Good morning, and welcome to KeyCorp's 2011 Second Quarter Earnings Results Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to the Chairman and Chief Executive Officer, Ms. Beth Mooney. Ms. Mooney, please go ahead.

Thank you, operator. Good morning, and welcome to KeyCorp's Second Quarter 2011 Earnings Conference Call. Joining me for today's presentation is Jeff Weeden, our Chief Financial Officer, and available for the Q&A portion of the call are the leaders of Key Corporate Bank and Key Community Bank, Chris Gorman and Bill Koehler. Also joining us for the Q&A discussion are our Chief Risk Officer, Chuck Hyle; and our Treasurer, Joe Vayda. Slide 2 is our forward-looking disclosure statement. It covers our presentation materials and comments, as well as the question-and-answer segment of our call today. Now if you would turn to Slide 3. This morning, we announced second quarter net income from continuing operations attributable to common shareholders of $243 million or $0.26 per common share. These results are above the amounts reported in the first quarter of this year and the year-ago period. Our improved performance reflected continued improvement in credit quality, good expense control and the successful execution of our business plan. Key's favorable credit quality trends have benefited from the improvement in the economy and the aggressive actions that were taken to exit higher risk lending activities and our early recognition and resolution of problem credit. This has resulted in Key's net charge-offs declining to their lowest level since the first quarter of 2008, and nonperforming assets has now declined for 7 consecutive quarters. Another area of focus has been expense management, and our second quarter showed continued progress. We have benefited from the success of our Keyvolution initiative and other efforts to streamline our operations. Going forward, we expect that we will continue to identify additional expense-saving opportunities as this is a critical factor in producing value for our shareholders in a slower growth environment. We're also leveraging our strong capital, balance sheet and liquidity position.…

Thank you, Beth. Slide 5 provides a summary of the company's second quarter 2011 results from continuing operations. As Beth commented on earlier, for the second quarter, the company earned a net profit of $0.26 per common share compared to $0.21 for the first quarter of this year and $0.06 for the same period 1 year ago. Over the next several slides, we will review in more detail our results for the second quarter. Turning to Slide 6, average total loans declined $858 million during the second quarter compared to the first quarter of this year. This was a slower decline that we had been experiencing in prior quarters, and supports our belief that we are nearing an inflection point in the total loan portfolio where it will begin showing growth. In fact, commercial, financial and agricultural loans showed its first quarterly growth in average balances since 2008, increasing $611 million or 3.7% unannualized from the prior quarter. Also during the quarter, we experienced an increase in total commercial, financial and agricultural loan commitments and a slight increase in utilization rates by our clients. In our non-exit consumer portfolio, we saw balances stabilize during the second quarter. And in our exit portfolio, runoff slowed to $312 million. At June 30, 2011, our exit loan portfolio was down to $4.7 billion, and it's expected to continue moving lower by approximately $250 million to $325 million per quarter for the next couple of quarters, much slower than the rate we experienced earlier in the cycle. Average commercial real estate balances for mortgage and construction loans declined by a little more than $1 billion during the quarter, as market liquidity continued to remain good for these assets. We anticipate that the decline in commercial real estate balances will slow considerably during the third…

[Operator Instructions] Let's begin with Craig Siegenthaler from Crédit Suisse. Craig Siegenthaler - Crédit Suisse AG: First, I just wonder if you could help us dissect the decline in the loan yields. If you take a look at the 20 basis point decline in the C&I yield from 1Q, what was the rough contribution from rates, competition and then maybe some unusual items like swaps runoff?

Okay, Craig, this is Jeff Weeden. The decline or the 20 basis point decline that we experienced in the C&I loan yields in the first quarter, there's a couple of important points to make. One, swaps contributed about 8 basis points of that decline so the swaps rolled off. That cost us about 8 basis points. But when we had also went out and looked at the impact, we have a large degree of our loan portfolio that's variable rate and that's priced off of 1-month LIBOR, as well as 3-month LIBOR. So if you look at the average rate on LIBOR between the first quarter and the second quarter, 1-month LIBOR was down about 6 basis points, and 3-month LIBOR was down about 4.5 to 5 basis points. So that also contributed probably about 3 to 4 basis points in that particular area. And then we did see, just as new spreads coming on are a little bit tighter. So that also had an impact. So the balance was really a tightening of the spreads. But there's a lot of it that's explained by swaps and then just the change in LIBOR. Craig Siegenthaler - Crédit Suisse AG: And then when we think about what you've seen so far in July in terms of competition and if we assume kind of, let's say, a flattish LIBOR flat interest rates in 3Q versus kind of that 8 basis points of competition you saw in the second quarter, how are we trending thus far in the third quarter?

Craig, its Chris Gorman. I think the pressure continues. I think that as we look at both structure and pricing, I would assume it would kind of go down another 5 basis points as people are looking for assets. The interesting thing that we see is we see it from both sides. We have a very big syndication business that we originate paper for our clients and distribute. So we see it on that side of it. And we also have a very big commercial loan mortgage business. So we feel like we have a pretty good insight to where the market is. And clearly, structure is getting more aggressive as is pricing. Craig Siegenthaler - Crédit Suisse AG: And then on the CD runoff, $4.3 billion is running off in the third and fourth quarter. Can you help us with the timing? Because I know it's very important if it's beginning, middle or kind of end of quarter for this $4.3 billion.

Yes, Craig, this is Jeff again. What we have specifically in the third, there's about $2.4 billion that will roll off in the third quarter. It's going to be about a 1.46% deal. I think you have to look at -- there's a lot of that of course that will be in there that will be 7-day, 30-day, et cetera, that just the normal runoff that continues to happen each and every quarter. The bigger runoffs really happen in 2012 when we get into the higher costing, some really of the more higher cost CDs out in the second and the third quarter. And the third quarter has got the largest lock. So there's about $1 billion in the third quarter of 2012 with an average rate of around 5%.

And we'll go next to Ken Zerbe with Morgan Stanley.

I guess my first question is just on capital. Obviously, your Tier 1 common has grown by, I think it was like 27 basis points this quarter. You're building capital which is great. How do you -- maybe could you just review your capital priorities specifically if they relate to buybacks and potential acquisitions?

Yes, Ken, this is Beth Mooney. Clearly, you're right. We are in the era of generating new capital, and we have said that disciplined capital management will be one of our priorities. In 2011, when we submitted our plan to our regulators under the capital submission, our priority at that time was the repayment of TARP in a shareholder-friendly manner, as well as the increase of our dividend to $0.03. Going forward, as we look at how we manage our capital both for a return to shareholders, as well as supporting our business, increasing our dividend is important over time. Share repurchase relative to our book value is clearly attractive. And then it's important that we support our organic growth, as well as we've said in the past, we would look at potential opportunities to enhance our geographic footprint, but that we would be disciplined and that we would make sure that it created franchise in shareholder value. But those would be the primary goals of any capital management policy at this time.

And are you seeing any kind of buying and the willingness of sellers to participate in M&A?

We would not comment obviously on any market trends, but we certainly, as you have seen, there has not been a lot of market activity yet this year.

Understood. And then just the last question, on expenses, how much -- I understand you're basically done with Keyvolution, but is there a way to quantify the additional expense savings you guys had mentioned about going forward? Or is that just sort of part of the ongoing business? And also is the $20 million reduction in FDIC insurance expenses sustainable going forward?

Yes, I think in terms of the -- I'll comment on the FDIC insurance first. It appears to be sustainable simply because we've de-risked the overall company. So the company has changed significantly I think in the last 3 years, so we have a lot more Tier 1 capital at this particular point in time. The quality of our investment portfolio is extremely high. So there's a great deal of liquidity in the overall wholesale funding needs or the loan-to-deposit ratio has improved dramatically. So we'll see obviously going forward on FDIC insurance will be significantly below where it has been for the prior quarters. And we would expect something similar to what we experienced in the second quarter of this year. Overall, expense management and expense controls, we haven't given any specific targets there. It's really part and parcel to our culture for the organization to continue to manage expenses tightly and look for revenue opportunities. We know that it's a challenging environment, and it's just part of the culture of the organization.

And we'll go next to Matthew O'Connor with Deutsche Bank.

This is Ron Placid [ph] on Matt's team. You mentioned the NIM is expected to remain under pressure from here. I guess, how should we think about the trajectory of the NIM going forward compared to the 3.19% in 2Q? And just compared to your long-term target of greater than 3.5%, what do we need to see from rates in the economy for Key to achieve that?

This is Jeff Weeden again. I think in terms of achieving the longer-term goal of above 3.5%, we're going to have to see the overall rate environment increase. So we certainly need an increase in short-term rates, as well as going out to probably the 3 to 5 years on the yield curve which, as we all know, has been very much depressed here of recent. And the prospects of that I would say of going up are not real high in the near term. In terms of overall pressure on the margin, I think just what we talked about, we're talking about a little bit of pressure on some of the loan yields. And so as asset yields come down a little bit, we're repricing deposits, which is why we provided the additional clarity I think around the CD book. But the fundamental item there is that as yields come down on assets and we're asset-sensitive position that we're in right now, it's going to continue to pressure the overall net interest margin, as well as how much liquidity we have. So liquidity has been extremely strong. Deposits are continuing to be plentiful in the system overall. And so that -- it just has a natural depressing impact on the net interest margin, not necessarily net interest income.

Okay, great. And then just switching gears, looking at credit. In terms of quantifying reserve draw down from here with reserves to loans coming down to currently 2.6%, how much should we expect the magnitude of reserve release to slow from here?

Well, we don't provide specific guidance with respect to reserve release because it is something that we go through mathematically each and every quarter. We did provide the direction. Our expectations would be for lower levels of nonperforming assets, as well as lower levels of net charge-offs. And I think as we continue to see the economy improve and you see the charge-off level really approaching that 1% level here in the second quarter, that the trend on reserves is going to continue to come down.

Okay. And just a quick follow-up. Just longer-term, where do you see kind of the reserve level normalizing?

Well, that's a difficult question to answer. I think in terms of what we had commented on even 6 months ago was that having the reserve over a cycle, it could come down to 1.5% to 2%. I really can't give you any more specifics than that because it does depend upon the quality and the size of the overall portfolio.

We'll go next to Ken Usdin with Jefferies.

Jeff, to your comments about pretax pre-provision, it's obviously settled in off of the original fourth quarter high point. And I'm just wondering if you're talking about the stable earning assets, a little bit of margin pressure. The fees look pretty good and then expenses, you had a little help from provision expense. And then we get the interchange stuff in the third quarter. I'm just wondering, are we at the point where pre pre is flattening? Or does that actually have to get -- is it once we get past the interchange run rating? I'm just wondering how close we are to flattening out on pretax pre-provision. And where do you think it could range?

Well, I think there's -- last quarter, we commented on a range of $300 million to $340 million as being plausible outcomes for the pre-provision net revenue. I think you have to look at individual expense line items. We have the gains in other real estate. Other real estate balances are pretty low at this particular point in time. So we're not looking for a significant expense in there. But on a more normal level of expense would be somewhere around $5 million for that particular item. And then I think in terms of the reserve for unfunded commitments, that continues to track down. But commitments are also starting to build again. So we're having some success in clients actually taking out new commitments, which we believe is a very healthy sign. And so the trend in that may not be down for an extended time period. So those are kind of offsetting items. And then I think the net interest margin itself will remain under some pressure here, just as generally as rates have been fairly low.

So if I adjust for the expenses and build in the impact of Durbin and then earning assets flat with a little margin pressure, it would probably mean versus this quarter's $344 million were priced -- directionally have to move down. But you're saying that, that range is still pretty reasonable.

I believe that range is still pretty reasonable.

Okay, great. And then the second question I had was just, credit quality is obviously continuing to get much better. It did look like, if I'm reading this right, that inflows were up a little bit. So I'm just wondering, when you look across the portfolio, is everything kind of still down and to the right? Or is there any things that you could worry about from a softening of the economy perspective at all?

Ken, this is Chuck Hyle. I think generally speaking, everything is moving down and to the right. Quarter-to-quarter, everything doesn't move in a nice, easy trajectory. Things can pump up a bit. And I think our inflows this quarter were up with just a tad, but a lot of things contribute to that. And we're negotiating in a lot of different areas. But I think not only are inflows up a little bit, payments are also up. Returns to accrual are also up. There are a lot of things that go on in any given quarter, kind of an arbitrary timeframe. But I would say that the trend in all areas are moving in the right direction. Some of them more slowly than others. Clearly, the business bank and the kind of consumer end of the business that didn't go up very much in terms of bad loans and so forth are coming down more slowly. And that is probably the sector of our portfolio that's most closely tied to the economy. So as the economy bumps along, we expect the trajectory to -- the slope of that to come down a little bit more slowly. But overall, we're pleased with direction and feel quite comfortable that things are moving in the right direction.

We'll go next to Erika Penala with Bank of America Merrill Lynch.

Just to follow up on Ken's question, on the Community Bank level, I did notice a spike up in the provision. What were the dynamics that were underlying that spike? And are you getting more worried about your core home equity debt service performance as the economic recovery stagnates?

This is Jeff Weeden. I think what we were -- what you saw in the current quarter was that there were some reserves that were allocated around in some of the business units where we saw some risk. But I don't think it was more than just the net charge-offs. So in that particular book, it was just a replenishment of the net charge-offs. I think as Chuck talked about, some of those particular books have not seen the improvement, overall improvement, but they did not have the amount of degradation earlier. And so charge-offs and provision have just kind of normalized and matched themselves in that particular book for the second quarter.

Okay. And in terms of Beth's comment with regards to an inflection point in loan balances, Jeff, you mentioned that the exit portfolio runoff is going to decline to a $250 million to $325 million range. I was wondering if you could help us fill the blanks in terms of how much you expect for runoff -- continued runoff in CRE. What kind of growth you are expecting out of your consumer core portfolio, and given your commentary about how the confidence is not quite where it should be, given where we are in the economy recovery, what you're expecting for C&I for the rest of the year.

I'll comment on the -- some of the other books that we've had. The runoff portfolio, we do expect to go down about $250 million to $325 million, but that's kind of like normal amortization that we're going to see from that. I think Chris Gorman can comment on the CRE book, and both Chris and Bill Taylor can talk about kind of what they're seeing in the other portfolios.

Sure, Jeff. Erika, I'll start with the real estate book because that's the biggest piece. And we had a runoff of about 10% quarter-over-quarter, which was about $900 million, which is in keeping with what we anticipated. Jeff mentioned in his comments that we expect that portfolio to stabilize in Q3 and have growth in Q4. That's still our view. We had pretty good visibility as to what was going out of there. That's the biggest number. The second portfolio would be our national leasing business. That portfolio has in fact been stable over the past year, and we feel very good about where that portfolio is going. We have a big exposure to technology, to software and to medical equipment, and that typically is a late year capital cycle. So we feel good about that business. And then lastly, our institutional and capital markets business enjoyed a 10% growth quarter-over-quarter, which was $400 million. We feel very good about where we are in that business going forward. We have a very large syndication pipeline which gives us very clear visibility for continued growth in that portfolio. So from the Corporate Banking perspective, we think we in fact have reached that inflection point and are focused on getting growth in the back half of the year.

So the inflection point comment is just from the Corporate Banking, on the Corporate Banking piece of the business, not the total -- not on total loan balances?

Total loan balances is what we're talking about because we are saying that the growth that we are seeing overall, both in our commercial, C&I book as well, is the fact that we've come down fairly rapidly because of the liquidity in the marketplace on CRE gives us this greater confidence that we're not going to see as much decline, and that's what was in our comments, as much decline in the third quarter in CRE and may in fact see a build in that particular book. With the strong pipelines that we have overall, we actually expect to see growth in the book in the fourth quarter. But we're not forecasting in a specific amount or anything, but it appears that we've reset inflection point and we've started to see growth overall in the portfolio.

And the reason we always start by talking about real estate is it really obfuscates a lot that's going on in the rest of the bank because the numbers are so significant.

And Erika, to your question, why don't we let Bill Koehler augment on his view on the Community Bank because we have noted healthy pipelines across all our businesses and stabilization in a number of portfolios. So Bill, why don't you share your view of the Community Bank?

As we've looked, Erika, at activity in our commercial businesses, the middle market continues to be strong. This will be I think the third straight quarter of strength in middle market in terms of loan growth. And the pipelines are still good. We had some pull-through. So there's a little bit of downdraft in the pipeline, but that's simply related to pull-through from the previous quarter. And in business banking, we had a very strong quarter in business banking. Our approvals are up across the board from small business, sort of traditional business banking, as well as SBA. If you go back a couple of quarters, we would have said approvals were largely coming in the form of SBA. And now it's much more balanced across all the subsegments of our small business activities. On consumer, the home equity has stabilized at least this past quarter, and with having the loan balances declined at a much lower rate than previous quarters. So we're seeing activity much broader across the Community Bank than we would have seen over the past 2 quarters from a loan demand perspective.

That was very clear. And my one last question is for Beth. I know that as you've come into your position, you've been very busy executing on the business plan goals that you laid out. But have you had a time to sit down and really think about Key's strategy in a more wholesale holistic manner in terms of whether -- currently, as Key stands, you're in the right geographies, and you're in the right businesses.

Erika, that's a good question, because as we sit here today, we are in the process of finalizing our strategic plans for the coming year. And I would tell you, we feel even more confident about our business plan and where the company is positioned to compete in the marketplace. We feel like we have built something very distinctive with our relationship-based, locally-delivered Community Bank, our unique expertise capabilities and range of products and services in our Corporate Bank. So both sides of the bank we believe are distinctive and well-positioned to compete. And the segment that we've been talking is that we feel like has really, really added to the robustness of our business model is the collaboration that we built and the cross-business opportunities between the Community Bank and the Corporate Bank. Each are seeing opportunities and revenue and client growth that they would not have without the other. So that alignment of our corporate Community Bank around our targeted verticals in our market is serving us well. We believe that it's less than an ideal operating environment, but we're gaining traction. And we see that we are winning with our clients, which to us validates the notion that we need to execute this strategy, stay focused, start showing organic growth and couple that with our capital management. I did, as you said I've been very busy over the last couple of months. But I did meet with many of our institutional shareholders, and I've heard and understood that their expectations are for profitable growth, continuing, strengthening of our risk profile and for disciplined capital management. And we feel like we are positioned to deliver those with the strategies and the markets we serve.

And when will you unveil this plan? Is it in conjunction with your fourth quarter call or perhaps during the fall conference season?

Erika, it's not a different plan. I think it's our ongoing annual process that we have where we constantly look at our strategies and validate them. So we go to various investor conferences and outline our priorities, our strategies, how we believe we're competitive and distinct. We will continue the dialogue. And if there are changes or nuances, we will always highlight those. But I think as we have taken our stake in the ground about executing on our business plan, focusing in on organic growth and disciplined capital management for our roadmap to how we're going to maximize shareholder value, we are very focused on continuing on that path.

And we'll take our next question from Steven Alexopoulos with JPMorgan. Steven Alexopoulos - JP Morgan Chase & Co: Maybe I'll start, I want to just clarify what Chris Gorman just said. You're saying that the $9.7 billion pre-book you expect to be stable in the third quarter and then maybe share growth in the fourth quarter. I'm just wondering what's changing here. Is the runoff slowing or you just have more of an appetite to add new commercial real estate and offset this runoff here?

Steve, there's a few things going on there. One is that we have very opportunistically delevered a lot of our clients, gone to the equity markets, gone to the commercial loan mortgage market. So that process has really kind of run through. The second thing that's happened is we have now successfully transitioned that book. When we started, we had about 60% of that book that was in construction. Today, that rests at 16%. And then at the same time, in keeping with what Beth was talking about, working very closely with the Community Bank, we really targeted these owners of real estate. And we're getting a lot of traction. We have a lot of traction in the REIT business already. I think we lead 17% of all the publicly-traded REITs in a financing perspective. But we're also now getting a lot of traction with these owners of real estate. So not only are the exits diminishing, but we're getting a build in the pipeline. Steven Alexopoulos - JP Morgan Chase & Co: Okay, that's helpful. And I just want to follow-up a question on cost saves. For Beth, given your experience on the retail side, would you consider more aggressive branch reduction strategy to drive costs down? And any thoughts on even selling off parts of the branch network that might be a drag on overall profitability?

Steven, yes, I would -- I'll be glad to elaborate on that. First, in terms of our network, we have looked at the distribution of our markets, and all are contributing and accretive to Key. But clearly, with some of the economics in the retail and consumer segment, we are still very focused on our cost structure from, I think I mentioned in the call, our cost infrastructure under our consumer payments, how we utilize various lower cost channels to make sure that we're adding to our convenience. And on the branch front, while we continue to invest and build branches in some of our priority markets in Seattle, Portland and Denver, we also have, if you look at our branch growth in any given quarter, we're using this as an opportunity to consolidate, close and reposition some of our fleet. So it is not a growth net 40, it is a growth 40. So we are constantly looking at how we can strengthen, become more cost-effective and be well-positioned to compete in our market. But we do have a continuing eye in these economic headwinds, as well as revenue headwinds specifically in that segment for trying to make sure we're optimizing our cost over time. Steven Alexopoulos - JP Morgan Chase & Co: Maybe to follow up. I know that there are some banks selling branch networks out there. The drive to be more efficient in the branch network, do you think you're more likely to add to the network to get to those efficiencies or actually shrink the size of the network?

I think we always look at all options to say what is the best mix for Key in this market, given our attributes. So I would tell you that we have a very robust process as we look at our market density.

And we'll go next to Mike Mayo with CLSA. Michael Mayo - Credit Agricole Securities (USA) Inc.: My question first is if Beth could elaborate a little bit more on maybe kind of strategic differences that a she [ph] CEO versus the past?

Mike, I'll be glad to take that question. One thing I have said at a variety of our investor conferences that I participated in over the most recent months is much of our strategy has been developed over the last 1 to 2 years within the management team here. And part of the reason that I believe the board was comfortable in an internal succession candidate is I was an architect of many of those pieces of our strategy. So I feel fundamentally very solid about our Community Bank focused to local delivery, relationship-based and service-based approach to our markets and feel like we have really validated that business model, and it's got a lot of traction. Under Chris Gorman's leadership, the Corporate Bank has gotten very focused about its targeted vertical, how to make sure that we had the right business mix and leasing commercial real estate. I think you heard him talk about a number of those areas, as well as our distinctive capabilities in our capital markets group. The real, real winner we believe for us and we think we're in early innings will be how we are truly aligning our Corporate and Community Bank, serving a continuum of our customers with capabilities that we think are: a, distinctive for a regional bank; and that b, we don't see other competitors really trying to deliver into the middle market, which we're defining as companies from, say, $25 million in revenues to just around $1 billion. So we have lots of success where we're getting cross-referrals, bringing our whole team to targeted clients. And we see ourselves not just landing lending and treasury management, but really being poised to offer debt in capital market capabilities. We have a number of wins across the bank and feel like that's distinctive. And we feel like we have adequate levers in our branch network to address some of the revenue headwinds that are specifically hitting the consumer segment and retail segments of our businesses. So if we look at our strategy, we like where we are. And our mantra is we need to stay the course, execute this business plan, talk about our results and our strengths and weaknesses with clarity and transparency and prove that this can organically grow our franchise and create value. Michael Mayo - Credit Agricole Securities (USA) Inc.: To assist with the transition is Henry Meyer on board as a consultant for maybe a year or so?

If you would have seen in the proxy, as well as our announcement at around the April timeframe, Henry will stay on as a year in a consulting basis. He is not an officer of the company. It is largely around what I would call, Henry has a Rolodex that is second to none, and as I stay, very, very focused on executing our business plans to making sure we really gain the momentum and traction that we believe is on the horizon, asked him to stay with me on community, civic and some industry groups where I can leverage his knowledge, expertise in Rolodex, and I can make sure that we are head down on our business plans.

[Operator Instructions] We'll go next to Brent Erensel with Portales Partners.

First of all, given the dynamics of the pretax pre-provision, what you mentioned about the inflection point with the lending, the headwind from Durbin. How do you break out of the current 1.28% ROE that you just reported?

Well, I think -- this is Jeff Weeden. Our stated objective is from 1% to 1.25%. Right now, it's been a little bit higher than that or the upper end of the range of that for the last several quarters. That's driven by the fact that we've had overall credit improvement. We've had some benefit associated with that. I think in terms of really getting the pre-provision profitability of the organization going longer-term, we're going to have to see generally an increase in interest rates and then overall growth in the lending activities and other activities of our clients. So as our clients continue to gain more confidence and business activity improves, I think that's where we'll continue to see -- that's when we'll see some of the overall growth. But until that point in time, we're talking about the range on pre-provision profitability of really being between $300 million and $340 million.

Again, and a quick follow-up, have you entertained a buyback in the current environment?

Well, I think with respect to buybacks, I think Beth has commented on this before. But whatever we do has to go through the board. Board has to go through their analysis of it. And then in today's environment, it has to go through a regulatory review process. So I think in terms of our comments on that, we spoke specifically about the fact that the next time that we go out -- in for the overall annual review, that the regulators will conduct again of at least the 19 banks, if not more than that. That will be part and parcel to our overall plans for coming time periods. But anything that you do along those particular lines does require the non-objection of your regulators.

And we'll go next to Matt Burnell with Wells Fargo Securities.

Just to -- I wanted to follow-up a little bit, and pardon this question being a little -- being pretty detail-focused. But you mentioned that commitments have been rising on the commercial side. I'm just curious over the course of the past 3 to 4 months, have you seen an improvement, stability or reduction in what I would refer to as commitments to commit? Are more customers coming to you looking for commitments now? Or could you just characterize sort of the trend in your commercial commitments over the last few quarters?

I'll comment just briefly on it because I specifically looked at what we are seeing. Beth commented about new and renewed commitments. And her comments there earlier I believe was like $9.3 billion to $9.6 billion. I don't have the exact number here to put my finger on it. But I did look specifically at the overall trend in commitments. And what we saw in the trend in commitments, we saw it in the first quarter. We saw that the -- going in the third month of the quarter was the strongest. And we continue to see strength build in the second quarter for approved new commitments. So if I were to look at each of the months, April, May through June, we saw building of approved commitments that got recorded.

And we've also seen a commensurate increase in the size of our pipelines over time related to that.

Matt, it's Chris. I'm not sure that there's much more activity out there. I think we're winning in the marketplace. We were just doing in analysis, I think at the end of the year, we think we'll -- 8% of our client base will be new. So I don't know if it's that we're being more effective in our targeted calling or that there is a whole lot more opportunity from a whole market perspective out there.

And I guess my follow-up focuses on Slide 10 with the average FTE graph. Obviously, the Keyvolution and some other steps that you've taken have reduced the average FTEs over the past couple of years. I'm just curious from where you sit today at about 15,300, where, what your thoughts are in terms of that number moving higher. Or is this going to stay pretty stable for the next 2 to 3 quarters?

This is Jeff Weeden. The overall trend will probably remain fairly stable. We typically have seasonal tracking of just when you have additional vacations. So you end up with having some seasonal temporary help that comes on in the summer months. But we are continuing to add people in select areas where we can drive revenue, so we're making those particular investments. And of course we've been also adding additional branches to our network, which will come with additional staffing. But we still have other initiatives that we're executing on within Keyvolution. And as we continue to execute on those, those will also have some of a dampening impact on the overall change in the FTE counts for the organization.

And we'll go next to Terry McEvoy with Oppenheimer. Terence McEvoy - Oppenheimer & Co. Inc.: Just want to dig deeper into Beth's response to Steve's question about just Key's M&A strategy. It seems like in the past, it's been -- Key would want to have 10% of the branches in each market. We can all do that analysis and see most of that is West of the Mississippi. It sounds like your response today suggested that maybe Key is willing to pursue a transaction where they already have significant market share that maybe there is a benefit of going from 20% to 30% in certain markets, particularly if there's an opportunity to cut costs. I just want to make sure I interpreted Beth's response correctly there.

Terry, this is Beth. How about I will clarify that? If you look at the focus of our de novo build, where we, as you said, our Western markets, we are not at that 10% threshold of branch share. That is where we have concentrated our new growth opportunities in terms of de novos. But I think we've always said in the past that our geographic distribution creates opportunities if there was ever consolidation opportunities within our industry because of the diversity of our markets, as well as our market share in many different places. Opportunistically, you would look at whether something enhanced your franchise value or enhanced -- and enhanced your shareholder value. So we have always said when it comes to potential for M&A acquisition that our geographic distribution could create opportunity across the spectrum, but we are concentrating our new builds in the West.

And we'll go next to Gerard Cassidy with RBC Capital Markets.

Regarding the growth that you're hoping or anticipating in the commercial real estate portfolio towards the end of the year, do you guys have any targeted levels that you want to manage the commercial real estate portfolio, too, as a percentage of total loans? And second, as part of that, is there any parts of the -- is there going to be in footprint commercial real estate lending that you're going to see the growth versus the outer footprint that was done during the boom times?

Sure, I'm Chuck Hyle. Let me take a stab at that. I think we're not targeting a specific number. We look at the total portfolio all the time. We look for concentrations. We look for correlations. And I think that having brought the construction and residential commercial real estate part of our portfolio down quite dramatically almost to nothing, the composition of our commercial real estate book is really quite different than it was a couple of years ago. And as a result, with all the construction largely out of the portfolio and moving to owners of real estate, REITs and larger players in that particular market, I think the number that we've come down to, and it was referenced earlier, we will probably see some increase in that part of the portfolio. In terms of the other part of your question, we have completely deemphasized construction. It doesn't say that we won't do the occasional transaction from a major player, but we've really deemphasized that. And to the extent that we do, we would play closer to home in terms of footprint. So the composition of our commercial real estate business, as Chris alluded to earlier, has changed quite dramatically.

And then second question was on the business plan or the metric you guys managed, too, on Page 4 of the slides. How often when you go to review and update this page, is it once a year in your August meeting possibly? And as part of that, what should we expect for the provision? You said the net charge of these average loans should reach about 40 to 50 basis points. Do you guys think once your reserve gets to a level that you feel is adequate, that the provision should equal net charge-offs?

Well, I think -- Gerard, this is Jeff. I think over time you'll see that migration towards the net charge-off level. But I think also you have to look at the overall quality of the portfolio, too, so that will have a change in it. It may match charge-offs or it may be greater than charge-offs in some time periods, too, depending upon the overall direction of the credit and the size of the overall portfolio. But that will probably be a good proxy once we get to whatever normal is.

That number, Gerard, would really reflect our core business rather than some of the exit businesses that we're still working our way out of, which obviously have higher charge-off numbers in it.

Okay. And just in terms of the review of all the metrics, do you guys do it once a year or every other year? Or how often is the look back?

Well, we review it on a regular basis, probably for change, though. It's more on the annual process when we go and update our long-term plan. So as we go through that with the board, we start the process even this week and go through it through the next 2 meetings with the board as we get ready to get into 2012 and set the targets basically for '12, '13 and '14.

That does conclude today's question-and-answer session. I'd like to turn the call back over to management for any additional or closing remarks.

Thank you, operator. And again, we thank you for taking time from your schedule to participate in our call today. If you have any follow-up questions, you can direct them to our Investor Relations team, Vernon Patterson, Chris Sikora. And their number is (216)689-4221. And that concludes our remarks today. Thank you.

This does conclude today's conference. Thank you for your participation.