Asset Quality (Tables)

9 Months Ended

Sep. 30, 2012

Nonperforming Assets and Past Due Loans

Our nonperforming assets and past due loans were as follows:

in millions	September 30, 2012		December 31, 2011		September 30, 2011
Total nonperforming loans (a)(b)	$	653	$	727	$	788
Nonperforming loans held for sale		19		46		42
OREO		29		65		63
Other nonperforming assets		17		21		21
Total nonperforming assets	$	718	$	859	$	914
Nonperforming assets from discontinued operation - education lending (f)	$	22	$	23	$	22
Restructured loans included in nonperforming loans(a)(c)	$	217	$	191	$	178
Restructured loans with an allocated specific allowance (d)		78		50		27
Specifically allocated allowance for restructured loans (e)		31		10		5
Accruing loans past due 90 days or more	$	89	$	164	$	118
Accruing loans past due 30 through 89 days		354		441		478

(a) September 30, 2012 includes $38 million of performing secured loans that were discharged through Chapter 7 bankruptcy and not formally re-affirmed as addressed in recently updated regulatory guidance. Such loans have been designated as nonperforming and TDRs.

(b) September 30, 2012 excludes $25 million of PCI loans acquired in July 2012.

(c) A loan is “restructured” (i.e., TDRs) when the borrower is experiencing financial difficulty and we grant a concession that we would not otherwise consider to improve the collectability of the loan. Typical concessions include: reducing the interest rate, extending the maturity date, or reducing the principal balance.

(d) Included in individually impaired loans allocated a specific allowance.

(e) Included in allowance for individually evaluated impaired loans.

(f) Includes approximately $3 million of restructured loans at September 30, 2012. See Note 11 for further discussion.

Breakdown of Individually Impaired Loans

The following tables set forth a further breakdown of individually impaired loans as of September 30, 2012, December 31, 2011 and September 30, 2011:

September 30, 2012 in millions		Recorded          Investment	(a)		Unpaid          Principal  Balance	(b)		Specific          Allowance		Average  Recorded          Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	57		$	118			—	$	58
Commercial real estate:
Commercial mortgage		106			182			—		109
Construction		42			203			—		47
Total commercial real estate loans		148			385			—		156
Total commercial loans with no related allowance recorded		205			503			—		214
Real estate — residential mortgage		—			—			—		1
Home equity:
Key Community Bank		45			45			—		23
Other		2			2			—		1
Total home equity loans		47			47			—		24
Consumer other — Key Community Bank		1			1			—		1
Consumer other:
Marine		4			4			—		2
Total consumer other		4			4			—		2
Total consumer loans		52			52			—		28
Total loans with no related allowance recorded		257			555			—		242
With an allowance recorded:
Commercial, financial and agricultural		35			45		$	12		39
Commercial real estate:
Commercial mortgage		31			32			7		44
Construction		—			—			—		2
Total commercial real estate loans		31			32			7		46
Total commercial loans with an allowance recorded		66			77			19		85
Real estate — residential mortgage		18			18			1		17
Home equity:
Key Community Bank		20			20			10		16
Other		8			8			1		7
Total home equity loans		28			28			11		23
Consumer other — Key Community Bank		2			2			1		2
Consumer other:
Marine		56			56			7		53
Other		1			1			—		1
Total consumer other		57			57			7		54
Total consumer loans		105			105			20		96
Total loans with an allowance recorded		171			182			39		181
Total	$	428		$	737		$	39	$	423

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

December 31, 2011 in millions		Recorded          Investment	(a)		Unpaid          Principal  Balance	(b)		Specific          Allowance		Average  Recorded          Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	88		$	195			—	$	75
Commercial real estate:
Commercial mortgage		100			240			—		131
Construction		30			113			—		98
Total commercial real estate loans		130			353			—		229
Total loans with no related allowance recorded		218			548			—		304
With an allowance recorded:
Commercial, financial and agricultural		62			70		$	26		75
Commercial real estate:
Commercial mortgage		96			115			21		91
Construction		12			18			4		29
Total commercial real estate loans		108			133			25		120
Commercial lease financing		—			—			—		6
Total loans with an allowance recorded		170			203			51		201
Total	$	388		$	751		$	51	$	505

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

September 30, 2011 in millions		Recorded          Investment	(a)		Unpaid          Principal  Balance	(b)		Specific          Allowance		Average  Recorded          Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	91		$	202			—	$	104
Commercial real estate:
Commercial mortgage		139			292			—		131
Construction		58			203			—		71
Total commercial real estate loans		197			495			—		202
Total commercial loans with an allowance recorded		288			697			—		306
Home equity — Key Community Bank		2			2			—		1
Total loans with no related allowance recorded		290			699			—		307
With an allowance recorded:
Commercial, financial and agricultural		53			61		$	20		48
Commercial real estate:
Commercial mortgage		78			90			14		84
Construction		20			20			10		27
Total commercial real estate loans		98			110			24		111
Total loans with an allowance recorded		151			171			44		159
Total	$	441		$	870		$	44	$	466

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

Breakdown of Nonperforming TDRs by Loans Category

A further breakdown of restructured loans (TDRs) included in nonperforming loans by loan category as of September 30, 2012, follows:

September 30, 2012 dollars in millions	Number  of loans		Pre-modification  Outstanding  Recorded  Investment		Post-modification  Outstanding  Recorded  Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		91	$	107	$	54
Commercial real estate:
Real estate — commercial mortgage		18		47		29
Real estate — construction		8		53		30
Total commercial real estate loans		26		100		59
Total commercial loans		117		207		113
Real estate — residential mortgage		70		7		7
Home equity:
Key Community Bank		1,804		89		58
Other		486		11		7
Total home equity loans		2,290		100		65
Consumer other — Key Community Bank		125		2		2
Consumer other:
Marine		491		33		28
Other		91		2		2
Total consumer other		582		35		30
Total consumer loans		3,067		144		104
Total nonperforming TDRs		3,184		351		217
Prior-year accruing (a)
Commercial, financial and agricultural		152		15		7
Commercial real estate:
Real estate — commercial mortgage		7		71		45
Real estate — construction		1		15		—
Total commercial real estate loans		8		86		45
Total commercial loans		160		101		52
Real estate — residential mortgage		108		11		11
Home equity:
Key Community Bank		86		6		6
Other		95		3		3
Total home equity loans		181		9		9
Consumer other — Key Community Bank		20		—		—
Consumer other:
Marine		126		32		32
Other		51		2		2
Total consumer other		177		34		34
Total consumer loans		486		54		54
Total prior-year accruing TDRs		646		155		106
Total TDRs		3,830	$	506	$	323

(a) All TDRs that were restructured prior to January 1, 2012 and are fully accruing.

A further breakdown of restructured loans (TDRs) included in nonperforming loans by loan category as of September 30, 2011, follows:

September 30, 2011 dollars in millions	Number  of loans		Pre-modification  Outstanding  Recorded  Investment		Post-modification  Outstanding  Recorded  Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		11	$	84	$	46
Commercial real estate:
Real estate — commercial mortgage		12		74		69
Real estate — construction		6		50		18
Total commercial real estate loans		18		124		87
Commercial lease financing		182		24		11
Total commercial loans		211		232		144
Real estate — residential mortgage		73		7		7
Home equity:
Key Community Bank		30		2		1
Other		29		1		1
Total home equity loans		59		3		2
Consumer other — Key Community Bank		7		—		—
Consumer other:
Marine		43		26		25
Other		18		—		—
Total consumer other		61		26		25
Total consumer loans		200		36		34
Total nonperforming TDRs		411		268		178
Prior-year accruing (a)
Commercial, financial and agricultural		1		8		5
Commercial real estate:
Real estate — commercial mortgage		4		57		32
Real estate — construction		3		39		19
Total commercial real estate loans		7		96		51
Commercial lease financing		167		17		13
Total commercial loans		175		121		69
Real estate — residential mortgage		56		9		9
Home equity:
Key Community Bank		64		6		6
Other		71		3		2
Total home equity loans		135		9		8
Consumer other — Key Community Bank		14		—		—
Consumer other:
Marine		109		13		11
Other		34		2		2
Total consumer other		143		15		13
Total consumer loans		348		33		30
Total prior-year accruing TDRs		523		154		99
Total TDRs		934	$	422	$	277

(a) All TDRs that were restructured prior to January 1, 2011 and are fully accruing.

Concession Types for our Commercial Accruing and Nonaccruing TDRs

The following table shows the concession types for our commercial accruing and nonaccruing TDRs and other selected financial data.

dollars in millions	September 30,  2012			December 31,  2011			September 30,  2011
Interest rate reduction	$	145		$	177		$	195
Forgiveness of principal		7			23			12
Other modification of loan terms		14			8			6
Total	$	166		$	208		$	213
Total commercial and consumer TDRs (a)	$	323		$	276		$	277
Total commercial TDRs to total commercial loans		.47	%		.60	%		.64	%
Total commercial TDRs to total loans		.32			.42			.44
Total commercial loans	$	35,535		$	34,782		$	33,219
Total loans		51,419			49,575			48,195

(a) Commitments outstanding to lend additional funds to borrowers whose terms have been modified in TDRs are $47 million, $25 million, and $39 million at September 30, 2012, December 31, 2011, and September 30, 2011, respectively.

Past Due Loans Including Current Loans

The following aging analysis as of September 30, 2012 and 2011, of past due and current loans provides further information regarding Key’s credit exposure.

September 30, 2012 in millions	Current		30-59     Days Past  Due		60-89     Days Past  Due		90 and   Greater  Days Past  Due		Nonperforming  Loans (a)		Total Past      Due and        Nonperforming  Loans		Purchased Credit     Impaired		Total Loans
LOAN TYPE
Commercial, financial and agricultural	$	21,766	$	46	$	19	$	15	$	132	$	212	$	1	$	21,979
Commercial real estate:
Commercial mortgage		7,344		19		3		26		134		182		3		7,529
Construction		993		5		3		13		53		74		—		1,067
Total commercial real estate loans		8,337		24		6		39		187		256		3		8,596
Commercial lease financing		4,881		48		11		2		18		79		—		4,960
Total commercial loans	$	34,984	$	118	$	36	$	56	$	337	$	547	$	4	$	35,535
Real estate — residential mortgage	$	1,997	$	22	$	13	$	6	$	83	$	124	$	17	$	2,138
Home equity:
Key Community Bank		9,492		57		30		15		171		273		3		9,768
Other		374		9		5		3		18		35		—		409
Total home equity loans		9,866		66		35		18		189		308		3		10,177
Consumer other — Key Community Bank		1,290		9		4		6		3		22		1		1,313
Credit cards		692		6		4		—		8		18		—		710
Consumer other:
Marine		1,377		29		9		2		31		71		—		1,448
Other		92		2		1		1		2		6		—		98
Total consumer other		1,469		31		10		3		33		77		—		1,546
Total consumer loans	$	15,314	$	134	$	66	$	33	$	316	$	549	$	21	$	15,884
Total loans	$	50,298	$	252	$	102	$	89	$	653	$	1,096	$	25	$	51,419

(a) Includes $38 million of performing secured loans that were discharged through Chapter 7 bankruptcy and not formally re-affirmed as addressed in recently updated regulatory guidance. Such loans have been designated as nonperforming and TDRs.

September 30, 2011 in millions	Current		30-59     Days Past  Due		60-89     Days Past  Due		90 and Greater  Days Past      Due		Nonperforming  Loans		Total Past Due and           Nonperforming  Loans		Total Loans
LOAN TYPE
Commercial, financial and agricultural	$	17,576	$	40	$	20	$	24	$	188	$	272	$	17,848
Commercial real estate:
Commercial mortgage		7,612		101		3		5		237		346		7,958
Construction		1,345		5		5		8		93		111		1,456
Total commercial real estate loans		8,957		106		8		13		330		457		9,414
Commercial lease financing		5,812		57		23		34		31		145		5,957
Total commercial loans	$	32,345	$	203	$	51	$	71	$	549	$	874	$	33,219
Real estate — residential mortgage	$	1,747	$	20	$	11	$	9	$	88	$	128	$	1,875
Home equity:
Key Community Bank		9,125		63		35		22		102		222		9,347
Other		529		13		7		4		12		36		565
Total home equity loans		9,654		76		42		26		114		258		9,912
Consumer other — Key Community Bank		1,159		11		5		8		4		28		1,187
Consumer other:
Marine		1,781		36		19		3		32		90		1,871
Other		125		3		1		1		1		6		131
Total consumer other		1,906		39		20		4		33		96		2,002
Total consumer loans	$	14,466	$	146	$	78	$	47	$	239	$	510	$	14,976
Total loans	$	46,811	$	349	$	129	$	118	$	788	$	1,384	$	48,195

Financing Receivable Credit Quality Indicators

Credit quality indicators for our commercial and consumer loan portfolios excluding $25 million of purchased credit impaired loans, based on bond rating, regulatory classification and payment activity as of September 30, 2012 and September 30, 2011 are as follows:

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category ^(a)

September 30, in millions
	Commercial, financial and     agricultural				RE — Commercial				RE — Construction				Commercial Lease				Total
RATING (b) (c)	2012		2011		2012		2011		2012		2011		2012		2011		2012		2011
AAA — AA	$	166	$	109	$	1	$	2	$	1	$	3	$	465	$	639	$	633	$	753
A		755		655		63		62		1		1		1,107		1,272		1,926		1,990
BBB — BB		19,229		14,928		6,137		5,747		759		762		3,087		3,509		29,212		24,946
B		940		807		585		726		38		132		188		306		1,751		1,971
CCC — C		888		1,349		740		1,421		268		558		113		231		2,009		3,559
Total	$	21,978	$	17,848	$	7,526	$	7,958	$	1,067	$	1,456	$	4,960	$	5,957	$	35,531	$	33,219

(a)  Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)  Our bond rating to internal loan grade conversion system is as follows: AAA - AA = 1, A = 2, BBB - BB = 3 - 13, B = 14 - 16, and CCC - C = 17 - 20.

(c)  Our internal loan grade to regulatory-defined classification is as follows: Pass = 1-16, Special Mention = 17, Substandard = 18, Doubtful = 19, and Loss = 20.

Consumer Credit Exposure

Credit Risk Profile by Regulatory Classifications ^(a) (b)

September 30, in millions
	Residential — Prime
GRADE	2012		2011
Pass	$	11,999	$	11,550
Substandard		296		237
Total	$	12,295	$	11,787

Credit Risk Profile Based on Payment Activity ^(a) (b)

September 30,	Consumer — Key Community     Bank				Credit cards				Consumer — Marine				Consumer — Other				Total
in millions	2012		2011		2012		2011		2012		2011		2012		2011		2012		2011
Performing	$	1,309	$	1,183	$	702		—	$	1,417	$	1,839	$	96	$	130	$	3,524	$	3,152
Nonperforming		3		4		8		—		31		32		2		1		44		37
Total	$	1,312	$	1,187	$	710		—	$	1,448	$	1,871	$	98	$	131	$	3,568	$	3,189

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) Our past due payment activity to regulatory classification conversion is as follows: pass = less than 90 days; and substandard = 90 days and greater plus nonperforming loans. As of September 30, 2012, any second lien home equity loan with an associated first lien: that is 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan in accordance with regulatory guidance issued in January 2012.

Summary of Allowance for Loan and Lease Losses

A summary of the allowance for loan and lease losses for the periods indicated is presented in the table below:

	Three months ended          September 30,				Nine months ended          September 30,
in millions	2012		2011		2012		2011
Balance at beginning of period — continuing operations	$	888	$	1,230	$	1,004	$	1,604
Charge-offs		(141)		(157)		(404)		(566)
Recoveries		32		48		117		130
Net loans charged off		(109)		(109)		(287)		(436)
Provision for loan and lease losses from continuing operations		109		10		172		(38)
Foreign currency translation adjustment		—		—		(1)		1
Balance at end of period — continuing operations	$	888	$	1,131	$	888	$	1,131

Changes in Allowance for Loan and Lease Losses by Loan Category

The changes in the ALLL by loan category for the periods indicated are as follows:

in millions	December 31, 2011		Provision			Charge-offs		Recoveries		September 30, 2012
Commercial, financial and agricultural	$	334	$	9		$	(65)	$	40	$	318
Real estate — commercial mortgage		272		—			(69)		18		221
Real estate — construction		63		—			(19)		3		47
Commercial lease financing		78		(10)			(20)		18		66
Total commercial loans		747		(1)			(173)		79		652
Real estate — residential mortgage		37		5			(19)		2		25
Home equity:
Key Community Bank		103		92			(113)		7		89
Other		29		14			(23)		4		24
Total home equity loans		132		106			(136)		11		113
Consumer other — Key Community Bank		41		15			(29)		5		32
Credit cards		—		27			(2)		—		25
Consumer other:
Marine		46		14			(41)		18		37
Other		1		5			(4)		2		4
Total consumer other:		47		19			(45)		20		41
Total consumer loans		257		172			(231)		38		236
Total ALLL — continuing operations		1,004		171	(a)		(404)		117		888
Discontinued operations		104		4			(56)		13		65
Total ALLL — including discontinued operations	$	1,108	$	175		$	(460)	$	130	$	953

(a) Includes $1 million of foreign currency translation adjustment.

in millions	December 31, 2010		Provision			Charge-offs		Recoveries		September 30, 2011
Commercial, financial and agricultural	$	485	$	(24)		$	124	$	33	$	370
Real estate — commercial mortgage		416		(31)			89		9		305
Real estate — construction		145		4			81		19		87
Commercial lease financing		175		(62)			36		19		96
Total commercial loans		1,221		(113)			330		80		858
Real estate — residential mortgage		49		4			22		3		34
Home equity:
Key Community Bank		120		59			78		9		110
Other		57		10			35		3		35
Total home equity loans		177		69			113		12		145
Consumer other — Key Community Bank		57		12			34		6		41
Consumer other:
Marine		89		(4)			60		26		51
Other		11		(5)			7		3		2
Total consumer other:		100		(9)			67		29		53
Total consumer loans		383		76			236		50		273
Total ALLL — continuing operations		1,604		(37	)  (a)		566		130		1,131
Discontinued operations		114		99			107		9		115
Total ALLL — including discontinued operations	$	1,718	$	62		$	673	$	139	$	1,246

(a) Includes $1 million of foreign currency translation adjustment.

Allowance for Loan and Lease Losses and Corresponding Loan Balances

A breakdown of the individual and collective ALLL and the corresponding loan balances as of September 30, 2012 follows:

	Allowance						Outstanding
September 30, 2012 in millions	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit Impaired		Loans			Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit Impaired
Commercial, financial and agricultural	$	12	$	306		—	$	21,979		$	92	$	21,886	$	1
Commercial real estate:
Commercial mortgage		7		214		—		7,529			138		7,388		3
Construction		—		47		—		1,067			42		1,025		—
Total commercial real estate loans		7		261		—		8,596			180		8,413		3
Commercial lease financing		—		66		—		4,960			—		4,960		—
Total commercial loans		19		633		—		35,535			272		35,259		4
Real estate — residential mortgage		1		24		—		2,138			18		2,103		17
Home equity:
Key Community Bank		10		79		—		9,768			65		9,700		3
Other		1		23		—		409			10		399		—
Total home equity loans		11		102		—		10,177			75		10,099		3
Consumer other — Key Community Bank		1		31		—		1,313			2		1,310		1
Credit cards		—		25		—		710			—		710		—
Consumer other:
Marine		7		30		—		1,448			60		1,388		—
Other		—		4		—		98			1		97		—
Total consumer other		7		34		—		1,546			61		1,485		—
Total consumer loans		20		216		—		15,884			156		15,707		21
Total ALLL — continuing operations		39		849		—		51,419			428		50,966		25
Discontinued operations		—		65		—		5,328	(a)		3		5,325		—
Total ALLL — including discontinued operations	$	39	$	914		—	$	56,747		$	431	$	56,291	$	25

(a) Amount includes $2.6 billion of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of September 30, 2011 follows:

	Allowance(a)				Outstanding(a)
September 30, 2011 in millions	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Commercial, financial and agricultural	$	20	$	349	$	17,848	$	144	$	17,704
Commercial real estate:
Commercial mortgage		14		291		7,958		217		7,741
Construction		10		78		1,456		78		1,378
Total commercial real estate loans		24		369		9,414		295		9,119
Commercial lease financing		—		96		5,957		—		5,957
Total commercial loans		44		814		33,219		439		32,780
Real estate — residential mortgage		—		34		1,875		—		1,875
Home equity:
Key Community Bank		—		110		9,347		2		9,345
Other		—		35		565		—		565
Total home equity loans		—		145		9,912		2		9,910
Consumer other — Key Community Bank		—		41		1,187		—		1,187
Consumer other:
Marine		—		51		1,871		—		1,871
Other		—		2		131		—		131
Total consumer other		—		53		2,002		—		2,002
Total consumer loans		—		273		14,976		2		14,974
Total ALLL — continuing operations		44		1,087		48,195		441		47,754
Discontinued operations		—		115		5,984		—		5,984
Total ALLL — including discontinued operations	$	44	$	1,202	$	54,179	$	441	$	53,738

(a) There were no loans acquired with deteriorated credit quality at September 30, 2011.

Changes in Liability for Credit Losses on Lending Related Commitments

Changes in the liability for credit losses on lending-related commitments are summarized as follows:

	Three months ended September 30,				Nine months ended September 30,
in millions	2012		2011		2012		2011
Balance at beginning of period	$	51	$	57	$	45	$	73
Provision (credit) for losses on lending-related commitments		(8)		(1)		(2)		(17)
Balance at end of period	$	43	$	56	$	43	$	56