KeyCorp (KEY) 8-K Keycorp Reports Fourth Quarter 2014

KeyCorp

Fourth Quarter 2014 Earnings Review

January 22, 2015

Beth E. Mooney

Chairman and

Chief Executive Officer

Don Kimble

Chief Financial Officer

Exhibit 99.2

2

FORWARD-LOOKING STATEMENTS AND ADDITIONAL

INFORMATION DISCLOSURE

This presentation contains forward-looking statements, including statements about our financial condition, results of operations, asset quality trends,

capital

levels

and

profitability.

Forward-looking

statements

can

often

be

identified

by

words

such

as

“outlook,”

“goal,”

“objective,”

“plan,”

“expect,”

“anticipate,”

“assume,”

“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.

Risks and uncertainties include but are not limited to: (1) deterioration of commercial real estate market fundamentals; (2) declining asset prices; (3)

adverse changes in credit quality trends; (4) changes in local, regional and international business, economic or political conditions; (5) the extensive

and increasing regulation of the U.S. financial services industry; (6) increasing capital and liquidity standards under applicable regulatory rules; (7)

unanticipated changes in our liquidity position, including but not limited to, changes in the cost of liquidity, our ability to enter the financial markets and

to secure alternative funding sources; (8) our ability to receive dividends from our subsidiary, KeyBank; (9) downgrades in our credit ratings or those

of

KeyBank;

(10)

operational

or

risk

management

failures

by

us

or

critical

third-parties;

(11)

breaches

of

security

or

failures

of

our

technology

systems

due

to

technological

or

other

factors

and

cybersecurity

threats;

(12)

adverse

judicial

proceedings;

(13)

the

occurrence

of

natural

or

man-made

disasters or conflicts or terrorist attacks; (14) a reversal of the U.S. economic recovery due to economic, political or other shocks; (15) our ability to

anticipate interest rate changes and manage interest rate risk; (16) deterioration of economic conditions in the geographic regions where we operate;

(17)

the

soundness

of

other

financial

institutions;

(18)

our

ability

to

attract

and

retain

talented

executives

and

employees,

to

effectively

sell

additional

products

or

services

to

new

or

existing

customers,

and

to

manage

our

reputational

risks;

(19)

our

ability

to

timely

and

effectively

implement

our

strategic initiatives; (20) increased competitive pressure due to industry consolidation; (21) unanticipated adverse effects of acquisitions and

dispositions of assets or businesses; and (22) our ability to develop and effectively use the quantitative models we rely upon in our business planning.

We provide greater detail regarding these factors in our 2013 Form 10-K and subsequent filings, which are available online at www.key.com/ir and

www.sec.gov. 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.

This

presentation

also

includes

certain

Non-GAAP

financial

measures

related

to

“tangible

common

equity,”

“Tier

1

common

equity,”

“pre-provision

net

revenue,”

and

“cash

efficiency

ratio.”

Management

believes

these

ratios

may

assist

investors,

analysts

and

regulators

in

analyzing

Key’s

financials.

Although Key has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components, they

have

limitations

as

analytical

tools

and

should

not

be

considered

in

isolation,

or

as

a

substitute

for

analysis

of

results

under

GAAP.

For

more

information on these calculations and to view the reconciliations to the most comparable GAAP measures, please refer to the Appendix to this

presentation and to page 99 of our 2013 Form 10-K.

3

EPS up 8% reflecting successful business model and investments to grow

Positive operating leverage, with revenue growth of 4% and expenses down 1%

-

Cash efficiency ratio of 64.4%

Total average loans up 5%, driven by CF&A balances up 12%

Noninterest income up 8%; record high quarter for investment banking and debt

placement fees

Asset quality remains strong, with NCOs below targeted range

-

NCOs down 14%, representing 22 bps of average loans in 4Q14

-

NPAs down 18%

New business originations are higher quality than overall book

Remaining disciplined with structure and relationship focus

Strong Risk

Management

Repurchased

$128

million

of

common

shares

in

4Q14

(a)

Committed to capital priorities: organic growth, dividends, repurchases,

opportunistic growth

Positive

Operating

Leverage

Investor Highlights –

4Q14 vs. prior year

Disciplined

Capital

Management

(a)

Common share repurchase amount includes repurchases to offset issuances of common shares under our employee compensation plans

4

EPS up 12%; generated positive operating leverage

Business model and strategic investments drove core business activity

Total average loans up 5% from prior year

-

Grew both commercial and consumer loan balances

Noninterest income up 2% with positive trends in several fee-based businesses

-

Record high year for investment banking and debt placement fees

Expenses well-controlled, down 2% from prior year

-

Down 3% excluding the acquisition of Pacific Crest Securities in

September 2014

Asset quality remains strong, with NCOs below targeted range

-

NCOs down 33%, representing 20 bps of average loans in 2014

-

NPAs down 18% from prior year

New business originations are higher quality than overall book

Remaining disciplined with structure and relationship focus

Strong Risk

Management

2014

shareholder

payout

of

82%

(a)

-

Repurchased $496 million of common shares in 2014

(a)

-

Increased quarterly common share dividend by 18% during 2014

Committed to capital priorities: organic growth, dividends, repurchases,

opportunistic growth

Positive

Operating

Leverage

Investor Highlights –

2014

Disciplined

Capital

Management

(a)

The 2014 shareholder payout and common share repurchase amounts include repurchases to offset issuances of common shares under our

employee compensation plans

5

Financial Review

*

*

*

*

*

*

*

*

*

*

6

Financial Highlights

TE = Taxable equivalent, EOP = End of Period

(a)

From continuing operations

(b)

Year-over-year average balance growth

(c) 

From consolidated operations

(d)

12-31-14 ratios are estimated

(e)

Non-GAAP measure: see Appendix for reconciliation

EPS –

assuming dilution

$ .28

$ .23

$  .27

$  .26

$  .26

Cash efficiency ratio

(e)

64.4

%

69.5

%

65.8

%

64.9

%

67.4

%

excl. efficiency and pension charges

63.4

66.0

63.4

63.9

65.1

Net interest margin (TE)

2.94

2.96

2.98

3.00

3.01

Return on average total assets

1.12

.92

1.14

1.13

1.08

Total loans and leases

5

%

5

%

6

%

4

%

3

%

CF&A loans

12

11

13

9

8

Deposits (excl. foreign deposits)

2

4

2

4

8

Tier 1 common equity

(d), (e)

11.2

%

11.3

%

11.3

%

11.3

%

11.2

%

Tier 1 risk-based capital

(d)

11.9

12.0

12.0

12.0

12.0

Tangible common equity to tangible assets

(e)

9.9

10.3

10.2

10.1

9.8

NCOs to average loans

.22

%

.22

%

.22

%

.15

%

.27

%

NPLs to EOP portfolio loans

.73

.71

.71

.81

.93

Allowance for loan losses to EOP loans

1.38

1.43

1.46

1.50

1.56

Balance

Sheet

Growth

(a),

(b)

Capital

(c)

Asset

Quality

(a)

Financial

Performance

(a)

Metrics

4Q14

3Q14

2Q14

1Q14

4Q13

7

Average total loans up 5% in 4Q14 from prior year,

driven by CF&A up 12%

Achieved guidance with FY 2014 average loan

balances up 5%

–

Both commercial and consumer loans up

Total commitments continue to grow with

utilization relatively stable

High quality new loan originations: consistent with

moderate risk profile

Loan Growth

$ in billions

Highlights

Average Commercial, Financial & Agricultural Loans

Average Loans

Exit Portfolios

Home Equity & Other

Total Commercial

$ in billions

$56.5

$53.6

8

Improving Deposit Mix

Highlights

Funding Cost

Funding cost continues to improve

Transaction deposit balances up 4% from 4Q13

Deposit growth from prior year (+2%) reflects

inflows from commercial clients as well as

commercial mortgage servicing

Large commercial client inflows drove balances 2%

higher than 3Q14

Average

Deposits

(a)

$ in billions

Note: Transaction deposits include noninterest-bearing, as well as NOW and MMDA

(a)

Excludes

deposits

in

foreign

office

Cost of total deposits

(a)

Interest-bearing liability cost

CDs and other time deposits

Savings

Noninterest-bearing

NOW and MMDA

$69.1

$67.8

9

Net Interest Income and Margin

TE = Taxable equivalent

Highlights

Net Interest Income & Net Interest Margin Trend (TE)

Net interest income relatively stable with prior year,

as loan growth and a more favorable mix of lower-

cost deposits mostly offset lower earning asset

yields

Modest growth from prior quarter (up 1%) driven by

higher earning asset levels and loan fees, which

more than offset lower earning asset yields

Maintaining moderate asset sensitive position

–

Naturally asset sensitive balance sheet flows:

approximately 70% of loans variable rate

–

High quality investment portfolio with average

life of 3.6 years

–

Flexibility to quickly adjust interest rate risk

position

NIM Change (bps):

vs.  3Q14

Higher levels of liquidity

(.03)

Lower earning asset yields

(.03)

Growth in commercial loans & HFS

.04    

Total Change

(.02)

Net interest income (TE)

NIM (TE)

$ in millions; continuing operations

10

Noninterest Income

TE = Taxable equivalent

Highlights

Noninterest Income

Noninterest income up 8% from prior year and up

18% from prior quarter, benefitting from:

–

Momentum in core businesses

–

Record quarter and year for investment

banking and debt placement fees

–

Strategic investments in fee-based

businesses

Full year noninterest income grew 2% from 2013,

driven by core businesses, including investment

banking and debt placement

4Q14 Noninterest Income Diversity

$ in millions; continuing operations

(a)

Other includes corporate-owned life insurance, principal investing, etc.

Leveraged lease termination gains

$490

$453

Investment Banking & Debt Placement: Record Qtr.

$ in millions; continuing operations

Investment Banking & Debt Placement Fees:

Trailing Twelve Months

11

Focused Expense Management

Noninterest Expense

$ in millions

Highlights

$704

4Q14 Expense Detail

$712

4Q expenses down 1% from prior year, with benefit

from continuous improvement efforts and lower

efficiency charges offsetting growth related to

Pacific Crest acquisition

Expenses down 2% from 2013, achieving full year

guidance and driving positive operating leverage in

2014

Cash efficiency ratio improved to 64% in 4Q14, or

63% excluding pension and efficiency charges

Efficiency charges:

Pension charges:

$15

$37

$16

$22

$10

$2

$25

$24

$ in millions

$15

$20

Pension settlement

Efficiency charges

All remaining expense

Pacific Crest

(a)

Non-GAAP measure: see Appendix for reconciliation

(b)

Excludes one-time gains of $54 million related to the

redemption of trust preferred securities

Cash Efficiency Ratio

(a)

Efficiency and pension charges, as a

% of revenue:

1.5%

1.5%

3.6%

3.9%

2.3%

1.0%

Cash efficiency ratio,

excluding efficiency

and pension charges

2.3%

3.5%

(b)

.8%

$8

$3

1.0%

Net Charge-offs & Provision for Loan and Lease Losses

Highlights

12

Nonperforming Assets

NPLs

NPLs to period-end loans

NCOs

Provision for loan and

lease losses

NCOs to average loans

$ in millions

$ in millions

NPLs held for sale,

OREO & other NPAs

Continued Improvement in Asset Quality

Net loan charge-offs decreased 14% from 4Q13 to

$32 MM, or 22 bps of average loans

Total gross charge-offs down 26% from 4Q13 and

flat with 3Q14

Nonperforming assets down 18% from prior year

Allowance for Loan and Lease Losses

Allowance for loan and

lease losses to NPLs

Allowance for loan

and lease losses

$ in millions

$531

$436

13

Disciplined capital management

–

Repurchased $128 MM of common shares

in 4Q14

Total common share repurchases of $496 MM in

2014, contributing to shareholder payout of 82%

including the impact of dividends

Tier 1 Common Equity

(a), (b)

Tangible Common Equity to Tangible Assets

(a)

Strong Capital

Highlights

Book Value per Share

Note: The 2014 shareholder payout and common share repurchase amounts include repurchases to offset issuances of common shares under our

employee compensation plans

(a)

Non-GAAP measure: see Appendix for reconciliations

(b)

12-31-14

ratio

is

estimated

Outlook and Expectations

Average Loans

Mid-single digit growth vs. FY 2013

•

Mid-single digit growth vs. FY 2014

Net Interest Income

Relatively stable from 2013, with slight

downward pressure from competitive

environment

•

Up low-to-mid single digit percentage vs. FY 2014

(low

single-digits without the benefit of higher rates)

•

NIM stable-to-slightly higher later in the year

Noninterest Income

Low single-digit growth compared to

prior year

•

Mid-single digit growth compared to 2014, including full

year impact of Pacific Crest

Expense

Low to mid-single digit percentage

decline from 2013

Efficiency /

Productivity

Positive operating leverage

•

Positive operating leverage

Asset Quality

Net charge-offs to average loans

below targeted range of  40 ��

60 bps

•

Net charge-offs to average loans below targeted range

of 40 –

60 bps 

•

Provision expected to approximate net charge-offs

Capital

Disciplined execution of 2014 capital

plan, including dividends and share

repurchases

•

Disciplined management of capital including dividends

and share repurchases

14

Guidance

ranges:

relatively

stable:

+/-

2%;

low

single-digit:

<5%;

mid-single

digit:

4%

-

6%;

low

double-digit:

10%

-

13%

FY 2014

FY 2015

•

Relatively stable with 2014

15

Appendix

*

*

*

*

*

*

*

*

*

*

Progress on Targets for Success

(a) 

Continuing operations, unless otherwise noted

(b)

Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits (excluding deposits in foreign office)

(c)

Excludes intangible asset amortization; non-GAAP measure: see Appendix for reconciliation

16

Balance Sheet

Efficiency

Moderate Risk

Profile

High Quality,

Diverse

Revenue Streams

Positive

Operating

Leverage

Disciplined

Capital

Management

Metrics

(a)

4Q14

3Q14

Targets

Loan

to

deposit

ratio

(b)

NCOs to average loans

Provision to average loans

Net interest margin

Noninterest income to total revenue

Cash

efficiency

ratio

(c)

Return on average assets

85%

87%

.22%

.22%

64.4%

69.5%

1.12%

.92%

.15%

.15%

2.94%

2.96%

45%

42%

90% -100%

40 -

60 bps

LT: >3.50%

LT: <60%

1.00% -1.25%

>40%

17

Efficiency Ratio: Driving to 60% and Below

Business plans and macroeconomic environment provide path to an efficiency    

ratio below 60%

Cash

Efficiency

Ratio

(a)

Outlook

(a)

Non-GAAP measure: see Appendix for reconciliation

(b)

Assumes implied forward curve

2-3 year outlook: 60%

Long-term, committed to moving below 60%

(b)

Oil & Gas

Longstanding history, expertise and relationships

18

Strong Portfolio Characteristics

>10 years of experience in energy lending with >20

specialists dedicated to oil & gas

Focused on middle market companies, aligned with our

relationship strategy

Portfolio regularly stress tested

Primarily secured by proven reserves

Total Loans Outstanding, 12/31/14

>40% of clients’

2015 production is hedged

Relationships

contribute

to

noninterest

income;

~5%

of

FY14

investment

banking

and

debt

placement

fees

Solid credit quality, with net charge-offs lower than overall

portfolio

Allowance reflects estimated impact of current oil prices

Oil & Gas: 2%

Other: 98%

Oil & Gas Outstanding Balances, 12/31/14

Oilfield Services

Upstream: 67%,

$0.7 B

Midstream: 24%,   

$0.3 B

Downstream: 9%,

$0.1 B

$0.1 B

Oil & Gas

$1.1 B

19

Average Total Investment Securities

Highlights

Average AFS securities

$ in billions

High Quality Investment Portfolio

Portfolio composed primarily of GNMA and GSE-

backed MBS and CMOs

Currently reinvesting cash flows into GNMA

securities in preparation for upcoming

regulatory liquidity requirements

–

42% of total portfolio was GNMA at

12/31/14

Period-end growth of $1.1 billion from 9/30/2014;

driven by liquidity management strategy and

LCR positioning

Securities cash flows of $.9 billion in both 4Q14     

and 3Q14

Average portfolio life at 12/31/14 of 3.6 years,

unchanged from 9/30/14

Securities to Total Assets

(b)

(a)  Yield is calculated on the basis of amortized cost

(b)  Includes end of period held-to-maturity and available-for-sale securities

Average yield

(a)

Average HTM securities

$17.2

2.25%

$17.1

Interest Rate Risk Management

Naturally Asset Sensitive Balance Sheet

Actively Managing Rate Risk

•

High quality

•

Fixed rate agency MBS and CMOs

•

Average maturity: 3.6 years

•

GNMAs total 42% of total portfolio

•

Reinvesting cash flows into GNMAs

$10

$17

$5

$5

Size of swap

portfolio

Modeled asset

sensitivity

~3%

0%

~8%

$5

Flexibility to Adjust Rate

Sensitivity with Swaps

Loan Portfolio

Variable:

69%

Fixed:

31%

Deposits

(a)

Flexibility to adjust rate sensitivity for changes in balance

sheet growth/mix as well as interest rate outlook

Debt 

hedges

A/LM

hedges

Investment Portfolio

Noninterest-

bearing:

38%

Interest-

bearing, non-

time: 54%

CDs:

8%

•

Maintaining

moderate

asset

sensitive

position

of

~3%

(b)

-

Assumes 200 basis point increase in short-term rates over a

12-month period

•

Utilize swaps for debt hedging and asset liability management

-

Fairly even pace of A/LM swap maturities

4Q14

Swaps 

($ in B)

12/31/14

Notional Amt.

Wtd. Avg.

Maturity (Yrs.)

Receive

Rate

Pay

Rate

A/L Management

$     9.7

1.8

.8%

.2%

Debt

5.2

3.9

2.3

.2

$  14.9

1.3%

.2%

4Q14

$18 B

AFS: $13 B

HTM: $5 B

Balance sheet has relatively short duration and is

more impacted by the short-end of the curve

$15 B

20

Actively managing a naturally asset sensitive balance sheet

(a)

Excludes deposits in foreign office

(b)

Preliminary estimate

4Q14

4Q14

21

Asset Quality Trends

Quarterly Change in Criticized Outstandings

(a)

Delinquencies to Period-end Total Loans

(a)

Loan and lease outstandings

(b)

From continuing operations

30 –

89 days delinquent

90+ days delinquent

Metric

(b)

4Q14

3Q14

2Q14

1Q14

4Q13

Delinquencies to EOP total loans: 30-89 days

.41

%

.61

%

.49

%

.48

%

.58

%

Delinquencies to EOP total loans: 90+ days

.17

.13

.15

.16

.13

NPLs to EOP portfolio loans

.73

.71

.71

.81

.93

NPAs to EOP portfolio loans + OREO + Other NPAs

.76

.74

.74

.85

.97

Allowance for loan losses to period-end loans

1.38

1.43

1.46

1.50

1.56

Allowance for loan losses to NPLs

190.0

200.5

205.6

185.7

166.9

Continuing operations

Continuing operations

Period-

end loans

Average

loans

Net loan

charge-offs

Net loan 

charge-offs

(b)

/

average loans

(%)

Nonperforming   

loans

(c)

Ending

allowance

(d)

Allowance /

period-end

loans

(d)  

(%)

Allowance /

NPLs

(%)

12/31/14

4Q14

4Q14

4Q14

12/31/14

12/31/14

12/31/14

12/31/14

Commercial, financial and agricultural

(a)

$   27,982

$   27,188

$              4

.06

$                    59

$             391

1.40

662.71

Commercial real estate:

Commercial Mortgage

8,047

8,161

3

.15

34

148

1.84

435.29

Construction

1,100

1,077

-

-

13

28

2.55

215.38

Commercial lease financing

4,252

4,119

2

.19

18

56

1.32

311.11

Real estate –

residential mortgage

2,225

2,223

3

.54

79

23

1.03

29.11

Home equity

10,633

10,639

6

.22

195

71

.67

36.41

Credit cards

754

728

7

3.81

2

33

4.38

N/M

Consumer other –

Key Community Bank

1,560

1,552

5

1.28

2

22

1.41

N/M

Consumer other –

Exit Portfolio

828

854

2

.93

16

22

2.66

137.50

Continuing total

(e)

$   57,381

$    56,541

$            32

.22

$                  418

$             794

1.38

189.95

Discontinued operations

2,295

2,328

8

4.85

20

29

1.26

145.00

Consolidated total

$   59,676

$    58,869

$            40

.28

$                  438

$             823

1.38

187.90

Credit Quality by Portfolio

Credit Quality

$ in millions

22

(a)

12-31-14

ending

loan

balance

includes

$88

million

of

commercial

credit

card

balances;

12-31-14

average

loan

balance

includes

$90

million

of

assets

from

commercial

credit

cards

(b)

Net loan charge-off amounts are annualized in calculation

(c)

12-31-14 NPL amount excludes $13 million of purchased credit impaired loans

(d)

12-31-14 allowance by portfolio is estimated

(e)

12-31-14 ending loan balance includes purchased loans of $138 million,

of which $13 million were purchased credit impaired

N/M = Not meaningful

Vintage (% of Loans)

Loan

Balances

Average

Loan

Size

($)

Average

FICO

Average

LTV

(a)

%

of

Loans

LTV>90%

2012 and

later

2011

2010

2009

2008 and

prior

Loans and lines

First lien

$

6,178           

$

66,174

772

67

%

.6  

%

51

%

5%

3%

3%

38

%

Second lien

4,188

54,159

766

76

3.7

34

5

3

4

54

Community Bank

$

10,366

60,358

770

71

1.8

45

5

3

3

44

Exit portfolio

267

16,861

729

80

31.8

1

-

-

-

99

Total home equity portfolio

$

10,633

Nonaccrual loans and lines

First lien

$

116

$

64,539

722

73

%

1.0%

7

%

4%

3%

6%

80

%

Second lien

69

47,343

712

80

2.1

3

2

2

5

88

Community Bank

$

185

56,848

718

77

1.5

6

4

2

5

83

Exit portfolio

10

24,138

699

77

28.9

-

-

-

-

100

Total home equity nonaccruals

$

195

Fourth quarter net charge-offs (NCOs)

Community Bank

$

6

4

%

-

3%

1%

92

%

% of average loans

.22

%

Exit Portfolio

-

-

-

-

-

-

% of average loans

-

(a) Average LTVs are at origination. Current average LTVs for Community Bank total home equity loans and lines is approximately 70%,

which compares to 71% at the end of the third quarter of 2014.

Home Equity Portfolio –

12/31/14

$ in millions, except average loan size

Home Equity Portfolio

Highlights

High quality portfolio

Community bank loans and lines: 97% of total portfolio; branch-

originated

–

60% first lien position

–

Average FICO score of 770

–

Average LTV at origination: 71%

$4.0 billion of the total portfolio are fixed rate loans that require

principal and interest payments; $6.5 billion are lines

$1.5 billion in lines outstanding (14% of the total portfolio)

come to end of draw period in the next four years

–

Proactive communication and client outreach initiated

near end of draw period

23

Balance Outstanding

Change

Net Loan Charge-offs

Balance on

Nonperforming Status

12-31-14

9-30-14

12-31-14 vs.           

9-30-14

4Q14

(b)

3Q14

(b)

12-31-14

9-30-14

Residential

properties

–

homebuilder

$          10

$          11

$            (1)

-

$         1

$          9          $        10         

Marine and RV floor plan

7

7

-

-

-

5

5

Commercial

lease

financing

(a)

967

1,046

(79)

$          3

(1)

1

1

Total commercial loans

984

1,064

(80)

3

-

15

16

Home

equity

–

Other

267

283

(16)

-

1

10

10

Marine

779

828

(49)

3

2

15

16

RV and other consumer

54

57

(3)

(1)

1

1

1

Total consumer loans

1,100

1,168

(68)

2

4

26

27

Total exit loans in loan portfolio

2,084

$     2,232

$        (148)

$        5

$         4

$        41

$        43

Discontinued

operations

–

education

lending

business (not included in exit loans above)

$    2,295

$    2,375

$          (80)

$        8

$         7

$        11

$          9

$ in millions; average balances

(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)

Credit amounts indicate recoveries exceeded charge-offs

$ in millions

Exit Loan Portfolio

Exit Loan Portfolio

24

Three months ended

12-31-14

9-30-14

6-30-14

3-31-14

12-31-13

Tangible common equity to tangible assets at period end

Key shareholders’

equity (GAAP)

$

10,530

$

10,486

$

10,504

$

10,403

$

10,303

Less:

Intangible assets

(a)

1,090

1,105

1,008

1,012

1,014

Preferred Stock, Series A

(b)

282

282

282

282

282

Tangible common equity (non-GAAP) 

$

9,158

$

9,099

$

9,214

$

9,109

$

9,007

Total assets (GAAP)

$

93,821

$

89,784

$

91,798

$

90,802

$

92,934

Less:

Intangible assets

(a)

1,090

1,105

1,008

1,012

1,014

Tangible assets (non-GAAP)

$

92,731

$

88,679

$

90,790

$

89,790

$

91,920

Tangible common equity to tangible assets ratio (non-GAAP)

9.88

%

10.26

%

10.15

%

10.14

%

9.80

%

Tier 1 common equity at period end

Key shareholders’

equity (GAAP)

$

10,530

$

10,486

$

10,504

$

10,403

$

10,303

Qualifying capital securities

340

340

339

339

339

Less:

Goodwill

1,057

1,051

979

979

979

Accumulated

other

comprehensive

income

(loss)

(c)

(395)

(366)

(328)

(367)

(394)

Other assets

(d)

89

110

86

84

89

Total Tier 1 capital (regulatory)

10,119

10,031

10,106

10,046

9,968

Less:

Qualifying capital securities

340

340

339

339

339

Preferred Stock, Series A

(b)

282

282

282

282

282

Total Tier 1 common equity (non-GAAP) 

$

9,497

$

9,409

$

9,485

$

9,425

$

9,347

Net risk-weighted assets (regulatory)

(e)

$

84,976

$

83,547

$

84,287

$

83,637

$

83,328

Tier 1 common equity ratio (non-GAAP)

(e)

11.18

%

11.26

%

11.25

%

11.27

%

11.22

%

Pre-provision net revenue

Net interest income (GAAP)

$

582

$

575

$

573

$

563

$

583

Plus:

Taxable-equivalent adjustment

6

6

6

6

6

Noninterest income (GAAP)

490

417

455

435

453

Less:

Noninterest expense (GAAP)

704

704

689

662

712

Pre-provision net revenue from continuing operations (non-GAAP)

$

374

$

294

$

345

$

342

$

330

GAAP to Non-GAAP Reconciliation

$ in millions

25

a)

Three months ended December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014, and December 31, 2013 exclude $68 million, $72 million, $79

million, $84 million, and $92 million of period-end purchased credit card receivable intangible assets, respectively

b)

Net of capital surplus

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 December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014, and

December 31, 2013

e)

12-31-14 amount is estimated

Three months ended

12-31-14

9-30-14

6-30-14

3-31-14

12-31-13

Average tangible common equity

Average Key shareholders’

equity (GAAP)

$

10,562

$

10,473

$

10,459

$

10,371

$

10,272

Less:

Intangible

assets

(average)

(a)

1,096

1,037

1,010

1,013

1,016

Preferred Stock, Series A (average)

291

291

291

291

291

Average tangible common equity (non-GAAP)

$

9,175

$

9,145

$

9,158

$

9,067

$

8,965

Return on average tangible common equity from continuing operations

Net

income

(loss)

from

continuing

operations

attributable

to

Key

common

shareholders (GAAP)

$

246

$

197

$

242

$

232

$

229

Average tangible common equity (non-GAAP)

9,175

9,145

9,158

9,067

8,965

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

10.64

%

8.55

%

10.60

%

10.38

%

10.13

%

Return on average tangible common equity consolidated

Net income (loss) attributable to Key common shareholders (GAAP)

$

248

$

180

$

214

$

236

$

224

Average tangible common equity (non-GAAP)

9,175

9,145

9,158

9,067

8,965

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

10.72

%

7.81

%

9.37

%

10.56

%

9.91

%

Cash efficiency ratio

Noninterest expense (GAAP)

$

704

$

704

$

689

$

662

$

712

Less:

Intangible asset amortization (GAAP)

10

10

9

10

10

Adjusted noninterest expense (non-GAAP)

$

694

$

694

$

680

$

652

$

702

Net interest income (GAAP)

$

582

$

575

$

573

$

563

$

583

Plus:

Taxable-equivalent adjustment

6

6

6

6

6

Noninterest income (GAAP)

490

417

455

435

453

Total taxable-equivalent revenue (non-GAAP)

$

1,078

$

998

$

1,034

$

1,004

$

1,042

Cash efficiency ratio (non-GAAP)

64.4

%

69.5

%

65.8

%

64.9

%

67.4

%

GAAP to Non-GAAP Reconciliation

(continued)

$ in millions

(a)

Three months ended December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014, and December 31, 2013 exclude $69 million, $76 million, $82

million, $89 million, and $96 million of average purchased credit card receivable intangible assets, respectively

26

KeyCorp & Subsidiaries

$ in billions

Quarter ended

December 31, 2014

Tier 1 common equity under current regulatory rules

$                    9.5

Adjustments from current regulatory rules to the Regulatory Capital Rules:

Deferred tax assets and PCCRs

(b)

(.1)

Common equity Tier 1 anticipated under the Regulatory Capital Rules

(c)

$                    9.4

Total risk-weighted assets under current regulatory rules

$                  85.0

Adjustments from current regulatory rules to the Regulatory Capital Rules:

Loan commitments <1 year

1.1

Past Due Loans

.1

Mortgage servicing assets

(d)

.5

Deferred tax assets

(d)

.2

Other

1.2

Total risk-weighted assets anticipated under the Regulatory Capital Rules

$                  88.1

Common Equity Tier 1 ratio under the Regulatory Capital Rules

10.7

%

(a)

Common

equity

Tier

1

capital

is

a

non-generally

accepted

accounting

principle

(GAAP)

financial

measure

that

is

used

by

investors,

analysts

and

bank regulatory agencies to assess the capital position of financial services companies.  Management reviews Common Equity Tier 1 along with

other measures of capital as part of its financial analyses

(b)

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

(c)

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”

(d)

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

Table may not foot due to rounding

27

Common Equity Tier 1 Under the Regulatory Capital  

Rules (estimated)

(a)