CLEVELAND, Jan. 24, 2012 /PRNewswire/ --

• Net income from continuing operations of $201 million, or $.21 per common share, for the fourth quarter of 2011
• Full year net income from continuing operations of $857 million, or $.92 per common share
• Net interest margin of 3.13%, up four basis points from the third quarter of 2011
• Average total loans increased $656 million from the third quarter of 2011
• Net charge-offs declined to $105 million, or .86% of average loan balances for the fourth quarter of 2011
• Nonperforming loans declined to $727 million, or 1.47% of period-end loans, and nonperforming assets decreased to $859 million
• Loan loss reserve at 2.03% of total period-end loans and 138% of nonperforming loans at December 31, 2011
• VISA planned litigation escrow deposit resulted in a $24 million charge during the fourth quarter of 2011
• Tier 1 common equity and Tier 1 risk-based capital ratios estimated at 11.28% and 13.01%, respectively, at December 31, 2011

KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $201 million, or $.21 per common share. Key's fourth quarter 2011 results compare to net income from continuing operations attributable to Key common shareholders of $292 million, or $.33 per common share, for the fourth quarter of 2010. The results for the fourth quarter of 2011 were negatively impacted by a $24 million charge resulting from VISA's late fourth quarter announcement of a planned litigation escrow deposit. In addition, Key recorded a $28 million gain on the sale of Tuition Management Systems during the fourth quarter of 2010. Fourth quarter 2011 net income attributable to Key common shareholders was $194 million compared to net income attributable to Key common shareholders of $279 million for the same quarter one year ago.

For 2011, net income from continuing operations attributable to Key common shareholders was $857 million, or $.92 per common share, compared to net income from continuing operations attributable to Key common shareholders of $413 million, or $.47 per common share, for 2010. The results for 2011 reflect lower credit costs and an improvement in noninterest expense as compared to 2010. Net income attributable to Key common shareholders for the year ended December 31, 2011, was $813 million compared to net income attributable to Key common shareholders of $390 million for 2010.

During the fourth quarter of 2011, the Company continued to benefit from improved asset quality. Nonperforming loans decreased by $341 million and nonperforming assets declined by $479 million from the year-ago quarter to $727 million and $859 million, respectively. Net charge-offs declined to $105 million, or .86% of average loan balances for the fourth quarter of 2011, compared to $256 million, or 2.00% of average loan balances for the same period one year ago.

Chairman and Chief Executive Officer Beth Mooney stated, "Key's fourth quarter results reflect continued improvement in credit quality and the third consecutive quarter of growth in our commercial, financial and agricultural loan portfolio. We are encouraged by this growth and believe it demonstrates our ability to leverage the alignment of our franchise across business lines to support the needs of our clients. Further, these results confirm our belief that the inflection point for loan growth was reached in the third quarter of 2011."

The Company originated new or renewed lending commitments to consumers and businesses of approximately $10.5 billion during the quarter and $36.6 billion for 2011. This annual amount compares to approximately $29.5 billion in 2010, an increase of 24%.

Mooney continued: "We are pleased by the positive survey results that tell us that Key's customer satisfaction, loyalty and retention scores continue to exceed those of other large U.S. banks. This includes the customer satisfaction survey by American Customer Satisfaction Index showing that Key is one of only two large banks that improved its overall customer satisfaction score for two consecutive years. This accomplishment, in the face of an extremely difficult operating environment, demonstrates the success of our client-focused relationship strategy. Key also ranked fifth nationwide in overall customer satisfaction in the J.D. Power and Associates 2011 Small Business Banking Satisfaction Survey."

At December 31, 2011, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios were 11.28% and 13.01%, compared to 11.28% and 13.49%, respectively, at September 30, 2011.

On January 12, 2012, Key signed a purchase and assumption agreement to acquire 37 retail banking branches in Buffalo and Rochester, NY. The deposits associated with these branches total approximately $2.4 billion, while loans total approximately $400 million.

"Viewed in a broader perspective, this acquisition marks an important milestone for Key," said Mooney. "During the challenging last few years, we have focused on taking actions to strengthen our balance sheet, fortify our capital, effectively manage risk and expenses, and focus on our core relationship business. Those actions, while sometimes difficult, have now positioned us so that we can, in a disciplined manner, act on opportunities to strengthen our franchise."

The following table shows Key's continuing and discontinued operating results for the comparative quarters and for the years ended December 31, 2011 and 2010.

(a) 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 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. As a result of these decisions, Key has accounted for these businesses as discontinued operations. The loss from discontinued operations for the year ended December 31, 2011, was primarily attributable to fair value adjustments related to the education lending securitization trusts.

(b) The year ended December 31, 2011, includes a $49 million deemed dividend recorded in the first quarter of 2011 related to the repurchase of the $2.5 billion Series B Preferred Stock.

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

SUMMARY OF CONTINUING OPERATIONS

Taxable-equivalent net interest income was $563 million for the fourth quarter of 2011, and the net interest margin was 3.13%. These results compare to taxable-equivalent net interest income of $635 million and a net interest margin of 3.31% for the fourth quarter of 2010. The decrease in net interest income is attributable to both a decline in earning assets and the net interest margin. The net interest margin has been under pressure as a result of the continuation of the low rate environment contracting the spread between lending rates and funding costs.

Compared to the third quarter of 2011, taxable-equivalent net interest income increased by $8 million, and the net interest margin improved by four basis points. The improvement in the net interest income and net interest margin resulted from a decline in Key's cost of funds due to rate reductions on deposits, maturities of higher rate certificates of deposit, and the impact of certain capital securities redemptions during the third and fourth quarters of 2011. In addition to the improved funding mix, a decrease in the balance of lower yielding short-term investments during the fourth quarter of 2011 also contributed to the margin improvement.

Key's noninterest income was $414 million for the fourth quarter of 2011, compared to $526 million for the year-ago quarter. Investment banking and capital markets income decreased $39 million compared to the same period one year ago, which includes a $24 million charge resulting from VISA's late fourth quarter announcement of a planned increase to its litigation escrow deposit. Other income also decreased from the year-ago quarter due to a $28 million gain from the sale of Tuition Management Systems in the fourth quarter of 2010. Also contributing to the decline in noninterest income were decreases in operating lease income of $17 million and net securities gains (losses) of $12 million. Electronic banking fees also declined $13 million as a result of new government pricing controls on debit transactions which were effective October 1, 2011.

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

Compared to the third quarter of 2011, noninterest income decreased by $69 million. The decrease was a result of lower net gains (losses) from principal investing (including results attributable to noncontrolling interests) of $42 million and a $10 million loss associated with the redemption of certain capital securities compared to a $13 million gain in the third quarter. Electronic banking fees also declined $15 million as a result of new government pricing controls on debit transactions which were effective October 1, 2011. These declines were partially offset by an increase in net gains (losses) from loan sales of $9 million.

Key's noninterest expense was $717 million for the fourth quarter of 2011, compared to $744 million for the same period last year. The improvement in expense levels resulted from declines of $20 million in FDIC deposit insurance premiums, $10 million in operating lease expense and reductions across several other expense categories. These decreases were partially offset by a $21 million increase in employee benefits expense due to higher medical claims expense compared to the year ago quarter when Key recorded a reduced amount due to favorable experience. In addition, the fourth quarter reflected a credit of $11 million in the provision (credit) for losses on lending-related commitments compared to a credit of $26 million in the same period one year ago.

Compared to the third quarter of 2011, noninterest expense increased by $25 million. Business services and professional fees and miscellaneous expenses both increased by $10 million and personnel expense increased $5 million. Marketing expense also increased $8 million as Key continues to promote, support and advertise relationship-based products, services and capabilities. These increases were partially offset by a decrease of $10 million in the provision (credit) for losses on lending-related commitments.

ASSET QUALITY

Key's provision for loan and lease losses was a credit of $22 million for the fourth quarter of 2011, compared to a credit of $97 million for the year-ago quarter and a charge of $10 million for the third quarter of 2011. Key's allowance for loan and lease losses was $1 billion, or 2.03% of total period-end loans, at December 31, 2011, compared to 2.35% at September 30, 2011, and 3.20% at December 31, 2010.

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

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

Net loan charge-offs for the quarter totaled $105 million, or .86% of average loans. These results compare to $256 million, or 2.00%, for the same period last year and $109 million, or .90%, for the previous quarter. Net loan charge-offs have declined for the last eight consecutive quarters and were less than one percent of average loans for the second consecutive quarter.

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

(a) Credit amount indicates recoveries exceeded charge-offs.

Compared to the third quarter of 2011, net loan charge-offs in the commercial loan portfolio decreased by $13 million which was attributable to a decline in the real estate – construction category. As shown in the table on page 6, Key's exit loan portfolio accounted for $22 million, or 21%, of Key's total net loan charge-offs for the fourth quarter of 2011. Net charge-offs in the exit loan portfolio decreased by $5 million from the third quarter of 2011, primarily driven by a decrease in net charge-offs in the residential properties - homebuilder loan portfolio.

At December 31, 2011, Key's nonperforming loans totaled $727 million and represented 1.47% of period-end portfolio loans, compared to 1.64% at September 30, 2011, and 2.13% at December 31, 2010. Nonperforming assets at December 31, 2011, totaled $859 million and represented 1.73% of portfolio loans and OREO and other nonperforming assets, compared to 1.89% at September 30, 2011, and 2.66% at December 31, 2010. The following table illustrates the trend in Key's nonperforming assets by loan type over the past five quarters.

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

Nonperforming assets continued to decrease during the fourth quarter of 2011, representing the ninth consecutive quarterly decline. As shown in the following table, Key's exit loan portfolio accounted for $119 million, or 13.9%, of Key's total nonperforming assets at December 31, 2011.

The following table shows the composition of Key's exit loan portfolio at December 31, 2011, and September 30, 2011, the net charge-offs recorded on this portfolio for the third and fourth quarters of 2011, and the nonperforming status of these loans at December 31, 2011, and September 30, 2011.

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

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

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

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2011.

(a) 12-31-11 ratio is estimated.

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

As shown in the preceding table, at December 31, 2011, Key's estimated Tier 1 common equity and Tier 1 risk-based capital ratios stood at 11.28% and 13.01%, respectively. In addition, the tangible common equity ratio was 9.88% at December 31, 2011.

The changes in Key's outstanding common shares over the past five quarters are summarized in the following table.

During the first quarter of 2011, Key successfully completed a $625 million common equity offering and a $1 billion debt offering. The proceeds from these offerings, along with other available funds, were used to repurchase the $2.5 billion of Fixed-Rate Perpetual Preferred Stock, Series B issued to the U.S. Treasury Department as a result of Key's participation in the U.S. Treasury's Capital Purchase Program.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. The specific lines of business that comprise each of the major business segments are described under the heading "Line of Business Descriptions." For more detailed financial information pertaining to each business segment and its respective lines of business, see the tables at the end of this release.

TE = Taxable Equivalent, N/M = Not Meaningful

TE = Taxable Equivalent, N/M = Not Meaningful

Key Community Bank Summary of Operations

Key Community Bank recorded net income attributable to Key of $40 million for the fourth quarter of 2011, compared to net income attributable to Key of $58 million for the year-ago quarter.

Taxable-equivalent net interest income declined by $29 million, or 7%, from the fourth quarter of 2010. Average loans and leases and average deposits were essentially even with the level one year ago; however, given the continued low rate environment the value derived from these assets and deposits was less in the current period.

Noninterest income decreased by $22 million, or 11%, from the year-ago quarter. Electronic banking fees declined $13 million as a result of new government pricing controls on debit transactions which were effective October 1, 2011. Investment banking and capital markets income also decreased $5 million from one year ago.

The provision for loan and lease losses declined by $44 million, or 59%, compared to the fourth quarter of 2010 due to lower net charge-offs and nonperforming loans from the same period one year ago. Net charge-offs were $71 million for the fourth quarter of 2011, down $44 million from the $115 million incurred in the same period one year ago. Nonperforming loans declined to $415 million at December 31, 2011, down $82 million from one year ago.

Noninterest expense increased by $20 million, or 4%, from the year-ago quarter. Personnel expense increased $17 million and real estate costs associated with investments in Key's branch network increased $18 million. These increases were partially offset by a reduction in FDIC deposit insurance premiums of $18 million from one year ago.

TE = Taxable Equivalent, N/M = Not Meaningful

Key Corporate Bank Summary of Operations

Key Corporate Bank recorded net income attributable to Key of $156 million for the fourth quarter of 2011, compared to net income attributable to Key of $289 million for the same period one year ago. This decrease was primarily driven by a $202 million reduction in a credit to the provision for loan and lease losses compared to the same period one year ago.

Taxable-equivalent net interest income decreased by $29 million, or 14%, compared to the fourth quarter of 2010, due to lower average deposits and average earning assets. Average deposits declined by $1.6 billion, or 13%, from one year ago primarily because Key moved $1.5 billion in escrow balances out of the Real Estate Capital line of business to a third party in the first quarter of 2011. Average earning assets decreased by $969 million, or 5%, from the year-ago quarter, while lower levels of nonperforming assets and better pricing helped to partially offset volume-related declines.

Noninterest income increased by $6 million, or 3%, from the fourth quarter of 2010. Other income increased $22 million as a result of gains on the disposition of certain investments held by the Real Estate Capital line of business. This increase was partially offset by decreases in operating lease income of $8 million, investment banking and capital markets income of $5 million and trust and investment services income of $4 million.

The provision for loan and lease losses in the fourth quarter of 2011 was a credit of $61 million compared to a credit of $263 million for the same period one year ago. Key Corporate Bank continued to experience improved asset quality for the ninth quarter in a row. Net charge-offs were $12 million for the fourth quarter of 2011, down $49 million from the $61 million incurred in the same period one year ago. Nonperforming loans declined to $294 million at December 31, 2011, down $281 million from one year ago.

Noninterest expense decreased by $13 million, or 5%, from the fourth quarter of 2010. Contributing to the improvement in expense levels were decreases in various miscellaneous expense items of $22 million, operating lease expense of $6 million, and business services and professional fees of $4 million from the year-ago quarter. These improvements were partially offset by an increase in personnel expense of $12 million. In addition, the fourth quarter reflected a credit to the provision for losses on lending-related commitments of $10 million compared to a credit of $18 million for the same period one year ago.

Other Segments

Other Segments consist of Corporate Treasury, Key's Principal Investing unit and various exit portfolios. Other Segments generated net income attributable to Key of $24 million for the fourth quarter of 2011, compared to net income attributable to Key of $3 million for the same period last year. These results were primarily attributable to a decrease in the provision for loan and lease losses of $81 million in the exit portfolio partially offset by decreases in various miscellaneous income items of $41 million and net interest income of $12 million.

Line of Business Descriptions

Key Community Bank

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

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

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

Key Corporate Bank

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

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

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

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

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

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

Key traces its history back more than 160 years and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key has assets of approximately $89 billion at December 31, 2011.

Key provides deposit, lending, cash management and investment services to individuals and small 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.

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 Tuesday, January 24, 2012. An audio replay of the call will be available through January 31, 2012.

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

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key's financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management's current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key's control. Key's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key's actual results to differ materially from those described in the forward-looking statements can be found in KeyCorp's Annual Report on Form 10-K for the year ended December 31, 2010, and its Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, June 30, 2011, and September 30, 2011, 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.

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

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

(c) 12-31-11 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).

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

GAAP to Non-GAAP Reconciliations

(dollars in millions, except per share amounts)

The table below presents the computations of certain financial measures related to "tangible common equity," "Tier 1 common equity" and "pre-provision net revenue." The tangible common equity ratio has become a focus of some investors, and management believes that this ratio may assist investors in analyzing Key's capital position absent the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and composition of capital, the calculation of which is prescribed in federal banking regulations. As a result of the Supervisory Capital Assessment Program, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 capital, known as Tier 1 common equity. Because the Federal Reserve has long indicated that voting common shareholders' equity (essentially Tier 1 capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 capital, such a focus is consistent with existing capital adequacy guidelines and does not imply a new or ongoing capital standard. Because Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations, this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key's capital adequacy using tangible common equity and Tier 1 common equity, management believes it is useful to provide investors the ability to assess Key's capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

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.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components, and to ensure that Key's performance is properly reflected to facilitate period-to-period comparisons. Although these non-GAAP financial measures are frequently used by investors 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.

(a) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the December 31, 2006 adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.

(b) Other assets deducted from Tier 1 capital and net risk-weighted assets consist of disallowed deferred tax assets of $158 million at December 31, 2010, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at December 31, 2011 and September 30, 2011.

(c) 12-31-11 amount is estimated.

GAAP = U.S. generally accepted accounting principles

(a) For the three months ended December 31, 2011, September 30, 2011, and December 31, 2010, Key did not have any impairment losses related to securities.

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

(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.

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

(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.

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

(a) Excluded at December 31, 2011, September 30, 2011, and December 31, 2010, are loans in the amount of $5.8 billion, $6.0 billion, and $6.5 billion, respectively, related to the discontinued operations of the education lending business.

(b) Excluded at December 31, 2010, are loans held for sale in the amount of $15 million related to the discontinued operations of the education lending business. There were no loans held for sale in the discontinued operations of the education lending business at December 31, 2011, and September 30, 2011.

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

SOURCE KeyCorp