Good morning, and welcome to KeyCorp's 2011 Third Quarter Earnings Results Conference Call. This 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. Please go ahead, ma'am.

Thank you, operator. Good morning, and welcome to KeyCorp's Third 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 our 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, please turn to Slide 3. This morning, we announced third quarter net income from continuing operations, attributable to common shareholders of $229 million or $0.24 per common share. Our results reflect continued improvement in credit quality, good expense control and the ongoing execution of our business plan. Key's favorable credit quality trends have benefited from the actions taken to improve our risk profile and our early recognition and resolution of problem credits. Key's net charge-offs to average loans declined to 90 basis points which is our seventh consecutive quarterly improvement and the first time that it has been below 1% since the first quarter of 2008. Nonperforming assets continue to decline during the third quarter, representing the eighth consecutive quarterly decline. We also reached an inflection point in our loan portfolio. Period-end loan balances increased in the third quarter, reflecting the progress we've made in repositioning our business and a 5.7% increase in our commercial, financial and agricultural portfolio. This increase in our CF&A loans was driven by continued activity in the industrial sector, as well as increases in middle market lending in all 3 of our geographic regions. The increase in loan balances also reflects our ability…

Thank you, Beth. Slide 6 provides a summary of the company's third quarter 2011 results from continuing operations. As Beth commented on earlier, for the third quarter, the company earned a net profit of $0.24 per common share compared to $0.26 for the second quarter of this year and $0.19 for the same period one year ago. Overall, we were encouraged by the continued progress we experienced in credit quality, loan demand and expense management during the third quarter. Over the next several slides, we will review in more detail the results from the current quarter. Turning to Slide 7. Average total loans declined $446 million during the third quarter compared to the second quarter of this year. However, this doesn't reflect the underlying strength that we saw in our commercial client base, with commercial and industrial loans increasing 2.7% linked quarter on annualized. And as Beth mentioned, on an ending balance basis, we saw our total loan portfolio increased $355 million or 0.7% on annualized. This was the first period end -- the period end increase in the total portfolio since the third quarter of 2008. As a result of this period-end balance increase, our pipeline of lending opportunities remaining solid and the reduced levels of run-off and balances in our exit portfolio, we believe we have reached an inflection point in our loans where we can begin to show an increase in average balances going forward. While our clients remain cautious about the world economic conditions, they are making capital investments in their operations and taking advantage of historically low interest rates and available liquidity for lending. Another encouraging sign of where we are winning with our clients came from the increase in our commercial financial and agricultural loan commitments during the quarter. This was the second consecutive…

[Operator Instructions] Our first question comes from Steven Alexopoulos from JPMorgan. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Jeff, regarding the capital plan that's being submitted, can you just help us understand the timing of when we should expect to see the outcome from this?

Well, we really -- we don't know when the outcome is going to take place because we haven't received the instructions yet from the regulators. As I commented on, all of us in the industry are really waiting for the process to be further articulated by the regulators. Once we have that, then we'll be in a better position to give some type of indication as to when we would expect to see things coming out, but I would assume that the regulators would make that public as to what their timing would be. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Okay, but we shouldn't expect you to move forward for any type of buybacks or anything this year then. We won't know until early next year?

That is correct. It will be a 2012 event. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Okay, and just one follow-up on the margin guidance you just gave. How sensitive is that to you delivering loan growth to see that margin stabilized or be up slightly in 4Q?

Well, I think if you look at our ending balance basis, we think that average balances will be up in the fourth quarter and it does have some degree of sensitivity associated with it, using our short-term liquidity. So we have 2 things in the guidance that were provided. One is that we have debt that matures here in the fourth quarter. And the second item that we have provided is that we expect to have loan growth, so there is some degree of sensitivity associated with that. The thing that would be negative against that is just that we have a much larger inflow of deposits, and we'd still end up with some short-term investments. But net interest income should be up in the fourth quarter.

Our next question comes from Matt O'Connor with Deutsche Bank.

Sorry to ask another capital question since we don't necessarily know the answer at this point. But would you hope that when you submit your capital planning process that you can draw down on some of your capital versus just use projected earnings power to deploy capital? Because obviously your Tier 1 comment of -- it's about 12% quite high -- or sorry, 11% and probably 2%, 3% above where you'll need to be. Is there hope that you can draw that down? Again, I realize you don't know, but would that be the hope?

I think that you answered it. We don't know at this particular point in time. We have to wait to see greater transparency coming out of the process and, of course, ongoing dialogue that we may have as the process unflow -- unfolds here. So we're not able to respond any further at this point in time.

Okay. And then just elsewhere on the expenses. You just finished up an expense initiative a quarter or 2 ago, expenses came in a little bit less than the low end that you've been projecting. And at the same time, the revenue outlook is a little bit more challenging. How should we think about just the investments spend and the expense base heading into, say, 2012?

Well, we haven't provided specific guidance on 2012 at this point in time, Matt. But suffice it to say that while we stopped reporting on our expense initiative, it is still alive and running in the organization, so we're still focused on expenses. I think both Beth and I commented on it that expenses do remain well managed and controlled. And we're going to have to continue to stay on top of that in this somewhat challenging revenue environment.

Our next question comes from Ken Houston with Jefferies. Bryan Batory - Jefferies & Company, Inc., Research Division: This is Bryan Batory from Ken's team. My question is on your pre-provision near-term outlook. It looks like it came in around 3.33% this quarter. And if we assume, I'm just wondering what your outlook is in 4Q. If we assume we got a little bit of growth in NII, and you have the Durbin impact hitting, but then on the flip side you also, typically, get a pickup in 4Q in investment banking fees. So could you give us kind of a sense of what pre-provision could have looked like next quarter?

Well, we've talked about in the past a range of around $300 million to $340 million. That's been the prior range that we provided. I think in terms of looking at the fourth quarter, we do expect to see a little bit of an increase in our net interest income. I think in terms of expenses, they'll still be very well controlled. I think on the fee revenue side of the equation, there are a couple of things there that just looking at the gain that we had on the redemption of the trust preferred securities, as well as principal investing was very strong here in the current quarter. So those would probably be not as strong -- principal investing won't be as strong in the fourth quarter would be the expectation. And then also, we wouldn't have the gain on the trust preferreds that we had in the third quarter. So if I were to guide in that particular level, it would be most likely below what we experienced just because of those 2 items that we had during the current quarter. Bryan Batory - Jefferies & Company, Inc., Research Division: Okay, and one follow-up. You guys mentioned last quarter that CRE balances could stabilize or even grow by the fourth quarter of '11, is that still the outlook and can you just discuss some of the trends you're seeing within that portfolio?

Well, I think in terms of the CRE, real estate capital line of business itself is actually doing quite well. Some of the clients still are more on the C&I book rather than the CRE book. So the trend obviously if you look at the average balance basis, the trend there is still going to be lower on average balances, simply because ending balances were below the average for the quarter. Chris, do you have anything else you'd like to comment on?

Sure, Jeff. I mean, Bryan, there's a couple of buckets. There's Key, overall, and I think point-to-point we're probably down something like 3% Key overall. The preponderance of the real estate loans are in the real estate line of business. And that gets a little more interesting in that if you look at our real estate line of business on an average basis we're down, call it $700 million or 8.1%. But on a point-to-point, we're actually up $20 million and we have a pretty decent pipeline. So we feel pretty good about the comment that it was going to stabilize in the third quarter and grow in the fourth.

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

One question, I'm sorry if you've already gone over this. I jumped on the call just a couple of minutes late. But in terms of commercial-industrial loan yields, it looks like those were down about 15 basis points. I'm curious as to what was driving that. What the effect of the swaps in that portfolio might have been? But I guess in the bigger picture, are you seeing greater competition in that business? What are the pricing of commitments in that business? And did the increase in LIBOR over the quarter actually helped, in terms of the yield of the loans that you put on in the balance sheet in the third quarter?

This is Jeff Weeden. I'll ask my colleagues to comment on that in just a second. But with respect to the swap book, it had very little impact, very little during the current quarter. Almost 0 impact there, so only a minor drag on that. I think the overall yield as you have pointed out was down but at 3.98% is certainly in line, as we looked at the pure comparisons. And it's also a remixing of the book. You have older loans that are rolling off. You have newer loans that are coming on. But I know that the rest of the team could comment on what they're seeing from the competitive front.

Matt, this is Bill Koehler. I would say the market is competitive, but I wouldn't say it's any more competitive today than it was a quarter or two ago. We do see pressure on pricing in any given situation on any given day. It has been more in the form of pricing and at least in the middle market less on structure, but we are seeing some pressure on structure in any given situation. Our yields and spreads have held up, by and large, and we think that's an indication of the strength of our relationship strategy.

So Matt, it's Chris Gorman. Just to augment Jeff and Bill's comment a bit. I think Jeff is spot on. Because we are winning a lot of new clients, we have a lot of newer loans that are replacing older ones. For example, on the corporate bank on a C&I basis point-to-point we're up about 14% just in the last quarter. And underneath that, there's a fair amount of movement so that's, I think, the biggest factor. In terms of our competitive perspective, we still see C&I book for kind of crossover credits 225 bps over LIBOR or so. We see that holding. And in terms of structure, I would say with spreads blowing out in August and September, I think, structure has actually become more favorable and pricing on the margin is more favorable during the last 60 days.

Okay, that's helpful. And Jeff just a very administrative question. In terms of the FDIC expense, should we expect that to continue to be at sort of a high single-digit number on a quarterly basis going into 2012?

Well, for the time being, I think that's a reasonable expectation, given our overall risk profile of the company. Our FDIC insurance certainly has come down significantly.

[Operator Instructions] We'll go next to Mike Turner with Campas Point Investment. Michael Turner - Compass Point Research & Trading, LLC: Most of my questions have been answered. Just two ones in the -- other income line item, was there anything unusual in there? I know it's a little higher last quarter and then it was even higher yet again in the third quarter.

We did have a $13 million gain that we identified, associated with the redemption of our trust preferred securities. Michael Turner - Compass Point Research & Trading, LLC: Okay, thanks. That's right. You pointed that out earlier. And also separately, what's kind of just from the 10,000-foot view, what's gross loan yields originations? What did they look like for the third quarter? I know there's a number of different products to wait that across. But at least relative to kind of your overall loan portfolio at $450 million?

Well, I think what we would talk about here. We have several other books that are in exit. So if you look at the Marine book and some of the national home equity book, those are higher yield and those are in exit, but there's no new originations that are taking place. I think Chris Gorman just commented on a lot of them are in the LIBOR plus 2 in the quarter range that for new originations on the commercial side of the equation. I don't know, Bill, what you...

I would say in the Middle Market, again, you got -- it depends on the risk profile, but we'll see LIBOR plus 2 in the quarter and some of the more leveraged credits and you could be down in the LIBOR plus 150 and some that are stronger. So that's probably a decent range.

And even higher than LIBOR plus 200, 300, 400, too. It depends on -- everything depends on a risk profile.

I would add as you look at our real estate book which we just chatted about, the new originations there would look to be kind of 275, 280 over LIBOR.

We'll go next to Russell Gunther with Bank of America Merrill Lynch.

Just quickly on the reserves. If you could widen your comments for net new loan growth going forward and the provision to be below NCOs. Could you give us a sense in terms of the magnitude that you might draw down the reserve and where you're comfortable as a floor?

Well, it's difficult to give you that exact amount until we see kind of how the ending credit balances end up. So there still -- the expectation is the charge-offs will exceed the amount of the provision and that we are in a longer-term cycle coming down here, in terms of overall nonperforming loans, criticized or identified in the materials today also continue to decline. So I think in terms of how we're going to have to look at this charge-offs now for the third quarter on an annualized basis were at 90 basis points. The reserve is at 235. So depending on how that outlook continues to look, which still seems to be a favorable trend in place. It will be coming down, but I can't tell you what the floor may be. I don't think that there's -- In GAAP, I don't think there is "a floor that would apply." So you have to kind of look at how it builds up each and every quarter.

We'll go next to Nancy Bush with NAB Research.

Beth, kind of a strategic question for you. I mean, I think you would agree that in the past, KeyCorp has been sort of a deposit and liquidity-challenged company. Do you see that having permanently changed right now? And has that, if it has, has that impacted your thinking on what you might be doing in terms of shaping the company, geographically, in the future?

Yes, Nancy, that's a great question. And I do think as we talk about the fact we have fundamentally repositioned our business mix, our risk profile and our company, part and parcel of that was to become a core-funded institutions. It's been 1 of our 5 path to progress to the future as we've identified the things we need to do. I consider that a permanent repositioning that we are now a core-funded company. As we think about what that means for shaping our geography, we clearly have found our way to become core-funded through the strength of our Community Bank franchise and our enhancements to our deposit network, as well as our business strategy around customer service and serving the clients in our market. We continue to invest in certain growth markets, primarily Portland, Seattle and Colorado. But given the economics of our industry, we're also continuing to look at productivity, where clients are using us in channels and making sure we're as efficient as we can be and our strategies in many ways around our branches are maturing, so we will continue to selectively invest in order to support our relationship strategy, but we are pleased with where our franchise is.

And I would just ask as a follow on and I apologize if you address this already, I kind of in and out of the call. Did you address debit fees and what your philosophy is, given all the controversy in the industry?

Yes, on that question, I'll ask Bill Koehler the President of our Community Bank because we have done some things to reposition our product and differentiate ourself.

Nancy, our focus with respect to debit in the regulatory environment is to acquire and retain engage clients. And when we say engage, we mean people who are choosing to use us as their primary bank. In that regard, you may have seen Key relationship rewards and the offering we announced about 2 weeks ago and what that is focused on is clients who want to build a relationship with us and rewarding them for that loyalty. Key relationship rewards promotes choice. It promotes control. And we think it's fair and the response we've gotten from our clients who have asked us about it and others out there in the market has been very, very good.

So this will be just basically a relationship strategy that you may be doing more with debit fees sort of after this kind of shakes out or you just haven't said anything yet?

We have chosen not to move forward with debit fees.

Our next question comes from Mike Mayo with CLSA.

I'm going to ask what might be a little sensitive, but I wanted to understand a little bit more about the say-on-pay vote and I guess you're one of the few companies, or at least banks, that got a no vote. And I didn't really understand what that means and how you might change the incentive compensation.

Mike, this is Beth Mooney, and that was not in this year's vote. That would be 2 years ago that we were a company that did receive a no on say on pay. And this year, that was not the case. And our board who manages our compensation and our Executive compensation programs took that vote very seriously, made a number of improvements that they announced and shared in the spring, and we were successful with our say-on-pay vote this year.

So as you're the CEO and you work with the board, what's the main incentive-based compensation that you're hoping to use to motivate the management team?

Our board sets our incentive plans and does so in conjunction with outside consultants, as well as counsel and those are disclosed, the terms of our incentive compensation programs are described fully in our proxy done by the board in their role and oversight of the organization.

And is Henry Meyer still a consultant? And if so, what's his pay arrangement?

Henry Meyer is not an employee nor an Executive Officer of the corporation. We did, upon his retirement, ask him to remain for a period of a year. His primary role as a new CEO, you can only imagine the challenges of our industry, as well as the time as well as establishing our story with our investors is in a community role, where he has helped transition community and client relationships. And has specifically aided me in that regard.

And what is his compensation for that one year?

Again, it's disclosed in our proxy and I will apologize I don't remember on the top of my head, but it is disclosed and it was subject to an 8-K filing at the time.

Our next question comes from Paul Miller with FBR Investment Bank. Kevin Barker - FBR Capital Markets & Co., Research Division: This is Kevin Barker filling in for Paul Miller. A quick question on the $5.7 billion worth of CDs that are maturing next year at 2.44% how -- can you lay out when the maturities of those at the beginning in the first quarter all the way down through the fourth quarter? And where you see those repricing or whether you're actually go at -- continue to hold on to those deposits?

Well, Kevin, this is Jeff Weeden. What we experienced in the third quarter with the rollover of the CD book, we actually saw about 65% to 70% remaining in the CD book and then an additional 10% or so that went in to other transaction deposit accounts. So we've got a fairly good retention rate at this particular point in time. Fourth quarter maturities that were identified there, but $2.5 billion and, of course, there's a lot of 7-day to 1-month to 6-month types of CDs that just continue to roll over. I think as you look out into 2012, we have about $1.7 billion that would mature in the first quarter, $1.6 billion in the second quarter, $1.5 billion in the third quarter and then it drops off to about $800 million. But I think the real point here is that, in the third quarter of next year, which goes back to those CDs that were put on in the financial crisis when things kind of dried up at that point in time. We have $1 billion worth of CDs in the third quarter of next year that have an average yield or cost of money of about 5%, 5.06%. In total, between what we have that matures between the October 1 and December 31 next year, of prior to 2009 CDs. So 2008 and prior, is about $2.8 billion of that total and those have an average yield of 4.87%. So if we think about that particular book of business as that rolls off and we have repricing opportunities, it gives us a little bit more confidence as we look at our forward margin. Now, of course, it is asset/liability management so you also have to look at the asset side of the equation, too, for repricing that exist there. But it does give us more confidence. I just wanted to leverage that we have here a Key to continue to show some positive momentum in our margin going forward. Kevin Barker - FBR Capital Markets & Co., Research Division: So would you argue with the rates where they are right now, I should say they'll stay static or stable from this point on. Do you actually see a tailwind to net interest income over the next several quarters?

Well, it is a dynamic process, so I think you have to look at both on the asset side, as well as the liability side. And I think in terms of if we have continued loan growth and we have some degree of expansion, I think that gives us some confidence there. But we haven't provided yet our 2012 guidance with respect to where we see various things playing out. But certainly it is a more of what I call a positive tone, which is why I said I believe that what we have in -- for the fourth quarter reversing some of the trends that we've had over the last several quarters. We see it as a more positive forward view at this point in time. Kevin Barker - FBR Capital Markets & Co., Research Division: Okay. And then finally, would you allow the percentage of your interest earning assets to increase, as far as like securities, as a percentage of these assets, if the loan growth was not there or was not sustainable?

Well, I think we have to look at the liability side of the equation and the duration of the deposits that we would be taking in. So certainly in some cases, you can do various things besides putting on investment securities. You could always look at extending the duration through the swap book at that particular point in time, but swap rates aren't what I call overly attractive. But it does give you an opportunity to extend some of the duration while maintaining the liquidity that may be necessary, in the event that loans do pick up even further and faster. So it's possible the investment book could show some new growth, but that is not the -- that's not the current vision that we would have. It would be used upon the loan growth.

We'll go next to Gerard Cassidy with RBC.

I was on some other call so I apologize if you answered this question. But Jeff, when you guys look at your capital levels under the Basel III, can you share with us, obviously, your SIFI -- so there's going to be a SIFI buffer that you're going to have to carry. But are you going to need to carry capital above -- I'll change my comment on this, above that level or if your SIFI buffer, let's say, is 100 basis points so you're required to carry 8%. Do you think you'd be comfortable staying around 8%, 8.25% in the quarter or would be something even higher than that?

Gerard, we would in all likelihood once we find out what the SIFI buffer would be. We would look at our overall risk profile. But in all likelihood, we would carry something in excess of that and have that as an internal trigger. So we don't want to carry things just that they're regulatory minimums. We're going to operate in a safe and sound fashion going forward and maintain flexibility. Certainly, we have considerable amount of capital right now that provides us a great deal of flexibility, I think, as we look at Basel III implementation into the future.

We'll go next to Eric Anderson with Hartford Financial.

Could you just briefly review for us sort of your current thoughts about the dividend and where that fits into your capital planning equation?

Yes, Eric, this is Beth. We are -- as we indicated, we are in the process of doing our 2012 Budgeting and Planning cycle which would also include looking at a potential dividend increase. I think the best way I could frame how you could think about that is we do have a board-approved dividend policy that indicates that the range with which we would look at a dividend payout would be somewhere between 20% to 30% of income. And while we have not finalized, obviously, those 2012 plans, that is sort of approved policy.

And do you have regulatory approval to do that or would that be the second step?

The regulatory approval, as we have discussed earlier, we would submit our capital plan which would include a dividend recommendation from the company and the board as well as other capital actions and that would all be subject to regulatory approval.

[Operator Instructions] We'll go next to Jeff Davis with Guggenheim Partners.

Question, I think, for Chris. Any read-through on the auto industry? I know you guys are not huge into the supplier manufacturer base and the like, but any read-through in terms of strength of that sector as it forward looking and what it might mean for the industrial part of the Midwest, more generally?

The only insight I could give you on that is as you look at the annualized build and you look at the last couple of months, there has been an increase in the last couple of months as you annualize it. And we're seeing -- and as you know, Jeff, we don't have a whole lot of exposure to the automobile industry, but we do have some clients, obviously, that have secondary and tertiary exposure. And almost without exception, those companies are doing pretty well. So I would say it's coming off a low base, but it continues to increase.

All right. As best as you can tell, though, not necessarily transitory?

No, I think, my personal opinion is as you look at the annualized builds, I don't think it looks transitory. I think it looks like a very slow return. But keep in mind this is an industry that at one point was what? 17.5 million units a year, so there's a long way to go.

Sure. And then as it relates to the industrial footprint, Chris, any indication for manufacturers that are big into export? Has there been any data points that would say their Export business is slowing?

We don't, Jeff, see their Export business slowing in our discussions and looking at their backlogs. But clearly, as a result of the stronger dollar, the profitability from that activity is, in fact, slowing.

It appears there are no further questions at this time. Ms. Mooney, I'd like to turn the conference back to you for any closing remarks.

All right. Thank you, operator, and again we thank you for taking time from your schedule to participate in our call today. We believe we are well positioned and we will focus on and manage that which we can control, as well as the execution of our relationship strategy. And if you have any follow-up questions, you can direct them to our Investor Relations team. Vernon Patterson or Kelly La Mer at (216)689-4221, and that concludes our remarks today. Thank you.

This concludes today's conference. Thank you for your participation.