KeyCorp Reports Second Quarter 2014 Net Income Of $242 Million, Or $.27 Per Common Share, Earnings Per Share Up 29% From Prior Year

07/17/2014

CLEVELAND, July 17, 2014 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced second quarter net income from continuing operations attributable to Key common shareholders of $242 million, or $.27 per common share, compared to $232 million, or $.26 per common share, for the first quarter of 2014, and $193 million, or $.21 per common share, for the second quarter of 2013.

For the six months ended June 30, 2014, net income from continuing operations attributable to Key common shareholders was $474 million, or $.53 per common share, compared to $389 million, or $.42 per common share, for the same period one year ago.

"Second quarter results demonstrate the successful execution of our strategy and continued efforts across our company to drive growth," said Chairman and Chief Executive Officer Beth Mooney. "We delivered positive operating leverage by growing revenue and reducing expense from one year ago. Further, we maintained strong risk management practices, as evidenced by a continued low net charge-offs to average loans ratio of .22% and declining nonperforming asset and loan levels. We continue to execute on our commitment to return capital to our shareholders by repurchasing $108 million in common shares and increasing our dividend by 18%."

"Total average loans continued to grow at a solid pace, driven by commercial, financial and agricultural loan growth of 13% from the prior year. Investment banking and debt placement fees were also strong, up 18% from one year ago. The growth of these two items reflects the strength of our distinctive business model and our ability to capitalize on revenue opportunities either through on-balance sheet or capital markets alternatives," added Mooney.

"We also continue to invest in growth opportunities that are consistent with our business model and strategy," said Mooney. "Today, we announced that we have entered into an agreement to acquire Pacific Crest Securities, a leading technology-focused investment bank and capital markets firm. Adding technology expertise to our Corporate Bank will enhance our model and capabilities to accelerate growth while also underscoring our commitment to be the leading corporate and investment bank serving middle market companies. This transaction is subject to regulatory approval and is expected to close in the third quarter of 2014."

SECOND QUARTER 2014 FINANCIAL RESULTS, from continuing operations

Compared to Second Quarter of 2013

Average loans up 5.5%, driven by a 12.6% growth in commercial, financial and agricultural loans
Average deposits up 2.5% due to commercial mortgage servicing acquisitions and growth in commercial deposits offsetting declines in certificates of deposit
Positive operating leverage with growth in revenues and decline in expenses
Net interest income (taxable-equivalent) down $7 million, primarily due to lower asset yields and lower loan fees caused by an early termination of a leveraged lease
Noninterest income up $26 million, reflecting growth in investment banking and debt placement fees, higher principal investing gains, and an increase in operating lease income and other leasing gains mostly due to an early termination of a leveraged lease
Noninterest expense down $22 million, reflecting $13 million in lower efficiency-related charges, and continued focus on expense management
Asset quality improved, with net loan charge-offs to average loans declining from .34% to .22%
Disciplined capital management, repurchasing $108 million of common shares during the second quarter of 2014 and maintaining a top tier capital position with Tier 1 common equity of 11.33%

Compared to First Quarter of 2014

Average loans up 1.6%, driven by a 4.2% growth in commercial, financial and agricultural loans
Average deposits up 1.3% due to the growth in commercial mortgage servicing and commercial and consumer client inflows
Net interest income (taxable-equivalent) up $10 million due to an increase in asset levels, higher loan fees, and more days in the quarter
Noninterest income up $20 million, with higher investment banking and debt placement fees and an increase in operating lease income and other leasing gains mostly due to the early termination of a leveraged lease
Noninterest expense up $27 million due to increased marketing expense and $14 million in higher efficiency-related charges
Asset quality remains strong, with net loan charge-offs to average loans remaining well below targeted range and improving levels of nonperforming assets and loans

Selected Financial Highlights

dollars in millions, except per share data											Change 2Q14 vs.
			2Q14			1Q14			2Q13		1Q14		2Q13
Income (loss) from continuing operations attributable to Key common shareholders		$	242		$	232		$	193		4.3	%	25.4	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution			.27			.26			.21		3.8		28.6
Return on average total assets from continuing operations			1.14	%		1.13	%		.95	%	N/A		N/A
Tier 1 common equity^(a)			11.33			11.27			11.18		N/A		N/A
Book value at period end		$	11.65		$	11.43		$	10.89		1.9	%	7.0	%
Net interest margin (TE) from continuing operations			2.98	%		3.00	%		3.13	%	N/A		N/A


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

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions											Change 2Q14 vs.
			2Q14			1Q14			2Q13		1Q14		2Q13
Net interest income (TE)		$	579		$	569		$	586		1.8	%	(1.2)	%
Noninterest income			455			435			429		4.6		6.1
	Total revenue	$	1,034		$	1,004		$	1,015		3.0	%	1.9	%


TE = Taxable Equivalent

Taxable-equivalent net interest income was $579 million for the second quarter of 2014, and the net interest margin was 2.98%. These results compare to taxable-equivalent net interest income of $586 million and a net interest margin of 3.13% for the second quarter of 2013. These decreases in net interest income and net interest margin were attributable to lower asset yields and a decrease in loan fees mostly due to the early termination of a leveraged lease. These decreases were partially offset by loan growth, the maturity of higher-rate certificates of deposit, and a more favorable mix of lower-cost deposits.

Compared to the first quarter of 2014, taxable-equivalent net interest income increased by $10 million, and the net interest margin declined by two basis points. The increase in net interest income was primarily due to higher asset levels and loan fees, a lower cost of funds as higher-rate certificates of deposit matured, and more days in the second quarter. The net interest margin was negatively impacted by the early termination of a leveraged lease.

Noninterest Income

dollars in millions								Change 2Q14 vs.
			2Q14		1Q14		2Q13	1Q14		2Q13
Trust and investment services income		$	94	$	98	$	100	(4.1)	%	(6.0)	%
Investment banking and debt placement fees			99		84		84	17.9		17.9
Service charges on deposit accounts			66		63		71	4.8		(7.0)
Operating lease income and other leasing gains			35		29		22	20.7		59.1
Corporate services income			41		42		43	(2.4)		(4.7)
Cards and payments income			43		38		42	13.2		2.4
Corporate-owned life insurance income			28		26		31	7.7		(9.7)
Consumer mortgage income			2		2		6	—		(66.7)
Mortgage servicing fees			11		15		13	(26.7)		(15.4)
Net gains (losses) from principal investing			27		24		7	12.5		285.7
Other income			9		14		10	(35.7)		(10.0)
	Total noninterest income	$	455	$	435	$	429	4.6	%	6.1	%

Key's noninterest income was $455 million for the second quarter of 2014, compared to $429 million for the year-ago quarter. Key continued to see the benefits of its business model – focusing on targeted industries – with investment banking and debt placement fees increasing $15 million from the prior year. In addition, net gains from principal investing increased $20 million. Operating lease income and other leasing gains increased $13 million, due to a $17 million gain from the early termination of a leveraged lease. These increases were partially offset by a decrease of $6 million in trust and investment services income, a decline in service charges on deposit accounts of $5 million due to lower non-sufficient funds and overdraft charges, and decreases in various other items.

Compared to the first quarter of 2014, noninterest income increased by $20 million. Investment banking and debt placement fees increased $15 million from prior quarter. Operating lease income and other leasing gains increased $6 million, due to a $17 million gain from the early termination of a leveraged lease. Key also benefitted from seasonal pickup in activity levels, with cards and payments income up $5 million and service charges on deposit accounts up $3 million. These increases were partially offset by a $5 million decrease in other income related to lower trading income.

Noninterest Expense

dollars in millions								Change 2Q14 vs.
			2Q14		1Q14		2Q13	1Q14		2Q13
Personnel expense		$	389	$	388	$	406	.3	%	(4.2)	%
Nonpersonnel expense			300		274		305	9.5		(1.6)
	Total noninterest expense	$	689	$	662	$	711	4.1	%	(3.1)	%

Key's noninterest expense was $689 million for the second quarter of 2014, compared to $711 million for the same period last year. This decline reflects lower efficiency charges of $13 million. Excluding the impact of efficiency charges, the $9 million decrease in expenses was mostly due to a decline in salaries and employee benefits.

Compared to the first quarter of 2014, noninterest expense increased by $27 million. The increase in expenses reflected $14 million in higher efficiency-related charges. Marketing expense increased $8 million from the prior quarter related to normal seasonal increases in spend. In addition, the provision (credit) for losses on lending-related commitments increased $4 million from the prior quarter.

BALANCE SHEET HIGHLIGHTS

As of June 30, 2014, Key had total assets of $91.8 billion compared to $90.8 billion at March 31, 2014, and $90.6 billion at June 30, 2013.

Average Loans

dollars in millions								Change 6-30-14 vs.
		6-30-14		3-31-14		6-30-13		3-31-14			6-30-13
Commercial, financial and agricultural^(a)		$	26,444	$	25,390	$	23,480		4.2	%		12.6	%
Other commercial loans			13,186		13,337		13,290		(1.1)			(.8)
Total home equity loans			10,627		10,630		10,381		—			2.4
Other consumer loans			5,354		5,389		5,545		(.6)			(3.4)
	Total loans	$	55,611	$	54,746	$	52,696		1.6	%		5.5	%

(a) Commercial, financial and agricultural average loan balances include $95 million, $94 million, and $96 million of assets from commercial credit cards at June 30, 2014, March 31, 2014, and June 30, 2013, respectively.

Average loans were $55.6 billion for the second quarter of 2014, an increase of $2.9 billion compared to the second quarter of 2013. The loan growth occurred primarily in the commercial, financial and agricultural portfolio, which increased $3 billion and was broad-based across Key's commercial lines of business. Consumer loans remained stable, as increases in home equity loans and direct term loans were mostly offset by run-off in Key's designated consumer exit portfolio. The growth in home equity and direct term loans was balanced across Key's geographic footprint.

Compared to the first quarter of 2014, average loans increased by $865 million. Commercial, financial and agricultural loans increased $1.1 billion, mostly within Key Corporate Bank. Consumer loans reflected a decrease in Key's consumer exit portfolio, which offset core consumer loan growth during the second quarter.

Average Deposits

dollars in millions											Change 6-30-14 vs.
		6-30-14			3-31-14			6-30-13			3-31-14			6-30-13
Non-time deposits^(a)		$	60,066		$	59,197		$	57,691			1.5	%		4.1	%
Certificates of deposit ($100,000 or more)			2,808			2,758			2,975			1.8			(5.6)
Other time deposits			3,587			3,679			4,202			(2.5)			(14.6)
	Total deposits	$	66,461		$	65,634		$	64,868			1.3	%		2.5	%

Cost of total deposits^(a)			.18	%		.20	%		.26	%		N/A			N/A


(a) Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $66.5 billion for the second quarter of 2014, an increase of $1.6 billion compared to the year-ago quarter. Demand deposits increased by $993 million, and NOW and money market deposit accounts increased $1.4 billion, mostly due to growth related to commercial client inflows as well as increases related to the commercial mortgage servicing business. These increases were partially offset by run-off in certificates of deposit.

Compared to the first quarter of 2014, average deposits, excluding deposits in foreign office, increased by $827 million. Demand deposits were up $632 million, driven by increases of escrow deposits in the commercial mortgage servicing business and inflows related to both commercial and consumer clients. NOW and money market deposit accounts increased $219 million mostly due to higher interest-bearing demand deposits with inflows across Key's commercial lines of business. These increases were partially offset by decreases in other interest-bearing deposit accounts.

ASSET QUALITY

dollars in millions										Change 2Q14 vs.
		2Q14			1Q14			2Q13		1Q14		2Q13
Net loan charge-offs	$	30		$	20		$	45		50.0	%	(33.3)	%
Net loan charge-offs to average total loans		.22	%		.15	%		.34	%	N/A		N/A
Nonperforming loans at period end^(a)	$	396		$	449		$	652		(11.8)		(39.3)
Nonperforming assets at period end		410			469			693		(12.6)		(40.8)
Allowance for loan and lease losses		814			834			876		(2.4)		(7.1)
Allowance for loan and lease losses to nonperforming loans		205.6	%		185.7	%		134.4	%	N/A		N/A
Provision (credit) for loan and lease losses	$	10		$	6		$	28		66.7	%	(64.3)	%


(a) Loan balances exclude $15 million, $16 million, and $19 million of purchased credit impaired loans at June 30, 2014, March 31, 2014, and June 30, 2013, respectively.

N/A = Not Applicable

Key's provision for loan and lease losses was $10 million for the second quarter of 2014, compared to $6 million for the first quarter of 2014 and $28 million for the year-ago quarter. Key's allowance for loan and lease losses was $814 million, or 1.46%, of total period-end loans at June 30, 2014, compared to 1.50% at March 31, 2014, and 1.65% at June 30, 2013.

Net loan charge-offs for the second quarter of 2014 totaled $30 million, or .22%, of average total loans. These results compare to $20 million, or .15%, for the first quarter of 2014, and $45 million, or .34%, for the same period last year.

At June 30, 2014, Key's nonperforming loans totaled $396 million and represented .71% of period-end portfolio loans, compared to .81% at March 31, 2014, and 1.23% at June 30, 2013. Nonperforming assets at June 30, 2014, totaled $410 million and represented .74% of period-end portfolio loans and OREO and other nonperforming assets, compared to .85% at March 31, 2014, and 1.30% at June 30, 2013.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2014.

Capital Ratios

	6-30-14		3-31-14		6-30-13
Tier 1 common equity^{(a), (b)}	11.33	%	11.27	%	11.18	%
Tier 1 risk-based capital^(a)	12.07		12.01		11.93
Total risk based capital^(a)	14.24		14.23		14.65
Tangible common equity to tangible assets^(b)	10.15		10.14		9.96
Leverage^(a)	11.25		11.30		11.25


(a) 6-30-14 ratio is estimated.

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

As shown in the preceding table, at June 30, 2014, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.33% and 12.07%, respectively. In addition, the tangible common equity ratio was 10.15% at June 30, 2014.

In October 2013, federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the "Regulatory Capital Rules"). While the Regulatory Capital Rules became effective January 1, 2014, the mandatory compliance date for Key as a "standardized approach" banking organization begins on January 1, 2015, subject to transitional provisions extending to January 1, 2019. Key's estimated Common Equity Tier 1 as calculated under the Regulatory Capital Rules was 10.77% at June 30, 2014. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.

Summary of Changes in Common Shares Outstanding

in thousands					Change 2Q14 vs.
		2Q14	1Q14	2Q13	1Q14		2Q13
Shares outstanding at beginning of period		884,869	890,724	922,581	(.7)	%	(4.1)	%
Common shares repurchased		(7,824)	(9,845)	(10,786)	(20.5)		(27.5)
Shares reissued (returned) under employee benefit plans		(222)	3,990	1,088	N/M		N/M
	Shares outstanding at end of period	876,823	884,869	912,883	(.9)	%	(4.0)	%

As previously reported, Key's 2014 CCAR capital plan includes common share repurchases of up to $542 million, which are expected to be executed through the first quarter of 2015. During the second quarter of 2014, Key completed $108 million of common share repurchases.

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 2Q14 vs.
			2Q14		1Q14		2Q13	1Q14		2Q13
Revenue from continuing operations (TE)
Key Community Bank		$	550	$	541	$	583	1.7	%	(5.7)	%
Key Corporate Bank			394		391		378	.8		4.2
Other Segments			91		70		56	30.0		62.5
	Total segments		1,035		1,002		1,017	3.3		1.8
Reconciling Items			(1)		2		(2)	N/M		N/M
	Total	$	1,034	$	1,004	$	1,015	3.0	%	1.9	%

Income (loss) from continuing operations attributable to Key
Key Community Bank		$	55	$	62	$	52	(11.3)	%	5.8	%
Key Corporate Bank			118		121		121	(2.5)		(2.5)
Other Segments			72		55		49	30.9		46.9
	Total segments		245		238		222	2.9		10.4
Reconciling Items			2		—		(23)	N/M		N/M
	Total	$	247	$	238	$	199	3.8	%	24.1	%


TE = Taxable equivalent, N/M = Not Meaningful

Key Community Bank


dollars in millions								Change 2Q14 vs.
			2Q14		1Q14		2Q13	1Q14		2Q13
Summary of operations
Net interest income (TE)		$	362	$	363	$	383	(.3)	%	(5.5)	%
Noninterest income			188		178		200	5.6		(6.0)
	Total revenue (TE)		550		541		583	1.7		(5.7)
Provision (credit) for loan and lease losses			23		9		41	155.6		(43.9)
Noninterest expense			440		433		459	1.6		(4.1)
	Income (loss) before income taxes (TE)		87		99		83	(12.1)		4.8
Allocated income taxes (benefit) and TE adjustments			32		37		31	(13.5)		3.2
	Net income (loss) attributable to Key	$	55	$	62	$	52	(11.3)	%	5.8	%

Average balances
Loans and leases		$	30,025	$	29,793	$	29,161	.8	%	3.0	%
Total assets			32,145		31,943		31,571	.6		1.8
Deposits			50,146		49,824		49,473	.6		1.4

Assets under management at period end		$	27,319	$	26,549	$	23,213	2.9	%	17.7	%


TE = Taxable Equivalent

Additional Key Community Bank Data

dollars in millions											Change 2Q14 vs.
			2Q14			1Q14			2Q13		1Q14		2Q13
Noninterest income
Trust and investment services income		$	67		$	67		$	68		—		(1.5)	%
Service charges on deposit accounts			55			52			60		5.8	%	(8.3)
Cards and payments income			38			35			38		8.6		—
Other noninterest income			28			24			34		16.7		(17.6)
	Total noninterest income	$	188		$	178		$	200		5.6	%	(6.0)	%

Average deposit balances
NOW and money market deposit accounts		$	27,574		$	27,428		$	26,341		.5	%	4.7	%
Savings deposits			2,483			2,465			2,536		.7		(2.1)
Certificates of deposit ($100,000 or more)			2,169			2,163			2,443		.3		(11.2)
Other time deposits			3,580			3,673			4,195		(2.5)		(14.7)
Deposits in foreign office			294			309			284		(4.9)		3.5
Noninterest-bearing deposits			14,046			13,786			13,674		1.9		2.7
	Total deposits	$	50,146		$	49,824		$	49,473		.6	%	1.4	%

Home equity loans
Average balance		$	10,321		$	10,305		$	9,992
Weighted-average loan-to-value ratio (at date of origination)			71	%		71	%		71	%
Percent first lien positions			59			58			57

Other data
Branches			1,009			1,027			1,052
Automated teller machines			1,311			1,330			1,359

Key Community Bank Summary of Operations

Average loan balances up 3.0% from prior year
Average core deposits up 3.6% from prior year
Net income attributable to Key Community Bank up 5.8% from the prior year

Key Community Bank recorded net income attributable to Key of $55 million for the second quarter of 2014, compared to net income attributable to Key of $52 million for the year-ago quarter.

Taxable-equivalent net interest income decreased by $21 million, or 5.5%, from the second quarter of 2013. Average loans and leases grew 3.0% driven by increases in commercial, financial and agricultural loans, while average deposits increased 1.4% from one year ago. However, these volume-related increases were offset by declines in the deposit spread as a result of the continued low-rate environment.

Noninterest income declined by $12 million, or 6%, from the year-ago quarter. Other noninterest income decreased $6 million from prior year primarily due to declines in consumer mortgage income, corporate services income, and trading income. Service charges on deposit accounts declined $5 million due to lower non-sufficient funds and overdraft charges.

The provision for loan and lease losses decreased by $18 million, or 43.9%, from the second quarter of 2013. Net loan charge-offs decreased $9 million from the same period one year ago.

Noninterest expense declined by $19 million, or 4.1%, from the year-ago quarter as a result of Key's continued focus on expense management. Personnel expense decreased $6 million primarily due to declines in salaries and employee benefits. Nonpersonnel expense decreased $13 million primarily due to decreases in outside loan servicing, and computer processing, equipment, and other miscellaneous costs related to branch closures.

Key Corporate Bank


dollars in millions								Change 2Q14 vs.
			2Q14		1Q14		2Q13	1Q14		2Q13
Summary of operations
Net interest income (TE)		$	207	$	194	$	196	6.7	%	5.6	%
Noninterest income			187		197		182	(5.1)		2.7
	Total revenue (TE)		394		391		378	.8		4.2
Provision (credit) for loan and lease losses			—		(1)		(7)	N/M		N/M
Noninterest expense			208		200		194	4.0		7.2
	Income (loss) before income taxes (TE)		186		192		191	(3.1)		(2.6)
Allocated income taxes and TE adjustments			66		71		70	(7.0)		(5.7)
	Net income (loss)		120		121		121	(.8)		(.8)
Less: Net income (loss) attributable to noncontrolling interests			2		—		—	N/M		N/M
	Net income (loss) attributable to Key	$	118	$	121	$	121	(2.5)	%	(2.5)	%

Average balances
Loans and leases		$	22,361	$	21,445	$	19,536	4.3	%	14.5	%
Loans held for sale			429		429		466	—		(7.9)
Total assets			26,194		25,363		23,251	3.3		12.7
Deposits			16,127		15,800		15,606	2.1		3.3

Assets under management at period end		$	12,350	$	12,344	$	12,331	—		.2	%


TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

dollars in millions								Change 2Q14 vs.
			2Q14		1Q14		2Q13	1Q14		2Q13
Noninterest income
Trust and investment services income		$	28	$	31	$	33	(9.7)	%	(15.2)	%
Investment banking and debt placement fees			97		84		82	15.5		18.3
Operating lease income and other leasing gains			11		21		13	(47.6)		(15.4)

Corporate services income			30		28		30	7.1		—
Service charges on deposit accounts			11		11		11	—		—
Cards and payments income			4		3		4	33.3		—
	Payments and services income		45		42		45	7.1		—

Mortgage servicing fees			11		15		13	(26.7)		(15.4)
Other noninterest income			(5)		4		(4)	N/M		N/M
	Total noninterest income	$	187	$	197	$	182	(5.1)	%	2.7	%


N/M = Not Meaningful

Key Corporate Bank Summary of Operations

Average loan balances up 14.5% from the prior year
Average deposits up 3.3% from the prior year
Investment banking and debt placement fees increased 18.3% from the prior year

Key Corporate Bank recorded net income attributable to Key of $118 million for the second quarter of 2014, compared to $121 million for the same period one year ago.

Taxable-equivalent net interest income increased by $11 million, or 5.6%, compared to the second quarter of 2013. Average earning assets increased $3.1 billion, or 14.6%, from the year-ago quarter, primarily driven by loan growth in commercial, financial and agricultural and real estate commercial mortgage. This growth in earning assets drove an increase of $7 million in earning asset spread and a $2 million increase in loan fees. Average deposit balances increased $521 million, or 3.3%, from the year-ago quarter, driven by increases in Public Sector as well as increases related to the commercial mortgage servicing acquisition.

Noninterest income increased by $5 million, or 2.7%, from the second quarter of 2013. The increase in investment banking and debt placement fees of $15 million was partially offset by declines in trust and investment services income, mortgage servicing fees, and other miscellaneous fees from the year-ago quarter.

The provision for loan and lease losses increased $7 million compared to the second quarter of 2013. There were net recoveries of $2 million for the second quarter of 2014 compared to net recoveries of $4 million for the same period one year ago.

Noninterest expense increased by $14 million, or 7.2%, from the second quarter of 2013. Increased personnel costs and higher expenses related to low-income housing tax credit investments were the primary drivers.

Other Segments

Other Segments consist of Corporate Treasury, Community Development, Key's Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $72 million for the second quarter of 2014, compared to net income attributable to Key of $49 million for the same period last year. These results were primarily attributable to an increase in net gains (losses) from principal investing of $20 million and higher operating lease income and other leasing gains of $17 million due to the early termination of a leveraged lease.

Discontinued Operations

Discontinued Operations consists of Education Lending, Victory Capital Management and Victory Capital Advisors, and Austin Capital Management, Ltd. During the second quarter of 2014, Key recognized a net after-tax loss of $22 million related to the fair value of the loans and securities in Key's ten education loan securitization trusts. Certain assumptions related to the valuing of the loans in these securitization trusts were adjusted based on market information and Key's related internal analysis resulting in this net after-tax loss.

*****

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 $91.8 billion at June 30, 2014.

Key provides deposit, lending, cash management and investment services to individuals and small and mid-sized businesses in 12 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.

INVESTOR RELATIONS: www.key.com/ir

KEY MEDIA NEWSROOM: www.key.com/newsroom

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, and profitability. Forward-looking statements can be identified by words such as "outlook," "goal," "objective," "plan," "expect," "anticipate," "intend," "project," "believe," or "estimate." Forward-looking statements represent management's current expectations and forecasts regarding future events. If underlying assumptions prove to be inaccurate or unknown risks or uncertainties arise, actual results could vary materially from these projections or expectations. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2013, which has been filed with the Securities and Exchange Commission and is available on Key's website (www.key.com/ir) and on the Securities and Exchange Commission's website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, changes in local, regional and international business, economic or political conditions, and the extensive and increasing regulation of the U.S. financial services industry. Forward looking statements speak only as of the date they are made and Key does not undertake any obligation to update the forward-looking statements to reflect new information or future events.

Notes to Editors:

A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, July 17, 2014. An audio replay of the call will be available through July 24, 2014.

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

*****

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

			Three months ended
			6-30-14			3-31-14			6-30-13
Summary of operations
	Net interest income (TE)		$	579		$	569		$	586
	Noninterest income			455			435			429
		Total revenue (TE)		1,034			1,004			1,015
	Provision (credit) for loan and lease losses			10			6			28
	Noninterest expense			689			662			711
	Income (loss) from continuing operations attributable to Key			247			238			199
	Income (loss) from discontinued operations, net of taxes^(a)			(28)			4			5
	Net income (loss) attributable to Key			219			242			204

	Income (loss) from continuing operations attributable to Key common shareholders		$	242		$	232		$	193
	Income (loss) from discontinued operations, net of taxes^(a)			(28)			4			5
	Net income (loss) attributable to Key common shareholders			214			236			198

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.28		$	.26		$	.21
	Income (loss) from discontinued operations, net of taxes ^(a)			(.03)			—			.01
	Net income (loss) attributable to Key common shareholders ^(b)			.24			.27			.22

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.27			.26			.21
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)			(.03)			—			.01
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)			.24			.26			.22

	Cash dividends paid			.065			.055			.055
	Book value at period end			11.65			11.43			10.89
	Tangible book value at period end			10.50			10.28			9.77
	Market price at period end			14.33			14.24			11.04

Performance ratios
	From continuing operations:
	Return on average total assets			1.14	%		1.13	%		.95	%
	Return on average common equity			9.55			9.33			7.72
	Return on average tangible common equity ^(c)			10.60			10.38			8.60
	Net interest margin (TE)			2.98			3.00			3.13
	Cash efficiency ratio ^(c)			65.8			64.9			69.1

	From consolidated operations:
	Return on average total assets			.96	%		1.09	%		.92	%
	Return on average common equity			8.44			9.50			7.92
	Return on average tangible common equity ^(c)			9.37			10.56			8.82
	Net interest margin (TE)			2.94			2.95			3.07
	Loan to deposit ^(d)			87.1			87.5			83.6

Capital ratios at period end
	Key shareholders' equity to assets			11.44	%		11.46	%		11.29	%
	Key common shareholders' equity to assets			11.13			11.14			10.96
	Tangible common equity to tangible assets ^(c)			10.15			10.14			9.96
	Tier 1 common equity ^{(c), (e)}			11.33			11.27			11.18
	Tier 1 risk-based capital ^(e)			12.07			12.01			11.93
	Total risk-based capital ^(e)			14.24			14.23			14.65
	Leverage ^(e)			11.25			11.30			11.25

Asset quality — from continuing operations
	Net loan charge-offs		$	30		$	20		$	45
	Net loan charge-offs to average loans			.22	%		.15	%		.34	%
	Allowance for loan and lease losses		$	814		$	834		$	876
	Allowance for credit losses			851			869			913
	Allowance for loan and lease losses to period-end loans			1.46	%		1.50	%		1.65	%
	Allowance for credit losses to period-end loans			1.53			1.57			1.72
	Allowance for loan and lease losses to nonperforming loans			205.6			185.7			134.4
	Allowance for credit losses to nonperforming loans			214.9			193.5			140.0
	Nonperforming loans at period end ^(f)		$	396		$	449		$	652
	Nonperforming assets at period end			410			469			693
	Nonperforming loans to period-end portfolio loans			.71	%		.81	%		1.23	%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets			.74			.85			1.30

Trust and brokerage assets
	Assets under management		$	39,669		$	38,893		$	35,544
	Nonmanaged and brokerage assets			48,728			47,396			37,759

Other data
	Average full-time equivalent employees			13,867			14,055			14,999
	Branches			1,009			1,027			1,052

Taxable-equivalent adjustment			$	6		$	6		$	5

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

			Six months ended
			6-30-14			6-30-13
Summary of operations
	Net interest income (TE)		$	1,148		$	1,175
	Noninterest income			890			854
		Total revenue (TE)		2,038			2,029
	Provision (credit) for loan and lease losses			16			83
	Noninterest expense			1,351			1,392
	Income (loss) from continuing operations attributable to Key			485			400
	Income (loss) from discontinued operations, net of taxes ^(a)			(24)			8
	Net income (loss) attributable to Key			461			408

	Income (loss) from continuing operations attributable to Key common shareholders		$	474		$	389
	Income (loss) from discontinued operations, net of taxes ^(a)			(24)			8
	Net income (loss) attributable to Key common shareholders			450			397

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.54		$	.42
	Income (loss) from discontinued operations, net of taxes ^(a)			(.03)			.01
	Net income (loss) attributable to Key common shareholders ^(b)			.51			.43

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution			.53			.42
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)			(.03)			.01
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)			.51			.43

	Cash dividends paid			.12			.105

Performance ratios
	From continuing operations:
	Return on average total assets			1.13	%		.97	%
	Return on average common equity			9.44			7.84
	Return on average tangible common equity ^(c)			10.49			8.73
	Net interest margin (TE)			2.99			3.18
	Cash efficiency ratio ^(c)			65.4			67.5

	From consolidated operations:
	Return on average total assets			1.03	%		.93	%
	Return on average common equity			8.96			8.00
	Return on average tangible common equity ^(c)			9.96			8.91
	Net interest margin (TE)			2.95			3.12

Asset quality — from continuing operations
	Net loan charge-offs		$	50		$	94
	Net loan charge-offs to average total loans			.18	%		.36	%

Other data
	Average full-time equivalent employees			13,961			15,197

Taxable-equivalent adjustment			$	12		$	11

(a) In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association. In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund. As a result of these decisions, Key has accounted for these businesses as discontinued operations.

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

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

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

(e) 6-30-14 ratio is estimated.

(f) Loan balances exclude $15 million, $16 million, and $19 million of purchased credit impaired loans at June 30, 2014, March 31, 2014, and June 30, 2013, respectively.

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 is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. 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 as they develop earnings forecasts and peer bank analysis.

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

			Three months ended
			6-30-14			3-31-14			6-30-13
Tangible common equity to tangible assets at period end
	Key shareholders' equity (GAAP)		$	10,504		$	10,403		$	10,229
	Less:	Intangible assets ^(a)		1,008			1,012			1,021
		Preferred Stock, Series A ^(b)		282			282			282
		Tangible common equity (non-GAAP)	$	9,214		$	9,109		$	8,926

	Total assets (GAAP)		$	91,798		$	90,802		$	90,639
	Less:	Intangible assets ^(a)		1,008			1,012			1,021
		Tangible assets (non-GAAP)	$	90,790		$	89,790		$	89,618

	Tangible common equity to tangible assets ratio (non-GAAP)			10.15	%		10.14	%		9.96	%

Tier 1 common equity at period end
	Key shareholders' equity (GAAP)		$	10,504		$	10,403		$	10,229
	Qualifying capital securities			339			339			339
	Less:	Goodwill		979			979			979
		Accumulated other comprehensive income (loss) ^(c)		(325)			(367)			(359)
		Other assets ^(d)		81			84			101
		Total Tier 1 capital (regulatory)		10,108			10,046			9,847
	Less:	Qualifying capital securities		339			339			339
		Preferred Stock, Series A ^(b)		282			282			282
		Total Tier 1 common equity (non-GAAP)	$	9,487		$	9,425		$	9,226

	Net risk-weighted assets (regulatory) ^(e)		$	83,729		$	83,637		$	82,528

	Tier 1 common equity ratio (non-GAAP) ^(e)			11.33	%		11.27	%		11.18	%

Pre-provision net revenue
	Net interest income (GAAP)		$	573		$	563		$	581
	Plus:	Taxable-equivalent adjustment		6			6			5
		Noninterest income (GAAP)		455			435			429
	Less:	Noninterest expense (GAAP)		689			662			711
	Pre-provision net revenue from continuing operations (non-GAAP)		$	345		$	342		$	304

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

			Three months ended
			6-30-14			3-31-14			6-30-13
Average tangible common equity
	Average Key shareholders' equity (GAAP)		$	10,459		$	10,371		$	10,314
	Less:	Intangible assets (average)^(f)		1,010			1,013			1,023
		Preferred Stock, Series A (average)		291			291			291
		Average tangible common equity (non-GAAP)	$	9,158		$	9,067		$	9,000

Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	242		$	232		$	193
	Average tangible common equity (non-GAAP)			9,158			9,067			9,000

	Return on average tangible common equity from continuing operations (non-GAAP)			10.60	%		10.38	%		8.60	%

Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	214		$	236		$	198
	Average tangible common equity (non-GAAP)			9,158			9,067			9,000

	Return on average tangible common equity consolidated (non-GAAP)			9.37	%		10.56	%		8.82	%

Cash efficiency ratio
	Noninterest expense (GAAP)		$	689		$	662		$	711
	Less:	Intangible asset amortization (GAAP)		9			10			10
		Adjusted noninterest expense (non-GAAP)	$	680		$	652		$	701

	Net interest income (GAAP)		$	573		$	563		$	581
	Plus:	Taxable-equivalent adjustment		6			6			5
		Noninterest income (GAAP)		455			435			429
		Total taxable-equivalent revenue (non-GAAP)	$	1,034		$	1,004		$	1,015

	Cash efficiency ratio (non-GAAP)			65.8	%		64.9	%		69.1	%

			Three months ended
			6-30-14			3-31-14
Common Equity Tier 1 under the Regulatory Capital Rules (estimates)
	Tier 1 common equity under current regulatory rules		$	9,487		$	9,425
	Adjustments from current regulatory rules to the Regulatory Capital Rules:
		Deferred tax assets and other^(g)		(106)			(114)
		Common Equity Tier 1 anticipated under the Regulatory Capital Rules^(h)	$	9,381		$	9,311

	Net risk-weighted assets under current regulatory rules		$	83,729		$	83,637
	Adjustments from current regulatory rules to the Regulatory Capital Rules:
		Loan commitments less than one year		1,037			1,023
		Past due loans		155			154
		Mortgage servicing assets⁽ⁱ⁾		484			480
		Deferred tax assets⁽ⁱ⁾		215			139
		Other		1,457			1,466
		Total risk-weighted assets anticipated under the Regulatory Capital Rules	$	87,077		$	86,899

	Common Equity Tier 1 ratio under the Regulatory Capital Rules^(h)			10.77	%		10.71	%

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

			Six months ended
			6-30-14			6-30-13
Pre-provision net revenue
	Net interest income (GAAP)		$	1,136		$	1,164
	Plus:	Taxable-equivalent adjustment		12			11
		Noninterest income (GAAP)		890			854
	Less:	Noninterest expense (GAAP)		1,351			1,392
	Pre-provision net revenue from continuing operations (non-GAAP)		$	687		$	637

Average tangible common equity
	Average Key shareholders' equity (GAAP)		$	10,415		$	10,297
	Less:	Intangible assets (average)^(j)		1,011			1,025
		Preferred Stock, Series A (average)		291			291
		Average tangible common equity (non-GAAP)	$	9,113		$	8,981

Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	474		$	389
	Average tangible common equity (non-GAAP)			9,113			8,981

	Return on average tangible common equity from continuing operations (non-GAAP)			10.49	%		8.73	%

Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	450		$	397
	Average tangible common equity (non-GAAP)			9,113			8,981

	Return on average tangible common equity consolidated (non-GAAP)			9.96	%		8.91	%

Cash efficiency ratio
	Noninterest expense (GAAP)		$	1,351		$	1,392
	Less:	Intangible asset amortization (GAAP)		19			22
		Adjusted noninterest expense (non-GAAP)	$	1,332		$	1,370

	Net interest income (GAAP)		$	1,136		$	1,164
	Plus:	Taxable-equivalent adjustment		12			11
		Noninterest income (GAAP)		890			854
		Total taxable-equivalent revenue (non-GAAP)	$	2,038		$	2,029

	Cash efficiency ratio (non-GAAP)			65.4	%		67.5	%

(a) For the three months ended June 30, 2014, March 31, 2014, and June 30, 2013, intangible assets exclude $79 million, $84 million, and $107 million, respectively, of period-end purchased credit card receivables.

(b) Net of capital surplus for the three months ended June 30, 2014, March 31, 2014, and June 30, 2013.

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

(d) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at June 30, 2014, March 31, 2014, and June 30, 2013.

(e) 6-30-14 amount is estimated.

(f) For the three months ended June 30, 2014, March 31, 2014, and June 30, 2013, average intangible assets exclude $82 million, $89 million, and $110 million, respectively, of average purchased credit card receivables.

(g) Includes the deferred tax asset subject to future taxable income for realization, primarily tax credit carryforwards, as well as the deductible portion of purchased credit card receivables.

(h) The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies' Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the "standardized approach."

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

(j) For the six months ended June 30, 2014, and June 30, 2013, average intangible assets exclude $85 million and $114 million, respectively, of average ending purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(dollars in millions)

			6-30-14		3-31-14		6-30-13
Assets
	Loans		$	55,600	$	55,445	$	53,101
	Loans held for sale			435		401		402
	Securities available for sale			12,224		12,359		13,253
	Held-to-maturity securities			5,233		4,826		4,750
	Trading account assets			890		840		592
	Short-term investments			3,176		2,922		3,582
	Other investments			899		899		1,037
		Total earning assets		78,457		77,692		76,717
	Allowance for loan and lease losses			(814)		(834)		(876)
	Cash and due from banks			604		409		696
	Premises and equipment			844		862		900
	Operating lease assets			306		294		303
	Goodwill			979		979		979
	Other intangible assets			108		117		149
	Corporate-owned life insurance			3,438		3,425		3,362
	Derivative assets			549		427		461
	Accrued income and other assets			3,090		3,004		2,864
	Discontinued assets			4,237		4,427		5,084
		Total assets	$	91,798	$	90,802	$	90,639

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	33,637	$	34,373	$	32,689
		Savings deposits		2,450		2,513		2,542
		Certificates of deposit ($100,000 or more)		2,743		2,849		2,918
		Other time deposits		3,505		3,682		4,089
		Total interest-bearing deposits		42,335		43,417		42,238
		Noninterest-bearing deposits		24,781		23,244		24,939
	Deposits in foreign office — interest-bearing			683		605		544
		Total deposits		67,799		67,266		67,721
	Federal funds purchased and securities sold under repurchase agreements			1,213		1,417		1,647
	Bank notes and other short-term borrowings			521		464		298
	Derivative liabilities			451		408		456
	Accrued expense and other liabilities			1,400		1,297		1,421
	Long-term debt			8,213		7,712		6,666
	Discontinued liabilities			1,680		1,819		2,169
		Total liabilities		81,277		80,383		80,378

Equity
	Preferred stock, Series A			291		291		291
	Common shares			1,017		1,017		1,017
	Capital surplus			3,987		3,961		4,045
	Retained earnings			7,950		7,793		7,214
	Treasury stock, at cost			(2,452)		(2,335)		(2,020)
	Accumulated other comprehensive income (loss)			(289)		(324)		(318)
		Key shareholders' equity		10,504		10,403		10,229
	Noncontrolling interests			17		16		32
		Total equity		10,521		10,419		10,261
Total liabilities and equity			$	91,798	$	90,802	$	90,639

Common shares outstanding (000)				876,823		884,869		912,883

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

			Three months ended						Six months ended
			6-30-14		3-31-14		6-30-13		6-30-14		6-30-13
Interest income
	Loans		$	526	$	519	$	539	$	1,045	$	1,087
	Loans held for sale			5		4		5		9		9
	Securities available for sale			71		72		80		143		160
	Held-to-maturity securities			23		22		20		45		38
	Trading account assets			7		6		4		13		10
	Short-term investments			1		1		1		2		3
	Other investments			6		6		8		12		17
		Total interest income		639		630		657		1,269		1,324

Interest expense
	Deposits			31		32		42		63		87
	Federal funds purchased and securities sold under repurchase agreements			—		1		—		1		1
	Bank notes and other short-term borrowings			2		2		2		4		3
	Long-term debt			33		32		32		65		69
		Total interest expense		66		67		76		133		160

Net interest income				573		563		581		1,136		1,164
Provision (credit) for loan and lease losses				10		6		28		16		83
Net interest income (expense) after provision for loan and lease losses				563		557		553		1,120		1,081

Noninterest income
	Trust and investment services income			94		98		100		192		195
	Investment banking and debt placement fees			99		84		84		183		163
	Service charges on deposit accounts			66		63		71		129		140
	Operating lease income and other leasing gains			35		29		22		64		47
	Corporate services income			41		42		43		83		88
	Cards and payments income			43		38		42		81		79
	Corporate-owned life insurance income			28		26		31		54		61
	Consumer mortgage income			2		2		6		4		13
	Mortgage servicing fees			11		15		13		26		21
	Net gains (losses) from principal investing			27		24		7		51		15
	Other income ^(a)			9		14		10		23		32
		Total noninterest income		455		435		429		890		854

Noninterest expense
	Personnel			389		388		406		777		797
	Net occupancy			68		64		72		132		136
	Computer processing			41		38		39		79		78
	Business services and professional fees			41		41		37		82		72
	Equipment			24		24		27		48		53
	Operating lease expense			10		10		11		20		23
	Marketing			13		5		11		18		17
	FDIC assessment			6		6		8		12		16
	Intangible asset amortization			9		10		10		19		22
	Provision (credit) for losses on lending-related commitments			2		(2)		5		—		8
	OREO expense, net			1		1		1		2		4
	Other expense			85		77		84		162		166
		Total noninterest expense		689		662		711		1,351		1,392
Income (loss) from continuing operations before income taxes				329		330		271		659		543
	Income taxes			76		92		72		168		142
Income (loss) from continuing operations				253		238		199		491		401
	Income (loss) from discontinued operations, net of taxes			(28)		4		5		(24)		8
Net income (loss)				225		242		204		467		409
	Less: Net income (loss) attributable to noncontrolling interests			6		—		—		6		1
Net income (loss) attributable to Key			$	219	$	242	$	204	$	461	$	408

Income (loss) from continuing operations attributable to Key common shareholders			$	242	$	232	$	193	$	474	$	389
Net income (loss) attributable to Key common shareholders				214		236		198		450		397

Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.28	$	.26	$	.21	$	.54	$	.42
Income (loss) from discontinued operations, net of taxes				(.03)		—		.01		(.03)		.01
Net income (loss) attributable to Key common shareholders ^(b)				.24		.27		.22		.51		.43

Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.27	$	.26	$	.21	$	.53	$	.42
Income (loss) from discontinued operations, net of taxes				(.03)		—		.01		(.03)		.01
Net income (loss) attributable to Key common shareholders ^(b)				.24		.26		.22		.51		.43

Cash dividends declared per common share			$	.065	$	.055	$	.055	$	.12	$	.105

Weighted-average common shares outstanding (000)				875,298		884,727		913,736		879,986		917,008

Weighted-average common shares and potential common shares outstanding (000) ^(c)				902,137		891,890		918,628		886,684		922,319


(a) For each of the three months ended June 30, 2014, March 31, 2014, and June 30, 2013, net securities gains (losses) totaled less than $1 million. For the three months ended June 30, 2014, March 31, 2014, and June 30, 2013, Key did not have any impairment losses related to securities.

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

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

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

			Second Quarter 2014								First Quarter 2014								Second Quarter 2013
			Average								Average								Average
			Balance		Interest		^(a)	Yield/Rate		^(a)	Balance		Interest		^(a)	Yield/Rate		^(a)	Balance		Interest		^(a)	Yield/Rate		^(a)
Assets
	Loans:^{(b), (c)}
	Commercial, financial and agricultural^(d)		$	26,444	$	219			3.31	%	$	25,390	$	206			3.29	%	$	23,480	$	212			3.63	%
	Real estate — commercial mortgage			7,880		74			3.79			7,807		74			3.84			7,494		78			4.14
	Real estate — construction			1,049		11			4.03			1,091		12			4.55			1,049		11			4.30
	Commercial lease financing			4,257		38			3.54			4,439		42			3.78			4,747		48			3.96
		Total commercial loans		39,630		342			3.45			38,727		334			3.49			36,770		349			3.80
	Real estate — residential mortgage			2,189		24			4.41			2,187		24			4.44			2,176		24			4.53
	Home equity:
		Key Community Bank		10,321		100			3.92			10,305		100			3.92			9,992		98			3.93
		Other		306		6			7.80			325		6			7.77			389		7			7.66
		Total home equity loans		10,627		106			4.03			10,630		106			4.04			10,381		105			4.07
	Consumer other — Key Community Bank			1,479		26			6.97			1,438		25			7.06			1,392		26			7.35
	Credit cards			702		18			10.39			701		20			11.28			697		20			11.91
	Consumer other:
		Marine		926		15			6.18			996		15			6.18			1,206		20			6.24
		Other		58		1			8.09			67		1			7.55			74		1			8.58
		Total consumer other		984		16			6.29			1,063		16			6.26			1,280		21			6.37
		Total consumer loans		15,981		190			4.77			16,019		191			4.83			15,926		196			4.94
		Total loans		55,611		532			3.83			54,746		525			3.88			52,696		545			4.15
	Loans held for sale			458		5			4.14			446		4			3.34			513		5			3.93
	Securities available for sale^{(b), (e)}			12,408		71			2.30			12,346		72			2.33			13,296		79			2.47
	Held-to-maturity securities^(b)			4,973		23			1.87			4,767		22			1.84			4,144		20			1.87
	Trading account assets			985		7			2.80			981		6			2.51			749		4			2.31
	Short-term investments			2,475		1			.17			2,486		1			.17			2,722		1			.23
	Other investments^(e)			888		6			2.64			936		6			2.57			1,048		8			2.61
		Total earning assets		77,798		645			3.31			76,708		636			3.32			75,168		662			3.54
	Allowance for loan and lease losses			(824)								(842)								(890)
	Accrued income and other assets			9,767								9,791								9,770
	Discontinued assets			4,341								4,493								5,096
		Total assets	$	91,082							$	90,150							$	89,144

Liabilities
	NOW and money market deposit accounts		$	34,283		11			.14		$	34,064		12			.14		$	32,849		14			.17
	Savings deposits			2,493		—			.03			2,475		—			.03			2,545		—			.04
	Certificates of deposit ($100,000 or more)^(f)			2,808		10			1.39			2,758		10			1.50			2,975		13			1.79
	Other time deposits			3,587		9			.98			3,679		10			1.07			4,202		14			1.35
	Deposits in foreign office			662		1			.23			660		—			.22			573		1			.24
		Total interest-bearing deposits		43,833		31			.28			43,636		32			.30			43,144		42			.39
	Federal funds purchased and securities sold under repurchase agreements			1,470		—			.19			1,469		1			.17			1,845		—			.14
	Bank notes and other short-term borrowings			545		2			1.54			587		2			1.63			367		2			1.84
	Long-term debt^{(f), (g)}			5,476		33			2.51			5,169		32			2.57			4,401		32			3.25
		Total interest-bearing liabilities		51,324		66			.52			50,861		67			.54			49,757		76			.62
	Noninterest-bearing deposits			23,290								22,658								22,297
	Accrued expense and other liabilities			1,654								1,750								1,653
	Discontinued liabilities^(g)			4,341								4,493								5,089
		Total liabilities		80,609								79,762								78,796

Equity
	Key shareholders' equity			10,459								10,371								10,314
	Noncontrolling interests			14								17								34
		Total equity		10,473								10,388								10,348

		Total liabilities and equity	$	91,082							$	90,150							$	89,144

Interest rate spread (TE)									2.79	%							2.78	%							2.92	%

Net interest income (TE) and net interest margin (TE)						579			2.98	%				569			3.00	%				586			3.13	%
TE adjustment^(b)						6								6								5
	Net interest income, GAAP basis				$	573							$	563							$	581

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

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

(d) Commercial, financial and agricultural average balances for the three months ended June 30, 2014, March 31, 2014, and June 30, 2013, include $95 million, $94 million, and $96 million of assets from commercial credit cards, respectively.

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

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

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

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

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


			Six months ended June 30, 2014								Six months ended June 30, 2013
			Average								Average
			Balance		Interest		^(a)	Yield/Rate		^(a)	Balance		Interest		^(a)	Yield/ Rate		^(a)
Assets
	Loans:^{(b), (c)}
	Commercial, financial and agricultural ^(d)		$	25,920	$	425			3.30	%	$	23,399	$	430			3.71	%
	Real estate — commercial mortgage			7,844		148			3.82			7,554		157			4.19
	Real estate — construction			1,069		23			4.29			1,042		22			4.28
	Commercial lease financing			4,348		80			3.67			4,795		95			3.94
		Total commercial loans		39,181		676			3.47			36,790		704			3.86
	Real estate — residential mortgage			2,188		48			4.42			2,174		49			4.55
	Home equity:
		Key Community Bank		10,313		200			3.92			9,890		194			3.95
		Other		315		12			7.79			401		15			7.68
	Total home equity loans			10,628		212			4.03			10,291		209			4.10
	Consumer other — Key Community Bank			1,459		51			7.01			1,368		51			7.46
	Credit cards			702		38			10.83			700		42			12.26
	Consumer other:
		Marine		961		30			6.18			1,258		40			6.27
		Other		62		2			7.80			80		3			8.26
		Total consumer other		1,023		32			6.28			1,338		43			6.38
	Total consumer loans			16,000		381			4.80			15,871		394			4.97
	Total loans			55,181		1,057			3.86			52,661		1,098			4.21
	Loans held for sale			452		9			3.75			491		9			3.61
	Securities available for sale^{(b), (e)}			12,378		143			2.31			12,684		160			2.59
	Held-to-maturity securities^(b)			4,870		45			1.86			3,981		38			1.90
	Trading account assets			983		13			2.66			729		10			2.86
	Short-term investments			2,480		2			.17			2,860		3			.22
	Other investments^(e)			912		12			2.61			1,054		17			3.10
	Total earning assets			77,256		1,281			3.32			74,460		1,335			3.60
	Allowance for loan and lease losses			(833)								(893)
	Accrued income and other assets			9,779								9,818
	Discontinued assets			4,417								5,156
	Total assets		$	90,619							$	88,541

Liabilities
	NOW and money market deposit accounts		$	34,174		23			.14		$	32,400		28			.17
	Savings deposits			2,484		—			.03			2,509		1			.05
	Certificates of deposit ($100,000 or more)^(f)			2,783		20			1.45			2,943		27			1.89
	Other time deposits			3,633		19			1.02			4,326		30			1.39
	Deposits in foreign office			661		1			.22			514		1			.25
		Total interest-bearing deposits		43,735		63			.29			42,692		87			.41

	Federal funds purchased and securities sold under repurchase agreements			1,470		1			.18			1,879		1			.15
	Bank notes and other short-term borrowings			565		4			1.59			377		3			1.80
	Long-term debt^{(f), (g)}			5,323		65			2.54			4,535		69			3.38
		Total interest-bearing liabilities		51,093		133			.53			49,483		160			.66
	Noninterest-bearing deposits			22,976								21,851
	Accrued expense and other liabilities			1,702								1,725
	Discontinued liabilities^(g)			4,417								5,151
	Total liabilities			80,188								78,210

Equity
	Key shareholders' equity			10,415								10,297
	Noncontrolling interests			16								34
	Total equity			10,431								10,331

	Total liabilities and equity		$	90,619							$	88,541

Interest rate spread (TE)									2.79	%							2.94	%

Net interest income (TE) and net interest margin (TE)						1,148			2.99	%				1,175			3.18	%
TE adjustment^(b)						12								11
	Net interest income, GAAP basis				$	1,136							$	1,164

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

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

(d) Commercial, financial and agricultural average balances for the six months ended June 30, 2014, and June 30, 2013, include $95 million and $94 million of assets from commercial credit cards, respectively.

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

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

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

Noninterest Expense
(dollars in millions)

	Three months ended						Six months ended
	6-30-14		3-31-14		6-30-13		6-30-14		6-30-13
Personnel ^(a)	$	389	$	388	$	406	$	777	$	797
Net occupancy		68		64		72		132		136
Computer processing		41		38		39		79		78
Business services and professional fees		41		41		37		82		72
Equipment		24		24		27		48		53
Operating lease expense		10		10		11		20		23
Marketing		13		5		11		18		17
FDIC assessment		6		6		8		12		16
Intangible asset amortization		9		10		10		19		22
Provision (credit) for losses on lending-related commitments		2		(2)		5		—		8
OREO expense, net		1		1		1		2		4
Other expense		85		77		84		162		166
Total noninterest expense	$	689	$	662	$	711	$	1,351	$	1,392

Average full-time equivalent employees ^(b)		13,867		14,055		14,999		13,961		15,197

(a) Additional detail provided in table below.

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


Personnel Expense
(in millions)

	Three months ended						Six months ended
	6-30-14		3-31-14		6-30-13		6-30-14		6-30-13
Salaries	$	224	$	220	$	227	$	444	$	449
Technology contract labor, net		14		17		19		31		37
Incentive compensation		81		72		77		153		150
Employee benefits		50		63		56		113		115
Stock-based compensation		10		11		9		21		19
Severance		10		5		18		15		27
Total personnel expense	$	389	$	388	$	406	$	777	$	797

Loan Composition
(dollars in millions)

									Percent change 6-30-14 vs.
			6-30-14		3-31-14		6-30-13		3-31-14			6-30-13
Commercial, financial and agricultural ^(a)			$	26,327	$	26,224	$	23,715		.4	%		11.0	%
Commercial real estate:
	Commercial mortgage			7,946		7,877		7,474		.9			6.3
	Construction			1,047		1,007		1,060		4.0			(1.2)
	Total commercial real estate loans			8,993		8,884		8,534		1.2			5.4
Commercial lease financing ^(b)				4,241		4,396		4,774		(3.5)			(11.2)
	Total commercial loans			39,561		39,504		37,023		.1			6.9
Residential — prime loans:
	Real estate — residential mortgage			2,189		2,183		2,176		.3			.6
	Home equity:
		Key Community Bank		10,379		10,281		10,173		1.0			2.0
		Other		300		315		375		(4.8)			(20.0)
	Total home equity loans			10,679		10,596		10,548		.8			1.2
Total residential — prime loans				12,868		12,779		12,724		.7			1.1
Consumer other — Key Community Bank				1,514		1,436		1,424		5.4			6.3
Credit cards				718		698		701		2.9			2.4
Consumer other:
	Marine			888		965		1,160		(8.0)			(23.4)
	Other			51		63		69		(19.0)			(26.1)
	Total consumer other			939		1,028		1,229		(8.7)			(23.6)
	Total consumer loans			16,039		15,941		16,078		.6			(.2)
	Total loans^{(c), (d)}		$	55,600	$	55,445	$	53,101		.3	%		4.7	%



Loans Held for Sale Composition
(dollars in millions)

									Percent change 6-30-14 vs.
			6-30-14		3-31-14		6-30-13		3-31-14			6-30-13
Commercial, financial and agricultural			$	181	$	44	$	22		311.4	%		722.7	%
Real estate — commercial mortgage				221		333		318		(33.6)			(30.5)
Commercial lease financing				10		8		14		25.0			(28.6)
Real estate — residential mortgage				23		16		48		43.8			(52.1)
	Total loans held for sale		$	435	$	401	$	402		8.5	%		8.2	%



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

			2Q14		1Q14		4Q13		3Q13			2Q13
Balance at beginning of period			$	401	$	611	$	699	$	402		$	434
	New originations			978		645		1,669		1,467			1,241
	Transfers from (to) held to maturity, net			(8)		3		1		15			17
	Loan sales			(934)		(596)		(1,750)		(1,181)			(1,292)
	Loan draws (payments), net			(2)		(262)		(8)		(4)			—
	Transfers to OREO / valuation adjustments			—		—		—		—			2
Balance at end of period			$	435	$	401	$	611	$	699		$	402

(a) Loan balances include $94 million, $95 million, and $96 million of commercial credit card balances at June 30, 2014, March 31, 2014, and June 30, 2013, respectively.

(b) Commercial lease financing includes receivables of $375 million and $124 million held as collateral for a secured borrowing at June 30, 2014, and March 31, 2014, respectively. Principal reductions are based on the cash payments received from these related receivables.

(c) At June 30, 2014, total loans include purchased loans of $151 million, of which $15 million were purchased credit impaired. At March 31, 2014, total loans include purchased loans of $159 million, of which $16 million were purchased credit impaired. At June 30, 2013, total loans include purchased loans of $187 million, of which $19 million were purchased credit impaired.

(d) Total loans exclude loans of $4.2 billion at June 30, 2014, $4.4 billion at March 31, 2014, and $5.0 billion at June 30, 2013, related to the discontinued operations of the education lending business.

N/M = Not Meaningful

Exit Loan Portfolio From Continuing Operations
(in millions)

	Balance				Change		Net Loan						Balance on
	Outstanding				6-30-14 vs.		Charge-offs						Nonperforming Status
	6-30-14		3-31-14		3-31-14		2Q14		^(c)	1Q14		^(c)	6-30-14		3-31-14
Residential properties — homebuilder	$	19	$	20	$	(1)		—		$	(1)		$	7	$	7
Marine and RV floor plan		23		23		—		—			—			6		6
Commercial lease financing^(a)		1,154		1,381		(227)	$	(5)			(2)			3		3
Total commercial loans		1,196		1,424		(228)		(5)			(3)			16		16
Home equity — Other		300		315		(15)		1			2			11		11
Marine		888		965		(77)		5			4			15		15
RV and other consumer		61		66		(5)		(1)			1			1		1
Total consumer loans		1,249		1,346		(97)	$	5			7			27		27
Total exit loans in loan portfolio	$	2,445	$	2,770	$	(325)		—		$	4		$	43	$	43

Discontinued operations — education lending business (not included in exit loans above)^(b)	$	4,162	$	4,354	$	(192)	$	7		$	9		$	19	$	20


(a) Includes (1) the business aviation, commercial vehicle, office products, construction and industrial leases; (2) Canadian lease financing portfolios; (3) European lease financing portfolios; and (4) all remaining balances related to lease in, lease out; sale in, lease out; service contract leases; and qualified technological equipment leases.

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

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

Asset Quality Statistics From Continuing Operations
(dollars in millions)

		2Q14			1Q14			4Q13			3Q13			2Q13
Net loan charge-offs	$	30		$	20		$	37		$	37		$	45
Net loan charge-offs to average total loans		.22	%		.15	%		.27	%		.28	%		.34	%
Allowance for loan and lease losses	$	814		$	834		$	848		$	868		$	876
Allowance for credit losses^(a)		851			869			885			908			913
Allowance for loan and lease losses to period-end loans		1.46	%		1.50	%		1.56	%		1.62	%		1.65	%
Allowance for credit losses to period-end loans		1.53			1.57			1.63			1.69			1.72
Allowance for loan and lease losses to nonperforming loans		205.6			185.7			166.9			160.4			134.4
Allowance for credit losses to nonperforming loans		214.9			193.5			174.2			167.8			140.0
Nonperforming loans at period end^(b)	$	396		$	449		$	508		$	541		$	652
Nonperforming assets at period end		410			469			531			579			693
Nonperforming loans to period-end portfolio loans		.71	%		.81	%		.93	%		1.01	%		1.23	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets		.74			.85			.97			1.08			1.30


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

(b) Loan balances exclude $15 million, $16 million, $16 million, $18 million, and $19 million of purchased credit impaired loans at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, respectively.

Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)

	Three months ended									Six months ended
	6-30-14			3-31-14			6-30-13			6-30-14			6-30-13
Average loans outstanding	$	55,611		$	54,746		$	52,696		$	55,181		$	52,661

Allowance for loan and lease losses at beginning of period	$	834		$	848		$	893		$	848		$	888
Loans charged off:
Commercial, financial and agricultural		11			12			15			23			29

Real estate — commercial mortgage		1			2			3			3			16
Real estate — construction		—			2			1			2			2
Total commercial real estate loans		1			4			4			5			18
Commercial lease financing		2			3			2			5			8
Total commercial loans		14			19			21			33			55
Real estate — residential mortgage		2			3			4			5			10
Home equity:
Key Community Bank		10			10			18			20			36
Other		3			3			6			6			12
Total home equity loans		13			13			24			26			48
Consumer other — Key Community Bank		8			8			7			16			16
Credit cards		12			6			8			18			16
Consumer other:
Marine		7			7			9			14			17
Other		—			1			1			1			2
Total consumer other		7			8			10			15			19
Total consumer loans		42			38			53			80			109
Total loans charged off		56			57			74			113			164
Recoveries:
Commercial, financial and agricultural		11			10			7			21			19

Real estate — commercial mortgage		1			1			5			2			10
Real estate — construction		1			14			—			15			8
Total commercial real estate loans		2			15			5			17			18
Commercial lease financing		4			2			4			6			8
Total commercial loans		17			27			16			44			45
Real estate — residential mortgage		1			1			—			2			—
Home equity:
Key Community Bank		1			3			4			4			6
Other		2			1			1			3			3
Total home equity loans		3			4			5			7			9
Consumer other — Key Community Bank		1			2			2			3			4
Credit cards		1			—			2			1			2
Consumer other:
Marine		2			3			4			5			9
Other		1			—			—			1			1
Total consumer other		3			3			4			6			10
Total consumer loans		9			10			13			19			25
Total recoveries		26			37			29			63			70
Net loan charge-offs		(30)			(20)			(45)			(50)			(94)
Provision (credit) for loan and lease losses		10			6			28			16			83
Foreign currency translation adjustment		—			—			—			—			(1)
Allowance for loan and lease losses at end of period	$	814		$	834		$	876		$	814		$	876

Liability for credit losses on lending-related commitments at beginning of period	$	35		$	37		$	32		$	37		$	29
Provision (credit) for losses on lending-related commitments		2			(2)			5			—			8
Liability for credit losses on lending-related commitments at end of period^(a)	$	37		$	35		$	37		$	37		$	37

Total allowance for credit losses at end of period	$	851		$	869		$	913		$	851		$	913

Net loan charge-offs to average total loans		.22	%		.15	%		.34	%		.18	%		.36	%
Allowance for loan and lease losses to period-end loans		1.46			1.50			1.65			1.46			1.65
Allowance for credit losses to period-end loans		1.53			1.57			1.72			1.53			1.72
Allowance for loan and lease losses to nonperforming loans		205.6			185.7			134.4			205.6			134.4
Allowance for credit losses to nonperforming loans		214.9			193.5			140.0			214.9			140.0

Discontinued operations — education lending business:
Loans charged off	$	11		$	13		$	12		$	24		$	28
Recoveries		4			4			5			8			9
Net loan charge-offs	$	(7)		$	(9)		$	(7)		$	(16)		$	(19)

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

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

	6-30-14			3-31-14			12-31-13			9-30-13			6-30-13
Commercial, financial and agricultural	$	37		$	60		$	77		$	102		$	146

Real estate — commercial mortgage		38			37			37			58			106
Real estate — construction		9			11			14			17			26
Total commercial real estate loans		47			48			51			75			132
Commercial lease financing		15			18			19			22			14
Total commercial loans		99			126			147			199			292
Real estate — residential mortgage		89			105			107			98			94
Home equity:
Key Community Bank		178			188			205			198			205
Other		11			11			15			13			16
Total home equity loans		189			199			220			211			221
Consumer other — Key Community Bank		2			2			3			2			3
Credit cards		1			1			4			4			11
Consumer other:
Marine		15			15			26			25			30
Other		1			1			1			2			1
Total consumer other		16			16			27			27			31
Total consumer loans		297			323			361			342			360
Total nonperforming loans^(a)		396			449			508			541			652
Nonperforming loans held for sale		1			1			1			13			14
OREO		12			12			15			15			18
Other nonperforming assets		1			7			7			10			9
Total nonperforming assets	$	410		$	469		$	531		$	579		$	693

Accruing loans past due 90 days or more	$	83		$	89		$	71		$	90		$	80
Accruing loans past due 30 through 89 days		274			267			318			288			251
Restructured loans — accruing and nonaccruing^(b)		266			294			338			349			311
Restructured loans included in nonperforming loans^(b)		142			178			214			228			195
Nonperforming assets from discontinued operations — education lending business		19			20			25			23			19
Nonperforming loans to period-end portfolio loans		.71	%		.81	%		.93	%		1.01	%		1.23	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets		.74			.85			.97			1.08			1.30

(a) Loan balances exclude $15 million, $16 million, $16 million, $18 million, and $19 million of purchased credit impaired loans at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, respectively.

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

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

	2Q14		1Q14		4Q13		3Q13		2Q13
Balance at beginning of period	$	449	$	508	$	541	$	652	$	650
Loans placed on nonaccrual status		79		98		129		161		160
Charge-offs		(56)		(57)		(66)		(78)		(74)
Loans sold		(21)		(3)		(19)		(61)		(5)
Payments		(17)		(21)		(46)		(43)		(36)
Transfers to OREO		(4)		(3)		(5)		(2)		(7)
Loans returned to accrual status		(34)		(73)		(26)		(88)		(36)
Balance at end of period^(a)	$	396	$	449	$	508	$	541	$	652

(a) Loan balances exclude $15 million, $16 million, $16 million, $18 million, and $19 million of purchased credit impaired loans at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, respectively.



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

	2Q14		1Q14		4Q13		3Q13		2Q13
Balance at beginning of period	$	1	$	1	$	13	$	14	$	23
Net advances / (payments)		—		—		(1)		(1)		(1)
Loans sold		—		—		(11)		—		(8)
Balance at end of period	$	1	$	1	$	1	$	13	$	14




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

	2Q14		1Q14		4Q13		3Q13		2Q13
Balance at beginning of period	$	12	$	15	$	15	$	18	$	21
Properties acquired — nonperforming loans		4		3		5		2		7
Valuation adjustments		(1)		(1)		—		(1)		(2)
Properties sold		(3)		(5)		(5)		(4)		(8)
Balance at end of period	$	12	$	12	$	15	$	15	$	18

Line of Business Results
(dollars in millions)

																Percent change 2Q14 vs.
	2Q14			1Q14			4Q13			3Q13			2Q13			1Q14			2Q13
Key Community Bank
Summary of operations
Total revenue (TE)	$	550		$	541		$	561		$	579		$	583			1.7	%		(5.7)	%
Provision (credit) for loan and lease losses		23			9			32			24			41			155.6			(43.9)
Noninterest expense		440			433			461			447			459			1.6			(4.1)
Net income (loss) attributable to Key		55			62			43			68			52			(11.3)			5.8
Average loans and leases		30,025			29,793			29,596			29,495			29,161			.8			3.0
Average deposits		50,146			49,824			50,409			49,652			49,473			.6			1.4
Net loan charge-offs		33			28			31			27			42			17.9			(21.4)
Net loan charge-offs to average total loans		.44	%		.38	%		.42	%		.36	%		.58	%		N/A			N/A
Nonperforming assets at period end	$	331		$	357		$	396		$	383		$	476			(7.3)			(30.5)
Return on average allocated equity		8.19	%		9.05	%		5.97	%		9.24	%		7.10	%		N/A			N/A
Average full-time equivalent employees		7,529			7,656			7,805			7,990			8,316			(1.7)			(9.5)


Key Corporate Bank
Summary of operations
Total revenue (TE)	$	394		$	391		$	411		$	384		$	378			.8	%		4.2	%
Provision (credit) for loan and lease losses		—			(1)			(10)			12			(7)			N/M			N/M
Noninterest expense		208			200			216			210			194			4.0			7.2
Net income (loss) attributable to Key		118			121			133			105			121			(2.5)			(2.5)
Average loans and leases		22,361			21,445			20,336			19,949			19,536			4.3			14.5
Average loans held for sale		429			429			668			422			466			—			(7.9)
Average deposits		16,127			15,800			17,370			16,123			15,606			2.1			3.3
Net loan charge-offs		(2)			(14)			2			6			(4)			N/M			N/M
Net loan charge-offs to average total loans		(.04)	%		(.26)	%		.04	%		.12	%		(.08)	%		N/A			N/A
Nonperforming assets at period end	$	22		$	53		$	55		$	111		$	125			(58.5)			(82.4)
Return on average allocated equity		32.62	%		33.25	%		33.61	%		26.17	%		30.58	%		N/A			N/A
Average full-time equivalent employees		1,943			1,926			1,901			1,951			1,886			.9			3.0

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

SOURCE KeyCorp

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Press Release

KeyCorp Reports Second Quarter 2014 Net Income Of $242 Million, Or $.27 Per Common Share, Earnings Per Share Up 29% From Prior Year