KeyCorp Reports Second Quarter 2007 Earnings

CLEVELAND, July 17 /PRNewswire-FirstCall/ -- KeyCorp today announced second quarter income from continuing operations of $337 million, or $0.85 per diluted common share. This compares to income from continuing operations of $303 million, or $0.74 per share, for the second quarter of 2006, and $358 million, or $0.89 per share, for the first quarter of 2007. Key's income from continuing operations for the first six months of 2007 was $695 million, or $1.74 per diluted common share. This compares to income from continuing operations - before the cumulative effect of an accounting change - of $577 million, or $1.40 per share, for the first half of 2006.

Net income totaled $334 million, or $0.84 per diluted common share, for the second quarter of 2007, compared to net income of $308 million, or $0.75 per share, for the second quarter of 2006 and $350 million, or $0.87 per share, for the first quarter of 2007. Key's net income for the first half of 2007 was $684 million, or $1.71 per diluted common share, compared to $597 million, or $1.45 per share, for the same period last year.

The following table shows Key's continuing and discontinued operating results for comparative quarters and for the six months ended June 30, 2007 and 2006.

Results of Operations Six Three months ended months ended in millions, except per share amounts 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Summary of operations Income from continuing operations before cumulative effect of accounting change $337 $358 $303 $695 $577 Income (loss) from discontinued operations, net of taxes (3) (8) 5 (11) 15 Cumulative effect of accounting change, net of taxes -- -- -- -- 5 Net income $334 $350 $308 $684 $597 Per common share - assuming dilution Income from continuing operations before cumulative effect of accounting change $.85 $.89 $.74 $1.74 $1.40 Income (loss) from discontinued operations (.01) (.02) .01 (.03) .04 Cumulative effect of accounting change -- -- -- -- .01 Net income $.84 $.87 $.75 $1.71 $1.45

As shown below, the comparability of Key's income from continuing operations for comparative quarters is affected by several significant items, including the McDonald Investments branch network sold in February 2007.

Significant Items Affecting the Comparability of Earnings Second First Second Quarter 2007 Quarter 2007 Quarter 2006 Pre- After- Pre- After- Pre- After- tax tax tax tax tax tax Amount Amount Amount Amount Amount Amount in millions, except per share amounts Income from continuing operations - GAAP basis $467 $337 $505 $358 $428 $303 Significant items: McDonald Investments branch network 7 4 (159)(a) (99)(a) 8 5 Gains related to MasterCard Incorporated shares (40) (25) -- -- (9) (6) Litigation reserve 42 26 -- -- -- -- Gain from settlement of automobile residual value insurance litigation -- -- (26) (17) -- -- Loss from repositioning of securities portfolio -- -- 49 31 -- -- Income from continuing operations - adjusted basis $476 $342 $369 $273 $427 $302 Per common share - assuming dilution Income from continuing operations - GAAP basis N/M $.85 N/M $.89 N/M $.74 Income from continuing operations - adjusted basis N/M .86 N/M .68 N/M .74 (a) Includes a $171 million ($107 million after-tax) gain resulting from the February 9, 2007, sale of the McDonald Investments branch network. N/M = Not Meaningful GAAP = U.S. generally accepted accounting principles

"We are extremely pleased with the company's results in light of continued competitive pressures experienced in a challenging interest rate environment," said Chairman and Chief Executive Officer Henry L. Meyer III. "Growth in noninterest income and effective expense control drove Key's strong second quarter results. Noninterest income rose by $104 million from the year-ago quarter, driven by the favorable performance of several of our fee-based businesses. Principal investing gains were $90 million during the current quarter, which was up $67 million from the year-ago period. While we don't expect this level of principal investing gains to repeat in the second half of

2007, we expect to see strength in several of our fee-based businesses, and our overall outlook for the remainder of the year is positive.

"Beyond our financial performance for the quarter, as we previously reported, the Comptroller of the Currency and the Federal Reserve Bank of Cleveland have removed the regulatory agreements. I am extremely appreciative of the commitment and level of effort put forth by our employees, and of the support provided by our Board of Directors as we strengthened our Anti-money Laundering and Bank Secrecy Act compliance programs."

The company expects earnings per share to be in the range of $1.50 to $1.60 for the second half of 2007.

SUMMARY OF CONTINUING OPERATIONS

Taxable-equivalent net interest income was $706 million for the second quarter of 2007, compared to $726 million for the year-ago quarter. Average earning assets grew by $2.6 billion, or 3%, while the net interest margin for the current quarter declined to 3.46% from 3.68% for the second quarter of 2006. The reduction in the net interest margin was due primarily to tighter interest rate spreads on both loans and deposits, reflecting the continuation of competitive pricing, and a shift from NOW and money market deposit accounts to higher-cost certificates of deposit. Additionally, as part of the February 2007 sale of the McDonald Investments branch network, Key transferred approximately $1.3 billion of NOW and money market deposit accounts to the buyer. McDonald Investments' NOW and money market deposit accounts averaged $1.5 billion for the second quarter of 2006.

Compared to the first quarter of 2007, taxable-equivalent net interest income grew by $6 million, and the net interest margin declined by 4 basis points. The improvement in net interest income was attributable to a $1.4 billion, or annualized 7%, increase in average earning assets.

Key's noninterest income was $649 million for the second quarter of 2007, compared to $545 million for the year-ago quarter. The strong growth reflected increases of $67 million in net gains from principal investing, $23 million in net gains from loan securitizations and sales, and higher revenue from several other fee-based businesses. In addition, results for the current quarter include a $40 million gain related to the sale of MasterCard Incorporated shares, compared to a $9 million gain recorded in the year-ago quarter that resulted from the share redemption by MasterCard Incorporated as part of its initial public offering. Trust and investment services income decreased due to lower brokerage income resulting from the sale of the McDonald Investments branch network. The company experienced increases in both personal and institutional asset management income.

Compared to the first quarter of 2007, noninterest income declined by $5 million. The company's first quarter results included a $171 million gain from the sale of the McDonald Investments branch network and $19 million of fee income from the operation of that network. During the same quarter, Key recorded a $49 million loss in connection with the repositioning of the securities portfolio and a $26 million gain from the settlement of the automobile residual value insurance litigation.

Key's noninterest expense was $815 million for the second quarter of 2007, compared to $798 million for the same period last year. Included in results for the current quarter is a $42 million charge related to litigation. Personnel expense decreased by $16 million, due to lower incentive compensation accruals stemming from the sale of the McDonald Investments branch network. Excluding the litigation reserve, nonpersonnel expense was down $9 million, due primarily to reductions in professional fees and certain other costs associated with the McDonald Investments branch network.

Compared to the first quarter of 2007, noninterest expense increased by $31 million as the litigation charge recorded in the second quarter more than offset reductions in both personnel and nonpersonnel expense associated with the McDonald Investments branch network. Additionally, Key recorded a $6 million provision for losses on lending-related commitments in the second quarter, compared to an $8 million credit in the first quarter.

ASSET QUALITY

Key's provision for loan losses from continuing operations was $53 million for the second quarter of 2007, compared to $23 million for the year-ago quarter and $44 million for the first quarter of 2007.

Net loan charge-offs for the quarter totaled $53 million, or 0.32% of average loans from continuing operations, compared to $34 million, or 0.22%, for the same period last year and $44 million, or 0.27%, for the previous quarter.

At June 30, 2007, Key's nonperforming loans totaled $276 million and represented 0.41% of period-end portfolio loans, compared to 0.39% at March 31, 2007, and 0.41% at June 30, 2006. At June 30, 2007, nonperforming assets totaled $378 million and represented 0.57% of portfolio loans, other real estate owned and other nonperforming assets, compared to 0.54% at March 31, 2007, and 0.46% at June 30, 2006.

Key's allowance for loan losses was $945 million, or 1.42% of loans outstanding, at June 30, 2007, compared to $944 million, or 1.44%, at March 31, 2007, and $956 million, or 1.42%, at June 30, 2006.

CAPITAL

Key's capital ratios continued to exceed all "well-capitalized" regulatory benchmarks at June 30, 2007. Key's tangible equity to tangible assets ratio was 6.89% at quarter end, compared to 6.97% at March 31, 2007, and 6.68% at June 30, 2006.

Key repurchased 6.0 million of its common shares and reissued .9 million shares under employee benefit plans during the second quarter of 2007. At June 30, 2007, Key had 16.0 million common shares remaining for repurchase under the current authorization.

Share repurchases and other activities that caused the change in Key's outstanding common shares over the past five quarters are summarized in the table below.

Summary of Changes in Common Shares Outstanding in thousands 2Q07 1Q07 4Q06 3Q06 2Q06 Shares outstanding at beginning of period 394,483 399,153 402,748 402,672 405,273 Issuance of shares under employee benefit plans 879 3,330 1,405 2,576 1,399 Repurchase of common shares (6,000) (8,000) (5,000) (2,500) (4,000) Shares outstanding at end of period 389,362 394,483 399,153 402,748 402,672 LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business group to Key's taxable-equivalent revenue and income from continuing operations for the periods presented. The specific lines of business that comprise each of the major business groups are described under the heading "Line of Business Descriptions." For more detailed financial information pertaining to each business group and its respective lines of business, see the last two pages of this release.

Major Business Groups Percent change 2Q07 vs. dollars in millions 2Q07 1Q07 2Q06 1Q07 2Q06 Revenue from continuing operations (TE) Community Banking $624 $799 $672 (21.9)% (7.1)% National Banking 630 605 596 4.1 5.7 Other Segments 92 (20) 21 N/M 338.1 Total Segments 1,346 1,384 1,289 (2.7) 4.4 Reconciling Items 9 (30) (18) N/M N/M Total $1,355 $1,354 $1,271 .1 % 6.6 % Income (loss) from continuing operations ` Community Banking $97 $197 $100 (50.8)% (3.0)% National Banking 169 163 176 3.7 (4.0) Other Segments 49 (9) 19 N/M 157.9 Total Segments 315 351 295 (10.3) 6.8 Reconciling Items 22 7 8 214.3 175.0 Total $337 $358 $303 (5.9)% 11.2 % TE = Taxable Equivalent, N/M = Not Meaningful Community Banking (a) Percent change 2Q07 vs. dollars in millions 2Q07 1Q07 2Q06 1Q07 2Q06 Summary of operations Net interest income (TE) $420 $418 $436 .5 % (3.7)% Noninterest income 204 381 236 (46.5) (13.6) Total revenue (TE) 624 799 672 (21.9) (7.1) Provision for loan losses 21 14 21 50.0 ___ Noninterest expense 448 470 491 (4.7) (8.8) Income before income taxes (TE) 155 315 160 (50.8) (3.1) Allocated income taxes and TE adjustments 58 118 60 (50.8) (3.3) Net income $97 $197 $100 (50.8)% (3.0)% Percent of consolidated income from continuing operations 29 % 55 % 33 % N/A N/A Average balances Loans and leases $26,551 $26,426 $26,830 .5 % (1.0)% Total assets 29,291 29,240 29,918 .2 (2.1) Deposits 46,171 46,581 46,675 (.9) (1.1) (a) See the table entitled "Significant Items Affecting the Comparability of Earnings" presented earlier in this release for the impact of the McDonald Investments branch network sold February 9, 2007. TE = Taxable Equivalent, N/A = Not Applicable Additional Community Banking Data Percent change 2Q07 vs. dollars in millions 2Q07 1Q07 2Q06 1Q07 2Q06 Average deposits outstanding NOW and money market deposit accounts $18,996 $19,640 $20,786 (3.3)% (8.6)% Savings deposits 1,619 1,617 1,737 .1 (6.8) Certificates of deposit ($100,000 or more) 4,709 4,576 4,010 2.9 17.4 Other time deposits 12,038 12,051 11,437 (.1) 5.3 Deposits in foreign office 1,046 960 634 9.0 65.0 Noninterest-bearing deposits 7,763 7,737 8,071 .3 (3.8) Total deposits $46,171 $46,581 $46,675 (.9)% (1.1)% Home equity loans Average balance $9,660 $9,677 $10,107 Weighted-average loan-to- value ratio 70% 70% 70% Percent first lien positions 58 59 60 Other data On-line households / household penetration 711,254/54% 687,263/53% 639,444/52% Branches 954 950 946 Automated teller machines 1,450 1,447 2,120 Community Banking Summary of Operations

Net income for Community Banking was $97 million for the second quarter of 2007, compared to $100 million for the year-ago quarter. Decreases in both net interest income and noninterest income were offset in part by a decline in noninterest expense. The provision for loan losses was essentially unchanged.

Taxable-equivalent net interest income decreased by $16 million, or 4%, from the second quarter of 2006. The decrease was attributable to a reduction in, and a tighter interest rate spread on, average earning assets, along with a shift from NOW and money market deposit accounts to higher-cost certificates of deposit. Also, as part of the February 2007 sale of the McDonald Investments branch network, Key transferred approximately $1.3 billion of NOW and money market deposit accounts to the buyer. McDonald's NOW and money market deposit accounts averaged $1.5 billion for the second quarter of 2006.

Noninterest income decreased by $32 million, or 14%, from the year-ago quarter, due primarily to a reduction in brokerage income caused by the McDonald Investments sale. This reduction was partially offset by an increase in service charges on deposit accounts.

Noninterest expense declined by $43 million, or 9%. Lower personnel costs and decreases in certain other costs associated with the McDonald Investments branch network accounted for most of the improvement.

National Banking Percent change 2Q07 vs. dollars in millions 2Q07 1Q07 2Q06 1Q07 2Q06 Summary of operations Net interest income (TE) $348 $340 $349 2.4 % (.3)% Noninterest income 282 265 247 6.4 14.2 Total revenue (TE) 630 605 596 4.1 5.7 Provision for loan losses 32 30 2 6.7 N/M Noninterest expense 328 314 313 4.5 4.8 Income from continuing operations before income taxes (TE) 270 261 281 3.4 (3.9) Allocated income taxes and TE adjustments 101 98 105 3.1 (3.8) Income from continuing operations 169 163 176 3.7 (4.0) Income (loss) from discontinued operations, net of taxes (3) (8) 5 62.5 N/M Net income $166 $155 $181 7.1 % (8.3)% Percent of consolidated income from continuing operations 50 % 46 % 58 % N/A N/A Average balances from continuing operations Loans and leases $39,348 $38,869 $37,730 1.2 % 4.3 % Loans held for sale 4,377 3,917 3,821 11.7 14.6 Total assets 49,639 48,480 47,682 2.4 4.1 Deposits 12,036 11,231 10,633 7.2 13.2 TE = Taxable Equivalent, N/M = Not Meaningful, N/A = Not Applicable National Banking Summary of Continuing Operations

Income from continuing operations for National Banking was $169 million for the second quarter of 2007, compared to $176 million for the same period last year. Increases in the provision for loan losses and noninterest expense accounted for the reduction, and more than offset an increase in noninterest income. Net interest income was essentially unchanged from the year-ago quarter.

Taxable-equivalent net interest income decreased by less than $1 million from the second quarter of 2006. The adverse effect of a tighter interest rate spread on average earning assets was offset by the growth in average loans and deposits.

The provision for loan losses rose by $30 million, reflecting a higher level of net loan charge-offs.

Noninterest income was up $35 million, or 14%. The growth was attributable to a significant increase in net gains from loan securitizations and sales, along with higher income from operating leases, and trust and investment services.

Noninterest expense grew by $15 million, or 5%, due primarily to higher costs associated with operating leases.

Other Segments

Other segments consist of Corporate Treasury and Key's Principal Investing unit. These segments generated net income of $49 million for the second quarter of 2007, up from $19 million for the same period last year.

Line of Business Descriptions Community Banking

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

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

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

National Banking

Real Estate Capital provides construction and interim lending, permanent debt placements and servicing, and equity and investment banking services to developers, brokers and owner-investors. This line of business deals exclusively with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from nonaffiliated third parties).

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

Institutional and Capital Markets provides products and services to large corporations, middle-market companies, financial institutions, government entities and not-for-profit organizations. These products and services include commercial lending, treasury management, investment banking, derivatives and foreign exchange, equity and debt underwriting and trading, and syndicated finance.

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

Consumer Finance includes Indirect Lending, Commercial Floor Plan Lending, Home Equity Services and Business Services.

Indirect Lending offers loans to consumers through dealers. This business unit also provides federal and private education loans to students and their parents, and processes payments on loans that private schools make to parents.

Commercial Floor Plan Lending finances inventory for automobile and marine dealers.

Home Equity Services works with home improvement contractors to provide home equity and home improvement financing solutions.

Business Services provides payroll processing solutions for businesses of all sizes.

Cleveland-based KeyCorp is one of the nation's largest bank-based financial services companies, with assets of approximately $94 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. The company's businesses deliver their products and services through 954 branches and additional offices; a network of 1,450 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, https://www.key.com/,(R) that provides account access and financial products 24 hours a day.

Notes to Editors:

A live Internet broadcast of KeyCorp's conference call to discuss quarterly earnings and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Tuesday, July 17, 2007. An audio replay of the call will be available through July 24.

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

This news release contains forward-looking statements, including statements about our financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements express management's current expectations or forecasts of future events and, by their nature, are subject to assumptions, risks and uncertainties. Although management believes that the expectations and forecasts reflected in these forward-looking statements are reasonable, actual results could differ materially due to a variety of factors including: (1) changes in interest rates; (2) changes in trade, monetary or fiscal policy; (3) changes in general economic conditions, or in the condition of the local economies or industries in which we have significant operations or assets, which could, among other things, materially impact credit quality trends and our ability to generate loans; (4) increased competitive pressure among financial services companies; (5) the inability to successfully execute strategic initiatives designed to grow revenues and/or manage expenses; (6) consummation of significant business combinations or divestitures; (7) operational or risk management failures due to technological or other factors; (8) heightened regulatory practices, requirements or expectations; (9) new legal obligations or liabilities or unfavorable resolution of litigation; (10) adverse capital markets conditions; (11) disruption in the economy and general business climate as a result of terrorist activities or military actions; and (12) changes in accounting or tax practices or requirements. Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. We do not assume any obligation to update these forward-looking statements. For further information regarding KeyCorp, please read KeyCorp's reports that are filed with the Securities and Exchange Commission and are available at http://www.sec.gov/.

INVESTOR KEY MEDIA RELATIONS: http://www.key.com/ir NEWSROOM: http://www.key.com/newsroom KeyCorp Reports Second Quarter 2007 Earnings Financial Highlights (dollars in millions, except per share amounts) Three months ended 6-30-07 3-31-07 6-30-06 Summary of operations Net interest income (TE) $706 $700 $726 Noninterest income 649 654 545 Total revenue (TE) 1,355 1,354 1,271 Provision for loan losses 53 44 23 Noninterest expense 815 784 798 Income from continuing operations before cumulative effect of accounting change 337 358 303 Income (loss) from discontinued operations, net of taxes (3) (8) 5 Net income 334 350 308 Per common share Income from continuing operations before cumulative effect of accounting change $.86 $.90 $.75 Income from continuing operations before cumulative effect of accounting change - assuming dilution .85 .89 .74 Income (loss) from discontinued operations (.01) (.02) .01 Income (loss) from discontinued operations - assuming dilution (.01) (.02) .01 Net income .85 .88 .76 Net income - assuming dilution .84 .87 .75 Cash dividends declared .365 .365 .345 Book value at period end 19.78 19.57 19.21 Market price at period end 34.33 37.47 35.68 Performance ratios - from continuing operations Return on average total assets 1.45% 1.58% 1.33% Return on average equity 17.66 19.06 15.85 Net interest margin (TE) 3.46 3.50 3.68 Performance ratios - from consolidated operations Return on average total assets 1.43% 1.54% 1.32% Return on average equity 17.50 18.63 16.11 Net interest margin (TE) 3.46 3.51 3.69 Capital ratios at period end Equity to assets 8.19% 8.28% 8.16% Tangible equity to tangible assets 6.89 6.97 6.68 Tier 1 risk-based capital (a) 8.10 8.15 7.90 Total risk-based capital (a) 12.08 12.20 12.08 Leverage (a) 9.12 9.17 8.82 Asset quality Net loan charge-offs $53 $44 $34 Net loan charge-offs to average loans from continuing operations .32% .27% .22% Allowance for loan losses $945 $944 $956 Allowance for loan losses to period- end loans 1.42% 1.44% 1.42% Allowance for loan losses to nonperforming loans 342.39 371.65 342.65 Nonperforming loans at period end $276 $254 $279 Nonperforming assets at period end 378 353 308 Nonperforming loans to period-end portfolio loans .41% .39% .41% Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets .57 .54 .46 Trust and brokerage assets Assets under management $85,592 $82,388 $80,349 Nonmanaged and brokerage assets (b) 33,485 32,838 57,682 Other data Average full-time equivalent employees 18,888 19,801 19,931 Branches 954 950 946 Taxable-equivalent adjustment $20 $21 $22 Financial Highlights (continued) (dollars in millions, except per share amounts) Six months ended 6-30-07 6-30-06 Summary of operations Net interest income (TE) $1,406 $1,448 Noninterest income 1,303 1,026 Total revenue (TE) 2,709 2,474 Provision for loan losses 97 62 Noninterest expense 1,599 1,550 Income from continuing operations before cumulative effect of accounting change 695 577 Income (loss) from discontinued operations, net of taxes (11) 15 Net income 684 597 Per common share Income from continuing operations before cumulative effect of accounting change $1.76 $1.42 Income from continuing operations before cumulative effect of accounting change - assuming dilution 1.74 1.40 Income (loss) from discontinued operations (.03) .04 Income (loss) from discontinued operations - assuming dilution (.03) .04 Net income 1.73 1.47 Net income - assuming dilution 1.71 1.45 Cash dividends declared .73 .69 Performance ratios - from continuing operations Return on average total assets 1.51% 1.29% Return on average equity 18.35 15.40 Net interest margin (TE) 3.48 3.70 Performance ratios - from consolidated operations Return on average total assets 1.49% 1.29% Return on average equity 18.06 15.80 Net interest margin (TE) 3.49 3.73 Asset quality Net loan charge-offs $97 $73 Net loan charge-offs to average loans from continuing operations .30% .23% Other data Average full-time equivalent employees 19,342 19,813 Taxable-equivalent adjustment $41 $50 (a) 6-30-07 ratio is estimated. (b) On February 9, 2007, Key sold the McDonald Investments branch network. TE = Taxable Equivalent Consolidated Balance Sheets (dollars in millions) 6-30-07 3-31-07 6-30-06 Assets Loans $66,692 $65,711 $67,408 Loans held for sale 4,546 4,175 4,189 Investment securities 37 38 44 Securities available for sale 7,819 7,789 7,140 Short-term investments 1,632 2,084 1,577 Other investments 1,602 1,466 1,379 Total earning assets 82,328 81,263 81,737 Allowance for loan losses (945) (944) (956) Cash and due from banks 1,818 2,052 2,814 Premises and equipment 600 590 557 Operating lease assets 1,110 1,074 1,043 Goodwill 1,202 1,202 1,372 Other intangible assets 110 115 132 Corporate-owned life insurance 2,822 2,805 2,732 Derivative assets 1,160 1,132 1,016 Accrued income and other assets 3,871 3,930 4,347 Total assets $94,076 $93,219 $94,794 Liabilities Deposits in domestic offices: NOW and money market deposit accounts $23,315 $23,317 $25,291 Savings deposits 1,613 1,654 1,751 Certificates of deposit ($100,000 or more) 6,197 6,094 5,224 Other time deposits 11,832 12,086 11,542 Total interest-bearing deposits 42,957 43,151 43,808 Noninterest-bearing deposits 14,199 13,473 13,268 Deposits in foreign office - interest-bearing 3,443 3,149 3,762 Total deposits 60,599 59,773 60,838 Federal funds purchased and securities sold under repurchase agreements 4,362 5,770 3,654 Bank notes and other short-term borrowings 2,631 1,108 2,360 Derivative liabilities 1,119 870 1,156 Accrued expense and other liabilities 5,083 4,918 4,999 Long-term debt 12,581 13,061 14,050 Total liabilities 86,375 85,500 87,057 Shareholders' equity Preferred stock -- -- -- Common shares 492 492 492 Capital surplus 1,652 1,614 1,577 Retained earnings 8,720 8,528 8,199 Treasury stock, at cost (2,994) (2,801) (2,411) Accumulated other comprehensive loss (169) (114) (120) Total shareholders' equity 7,701 7,719 7,737 Total liabilities and shareholders' equity $94,076 $93,219 $94,794 Common shares outstanding (000) 389,362 394,483 402,672 Consolidated Statements of Income (dollars in millions, except per share amounts) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Interest income Loans $1,176 $1,161 $1,136 $2,337 $2,196 Loans held for sale 82 75 73 157 141 Investment securities -- 1 1 1 1 Securities available for sale 106 100 84 206 167 Short-term investments 16 18 16 34 31 Other investments 15 13 17 28 42 Total interest income 1,395 1,368 1,327 2,763 2,578 Interest expense Deposits 447 433 378 880 708 Federal funds purchased and securities sold under repurchase agreements 59 49 20 108 40 Bank notes and other short- term borrowings 18 11 27 29 51 Long-term debt 185 196 198 381 381 Total interest expense 709 689 623 1,398 1,180 Net interest income 686 679 704 1,365 1,398 Provision for loan losses 53 44 23 97 62 Net interest income after provision for loan losses 633 635 681 1,268 1,336 Noninterest income Trust and investment services income 115 125 139 240 274 Service charges on deposit accounts 84 75 77 159 149 Investment banking and capital markets income 52 44 57 96 117 Operating lease income 66 64 56 130 108 Letter of credit and loan fees 45 38 45 83 85 Corporate-owned life insurance income 32 25 26 57 51 Electronic banking fees 25 24 27 49 51 Net gains from loan securitizations and sales 33 9 10 42 20 Net securities gains (losses) 2 (47) 4 (45) 5 Gain on sale of McDonald Investments branch network --- 171 --- 171 --- Other income 195 126 104 321 166 Total noninterest income 649 654 545 1,303 1,026 Noninterest expense Personnel 411 428 427 839 827 Net occupancy 59 63 59 122 120 Computer processing 49 51 49 100 105 Operating lease expense 55 52 45 107 86 Professional fees 26 26 40 52 73 Equipment 24 25 26 49 52 Marketing 20 19 23 39 38 Other expense 171 120 129 291 249 Total noninterest expense 815 784 798 1,599 1,550 Income from continuing operations before income taxes and cumulative effect of accounting change 467 505 428 972 812 Income taxes 130 147 125 277 235 Income from continuing operations before cumulative effect of accounting change 337 358 303 695 577 Income (loss) from discontinued operations, net of taxes (3) (8) 5 (11) 15 Income before cumulative effect of accounting change 334 350 308 684 592 Cumulative effect of change in accounting for forfeited stock-based awards, net of taxes --- --- --- --- 5 Net income $334 $350 $308 $684 $597 Per common share: Income from continuing operations before cumulative effect of accounting change $.86 $.90 $.75 $1.76 $1.42 Income before cumulative effect of accounting change .85 .88 .76 1.73 1.46 Net income .85 .88 .76 1.73 1.47 Per common share - assuming dilution: Income from continuing operations before cumulative effect of accounting change $.85 $.89 $.74 $1.74 $1.40 Income before cumulative effect of accounting change .84 .87 .75 1.71 1.44 Net income .84 .87 .75 1.71 1.45 Cash dividends declared per common share $.365 $.365 $.345 $.73 $.69 Weighted-average common shares outstanding (000) 392,045 397,875 404,528 394,944 405,949 Weighted-average common shares and potential common shares outstanding (000) 396,918 403,478 410,559 400,180 411,842 Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates From Continuing Operations (dollars in millions) Second Quarter 2007 First Quarter 2007 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Assets Loans: (a),(b) Commercial, financial and agricultural $21,856 $401 7.36% $21,562 $392 7.38% Real estate - commercial mortgage 8,565 165 7.75 8,426 163 7.83 Real estate - construction 8,243 167 8.09 8,227 166 8.20 Commercial lease financing 10,096 142 5.62 10,094 146 5.78 Total commercial loans 48,760 875 7.19 48,309 867 7.26 Real estate - residential 1,472 24 6.57 1,444 24 6.60 Home equity 10,752 193 7.22 10,706 191 7.22 Consumer - direct 1,370 37 10.64 1,450 36 10.15 Consumer - indirect 3,961 67 6.76 3,760 64 6.79 Total consumer loans 17,555 321 7.33 17,360 315 7.32 Total loans 66,315 1,196 7.23 65,669 1,182 7.28 Loans held for sale 4,415 82 7.50 3,940 75 7.70 Investment securities (a) 39 --- 6.72 39 1 7.21 Securities available for sale (c) 7,793 106 5.45 7,548 100 5.27 Short-term investments 1,484 16 4.19 1,607 18 4.55 Other investments (c) 1,541 15 3.68 1,400 13 3.65 Total earning assets 81,587 1,415 6.95 80,203 1,389 6.99 Allowance for loan losses (942) (942) Accrued income and other assets 12,767 12,835 Total assets $93,412 $92,096 Liabilities NOW and money market deposit accounts $22,953 179 3.14 $23,424 177 3.06 Savings deposits 1,633 1 .19 1,629 1 .19 Certificates of deposit ($100,000 or more) (d) 6,237 79 5.03 6,151 76 5.03 Other time deposits 12,047 141 4.70 12,063 138 4.64 Deposits in foreign office (e) 3,600 47 5.20 3,258 41 5.12 Total interest- bearing deposits 46,470 447 3.85 46,525 433 3.77 Federal funds purchased and securities sold under repurchase agreements (e) 4,748 59 5.04 3,903 49 5.04 Bank notes and other short-term borrowings 1,771 18 4.14 1,113 11 3.98 Long-term debt (d),(e) 12,909 185 5.83 13,617 196 5.90 Total interest- bearing liabilities 65,898 709 4.33 65,158 689 4.29 Noninterest-bearing deposits 13,927 13,237 Accrued expense and other liabilities 5,933 6,083 Total liabilities 85,758 84,478 Shareholders' equity 7,654 7,618 Total liabilities and shareholders' equity $93,412 $92,096 Interest rate spread (TE) 2.62% 2.70% Net interest income (TE) and net interest margin (TE) 706 3.46% 700 3.50% TE adjustment (a) 20 21 Net interest income, GAAP basis $686 $679 Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates From Continuing Operations (dollars in millions) Second Quarter 2006 Average Balance Interest Yield/Rate Assets Loans: (a),(b) Commercial, financial and agricultural $21,970 $390 7.12% Real estate - commercial mortgage 8,071 153 7.59 Real estate - construction 7,570 152 8.07 Commercial lease financing 9,764 148 6.05 Total commercial loans 47,375 843 7.13 Real estate - residential 1,430 24 6.54 Home equity 11,003 193 7.02 Consumer - direct 1,685 41 9.64 Consumer - indirect 3,503 57 6.66 Total consumer loans 17,621 315 7.16 Total loans 64,996 1,158 7.14 Loans held for sale 3,844 73 7.64 Investment securities (a) 46 1 8.01 Securities available for sale (c) 7,075 84 4.71 Short-term investments 1,678 16 3.89 Other investments (c) 1,398 17 4.60 Total earning assets 79,037 1,349 6.83 Allowance for loan losses (958) Accrued income and other assets 13,137 Total assets $91,216 Liabilities NOW and money market deposit accounts $25,347 173 2.75 Savings deposits 1,752 1 .20 Certificates of deposit ($100,000 or more)(d) 5,382 61 4.54 Other time deposits 11,456 115 4.02 Deposits in foreign office (e) 2,116 28 5.22 Total interest-bearing deposits 46,053 378 3.29 Federal funds purchased and securities sold under repurchase agreements (e) 1,692 20 4.76 Bank notes and other short-term borrowings 2,497 27 4.17 Long-term debt (d),(e) 14,088 198 5.59 Total interest-bearing liabilities 64,330 623 3.87 Noninterest-bearing deposits 13,014 Accrued expense and other liabilities 6,205 Total liabilities 83,549 Shareholders' equity 7,667 Total liabilities and shareholders' equity $91,216 Interest rate spread (TE) 2.96% Net interest income (TE) and net interest margin (TE) 726 3.68% TE adjustment (a) 22 Net interest income, GAAP basis $704 (a) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. (b) For purposes of these computations, nonaccrual loans are included in average loan balances. (c) Yield is calculated on the basis of amortized cost. (d) Rate calculation excludes basis adjustments related to fair value hedges. (e) Results from continuing operations exclude the Dollar amount of liabilities assumed necessary to support interest-earning assets held by the discontinued Champion Mortgage finance business. The interest expense related to these liabilities, which also is excluded from continuing operations, was calculated using a matched funds transfer pricing methodology. TE = Taxable Equivalent GAAP = U.S. generally accepted accounting principles Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates From Continuing Operations (dollars in millions) Six months ended Six months ended June 30, 2007 June 30, 2006 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Assets Loans: (a),(b) Commercial, financial and agricultural $21,710 $793 7.37% $21,846 $747 6.89% Real estate - commercial mortgage 8,496 328 7.79 8,080 297 7.41 Real estate - construction 8,235 333 8.14 7,442 290 7.87 Commercial lease financing 10,095 288 5.70 9,672 291 6.02 Total commercial loans 48,536 1,742 7.23 47,040 1,625 6.96 Real estate - residential 1,458 48 6.58 1,440 47 6.43 Home equity 10,729 384 7.22 10,987 377 6.92 Consumer - direct 1,410 73 10.39 1,707 82 9.65 Consumer - indirect 3,861 131 6.77 3,436 114 6.66 Total consumer loans 17,458 636 7.33 17,570 620 7.09 Total loans 65,994 2,378 7.25 64,610 2,245 6.99 Loans held for sale 4,179 157 7.59 3,769 141 7.54 Investment securities (a) 39 1 6.96 54 2 7.11 Securities available for sale (c) 7,671 206 5.36 7,111 167 4.66 Short-term investments 1,545 34 4.37 1,711 31 3.65 Other investments (c) 1,471 28 3.66 1,367 42 5.84 Total earning assets 80,899 2,804 6.97 78,622 2,628 6.71 Allowance for loan losses (942) (958) Accrued income and other assets 12,801 13,068 Total assets $92,758 $90,732 Liabilities NOW and money market deposit accounts $23,187 356 3.10 $24,902 318 2.58 Savings deposits 1,631 2 .19 1,782 2 .26 Certificates of deposit ($100,000 or more) (d) 6,194 155 5.03 5,395 119 4.44 Other time deposits 12,055 279 4.67 11,369 219 3.88 Deposits in foreign office (e) 3,430 88 5.16 2,073 50 4.86 Total interest- bearing deposits 46,497 880 3.81 45,521 708 3.14 Federal funds purchased and securities sold under repurchase agreements (e) 4,328 108 5.04 1,858 40 4.34 Bank notes and other short-term borrowings 1,444 29 4.08 2,524 51 4.03 Long-term debt (d),(e) 13,261 381 5.87 14,039 381 5.44 Total interest- bearing liabilities 65,530 1,398 4.31 63,942 1,180 3.71 Noninterest-bearing deposits 13,584 12,854 Accrued expense and other liabilities 6,008 6,316 Total liabilities 85,122 83,112 Shareholders' equity 7,636 7,620 Total liabilities and shareholders' equity $92,758 $90,732 Interest rate spread (TE) 2.66% 3.00% Net interest income (TE) and net interest margin (TE) 1,406 3.48% 1,448 3.70% TE adjustment (a) 41 50 Net interest income, GAAP basis $1,365 $1,398 (a) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%. (b) For purposes of these computations, nonaccrual loans are included in average loan balances. (c) Yield is calculated on the basis of amortized cost. (d) Rate calculation excludes basis adjustments related to fair value hedges. (e) Results from continuing operations exclude the dollar amount of liabilities assumed necessary to support interest-earning assets held by the discontinued Champion Mortgage finance business. The interest expense related to these liabilities, which also is excluded from continuing operations, was calculated using a matched funds transfer pricing methodology. TE = Taxable Equivalent GAAP = U.S. generally accepted accounting principles Noninterest Income (in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Trust and investment services income (a) $115 $125 $139 $240 $274 Service charges on deposit accounts 84 75 77 159 149 Investment banking and capital markets income (a) 52 44 57 96 117 Operating lease income 66 64 56 130 108 Letter of credit and loan fees 45 38 45 83 85 Corporate-owned life insurance income 32 25 26 57 51 Electronic banking fees 25 24 27 49 51 Net gains from loan securitizations and sales 33 9 10 42 20 Net securities gains (losses) 2 (47) 4 (45) 5 Gain on sale of McDonald Investments branch network - 171 - 171 - Other income: Insurance income 15 14 17 29 31 Loan securitization servicing fees 6 5 5 11 10 Credit card fees 3 3 3 6 6 Net gains from principal investing 90 29 23 119 20 Miscellaneous income 81 75 56 156 99 Total other income 195 126 104 321 166 Total noninterest income $649 $654 $545 $1,303 $1,026 (a) Additional detail provided in tables below. Trust and Investment Services Income (in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Brokerage commissions and fee income $28 $40 $59 $68 $121 Personal asset management and custody fees 41 40 38 81 77 Institutional asset management and custody fees 46 45 42 91 76 Total trust and investment services income $115 $125 $139 $240 $274 Investment Banking and Capital Markets Income (in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Investment banking income $22 $21 $26 $43 $48 Dealer trading and derivatives income 12 8 9 20 16 Income from other investments 6 5 11 11 32 Foreign exchange income 12 10 11 22 21 Total investment banking and capital markets income $52 $44 $57 $96 $117 Noninterest Expense (dollars in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Personnel (a) $411 $428 $427 $839 $827 Net occupancy 59 63 59 122 120 Computer processing 49 51 49 100 105 Operating lease expense 55 52 45 107 86 Professional fees 26 26 40 52 73 Equipment 24 25 26 49 52 Marketing 20 19 23 39 38 Other expense: Postage and delivery 11 12 12 23 25 Franchise and business taxes 8 9 10 17 20 Telecommunications 7 7 7 14 14 Provision (credit) for losses on lending-related commitments 6 (8) - (2) - Miscellaneous expense 139 100 100 239 190 Total other expense 171 120 129 291 249 Total noninterest expense $815 $784 $798 $1,599 $1,550 Average full-time equivalent employees 18,888 19,801 19,931 19,342 19,813 (a) Additional detail provided in table below. Personnel Expense (in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Salaries $236 $245 $234 $481 $463 Incentive compensation 82 75 98 157 175 Employee benefits 73 82 75 155 155 Stock-based compensation 16 24 18 40 32 Severance 4 2 2 6 2 Total personnel expense $411 $428 $427 $839 $827 Loan Composition (dollars in millions) Percent change 6-30-07 vs. 6-30-07 3-31-07 6-30-06 3-31-07 6-30-06 Commercial, financial and agricultural $21,814 $21,476 $21,598 1.6 % 1.0 % Commercial real estate: Commercial mortgage 8,629 8,519 7,994 1.3 7.9 Construction 8,214 8,355 7,767 (1.7) 5.8 Total commercial real estate loans 16,843 16,874 15,761 (.2) 6.9 Commercial lease financing 10,138 10,036 9,909 1.0 2.3 Total commercial loans 48,795 48,386 47,268 .8 3.2 Real estate - residential mortgage 1,572 1,440 1,418 9.2 10.9 Home equity a 10,879 10,669 13,509 2.0 (19.5) Consumer - direct 1,366 1,375 1,670 (.7) (18.2) Consumer - indirect: Marine 3,444 3,203 2,920 7.5 17.9 Other 636 638 623 (.3) 2.1 Total consumer - indirect loans 4,080 3,841 3,543 6.2 15.2 Total consumer loans 17,897 17,325 20,140 3.3 (11.1) Total loans $66,692 $65,711 $67,408 1.5 % (1.1)% (a) On August 1, 2006, Key transferred $2.5 billion of home equity loans from the loan portfolio to loans held for sale in connection with the November 2006 sale of the Champion Mortgage loan portfolio. Excluding the transfer, home equity loans were down $156 million, or 1%, from the second quarter of 2006. Loans Held for Sale Composition (dollars in millions) Percent change 6-30-07 vs. 6-30-07 3-31-07 6-30-06 3-31-07 6-30-06 Commercial, financial and agricultural $76 $68 $45 11.8 % 68.9 % Real estate - commercial mortgage 1,613 1,224 1,133 31.8 42.4 Real estate - construction 172 163 36 5.5 377.8 Commercial lease financing 22 1 - N/M N/M Real estate - residential mortgage 39 26 27 50.0 44.4 Home equity - - 1 - (100.0) Education 2,616 2,681 2,929 (2.4) (10.7) Automobile 8 12 18 (33.3) (55.6) Total loans held for sale $4,546 $4,175 $4,189 8.9 % 8.5 % N/M = Not Meaningful Summary of Loan Loss Experience (dollars in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Average loans outstanding from continuing operations $66,315 $65,669 $64,996 $65,994 $64,610 Allowance for loan losses at beginning of period $944 $944 $966 $944 $966 Loans charged off: Commercial, financial and agricultural 30 17 20 47 44 Real estate - commercial mortgage 5 6 3 11 6 Real estate - construction 2 1 - 3 2 Total commercial real estate loans 7 7 3 14 8 Commercial lease financing 9 13 8 22 14 Total commercial loans 46 37 31 83 66 Real estate - residential mortgage 1 1 2 2 3 Home equity 8 8 8 16 16 Consumer - direct 8 7 9 15 19 Consumer - indirect 9 11 9 20 20 Total consumer loans 26 27 28 53 58 72 64 59 136 124 Recoveries: Commercial, financial and agricultural 6 7 7 13 19 Real estate - commercial mortgage 1 3 - 4 1 Commercial lease financing 4 3 9 7 14 Total commercial loans 11 13 16 24 34 Real estate - residential mortgage 1 - 1 1 1 Home equity 2 1 1 3 3 Consumer - direct 1 2 2 3 4 Consumer - indirect 4 4 5 8 9 Total consumer loans 8 7 9 15 17 19 20 25 39 51 Net loan charge-offs (53) (44) (34) (97) (73) Provision for loan losses from continuing operations 53 44 23 97 62 Provision for loan losses from discontinued operations - - 1 - 1 Foreign currency translation adjustment 1 - - 1 - Allowance for loan losses at end of period $945 $944 $956 $945 $956 Net loan charge-offs to average loans from continuing operations .32% .27% .22% .30% .23% Allowance for loan losses to period-end loans 1.42 1.44 1.42 1.42 1.42 Allowance for loan losses to nonperforming loans 342.39 371.65 342.65 342.39 342.65 Changes in Liability for Credit Losses on Lending-Related Commitments (in millions) Three months ended Six months ended 6-30-07 3-31-07 6-30-06 6-30-07 6-30-06 Balance at beginning of period $45 $53 $59 $53 $59 Provision (credit) for losses on lending-related commitments 6 (8) - (2) - Charge-offs (1) - - (1) - Balance at end of period (a) $50 $45 $59 $50 $59 Summary of Nonperforming Assets and Past Due Loans (dollars in millions) 6-30-07 3-31-07 12-31-06 9-30-06 6-30-06 Commercial, financial and agricultural $83 $70 $38 $42 $76 Real estate - commercial mortgage 41 44 48 36 35 Real estate - construction 23 10 10 37 4 Total commercial real estate loans 64 54 58 73 39 Commercial lease financing 34 31 22 20 29 Total commercial loans 181 155 118 135 144 Real estate - residential mortgage 27 32 34 34 36 Home equity (b) 55 52 50 46 90 Consumer - direct 2 2 2 2 3 Consumer - indirect 11 13 11 6 6 Total consumer loans 95 99 97 88 135 Total nonperforming loans 276 254 215 223 279 Nonperforming loans held for sale (b) 4 3 3 56 1 OREO 27 42 57 52 26 Allowance for OREO losses (2) (2) (3) (3) (1) OREO, net of allowance 25 40 54 49 25 Other nonperforming assets 73 56(c) 1 1 3 Total nonperforming assets $378 $353 $273 $329 $308 Accruing loans past due 90 days or more $181 $146 $120 $125 $119 Accruing loans past due 30 through 89 days 623 626 644 715 600 Nonperforming loans to period-end portfolio loans .41% .39% .33% .34% .41% Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets .57 .54 .41 .50 .46 Summary of Changes in Nonperforming Loans (in millions) 2Q07 1Q07 4Q06 3Q06 2Q06 Balance at beginning of period $254 $215 $223 $279 $295 Loans placed on nonaccrual status 130 129 115 134 98 Charge-offs (72) (61) (74) (70) (59) Loans sold (7) - (5) (22) (6) Payments (21) (7) (23) (43) (45) Transfer to held-for-sale portfolio (b) - - - (55) - Transfers to OREO - (9) (12) - (4) Loans returned to accrual status (8) (13) (9) - - Balance at end of period $276 $254 $215 $223 $279 (a) Included in "accrued expense and other liabilities" on the consolidated balance sheet. (b) On August 1, 2006, Key transferred approximately $55 million of home equity loans from nonperforming loans to nonperforming loans held for sale in connection with an expected sale of the Champion Mortgage finance business. (c) Primarily one investment of approximately $51 million held by the Private Equity unit within Key's Real Estate Capital line of business. Line of Business Results (dollars in millions) Community Banking 2Q07 1Q07 4Q06 3Q06 2Q06 Summary of operations Total revenue (TE) $624 $799 $670 $679 $672 Provision for loan losses 21 14 23 22 21 Noninterest expense 448 470 492 486 491 Net income 97 197 97 107 100 Average loans and leases 26,551 26,426 26,667 26,767 26,830 Average deposits 46,171 46,581 47,383 46,976 46,675 Net loan charge- offs 26 19 24 22 24 Return on average allocated equity 15.80% 32.46% 15.41% 16.93% 16.09% Average full-time equivalent employees 8,202 8,619 8,805 8,915 8,782 Supplementary information (lines of business) Regional Banking Total revenue (TE) $530 $707 $571 $578 $573 Provision for loan losses 19 18 19 19 19 Noninterest expense 400 421 444 436 439 Net income 69 167 68 77 72 Average loans and leases 18,433 18,453 18,648 18,796 18,854 Average deposits 42,694 43,012 43,721 43,449 43,145 Net loan charge-offs 19 18 19 19 21 Return on average allocated equity 16.07% 38.99% 15.23% 17.22% 16.46% Average full-time equivalent employees 7,883 8,296 8,484 8,595 8,454 Commercial Banking Total revenue (TE) $94 $92 $99 $101 $99 Provision for loan losses 2 (4) 4 3 2 Noninterest expense 48 49 48 50 52 Net income 28 30 29 30 28 Average loans and leases 8,118 7,973 8,019 7,971 7,976 Average deposits 3,477 3,569 3,662 3,527 3,530 Net loan charge-offs 7 1 5 3 3 Return on average allocated equity 15.16% 16.80% 15.85% 16.24% 15.22% Average full-time equivalent employees 319 323 321 320 328 Line of Business Results (dollars in millions) Community Banking Percent change 2Q07 vs. 1Q07 2Q06 Summary of operations Total revenue (TE) (21.9)% (7.1)% Provision for loan losses 50.0 --- Noninterest expense (4.7) (8.8) Net income (50.8) (3.0) Average loans and leases .5 (1.0) Average deposits (.9) (1.1) Net loan charge-offs 36.8 8.3 Return on average allocated equity N/A N/A Average full-time equivalent employees (4.8) (6.6) Supplementary information (lines of business) Regional Banking Total revenue (TE) (25.0)% (7.5)% Provision for loan losses 5.6 --- Noninterest expense (5.0) (8.9) Net income (58.7) (4.2) Average loans and leases (.1) (2.2) Average deposits (.7) (1.0) Net loan charge-offs 5.6 (9.5) Return on average allocated equity N/A N/A Average full-time equivalent employees (5.0) (6.8) Commercial Banking Total revenue (TE) 2.2% (5.1)% Provision for loan losses N/M --- Noninterest expense (2.0) (7.7) Net income (6.7) --- Average loans and leases 1.8 1.8 Average deposits (2.6) (1.5) Net loan charge-offs 600.0 133.3 Return on average allocated equity N/A N/A Average full-time equivalent employees (1.2) (2.7) Line of Business Results (continued) (dollars in millions) National Banking 2Q07 1Q07 4Q06 3Q06 2Q06 Summary of operations Total revenue (TE) $630 $605 $678 $596 $596 Provision for loan losses 32 30 30 13 2 Noninterest expense 328 314 330 305 313 Income from continuing operations 169 163 199 174 176 Net income 166 155 34 181 181 Average loans and leases (a) 39,348 38,869 38,498 37,898 37,730 Average loans held for sale (a) 4,377 3,917 4,521 4,553 3,821 Average deposits (a)12,036 11,231 11,839 11,066 10,633 Net loan charge- offs (a) 27 25 30 21 10 Return on average allocated equity (a)16.43% 16.49% 19.93% 17.85% 18.55% Return on average allocated equity 16.14 15.68 3.21 17.46 17.93 Average full-time equivalent employees 3,830 4,219 4,313 4,326 4,231 Supplementary information (lines of business) Real Estate Capital Total revenue (TE) $188 $167 $189 $170 $176 Provision for loan losses 8 1 18 7 --- Noninterest expense 78 72 70 70 72 Net income 64 59 63 58 65 Average loans and leases 12,827 12,755 12,931 12,854 12,719 Average loans held for sale 1,241 1,145 1,125 1,022 692 Average deposits 4,865 4,297 4,096 3,598 3,467 Net loan charge-offs 3 1 8 --- 2 Return on average allocated equity 19.55% 19.28% 20.40% 19.03% 21.80% Average full-time equivalent employees 991 971 957 970 980 Equipment Finance Total revenue (TE) $155 $135 $146 $137 $136 Provision for loan losses 16 13 7 11 2 Noninterest expense 93 85 77 81 76 Net income 29 23 39 28 36 Average loans and leases 10,609 10,479 10,222 10,100 9,871 Average loans held for sale 10 4 33 6 34 Average deposits 16 13 15 19 14 Net loan charge-offs 16 13 14 11 3 Return on average allocated equity 13.08% 10.55% 17.72% 12.78% 17.15% Average full-time equivalent employees 971 952 938 927 915 Institutional and Capital Markets Total revenue (TE) $189 $182 $223 $190 $192 Provision for loan losses --- --- (4) 4 (4) Noninterest expense 116 115 137 111 117 Net income 45 41 57 48 48 Average loans and leases 7,454 7,436 7,521 7,390 7,601 Average loans held for sale 468 140 387 454 139 Average deposits 6,728 6,491 7,285 6,933 6,676 Net loan charge- offs (recoveries) --- 1 (2) 4 (2) Return on average allocated equity 15.15% 14.16% 19.18% 16.94% 17.57% Average full-time equivalent employees 1,302 1,350 1,375 1,385 1,296 Consumer Finance Total revenue (TE) $98 $121 $120 $99 $92 Provision for loan losses 8 16 9 (9) 4 Noninterest expense 41 42 46 43 48 Income from continuing operations 31 40 40 40 27 Net income (loss) 28 32 (125) 47 32 Average loans and leases (a) 8,458 8,199 7,824 7,554 7,539 Average loans held for sale (a) 2,658 2,628 2,976 3,071 2,956 Average deposits (a) 427 430 443 516 476 Net loan charge- offs (a) 8 10 10 6 7 Return on average allocated equity (a) 16.99% 22.82% 23.20% 23.83% 16.14% Return on average allocated equity 15.34 18.25 (53.67) 20.47 14.04 Average full-time equivalent employees 566 946 1,043 1,044 1,040 Line of Business Results (continued) (dollars in millions) National Banking Percent change 2Q07 vs. 1Q07 2Q06 Summary of operations Total revenue (TE) 4.1% 5.7% Provision for loan losses 6.7 N/M Noninterest expense 4.5 4.8 Income from continuing operations 3.7 (4.0) Net income 7.1 (8.3) Average loans and leases (a) 1.2 4.3 Average loans held for sale (a) 11.7 14.6 Average deposits (a) 7.2 13.2 Net loan charge-offs (a) 8.0 170.0 Return on average allocated equity (a) N/A N/A Return on average allocated equity N/A N/A Average full-time equivalent employees (9.2) (9.5) Supplementary information (lines of business) Real Estate Capital Total revenue (TE) 12.6% 6.8% Provision for loan losses 700.0 N/M Noninterest expense 8.3 8.3 Net income 8.5 (1.5) Average loans and leases .6 .8 Average loans held for sale 8.4 79.3 Average deposits 13.2 40.3 Net loan charge-offs 200.0 50.0 Return on average allocated equity N/A N/A Average full-time equivalent employees 2.1 1.1 Equipment Finance Total revenue (TE) 14.8% 14.0% Provision for loan losses 23.1 700.0 Noninterest expense 9.4 22.4 Net income 26.1 (19.4) Average loans and leases 1.2 7.5 Average loans held for sale 150.0 (70.6) Average deposits 23.1 14.3 Net loan charge-offs 23.1 433.3 Return on average allocated equity N/A N/A Average full-time equivalent employees 2.0 6.1 Institutional and Capital Markets Total revenue (TE) 3.8% (1.6)% Provision for loan losses --- (100.0) Noninterest expense .9 (.9) Net income 9.8 (6.3) Average loans and leases .2 (1.9) Average loans held for sale 234.3 236.7 Average deposits 3.7 .8 Net loan charge-offs (recoveries) (100.0) 100.0 Return on average allocated equity N/A N/A Average full-time equivalent employees (3.6) .5 Consumer Finance Total revenue (TE) (19.0)% 6.5% Provision for loan losses (50.0) 100.0 Noninterest expense (2.4) (14.6) Income from continuing operations (22.5) 14.8 Net income (loss) (12.5) (12.5) Average loans and leases (a) 3.2 12.2 Average loans held for sale (a) 1.1 (10.1) Average deposits (a) (.7) (10.3) Net loan charge-offs (a) (20.0) 14.3 Return on average allocated equity (a) N/A N/A Return on average allocated equity N/A N/A Average full-time equivalent employees (40.2) (45.6) (a) From continuing operations. TE = Taxable Equivalent N/A = Not Applicable N/M = Not Meaningful