Edgar Filing: KEYCORP /NEW/

10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended

March 31, 2013

Commission File Number 1-11302

LOGO

Exact name of registrant as specified in its charter:


		Ohio				34-6542451
		State or other jurisdiction of incorporation or organization				I.R.S. Employer Identification Number:

		127 Public Square, Cleveland, Ohio				44114-1306
		Address of principal executive offices:				Zip Code:


		(216) 689-3000
		Registrant’s telephone number, including area code:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


				Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


				Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ		Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


				Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common Shares with a par value of $1 each				920,510,321 Shares
Title of class				Outstanding at April 30, 2013

KEYCORP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements	Page Number

	Consolidated Balance Sheets — March 31, 2013 (Unaudited), December 31, 2012, and March 31, 2012 (Unaudited)	5

	Consolidated Statements of Income (Unaudited) — Three months ended March 31, 2013 and 2012	6

	Consolidated Statements of Comprehensive Income (Unaudited) — Three months ended March 31, 2013 and 2012	7

	Consolidated Statements of Changes in Equity (Unaudited) — Three months ended March 31, 2013 and 2012	8

	Consolidated Statements of Cash Flows (Unaudited) — Three months ended March 31, 2013 and 2012	9

	Notes to Consolidated Financial Statements (Unaudited)	10

	Note 1. Basis of Presentation	10

	Note 2. Earnings Per Common Share	13

	Note 3. Loans and Loans Held for Sale	14

	Note 4. Asset Quality	15

	Note 5. Fair Value Measurements	30

	Note 6. Securities	45

	Note 7. Derivatives and Hedging Activities	49

	Note 8. Mortgage Servicing Assets	57

	Note 9. Variable Interest Entities	58

	Note 10. Income Taxes	60

	Note 11. Acquisitions and Discontinued Operations	61

	Note 12. Securities Financing Activities	68

	Note 13. Employee Benefits	70

	Note 14. Trust Preferred Securities Issued by Unconsolidated Subsidiaries	71

	Note 15. Contingent Liabilities and Guarantees	72

	Note 16. Accumulated Other Comprehensive Income	75

	Note 17. Shareholders’ Equity	76


		Note 18. Line of Business Results	77

		Report of Independent Registered Public Accounting Firm	81

Item 2.		Management’s Discussion & Analysis of Financial Condition & Results of Operations	82

	Introduction		82
		Terminology	82
		Selected financial data	83
		Consolidated statements of income	84
		Forward-looking statements	87
		Economic overview	88
		Long-term financial goals	89
		Strategic developments	90
		Demographics	91
		Supervision and regulation	92
		Regulatory reform developments	92
		Supervisory and company run-stress testing	92
		Enhanced prudential standards and early remediation requirements	92
		Bureau of consumer financial protection	92
		U.S. implementation of Basel III	92

	Highlights of Our Performance		94

	Results of Operations		98
		Net interest income	98
		Noninterest income	102
		Trust and investment services income	104
		Investment banking and debt placement fees	104
		Operating lease income and other leasing gains	104
		Cards and payments	104
		Other income	104
		Noninterest expense	104
		Personnel	105
		Operating lease expense	105
		Intangible asset amortization	106
		Other expense	106
		Income taxes	106

	Line of Business Results		107
		Key Community Bank summary of operations	107
		Key Corporate Bank summary of operations	108
		Other Segments	109

	Financial Condition		110
		Loans and loans held for sale	110
		Commercial loan portfolio	110
		*Commercial, financial and agricultural*	110
		*Commercial real estate loans*	110
		*Commercial lease financing*	111
		Commercial loan modification and restructuring	111
		*Extensions*	113
		*Guarantors*	113
		Consumer loan portfolio	113
		Loans held for sale	114
		Loan sales	114
		Securities	115


		Securities available-for-sale	116
		Held-to-maturity securities	117
		Other investments	118
		Deposits and other sources of funds	118
		Capital	119
		CCAR and capital actions	119
		Dividends	119
		Common shares outstanding	119
		Capital adequacy	120
		Basel III	121
	Risk Management		123
		Overview	123
		Market risk management	125
		Trading market risk	125
		Nontrading market risk	127
		*Net interest income simulation analysis*	128
		*Economic value of equity modeling*	129
		*Management of interest rate exposure*	129
		Liquidity risk management	129
		Governance structure	130
		Factors affecting liquidity	130
		Managing liquidity risk	130
		Long-term liquidity strategy	131
		Sources of liquidity	131
		Liquidity programs	131
		Liquidity for KeyCorp	131
		Our liquidity position and recent activity	132
		Credit risk management	132
		Credit policy, approval and evaluation	132
		Allowance for loan and lease losses	133
		Net loan charge-offs	136
		Nonperforming assets	139
		Operational risk management	142

		Critical Accounting Policies and Estimates	142

		European Sovereign Debt Exposure	144
Item 3.		Quantitative and Qualitative Disclosure about Market Risk	145
Item 4.		Controls and Procedures	145

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings	145
Item 1A.		Risk Factors	145
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	146
Item 6.		Exhibits	146
		Signature	147
		Exhibits	149

Throughout the Notes to Consolidated Financial Statements (Unaudited) and Management’s Discussion & Analysis of Financial Condition & Results of Operations, we use certain acronyms and abbreviations as defined in Note 1 (“Basis of Presentation”), that begins on page 11.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets


in millions, except per share data	March 31, 2013		December 31, 2012		March 31, 2012

	(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks	$	621	$	584	$	415
Short-term investments		3,081		3,940		3,605
Trading account assets		701		605		614
Securities available for sale		13,496		12,094		14,633
Held-to-maturity securities (fair value: $3,779, $3,992 and $3,052)		3,721		3,931		3,019
Other investments		1,059		1,064		1,188
Loans, net of unearned income of $923, $957 and $1,282		52,574		52,822		49,226
Less: Allowance for loan and lease losses		893		888		944

Net loans		51,681		51,934		48,282
Loans held for sale		434		599		511
Premises and equipment		930		965		937
Operating lease assets		309		288		335
Goodwill		979		979		917
Other intangible assets		159		171		15
Corporate-owned life insurance		3,352		3,333		3,270
Derivative assets		609		693		830
Accrued income and other assets (including $50 of consolidated
LIHTC guaranteed funds VIEs, see Note 9)^(a)		2,884		2,774		3,070
Discontinued assets (including $2,358 of consolidated education loan securitization trust VIEs (see Note 9) and $154 of loans in portfolio at fair value)^(a)		5,182		5,282		5,790

Total assets	$	89,198	$	89,236	$	87,431


LIABILITIES
Deposits in domestic offices:
NOW and money market deposit accounts	$	32,700	$	32,380	$	29,124
Savings deposits		2,546		2,433		2,075
Certificates of deposit ($100,000 or more)		2,998		2,879		3,984
Other time deposits		4,324		4,575		5,848

Total interest-bearing		42,568		42,267		41,031
Noninterest-bearing		21,564		23,319		19,606
Deposits in foreign office — interest-bearing		522		407		857

Total deposits		64,654		65,993		61,494
Federal funds purchased and securities sold under repurchase agreements		1,950		1,609		1,846
Bank notes and other short-term borrowings		378		287		324
Derivative liabilities		524		584		754
Accrued expense and other liabilities		1,352		1,387		1,424
Long-term debt		7,785		6,847		8,898
Discontinued liabilities (including $2,151 of consolidated education loan securitization trust VIEs at fair value, see Note 9)^(a)		2,176		2,220		2,575

Total liabilities		78,819		78,927		77,315

EQUITY
Preferred stock, $1 par value, authorized 25,000,000 shares:
7.75% Noncumulative Perpetual Convertible Preferred Stock, Series A, $100 liquidation preference; authorized 7,475,000 shares; issued 2,904,839, 2,904,839 and 2,904,839 shares		291		291		291
Common shares, $1 par value; authorized 1,400,000,000 shares; issued 1,016,969,905, 1,016,969,905 and 1,016,969,905 shares		1,017		1,017		1,017
Capital surplus		4,059		4,126		4,116
Retained earnings		7,065		6,913		6,411
Treasury stock, at cost (94,388,605, 91,201,285 and 60,868,267)		(1,930)		(1,952)		(1,717)
Accumulated other comprehensive income (loss)		(162)		(124)		(19)

Key shareholders’ equity		10,340		10,271		10,099
Noncontrolling interests		39		38		17

Total equity		10,379		10,309		10,116

Total liabilities and equity	$	89,198	$	89,236	$	87,431

(a)	The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Income (Unaudited)


	Three months ended March 31,
dollars in millions, except per share amounts	2013		2012

INTEREST INCOME
Loans	$	548	$	536
Loans held for sale		4		5
Securities available for sale		80		116
Held-to-maturity securities		18		12
Trading account assets		6		6
Short-term investments		2		1
Other investments		9		8

Total interest income		667		684

INTEREST EXPENSE
Deposits		45		77
Federal funds purchased and securities sold under repurchase agreements		1		1
Bank notes and other short-term borrowings		1		2
Long-term debt		37		51

Total interest expense		84		131


NET INTEREST INCOME		583		553
Provision (credit) for loan and lease losses		55		42

Net interest income (expense) after provision for loan and lease losses		528		511

NONINTEREST INCOME ^(a)
Trust and investment services income		95		96
Investment banking and debt placement fees		79		61
Service charges on deposit accounts		69		68
Operating lease income and other leasing gains		23		52
Corporate services income		45		44
Cards and payments income		37		29
Corporate-owned life insurance income		30		30
Consumer mortgage income		7		9
Net gains (losses) from principal investing		8		35
Other income ^(b)		32		18

Total noninterest income		425		442

NONINTEREST EXPENSE
Personnel		391		372
Net occupancy		64		64
Computer processing		39		41
Business services and professional fees		35		37
Equipment		26		26
Operating lease expense		12		17
Marketing		6		13
FDIC assessment		8		8
Intangible asset amortization on credit cards		8		—
Other intangible asset amortization		4		1
Provision (credit) for losses on lending-related commitments		3		—
OREO expense, net		3		6
Other expense		82		94

Total noninterest expense		681		679

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		272		274
Income taxes		70		73

INCOME (LOSS) FROM CONTINUING OPERATIONS		202		201
Income (loss) from discontinued operations, net of taxes of $4 and ($1) (see Note 11)		3		(1)

NET INCOME (LOSS)		205		200
Less: Net income (loss) attributable to noncontrolling interests		1		—

NET INCOME (LOSS) ATTRIBUTABLE TO KEY	$	204	$	200


Income (loss) from continuing operations attributable to Key common shareholders	$	196	$	195
Net income (loss) attributable to Key common shareholders		199		194

Per common share:
Income (loss) from continuing operations attributable to Key common shareholders	$	.21	$	.21
Income (loss) from discontinued operations, net of taxes		—		—
Net income (loss) attributable to Key common shareholders ^(c)		.22		.20

Per common share — assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders	$	.21	$	.20
Income (loss) from discontinued operations, net of taxes		—		—
Net income (loss) attributable to Key common shareholders ^(c)		.21		.20

Cash dividends declared per common share	$	.05	$	.03

Weighted-average common shares outstanding (000)		920,316		949,342
Weighted-average common shares and potential common shares outstanding (000) ^(d)		926,051		953,971

(a)	The noninterest income line items have been changed for the current quarter and all prior quarters to reflect Key’s current business mix.

(b)	For the three months ended March 31, 2013 and 2012, we did not have any impairment losses related to securities.

(c)	EPS may not foot due to rounding.

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

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Comprehensive Income (Unaudited)


		Three months ended March 31,
in millions		2013	2012

Net income (loss)	$	205	$	200
Other comprehensive income (loss), net of tax:

Net unrealized gains (losses) on securities available for sale, net of income taxes of ($13) and ($6)		(22)		(11)
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($5) and $7		(8)		12
Foreign currency translation adjustments, net of income taxes		(11)		6
Net pension and postretirement benefit costs, net of income taxes		3		2

Total other comprehensive income (loss), net of tax		(38)		9

Comprehensive income (loss)		167		209
Less: Comprehensive income attributable to noncontrolling interests		1		—

Comprehensive income (loss) attributable to Key	$	166	$	209

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Changes in Equity (Unaudited)


	Key Shareholders’ Equity
dollars in millions, except per share amounts	Preferred Shares Outstanding (000)		Common Shares Outstanding (000)		Preferred Stock		Common Shares		Capital Surplus		Retained Earnings		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests
BALANCE AT DECEMBER 31, 2011		2,905		953,008	$	291	$	1,017	$	4,194	$	6,246	$	(1,815)	$	(28)	$	17
Net income (loss)												200
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of ($6)																(11)
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $7																12
Foreign currency translation adjustments, net of income taxes																6
Net pension and postretirement benefit costs, net of income taxes																2
Deferred compensation										4
Cash dividends declared on common shares ($.03 per share)												(29)
Cash dividends declared on Noncumulative Series A
Preferred Stock ($1.9375 per share)												(6)
Common shares reissued (returned) for stock options and other employee benefit plans				3,094						(82)				98

BALANCE AT MARCH 31, 2012		2,905		956,102	$	291	$	1,017	$	4,116	$	6,411	$	(1,717)	$	(19)	$	17


BALANCE AT DECEMBER 31, 2012		2,905		925,769	$	291	$	1,017	$	4,126	$	6,913	$	(1,952)	$	(124)	$	38
Net income (loss)												204						1
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of ($13)																(22)
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($5)																(8)
Foreign currency translation adjustments, net of income taxes																(11)
Net pension and postretirement benefit costs, net of income taxes																3
Deferred compensation										4
Cash dividends declared on common shares ($.05 per share)												(47)
Cash dividends declared on Noncumulative Series A
Preferred Stock ($1.9375 per share)												(5)
Common shares repurchased				(6,790)										(65)
Common shares reissued (returned) for stock options and other employee benefit plans				3,602						(71)				87

BALANCE AT MARCH 31, 2013		2,905		922,581	$	291	$	1,017	$	4,059	$	7,065	$	(1,930)	$	(162)	$	39

See Notes to Consolidated Financial Statements (Unaudited).

Consolidated Statements of Cash Flows (Unaudited)


	Three months ended March 31,
in millions	2013		2012

OPERATING ACTIVITIES
Net income (loss)	$	205	$	200
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision (credit) for loan and lease losses		55		42
Depreciation, amortization and accretion expense, net		61		48
FDIC (payments) net of FDIC expense		7		7
Deferred income taxes (benefit)		32		28
Net losses (gains) and writedown on OREO		3		6
Net losses (gains) from loan sales		(31)		(22)
Net losses (gains) from principal investing		(8)		(35)
Provision (credit) for losses on lending-related commitments		3		—
(Gains) losses on leased equipment		(5)		(27)
Net decrease (increase) in loans held for sale excluding loan transfers from continuing operations		(1,093)		(912)
Net decrease (increase) in trading account assets		(96)		9
Other operating activities, net		(206)		(435)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(1,073)		(1,091)
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments		859		(86)
Purchases of securities available for sale		(2,755)		(2)
Proceeds from sales of securities available for sale		3		—
Proceeds from prepayments and maturities of securities available for sale		1,315		1,364
Proceeds from prepayments and maturities of held-to-maturity securities		210		96
Purchases of held-to-maturity securities		—		(1,005)
Purchases of other investments		(11)		(16)
Proceeds from sales of other investments		3		2
Proceeds from prepayments and maturities of other investments		20		24
Net decrease (increase) in loans, excluding acquisitions, sales and transfers		156		202
Proceeds from loan sales		1,345		1,195
Purchases of premises and equipment		(10)		(26)
Proceeds from sales of premises and equipment		8		—
Proceeds from sales of other real estate owned		5		12

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		1,148		1,760
FINANCING ACTIVITIES
Net increase (decrease) in deposits		(1,339)		(462)
Net increase (decrease) in short-term borrowings		433		122
Net proceeds from issuance of long-term debt		1,007		—
Payments on long-term debt		(30)		(572)
Repurchase of Treasury Shares		(65)		—
Net proceeds from issuance of common shares		8		—
Cash dividends paid		(52)		(35)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(38)		(947)

NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		37		(278)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD		584		693

CASH AND DUE FROM BANKS AT END OF PERIOD	$	621	$	415


Additional disclosures relative to cash flows:
Interest paid	$	110	$	101
Income taxes paid (refunded)		25		3
Noncash items:
Loans transferred to portfolio from held for sale		—	$	19
Loans transferred to other real estate owned	$	7		5

See Notes to Consolidated Financial Statements (Unaudited).

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

As used in these Notes, references to “Key,” “we,” “our,” “us” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. KeyCorp refers solely to the parent holding company, and KeyBank refers to KeyCorp’s subsidiary, KeyBank National Association.

The acronyms and abbreviations identified below are used in the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion & Analysis of Financial Condition & Results of Operations. You may find it helpful to refer back to this page as you read this report.

References to our “2012 Form 10-K” refer to our Form 10-K for the year ended December 31, 2012, that has been filed with the U.S. Securities and Exchange Commission and is available on its website (www.sec.gov) or on our website (www.key.com/ir).


ABO: Accumulated benefit obligation. AICPA: American Institute of Certified Public Accountants. ALCO: Asset/Liability Management Committee. ALLL: Allowance for loan and lease losses. A/LM: Asset/liability management. AOCI: Accumulated other comprehensive income (loss). APBO: Accumulated postretirement benefit obligation. Austin: Austin Capital Management, Ltd. BHCA: Bank Holding Company Act of 1956, as amended. BHCs: Bank holding companies. CCAR: Comprehensive Capital Analysis and Review. CFPB: Bureau of Consumer Financial Protection. CFTC: Commodities Futures Trading Commission. CMO: Collateralized mortgage obligation. Common Shares: Common Shares, $1 par value. CPP: Capital Purchase Program of the U.S. Treasury. DIF: Deposit Insurance Fund of the FDIC. Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. ERISA: Employee Retirement Income Security Act of 1974. ERM: Enterprise risk management. EVE: Economic value of equity. FASB: Financial Accounting Standards Board. FDIA: Federal Deposit Insurance Act, as amended. FDIC: Federal Deposit Insurance Corporation. Federal Reserve: Board of Governors of the Federal Reserve System. FHFA: Federal Housing Finance Agency. FHLMC: Federal Home Loan Mortgage Corporation. FINRA: Financial Industry Regulatory Authority. FNMA: Federal National Mortgage Association. FOMC: Federal Open Market Committee of the Federal Reserve Board. FSOC: Financial Stability Oversight Council. FVA: Fair value of pension plan assets. GAAP: U.S. generally accepted accounting principles. GNMA: Government National Mortgage Association. HUD: U.S. Department of Housing and Urban Development. IRS: Internal Revenue Service. ISDA: International Swaps and Derivatives Association. KAHC: Key Affordable Housing Corporation. LIBOR: London Interbank Offered Rate.		LIHTC: Low-income housing tax credit. LILO: Lease in, lease out transaction. Moody’s: Moody’s Investor Services, Inc. N/A: Not applicable. NASDAQ: The NASDAQ Stock Market LLC. N/M: Not meaningful. NOW: Negotiable Order of Withdrawal. NPR: Notice of proposed rulemaking. NYSE: New York Stock Exchange. OCC: Office of the Comptroller of the Currency. OCI: Other comprehensive income (loss). OFR: Office of Financial Research of the U.S. Department of Treasury. OREO: Other real estate owned. OTTI: Other-than-temporary impairment. QSPE: Qualifying special purpose entity. PBO: Projected benefit obligation. PCCR: Purchased credit card relationship. PCI: Purchased credit impaired. S&P: Standard and Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc. SCAP: Supervisory Capital Assessment Program administered by the Federal Reserve. SEC: U.S. Securities & Exchange Commission. Series A Preferred Stock: KeyCorp’s 7.750% Noncumulative Perpetual Convertible Preferred Stock, Series A. SIFIs: Systemically important financial companies, including BHCs with total consolidated assets of at least $50 billion and nonbank financial companies designated by FSOC for supervision by the Federal Reserve. SILO: Sale in, lease out transaction. SPE: Special purpose entity. TDR: Troubled debt restructuring. TE: Taxable equivalent. U.S. Treasury: United States Department of the Treasury. VaR: Value at risk. VEBA: Voluntary Employee Beneficiary Association. Victory: Victory Capital Management and/or Victory Capital Advisors VIE: Variable interest entity. XBRL: eXtensible Business Reporting Language.

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices. The noninterest income line items reported on the consolidated statements of income have been changed for the current quarter and all prior quarters to reflect our current business mix.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly impact the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements and financial instruments. See Note 9 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% generally are carried at cost. Investments held by our registered broker-dealer and investment company subsidiaries (primarily principal investments) are carried at fair value.

We believe that the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2012 Form 10-K.

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

Offsetting Derivative Positions

In accordance with the applicable accounting guidance, we take into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. Additional information regarding derivative offsetting is provided in Note 7 (“Derivatives and Hedging Activities”).

Accounting Guidance Adopted in 2013

Testing indefinite-lived intangible assets for impairment. In July 2012, the FASB issued new accounting guidance that simplifies how an entity tests indefinite-lived intangible assets other than goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether further testing for impairment of indefinite-lived intangible assets other than goodwill is required. This accounting guidance was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (January 1, 2013, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.

Offsetting disclosures. In December 2011, the FASB issued new accounting guidance that requires an entity to disclose information about offsetting and related arrangements to enable financial statement users to understand the effect of those arrangements on the entity’s financial position. In January 2013, the FASB issued new accounting guidance that clarified the scope of the guidance to include derivatives, repurchase and reverse repurchase agreements, and securities lending and borrowing transactions. This accounting guidance was effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (effective January 1, 2013, for us). Information about our offsetting and related arrangements is provided in Note 12 (“Securities Financing Activities”).

Reporting of amounts reclassified out of AOCI. In February 2013, the FASB issued new accounting guidance that requires reclassifications of amounts out of AOCI to be reported in a new format. It will not require the reporting of any information that is not currently required to be disclosed under existing GAAP. This accounting guidance was effective prospectively for reporting periods beginning after December 15, 2012 (effective January 1, 2013, for us). The disclosures required by this accounting guidance are provided in Note 16 (“Accumulated Other Comprehensive Income”).

Accounting Guidance Pending Adoption at March 31, 2013

Reporting of cumulative translation adjustments upon the derecognition of certain investments. In March 2013, the FASB issued new accounting guidance that addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. This accounting guidance will be effective prospectively for reporting periods beginning after December 15, 2013 (effective January 1, 2014, for us). The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

2. Earnings Per Common Share

Our basic and diluted earnings per Common Share are calculated as follows:


	Three months ended March 31,
dollars in millions, except per share amounts	2013		2012

EARNINGS
Income (loss) from continuing operations	$	202	$	201
Less: Net income (loss) attributable to noncontrolling interests		1		—

Income (loss) from continuing operations attributable to Key		201		201
Less: Dividends on Series A Preferred Stock		5		6

Income (loss) from continuing operations attributable to Key common shareholders		196		195
Income (loss) from discontinued operations, net of taxes^(a)		3		(1)

Net income (loss) attributable to Key common shareholders	$	199	$	194



WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)		920,316		949,342
Effect of dilutive convertible preferred stock, common share options and other stock awards (000)		5,735		4,629

Weighted-average common shares and potential common shares outstanding (000)		926,051		953,971



EARNINGS PER COMMON SHARE

Income (loss) from continuing operations attributable to Key common shareholders	$	.21	$	.21
Income (loss) from discontinued operations, net of taxes ^(a)		—		—
Net income (loss) attributable to Key common shareholders^(b)		.22		.20

Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	$	.21	$	.20
Income (loss) from discontinued operations, net of taxes ^(a)		—		—
Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)		.21		.20

(a)

In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, we 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, we decided to sell Victory to a private equity fund. As a result of these decisions, we have accounted for these businesses as discontinued operations. For further discussion regarding the income (loss) from discontinued operations see Note 11 (“Acquisitions and Discontinued Operations”).

(b)	EPS may not foot due to rounding.

3. Loans and Loans Held for Sale

Our loans by category are summarized as follows:


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Commercial, financial and agricultural^(a)	$	23,412	$	23,242	$	20,217
Commercial real estate:
Commercial mortgage		7,544		7,720		7,807
Construction		1,057		1,003		1,273

Total commercial real estate loans		8,601		8,723		9,080
Commercial lease financing		4,796		4,915		5,325

Total commercial loans		36,809		36,880		34,622
Residential — prime loans:
Real estate — residential mortgage		2,176		2,174		1,967
Home equity:
Key Community Bank		9,809		9,816		9,153
Other		401		423		507

Total home equity loans		10,210		10,239		9,660

Total residential — prime loans		12,386		12,413		11,627
Consumer other — Key Community Bank		1,353		1,349		1,212
Credit cards		693		729		—
Consumer other:
Marine		1,254		1,358		1,654
Other		79		93		111

Total consumer other		1,333		1,451		1,765

Total consumer loans		15,765		15,942		14,604

Total loans ^{(b) (c)}	$	52,574	$	52,822	$	49,226

(a)	March 31, 2013 and December 31, 2012 loan balances includes $93 million and $90 million of commercial credit card balances, respectively.

(b)	Excluded at March 31, 2013, December 31, 2012, and March 31, 2012, are loans in the amount of $5.1 billion, $5.2 billion and $5.7 billion, respectively, related to the discontinued operations of the education lending business.

(c)	March 31, 2013 includes purchased loans of $204 million of which $22 million were PCI loans. December 31, 2012 includes purchased loans of $217 million of which $23 million were PCI loans.

Our loans held for sale are summarized as follows:


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Commercial, financial and agricultural	$	180	$	29	$	28
Real estate — commercial mortgage		196		477		362
Real estate — construction		—		—		15
Commercial lease financing		9		8		30
Real estate — residential mortgage		49		85		76

Total loans held for sale	$	434	$	599	$	511

Our quarterly summary of changes in loans held for sale as follows:


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Balance at beginning of the period	$	599	$	628	$	728
New originations		1,075		1,686		935
Transfers from held to maturity, net		19		38		19
Loan sales		(1,257)		(1,747)		(1,168)
Loan draws (payments), net		—		(4)		(3)
Transfers to OREO / valuation adjustments		(2)		(2)		—

Balance at end of period	$	434	$	599	$	511

4. Asset Quality

We manage our exposure to credit risk by closely monitoring loan performance trends and general economic conditions. A key indicator of the potential for future credit losses is the level of nonperforming assets and past due loans.

Our nonperforming assets and past due loans were as follows:


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Total nonperforming loans^{(a), (b)}	$	650	$	674	$	666
Nonperforming loans held for sale		23		25		24
OREO		21		22		61
Other nonperforming assets		11		14		16

Total nonperforming assets	$	705	$	735	$	767


Nonperforming assets from discontinued operations - education lending^(c)	$	15	$	20	$	19



Restructured loans included in nonperforming loans^(a)	$	178	$	249	$	184
Restructured loans with an allocated specific allowance^(d)		52		114		47
Specifically allocated allowance for restructured loans^(e)		30		33		18

Accruing loans past due 90 days or more	$	83	$	78	$	169
Accruing loans past due 30 through 89 days		368		424		420

(a)	December 31, 2012, includes $72 million of performing secured loans that were discharged through Chapter 7 bankruptcy and not formally re-affirmed, as addressed in updated regulatory guidance issued in the third quarter of 2012. Such loans have been designated as nonperforming and TDRs.

(b)	March 31, 2013 and December 31, 2012, excludes $22 million and $23 million of PCI loans, respectively.

(c)	Includes approximately $4 million and $3 million of restructured loans at March 31, 2013 and December 31, 2012, respectively. There were no additional restructured loans at March 31, 2012. See Note 11 (“Acquisitions and Discontinued Operations”) for further discussion.

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

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

We evaluate purchased loans for impairment in accordance with the applicable accounting guidance. Purchased loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are deemed PCI and initially recorded at fair value without recording an allowance for loan losses. At the date of acquisition, the estimated gross contractual amount receivable of PCI loans totaled $41 million. The estimated cash flows not expected to be collected (the nonaccretable amount) was $11 million, and the accretable amount was approximately $5 million. The difference between the fair value and the cash flows expected to be collected from the purchased loans is accreted to interest income over the remaining term of the loans.

At March 31, 2013, the outstanding unpaid principal balance and carrying value of all PCI loans was $29 million and $22 million, respectively. Changes in the accretable yield during 2013 included accretion and net reclassifications of less than $1 million, resulting in an ending balance of $4 million at March 31, 2013.

At March 31, 2013, the approximate carrying amount of our commercial nonperforming loans outstanding represented 63% of their original contractual amount, total nonperforming loans outstanding represented 76% of their original contractual amount owed, and nonperforming assets in total were carried at 73% of their original contractual amount.

At March 31, 2013, our twenty largest nonperforming loans totaled $194 million, representing 30% of total loans on nonperforming status from continuing operations. At March 31, 2012, the twenty largest nonperforming loans totaled $215 million, representing 32% of total loans on nonperforming status.

Nonperforming loans and loans held for sale reduced expected interest income by $6 million for the three months ended March 31, 2013, and $25 million for the year ended December 31, 2012.

The following tables set forth a further breakdown of individually impaired loans as of March 31, 2013, December 31, 2012 and March 31, 2012:


March 31, 2013 in millions	Recorded Investment		^(a)	Unpaid Principal Balance		^(b)	Specific Allowance		Average Recorded Investment

With no related allowance recorded:
Commercial, financial and agricultural	$	93		$	131			—	$	63
Commercial real estate:
Commercial mortgage		87			140			—		88
Construction		48			175			—		48

Total commercial real estate loans		135			315			—		136

Total commercial loans with no related allowance recorded		228			446			—		199

Real estate — residential mortgage		15			15			—		18

Home equity:
Key Community Bank		64			64			—		65
Other		2			2			—		2

Total home equity loans		66			66			—		67
Consumer other:
Marine		3			3			—		1

Total consumer other		3			3			—		1

Total consumer loans		84			84			—		86

Total loans with no related allowance recorded		312			530			—		285

With an allowance recorded:
Commercial, financial and agricultural		15			23		$	8		24
Commercial real estate:
Commercial mortgage		9			9			3		8
Construction		—			9			—		—

Total commercial real estate loans		9			18			3		8

Total commercial loans with an allowance recorded		24			41			11		32


Real estate — residential mortgage		18			18			1		18

Home equity:
Key Community Bank		26			25			14		24
Other		10			10			—		10

Total home equity loans		36			35			14		34

Consumer other — Key Community Bank		3			3			1		2
Credit cards		4			4			1		3
Consumer other:
Marine		47			47			5		53
Other		1			1			1		1

Total consumer other		48			48			6		54

Total consumer loans		109			108			23		111

Total loans with an allowance recorded		133			149			34		143

Total	$	445		$	679		$	34	$	428

(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, and 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, 2012 in millions	Recorded Investment		^(a)	Unpaid Principal Balance		^(b)	Specific Allowance		Average Recorded Investment

With no related allowance recorded:
Commercial, financial and agricultural	$	32		$	64			—	$	60
Commercial real estate:
Commercial mortgage		89			142			—		95
Construction		48			182			—		39

Total commercial real estate loans		137			324			—		134

Total commercial loans with no related allowance recorded		169			388			—		194

Real estate — residential mortgage		21			21			—		10

Home equity:
Key Community Bank		65			65			—		33
Other		3			3			—		1

Total home equity loans		68			68			—		34

Total consumer loans		89			89			—		44

Total loans with no related allowance recorded		258			477			—		238

With an allowance recorded:
Commercial, financial and agricultural		33			42		$	12		48
Commercial real estate:
Commercial mortgage		7			7			1		51
Construction		—			—			—		6

Total commercial real estate loans		7			7			1		57

Total commercial loans with an allowance recorded		40			49			13		105


Real estate — residential mortgage		17			17			1		8

Home equity:
Key Community Bank		22			22			11		11
Other		9			9			1		5

Total home equity loans		31			31			12		16

Consumer other — Key Community Bank		2			2			2		1
Credit cards		2			2			—		1
Consumer other:
Marine		60			60			7		30
Other		1			1			—		1

Total consumer other		61			61			7		31

Total consumer loans		113			113			22		57

Total loans with an allowance recorded		153			162			35		162

Total	$	411		$	639		$	35	$	400

(a)

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


March 31, 2012 in millions	Recorded Investment		^(a)	Unpaid Principal Balance		^(b)	Specific Allowance		Average Recorded Investment

With no related allowance recorded:
Commercial, financial and agricultural	$	77		$	189			—	$	83
Commercial real estate:
Commercial mortgage		113			252			—		106
Construction		47			164			—		39

Total commercial real estate loans		160			416			—		145

Total commercial loans with no related allowance recorded		237			605			—		228

Real estate — residential mortgage		—			—			—		—

Home equity:
Key Community Bank		—			—			—		—
Other		—			—			—		—

Total home equity loans		—			—			—		—

Consumer other — Key Community Bank		—			—			—		—
Credit cards		—			—			—		—
Consumer other:
Marine		—			—			—		—
Other		—			—			—		—

Total consumer other		—			—			—		—

Total consumer loans		—			—			—		—

Total loans with no related allowance recorded		237			605			—		228

With an allowance recorded:
Commercial, financial and agricultural		49			60		$	19		55
Commercial real estate:
Commercial mortgage		69			111			16		83
Construction		4			4			3		8

Total commercial real estate loans		73			115			19		91
Commercial lease financing		—			—			—		—

Total commercial loans with an allowance recorded		122			175			38		146


Real estate — residential mortgage		—			—			—		—

Home equity:
Key Community Bank		—			—			—		—
Other		—			—			—		—

Total home equity loans		—			—			—		—

Consumer other — Key Community Bank		—			—			—		—
Credit cards		—			—			—		—
Consumer other:
Marine		—			—			—		—
Other		—			—			—		—

Total consumer other		—			—			—		—

Total consumer loans		—			—			—		—

Total loans with an allowance recorded		122			175			38		146

Total	$	359		$	780		$	38	$	374

(a)

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

For the three months ended March 31, 2013, and 2012, interest income recognized on the outstanding balances of accruing impaired loans totaled $2 million and $1 million, respectively.

At March 31, 2013, aggregate restructured loans (accrual, nonaccrual and held-for-sale loans) totaled $294 million, compared to $320 million at December 31, 2012, and $293 million at March 31, 2012. We added $34 million in restructured loans during the first three months of 2013, which were partially offset by $60 million in payments and charge-offs.

A further breakdown of TDRs included in nonperforming loans by loan category as of March 31, 2013, follows:


March 31, 2013 dollars in millions	Number of loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment

LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		48	$	58	$	25
Commercial real estate:
Real estate — commercial mortgage		17		61		23
Real estate — construction		6		30		4

Total commercial real estate loans		23		91		27

Total commercial loans		71		149		52
Real estate — residential mortgage		347		21		21
Home equity:
Key Community Bank		1,479		75		74
Other		229		6		6

Total home equity loans		1,708		81		80
Consumer other — Key Community Bank		59		2		2
Credit cards		360		2		2
Consumer other:
Marine		302		41		20
Other		36		1		1

Total consumer other		338		42		21

Total consumer loans		2,812		148		126

Total nonperforming TDRs		2,883		297		178

Prior-year accruing^(a)
Commercial, financial and agricultural		106		11		5
Commercial real estate:
Real estate — commercial mortgage		4		22		15
Real estate — construction		1		23		29

Total commercial real estate loans		5		45		44

Total commercial loans		111		56		49
Real estate — residential mortgage		121		12		12
Home equity:
Key Community Bank		147		15		15
Other		190		6		5

Total home equity loans		337		21		20
Consumer other — Key Community Bank		24		1		1
Credit cards		308		2		2
Consumer other:
Marine		263		30		30
Other		57		2		2

Total consumer other		320		32		32

Total consumer loans		1,110		68		67

Total prior-year accruing TDRs		1,221		124		116

Total TDRs		4,104	$	421	$	294

(a)	All TDRs that were restructured prior to January 1, 2013, and are fully accruing.

A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2012, follows:


December 31, 2012 dollars in millions	Number of loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment

LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		82	$	76	$	39
Commercial real estate:
Real estate — commercial mortgage		15		62		25
Real estate — construction		8		53		33

Total commercial real estate loans		23		115		58

Total commercial loans		105		191		97
Real estate — residential mortgage		372		28		28
Home equity:
Key Community Bank		1,577		87		82
Other		322		9		8

Total home equity loans		1,899		96		90
Consumer other — Key Community Bank		28		1		1
Credit cards		405		3		3
Consumer other:
Marine		251		30		29
Other		34		1		1

Total consumer other		285		31		30

Total consumer loans		2,989		159		152

Total nonperforming TDRs		3,094		350		249

Prior-year accruing^(a)
Commercial, financial and agricultural		122		12		6
Commercial real estate:
Real estate — commercial mortgage		4		22		15

Total commercial real estate loans		4		22		15

Total commercial loans		126		34		21
Real estate — residential mortgage		101		10		10
Home equity:
Key Community Bank		76		5		5
Other		84		3		3

Total home equity loans		160		8		8
Consumer other — Key Community Bank		16		—		—
Consumer other:
Marine		117		31		31
Other		43		1		1

Total consumer other		160		32		32

Total consumer loans		437		50		50

Total prior-year accruing TDRs		563		84		71

Total TDRs		3,657	$	434	$	320

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

A further breakdown of TDRs included in nonperforming loans by loan category as of March 31, 2012, follows:


			Pre-modification		Post-modification
			Outstanding		Outstanding
March 31, 2012	Number		Recorded		Recorded
dollars in millions	of loans		Investment		Investment

LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		102	$	105	$	64
Commercial real estate:
Real estate — commercial mortgage		16		102		64
Real estate — construction		8		35		19

Total commercial real estate loans		24		137		83

Total commercial loans		126		242		147
Real estate — residential mortgage		43		5		5
Home equity:
Key Community Bank		27		3		3
Other		32		1		1

Total home equity loans		59		4		4
Consumer other — Key Community Bank		2		—		—
Consumer other:
Marine		48		28		28
Other		6		—		—

Total consumer other		54		28		28

Total consumer loans		158		37		37

Total nonperforming TDRs		284		279		184

Prior-year accruing^(a)
Commercial, financial and agricultural		176		20		11
Commercial real estate:
Real estate — commercial mortgage		7		75		57
Real estate — construction		1		15		2

Total commercial real estate loans		8		90		59

Total commercial loans		184		110		70
Real estate — residential mortgage		113		12		12
Home equity:
Key Community Bank		88		7		7
Other		104		3		3

Total home equity loans		192		10		10
Consumer other — Key Community Bank		19		—		—
Consumer other:
Marine		140		15		15
Other		51		2		2

Total consumer other		191		17		17

Total consumer loans		515		39		39

Total prior-year accruing TDRs		699		149		109

Total TDRs		983	$	428	$	293

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

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession to the borrower without commensurate financial, structural, or legal consideration. All commercial and consumer loan TDRs, regardless of size, are evaluated for impairment individually to determine the probable loss content and are assigned a specific loan allowance if deemed appropriate. The financial effects of TDRs are reflected in the components that make up the allowance for loan and lease losses in either the amount of a charge-off or the loan loss provision. These components affect the ultimate allowance level. Additional information regarding TDRs for discontinued operations is provided in Note 11 (“Acquisitions and Discontinued Operations”).

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. There were 240 consumer loan TDRs with a combined recorded investment of $14 million which have experienced payment defaults during the first three months of 2013 arising from modifications resulting in TDR status during 2012. There were no significant payment defaults during the first three months of 2013 arising from commercial loans that were designated as TDRs during 2012.

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


dollars in millions	March 31, 2013			December 31, 2012			March 31, 2012

Interest rate reduction	$	85		$	104		$	184
Forgiveness of principal		10			7			11
Other modification of loan terms		6			7			22

Total	$	101		$	118		$	217


Total commercial and consumer TDRs^(a), (b)	$	294		$	320		$	293
Total commercial TDRs to total commercial loans		.27	%		.32	%		.63	%
Total commercial TDRs to total loans		.19			.22			.44
Total commercial loans	$	36,809		$	36,880		$	34,622
Total loans		52,574			52,822			49,226

(a)	Commitments outstanding to lend additional funds to borrowers whose terms have been modified in TDRs are $33 million, $32 million, and $24 million at March 31, 2013, December 31, 2012, and March 31, 2012, respectively.

(b)	Concession types for consumer accruing and nonaccruing TDRs consisted primarily of interest rate reductions and modifications due to updated regulatory guidance in the quarters ended March 31, 2013, December 31, 2012, and March 31, 2012, respectively.

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” on page 120 of our 2012 Form 10-K. Pursuant to regulatory guidance issued in January 2012, the above-mentioned policy for nonperforming loans was revised effective for the second quarter of 2012. Beginning in the second quarter of 2012, any second lien home equity loan with an associated first lien that is 120 days or more past due or in foreclosure or for which the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan. This policy was implemented prospectively, and, therefore, prior periods were not restated or re-presented. Credit card loans on which payments are past due for 90 days are placed on nonaccrual status.

At March 31, 2013, approximately $51.5 billion, or 97.9%, of our total loans are current. At March 31, 2013, total past due loans and nonperforming loans of $1.1 billion represent approximately 2.1% of total loans.

The following aging analysis as of March 31, 2013, December 31, 2012, and March 31, 2012, of past due and current loans provides further information regarding Key’s credit exposure.


March 31, 2013 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		Purchased Credit Impaired		Total Loans

LOAN TYPE
Commercial, financial and agricultural	$	23,134	$	35	$	74	$	26	$	142	$	277	$	1	$	23,412
Commercial real estate:
Commercial mortgage		7,368		35		14		11		114		174		2		7,544
Construction		1,024		5		—		1		27		33		—		1,057

Total commercial real estate loans		8,392		40		14		12		141		207		2		8,601
Commercial lease financing		4,728		34		11		11		12		68		—		4,796

Total commercial loans	$	36,254	$	109	$	99	$	49	$	295	$	552	$	3	$	36,809


Real estate — residential mortgage	$	2,037	$	15	$	5	$	7	$	96	$	123	$	16	$	2,176
Home equity:
Key Community Bank		9,512		51		28		17		199		295		2		9,809
Other		371		7		3		2		18		30		—		401

Total home equity loans		9,883		58		31		19		217		325		2		10,210
Consumer other — Key Community Bank		1,331		8		4		6		3		21		1		1,353
Credit cards		668		8		4		—		13		25		—		693
Consumer other:
Marine		1,202		18		7		2		25		52		—		1,254
Other		76		1		1		—		1		3		—		79

Total consumer other		1,278		19		8		2		26		55		—		1,333

Total consumer loans	$	15,197	$	108	$	52	$	34	$	355	$	549	$	19	$	15,765


Total loans	$	51,451	$	217	$	151	$	83	$	650	$	1,101	$	22	$	52,574


December 31, 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	$	23,030	$	56	$	34	$	22	$	99	$	211	$	1	$	23,242
Commercial real estate:
Commercial mortgage		7,556		21		11		9		120		161		3		7,720
Construction		943		1		2		1		56		60		—		1,003

Total commercial real estate loans		8,499		22		13		10		176		221		3		8,723
Commercial lease financing		4,772		88		31		8		16		143		—		4,915

Total commercial loans	$	36,301	$	166	$	78	$	40	$	291	$	575	$	4	$	36,880


Real estate — residential mortgage	$	2,023	$	16	$	10	$	6	$	103	$	135	$	16	$	2,174
Home equity:
Key Community Bank		9,506		54		26		17		210		307		3		9,816
Other		387		9		4		2		21		36		—		423

Total home equity loans		9,893		63		30		19		231		343		3		10,239
Consumer other — Key Community Bank		1,325		9		5		8		2		24		—		1,349
Credit cards		706		7		5		—		11		23		—		729
Consumer other:
Marine		1,288		23		9		4		34		70		—		1,358
Other		87		2		1		1		2		6		—		93

Total consumer other		1,375		25		10		5		36		76		—		1,451

Total consumer loans	$	15,322	$	120	$	60	$	38	$	383	$	601	$	19	$	15,942


Total loans	$	51,623	$	286	$	138	$	78	$	674	$	1,176	$	23	$	52,822

(a)	Includes $72 million of performing secured loans that were discharged through Chapter 7 bankruptcy and not formally re-affirmed as addressed in updated regulatory guidance issued in the third quarter of 2012. Such loans have been designated as nonperforming and TDRs.


March 31, 2012 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	$	19,989	$	25	$	16	$	19	$	168	$	228	$	20,217
Commercial real estate:
Commercial mortgage		7,532		7		11		82		175		275		7,807
Construction		1,170		19		7		11		66		103		1,273

Total commercial real estate loans		8,702		26		18		93		241		378		9,080
Commercial lease financing		5,140		126		22		15		22		185		5,325

Total commercial loans	$

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