1 common equity (a), (c)11.1611.3011.26Tier 1 risk-based capital (c)11.9412.1012.99Total risk-based capital (c)14.8615.1716.51Leverage (c)11.3711.3711.79Asset quality ? from continuing operationsNet loan charge-offs$58$109$105Net loan charge-offs to average loans .44%.86%.86%Allowance for loan and lease losses to annualized net loan charge-offs384.85204.78241.01Allowance for loan and lease losses$888$888$1,004Allowance for credit losses9179311,049Allowance for loan and lease losses to period-end loans1.68%1.73%2.03%Allowance for credit losses to period-end loans1.741.812.12Allowance for loan and lease losses to nonperforming loans131.75135.99138.10Allowance for credit losses to nonperforming loans 136.05142.57144.29Nonperforming loans at period end (f)$674$653$727Nonperforming assets at period end735718859Nonperforming loans to period-end portfolio loans1.28%1.27%1.47%Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets1.391.391.73Trust and brokerage assetsAssets under management$50,674$49,670$51,732Nonmanaged and brokerage assets 25,19724,22030,639Other dataAverage full-time equivalent employees15,58915,83315,381Branches1,0881,0871,058Taxable-equivalent adjustment$6$6$6Financial Highlights (continued)(dollars in millions, except per share amounts)Twelve months ended12-31-1212-31-11Summary of operationsNet interest income (TE)$2,288$2,292Noninterest income1,9671,808Total revenue (TE)4,2554,100Provision (credit) for loan and lease losses229(60)Noninterest expense2,9072,790Income (loss) from continuing operations attributable to Key849964Income (loss) from discontinued operations, net of taxes (b)9(44)Net income (loss) attributable to Key 858920Income (loss) from continuing operations attributable to Key common shareholders$827$857Income (loss) from discontinued operations, net of taxes (b)9(44)Net income (loss) attributable to Key common shareholders836813Per common shareIncome (loss) from continuing operations attributable to Key common shareholders$.88$.92Income (loss) from discontinued operations, net of taxes (b).01(.05)Net income (loss) attributable to Key common shareholders (e).89.87Income (loss) from continuing operations attributable to Key common shareholders ? assuming dilution .88.92Income (loss) from discontinued operations, net of taxes ? assuming dilution (b).01(.05)Net income (loss) attributable to Key common shareholders ? assuming dilution (e).89.87Cash dividends paid.18.10Performance ratios From continuing operations: Return on average total assets 1.05%1.17%Return on average common equity 8.399.26Net interest margin (TE) 3.213.16From consolidated operations:Return on average total assets.99%1.04%Return on average common equity8.488.79Net interest margin (TE)3.133.09Asset quality ? from continuing operationsNet loan charge-offs$345$541Net loan charge-offs to average loans .69%1.11%Other dataAverage full-time equivalent employees15,58915,381Taxable-equivalent adjustment$24$25(a) The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity," "Tier 1 common equity," and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.(b) In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. As a result of these decisions, Key has accounted for these businesses as discontinued operations.(c) 12-31-12 ratio is estimated.(d) Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).(e) Earnings per share may not foot due to rounding.(f) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles GAAP to Non-GAAP Reconciliations(dollars in millions)The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on tangible common equity," "Tier 1 common equity," "pre-provision net revenue," and "cash efficiency ratio." The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the Comprehensive Capital Analysis and Review process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories. Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to enable investors to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze the results by presenting them on a more comparable basis.The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors to assist in the development of their earnings forecasts and peer bank analysis. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.Three months ended 12-31-129-30-1212-31-11Tangible common equity to tangible assets at period endKey shareholders' equity (GAAP)$10,271$10,251$9,905Less: Intangible assets (a)1,0271,031934Preferred Stock, Series A 291291291Tangible common equity (non-GAAP) $8,953$8,929$8,680Total assets (GAAP)$89,236$86,950$88,785Less: Intangible assets (a)1,0271,031934Tangible assets (non-GAAP)$88,209$85,919$87,851Tangible common equity to tangible assets ratio (non-GAAP)10.15%10.39%9.88%Tier 1 common equity at period endKey shareholders' equity (GAAP) $10,271$10,251$9,905Qualifying capital securities 3393391,046Less:Goodwill 979979917Accumulated other comprehensive income (loss) (b)(172)(109)(72)Other assets (c)11712172Total Tier 1 capital (regulatory)9,6869,59910,034Less: Qualifying capital securities 3393391,046Preferred Stock, Series A 291291291Total Tier 1 common equity (non-GAAP) $9,056$8,969$8,697Net risk-weighted assets (regulatory) (c), (d)$81,150$79,363$77,214Tier 1 common equity ratio (non-GAAP) (d)11.16%11.30%11.26%Pre-provision net revenueNet interest income (GAAP)$601$572$557Plus:Taxable-equivalent adjustment666Noninterest income466544414Less:Noninterest expense756734717Pre-provision net revenue from continuing operations (non-GAAP)$317$388$260GAAP to Non-GAAP Reconciliations (continued)(dollars in millions)Three months ended12-31-129-30-1212-31-11Average tangible common equityAverage Key shareholders' equity (GAAP)$10,261$10,222$9,943Less:Intangible assets (average) (a)1,0301,026934Preferred Stock, Series A (average)291291291Average tangible common equity (non-GAAP)$8,940$8,905$8,718Return on average tangible common equity from continuing operationsNet income (loss) from continuing operations attributable to Key common shareholders (GAAP)$193$214$201Average tangible common equity (non-GAAP)8,9408,9058,718Return on average tangible common equity from continuing operations (non-GAAP)8.59%9.56%9.15%Return on average tangible common equity consolidatedNet income (loss) attributable to Key common shareholders (GAAP)$197$214$194Average tangible common equity (non-GAAP)8,9408,9058,718Return on average tangible common equity consolidated (non-GAAP)8.77%9.56%8.83%Cash efficiency ratioNoninterest expense (GAAP)$756$734$717Less:Intangible asset amortization on credit cards86?Other intangible asset amortization431Adjusted noninterest expense (non-GAAP)$744$725$716Net interest income (GAAP)$601$572$557Plus:Taxable-equivalent adjustment666Noninterest income466544414Total taxable-equivalent revenue (non-GAAP)$1,073$1,122$977Cash efficiency ratio (non-GAAP)69.34%64.62%73.29%Three months ended12-31-129-30-12Tier 1 common equity under Basel III (estimates)Tier 1 common equity under Basel I$9,056$8,969Adjustments 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$8,752Total risk-weighted assets under Basel I$81,150$79,363Adjustments from Basel I to Basel III:Market risk impact1,225579Loan commitments less than one year9521,127Residential mortgage and home equity loans1,8551,855Other1,1731,119Total risk-weighted assets under Basel III (g)$86,355$84,043Tier 1 common equity ratio under Basel III10.17%10.41%(a) Three months ended December 31, 2012 and September 30, 2012 exclude $123 million and $130 million, respectively, of period end purchased credit card receivable intangible assets. Three months ended December 31, 2012 and September 30, 2012 exclude $126 million and $86 million, respectively, of average ending purchased credit card receivable intangible assets.(b) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. (c) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at December 31, 2012, September 30, 2012, and December 31, 2011.(d) 12-31-12 amount is estimated.(e) Includes AFS mark-to-market, cash flow hedges on items recognized at fair value on the balance sheet, and defined benefit pension liability.(f) Deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards.(g) The amount of regulatory capital and risk-weighted assets estimated under Basel III (as fully phased-in on January 1, 2019) is based upon the federal banking agencies' notice of proposed rulemaking, which implement Basel III and the Standardized Approach.GAAP = U.S. generally accepted accounting principles Consolidated Balance Sheets(dollars in millions)12-31-129-30-1212-31-11AssetsLoans$52,822$51,419$49,575Loans held for sale599628728Securities available for sale12,09411,96216,012Held-to-maturity securities 3,9314,1532,109Trading account assets605663623Short-term investments3,9402,2083,519Other investments1,0641,1061,163Total earning assets75,05572,13973,729Allowance for loan and lease losses(888)(888)(1,004)Cash and due from banks585974694Premises and equipment965942944Operating lease assets288290350Goodwill979979917Other intangible assets17118217Corporate-owned life insurance3,3333,3093,256Derivative assets693771945Accrued income and other assets2,8012,8713,077Discontinued assets5,2545,3815,860Total assets$89,236$86,950$88,785LiabilitiesDeposits in domestic offices:NOW and money market deposit accounts$32,380$30,573$27,954Savings deposits2,4332,3931,962Certificates of deposit ($100,000 or more)2,8793,2264,111Other time deposits4,5754,9416,243Total interest-bearing deposits42,26741,13340,270Noninterest-bearing deposits23,31922,48621,098Deposits in foreign office ? interest-bearing407569588Total deposits65,99364,18861,956Federal funds purchased and securities sold under repurchase agreements1,6091,7461,711Bank notes and other short-term borrowings287388337Derivative liabilities5846571,026Accrued expense and other liabilities1,4251,2381,763Long-term debt6,8476,1199,520Discontinued liabilities 2,1822,3352,550Total liabilities78,92776,67178,863EquityPreferred stock, Series A291291291Common shares1,0171,0171,017Capital surplus4,1264,1184,194Retained earnings6,9136,7626,246Treasury stock, at cost(1,952)(1,868)(1,815)Accumulated other comprehensive income (loss)(124)(69)(28)Key shareholders' equity10,27110,2519,905Noncontrolling interests382817Total equity10,30910,2799,922Total liabilities and equity$89,236$86,950$88,785Common shares outstanding (000)925,769936,195953,008Consolidated Statements of Income (dollars in millions, except per share amounts)Three months endedTwelve months ended12-31-129-30-1212-31-1112-31-1212-31-11Interest incomeLoans$563$538$542$2,155$2,206Loans held for sale5542014Securities available for sale8593128399583Held-to-maturity securities 192196912Trading account assets3451826Short-term investments21166Other investments11993842Total interest income6886716982,7052,889Interest expenseDeposits496085257390Federal funds purchased and securities sold under repurchase agreements11145Bank notes and other short-term borrowings212711Long-term debt353753173216Total interest expense8799141441622Net interest income6015725572,2642,267Provision (credit) for loan and lease losses57109(22)229(60)Net interest income (expense) after provision for loan and lease losses5444635792,0352,327Noninterest incomeTrust and investment services income 104106104421434Service charges on deposit accounts757470287281Operating lease income16172575122Letter of credit and loan fees595256221213Corporate-owned life insurance income362635122121Net securities gains (losses) (a)????1Electronic banking fees18181872114Gains on leased equipment 246911125Insurance income1413115053Net gains (losses) from loan sales57392715075Net gains (losses) from principal investing211(8)7278Investment banking and capital markets income (loss) 473824165134Other income3610443221157Total noninterest income4665444141,9671,808Noninterest expensePersonnel4334113871,6181,520Net occupancy696566260258Operating lease expense1213185794Computer processing394342166166Business services and professional fees554957193186FDIC assessment8773152OREO expense, net1151513Equipment272725107103Marketing2018246860Provision (credit) for losses on lending-related commitments(14)(8)(11)(16)(28)Intangible asset amortization on credit cards86?14?Other intangible asset amortization43194Other expense949996385362Total noninterest expense7567347172,9072,790Income (loss) from continuing operations before income taxes2542732761,0951,345Income taxes555269239369Income (loss) from continuing operations199221207856976Income (loss) from discontinued operations, net of taxes4?(7)9(44)Net income (loss)203221200865932Less: Net income (loss) attributable to noncontrolling interests ?2?712Net income (loss) attributable to Key$203$219$200$858$920Income (loss) from continuing operations attributable to Key common shareholders $193$214$201$827$857Net income (loss) attributable to Key common shareholders 197214194836813Per common shareIncome (loss) from continuing operations attributable to Key common shareholders$.21$.23$.21$.88$.92Income (loss) from discontinued operations, net of taxes??(.01).01(.05)Net income (loss) attributable to Key common shareholders (b).21.23.20.89.87Per common share ? assuming dilutionIncome (loss) from continuing operations attributable to Key common shareholders$.21$.23$.21$.88$.92Income (loss) from discontinued operations, net of taxes??(.01).01(.05)Net income (loss) attributable to Key common shareholders (b).21.23.20.89.87Cash dividends declared per common share$.05$.05$.03$.18$.10Weighted-average common shares outstanding (000)925,725936,223948,658938,941931,934Weighted-average common shares and potential common shares outstanding (000) (c)930,382940,764951,684943,259935,801(a)For the three months ended December 31, 2012, September 30, 2012, and December 31, 2011, Key did not have any impairment losses related to securities.(b)Earnings per share may not foot due to rounding.(c)Assumes conversion of stock options and/or Preferred Series A shares, as applicable.Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations(dollars in millions)Fourth Quarter 2012Third Quarter 2012Fourth Quarter 2011AverageAverageAverageBalanceInterest(a)Yield/Rate(a)BalanceInterest(a)Yield/Rate(a)BalanceInterest(a)Yield/Rate(a)AssetsLoans: (b), (c)Commercial, financial and agricultural$22,436(h)$2133.77%$21,473(h)$2033.76%$18,590$1833.90%Real estate ? commercial mortgage7,555824.357,463834.408,090924.48Real estate ? construction1,070144.941,116124.551,380164.68Commercial lease financing4,869494.015,026393.135,715654.58Total commercial loans35,9303583.9635,0783373.8333,7753564.19Real estate ? residential mortgage2,164264.702,092254.801,918245.15Home equity:Key Community Bank9,807983.999,734994.029,280964.10Other41198.2346897.73553117.68Total home equity loans10,2181074.1610,2021084.199,8331074.30Consumer other ? Key Community Bank1,339329.631,297329.651,191309.62Credit cards7142313.154321715.38???Consumer other:Marine1,403226.161,493226.281,820296.35Other9118.2510138.0212727.87Total consumer other 1,494236.291,594256.391,947316.44Total consumer loans15,9292115.3015,6172075.2614,8891925.12Total loans51,8595694.3750,6955444.2748,6645484.47Loans held for sale 61853.4753253.2844043.36Securities available for sale (b), (e)11,980842.9512,608943.0716,7901283.16Held-to-maturity securities (b)4,036191.944,251211.941,64892.12Trading account assets60631.9169342.1073652.72Short-term investments2,0902.271,8681.242,9291.26Other investments (e)1,088124.051,13483.081,18192.98Total earning assets72,2776943.8571,7816773.7872,3887043.90Allowance for loan and lease losses(898)(883)(1,057)Accrued income and other assets9,9419,9579,942Discontinued assets ? education lending business 5,2875,4215,912Total assets$86,607$86,276$87,185Liabilities NOW and money market deposit accounts$31,05814.18$30,17614.19$27,72215.22Savings deposits2,408?.062,3781.061,964?.06Certificates of deposit ($100,000 or more) (f)2,992162.153,420222.534,275322.97Other time deposits4,714181.525,158231.766,505372.24Deposits in foreign office 8741.21666?.216501.25Total interest-bearing deposits42,04649.4741,79860.5741,11685.82Federal funds purchased and securitiessold under repurchase agreements 1,7021.161,8221.171,7471.25Bank notes and other short-term borrowings 30621.9739011.5347121.87Long-term debt (f), (g)3,301354.843,793374.437,020533.21Total interest-bearing liabilities 47,35587.7347,80399.8350,3541411.12Noninterest-bearing deposits21,88920,87818,464Accrued expense and other liabilities1,7811,9282,496Discontinued liabilities ? education lending business (d), (g)5,2875,4215,912Total liabilities76,31276,03077,226EquityKey shareholders' equity10,26110,2229,943Noncontrolling interests342416Total equity10,29510,2469,959Total liabilities and equity$86,607$86,276$87,185Interest rate spread (TE)3.12%2.95%2.78%Net interest income (TE) and net interest margin (TE) 6073.37%5783.23%5633.13%TE adjustment (b)666Net interest income, GAAP basis$601$572$557(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.(b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. (c) For purposes of these computations, nonaccrual loans are included in average loan balances.(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.(e) Yield is calculated on the basis of amortized cost.(f) Rate calculation excludes basis adjustments related to fair value hedges. (g) A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations. (h) Commercial, financial and agricultural average balance for the three months ended December 31, 2012, and September 30, 2012, includes $90 million and 54 million, respectively, of assets from commercial credit cards.TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations(dollars in millions)Twelve months ended December 31, 2012Twelve months ended December 31, 2011AverageAverageBalanceInterest(a)Yield/Rate(a) BalanceInterest(a) Yield/ Rate(a) AssetsLoans: (b), (c)Commercial, financial and agricultural $21,141(h)$8103.83%$17,507$7054.03%Real estate ? commercial mortgage7,6563394.438,4373804.50Real estate ? construction1,171564.741,677734.36Commercial lease financing5,1421873.645,8462935.01Total commercial loans35,1101,3923.9633,4671,4514.34Real estate ? residential mortgage2,0491004.861,850975.25Home equity:Key Community Bank9,5203844.039,3903874.12Other473377.81598467.66Total home equity loans9,9934214.219,9884334.34Consumer other ? Key Community Bank1,2691219.531,1671139.62Credit cards2884013.99???Consumer other:Marine1,551976.261,9921256.28Other10288.14142117.87Total consumer other 1,6531056.382,1341366.38Total consumer loans15,2527875.1615,1397795.14Total loans50,3622,1794.3348,6062,2304.59Loans held for sale 579203.45387143.58Securities available for sale (b), (e)13,4223993.0818,7665843.20Held-to-maturity securities (b)3,511691.97514122.35Trading account assets718182.48878262.97Short-term investments2,1166.272,5436.25Other investments (e)1,141383.271,264423.14Total earning assets71,8492,7293.8272,9582,9144.02Allowance for loan and lease losses(919)(1,250)Accrued income and other assets9,96110,385Discontinued assets ? education lending business 5,5246,203Total assets$86,415$88,296Liabilities NOW and money market deposit accounts$29,67356.19$27,00171.26Savings deposits2,2181.051,9581.06Certificates of deposit ($100,000 or more) (f)3,574942.644,9311493.02Other time deposits5,3861041.927,1851662.31Deposits in foreign office 7672.238073.30Total interest-bearing deposits41,618257.6241,882390.93Federal funds purchased and securitiessold under repurchase agreements 1,8144.191,9815.27Bank notes and other short-term borrowings 41371.69619111.84Long-term debt (f), (g)4,6731734.107,2932163.18Total interest-bearing liabilities 48,518441.9251,7756221.21Noninterest-bearing deposits20,21717,381Accrued expense and other liabilities1,9892,687Discontinued liabilities ? education lending business (d), (g)5,5246,203Total liabilities76,24878,046EquityKey shareholders' equity10,14410,133Noncontrolling interests23117Total equity10,16710,250Total liabilities and equity$86,415$88,296Interest rate spread (TE)2.90%2.81%Net interest income (TE) and net interest margin (TE) 2,2883.21%2,2923.16%TE adjustment (b)2425Net interest income, GAAP basis$2,264$2,267(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.(b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. (c) For purposes of these computations, nonaccrual loans are included in average loan balances.(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.(e) Yield is calculated on the basis of amortized cost.(f) Rate calculation excludes basis adjustments related to fair value hedges. (g) A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.(h) Commercial, financial and agricultural average balance includes $36 million of assets from commercial credit cards.TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles Noninterest Income(in millions)Three months ended Twelve months ended12-31-129-30-1212-31-1112-31-1212-31-11Trust and investment services income (a)$104$106$104$421$434Service charges on deposit accounts757470287281Operating lease income16172575122Letter of credit and loan fees595256221213Corporate-owned life insurance income362635122121Net securities gains (losses)????1Electronic banking fees18181872114Gains on leased equipment 246911125Insurance income1413115053Net gains (losses) from loan sales57392715075Net gains (losses) from principal investing211(8)7278Investment banking and capital markets income (loss) (a)473824165134Other income3610443221157Total 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 endedTwelve months ended12-31-129-30-1212-31-1112-31-1212-31-11Brokerage commissions and fee income$32$34$33$134$132Personal asset management and custody fees424138161153Institutional asset management and custody fees303133126149Total trust and investment services income$104$106$104$421$434Investment Banking and Capital Markets Income (Loss)(in millions)Three months endedTwelve months ended12-31-129-30-1212-31-1112-31-1212-31-11Investment banking income$34$32$25$111$92Income (loss) from other investments2231321Dealer trading and derivatives income (loss), proprietary (a), (b)(1)4(6)(2)(24)Dealer trading and derivatives income (loss), nonproprietary (b)3(9)(9)62Total dealer trading and derivatives income (loss)2(5)(15)4(22)Foreign exchange income99113743Total investment banking and capital markets income (loss) $47$38$24$165$134(a)For the quarter ended December 31, 2012, income related to foreign exchange derivatives trading and interest rate derivative trading was less than $1 million and was offset by losses from Key's credit portfolio management activities. For the quarters ended September 30, 2012, and December 31, 2011, fixed income securities trading comprised the vast majority of this amount. In these quarters, income related to foreign exchange derivative trading and interest rate derivative trading was less than $1 million and was offset by losses from Key's credit portfolio management activities. (b)The allocation between proprietary and nonproprietary is made based upon whether the trade is conducted for the benefit of Key or Key's clients rather than based upon the proposed rulemakings under the Volcker Rule. The prohibitions and restrictions on proprietary trading activities contemplated by the Volcker Rule and the rules proposed thereunder are not yet final. Therefore, the ultimate impact of the rules proposed under the Volcker Rule is not yet known.Noninterest Expense(dollars in millions)Three months ended Twelve months ended12-31-129-30-1212-31-1112-31-1212-31-11Personnel (a)$433$411$387$1,618$1,520Net occupancy696566260258Operating lease expense1213185794Computer processing394342166166Business services and professional fees554957193186FDIC assessment8773152OREO expense, net1151513Equipment272725107103Marketing2018246860Provision (credit) for losses on lending-related commitments(14)(8)(11)(16)(28)Intangible asset amortization on credit cards86?14?Other intangible asset amortization43194Other expense949996385362Total noninterest expense$756$734$717$2,907$2,790Average full-time equivalent employees (b)15,58915,83315,38115,58915,381(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 ended12-31-129-30-1212-31-1112-31-1212-31-11Salaries$257$251$234$989$919Incentive compensation878982313306Employee benefits665555242229Stock-based compensation1311135145Severance10532321Total personnel expense$433$411$387$1,618$1,520Loan Composition(dollars in millions)Percent change 12-31-12 vs.12-31-129-30-1212-31-119-30-1212-31-11Commercial, financial and agricultural (a)$23,242$21,979$19,7595.7%17.6%Commercial real estate:Commercial mortgage7,7207,5298,0372.5(3.9)Construction1,0031,0671,312(6.0)(23.6)Total commercial real estate loans8,7238,5969,3491.5(6.7)Commercial lease financing 4,9154,9605,674(.9)(13.4)Total commercial loans36,88035,53534,7823.86.0Residential ? prime loans:Real estate ? residential mortgage2,1742,1381,9461.711.7Home equity:Key Community Bank9,8169,7689,229.56.4Other423409(d)5353.4(20.9)Total home equity loans10,23910,1779,764.64.9Total residential ? prime loans 12,41312,31511,710.86.0Consumer other ? Key Community Bank1,3491,3131,1922.713.2Credit cards729710?2.7N/MConsumer other:Marine1,3581,4481,766(6.2)(23.1)Other9398125(5.1)(25.6)Total consumer ? indirect loans1,4511,5461,891(6.1)(23.3)Total consumer loans15,94215,88414,793.47.8Total loans (b), (c)$52,822$51,419$49,5752.7%6.5%Loans Held for Sale Composition(dollars in millions)Percent change 12-31-12 vs.12-31-129-30-1212-31-119-30-1212-31-11Commercial, financial and agricultural$29$13$19123.1%52.6%Real estate ? commercial mortgage477484567(1.4)(15.9)Real estate ? construction?1035N/MN/MCommercial lease financing8412100.0(33.3)Real estate ? residential mortgage8511795(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)4Q123Q122Q121Q124Q11Balance at beginning of period$628$656$511$728$479New originations1,6861,2801,3089351,235Transfers from held to maturity, net381371919Loan sales(1,747)(1,311)(1,165)(1,168)(932)Loan draws (payments), net(4)(9)(4)(3)(72)Transfers to OREO / valuation adjustments(2)(1)(1)?(1)Balance at end of period$599$628$656$511$728(a) December 31, 2012 and September 30, 2012 loan balances include $90 million and $88 million of commercial credit card balances, respectively.(b) Excluded at December 31, 2012, September 30, 2012, and December 31, 2011, are loans in the amount of $5.2 billion, $5.3 billion, and $5.8 billion, respectively, related to the discontinued operations of the education lending business.(c) December 31, 2012 includes purchased loans of $217 million of which $23 million were purchased credit impaired. September 30, 2012 includes purchased loans of $231 million of which $25 million were purchased credit impaired.(d) This loan category was impacted by the $45 million in net loan charge-offs taken in the third quarter of 2012 related to the updated regulatory guidance. During the fourth quarter of 2012, updated charge-off amounts were reallocated to other loan categories. This amount would have been $454 million exclusive of the above-referenced net loan charge-offs at September 30, 2012.N/M = Not Meaningful Exit Loan Portfolio From Continuing Operations(dollars in millions)Balance ChangeNet LoanBalance onOutstanding 12-31-12 vs.Charge-offsNonperforming Status12-31-129-30-129-30-124Q123Q12(c)12-31-129-30-12Residential properties ? homebuilder$24$31$(7)$1?$10$6Marine and RV floor plan3335(2)?$(1)1012Commercial lease financing (a)9971,035(38)?(3)68Total commercial loans1,0541,101(47)1(4)2626Home equity ? Other423409(d)141152118Marine1,3581,448(90)1463431RV and other consumer9398(5)1(1)22Total consumer loans1,8741,955(81)26105751Total exit loans in loan portfolio$2,928$3,056$(128)$27$6$83$77Discontinued 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)4Q123Q122Q121Q124Q11Net loan charge-offs$58$109$77$101$105Net loan charge-offs to average loans.44%.86%.63%.82%.86%Allowance for loan and lease losses to annualized net loan charge-offs384.85204.78286.74232.39241.01Allowance for loan and lease losses$888$888$888$944$1,004Allowance for credit losses (a)9179319399891,049Allowance for loan and lease losses to period-end loans1.68%1.73%1.79%1.92%2.03%Allowance for credit losses to period-end loans1.741.811.892.012.12Allowance for loan and lease losses to nonperforming loans131.75135.99135.16141.74138.10Allowance for credit losses to nonperforming loans 136.05142.57142.92148.50144.29Nonperforming loans at period end (b)$674$653$657$666$727Nonperforming assets at period end735718751767859Nonperforming loans to period-end portfolio loans1.28%1.27%1.32%1.35%1.47%Nonperforming assets to period-end portfolio loans plusOREO and other nonperforming assets1.391.391.511.551.73(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.(b) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.Summary of Loan and Lease Loss Experience From Continuing Operations(dollars in millions)Three months ended Twelve months ended12-31-129-30-1212-31-1112-31-1212-31-11Average loans outstanding$51,859$50,695$48,664$50,362$48,606Allowance for loan and lease losses at beginning of period $888$888$1,131$1,004$1,604Loans charged off: Commercial, financial and agricultural 15164580169Real estate ? commercial mortgage 332324102113Real estate ? construction 5322483Total commercial real estate loans 382626126196Commercial lease financing 7?62742Total commercial loans 604277233407Real estate ? residential mortgage (a)8672729Home equity:Key Community Bank (a)(14)652299100Other (a)126103545Total home equity loans (2)7132134145Consumer other ? Key Community Bank99113845Credit cards92?11?Consumer other: Marine (a)1811205980Other (a)2?269Total consumer other 2011226589Total consumer loans 449972275308Total loans charged off 104141149508715Recoveries: Commercial, financial and agricultural 239176350Real estate ? commercial mortgage 5212310Real estate ? construction 218527Total commercial real estate loans 7392837Commercial lease financing 4862225Total commercial loans 342032113112Real estate ? residential mortgage 1??33Home equity:Key Community Bank4321111Other11154Total home equity loans 5431615Consumer other ? Key Community Bank12268Consumer other:Marine4562232Other11134Total consumer other 5672536Total consumer loans 1212125062Total recoveries 463244163174Net loan charge-offs(58)(109)(105)(345)(541)Provision (credit) for loan and lease losses57109(22)229(60)Foreign currency translation adjustment 1???1Allowance for loan and lease losses at end of period$888$888$1,004$888$1,004Liability for credit losses on lending-related commitments at beginning of period$43$51$56$45$73Provision (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$45Total allowance for credit losses at end of period$917$931$1,049$917$1,049Net loan charge-offs to average loans .44%.86%.86%.69%1.11%Allowance for loan and lease losses to annualized net loan charge-offs384.85204.78241.01257.39185.58Allowance for loan and lease losses to period-end loans1.681.732.031.682.03Allowance for credit losses to period-end loans1.741.812.121.742.12Allowance for loan and lease losses to nonperforming loans 131.75135.99138.10131.75138.10Allowance for credit losses to nonperforming loans 136.05142.57144.29136.05144.29Discontinued operations ? education lending business:Loans charged off$19$17$31$75$138Recoveries4561715Net loan charge-offs$(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 toadjustments made from this review. Prior to reallocation, Real estate ? residential mortgage, Home equity ? Other, Consumer other ? Marine, and Consumer other ? Other charge-offs were $3 million, $6 million, $11 million, and $1 million, respectively.(b) Included in "accrued expense and other liabilities" on the balance sheet.Summary of Nonperforming Assets and Past Due Loans From Continuing Operations(dollars in millions)12-31-129-30-126-30-123-31-1212-31-11Commercial, financial and agricultural$99$132$141$168$188Real estate ? commercial mortgage120134172175218Real estate ? construction5653686654Total commercial real estate loans176187240241272Commercial lease financing1618182227Total commercial loans291337399431487Real estate ? residential mortgage (a)10383788287Home equity:Key Community Bank210171141109108Other2118171212Total home equity loans (a)231189158121120Consumer other ? Key Community Bank23211Credit cards118???Consumer other:Marine3431193031Other22111Total consumer other 3633203132Total consumer loans383316258235240Total nonperforming loans (b)674653657666727Nonperforming loans held for sale2519382446OREO2229286165Other nonperforming assets1417281621Total nonperforming assets$735$718$751$767$859Accruing loans past due 90 days or more$78$89$131$169$164Accruing loans past due 30 through 89 days424354362420441Restructured loans ? accruing and nonaccruing (c)320323274293276Restructured loans included in nonperforming loans (c)249217163184191Nonperforming assets from discontinued operations ? education lending business2022181923Nonperforming 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 assets1.391.391.511.551.73(a) All of the increase in Real estate ? residential mortgage and $26 million of the increase in Total home equity loans from September 30, 2012 to December 31, 2012 was related to regulatory guidance issued in the second and third quarters of 2012.(b) December 31, 2012 and September 30, 2012 amounts exclude $23 million and $25 million, respectively, of purchased credit impaired loans acquired in July 2012.(c) Restructured loans (i.e., troubled debt restructurings) are those for which Key, for reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance. The majority of the increase in restructured loans included in nonperforming loans from September 30, 2012 to December 31, 2012 was a result of updated regulatory guidance in the third quarter of 2012.Summary of Changes in Nonperforming Loans From Continuing Operations(in millions)4Q123Q122Q121Q124Q11Balance at beginning of period$653$657$666$727$788Loans placed on nonaccrual status288276350214230Charge-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)4Q123Q122Q121Q124Q11Balance at beginning of period$19$38$24$46$42Transfers in8?16?19Net 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$46Summary of Changes in Other Real Estate Owned, Net of Allowance, From Continuing Operations(in millions)4Q123Q122Q121Q124Q11Balance at beginning of period$29$28$61$65$63Properties acquired ? nonperforming loans 71161513Valuation adjustments(2)(2)(7)(7)(4)Properties sold(12)(8)(32)(12)(7)Balance at end of period$22$29$28$61$65Line of Business Results(dollars in millions)Percent change 4Q12 vs.4Q123Q122Q121Q124Q113Q124Q11Key Community BankSummary of operationsTotal revenue (TE)$567$576$537$528$546(1.6)%3.8%Provision (credit) for loan and lease losses2312011230(80.8)(23.3)Noninterest expense 5295124764574763.311.1Net income (loss) attributable to Key31(23)415740N/M(22.5)Average loans and leases29,25228,38627,04326,61726,4063.110.8Average deposits50,12349,53748,25347,76848,0761.24.3Net loan charge-offs 1293504971(87.1)(83.1)Net loan charge-offs to average loans .16%1.30%.74%.74%1.07%N/AN/ANonperforming assets at period end$459$422$401$402$4158.810.6Return on average allocated equity4.13%(3.11)%5.73%7.74%5.07%N/AN/AAverage full-time equivalent employees9,0199,2098,7578,7198,633(2.1)4.5Key Corporate BankSummary of operationsTotal revenue (TE)$424$392$392$401$4128.2%2.9%Provision (credit) for loan and lease losses11(3)413(61)N/MN/MNoninterest expense 206209218230228(1.4)(9.6)Net income (loss) attributable to Key 13011810410015610.2(16.7)Average loans and leases 19,47718,88618,53218,58417,7843.19.5Average loans held for sale 53844151450935622.051.1Average deposits 13,67212,87312,40911,55611,1626.222.5Net loan charge-offs 21892512162.575.0Net loan charge-offs to average loans .43%.17%.20%.54%.27%N/AN/ANonperforming 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/AN/AAverage full-time equivalent employees 2,0492,1462,1752,1692,204(4.5)(7.0)Key Corporate Bank supplementary information (lines of business)Real Estate Capital and Corporate Banking ServicesTotal revenue (TE)$189$166$181$165$18413.9%2.7%Provision (credit) for loan and lease losses14(3)5?(31)N/MN/MNoninterest expense 5962676366(4.8)(10.6)Net income (loss) attributable to Key72676564947.5(23.4)Average loans and leases7,6257,3427,3447,7007,4463.92.4Average loans held for sale45535933729121626.7110.6Average deposits10,5389,6749,2548,2797,6948.937.0Net loan charge-offs26971610188.9160.0Net loan charge-offs to average loans 1.36%.49%.38%.84%.53%N/AN/ANonperforming assets at period end$136$142$186$173$209(4.2)(34.9)Return on average allocated equity38.86%34.44%31.27%27.92%36.35%N/AN/AAverage full-time equivalent employees907929983982983(2.4)(7.7)Equipment FinanceTotal revenue (TE)$53$57$57$64$62(7.0)%(14.5)%Provision (credit) for loan and lease losses(6)?6(2)(15)N/MN/MNoninterest expense 3535373748?(27.1)Net income (loss) attributable to Key1514918187.1(16.7)Average loans and leases5,0995,1594,8874,7804,681(1.2)8.9Average loans held for sale9723241028.6(10.0)Average deposits66789?(33.3)Net loan charge-offs4(1)45(1)N/MN/MNet loan charge-offs to average loans .31%(.08)%.33%.42%(.08)%N/AN/ANonperforming assets at period end$26$30$33$28$41(13.3)(36.6)Return on average allocated equity25.07%22.73%14.48%26.71%23.19%N/AN/AAverage full-time equivalent employees367383393394442(4.2)(17.0)Institutional and Capital MarketsTotal revenue (TE)$182$169$154$172$1667.7%9.6%Provision (credit) for loan and lease losses3?(7)15(15)N/MN/MNoninterest expense 112112114130114?(1.8)Net income (loss) attributable to Key 433730184416.2(2.3)Average loans and leases6,7536,3856,3016,1045,6575.819.4Average loans held for sale7475154194130(1.3)(43.1)Average deposits3,1283,1933,1483,2693,459(2.0)(9.6)Net loan charge-offs (9)?(2)43N/MN/MNet loan charge-offs to average loans (.53)%?(.13)%.26%.21%N/AN/ANonperforming 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/AN/AAverage full-time equivalent employees 775834799793779(7.1)(.5)TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful  SOURCE KeyCorpFor further information: ANALYSTS, Vernon L. Patterson, +1-216-689-0520, Vernon_Patterson@KeyBank.com or Kelly L. Lammers, +1-216-689-3133, Kelly_L_Lammers@KeyBank.com; MEDIA, Jack Sparks, +1-720-904-4554, Jack_Sparks@KeyBank.com, Twitter: @keybank_news; INVESTOR RELATIONS: www.key.com/ir, KEY MEDIA, NEWSROOM: www.key.com/newsroom