10-K

United States Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006

OR

[ ] Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the transition period from          to

Commission file number 1-11302

(Exact name of Registrant as specified in its charter)

Ohio	34-6542451
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
127 Public Square, Cleveland, Ohio	44114-1306
(Address of principal executive offices)	(Zip Code)

(216) 689-6300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: Common Shares, $1 par value Rights to Purchase Common Shares	Securities registered pursuant to Section 12(g) of the Act: None
(Title of each class)	(Title of class)
New York Stock Exchange
(Name of each exchange on which registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

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

Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

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

Yes o No þ

The aggregate market value of voting stock held by nonaffiliates of the registrant was approximately $14,328,361,640 at June 30, 2006. (The aggregate market value has been computed using the closing market price of the stock as reported by the New York Stock Exchange on June 30, 2006.)

395,895,222 Shares

(Number of KeyCorp Common Shares outstanding as of February 26, 2007)

Certain specifically designated portions of KeyCorp’s 2006 Annual Report to Shareholders are incorporated by reference into Parts I, II and IV of this Form 10-K. Certain specifically designated portions of KeyCorp’s definitive Proxy Statement for its 2007 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

KeyCorp

2006 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

Item			Page
Number			Number
PART I
	1	Business		1
	1A	Risk Factors		9
	1B	Unresolved Staff Comments		16
	2	Properties		16
	3	Legal Proceedings		16
	4	Submission of Matters to a Vote of Security Holders		17
PART II
	5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		17
	6	Selected Financial Data		17
	7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	7A	Quantitative and Qualitative Disclosures about Market Risk		17
	8	Financial Statements and Supplementary Data		17
	9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		17
	9A	Controls and Procedures		17
	9B	Other Information		18
PART III
	10	Directors, Executive Officers and Corporate Governance		18
	11	Executive Compensation		18
	12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		19
	13	Certain Relationships and Related Transactions, and Director Independence		19
	14	Principal Accountant Fees and Services		19
PART IV
	15	Exhibits and Financial Statement Schedules		20
		Signatures		24
		Exhibits
EX-10.40
EX-10.51
EX-10.52
EX-10.53
EX-10.54
EX-10.55
EX-10.56
EX-10.57
EX-10.58
EX-10.59
EX-10.60
EX-10.61
EX-10.62
EX-12
EX-13
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

ITEM 1.   BUSINESS

Overview

KeyCorp, organized in 1958 under the laws of the State of Ohio, is headquartered in Cleveland, Ohio. It has elected to be a bank holding company and a financial holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”). At December 31, 2006, KeyCorp was one of the nation’s largest bank-based financial services companies with consolidated total assets of $92.3 billion. Its subsidiaries provide a wide range of retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to individual, corporate and institutional clients through two major business groups: Community Banking and National Banking. As of December 31, 2006, these services were provided across much of the country through subsidiaries operating 950 full-service retail banking branches (“KeyCenters”), a telephone banking call center services group and 2,050 ATMs, in sixteen states. Additional information pertaining to the two business groups is included in the “Line of Business Results” section beginning on page 25 and in Note 4 (“Line of Business Results”) beginning on page 76 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) and is incorporated herein by reference. KeyCorp and its subsidiaries had an average of 20,006 full-time equivalent employees during 2006.

In addition to the customary banking services of accepting deposits and making loans, KeyCorp’s bank and trust company subsidiaries offer personal and corporate trust services, personal financial services, access to mutual funds, cash management services, investment banking and capital markets products, and international banking services. Through its subsidiary bank, trust company and registered investment adviser subsidiaries, KeyCorp provides investment management services to clients that include large corporate and public retirement plans, foundations and endowments, high net worth individuals and Taft-Hartley plans (i.e., multiemployer trust funds established for providing pension, vacation or other benefits to employees).

KeyCorp provides other financial services both inside and outside of its primary banking markets through its nonbank subsidiaries. These services include accident, health, and credit-life insurance on loans made by its subsidiary bank, principal investing, community development financing, securities underwriting and brokerage, merchant services, and other financial services. KeyCorp is an equity participant in a joint venture by Key Merchant Services, LLC, which provides merchant services to businesses.

KeyCorp is a legal entity separate and distinct from its bank and other subsidiaries. Accordingly, the right of KeyCorp, its security holders and its creditors to participate in any distribution of the assets or earnings of KeyCorp’s bank and other subsidiaries is subject to the prior claims of the respective creditors of such bank and other subsidiaries, except to the extent that KeyCorp’s claims in its capacity as creditor of such bank and other subsidiaries may be recognized.

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The following financial data is included in the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) and is incorporated herein by reference as indicated below:

Description of Financial Data	Page
Selected Financial Data		24
Average Balance Sheets, Net Interest Income and Yields/Rates From Continuing Operations		30
Components of Net Interest Income Changes		32
Composition of Loans		37
Remaining Final Maturities and Sensitivity of Certain Loans to Changes in Interest Rates		41
Securities Available for Sale		41
Investment Securities		42
Maturity Distribution of Time Deposits of $100,000 or More		43
Allocation of the Allowance for Loan Losses		51
Summary of Loan Loss Experience		52
Summary of Nonperforming Assets and Past Due Loans		53
Nonperforming Assets and Past Due Loans		85
Short-Term Borrowings		86

The executive offices of KeyCorp are located at 127 Public Square, Cleveland, Ohio 44114-1306, and its telephone number is (216) 689-6300.

Acquisitions and Divestitures

The information presented in Note 3 (“Acquisitions and Divestitures”) on page 75 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) is incorporated herein by reference.

Competition

The market for banking and related financial services is highly competitive. KeyCorp and its subsidiaries (“Key”) compete with other providers of financial services, such as bank holding companies, commercial banks, savings associations, credit unions, mortgage banking companies, finance companies, mutual funds, insurance companies, investment management firms, investment banking firms, broker-dealers and other local, regional and national institutions which offer financial services. Key competes by offering quality products and innovative services at competitive prices.

In recent years, mergers and acquisitions have led to greater concentration in the banking industry and placed added competitive pressure on Key’s core banking products and services. In addition, competition has intensified as a consequence of the financial modernization laws that were enacted in November 1999 to permit qualifying financial institutions to expand into other activities. For example, commercial banks are permitted to have affiliates that underwrite and deal in securities, underwrite insurance and make merchant banking investments under certain conditions. See “Financial Modernization Legislation” on page 8 of this report.

Supervision and Regulation

The following discussion addresses certain material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information regarding Key. The regulatory framework is intended primarily to protect customers and depositors, the Deposit Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (“FDIC”) and the banking system as a whole, and generally is not intended to protect security holders.

Set forth below is a brief discussion of selected laws, regulations and regulatory agency policies applicable to Key. This discussion is not intended to be comprehensive and is qualified in its entirety by reference to the full text of the statutes, regulations and regulatory agency policies to which the discussion refers. Changes in applicable laws,

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regulations and regulatory agency policies cannot necessarily be predicted by management, yet such changes may have a material effect on Key’s business, financial condition or results of operations.

General

As a bank holding company, KeyCorp is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) under the BHCA. Under the BHCA, bank holding companies may not, in general, directly or indirectly acquire the ownership or control of more than 5% of the voting shares, or substantially all of the assets, of any bank, without the prior approval of the Federal Reserve Board. In addition, bank holding companies are generally prohibited from engaging in commercial or industrial activities. KeyCorp’s bank subsidiaries are also subject to extensive regulation, supervision and examination by applicable federal banking agencies. KeyCorp operates one full-service, FDIC-insured national bank subsidiary, KeyBank National Association (“KBNA”), and one national bank subsidiary whose activities are limited to those of a fiduciary. Both of KeyCorp’s national bank subsidiaries, and their subsidiaries, are subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (the “OCC”). Because the domestic deposits in KBNA are insured (up to applicable limits) by the FDIC, the FDIC also has certain regulatory and supervisory authority over KBNA.

KeyCorp also has other financial services subsidiaries that are subject to regulation, supervision and examination by the Federal Reserve Board, as well as other applicable state and federal regulatory agencies and self-regulatory organizations. For example, KeyCorp’s brokerage and asset management subsidiaries are subject to supervision and regulation by the Securities and Exchange Commission (the “SEC”), the National Association of Securities Dealers, Inc., the New York Stock Exchange and/or state securities regulators, and KeyCorp’s insurance subsidiaries are subject to regulation by the insurance regulatory authorities of the various states. Other nonbank subsidiaries of KeyCorp are subject to laws and regulations of both the federal government and the various states in which they are authorized to do business.

Dividend Restrictions

The principal source of cash flow to KeyCorp, including cash flow to pay dividends on its common shares and interest on its indebtedness, is dividends from its subsidiaries. Various statutory and regulatory provisions limit the amount of dividends that may be paid by KeyCorp’s bank subsidiaries without regulatory approval. The approval of the OCC is required for the payment of any dividend by a national bank if the total of all dividends declared by the board of directors of such bank in any calendar year would exceed the total of: (i) the bank’s net income for the current year plus (ii) the retained net income (as defined and interpreted by regulation) for the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock. In addition, a national bank can pay dividends only to the extent of its undivided profits. KeyCorp’s national bank subsidiaries are subject to these restrictions.

If, in the opinion of a federal banking agency, a depository institution under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the institution, could include the payment of dividends), the agency may require that such institution cease and desist from such practice. The OCC and the FDIC have indicated that paying dividends that would deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound practice. Moreover, under the Federal Deposit Insurance Act (the “FDIA”), an insured depository institution may not pay any dividend (i) if payment would cause it to become less than “adequately capitalized,” or (ii) while it is in default in the payment of an assessment due to the FDIC. See “Regulatory Capital Standards and Related Matters — Prompt Corrective Action” on page 6 of this report. Also, the federal banking agencies have issued policy statements that provide that FDIC-insured depository institutions and their holding companies should generally pay dividends only out of their current operating earnings.

Holding Company Structure

Bank Transactions With Affiliates.  Federal banking law and regulation impose qualitative standards and quantitative limitations upon certain transactions by a bank with its affiliates. Transactions covered by these provisions, which include bank loans and other extensions of credit to affiliates, bank purchases of assets from affiliates, and

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bank sales of assets to affiliates, must be on arm’s length terms, cannot exceed certain amounts which are determined with reference to the bank’s regulatory capital, and if a loan or other extension of credit, must be secured by collateral in an amount and quality expressly prescribed by statute. For these purposes, a bank includes certain of its subsidiaries and other companies it is deemed to control, while an affiliate includes the bank’s parent bank holding company, certain of its nonbank subsidiaries and other companies it is deemed to control, and certain other companies. As a result, these provisions materially restrict the ability of KBNA, as a bank, to fund its affiliates including KeyCorp, McDonald Investments Inc., any of the Victory mutual funds, and KeyCorp’s nonbanking subsidiaries engaged in making merchant banking investments.

Source of Strength Doctrine.  Under Federal Reserve Board policy, a bank holding company is expected to serve as a source of financial and managerial strength to each of its subsidiary banks and, under appropriate circumstances, to commit resources to support each such subsidiary bank. This support may be required at a time when KeyCorp may not have the resources to provide it or would choose not to provide it. Certain loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits in, and certain other indebtedness of, the subsidiary bank. In addition, federal law provides that in the event of its bankruptcy, any commitment by a bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Depositor Preference.  The FDIA provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of its depositors (including claims by the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver would be afforded a priority over other general unsecured claims against such an institution, including federal funds and letters of credit. If an insured depository institution fails, insured and uninsured depositors along with the FDIC will be placed ahead of unsecured, nondeposit creditors, including a parent holding company, in order of priority of payment.

Liability of Commonly Controlled Institutions.  Under the FDIA, an insured depository institution which is under common control with another insured depository institution is generally liable for any loss incurred, or reasonably anticipated to be incurred, by the FDIC in connection with the default of the commonly controlled institution, or any assistance provided by the FDIC to the commonly controlled institution which is in danger of default. The term “default” is defined generally to mean the appointment of a conservator or receiver and the term “in danger of default” is defined generally as the existence of certain conditions indicating that a “default” is likely to occur in the absence of regulatory assistance.

Commercial Real Estate Lending Concentrations.  In December 2006, the banking agencies jointly issued final guidance on sound risk management practices for institutions having concentrations in commercial real estate (“CRE”) loans. Institutions actively involved in CRE lending should perform ongoing risk assessments to identify CRE concentrations. Institutions having such concentrations should have risk management practices that are commensurate with the level and nature of their concentration risk. Key elements in establishing a risk management framework that effectively identifies, monitors, and controls CRE concentration risk include board and management oversight, portfolio management, management information systems, market analysis, credit underwriting standards, portfolio stress testing and sensitivity analysis, and credit risk review. Institutions having such concentrations also should have regulatory capital that is commensurate with the level and nature of their concentration risk. In assessing capital adequacy, the agencies will consider the level and nature of inherent risk in the CRE portfolio as well as management expertise, historical performance, underwriting standards, risk management practices, market conditions, and any loan loss reserves allocated for CRE concentration risk. Institutions potentially exposed to significant CRE concentration risk may be identified for further supervisory analysis of the level and nature of CRE concentration risk. Such institutions include those that have experienced rapid growth in CRE lending, have notable exposure to a specific type of CRE, or are approaching or have exceeded specific quantitative supervisory criteria.

Elevated Risk Complex Structured Finance Transactions.  In January 2007, the banking agencies and the SEC published an interagency statement on sound practices concerning elevated risk complex structured finance transactions (“CSFTs”) to describe the types of risk management principles they believe may help a financial institution identify CSFTs that may pose heightened levels of legal or reputational risk to the institution as well as evaluate, manage and address such risks within the institution’s internal control framework. The statement focuses

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on the maintenance of policies and procedures designed to allow the institution to identify, evaluate, assess, document, and control the full range of market, credit, operational, legal, and reputational risks associated with elevated risk CSFTs. The statement also provides illustrative examples of both structured finance transactions that are not considered to be elevated risk CSFTs as well structured finance transactions that may be elevated risk CSFTs.

Regulatory Capital Standards and Related Matters

Risk-Based and Leverage Regulatory Capital.  Federal law and regulation define and prescribe minimum levels of regulatory capital for bank holding companies and their bank subsidiaries. Adequacy of regulatory capital is assessed periodically by the federal banking agencies in the examination and supervision process, and in the evaluation of applications in connection with specific transactions and activities, including acquisitions, expansion of existing activities, and commencement of new activities.

Bank holding companies are subject to risk-based capital guidelines adopted by the Federal Reserve Board. These guidelines establish minimum ratios of qualifying capital to risk-weighted assets. Qualifying capital includes Tier 1 capital and Tier 2 capital. Risk-weighted assets are calculated by assigning varying risk-weights to broad categories of assets and off-balance-sheet exposures, based primarily on counterparty credit risk. The required minimum Tier 1 risk-based capital ratio, calculated by dividing Tier 1 capital by risk-weighted assets, is currently 4.00%. The required minimum total risk-based capital ratio is currently 8.00%. It is calculated by dividing the sum of Tier 1 capital and Tier 2 capital (which cannot exceed the amount of Tier 1 capital), after deducting for investments in certain subsidiaries and associated companies and for reciprocal holdings of capital instruments, by risk-weighted assets.

Tier 1 capital includes common equity, qualifying perpetual preferred equity, and minority interests in the equity accounts of consolidated subsidiaries less certain intangible assets (including goodwill) and certain other assets. Tier 2 capital includes qualifying hybrid capital instruments, perpetual debt, mandatory convertible debt securities, perpetual preferred equity not includable in Tier 1 capital, and limited amounts of term subordinated debt, medium-term preferred equity, certain unrealized holding gains on certain equity securities, and the allowance for loan and lease losses.

Bank holding companies, such as KeyCorp, whose securities and commodities trading activities exceed specified levels also are required to maintain capital for market risk. Market risk includes changes in the market value of trading account, foreign exchange, and commodity positions, whether resulting from broad market movements (such as changes in the general level of interest rates, equity prices, foreign exchange rates, or commodity prices) or from position specific factors (such as idiosyncratic variation, event risk, and default risk). The banking agencies have developed and published for comment a proposed rule that would modify the existing market risk capital requirements. The proposed rule would enhance modeling requirements consistent with advances in risk management, enhance sensitivity to risks not adequately captured in the current methodologies of the existing requirements, and modify the definition of covered position to better capture positions for which the market risk capital requirements are appropriate. It would also impose an explicit capital requirement for incremental default risk to capture default risk over a time horizon of one year taking into account the impact of liquidity, concentrations, hedging, and optionality. In general, the proposed rule would become effective in January 2008. At December 31, 2006, Key’s Tier 1 and total capital to risk-weighted assets ratios were 8.24% and 12.43%, respectively, which include required adjustments for market risk.

In addition to the risk-based standard, bank holding companies are subject to the Federal Reserve Board’s leverage ratio guidelines. These guidelines establish minimum ratios of Tier 1 capital to total assets. The minimum leverage ratio, calculated by dividing Tier 1 capital by average total consolidated assets, is 3.00% for bank holding companies that either have the highest supervisory rating or have implemented the Federal Reserve Board’s risk-based capital measure for market risk. All other bank holding companies must maintain a minimum leverage ratio of at least 4.00%. Neither KeyCorp nor any of its bank subsidiaries has been advised by its primary federal banking regulator of any specific leverage ratio applicable to it. At December 31, 2006, Key’s Tier 1 capital leverage ratio was 8.98%.

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KeyCorp’s national bank subsidiaries are also subject to risk-based and leverage capital requirements adopted by the OCC, which are substantially similar to those imposed by the Federal Reserve Board on bank holding companies. At December 31, 2006, each of KeyCorp’s national bank subsidiaries had regulatory capital in excess of all minimum risk-based and leverage capital requirements.

In addition to establishing regulatory minimum ratios of capital to assets for all bank holding companies and their bank subsidiaries, the risk-based and leverage capital guidelines also identify various organization-specific factors and risks that are not taken into account in the computation of the capital ratios but that affect the overall supervisory evaluation of a banking organization’s regulatory capital adequacy and can result in the imposition of higher minimum regulatory capital ratio requirements upon the particular organization. Neither the Federal Reserve Board nor the OCC has advised KeyCorp or any of its national bank subsidiaries of any specific minimum risk-based or leverage capital ratio applicable to KeyCorp or such national bank subsidiary. Additional information regarding regulatory capital levels is included in the “Capital” section beginning on page 43 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

Recourse Obligations, Direct Credit Substitutes, and Residual Interests.  Specialized regulatory capital treatment is prescribed for on-balance sheet assets and off-balance sheet exposures consisting of recourse obligations, direct credit substitutes, and residual interests that expose banking organizations primarily to credit risk. This treatment includes a concentration limit Tier 1 capital charge and a dollar-for-dollar capital charge for certain types of residual interests and the use of credit rating and certain alternative approaches to match regulatory capital requirements more closely to a banking organization’s relative risk of loss for certain positions in asset securitizations.

Equity Investments in Nonfinancial Companies.  Specialized regulatory capital treatment is prescribed for certain equity investments made by banking organizations in companies engaged in nonfinancial activities. This treatment imposes marginal capital charges (applied by making deductions from Tier 1 capital) that increase as the banking organization’s aggregate carrying amount of its covered equity investments increase in relation to its Tier 1 capital. Such capital charges range from 8% to 25% as such aggregate carrying amount increases from 15% to 25% of the banking organization’s Tier 1 capital.

Prompt Corrective Action.  The “prompt corrective action” provisions of the FDIA create a statutory framework that applies a system of both discretionary and mandatory supervisory actions indexed to the capital level of FDIC-insured depository institutions. These provisions impose progressively more restrictive constraints on operations, management, and capital distributions of an institution as its regulatory capital decreases, or in some cases, based on supervisory information other than the institution’s capital level. This framework and the authority it confers on the federal banking agencies supplements other existing authority vested in such agencies to initiate supervisory actions to address capital deficiencies. Moreover, other provisions of law and regulation employ regulatory capital level designations the same as or similar to those established by the prompt corrective action provisions both in imposing certain restrictions and limitations and in conferring certain economic and other benefits upon institutions. These include restrictions on brokered deposits, FDIC deposit insurance limits on pass-through deposits, limits on exposure to interbank liabilities, risk-based FDIC deposit insurance premium assessments, and expedited action upon regulatory applications.

FDIC-insured depository institutions are grouped into one of five prompt corrective action capital categories — well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized — using the Tier 1 risk-based, total risk-based, and Tier 1 leverage capital ratios as the relevant capital measures. An institution is considered well capitalized if it has a total risk-based capital ratio of at least 10.00%, a Tier 1 risk-based capital ratio of at least 6.00% and a Tier 1 leverage capital ratio of at least 5.00% and is not subject to any written agreement, order or capital directive to meet and maintain a specific capital level for any capital measure. An adequately capitalized institution must have a total risk-based capital ratio of at least 8.00%, a Tier 1 risk-based capital ratio of at least 4.00% and a Tier 1 leverage capital ratio of at least 4.00% (3.00% if it has achieved the highest composite rating in its most recent examination). At December 31, 2006, KBNA, KeyCorp’s only FDIC-insured depository institution subsidiary, met the requirements for the “well capitalized” capital category. An institution’s prompt corrective action capital category, however, may not constitute an accurate representation of the overall financial condition or prospects of KeyCorp or its bank subsidiaries, and should be considered in conjunction with other available information regarding Key’s financial condition and results of operations.

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Basel Accords.  The current minimum risk-based capital requirements adopted by the U.S. federal banking agencies are based on a 1988 international accord (“Basel I”) that was developed by the international Basel Committee on Banking Supervision. In 2004, the Basel Committee published its new capital framework document (“Basel II”) governing the capital adequacy of large, internationally active banking organizations that generally rely on sophisticated risk management and measurement systems. Basel II is designed to create incentives for these organizations to improve their risk measurement and management processes and to better align minimum capital requirements with the risks underlying activities conducted by these organizations.

Basel II adopts a three-pillar framework for addressing capital adequacy — minimum capital requirements, supervisory review, and market discipline. The minimum capital requirement pillar includes capital charges for credit, operational, and market risk exposures of a banking organization. The supervisory review pillar addresses the need for a banking organization to assess its capital adequacy position relative to its overall risk, rather than only with respect to its minimum capital requirement, as well as the need for a banking organization supervisory authority to review and respond to the banking organization’s capital adequacy assessment. The market discipline pillar imposes public disclosure requirements on a banking organization that are intended to allow market participants to assess key information about the organization’s risk profile and its associated level of capital.

The agencies have developed and published for comment a proposed rule for implementing Basel II in the U.S.  The proposed rule would apply to certain organizations on a mandatory basis, as well as to those that elect voluntarily to do so. Organizations that are required or have elected to apply the proposed rule are subject to a transitional implementation timeline of at least 4 years. During the transition period, limits are imposed upon the amount by which minimum required capital may decrease. January 2008 is the earliest start date for the transition period. The proposed rule would apply to determine the risk-based capital requirement for wholesale, retail, equity, and securitization exposures, and imposes an explicit capital charge for operational risk. The Basel II proposed rule does not effect any change in the existing prompt corrective action and leverage capital requirements, and explicitly reserves the agencies’ authority to require organizations to hold additional capital where appropriate.

The agencies also have developed and published for comment a proposed rule to update their existing Basel I risk-based capital standards (“Basel IA”) in order to enhance the risk-sensitivity of the capital charges, to reflect changes in accounting standards and financial markets, and to address competitive equity questions that may be raised by U.S. implementation of Basel II. The Basel IA proposed rule would be available to organizations not covered by the Basel II proposed rule. It would be optional in that such an organization could elect to adopt the Basel IA proposed rule in its entirety or remain under the existing Basel I risk-based capital rules. The Basel IA proposed rule would increase the number of risk-weight categories, allow greater use of external credit ratings, expand the range of recognized collateral and eligible guarantors, use loan-to-value ratios to risk-weight residential mortgages, increase the credit conversion factor for certain short-term commitments, assess a capital charge for early amortizations in securitizations of revolving retail exposures, and remove the 50% limit on the risk-weight for certain derivative transactions. The Basel IA proposed rule does not effect any change in the existing prompt corrective action and leverage capital requirements, and explicitly reserves the agencies’ authority to require organizations to compute the risk-based capital requirement under the existing Basel I risk-based capital rules.

FDIC Deposit Insurance

Because substantially all of KBNA’s domestic deposits are insured up to applicable limits by the FDIC, KBNA is subject to deposit insurance premium assessments by the FDIC. Comprehensive deposit insurance reform legislation was enacted in 2006. Pursuant to this legislation, the former Bank Insurance Fund and Savings Association Insurance Fund were merged into the DIF, deposit insurance for certain retirement accounts has increased from $100,000 to $250,000, and deposit insurance limits for accounts are subject to an indexing mechanism for future increases in coverage limits. The legislation also requires the FDIC to maintain the DIF reserve ratio within a range of 1.15%-1.50% of estimated insured deposits, with a DIF restoration plan being required upon the FDIC’s determination that the DIF reserve ratio has fallen or will within six months fall below 1.15% of estimated insured deposits. Other changes made by this legislation have permitted the FDIC to change its previous risk-related deposit insurance assessment framework. Under the new assessment framework, premiums ranging tentatively from $.05 to $.43 in 2007 (compared with zero to $.27 throughout 2006) for each $100 of domestic deposits will be assessed based upon an institution’s capitalization, financial ratios (or, for certain large

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institutions, long-term debt issuer ratings), and federal supervisory evaluation. This new legislation and the FDIC’s new assessment framework implementing it also authorizes certain premium assessment credits (including a one-time assessment credit for KBNA of approximately $59.4 million) and, under certain circumstances, requires certain dividends from the DIF.

Financial Modernization Legislation

The Gramm-Leach-Bliley Act of 1999 (the “GLBA”) authorized new activities for qualifying financial institutions. The GLBA repealed significant provisions of the Glass-Steagall Act to permit commercial banks to, among other things, have affiliates that underwrite and deal in securities and make merchant banking investments. The GLBA modified the BHCA to permit bank holding companies that meet certain specified standards (known as “financial holding companies”) to engage in a broader range of financial activities than previously permitted under the BHCA, and allowed subsidiaries of commercial banks that meet certain specified standards (known as “financial subsidiaries”) to engage in a wide range of financial activities that are prohibited to such banks themselves. In 2000, KeyCorp elected to become a financial holding company. Under the authority conferred by the GLBA, Key has been able to expand the nature and scope of its equity investments in nonfinancial companies, operate its McDonald Investments Inc. subsidiary with fewer operating restrictions, and acquire financial subsidiaries to engage in real estate leasing and insurance agency activities without geographic restriction.

The GLBA also established new privacy protections for customers of financial institutions. Under federal law, a financial institution must provide notice to customers about its privacy policies and practices, describe the conditions under which the financial institution may disclose nonpublic personal information about consumers to non-affiliated third parties, and provide an “opt-out” method for consumers to prevent the financial institution from disclosing that information to non-affiliated third parties.

The GLBA repealed the blanket exception for banks and savings associations from the definitions of “broker” and “dealer” under the Securities Exchange Act of 1934 (the “Exchange Act”), and replaced this full exception with functional exceptions. Under the statute, institutions that engage in securities activities either must conduct those activities through a registered broker-dealer or conform their securities activities to those which qualify for functional exceptions. While the requirements relating to dealer registration have become effective, the effective date of the requirements relating to broker registration has been delayed until July 2007.

USA PATRIOT Act

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) and the federal regulations issued pursuant to it substantially broaden previously existing anti-money laundering law and regulation, increase compliance, due diligence and reporting obligations for financial institutions, create new crimes and penalties, and require the federal banking agencies, in reviewing merger and other acquisition transactions, to consider the effectiveness of the parties in combating money laundering activities.

In October 2005, KBNA consented to the issuance of a consent order (“Order”) from the OCC pursuant to which KBNA is required to improve its compliance and operations infrastructure designed, pursuant to the Bank Secrecy Act (“BSA”), to detect and prevent money laundering. As part of the Order, KBNA has agreed to strengthen its BSA internal controls, including the development and implementation of enhanced policies and procedures for BSA compliance; to enhance its programs and controls for Suspicious Activity Reporting; to enhance its BSA audit functions and its independent audit program; and to improve employee training relating to the detection and prevention of money laundering. At the same time, KeyCorp entered into a Memorandum of Understanding (“MOU”) with the Federal Reserve Bank of Cleveland (“FRB”) covering compliance with the BSA and other related matters. Neither the OCC nor the FRB imposed a fine or civil money penalty in connection with these actions.

KeyCorp and KBNA have taken significant steps to strengthen the organizations’ compliance policies and procedures, and operations infrastructure in areas related to those specified in the Order and the MOU, as well as in other respects. Management is committed to ensuring that all of the requirements of these regulatory actions are met.

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Fair and Accurate Credit Transactions Act of 2003

The Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”) imposes new requirements on financial institutions regarding identity theft and reporting to credit bureaus. The FACT Act also allows customers to choose to opt out of having certain information shared across a financial institution’s affiliates for market solicitation purposes. Compliance with the FACT Act requires Key to modify numerous computer systems and to make operational changes in several business areas. Key believes that the changes that it has already made or will implement in 2007 will satisfy the material requirements of the FACT Act and the current regulations implementing it. Although additional FACT Act implementing regulations are still pending that may mandate additional disclosures or impose system or process changes, Key believes that it will be able to implement any new regulatory requirements within the time frames provided.

Entry Into Certain Covenants

In 2006, KeyCorp entered into two transactions involving the issuance of trust preferred securities (“Trust Preferred Securities”) by Delaware statutory trusts formed by KeyCorp (the “Trusts”), as further described below. Simultaneously with the closing of each of those transactions, KeyCorp entered into a replacement capital covenant (each, a “Replacement Capital Covenant” and collectively, the “Replacement Capital Covenants”) for the benefit of persons that buy, hold or sell a specified series of long-term indebtedness of KeyCorp or its then largest depository institution, currently KBNA (the “Covered Debt”). Each of the Replacement Capital Covenants provide that neither KeyCorp nor any of its subsidiaries (including any of the Trusts) will redeem or purchase all or any part of the Trust Preferred Securities or certain junior subordinated debentures issued by KeyCorp and held by the Trust (the “Junior Subordinated Debentures”), as applicable, on or before the date specified in the applicable Replacement Capital Covenant, with certain limited exceptions, except to the extent that, during the 180 days prior to the date of that redemption or purchase, KeyCorp has received proceeds from the sale of qualifying securities that (i) have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Trust Preferred Securities or the Junior Subordinated Debentures, as applicable, at the time of redemption or purchase, and (ii) KeyCorp has obtained the prior approval of the Federal Reserve Board, if such approval is then required by the Federal Reserve Board. KeyCorp will provide a copy of the Replacement Capital Covenants to respective holders of Covered Debt upon request made in writing to KeyCorp, Investor Relations, at 127 Public Square (Mail Code OH-01-27-1113), Cleveland, OH 44114-1306.

The following table identifies the (i) closing date for each transaction, (ii) issuer, (iii) series of Trust Preferred Securities issued, (iv) Junior Subordinated Debentures, and (v) applicable Covered Debt as of the date this annual report was filed with the SEC.

		Trust Preferred	Junior Subordinated
Closing Date	Issuer	Securities	Debentures	Covered Debt
6/20/06	KeyCorp Capital VIII and KeyCorp	$250,000,000 principal amount of 7% Enhanced Trust Preferred Securities	KeyCorp’s 7% junior subordinated debentures due June 15, 2066	KeyCorp’s 5.70% junior subordinated debentures due 2035, underlying the 5.70% trust preferred securities of KeyCorp Capital VII (CUSIP No. 49327LAA4011)
11/21/06	KeyCorp Capital IX and KeyCorp	$500,000,000 principal amount of 6.750% Enhanced Trust Preferred Securities	KeyCorp’s 6.750% junior subordinated debentures due December 15, 2066	KeyCorp’s 5.70% junior subordinated debentures due 2035, underlying the 5.70% trust preferred securities of KeyCorp Capital VII (CUSIP No. 49327LAA4011)

ITEM 1A.   RISK FACTORS

An investment in our common shares is subject to risks inherent to our business. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or

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incorporated by reference in this report. The risks and uncertainties described below are not the only ones we face. Although we have significant risk management policies, procedures and verification processes in place, additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. This report is qualified in its entirety by these risk factors.

If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common shares could decline, perhaps significantly, and you could lose all or part of your investment.

Risks Related To Our Business

We Are Subject To Interest Rate Risk

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, the competitive environment within our markets, consumer preferences for specific loan and deposit products and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the amount of interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits as well as the fair value of our financial assets and liabilities. If the interest we pay on deposits and other borrowings increases at a faster rate than the interest we receive on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on deposits and other borrowings.

Although management believes it has implemented effective asset and liability management strategies, including the use of derivatives as hedging instruments, to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected and/or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Additional information regarding interest rate risk is included in the section captioned “Risk Management — Market risk management — Interest rate risk management” beginning on page 47 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

We Are Subject To Other Market Risk In Addition To Interest Rate Risk

The values of some financial instruments vary not only with changes in market interest rates, but also with changes in foreign exchange rates, factors influencing valuations in the equity securities markets and other market-driven rates or prices. For example, the value of a fixed-rate bond will decline if market interest rates increase. Similarly, the value of the U.S. dollar regularly fluctuates in relation to other currencies. When the value of an instrument is tied to such external factors, the holder faces “market risk.”

Although management believes it has implemented effective strategies to reduce the potential effects of changes in interest rates, foreign exchange rates, equity prices and credit spreads on the fair value of our trading portfolio, any substantial, unexpected and/or prolonged change in those factors could have a material adverse effect on our financial condition and results of operations. Additional information regarding market risk is included in the section captioned “Risk Management — Market risk management — Trading portfolio risk management” beginning on page 49 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

We Are Subject To Credit Risk

There are inherent risks associated with our lending and trading activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where we operate. Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. We also are subject to various laws and regulations that affect our lending activities. Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment against us of civil money or other penalties.

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As of December 31, 2006, approximately 73.4% of our loan portfolio consisted of commercial, financial and agricultural loans, commercial real estate loans, including commercial mortgage and construction loans, and commercial leases. These types of loans (and leases) are generally viewed as potentially having more risk of default than residential real estate loans or consumer loans. These types of loans are also typically larger than residential real estate loans and consumer loans. Although we closely monitor and manage risk concentrations and utilize various portfolio management practices to limit excessive concentrations when it is feasible to do so, our loan portfolio still does contain a number of commercial loans with relatively large balances. The deterioration of one or a few of these loans could cause a significant increase in non-performing loans, and an increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for possible loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on our financial condition and results of operations. Additional information regarding credit risk is included in the section captioned “Risk Management — Credit risk management” beginning on page 49 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

Various Factors May Cause Our Allowance For Possible Loan Losses To Increase

We maintain an allowance for possible loan losses, which is a reserve established through a provision for possible loan losses charged to expense, that represents management’s estimate of probable losses within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the allowance reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political and regulatory conditions; and unexpected losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for possible loan losses inherently involves a degree of subjectivity and requires that we make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for possible loan losses. In addition, bank regulatory agencies and our independent auditors periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments that can differ somewhat from those of our own management. In addition, if charge-offs in future periods exceed the allowance for possible loan losses, we will need additional provisions to increase the allowance for possible loan losses. Additional provisions to increase the allowance for possible loan losses, should they become necessary, would result in a decrease in net income and capital, and may have a material adverse effect on our financial condition and results of operations. Additional information regarding the allowance for loan losses is included in the section captioned “Risk Management — Credit risk management — Allowance for loan losses” beginning on page 50 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

We Are Subject To Liquidity Risk

Market conditions or other events could negatively affect the level or cost of liquidity, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner and without adverse consequences. Although management has implemented strategies to maintain sufficient and diverse sources of funding to accommodate planned as well as unanticipated changes in assets and liabilities under both normal and adverse conditions, any substantial, unexpected and/or prolonged change in the level or cost of liquidity could have a material adverse effect on our financial condition and results of operations. Additional information regarding liquidity risk is included in the section captioned “Risk Management — Liquidity risk management” beginning on page 54 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

We Are Subject To Operational Risk

We, like all businesses, are subject to operational risk, which represents the risk of loss resulting from human error, inadequate or failed internal processes and systems, and external events. Operational risk also encompasses compliance (legal) risk, which is the risk of loss from violations of, or noncompliance with, laws, rules, regulations, prescribed practices or ethical standards. Although we seek to mitigate operational risk through a system of internal controls, resulting losses from operational risk could take the form of explicit charges, increased operational costs,

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harm to our reputation or foregone opportunities, any and all of which could have a material adverse effect on our financial condition and results of operations. Additional information regarding operational risk is included in the section captioned “Risk Management — Operational risk management” beginning on page 57 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto).

Our Profitability Depends Significantly On Economic Conditions In The Geographic Regions In Which We Operate

Our success depends primarily on the general economic conditions of the markets in which we operate. Although we are somewhat geographically diversified, assisted in part in this respect by our “out of footprint” commercial real estate and equipment leasing lines of business, we still do have concentrations of loans and other business activities in geographic areas where our KeyCenters are principally located — the Midwest, the Northeast and the Pacific Northwest. The regional economic conditions in these areas have an impact on the demand for our products and services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources. A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, outbreak of hostilities or other international or domestic occurrences, unemployment, changes in securities markets or other factors could also impact these regional economies and, in turn, have a material adverse effect on our financial condition and results of operations.

We Operate In A Highly Competitive Industry And Market Areas

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national and super-regional banks as well as smaller community banks within the various markets in which we operate. However, we also face competition from many other types of financial institutions, including, without limitation, savings associations, credit unions, mortgage banking companies, finance companies, mutual funds, insurance companies, investment management firms, investment banking firms, broker-dealers and other local, regional and national financial services firms. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks.

Our ability to compete successfully depends on a number of factors, including, among other things:

•  Our ability to develop and execute strategic plans and initiatives.

•  Our ability to develop, maintain and build upon long-term customer relationships based on quality service, high ethical standards and safe, sound assets.

•  Our ability to expand our market position.

•  The scope, relevance and pricing of products and services offered to meet customer needs and demands.

•  The rate at which we introduce new products and services relative to our competitors.

•  Industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

We Are Subject To Extensive Government Regulation And Supervision

We, primarily through KBNA and certain of its non-bank subsidiaries, are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies; changes in the interpretation or implementation of statutes, regulations or policies; and/or continuing to become subject to heightened regulatory practices, requirements or

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expectations, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products that we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to appropriately comply with laws, regulations or policies (including internal policies and procedures designed to prevent such violations) could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. Additional information regarding supervision and regulation is included in the section captioned “Supervision and Regulation” in Item 1. Business, beginning on page 2 of this report.

Our Controls And Procedures May Fail Or Be Circumvented

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

We Rely On Dividends From Our Subsidiaries For Most Of Our Revenue

KeyCorp is a legal entity separate and distinct from its subsidiaries. It receives substantially all of its revenue from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on our common shares and interest and principal on our debt. Various laws and regulations limit the amount of dividends that KBNA and certain non-bank subsidiaries may pay to KeyCorp. Also, KeyCorp’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event KBNA is unable to pay dividends to KeyCorp, we may not be able to service debt, pay obligations or pay dividends on our common shares. The inability to receive dividends from KBNA could have a material adverse effect on our business, financial condition and results of operations. Additional information regarding dividend restrictions is included in the section captioned “Supervision and Regulation” in Item 1. Business, beginning on page 2 of this report.

Potential Acquisitions May Disrupt Our Business And Dilute Shareholder Value

Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things:

•  Potential exposure to unknown or contingent liabilities of the target company.

•  Exposure to potential asset quality issues of the target company.

•  Difficulty and expense of integrating the operations and personnel of the target company.

•  Potential disruption to our business.

•  Potential diversion of our management’s time and attention.

•  The possible loss of key employees and customers of the target company.

•  Difficulty in estimating the value (including goodwill) of the target company.

•  Difficulty in estimating the fair value of acquired assets, liabilities and derivatives of the target company.

•  Potential changes in banking or tax laws or regulations that may affect the target company.

We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash, debt or equity securities may occur at any time. Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of our tangible book value and net income per common share may

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occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.

We May Not Be Able To Attract And Retain Skilled People

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most activities in which we are engaged can be intense and we may not be able to hire or retain the people we want and/or need. Although we maintain employment agreements with certain key employees, and have incentive compensation plans aimed, in part, at long-term employee retention, the unexpected loss of services of one or more of our key personnel could still occur, and such events may have a material adverse impact on our business because of the loss of the employee’s skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

Our Information Systems May Experience An Interruption Or Breach In Security

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

We Continually Encounter Technological Change

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Our largest competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

We Are Subject To Claims And Litigation

From time to time, customers and/or vendors may make claims and take legal action against us. Whether these claims and legal action are founded or unfounded, if such claims and legal actions are not resolved in our favor they may result in significant financial liability and/or adversely affect how the market perceives us and our products and services as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Our Earnings May Be Affected By Changes In Accounting Principles And In Tax Laws

Changes in U.S. generally accepted accounting principles could have a significant adverse effect on Key’s reported financial results. Although these changes may not have an economic impact on our business, they could affect our ability to attain targeted levels for certain performance measures.

We, like all businesses, are subject to tax laws, rules and regulations. Changes to tax laws, rules and regulations, including changes in the interpretation or implementation of tax laws, rules and regulations by the Internal Revenue

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Service or other governmental bodies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, among other things. Failure to appropriately comply with tax laws, rules and regulations could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations.

Severe Weather, Natural Disasters, Acts Of War Or Terrorism And Other External Events Could
Significantly Impact Our Business

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Although management has established disaster recovery plans and procedures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Risks Associated With Our Common Shares

Our Share Price Can Be Volatile

Share price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Our share price can fluctuate significantly in response to a variety of factors including, among other things:

•  Actual or anticipated variations in quarterly results of operations.

•  Recommendations by securities analysts.

•  Operating and stock price performance of other companies that investors deem comparable to our business.

•  News reports relating to trends, concerns and other issues in the financial services industry.

•  Perceptions of us and/or our competitors in the marketplace.

•  New technology used, or services offered, by competitors.

•  Significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments entered into by us or our competitors.

•  Failure to integrate acquisitions or realize anticipated benefits from acquisitions.

•  Changes in government regulations.

•  Geopolitical conditions such as acts or threats of terrorism or military conflicts.

General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause our share price to decrease regardless of operating results.

An Investment In Our Common Shares Is Not An Insured Deposit

Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common shares, you may lose some or all of your investment.

Our Articles Of Incorporation, Regulations And Shareholders Rights Plan As Well As Certain Banking Laws May Have An Anti-Takeover Effect

Provisions of our articles of incorporation and regulations, federal banking laws, including regulatory approval requirements, and our stock purchase rights plan could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our shareholders. The combination of these provisions may inhibit a

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non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common shares.

Risks Associated With Our Industry

The Earnings Of Financial Services Companies Are Significantly Affected By General Business And
Economic Conditions

Our operations and profitability are impacted by general business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, and the strength of the U.S. economy and the local economies in which we operate, all of which are beyond our control. A deterioration in economic conditions could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, among other things, any of which could have a material adverse impact on our financial condition and results of operations.

Financial Services Companies Depend On The Accuracy And Completeness Of Information About
Customers And Counterparties

In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. We may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

Consumers May Decide Not To Use Banks To Complete Their Financial Transactions

Technology and other changes are allowing parties to complete through alternative methods financial transactions that historically have involved banks. For example, consumers can now maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

There are no unresolved SEC staff comments.

ITEM 2.   PROPERTIES

The headquarters of KeyCorp and KBNA are located in Key Tower at 127 Public Square, Cleveland, Ohio 44114-1306. At December 31, 2006, Key leased approximately 695,000 square feet of the complex, encompassing the first twenty-three floors, the 28th floor and the 54th through 56th floors of the 57-story Key Tower. As of the same date, KBNA owned 527 and leased 423 retail banking branches. The lease terms for applicable retail banking branches are not individually material, with terms ranging from month-to-month to 99 years from inception.

ITEM 3.   LEGAL PROCEEDINGS

The information in the Legal Proceedings section of Note 18 (“Commitments, Contingent Liabilities and Guarantees”), beginning on page 97 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) is incorporated herein by reference.

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ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders of KeyCorp.

PART II

ITEM 5.   MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The dividend restrictions discussion on page 3 of this report and the following disclosures included in the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) are incorporated herein by reference:

	Page
Discussion of common shares, shareholder information and repurchase activities in the “Capital” section		43
Presentation of quarterly market price and cash dividends per common share		58
Discussion of dividend restrictions in the “Liquidity risk management — Liquidity for KeyCorp” section and in Note 5 (“Restrictions on Cash, Dividends and Lending Activities”)		55, 80
KeyCorp common share price performance graph		43

ITEM 6.   SELECTED FINANCIAL DATA

The Selected Financial Data presented on page 24 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) is incorporated herein by reference.

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The information included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 18 through 59 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) is incorporated herein by reference.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information included under the caption “Risk Management — Market risk management” on pages 47 through 49 of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) is incorporated herein by reference.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Selected Quarterly Financial Data and the financial statements and the notes thereto, presented on page 58 and on pages 63 through 104, respectively, of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) are incorporated herein by reference.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.  CONTROLS AND PROCEDURES

As of the end of the period covered by this report, KeyCorp carried out an evaluation, under the supervision and with the participation of KeyCorp’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of KeyCorp’s disclosure controls and procedures (as defined in

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Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, KeyCorp’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective, in all material respects, as of the end of the period covered by this report. No changes were made to KeyCorp’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, KeyCorp’s internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting on page 60 and on page 61, respectively, of the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto) are incorporated herein by reference.

ITEM 9B.   OTHER INFORMATION

Not applicable.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is set forth in the sections captioned “Issue One — ELECTION OF DIRECTORS,” “EXECUTIVE OFFICERS,” and “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” contained in KeyCorp’s definitive Proxy Statement for the 2007 Annual Meeting of Shareholders to be held May 10, 2007 and is incorporated herein by reference. KeyCorp expects to file its final proxy statement on or before March 21, 2007.

KeyCorp has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Edward P. Campbell, H. James Dallas, Lauralee E. Martin and Peter G. Ten Eyck, II are members of the Audit Committee. The Board of Directors has determined that Mr. Campbell and Ms. Martin each qualify as an “audit committee financial expert,” as defined in Item 407(d)(5) of Regulation S-K, and that each member of the Audit Committee is “independent” as that term is defined in Section 303A.02 of the New York Stock Exchange’s listing standards.

KeyCorp has adopted a code of ethics that applies to all of its employees, including its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and any persons performing similar functions. The Code of Ethics is located on KeyCorp’s website (www.key.com). Any amendment to, or waiver from a provision of, the Code of Ethics that applies to its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer will be promptly disclosed on its website as required by laws, rules and regulations of the SEC. Shareholders may obtain a copy of the Code of Ethics free of charge by writing KeyCorp Investor Relations, at 127 Public Square (Mail Code OH-01-27-1113), Cleveland, OH 44114-1306.

ITEM 11.   EXECUTIVE COMPENSATION

The information required by this item is set forth in the sections captioned “COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS,” “COMPENSATION DISCUSSION AND ANALYSIS” and “COMPENSATION AND ORGANIZATION COMMITTEE REPORT” contained in KeyCorp’s definitive Proxy Statement for the 2007 Annual Meeting of Shareholders to be held May 10, 2007 and is incorporated herein by reference.

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ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is set forth in the sections captioned “EQUITY COMPENSATION PLAN INFORMATION” and “SHARE OWNERSHIP AND OTHER PHANTOM STOCK UNITS” contained in KeyCorp’s definitive Proxy Statement for the 2007 Annual Meeting of Shareholders to be held May 10, 2007 and is incorporated herein by reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is set forth in the section captioned “DIRECTOR INDEPENDENCE” contained in KeyCorp’s definitive Proxy Statement for the 2007 Annual Meeting of Shareholders to be held May 10, 2007 and is incorporated herein by reference.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is set forth in the sections captioned “AUDIT FEES,” “AUDIT-RELATED FEES,” “TAX FEES” and “ALL OTHER FEES” contained in KeyCorp’s definitive Proxy Statement for the 2007 Annual Meeting of Shareholders to be held May 10, 2007 and is incorporated herein by reference.

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PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

The following financial statements of KeyCorp and its subsidiaries, and the auditor’s report thereon, are incorporated herein by reference to the pages indicated in the Financial Review section of KeyCorp’s 2006 Annual Report to Shareholders (Exhibit 13 hereto):

	Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm		62
Consolidated Balance Sheets at December 31, 2006 and 2005		63
Consolidated Statements of Income for the Years Ended December 31, 2006, 2005 and 2004		64
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004		65
Consolidated Statements of Cash Flow for the Years Ended December 31, 2006, 2005 and 2004		66
Notes to Consolidated Financial Statements		67

(a) (2) Financial Statement Schedules

All financial statement schedules for KeyCorp and its subsidiaries have been included in the consolidated financial statements or the related footnotes, or they are either inapplicable or not required.

(a) (3) Exhibits*

3	.1	Amended and Restated Articles of Incorporation of KeyCorp, filed as Exhibit 3 to Form 10-Q for the quarter ended September 30, 1998, and incorporated herein by reference.
3	.2	Amended and Restated Regulations of KeyCorp, effective May 23, 2002, filed as Exhibit 3.2 to Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference.
4	.1	Restated Rights Agreement, dated as of May 15, 1997, between KeyCorp and KeyBank National Association, as Rights Agent, filed on June 19, 1997, as Exhibit 1 to Form 8-A, and incorporated herein by reference.
10	.1	Form of Premium Priced Option Grant between KeyCorp and Henry L. Meyer III, dated January 13, 1999, filed as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 1999, and incorporated herein by reference.
10	.2	Form of Option Grant between KeyCorp and Henry L. Meyer III, dated November 15, 2000, filed as Exhibit 10.6 to Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
10	.3	Form of Award of Restricted Stock (2003-2005), filed as Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference.
10	.4	Form of Award of Executive Officer Grants (2004-2006), filed as Exhibit 10.1 to Form 10-Q for quarter ended June 30, 2004, and incorporated herein by reference.
10	.5	Form of Award of Executive Officer Grants (2005-2007), filed as Exhibit 10.2 to Form 8-K filed February 16, 2005, and incorporated herein by reference.
10	.6	Form of Award of Officer Grants (2005-2007), filed as Exhibit 10.3 to Form 8-K filed February 16, 2005, and incorporated herein by reference.
10	.7	Award of Phantom Stock to Henry L. Meyer III (2003-2005), filed as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference.
10	.8	Amended Employment Agreement between KeyCorp and Henry L. Meyer III, as of January 1, 2007, filed as Exhibit 10.1 to Form 8-K filed December 1, 2006, and incorporated herein by reference.

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10	.9	KeyCorp Annual Incentive Plan as amended and restated on January 17, 2001, filed as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference.
10	.10	KeyCorp Annual Performance Plan, filed as Exhibit 10.1 to Form 8-K filed January 24, 2005, and incorporated herein by reference.
10	.11	KeyCorp Amended and Restated 1991 Equity Compensation Plan (amended as of March 13, 2003), filed as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference.
10	.12	KeyCorp 2004 Equity Compensation Plan, filed as Exhibit 10.13 to Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.
10	.13	McDonald & Company Investments, Inc. Stock Option Plan, filed as Exhibit 10.39 to Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
10	.14	McDonald & Company Investments, Inc. 1995 Key Employees Stock Option Plan, filed as Exhibit 10.40 to Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
10	.15	KeyCorp Directors’ Stock Option Plan (November 17, 1994 Restatement), filed as Exhibit 10.37 to Form 10-K for the year ended December 31, 1994, and incorporated herein by reference.
10	.16	KeyCorp 1997 Stock Option Plan for Directors as amended and restated on March 14, 2001, filed as Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference.
10	.17	KeyCorp Umbrella Trust for Directors between KeyCorp and National Bank of Detroit, dated July 1, 1990, filed as Exhibit 10.28 to Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.
10	.18	Amended and Restated Director Deferred Compensation Plan (May 18, 2000 Amendment and Restatement), filed as Exhibit 10 to Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by reference.
10	.19	Amendment to the Director Deferred Compensation Plan, effective December 28, 2004, filed as Exhibit 10.20 to Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.
10	.20	KeyCorp Second Director Deferred Compensation Plan, effective as of January 1, 2005, filed as Exhibit 10.6 to Form 8-K filed December 22, 2005, and incorporated herein by reference.
10	.21	KeyCorp Directors’ Deferred Share Plan, filed as Exhibit 10.22 to Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
10	.22	KeyCorp Directors’ Survivor Benefit Plan, effective September 1, 1990, filed as Exhibit 10.25 to Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.
10	.23	KeyCorp Excess Cash Balance Pension Plan (Amended and Restated as of January 1, 1998), filed as Exhibit 10.34 to Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
10	.24	First Amendment to KeyCorp Excess Cash Balance Pension Plan, effective July 1, 1999, filed as Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 1999, and incorporated herein by reference.
10	.25	Second Amendment to KeyCorp Excess Cash Balance Pension Plan, effective January 1, 2003, filed as Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference.
10	.26	Restated Amendment to KeyCorp Excess Cash Balance Pension Plan, effective December 31, 2004, filed as Exhibit 10.4 to Form 8-K filed January 24, 2005, and incorporated herein by reference.
10	.27	KeyCorp Second Excess Cash Balance Pension Plan, effective as of January 1, 2005, filed as Exhibit 10.8 to Form 8-K filed December 22, 2005, and incorporated herein by reference.
10	.28	KeyCorp Automatic Deferral Plan, effective as of January 1, 2005, filed as Exhibit 10.2 to Form 8-K filed December 22, 2005, and incorporated herein by reference.
10	.29	McDonald Financial Group Deferral Plan, effective as of January 1, 2005, filed as Exhibit 10.5 to Form 8-K filed December 22, 2005, and incorporated herein by reference.
10	.30	KeyCorp Deferred Bonus Plan, effective as of January 1, 2005, filed as Exhibit 10.4 to Form 8-K filed December 22, 2005, and incorporated herein by reference.

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10	.31	Key Asset Management Long Term Incentive Plan, filed as Exhibit 10.34 to Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
10	.32	KeyCorp Commissioned Deferred Compensation Plan, effective as of January 1, 2005, filed as Exhibit 10.3 to Form 8-K filed December 22, 2005, and incorporated herein by reference.
10	.33	Trust Agreement for certain amounts that may become payable to certain executives and directors of KeyCorp, dated April 1, 1997, and amended as of August 25, 2003, filed as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2003, and incorporated herein by reference.
10	.34	Trust Agreement (Executive Benefits Rabbi Trust), dated November 3, 1988, filed as Exhibit 10.20 to Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.
10	.35	KeyCorp Umbrella Trust for Executives between KeyCorp and National Bank of Detroit, dated July 1, 1990, filed as Exhibit 10.27 to Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.
10	.36	KeyCorp Supplemental Retirement Benefit Plan, effective January 1, 1981, restated August 16, 1990, amended January 1, 1995 and August 1, 1996, filed as Exhibit 10.26 to Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
10	.37	First Amendment to KeyCorp Supplemental Retirement Benefit Plan, effective January 1, 1995, filed as Exhibit 10.46 to Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
10	.38	Second Amendment to KeyCorp Supplemental Retirement Benefit Plan, effective August 1, 1996, filed as Exhibit 10.47 to Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
10	.39	Third Amendment to KeyCorp Supplemental Retirement Benefit Plan, effective July 1, 1999, filed as Exhibit 10.6 to Form 10-Q for the quarter ended September 30, 1999, and incorporated herein by reference.
10	.40	KeyCorp Second Executive Supplemental Pension Plan, effective December 31, 2006.
10	.41	KeyCorp Supplemental Retirement Benefit Plan for Key Executives, effective July 1, 1990, restated August 16, 1990, filed as Exhibit 10.26 to Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.
10	.42	Amendment to KeyCorp Supplemental Retirement Benefit Plan for Key Executives, effective January 1, 1995, filed as Exhibit 10.54 to Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
10	.43	Second Amendment to KeyCorp Supplemental Retirement Benefit Plan for Key Executives, effective August 1, 1996, filed as Exhibit 10.55 to Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
10	.44	Third Amendment to KeyCorp Supplemental Retirement Benefit Plan for Key Executives, effective July 1, 1999, filed as Exhibit 10.7 to Form 10-Q for the quarter ended September 30, 1999, and incorporated herein by reference.
10	.45	Fourth Amendment to KeyCorp Supplemental Retirement Benefit Plan for Key Executives, effective December 28, 2004, filed as Exhibit 10.70 to Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.
10	.46	KeyCorp Second Supplemental Retirement Benefit Plan for Key Executives, filed as Exhibit 10.71 to Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.
10	.47	KeyCorp Survivor Benefit Plan, effective September 1, 1990, filed as Exhibit 10.17 to Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.
10	.48	KeyCorp Deferred Equity Allocation Plan, filed as Exhibit 10.58 to Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
10	.49	Letter Agreement between KeyCorp and Jack L. Kopinsky dated August 9, 2005, filed as Exhibit 10.1 to Form 8-K filed August 12, 2005, and incorporated herein by reference.
10	.50	Change of Control Agreement between KeyCorp and Beth Mooney, effective July 21, 2006, filed as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference.
10	.51	Form of Revised Tier One Change of Control Agreement between KeyCorp and Certain Executive Officers of KeyCorp, effective January 1, 2007.

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10	.52	Form of Revised Tier Two Change of Control Agreement between KeyCorp and Certain Executive Officers of KeyCorp, effective January 1, 2007.
10	.53	Form of New Tier One Change of Control Agreement between KeyCorp and Certain Executive Officers of KeyCorp, effective January 1, 2007.
10	.54	Form of New Tier Two Change of Control Agreement between KeyCorp and Certain Executive Officers of KeyCorp, effective January 1, 2007.
10	.55	KeyCorp Deferred Savings Plan, effective December 31, 2006.
10	.56	KeyCorp Second Supplemental Retirement Plan, effective December 31, 2006.
10	.57	Amendment to Merge the KeyCorp Excess 401(k) Savings Plan into the KeyCorp Deferred Savings Plan, effective December 31, 2006.
10	.58	Amendment to Merge the KeyCorp Second Excess 401(k) Savings Plan into the KeyCorp Deferred Savings Plan, effective December 31, 2006.
10	.59	Amendment to Merge the KeyCorp Deferred Compensation Plan into the KeyCorp Deferred Savings Plan, effective December 31, 2006.
10	.60	Amendment to Merge the KeyCorp Second Deferred Compensation Plan into the KeyCorp Deferred Savings Plan, effective December 31, 2006.
10	.61	Amendment to Merge the KeyCorp Supplemental Retirement Plan into the KeyCorp Second Supplemental Retirement Plan, effective December 31, 2006.
10	.62	Amendment to Merge the KeyCorp Executive Supplemental Pension Plan into the KeyCorp Second Executive Supplemental Pension Plan, effective December 31, 2006.
12		Statement regarding Computation of Ratios.
13		Financial Review section of KeyCorp 2006 Annual Report to Shareholders.
21		Subsidiaries of the Registrant.
23		Consent of Independent Registered Public Accounting Firm.
24		Power of Attorney.
31	.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32	.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

KeyCorp hereby agrees to furnish the SEC upon request, copies of instruments, including indentures, which define the rights of long-term debt security holders.

All documents listed as Exhibits 10.1 through 10.62 constitute management contracts or compensatory plans or arrangements.

*  Copies of these Exhibits have been filed with the SEC. Shareholders may obtain a copy of any exhibit, upon payment of reproduction costs, by writing KeyCorp Investor Relations, at 127 Public Square (Mail Code OH-01-27-1113), Cleveland, OH 44114-1306.

Information Available on Website

KeyCorp makes available free of charge on its website, www.key.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports as soon as reasonably practicable after KeyCorp electronically files such material with, or furnishes it to, the SEC. In addition, KeyCorp makes available on its website its corporate governance guidelines and the charters of its committees. Shareholders may obtain a copy of any of these corporate governance documents free of charge by writing KeyCorp Investor Relations, at 127 Public Square (Mail Code OH-01-27-1113), Cleveland, OH 44114-1306.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the date indicated.

KEYCORP

/s/  Thomas C. Stevens

Thomas C. Stevens

Vice Chairman and Chief Administrative Officer

February 28, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature	Title
* Henry L. Meyer III	Chairman, Chief Executive Officer, and President (Principal Executive Officer), and Director
* Jeffrey B. Weeden	Chief Financial Officer (Principal Financial Officer)
* Robert L. Morris	Chief Accounting Officer (Principal Accounting Officer)
* Ralph Alvarez	Director
* William G. Bares	Director
* Edward P. Campbell	Director
* Dr. Carol A. Cartwright	Director
* Alexander M. Cutler	Director
* H. James Dallas	Director
* Charles R. Hogan	Director
* Lauralee E. Martin	Director
* Eduardo R. Menascé	Director
* Bill R. Sanford	Director
* Thomas C. Stevens	Director
* Peter G. Ten Eyck, II	Director

/s/  Paul N. Harris

*  By Paul N. Harris, attorney-in-fact

February 28, 2007

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EX-10.40

EXHIBIT 10.40

KEYCORP
SECOND EXECUTIVE SUPPLEMENTAL PENSION PLAN

ARTICLE I

THE PLAN

     The KeyCorp Second Executive Supplemental Pension Plan (the “Plan”), originally established on December 28, 2004 and made effective January 1, 2005 is hereby amended and restated as of December 31, 2006 to reflect the merger of the KeyCorp Executive Supplemental Pension Plan into the Plan effective December 31, 2006. The Plan, as amended and restated, is structured and designed to provide a nonqualified supplemental retirement benefit to a certain select group of employees of KeyCorp and its subsidiaries. It is the intention of KeyCorp and it is the understanding of those employees covered under the Plan, that the Plan constitutes a nonqualified retirement plan for a select group of management or highly compensated employees as described in Section 201(2), Section 301(3) and Section 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) and as such, the Plan is unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE II

DEFINITIONS

2.1 Meanings of Definitions. As used herein, the following words and phrases shall have the meanings hereinafter set forth, unless a different meaning is plainly required by the context:

     (a) “Average Interest Credit” shall mean the average of the Interest Credits (as defined in the Pension Plan) for the three (3) consecutive calendar years ending with the year of the Participant’s termination.

     (b) “Average Treasury Rate” shall mean the average of the Treasury Rates (as defined in the Pension Plan) for the three (3) consecutive calendar years ending with the year of the Participant’s termination.

     (c) “Equity/Compensation Award” shall mean one-half (50%) of the value of an award granted under the KeyCorp 2004 Equity Compensation Plan for any Plan year. The term “Equity/Compensation Award” may include “Stock Appreciation Rights”, “Restricted Stock”, “Restricted Stock Units”, “Performance Shares”, and/or “Performance Units”, but shall specifically not include “Options” as those terms have been defined in accordance with the provisions of the KeyCorp 2004 Equity Compensation Plan.”

     (d) “Beneficiary” shall mean the Participant’s surviving spouse who is entitled to receive the benefits hereunder in the event the Participant dies before his or her Supplemental Pension Benefit shall have been distributed to him or her.

     (e) “Credited Service” shall be calculated with respect to a Participant by measuring the period of service commencing on the Participant’s Employment Commencement Date and Re-Employment Commencement Date, if applicable, and ending on the Participant’s Severance from Service Date, and shall be computed based on each full month during which time the Employee is employed by an Employer.

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     (f) “Compensation” for any Plan Year or any partial Plan Year in which the Participant incurs a Severance From Service Date shall mean the entire amount of base compensation paid to such Participant during such period by reason of his employment as an Employee, as reported for federal income tax purposes, or such base compensation which would have been paid except for (1) the timing of an Employer’s payroll processing operations, (2) the Participant’s election to participate in the KeyCorp 401(k) Savings Plan, the KeyCorp Excess 401(k) Savings Plan, a transportation reimbursement plan, and/or the KeyCorp Flexible Benefits Plan, and/or (3) the Participant’s election to defer such base compensation under the KeyCorp Deferred Compensation Plan or the KeyCorp Deferred Savings Plan for the applicable Plan Year, provided, however, that the term Compensation shall specifically exclude:

(i)	any amount attributable to the Participant’s exercise of stock appreciation rights and the amount of any gain to the Participant upon the exercise of stock options;
(ii)	any amount attributable to the Participant’s receipt of non-cash remuneration whether or not it is included in the Participant’s income for federal income tax purposes;
(iii)	any amount attributable to the Participant’s receipt of moving expenses and any relocation bonus paid to the Participant during the Plan Year;
(iv)	any amount attributable to a lump sum severance payment paid by an Employer or the Corporation to the Participant;
(v)	any amount attributable to fringe benefits (cash and non-cash);
(vi)	any amount attributable to any bonus or payment made as an inducement for the Participant to accept employment with an Employer;
(vii)	any amount paid to the Participant during the Plan Year which is attributable to interest earned on compensation which had been deferred under a plan of an Employer or the Corporation; and
(viii)	any amount paid for any period after the Participant’s termination or retirement date.

     In the case of a Disabled Participant, such Participant’s Compensation for each year while Disabled shall equal an amount which shall reflect the Participant’s Compensation for the calendar year preceding the date of the Participant’s Disability.

     (g) “Corporation” shall mean KeyCorp, an Ohio Corporation, its corporate successors, and any corporation or corporations into or with which it may be merged or consolidated.

     (h) “Disability” shall mean (1) the physical or mental disability of a permanent nature which prevents a Participant from performing the duties such Participant was employed to perform for his or her Employer when such disability commenced, (2) qualifies for disability benefits under the federal Social Security Act within 30 months following the Participant’s disability, and (3) qualifies the Participant for disability coverage under the KeyCorp Long Term Disability Plan. In addition to the foregoing, the disability requirements addressed in Section 409A of the Code are incorporated into the provisions of this definition.

     (i) “Early Retirement Date” shall mean the date of Participant’s retirement from his or her employment with Employer on or after the Participant’s attainment of age 55 and completion of a minimum of ten years of Credited Service, but prior to the Participant’s Normal Retirement Date.

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     (j) “Employee” shall mean the employees listed on Exhibit A attached hereto.

     (k) “Employer” shall mean the Corporation and its subsidiaries unless specifically excluded as an Employer for Plan purposes by written action by an officer of the Corporation and approved by the Corporation. An Employer’s participation in the Plan shall be subject to any conditions or requirements made by the Corporation, and each Employer shall be deemed to appoint the Corporation as its exclusive agent under the Plan as long as it continues as a subsidiary of the Corporation.

     (l) “Excess Pension Program Benefit” shall mean the Participant’s collective nonqualified pension benefit accrued under the KeyCorp Excess Cash Balance Pension Plan and the KeyCorp Second Excess Cash Balance Pension Plan subject to the terms and conditions of each respective Plan.

     (m) “Executive Supplemental Pension Program Benefit” shall mean the Participant’s collective nonqualified pension benefit accrued under the KeyCorp Executive Supplemental Pension Plan and the KeyCorp Second Executive Supplemental Pension Plan subject to the terms and conditions of each respective Plan.

     (n) “Final Average Compensation” shall mean with respect to any Participant the annual average of his or her highest aggregate Compensation for any period of five consecutive years within the period of ten consecutive years immediately prior to his or her retirement, death, or other termination of employment, or any termination of the Plan, whichever first occurs. If the Participant receives no Compensation for any portion of such five years because of an absence from work, there shall be treated as Compensation received during such period of absence an amount equal to the Compensation the Participant would have received had he or she not been absent, such amount to be determined by the Corporation on the basis of such Participant’s Compensation in effect immediately prior to such absence. In computing a Participant’s Final Average Compensation, there shall be included the Participant’s highest five Incentive Compensation Awards granted under an Incentive Compensation Plan during the ten year period immediately preceding the earliest of his or her retirement, death, disability, or other termination of employment.

     (o) “Employment Commencement Date” of a Participant shall mean the date on which he or she first performs an Hour of Service for an Employer.

     (p) “Hour of Service” shall mean any hour for which an Employee is paid or entitled to payment by an Employer for the performance of duties.

     (q) “Incentive Compensation Award” for any Plan year shall collectively mean the short term incentive compensation award (whether in cash or common shares of the Corporation, and whether paid or deferred, or a combination of both) and the long term incentive compensation award (whether in cash or common shares of the Corporation, and whether paid or deferred, or a combination of both) (if any) granted to a Participant under an Incentive Compensation Plan, as follows:

• An incentive compensation award granted under the KeyCorp Annual Incentive Plan, the KeyCorp Short Term Incentive Compensation Plan, the KeyCorp Management Incentive Compensation Plan, and/or such other Employer-sponsored line of business Incentive Compensation Plan which shall constitute an Incentive Compensation Award for the year in which the award is earned (without regard to the actual time of payment).

• An incentive compensation award granted under the KeyCorp Long Term Incentive Compensation Plan (“LTIC Plan”) with respect to any multi-year performance period which shall be deemed to be for the last year of the multi-year period

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	without regard to the actual time of payment of the award. Accordingly, an incentive compensation award granted under the LTIC Plan with respect to the three-year performance period of 1993, 1994, and 1995 will be deemed to be for 1995 (without regard to the actual time of payment), and the entire incentive compensation award under the LTIC Plan for that performance period will be an Incentive Compensation Award for the year 1995.
•	An incentive compensation award granted under the KeyCorp Long Term Incentive Plan (“Long Term Plan”) with respect to any multi-year period which shall be deemed to be for the last year of the multi-year performance period and for the year immediately following such year (without regard to the actual time of payment). Accordingly, an award granted under the Long Term Plan with respect to the four-year performance period of 1998, 1999, 2000, and 2001 shall be deemed to be for the years 2001 and 2002, with one-half the award allocated to the year 2001, and one-half the award allocated to the year 2002.
•	An incentive compensation award granted in the form of restricted stock under the KeyCorp Amended and Restated 1991 Equity Compensation Plan with respect to any multi-year period (but specifically excluding those awards applicable to the 2002-2003 multi-year period), which shall be deemed to be for the year in which the award (grant) is made to the Participant; provided, however, that only those shares of restricted stock that have vested as of the Participant’s termination date shall be utilized for purposes of determining the Participant’s Incentive Compensation Award. The fair market value of such             shares as of the date of the restricted stock grant multiplied by the number of vested shares as of the Participant’s termination date shall determine the value of such Incentive Compensation Award for purposes of calculating the Participant’s Supplemental Pension Benefit under the provisions of Article III of the Plan.
	Notwithstanding the foregoing, however, in calculating the Participant’s Supplemental Pension Benefit under the provisions of Article III of the Plan, if it is determined that an incentive compensation award granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan would produce a larger monthly Supplemental Pension Benefit for the Participant if the award was included in the year in which the award (or any part of the award) initially vested rather than in the year in which the award was granted, then such incentive compensation award shall be included in the year in which the award (or any part of the award) initially vested rather than for the year in which the award was granted.
	If at the time of the Participant’s termination date, the Participant maintains shares of not forfeited restricted stock and such restricted stock later vests in conjunction with the passage of time or with the Corporation’s attainment of certain performance criteria, or otherwise, then as of such subsequent vesting date the Participant’s monthly Supplemental Pension Benefit shall be recalculated to include such newly vested shares. Such newly vested             shares shall relate to the award in which such shares were granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan, and shall be included as a part of that award (based on either the date granted or the date initially vested, whichever date was actually used by the Plan in calculating the Participant’s initial monthly Supplemental Pension Benefit).

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For those limited Participants who, for Plan purposes and in accordance with the provisions of this Section 2.1(q) hereof, received Incentive Compensation Award(s) granted in the form of time-lapsed restricted stock award(s) and/or performance shares under the KeyCorp Amended and Restated 1991 Equity Compensation Plan with respect to any multi-year period, the term Incentive Compensation Award shall also include those Equity/Compensation Award(s) granted to the Participant under the 2004 Equity Compensation Plan. An Equity/Compensation Award shall be deemed to be for the year in which the Equity/Compensation Award vests. If the Equity/Compensation Award is in the form of Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, the fair market value of such shares as of the date of the Equity/Compensation Award grant multiplied by the number of vested shares as of the Participant’s termination date shall determine the value of such Incentive Compensation Award for purposes of calculating the Participant’s Supplemental Pension Benefit under the provisions of Article III of the Plan.

          Notwithstanding the foregoing provisions of this Section 2.1(q) hereof, in calculating a Participant’s Incentive Compensation Award for any 12 month period, there shall be included only one award granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan, or Equity/Compensation Award under the KeyCorp 2004 Equity Compensation Plan included for purposes of determining the Participant’s Incentive Compensation Award for such 12 month period.

     (r) “Incentive Compensation Plan” shall mean the KeyCorp Management Incentive Compensation Plan, the KeyCorp Annual Incentive Plan, the KeyCorp Short Term Incentive Compensation Plan, the KeyCorp Long Term Incentive Compensation Plan, the KeyCorp Long Term Incentive Plan, the KeyCorp Amended and Restated 1991 Equity Compensation Plan, the KeyCorp 2004 Equity Compensation Plan, and/or such other Employer or KeyCorp-sponsored incentive compensation plan that KeyCorp in its sole discretion determines constitutes an “Incentive Compensation Plan” for purposes of this Section 2.1(r), as may be amended from time to time.”

     (s) “Harmful Activity” shall have occurred if the Participant shall do any one or more of the following:

(i)	Use, publish, sell, trade or otherwise disclose Non-Public Information of KeyCorp unless such prohibited activity was inadvertent, done in good faith and did not cause significant harm to KeyCorp.
(ii)	After notice from KeyCorp, fail to return to KeyCorp any document, data, or thing in his or her possession or to which the Participant has access that may involve Non-Public Information of KeyCorp.
(iii)	After notice from KeyCorp, fail to assign to KeyCorp all right, title, and interest in and to any confidential or non-confidential Intellectual Property which the Participant created, in whole or in part, during employment with KeyCorp, including, without limitation, copyrights, trademarks, service marks, and patents in or to (or associated with) such Intellectual Property.
(iv)	After notice from KeyCorp, fail to agree to do any acts and sign any document reasonably requested by KeyCorp to assign and convey all right, title, and interest in and to any confidential or non-confidential Intellectual Property which the Participant created, in whole or in part, during employment with KeyCorp, including, without limitation, the signing of patent applications and assignments thereof.

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(v)	Upon the Participant’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, solicit or entice for employment or hire any KeyCorp employee.
(vi)	Upon the Participant’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, call upon, solicit, or do business with (other than business which does not compete with any business conducted by KeyCorp) any KeyCorp customer the Participant called upon, solicited, interacted with, or became acquainted with, or learned of through access to information (whether or not such information is or was non-public) while the Participant was employed at KeyCorp unless such prohibited activity was inadvertent, done in good faith, and did not involve a customer whom the Participant should have reasonably known was a customer of KeyCorp.
(vii)	Upon the Participant’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, after notice from KeyCorp, continue to engage in any business activity in competition with KeyCorp in the same or a closely related activity that the Participant was engaged in for KeyCorp during the one year period prior to the termination of the Participant’s employment.
	For purposes of this Section 2.1(s) the term:
	“Intellectual Property” shall mean any invention, idea, product, method of doing business, market or business plan, process, program, software, formula, method, work of authorship, or other information, or thing relating to KeyCorp or any of its businesses.
	“Non-Public Information” shall mean, but is not limited to, trade secrets, confidential processes, programs, software, formulas, methods, business information or plans, financial information, and listings of names (e.g., employees, customers, and suppliers) that are developed, owned, utilized, or maintained by an employer such as KeyCorp, and that of its customers or suppliers, and that are not generally known by the public.
	“KeyCorp” shall include KeyCorp, its subsidiaries, and its affiliates.

     (t) “Normal Retirement Date” shall mean the first day of the month coinciding with or immediately following a Participant’s 65th birthday or, if later, the fifth anniversary of the Participant’s Employment Commencement Date.

     (u) “Participant” shall mean an Employee employed by an Employer in a position classified as a job grade 89 or above, who is selected by the Corporation to become a Participant in the Plan, and whose participation in the Plan has not been terminated by the Corporation. The Corporation retains the right at all times, in its sole and absolute discretion to determine who shall become and remain a Participant in the Plan.

     (v) “Pension Plan” shall mean the KeyCorp Cash Balance Pension Plan with all amendments that may be made thereto.

     (w) “Severance from Service Date” shall occur on the earlier of the date on which a Participant quits, retires, is discharged or dies.

     (x) “Social Security Primary Insurance Amount” shall mean the amount estimated by the Corporation that is expected to be paid to a Participant under the Federal Insurance Contributions Act.

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Such amount shall be calculated assuming the Participant receives payment at age 65 or the Participant’s Normal Retirement Date, whichever is later, and that he or she receives no earnings for the purpose of calculating this amount after the date of the Participant’s termination of employment. All compensation prior to the Participant’s date of termination of employment with an Employer shall be based upon a salary scale, projected backwards, which is the actual change in the average compensation from year to year, as indexed, and determined by the Social Security Administration.

     (y) “Supplemental Pension Benefit” shall mean the pension benefit payable pursuant to the terms of the Plan to a Participant meeting the eligibility requirements of Section 3.1 of the Plan.

2.2 Construction. Unless the context otherwise indicates, the masculine wherever used shall include the feminine and neuter, the singular shall include the plural, words such as “herein”, “hereof”, “hereby”, “hereunder” and words of similar import shall refer to the Plan as a whole and not any particular part thereof.

     All other capitalized but undefined terms used herein, shall have the meaning given to them in the Pension Plan.

ARTICLE III

SUPPLEMENTAL PENSION BENEFIT

3.1 Eligibility. Subject to the provisions of Article V hereof, a Participant shall be eligible for a Supplemental Pension Benefit hereunder if the Participant (i) retires on or after age 65 with five or more years of Credited Service, (ii) terminates employment with an Employer on or after age 55 with ten or more years of Credited Service, (iii) terminates active employment with an Employer upon becoming Disabled after completing five or more years of Credited Service and disability benefits have ceased under the KeyCorp Long-Term Disability Plan due to the Participant’s election for Early or Normal Retirement under the Pension Plan, or (iv) dies after completing five years of Credited Service, and has a Beneficiary who is eligible for a benefit under the Pension Plan.

A Participant shall also be eligible for an Supplemental Pension Benefit if the Participant becomes involuntarily terminated from his or her employment with an Employer for reasons other than the Participant’s Discharge for Cause, and (i) as of the Participant’s termination date the Participant has a minimum of twenty-five (25) or more years of Credited Service, and (ii) the Participant enters into a written non-solicitation and non-compete agreement under terms that are satisfactory to the Employer.

     For purposes of this Section 3.1, hereof, the term “Discharge for Cause” shall mean a Participant’s employment termination that is the result of the Participant’s violation of the Employer’s policies, practices or procedures, violation of city, state, or federal law, or failure to perform his or her assigned job duties in a satisfactory manner. The Employer shall determine whether a Participant has been Discharged for Cause.

     Notwithstanding any of the forgoing provisions of this Section 3.1, however, a Participant’s eligibility for a Supplemental Pension Benefit shall be subject to the requirements of Article V of the Plan.

3.2 Supplemental Pension Benefit Calculation. The amount of any Supplemental Pension Benefit to be paid to a Participant under the terms of the Plan on or after the Participant’s Normal Retirement Date shall be calculated as follows:

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     A Participant’s Supplemental Pension Benefit shall equal the difference between "(a)” and"(b)” where:

1.	“(a)” is equal to 2% times the Participant’s years of Credited Service (up to a Plan maximum of 25 years) times the Participant’s Final Average Compensation, and
2.	“(b)” is equal to the sum of:

(i)	the Participant’s accrued and vested annual pension benefit under the Pension Plan calculated as of the participant’s Normal Retirement Date, payable in the form of a single life annuity option, and
(ii)	the Participant’s annual estimated Social Security Primary Insurance Amount payable at the Participant’s Normal Retirement Date.

     For purposes of calculating a Participant’s Supplemental Pension Benefit under this Section 3.2 hereof, the Participant’s “annual pension benefit” under the Pension Plan shall be the Participant’s Accrued Benefit as of the Participant’s termination date calculated in accordance with the provisions of Article IV of the Pension Plan as if such benefit were to be paid in the form of a single life annuity; if the Participant is eligible for and elects to receive his or her Pension Plan benefit under a Predecessor Plan grandfathered formula, such “annual pension benefit” for purposes of this Section 3.2 hereof, shall be the benefit payable to the Participant under the terms of the Pension Plan’s Predecessor Plan grandfathered formula as of the Participant’s termination date, as if such benefit were to be paid in the form of a single life annuity.

3.3 Early Retirement Election. In the event the Participant elects to receive his or her Supplemental Pension Benefit on or after the Participant’s Early Retirement Date but prior to the Participant’s Normal Retirement Date, the Participant’s Supplemental Pension Benefit shall be calculated as provided in accordance with Section 3.2 hereof, provided, however, that in determining the Participant’s annual Pension Plan benefit as of the Participant’s Normal Retirement Date, the Participant’s Accrued Benefit under the Pension Plan as of his or her termination date shall be increased for purposes of this Plan with an imputed Average Interest Credit to reflect the Participant’s Pension Plan benefit at his or her Normal Retirement Date and shall be converted to the form of a single life annuity option using the Average Treasury Rate and the GATT Mortality Table. The amount of the Participant’s annual Supplemental Pension Benefit otherwise determined under Section 3.2 and Section 3.3 hereof, shall be reduced by 3.6% for each year that the Participant is between the ages of 55 and 60 and by 4.8% for each year after the Participant attains age 60 to actuarially adjust the commencement of the Participant’s Supplemental Pension Benefit prior to his or her Normal Retirement Date.

3.4 Actuarial Factors. The Supplemental Pension Benefit payable to a Participant or Participant’s Beneficiary in a form other than a single life annuity shall be actuarially equivalent to such single life annuity payment option. In making the determination provided for in this Article III, the Corporation shall rely upon calculations made by the independent actuaries for the Plan, who shall determine actuarially equivalent benefits under the Plan by applying the UP-1984 Mortality Table (set back two years) and using an interest rate of 6%.

3.5 Recalculation as a Result of Harmful Activity. Notwithstanding the foregoing provisions of Section 3.2 and Section 3.3 hereof, the Corporation reserves the right at all times to recalculate a Participant’s Supplemental Pension Benefit, if it is determined that within six months of the Participant’s termination date the Participant engaged in any Harmful Activity, as that term is defined in accordance with Section 2.1(s) of the Plan, which resulted in the forfeiture of all or any portion of the Participant’s

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restricted share award(s) under the KeyCorp Amended and Restated 1991 Equity Compensation Plan or Equity/Compensation Awards granted under the KeyCorp 2004 Equity Compensation Plan (if applicable). Such recalculation shall relate back to the Participant’s original date of termination, and any Supplemental Pension Benefit payment paid to the Participant in excess of such recalculated Supplemental Pension Benefit amount shall be offset against any future Supplemental Pension Benefit payments to be paid to the Participant.”

ARTICLE IV

PAYMENT OF SUPPLEMENTAL PENSION BENEFIT

4.1 Immediate Payment Upon Termination or Retirement of Participant. Subject to the provisions of Section 4.2 and Section 4.3 hereof, a Participant meeting the age and service eligibility requirements of Section 3.1, shall receive an immediate distribution of his or her Supplemental Pension Benefit upon the Participant’s termination of employment in the form of a single life annuity, unless the Participant elects in writing a minimum of thirty days prior to his or her termination date to receive payment of his or her Supplemental Pension Benefit under a different form of payment. The forms of payment from which a Participant may elect shall provide a benefit that is actuarially equivalent to the Participant’s single life annuity payment as calculated under the provisions of Section 3.2 hereof, and shall be identical to those forms of payment specified in the Pension Plan, provided, however, that the lump sum payment option available under the Pension Plan shall not be available under this Plan. Such method of payment, once elected by the Participant, shall be irrevocable.

4.2 Deferred Benefit Payment. A Participant who terminates his or her employment with an Employer after meeting the age and service requirements of Section 3.1, may elect to defer the receipt of his or her Supplemental Pension Benefit until a date specified by the Participant, subject to the following requirements: (i) the Participant notifies the Corporation in writing of his or her deferral election a minimum of twelve months prior to the Participant’s termination of employment, (ii) the Participant specifies the future date on which such Supplemental Pension Benefit shall be distributed, (iii) the Participant’s requested deferral period is for a period of not less than five years following the Participant’s retirement or termination of employment, and (iv) the Participant commences distribution of his or her Supplemental Pension Benefit no later than the first day of the month immediately following the Participant’s sixty-fifth (65th) birthday. The election to defer, once made by the Participant, shall be irrevocable.

     Notwithstanding the foregoing, in the case of an “unforeseeable emergency”, upon written application by the Participant to the Corporation, the Corporation may accelerate the distribution of the Participant’s deferred Supplemental Pension Benefit. For purposes of this Section 4.2, the term “unforeseeable emergency” shall mean a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Section 152(a) of the Code), the loss of the Participant’s property due to casualty, or such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The determination of an “unforeseeable emergency” and the ability of the Corporation to accelerate the Participant’s Supplemental Pension Benefit shall be determined in accordance with the requirements of Section 409A of the Code and applicable regulations issued thereunder.

4.3 Payment Limitation for Key Employees. Notwithstanding any other provision of the Plan to the contrary, in the event that the Participant constitutes a “key” employee of the Corporation (as that term is defined in accordance with Section 416(i) of the Code without regard to paragraph (5) thereof), distributions of the Participant’s Supplemental Pension Benefit may not be made before the date which is six months after the Participant’s date of separation from service (or, if earlier, the date of death of the

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Participant). The term “separation from service” shall be defined for Plan purposes in accordance with the requirements of Section 409A of the Code and applicable regulations issued thereunder.

4.4 Payment Upon Death of Participant.

     (a) Upon the death of a Participant who has met the service requirements of Section 3.1, but who has not yet commenced distribution of his or her Supplemental Pension Benefit, there shall be paid to the Participant’s Beneficiary 50% of the Supplemental Pension Benefit which the Participant would have been entitled to receive under the provisions of Section 3.2 of the Plan calculated as if the Participant had retired on his or her Normal Retirement Date and elected to receive his or her Supplemental Pension Benefit.

     For purposes of this Section 4.4(a) only, the following shall apply:

(i)	The Participant’s Credited Service shall be calculated as of the Participant’s date of death.
(ii)	The Participant’s Pension Plan benefit shall be calculated under the provisions of Article IV of the Pension Plan as if the Participant had died on his or her Normal Retirement Date, with such Pension Plan benefit being increased for purposes of this Section 4.4(a) with an imputed Average Interest Credit to reflect what the Participant’s Pension Plan benefit would have been as of the Participant’s Normal Retirement Date; such Pension Plan benefit shall be converted to a single life annuity option using the Average Treasury Rate and Gatt Mortality Table.
(iii)	The Participant’s Social Security Primary Amount shall be calculated as if the Participant had retired as of his or her Normal Retirement Date.

     Payment of this death benefit shall be made in the form of a single life annuity and will be subject to distribution any time after the Participant’s Early Retirement Date, which shall be calculated in accordance with the actuarial reduction provisions contained within Section 3.3 hereof, if paid prior to the Participant’s Normal Retirement Date.

     (b) In the event of a Participant’s death after the Participant has commenced distribution of his or her Supplemental Pension Benefit, there shall be paid to the Participant’s Beneficiary only those survivor benefits provided under the form of benefit payment elected by the Participant.

ARTICLE V

DISTRIBUTION OF LARGEST PLAN BENEFIT

5.1 Distribution of Largest Plan Benefit. Subject to any previous benefit election made by the Participant under the KeyCorp Executive Supplemental Pension Plan, a Participant who meets the eligibility requirements for an Executive Supplemental Pension Program Benefit and who is also eligible for an Excess Pension Program Benefit shall automatically be provided at the Participant’s termination the larger of the two Program benefits (i.e. the greater of the Participant’s Excess Pension Program Benefit or the Executive Supplemental Pension Program Benefit).

     In making the determination required under this Section 5.1 hereof, the Corporation shall rely upon calculations made by independent actuaries for the Pension Plan, who shall apply the actuarial assumptions and interest rate then in use under the Pension Plan for converting the Participant’s Excess Pension Program Benefit to a single life annuity form of payment. The Participant automatically will

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receive the Program Benefit that provides the Participant with the largest monthly single life annuity benefit.

5.2 Beneficiary Distribution of Largest Plan Benefit.

(a)	Upon the death of a Participant meeting eligibility requirements for an Excess Pension Program Benefit and the eligibility requirements for an Executive Supplemental Pension Program Benefit there shall be paid to the Participant’s Beneficiary the larger of the two Programs’ death benefit. Such death benefit shall be paid to the Beneficiary in the form of a single life annuity.
(b)	In the event of a Participant’s death after the Participant has commenced distribution of his or her Plan benefit, there shall be paid to the Participant’s Beneficiary only those survivor benefits provided under the form of benefit payment elected by the Participant.

ARTICLE VI

ADMINISTRATION AND CLAIMS PROCEDURE

6.1 Administration. The Corporation, which shall be the “Administrator” of the Plan for purposes of ERISA and the “Plan Administrator” for purposes of the Code, shall be responsible for the general administration of the Plan, for carrying out the provisions hereof, and for making payments hereunder. The Corporation shall have the sole and absolute discretionary authority and power to carry out the provisions of the Plan, including, but not limited to, the authority and power (a) to determine all questions relating to the eligibility for and the amount of any benefit to be paid under the Plan, (b) to determine all questions pertaining to claims for benefits and procedures for claim review, (c) to resolve all other questions arising under the Plan, including any questions of construction and interpretation, and (d) to take such further action as the Corporation shall deem necessary or advisable in the administration of the Plan. All findings, decisions, and determinations of any kind made by the Corporation shall not be disturbed unless the Corporation has acted in an arbitrary and capricious manner. Subject to the requirements of law, the Corporation shall be the sole judge of the standard of proof required in any claim for benefits and in any determination of eligibility for a benefit. All decisions of the Corporation shall be final and binding on all parties. The Corporation may employ such attorneys, investment counsel, agents, and accountants as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The actions taken and the decisions made by the Corporation hereunder shall be final and binding upon all interested parties subject, however, to the provisions of Section 6.2. The Plan Year, for purposes of Plan administration, shall be the calendar year.

6.2 Claims Review Procedure. Whenever the Corporation decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Plan filed by any person (herein referred to as the “Claimant”), the Corporation shall transmit a written notice of its decision to the Claimant, which notice shall be written in a manner calculated to be understood by the Claimant and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Claimant that, within 60 days of the date on which he or she receives such notice, he or she may obtain review of the decision of the Corporation in accordance with the procedures hereinafter set forth. Within such 60-day period, the Claimant or his or her authorized representative may request that the claim denial be reviewed by filing with the Corporation a written request therefore, which request shall contain the following information:

(a) the date on which the request was filed with the Corporation; provided, however, that the date on which the request for review was in fact filed with the Corporation shall control

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	in the event that the date of the actual filing is later than the date stated by the Claimant pursuant to this paragraph (a);
(b)	the specific portions of the denial of his claim which the Claimant requests the Corporation to review;
(c)	a statement by the Claimant setting forth the basis upon which he believes the Corporation should reverse its previous denial of his claim and accept his claim as made; and
(d)	any written material which the Claimant desires the Corporation to examine in its consideration of his position as stated pursuant to paragraph (c) above.

     In accordance with this Section 6.2, if the Claimant requests a review of the Corporation’s decision, such review shall be made by the Corporation, or at the election of the Corporation, who shall, within sixty (60) days after receipt of the request form, review and render a written decision on the claim containing the specific reasons for the decision including reference to Plan provisions upon which the decision is based. All findings, decisions, and determinations of any kind made by the Corporation shall not be modified unless the Corporation has acted in an arbitrary and capricious manner. Subject to the requirements of a law, the Corporation shall be the sole judge of the standard of proof required in any claim for benefits, and any determination of eligibility for a benefit. All decisions of the Corporation shall be binding on the Claimant and upon all other Persons. If the Participant, or Beneficiary shall not file written notice with the Corporation at the times set forth above, such individual shall have waived all benefits under the Plan other than as already provided, if any, under the Plan.

ARTICLE VII

FUNDING

     All benefits under the Plan shall be payable solely in cash from the general assets of the Corporation or a subsidiary, and Participants and Beneficiaries shall have the status of general unsecured creditors of the Corporation. The obligations of the Corporation to make distributions in accordance with Article III and Article IV of the Plan constitute a mere promise to make payments in the future. The Corporation shall have no obligation to establish a trust or fund to fund its obligation to pay benefits under the Plan or to insure any benefits under the Plan. Notwithstanding any provision of this Plan, the Corporation may, in its sole discretion, combine the payment due and owing under this Plan with one or more other payments owing to a Participant or a Participant’s Beneficiary under any other plan, contract, or otherwise (other than any payment due under the Pension Plan), in one check, direct deposit, wire transfer, or other means of payment. Finally, it is the intention of the Corporation and the Participants that the Plan be unfunded for tax purposes and for the purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE VIII

AMENDMENT AND TERMINATION

     The Corporation reserves the right to amend or terminate the Plan at any time by action of its Board of Directors or a duly authorized committee of such Board of Directors; provided, however, that no such action shall adversely affect the benefit accrued up to the date of the Plan amendment or termination for any Participant who has met the age and service requirements of Section 3.1 of the Plan, or any Participant or Participant’s Beneficiary who is receiving, or who is eligible to receive a Supplemental

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Pension Benefit hereunder, unless an equivalent benefit is provided under another plan maintained by the Corporation. No amendment or termination will result in an acceleration of Supplemental Pension Benefits in violation of Section 409A of the Code.

ARTICLE IX

MISCELLANEOUS

9.1 Interest of Participant. The obligation of the Corporation under the Plan to provide the Participant or the Participant’s Beneficiary with a Supplemental Pension Benefit merely constitutes the unsecured promise of the Corporation to make payments as provided herein, and no person shall have any interest in, or a lien, or prior claim on any property of the Corporation.

9.2 No Commitment as to Employment. Nothing herein contained shall be construed as a commitment or agreement upon the part of any Participant hereunder to continue his or her employment with an Employer, and nothing herein contained shall be construed as a commitment on the part of any Employer to continue the employment or rate of compensation of any Participant hereunder for any period. All Participants shall remain subject to discharge to the same extent as if the Plan had never been put into effect.

9.3 Benefits. Nothing in the Plan shall be construed to confer any right or claim upon any person, firm, or corporation other than Participants and Participants’ Beneficiaries who become entitled to a benefit under the Plan.

9.4 Restrictions on Alienation. Except to the extent permitted by law, no benefit under the Plan shall be subject to anticipation, alienation, assignment (either at law or in equity), encumbrance, garnishment, levy, execution, or other legal or equitable process. No person shall have power in any manner to anticipate, transfer, assign, (either at law or in equity), alienate or subject to attachment, garnishment, levy, execution, or other legal or equitable process, or in any way encumber his or her benefits under the Plan, or any part thereof, and any attempt to do so shall be void.

9.5 Absence of Liability. No member of the Board of Directors of the Corporation or a subsidiary, or any officer of the Corporation or a subsidiary shall be liable for any act or action hereunder, whether of commission or omission, taken by any other member, or by any officer, agent, or Employee except in circumstances involving his or her bad faith or willful misconduct.

9.6 Expenses. The expenses of administration of the Plan shall be paid by the Corporation.

9.7 Precedent. Except as otherwise specifically provided, no action taken in accordance with the Plan by the Corporation shall be construed or relied upon as a precedent for similar action under similar circumstances.

9.8 Duty to Furnish Information. The Corporation shall furnish to each Participant or Participant’s Beneficiary any documents, reports, returns statements, or other information that it reasonably deems necessary to perform its duties imposed hereunder or otherwise imposed by law.

9.9 Withholding. The Corporation shall withhold any tax required by any present or future law to be withheld from any payment hereunder to any Participant or Participant’s Beneficiary.

9.10 Validity of Plan. The validity of the Plan shall be determined and the Plan shall be construed and interpreted in accordance with the provisions of the Act, the Code, and, to the extent applicable, the

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laws of the State of Ohio. The invalidity or illegality of any provision of the Plan shall not affect the validity or legality of any other part thereof.

9.11 Parties Bound. The Plan shall be binding upon the Corporation, all Participants, all Participants’ Beneficiaries, and the executors, administrators, successors, and assigns of each of them.

9.12 Headings. All headings used in the Plan are for convenience of reference only and are not part of the substance of the Plan.

ARTICLE X

CHANGE OF CONTROL

     Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, a Participant’s interest in his or her Supplemental Pension Benefit shall vest. On and after a Change of Control, a Participant shall be entitled to receive an immediate distribution of his or her Supplemental Pension Benefit if the Participant has at least five (5) years of Credited Service, and (i) the Participant’s employment is terminated by his or her Employer and any other Employer without cause, or (ii) the Participant resigns within two years following a Change of Control as a result of the Participant’s mandatory relocation, reduction in the Participant’s base salary, reduction in the Participant’s average annual incentive compensation (unless such reduction is attributable to the overall corporate or business unit performance), or the Participant’s exclusion from stock option programs as compared to comparably situated Employees.

     For purposes of this Article X hereof, a “Change of Control” shall be deemed to have occurred if under a rabbi trust arrangement established by KeyCorp (“Trust”), as such Trust may from time to time be amended or substituted, the Corporation is required to fund the Trust because a “Change of Control”, as defined in the Trust, has occurred.

ARTICLE XI

COMPLIANCE WITH
SECTION 409A CODE

     The Plan is intended to provide for the deferral of compensation in accordance with the provisions of Section 409A of the Code and regulations and published guidance issued pursuant thereto. Accordingly, the Plan shall be construed in a manner consistent with those provisions and may at any time be amended in the manner and to the extent determined necessary or desirable by the Corporation to reflect or otherwise facilitate compliance with such provisions with respect to amounts deferred on and after January 1, 2005, including as contemplated by Section 855(f) of the American Jobs Creation Act of 2004. Notwithstanding any provision of the Plan to the contrary, no otherwise permissible election or distribution shall be made or given effect under the Plan that would result in early taxation or assessment of penalties or interest of any amount under Section 409A of the Code.

     Notwithstanding any provision of the Plan to the contrary, Supplemental Pension Benefits shall not be distributed to a Participant earlier than:

(a) the Participant’s separation from service as determined by the Secretary of the Treasury (except as provided below with respect to a key employee of the Corporation);

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(b)	death of the Participant; or
(c)	upon the occurrence to the Participant, the Participant’s spouse, or the Participant’s dependent an unforeseeable emergency as defined in Section 409A(a)(2)(B)(ii) of the Code.

     If it is determined that a Participant constitutes a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of the Corporation, the Participant shall not commence the distribution of his or her Supplemental Pension Benefits before the date which is six months after the date of the Participant’s separation from service (or, if earlier, the date of death of the Participant).

ARTICLE XII

MERGER OF THE
KEYCORP EXECUTIVE SUPPLEMENTAL PENSION PLAN
INTO THE PLAN

12.1 Merger. As of December 31, 2006 the KeyCorp Executive Supplemental Pension Plan shall be merged into this Plan, and as of that date the KeyCorp Executive Supplemental Pension Plan shall not exist separate and apart from this Plan and all benefits that have accrued under the KeyCorp Executive Supplemental Pension Plan shall be merged into and shall become a part of this Plan.

     IN WITNESS WHEREOF, KeyCorp has caused this KeyCorp Second Executive Supplemental Pension Plan to be executed as of December 21, 2006, and to be effective as of December 31, 2006.

KEYCORP
By:	/s/ Thomas Helfrich
Title:	Executive Vice President

15

Exhibit A

     Employee

16

EX-10.51

EXHIBIT 10.51

AGREEMENT

     THIS AGREEMENT (“Agreement”) is made as of the XX day of XXXXX, 200X, between KEYCORP, an Ohio corporation (“Key”), and XXXXXX (the “Executive”).

     Key is entering into this Agreement in recognition of the importance of the Executive’s services to the continuity of management of Key and based upon its determination that it will be in the best interests of Key and its Subsidiaries to encourage the Executive’s continued attention and dedication to the Executive’s duties in the potentially disruptive circumstances of a possible Change of Control of Key. (As used in this Agreement, the terms “Subsidiaries” and “Change of Control” and certain other capitalized terms have the meanings ascribed to them in Section 8, at the end of this Agreement.)

     Key and the Executive agree, effective as of the date first set forth above, as follows:

1. Basic Severance Benefits. The benefits described in Sections 1.1, 1.2, and 1.3 below are subject to the limitations set forth in Sections 5.1 (which requires an election among applicable agreements providing severance benefits if more than one such agreement would apply in the particular circumstances of the termination of the Executive’s employment and stipulates that any payments received under this Agreement are in lieu of other claims or rights), 5.2 (regarding withholding), and 5.3 (requiring the execution of a waiver and release by the Executive).

1.1 If Employment is Terminated Without Cause, etc., Within Two Years of a Change of Control. If, within two years following the occurrence of a Change of Control, the Executive’s employment with Key and its Subsidiaries is terminated by Key or its Subsidiary for any reason other than Cause, Disability, or death or by the Executive after a Reduction of Compensation or a Mandatory Relocation has occurred:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to three times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation plus (iii) 50% of Average Long Term Incentive Compensation; and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.1(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending on the third anniversary of the Termination Date (the “Section 1.1 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.1 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which

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such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.1 Benefit Period. For purposes of this Section 1.1(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

1.2 If Employment is Terminated by Executive for Good Reason During a Window Period. Except as provided in the last sentence of this Section 1.2, if the Executive’s employment with Key and its Subsidiaries is terminated by the Executive for Good Reason during a Window Period:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to one and one half times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation plus (iii) 50% of Average Long Term Incentive Compensation, and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.2(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending eighteen months, to the day, after the Termination Date (the “Section 1.2 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.2 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall

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equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.2 Benefit Period. For purposes of this Section 1.2(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

This Section 1.2 shall not apply if, at the Termination Date, (x) there has been either any Reduction of Compensation or any Mandatory Relocation (in which event Section 1.1 would apply to the termination) or (y) Key or any Subsidiary has Cause to terminate the Executive’s employment (in which case no lump sum severance or retirement benefits would be payable or provided under either of Sections 1.1 or 1.2).

1.3 Continued Medical Coverage

(a) Payment of Cost of COBRA Health Benefits. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive elects to continue to receive health benefits pursuant to an election that Key or any Subsidiary is required to provide to the Executive in order to comply with Section 4980B(f) of the Internal Revenue Code (commonly referred to as “COBRA continuation coverage”) during the period specified in Section 4980B(f) (the “COBRA continuation period”), Key will pay the cost of continuing those benefits from the Termination Date through the first to occur of (a) the end of the COBRA continuation period or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity.

(b) Payment of Retiree Medical Coverage. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive is age 50 with 15 years Vesting Service (as that term is defined under the KeyCorp Cash Balance Pension Plan) as of his or her Termination Date, the Executive may elect, in lieu of electing COBRA continuation coverage under the provisions of Section 1.3(a) hereof, to participate in the KeyCorp Retiree Medical Plan. Key will pay the premium cost for the Executive’s Retiree Medical Plan coverage from the Executive’s Termination Date through (a) the last day of the eighteen-month period following the Executive’s Termination Date, or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity, whichever shall first occur. If the Executive is not age 55 at the time that Key’s premium payment ends, the Executive shall be required to pay the full premium cost for his or her continued Retiree Medical Plan coverage until the Executive reaches age 55, at which time the KeyCorp Retiree Medical Plan premium cost-sharing structure will apply.

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1.4 Provisions Applicable to Continued Retirement and Savings Plans Participation.

(a) If the Executive becomes entitled to payment of a lump sum severance benefit under either of Section 1.1 or Section 1.2, the rules set forth in the remainder of this Section 1.4(a) shall be applicable for purposes of all Relevant Plans:

(i) the entire Section 1.1 Benefit Period or Section 1.2 Benefit Period (each, a “Benefit Period”), as the case may be, shall be included in determining the Executive’s years of service,

(ii) amounts received by the Executive under clause (a)(i) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be base salary received by the Executive ratably during the applicable Benefit Period, and

(iii) amounts received by the Executive under clause (a)(ii) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be short term incentive compensation received by the Executive ratably during the applicable Benefit Period.

(b) If either Section 1.1(b) or Section 1.2(b) becomes applicable and at any time during the applicable Benefit Period, Key determines in good faith that continuing the Executive’s coverage by and participation in any of the Relevant Plans during the applicable Benefit Period is Impermissible, the Executive shall not be covered by and participate in such affected plan or plans during the applicable Benefit Period, but Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Executive continued to be covered by and to participate in all such affected plans throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the Termination Date, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the affected plan or plans in question.

(c) If either Section 1.1(b) or Section 1.2(b) becomes applicable and any of the Relevant Plans and/or the KeyCorp Deferred Savings Plan are Discontinued Plans, as to each such Discontinued Plan, Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position with regard that the Executive would have been in had the Discontinued Plan continued through the end of the applicable Benefit Period without having become a Discontinued Plan and had the Executive continued to be covered by and to participate in that Discontinued Plan throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the date of the Change of Control, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would

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be applicable under the Discontinued Plan, and as a lump sum payment under the KeyCorp Deferred Savings Plan, provided however, that to the extent the Discontinued Plan has been substituted for by a Relevant Plan, the amount payable by Key under this Section 1.4(c) shall be offset by the amounts actually paid under that substitute plan.

2. Certain Compensation Guaranties During Two Years following a Change of Control. For so long as the Executive remains in the employ of Key or one of its Subsidiaries during the period beginning on the day after any Change of Control and continuing through the second anniversary of that Change of Control (the period of the Executive’s employment during such two year period being the “Guaranteed Compensation Period”), the Executive shall be entitled to the Incentive Compensation Guaranty set forth in Section 2.1 and to the Option/SAR Guaranty set forth in Section 2.2.

2.1 Guaranteed Level of Incentive Compensation. Except as otherwise provided in Section 2.3, Key shall cause the Executive to receive, during the Guaranteed Compensation Period, as incentive compensation, an amount that, on an annualized basis, is at least equal to the Executive’s Average Annual Incentive Compensation. The guaranty set forth in the immediately preceding sentence (the “Incentive Compensation Guaranty”) establishes a minimum amount of incentive compensation that must be paid to the Executive with respect to the Executive’s employment during the Guaranteed Compensation Period. Except as and to the extent otherwise permitted by any of the provisions of Section 2.3:

(a) Key shall make payments to the Executive in cash that satisfy the Incentive Compensation Guaranty quarterly in arrears, within 30 days after the end of each calendar quarter for each quarter or portion thereof during the Guaranteed Compensation Period;

(b) If the Executive’s employment terminates for any reason other than Cause, Key shall pay all unpaid guaranteed incentive compensation with respect to the Guaranteed Compensation Period to the Executive in a lump sum by not later than 30 business days after the Termination Date; and

(c) If the Executive’s employment is terminated by Key for Cause, Key shall not be required to pay to the Executive any amount of incentive compensation on account of the Incentive Compensation Guaranty that was not required to have been paid before the Termination Date.

2.2 Guaranteed Participation in Stock Option and SAR Plans. During the Guaranteed Compensation Period, the Executive shall participate fully (and at a level at least substantially equivalent to that of comparable senior executives of Key) in each and every stock option and stock appreciation right plan in which similarly situated executives of Key and its Subsidiaries generally participate. The guaranty of full participation set forth in this Section 2.2 is hereinafter sometimes referred to as the “Option/SAR Guaranty.”

2.3 Exceptions to and Alternative Means of Satisfying the Incentive Compensation Guaranty. For purposes of the exceptions and alternative means of satisfying the Incentive

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Compensation Guaranty that are set forth in this Section 2.3, the Incentive Compensation Guaranty shall be deemed to be made up of two parts, the “Short Term Part” and the “Long Term Part,” each of which shall bear the same proportion, respectively, to the entire Incentive Compensation Guaranty as Average Short Term Incentive Compensation and Average Long Term Incentive Compensation bear, respectively, to Average Annual Incentive Compensation.

(a) Bona fide Short Term Incentive Compensation Plan Exception. If (i) Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level; (ii) Key, in administering that plan in good faith and without discriminating against the Executive, utilizes a performance factor that is intended to rate for the short term compensation cycle in question either the corporation’s overall performance or the overall performance of the business unit in which the Executive works; (iii) that performance factor is uniformly applied (either in establishing an incentive compensation pool or against each participant’s target) to all participants in the plan or to all participants in the plan that work in the business unit in which the Executive works, as the case may be; and (iv) the application of that factor reduces the short term incentive compensation payable under that plan to a level below the Executive’s target level; then payment of the short term incentive compensation, if any, due to the Executive at the reduced level under that plan shall satisfy Key’s obligation under the Short Term Part for that particular short term compensation cycle.

(b) Annual Payment Exception. If Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level and that plan provides for payment of all amounts earned at regularly scheduled times not less frequently than once a year, Key may satisfy the Short Term Part by paying incentive compensation to the Executive under that plan (at not less than the Executive’s target level or as reduced if permitted by 2.3(a) above) at those regularly scheduled times, except that if Executive’s employment terminates for any reason other than Cause, Key shall make payments under that plan, pro rated to include all periods within the Compensation Guaranty Period as to which the Executive has not yet received incentive compensation under that plan, within 30 business days after the Termination Date.

(c) Issuance of Restricted Stock Alternative. As an alternative to paying Executive cash to satisfy the Long Term Part, Key may make restricted stock grants of Common Shares to the Executive each year during the Guaranteed Compensation Period that:

(i) are made during the same calendar quarter of the year as the calendar quarter during which Key made LTIC Stock Grants in the year immediately preceding the Change Year (but if Key made such grants during more than one calendar quarter in the year immediately preceding the Change Year, then the new grant shall be made during the same calendar quarter of the year as the calendar quarter

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during which Key made grants to the highest number of officers in the year immediately preceding the Change Year);

(ii) have a Fair Market Value that on an annual basis is at least equal to the Executive’s Average Long Term Incentive Compensation;

(iii) provide for time lapsed vesting of the restricted stock subject to the grant so that the entire grant will be fully vested not later than the third anniversary of the date of grant if the Executive continues to be employed through that date; and

(iv) have the further provision that, upon any termination of the Executive’s employment other than a termination for Cause (including, without limitation, any termination by reason of death, disability, voluntary or involuntary retirement, or resignation), if, as of the Termination Date, less than a proportionate part of the Common Shares subject to the restricted stock grant granted to the Executive during the Guaranteed Compensation Period has vested, then an additional portion of those Common Shares shall vest immediately on the Termination Date so that, in the aggregate, a proportionate part has vested as of the Termination Date. For these purposes, “a proportionate part” means the full number of Common Shares in the restricted stock grant multiplied by a fraction, the numerator of which is the number of days between (x) January 1 of the calendar year in which the restricted stock grant was made and (y) the last day of the Guaranteed Compensation Period, inclusive, and the denominator of which is 1095 (i.e., 365 times three).

If Key makes restricted stock grants as provided in this 2.3(c), Key will have satisfied the Long Term Part.

3. Other Benefits.

3.1 Reimbursement of Certain Expenses After a Change of Control.

(a) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of defending any action brought to have this Agreement declared invalid or unenforceable.

(b) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of prosecuting any action to compel Key to comply with the terms of this Agreement upon receipt from Executive of an undertaking to repay Key for such expenses if, and only if, it is ultimately determined by a court of competent jurisdiction that the Executive had no reasonable grounds for bringing that action (which determination need not be made simply because the Executive fails to succeed in the action).

(c) From and after a Change of Control, expenses (including attorney’s fees) incurred by the Executive in defending any action, suit, or proceeding commenced or

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threatened (whether before or after the Change of Control) against the Executive (i) for any action or failure to act as a director, employee, officer, or agent of Key or any Subsidiary or (ii) if the Executive is or was serving at the request of Key or any Subsidiary, for any action or failure to act as a director, trustee, officer, employee, member, manager, or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any employee benefit plan maintained by Key or any Subsidiary (“Plan”), shall be paid by Key, as they are incurred, in advance of final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the Executive in which the Executive agrees to reasonably cooperate with Key or the Subsidiary, as the case may be, concerning the action, suit, or proceeding, and (i) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a director, to repay the amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that the Executive’s action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to Key or a Subsidiary or undertaken with reckless disregard for the best interests of Key or a Subsidiary, or (ii) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a trustee, officer, employee, member, manager, or agent (including as a Plan fiduciary), to repay the amount if it is ultimately determined that the Executive is not entitled to be indemnified. The obligation of Key to advance expenses provided for in this Section 3.1(c) shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or regulations of Key or of any Subsidiary, any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise. Without limiting the preceding provisions of this Section 3.1, Key shall advance the Executive’s expenses provided for herein as incurred in connection with service as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee or any successor of either of the Committees.

3.2 Indemnification. From and after a Change of Control, Key shall indemnify the Executive, to the full extent permitted or authorized by the Ohio General Corporation Law as it may from time to time be amended, if the Executive is (whether before or after the Change of Control) made or threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or was a director, officer, employee, or agent of Key or any Subsidiary, or is or was serving at the request of Key or any Subsidiary as a director, trustee, officer, employee, member, manager, or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any Plan, including serving as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee, or any successor of either of the Committees. The indemnification provided by this Section 3.2 shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or the regulations of Key or of any Subsidiary, or any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or

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otherwise, both as to action in the Executive’s official capacity and as to action in another capacity while holding such office, and shall continue as to the Executive after the Executive has ceased to be a director, trustee, officer, employee, member, manager, agent, committee member or other fiduciary and shall inure to the benefit of the heirs, executors, and administrators of the Executive. Notwithstanding the foregoing provisions of this Section 3.2, the Executive shall not be indemnified if it is judicially determined that the Executive’s action or failure to act constituted gross negligence or willful misconduct in carrying out the Executive’s duties as a fiduciary of a Plan.

3.3 Disability. If, after a Change of Control and prior to the Termination Date, the Executive is unable to perform services for Key or any Subsidiary for any period by reason of disability of the Executive, Key will pay and provide to the Executive all compensation and benefits to which the Executive would have been entitled had the Executive continued to be actively employed by Key or any Subsidiary through the earliest of the following dates: (a) the first date on which the Executive is no longer so disabled to such an extent that the Executive is unable to perform services for Key or any Subsidiary (whereupon the Executive shall be restored to his duties and this Agreement shall apply in accordance with its terms), (b) the date on which the Executive becomes eligible for payment of long term disability benefits under a long term disability plan generally applicable to executives of Key or a Subsidiary, (c) the date on which Key has paid and provided 24 months of compensation and benefits to the Executive during the Executive’s disability, or (d) the date of the Executive’s death.

3.4 Gross-Up of Payments Deemed to be Excess Parachute Payments.

(a) Key and the Executive acknowledge that, following a Change of Control, one or more payments or distributions to be made by Key to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a “Payment”) may be determined to be an “excess parachute payment” that is not deductible by Key for federal income tax purposes and with respect to which the Executive will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Internal Revenue Code (hereinafter referred to respectively as “Section 280G” and “Section 4999”). If the Executive’s employment is terminated after a Change of Control occurs, the Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue Service, shall make all determinations required to be made under this Section 3.4, shall determine whether any Payment would be an excess parachute payment and shall communicate its determination, together with detailed supporting calculations, to Key and to the Executive within 30 days after the Termination Date or such earlier time as is requested by Key. Key and the Executive shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. Key shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Section 3.4.

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(b) If the Accounting Firm determines that any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax), Key shall make additional cash payments to the Executive, from time to time and at the same time as any Payment constituting an excess parachute payment is paid or provided to the Executive, in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.

(c) If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax) in excess of the amount, if any, previously determined by the Accounting Firm, Key shall make further additional cash payments to the Executive not later than the due date of any payment indicated by the Internal Revenue Service with respect to these matters, in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.

(d) If Key desires to contest any determination by the Internal Revenue Service with respect to the amount of excise tax under Section 4999, the Executive shall, upon receipt from Key of an unconditional written undertaking to indemnify and hold the Executive harmless (on an after tax basis) from any and all adverse consequences that might arise from the contesting of that determination, cooperate with Key in that contest at Key’s sole expense. Nothing in this clause (d) shall require the Executive to incur any expense other than expenses with respect to which Key has paid to the Executive sufficient sums so that after the payment of the expense by the Executive and taking into account the payment by Key with respect to that expense and any and all taxes that may be imposed upon the Executive as a result of the Executive’s receipt of that payment, the net effect is no cost to the Executive. Nothing in this clause (d) shall require the Executive to extend the statute of limitations with respect to any item or issue in the Executive’s tax returns other than, exclusively, the excise tax under Section 4999. If, as the result of the contest of any assertion by the Internal Revenue Service with respect to excise tax under Section 4999, the Executive receives a refund of a Section 4999 excise tax previously paid and/or any interest with respect thereto, the Executive shall promptly pay to Key such amount as will leave the Executive, net of the repayment and all tax effects, in the same position, after all taxes and interest, that the Executive would have been in if the refunded excise tax had never been paid.

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4. No Set-Off; No Obligation to Seek Other Employment or to Otherwise Mitigate Damages; No Effect Upon Other Plans. Key’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim whatsoever that Key or any of its Subsidiaries may have against the Executive. The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. Except as provided in Section 1.3, the amount of any payment provided for under this Agreement shall not be reduced by any compensation or benefits earned by the Executive as the result of employment by another employer or otherwise after the termination of the Executive’s employment. Neither the provisions of this Agreement, nor the execution of the waiver and release referred to in Section 5.3 below, nor the making of any payment provided for hereunder shall reduce any amounts otherwise payable, or in any way diminish the Executive’s rights, under any incentive compensation plan, stock option or stock appreciation rights plan, deferred compensation plan, restricted stock plan or agreement, retirement or supplemental retirement plan, stock purchase and savings plan, disability or insurance plan, or other similar contract, plan, or arrangement of Key or any Subsidiary, all of which will continue to be governed by their respective terms.

5. Certain Limitations on Benefits.

5.1 Election of Benefits Required; Payments in Lieu of Other Claims or Rights. If (a) the Executive is a party to either or both of an employment agreement (which includes any letter agreement regarding Executive’s employment with Key or any Subsidiary) or severance agreement with Key or any Subsidiary (singularly or collectively, the “Prior Agreement”), and (b) the Executive’s employment is terminated under circumstances giving rise to a right on the part of the Executive to receive continuing compensation, separation pay, or other severance benefits under the Prior Agreement and under this Agreement, the Executive shall have the right to elect to have either the Prior Agreement (if and only to the extent the Prior Agreement is applicable) or this Agreement (if and only to the extent this Agreement is applicable) , but not both, apply to the termination. If this Section 5.1 applies: (x) Key shall not make any payments arising out of the termination of the Executive’s employment, either under the Prior Agreement or under this Agreement, until after the Executive has delivered to Key a signed notice of election to receive payments under the Prior Agreement or under this Agreement, and (y) if the Executive elects to receive payments under the Prior Agreement, the provisions of Sections 3.1, 3.2, and 3.4 of this Agreement shall nevertheless continue to be applicable, but without duplication of payments. If the Executive receives any payments under Section 1.1(a) or Section 1.2(a), as the case may be, of this Agreement as a result of the termination of the Executive’s employment following a Change of Control, those payments shall be in lieu of any and all other claims or rights that the Executive may have for severance, separation, and/or salary continuation pay upon that termination of the Executive’s employment.

5.2 Taxes; Withholding of Taxes. Without limiting either the right of Key or its Subsidiary to withhold taxes pursuant to this Section 5.2 or the obligation of Key to make gross-up payments pursuant to Section 3.4, the Executive shall be responsible for all income,

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excise, and other taxes (federal, state, city, or other) imposed on or incurred by the Executive as a result of receiving the payments provided in this Agreement, including, without limitation, the payments provided under Section 1 of this Agreement. Key or its Subsidiary may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as Key shall determine to be required pursuant to any law or government regulation or ruling. Without limiting the generality of the foregoing, Key or its Subsidiary may withhold from any amount payable under either of Sections 1.1 or 1.2 of this Agreement amounts sufficient to satisfy any tax withholding requirements that may arise out of any payment made to the Executive by Key or any Subsidiary under Section 1.3 of this Agreement.

5.3 Waiver and Release. Key may condition the payment of any amounts otherwise due under Section 1 of this Agreement upon (a) the execution by the Executive of a waiver and release in the form attached to this Agreement as Exhibit A, with blanks appropriately filled and, in the case of clause (e) contained therein, completed with the number of days that Key determines is required under applicable law, but in no event more than 45 days, and (b) the observation of such waiting periods, if any, before and after execution of the waiver and release by the Executive as are required by law, such as, for example, the waiting periods required for a waiver and release to be effective with respect to claims under the Age Discrimination in Employment Act, provided that Key delivers to the Executive such a waiver and release, appropriately completed, within seven days of the date on which the Executive’s employment is terminated.

6. Term of this Agreement. This Agreement shall be effective upon the date first above written and shall thereafter apply to any Change of Control occurring on or before December 31, 2007. Unless this Agreement is terminated earlier pursuant to Section 6.1, on December 31, 2007 and on December 31 of each succeeding year thereafter (a “Renewal Date”), the term of this Agreement shall be automatically extended for an additional year unless either party has given notice to the other, at least one year in advance of that Renewal Date, that the Agreement shall not apply to any Change of Control occurring after that Renewal Date.

6.1 Termination of Agreement Upon Termination of Employment Before a Change of Control. This Agreement shall automatically terminate and cease to be of any further effect on the first date occurring before a Change of Control on which the Executive is no longer employed by Key or any Subsidiary, except that, for purposes of this Agreement, any termination of employment of the Executive that is effected before and in contemplation of a Change of Control that occurs after the date of the termination shall be deemed to be a termination of the Executive’s employment as of immediately after that Change of Control and this Agreement shall be deemed to be in effect immediately after that Change of Control.

6.2 No Termination of Agreement after a Change of Control. If a Change of Control occurs while this Agreement remains in effect, this Agreement shall remain effective indefinitely thereafter with respect to any and all consequences flowing from that Change of Control under the terms of this Agreement. However, after a Change of Control, Key may terminate this Agreement with respect to any further Change of Control that might occur after a future Renewal Date by giving notice, at least one year in advance of that future

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Renewal Date, as contemplated above in this Section 6, that the Agreement shall not apply to any Change of Control occurring after that future Renewal Date.

7. Miscellaneous.

7.1 Successor to Key. Key shall not consolidate with or merge into any other corporation, or transfer all or substantially all of its assets to another corporation or bank, unless such other corporation or bank shall assume this Agreement in a signed writing and deliver a copy thereof to the Executive. Upon such assumption the successor corporation or bank shall become obligated to perform the obligations of Key under this Agreement and the term “Key” as used in this Agreement shall be deemed to refer to such successor corporation or bank.

7.2 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, and addressed, in the case of notices to Key or a Subsidiary, as follows:

KeyCorp
127 Public Square
Cleveland, Ohio 44114
Attention: Secretary

and, in the case of notices to the Executive, properly addressed to the Executive at the Executive’s most recent home address as shown on the records of Key or its Subsidiary, or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7.3 Employment Rights. Nothing expressed or implied in this Agreement shall create any right or duty on the part of Key or the Executive to have the Executive continue as an officer of Key or a Subsidiary or to remain in the employment of Key or a Subsidiary.

7.4 Administration. Key shall be responsible for the general administration of this Agreement and for making payments under this Agreement. All fees and expenses billed by the Accounting Firm for services contemplated under this Agreement shall be the responsibility of Key.

7.5 Source of Payments. Any payment specified in this Agreement to be made by Key may be made, at the election of Key, directly by Key or through any Subsidiary of Key. All payments under this Agreement shall be made solely from the general assets of Key or one of its Subsidiaries (or from a grantor trust, if any, established by Key for purposes of making payments under this Agreement and other similar agreements), and the Executive shall have the rights of an unsecured general creditor of Key with respect thereto.

7.6 Claims Review Procedure. Whenever Key decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Agreement by the Executive, Key shall transmit a written notice of its decision to the Executive, which notice shall be written

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in a manner calculated to be understood by the Executive and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Executive that, within 60 days of the date on which the Executive receives such notice, the Executive may obtain review of the decision of Key in accordance with the procedures hereinafter set forth. Within such 60-day period, the Executive or the Executive’s authorized representative may request that the claim denial be reviewed by filing with Key a written request therefor, which request shall contain the following information:

(a) the date on which the request was filed with Key,

(b) the specific portions of the denial of the Executive’s claim that the Executive requests Key to review, and

(c) any written material that the Executive desires Key to examine.

Within 30 days of the date specified in clause (a) of this Section 7.6, Key shall conduct a full and fair review of its decision to deny the Executive’s claim for benefits and deliver to the Executive its written decision on review, written in a manner calculated to be understood by the Executive, specifying the reasons and the Agreement provisions upon which its decision is based. Nothing in this Section 7.6 shall be construed as limiting or restricting the Executive’s right to institute legal proceedings in a court of competent jurisdiction to enforce this Agreement after complying with the procedures set forth in this Section 7.6 or as limiting or restricting the scope of the court’s review (which review shall be de novo); provided, further, that the failure of the Executive to comply with the procedures set forth in this Section 7.6 shall not bar or prohibit the subsequent compliance by the Executive with those procedures and thereafter the Executive shall have the right to institute legal proceedings to enforce this Agreement.

7.7 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

7.8 Modification, Waiver, Etc. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the Executive and Key. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof has been made by either party that is not set forth expressly in this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, successors, heirs, and designees. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio.

7.9 Savings Clause. If any payments otherwise payable to the Executive under this Agreement are prohibited or limited by any statute or regulation in effect at the time the payments would otherwise be payable, including, without limitation, any regulation issued by

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the Federal Deposit Insurance Corporation (the “FDIC”) that limits executive change of control payments that can be made by an FDIC insured institution or its holding company if the institution is financially troubled (any such limiting statute or regulation a “Limiting Rule”):

(a) Key will use its best efforts to obtain the consent of the appropriate governmental agency (whether the FDIC or any other agency) to the payment by Key to the Executive of the maximum amount that is permitted (up to the amounts that would be due to the Executive absent the Limiting Rule); and

(b) the Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable Key severance, separation pay, and/or salary continuation plan that may be in effect at the time of the Executive’s termination.

Following any such election, the Executive will be entitled to receive benefits under the agreement or plan elected only if and to the extent the agreement or plan is applicable and subject to its specific terms.

8. Definitions.

8.1 Accounting Firm. The term “Accounting Firm” means the independent auditors of Key for the fiscal year preceding the year in which the Change of Control occurred and such firm’s successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, Key shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for Key or any of its affiliates (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”)).

8.2 Average Annual Incentive Compensation. The term “Average Annual Incentive Compensation” means the sum of Average Short Term Incentive Compensation, as defined in Section 8.4 below, and Average Long Term Incentive Compensation, as defined in Section 8.3 below. For purposes of this Agreement:

(a) except as provided in (c) below, incentive compensation means any cash based incentive compensation, including bonuses and is calculated before any reduction on account of deferrals;

(b) notwithstanding the fact that they are made in restricted stock and/or performance shares rather than in cash, any LTIC Stock Grant shall be deemed to be long term incentive compensation;

(c) special hiring bonuses paid or awarded to a newly hired executive in connection with that hiring or extraordinary bonuses to an incumbent executive, outside and beyond Key’s regular incentive compensation program, such as special retention

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awards to induce an executive to stay with Key, shall not be treated as incentive compensation;

(d) short term incentive compensation means incentive compensation for periods of time of one year or less;

(e) targeted short term incentive compensation means:

(i) if the short term incentive compensation plan, program, or arrangement in question designates a targeted amount or a targeted level of achievement for the Executive or the Executive’s job grade, it means that targeted amount or level;

(ii) if the short term incentive compensation plan, program, or arrangement in question has only one level of payout for the Executive or the Executive’s job grade (other than zero), it means that level (i.e., the level other than zero);

(iii) if the short term incentive compensation plan, program, or arrangement in question does not designate a targeted amount or level of achievement for the Executive or the Executive’s job grade but does have multiple anticipated levels of possible payout or achievement for the Executive or the Executive’s job grade, it means (in each case excluding from consideration any level that results in zero payout) the middle level of payout or achievement for the Executive or the Executive’s job grade (or if there are an even number of levels, the average of the two levels if there are only two levels or the average of the middle two levels if there are four or more levels); and

(iv) in all other cases, the amount anticipated or projected to be paid under the plan, program, or arrangement in question at the time the performance period in question commenced.

For purposes of calculating Average Annual Incentive Compensation under this Section 8.2, in determining the amount of incentive compensation (short or long term) payable to or targeted for the Executive for any past or current incentive compensation period or cycle, if the incentive compensation was for a partial period or cycle (such as where an executive becomes a participant in an incentive plan after the incentive compensation period or cycle has commenced so that the award payable to or targeted for the executive is prorated), such incentive compensation payable to or targeted for the Executive shall be determined as if the Executive had participated throughout the complete incentive compensation period or cycle in question. For example, if, with respect to a 12-month plan that would have paid the Executive short term incentive compensation of $12X if the Executive had been a participant for the full plan year, the Executive became a participant when only seven months were left in the plan year and the Executive was therefore paid incentive compensation of only $7X, the Executive would be treated for purposes of this Section 8.2 as if the Executive had been a participant for the full plan year and had been paid incentive compensation of $12X under the plan.

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8.3 Average Long Term Incentive Compensation. The term “Average Long Term Incentive Compensation” means the higher of:

(i) the average of the dollar value of the LTIC Stock Grants made to the Executive in each of the two years immediately preceding the Change Year (e.g., the average of the 2006 LTIC Stock Grant and the 2007 LTIC Stock Grant if the Change Year is 2008), or, if for any reason an LTIC Stock Grant was made to Executive in only one of those two immediately preceding years, the dollar value of the LTIC Stock Grant for that single year, and

(ii) the dollar value of the LTIC Stock Grant for the Change Year;

except that, if the Executive first became employed by Key or a Subsidiary during the Change Year or during the year immediately preceding the Change Year and pursuant to an offer letter or agreement the terms of which were approved by the Committee, “Average Long Term Incentive Compensation” shall be not less than the dollar value of the LTIC Stock Grant target specified in that offer letter or agreement.

For purposes of this Section 8.3 the dollar value of any LTIC Stock Grant means the aggregate Fair Market Value of the Common Shares subject to that grant (whether those Common Shares are restricted Common Shares or Performance Shares) as of the date the grant is made, taking into account all and only all of the target level of those Common Shares that are subject to the particular LTIC Stock Grant, without regard to changes in Key’s stock price after the date of grant or to any restrictions on or contingencies concerning those Common Shares.

8.4 Average Short Term Incentive Compensation. The term “Average Short Term Incentive Compensation” means the higher of:

(a) the average of the short term incentive compensation payable to the Executive for each of the last two years immediately preceding the Change Year or, if, for any reason, short term incentive compensation was payable to the Executive for only one of those two years, the amount of short term incentive compensation payable to the Executive for that year, and

(b) the Executive’s targeted short term incentive compensation for the Change Year or for the year immediately preceding the Change Year, whichever is higher,

except that if the Executive first became a participant in Key’s short term incentive compensation program during the Change Year, Average Short Term Incentive Compensation means the Executive’s targeted short term incentive compensation for the Change Year.

8.5 Base Salary. The term “Base Salary” means the salary payable to the Executive from time to time before any reduction for voluntary contributions to the KeyCorp 401(k) Plan or any other deferral. Base Salary does not include imputed income from payment by Key of country club membership fees or other noncash benefits.

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8.6 Cause. The employment of the Executive by Key or any of its Subsidiaries shall have been terminated for “Cause” if, after a Change of Control and prior to the termination of employment, any of the following has occurred:

(a) the Executive shall have been convicted of a felony,

(b) the Executive commits an act or series of acts of dishonesty in the course of the Executive’s employment which are materially inimical to the best interests of Key or a Subsidiary and which constitutes the commission of a felony, all as determined by the vote of three fourths of all of the members of the Board of Directors of Key (other than the Executive, if the Executive is a Director of Key) which determination is confirmed by a panel of three arbitrators appointed and acting in accordance with the rules of the American Arbitration Association for the purpose of reviewing that determination,

(c) Key or any Subsidiary has been ordered or directed by any federal or state regulatory agency with jurisdiction to terminate or suspend the Executive’s employment and such order or directive has not been vacated or reversed upon appeal, or

(d) after being notified in writing by the Board of Directors of Key to cease any particular Competitive Activity, the Executive shall intentionally continue to engage in such Competitive Activity while the Executive remains in the employ of Key or a Subsidiary.

If (x) Key or any Subsidiary terminates the employment of the Executive during the two year period beginning on the date of a Change of Control and at a time when it has “Cause” therefor under clause (c), above, (y) the order or directive is subsequently vacated or reversed on appeal and the vacation or reversal becomes final and no longer subject to further appeal, and (z) Key or the Subsidiary fails to offer to reinstate the Executive to employment within ten days of the date on which the vacation or reversal becomes final and no longer subject to further appeal, Key or the Subsidiary will be deemed to have terminated the Executive without Cause during the two year period beginning on the date of the Change of Control.

8.7 Change of Control. A “Change of Control” shall be deemed to have occurred if, at any time while this Agreement is in effect pursuant to Section 6 hereof, there is a Change of Control under any of clauses (a), (b), (c), or (d) below. For these purposes, Key will be deemed to have become a subsidiary of another corporation if any other corporation (which term shall, for all purposes of this Section 8.7, include, in addition to a corporation, a limited liability company, partnership, trust, or other organization) owns, directly or indirectly, 50 percent or more of the total combined outstanding voting power of all classes of stock of Key or any successor to Key.

(a) A Change of Control will have occurred under this clause (a) if Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and either

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(i) immediately after giving effect to that transaction, less than 65% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to the transaction, or

(ii) immediately after giving effect to that transaction, individuals who were directors of Key on the day before the first public announcement of (x) the pendency of the transaction or (y) the intention of any person or entity to cause the transaction to occur, cease for any reason to constitute at least 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key.

(b) A Change of Control will have occurred under this clause (b) if a tender or exchange offer shall be made and consummated for 35% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 35% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as adopted under the 1934 Act, disclosing the acquisition of 35% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this clause (b));

(c) A Change of Control will have occurred under this clause (c) if either

(i) without the prior approval, solicitation, invitation, or recommendation of the Key Board of Directors any person or entity makes a public announcement of a bona fide intention (A) to engage in a transaction with Key that, if consummated, would result in a Change Event (as defined below in this clause (c)), or (B) to “solicit” (as defined in Rule 14a-1 under the 1934 Act) proxies in connection with a proposal that is not approved or recommended by the Key Board of Directors, or

(ii) any person or entity publicly announces a bona fide intention to engage in an election contest relating to the election of directors of Key (pursuant to Regulation 14A, including Rule 14a-11, under the 1934 Act),

and, at any time within the 24 month period immediately following the date of the announcement of that intention, individuals who, on the day before that announcement, constituted the directors of Key (the “Incumbent Directors”) cease for any reason to constitute at least a majority thereof unless both (A) the election, or the nomination for election by Key’s shareholders, of each new director was approved by a vote of at least two-thirds of the Incumbent Directors in office at the time of the election or nomination for election of such new director, and (B) prior to the time that the Incumbent Directors no longer constitute a majority of the Board of Directors, the Incumbent Directors then in office, by a vote of at least 75% of their number, reasonably determine in good faith that the change

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in Board membership that has occurred before the date of that determination and that is anticipated to thereafter occur within the balance of the 24 month period to cause the Incumbent Directors to no longer be a majority of the Board of Directors was not caused by or attributable to, in whole or in any significant part, directly or indirectly, proximately or remotely, any event under subclause (i) or (ii) of this clause (c).

For purposes of this clause (c), the term “Change Event” shall mean any of the events described in the following subclauses (x), (y), or (z) of this clause (c):

(x) A tender or exchange offer shall be made for 25% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 25% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as adopted under the 1934 Act, disclosing the acquisition of 25% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this subclause (x)).

(y) Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and, after giving effect to such transaction, less than 50% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to such transaction or less than 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key were directors of Key immediately prior to such transaction.

(z) There is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Key.

(d) A Change of Control will have occurred under this clause (d) if there is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Key.

8.8 Change Year. The term “Change Year” means the year in which a Change of Control occurred or, if more than one Change of Control has occurred, the year in which the earliest Change of Control occurred.

8.9 Common Shares. The term “Common Shares” means common shares of Key.

8.10 Committee. The term “Committee” means the Compensation and Organization Committee of the Board of Directors of Key or any successor to that committee.

8.11 Competitive Activity. The Executive shall be deemed to have engaged in “Competitive Activity” if the Executive:

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(a) engages in any business or business activity in which Key or any of its Subsidiaries engages, including, without limitation, engaging in any business activity in the banking or financial services industry (other than as a director, officer, or employee of Key or any of its Subsidiaries), or

(b) serves as a director, officer, or employee of any bank, bank holding company, savings and loan association, building and loan association, savings and loan holding company, insurance company, investment banking or securities company, mutual fund company, or other financial services company other than Key or any of its Subsidiaries (each of the foregoing being hereinafter referred to as a “Financial Services Company”), or renders services of a consultative or advisory nature or otherwise to any such Financial Services Company; provided, however, this clause (b) shall not prohibit or restrict the Executive from serving in any such capacity with the consent of Key.

8.12 Disability. For purposes of this Agreement, the Executive’s employment will have been terminated by Key or its Subsidiary by reason of “Disability” of the Executive only if (a) as a result of bodily injury or sickness, the Executive has been unable to perform the Executive’s normal duties for Key or its Subsidiary for a period of 180 consecutive days, and (b) the Executive begins to receive payments under the KeyCorp Long Term Disability Benefit Plan not later than 30 days after the Termination Date.

8.13 Discontinued Plan. The term “Discontinued Plan” includes any Retirement Plan, the Savings Plan and/or the KeyCorp Deferred Savings Plan that:

(a) the Executive was covered by and participating in immediately before the occurrence of a Change of Control, and

(b) was, between the date of the Change of Control and the Termination Date, either terminated or altered in such a way as to substantially reduce the benefits provided to the Executive thereunder without having been substituted for by a similar plan providing substantially similar benefits to the Executive.

8.14 Fair Market Value. The term “Fair Market Value” with respect to Common Shares means:

(a) if the Common Shares are traded on a national exchange, the mean between the high and low sales price per Common Share on the national exchange on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares, or

(b) if the Common Shares are not traded on a national exchange, the mean between the high and low sales price per Common Share in the over-the-counter market, National Market System, as report by the National Quotations Bureau, Inc. and NASDAQ on the date for which the determination of fair market value is made or, if

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there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares.

8.15 Good Reason. The Executive shall be deemed to have “Good Reason” to terminate the Executive’s employment under this Agreement during a Window Period if, at any time after the occurrence of a Change of Control and before the end of the Window Period, either or both of the events listed in clauses (a) and (b) of this Section 8.15 occurs without the written consent of the Executive:

(a) following notice by the Executive to Key and an opportunity by Key to cure, the Executive determines in good faith that the Executive’s position, responsibilities, duties, or status with Key are at any time materially less than or reduced from those in effect before the Change of Control or that the Executive’s reporting relationships with superior executive officers have been materially changed from those in effect before the Change of Control; or

(b) Key’s headquarters is relocated outside of the greater Cleveland metropolitan area (but this clause (b) shall apply only if Key’s headquarters was the Executive’s principal place of employment before the Change of Control).

For purposes of clause (a), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the circumstance otherwise constituting Good Reason persists (as determined in good faith by the Executive, whose determination shall be conclusive) for more than seven calendar days after the Executive has given notice to Key of the existence of that circumstance.

8.16 Impermissible. The term “Impermissible,” when used in the context of the Executive’s continued coverage by and participation in any of the Retirement Plans or Savings Plans shall mean that such a continuation would violate the provisions of any such plan, would cause any such plan that is or is intended to be qualified under Section 401(a) of the Internal Revenue Code to fail to be so qualified, would require shareholder approval, or would be unlawful.

8.17 LTIC Stock Grant. The term “LTIC Stock Grant” means the grant, if any, of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made by the Committee to the Executive during any particular year as part of Key’s ongoing compensation program. For greater clarity, for purposes of this Agreement:

(a) “The terms “2006 LTIC Stock Grant”, “2007 LTIC Stock Grant,” “2008 LTIC Stock Grant,” etc. refer to LTIC Stock Grants, if any, made to the Executive by resolution adopted by the Committee in the specified year.

(b) An extraordinary grant or award of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made to a newly hired executive in connection with that hiring (i.e., any signing or hiring bonus) and a grant or award made to an incumbent executive outside of Key’s regular restricted stock

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and Performance Share program (e.g., a special retention grant or award) shall be treated as not being an LTIC Stock Grant and shall not be taken into account when calculating Average Long Term Incentive Compensation.

8.18 Mandatory Relocation. A “Mandatory Relocation” shall have occurred if, at any time after a Change of Control, the Executive is required to relocate the Executive’s principal place of employment for Key or its Subsidiary without the Executive’s written consent more than 35 miles from where the Executive was located prior to the Change of Control.

8.19 Performance Shares. The term “Performance Shares” means an award denominated in Common Shares or phantom Common Shares (regardless of whether payable in stock or cash) the vesting of which is contingent or accelerated upon attainment of one or more performance goals (absent death, disability, or a Change of Control) .

8.20 Reduction of Compensation. A “Reduction of Compensation” shall have occurred if any one or more of the following occurs:

(a) the Base Salary of the Executive is reduced at any time after a Change of Control;

(b) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Short Term Incentive Compensation Guaranty;

(c) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Long Term Incentive Compensation Guaranty; or

(d) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Option/SAR Guaranty.

For purposes of clauses (b), (c) and (d), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the failure to satisfy the Short Term Incentive Compensation Guaranty, the Long Term Incentive Compensation Guaranty, and/or the Option/SAR Guaranty, as the case may be, persists (as determined in good faith by the Executive) for more than seven calendar days after the Executive has given notice to Key of the existence of that failure.

8.21 Relevant Plans. The term “Relevant Plans” means:

(a) all Retirement Plans and Savings Plans that the Executive was covered by and participating in immediately before the Termination Date, and

(b) all Discontinued Plans (other than the KeyCorp Deferred Savings Plan).

Reference to a “Relevant Plan,” in the singular, means any of the Relevant Plans.

8.22 Retirement Plans. The term “Retirement Plans” means the KeyCorp Cash Balance Pension Plan and the Supplemental Retirement Plan, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds,

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replaces, or is substituted for any such plan, and all retirement plans of any nature maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Retirement Plan,” in the singular, means any of the Retirement Plans.

8.23 Savings Plans. The term “Savings Plans” means and includes the KeyCorp 401(k) Savings Plan, as from time to time amended, restated, or otherwise modified, including any plan that, after the Effective Date, succeeds, replaces, or is substituted for such plan, and other than the KeyCorp Deferred Savings Plan, all salary reduction, savings, profit-sharing, or stock bonus plans (including, without limitation, all plans involving employer matching contributions, whether or not constituting a qualified cash or deferred arrangement under Section 401(k) of the Internal Revenue Code), maintained by Key or any of its Subsidiaries in which Executive was participating prior to the Termination Date. Reference to a “Savings Plan,” in the singular, shall mean any of the Savings Plans.

8.24 Supplemental Retirement Plan. The term “Supplemental Retirement Plan” means the KeyCorp Supplemental Retirement Plan, the KeyCorp Excess Cash Balance Pension Plan, or the KeyCorp Executive Supplemental Pension Plan in which the Executive participates, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for any of such plans.

8.25 Subsidiary. A “Subsidiary” means any corporation, bank, partnership, or other entity a majority of the voting control of which is directly or indirectly owned or controlled at the time in question by Key.

8.26 Termination Date. The term “Termination Date” means the date on which the Executive’s employment with Key and its Subsidiaries terminates.

8.27 Window Period. The term “Window Period,” with respect to any particular Change of Control, means the three-month period beginning on the date that falls on the same day of the month as the date of the Change of Control in the fifteenth month after the month in which the Change of Control occurs. If at any time there has been more than one Change of Control, there shall be a separate Window Period with respect to each such Change of Control.

8.28 Agreement Supersedes Similar Agreement Previously Entered Into. This Agreement supersedes a similar agreement originally entered into between Key and the Executive as of [ORIGINAL DATE OF PREVIOUS AGREEMENT] and that agreement (as amended, if it has been heretofore amended) is no longer of any force or effect.

8.29 Compliance with American Jobs Creation Act. In the event that any provision of this Agreement is determined to constitute deferred compensation, as defined in accordance with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, the applicable provision will be administered in accordance with the requirements

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of Section 409A of the Code, including the delay of any payment otherwise payable under this Agreement for a period of 6 months following the Termination Date.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

KEYCORP
By
	Henry L. Meyer III
	Chairman and Chief Executive Officer
THE “EXECUTIVE”
XXXXXX

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Exhibit A

WAIVER AND RELEASE

DO NOT SIGN WITHOUT READING AND UNDERSTANDING

     In consideration of the payments to be made to me following termination of my employment with KeyCorp pursuant to the agreement between KeyCorp and me dated as of XXXXX XX, 200X (the “Change of Control Agreement”), which payments I acknowledge I am not entitled to receive without execution of this Waiver and Release, and which payments will not commence earlier than eight days after the execution of this Waiver and Release, I, for myself, my heirs, administrators, executors, and assigns, release and discharge KeyCorp, its affiliates, subsidiaries, divisions, successors, and assigns and the employees, officers, directors, and agents thereof (collectively referred to throughout this Waiver and Release as “Key”) from any and all causes of action, charges of discrimination, proceedings, or claims of every kind, nature, and character, arising out of or relating to my employment with Key and the termination of my employment with Key based upon or related to any contention (i) that my employment terminated because of any tortuous, wrongful, unlawful, or improper conduct or act or in violation or breach of any express or implied contract or agreement, or (ii) that Key engaged in any discriminatory act, event, pattern, or practice involving age, religion, creed, sex, national origin, ancestry, handicap, disability, veteran status, marital status, race, or color, or the continuing or future effects thereof (including, without limitation, the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., or any similar state law).

     I warrant that no promise or inducement has been offered to me other than as set forth in the Change of Control Agreement, that I am relying on no other statement or representation by Key, and that I have not assigned any of my rights. I have read this Waiver and Release; I have had a full opportunity to consider it (including the opportunity to consult with an attorney of my choice); and I understand that by signing it I am giving up important rights, including any right to sue under federal, state, or local law. I also verify that my entering into this Waiver and Release is wholly voluntary.

I further warrant that:

(a) I understand that I am specifically waiving rights or claims under the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq.;

(b) I understand that I am not hereby waiving any rights or claims that may arise after this Waiver and Release is executed by me;

(c) I understand that this Waiver and Release is being given by me in exchange for consideration that is more valuable to me than what I am entitled to without the Change of Control Agreement and the execution of this Waiver and Release;

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(d) I have been advised in writing by Key that I should have, at my expense, an attorney of my choice review this Waiver and Release;

(e) I have been advised by Key that I may take up to ___days from receipt of this Waiver and Release to determine whether to execute the same; and

(f) I have been advised by Key that this Waiver and Release may be revoked by me within seven (7) days following execution of this Waiver and Release whereupon this Waiver and Release shall be null and void.

     IN WITNESS WHEREOF, I have hereby set my hand this                      day of                     , ___.

Witness:

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Exhibit A
(cont’d)

Acknowledgment of Receipt of Waiver and Release

     I do hereby acknowledge that on                                         , ___, I received a copy of the Waiver and Release which is attached hereto, and I understand that I have ___* days from the date of receipt of the Waiver and Release to determine whether to execute it.

Witness:

*to be completed the same as clause (e) of the Waiver and Release.

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Exhibit A
(cont’d)

Director of Human Resources
KeyCorp
127 Public Square
Cleveland, Ohio 44114

Re:       Waiver and Release

Dear Sir or Madam:

          On                      ___, ___, I executed a Waiver and Release in favor of KeyCorp. More than seven (7) days have elapsed since I executed the Waiver and Release. I have at no time revoked my acceptance or execution of the Waiver and Release and, accordingly, I hereby request that KeyCorp commence making the payments due to me under my Change of Control Agreement.

	Very truly yours,
Witness:

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EX-10.52

EXHIBIT 10.52

AGREEMENT

          THIS AGREEMENT (“Agreement”) is made as of the XX day of XXXXX, 200X, between KEYCORP, an Ohio corporation (“Key”), and XXXXXX (the “Executive”).

          Key is entering into this Agreement in recognition of the importance of the Executive’s services to the continuity of management of Key and based upon its determination that it will be in the best interests of Key and its Subsidiaries to encourage the Executive’s continued attention and dedication to the Executive’s duties in the potentially disruptive circumstances of a possible Change of Control of Key. (As used in this Agreement, the terms “Subsidiaries” and “Change of Control” and certain other capitalized terms have the meanings ascribed to them in Section 8, at the end of this Agreement.)

          Key and the Executive agree, effective as of the date first set forth above, as follows:

1. Basic Severance Benefits. The benefits described in Sections 1.1, 1.2, and 1.3 below are subject to the limitations set forth in Sections 5.1 (which requires an election among applicable agreements providing severance benefits if more than one such agreement would apply in the particular circumstances of the termination of the Executive’s employment and stipulates that any payments received under this Agreement are in lieu of other claims or rights), 5.2 (regarding withholding), and 5.3 (requiring the execution of a waiver and release by the Executive).

1.1 If Employment is Terminated Without Cause, etc., Within Two Years of a Change of Control. If, within two years following the occurrence of a Change of Control, the Executive’s employment with Key and its Subsidiaries is terminated by Key or its Subsidiary for any reason other than Cause, Disability, or death or by the Executive after a Reduction of Compensation or a Mandatory Relocation has occurred:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to two times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation plus (iii) 50% of Average Long Term Incentive Compensation; and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.1(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending on the second anniversary of the Termination Date (the “Section 1.1 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.1 Benefit Period, except that, if Key determines that such coverage or participation in

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any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.1 Benefit Period. For purposes of this Section 1.1(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

1.2 If Employment is Terminated by Executive for Good Reason During a Window Period. Except as provided in the last sentence of this Section 1.2, if the Executive’s employment with Key and its Subsidiaries is terminated by the Executive for Good Reason during a Window Period:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to one and one half times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation plus (iii) 50% of Average Long Term Incentive Compensation, and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.2(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending eighteen months, to the day, after the Termination Date (the “Section 1.2 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.2 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

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(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.2 Benefit Period. For purposes of this Section 1.2(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

This Section 1.2 shall not apply if, at the Termination Date, (x) there has been either any Reduction of Compensation or any Mandatory Relocation (in which event Section 1.1 would apply to the termination) or (y) Key or any Subsidiary has Cause to terminate the Executive’s employment (in which case no lump sum severance or retirement benefits would be payable or provided under either of Sections 1.1 or 1.2).

1.3 Continued Medical Coverage

(a) Payment of Cost of COBRA Health Benefits. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive elects to continue to receive health benefits pursuant to an election that Key or any Subsidiary is required to provide to the Executive in order to comply with Section 4980B(f) of the Internal Revenue Code (commonly referred to as “COBRA continuation coverage”) during the period specified in Section 4980B(f) (the “COBRA continuation period”), Key will pay the cost of continuing those benefits from the Termination Date through the first to occur of (a) the end of the COBRA continuation period or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity.

(b) Payment of Retiree Medical Coverage. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive is age 50 with 15 years Vesting Service (as that term is defined under the KeyCorp Cash Balance Pension Plan) as of his or her Termination Date, the Executive may elect, in lieu of electing COBRA continuation coverage under the provisions of Section 1.3(a) hereof, to participate in the KeyCorp Retiree Medical Plan. Key will pay the premium cost for the Executive’s Retiree Medical Plan coverage from the Executive’s Termination Date through (a) the last day of the eighteen-month period following the Executive’s Termination Date, or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity, whichever shall first occur. If the Executive is not age 55 at the time that Key’s premium payment ends, the Executive shall be required to pay the full premium cost for his or her continued Retiree Medical Plan

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coverage until the Executive reaches age 55, at which time the KeyCorp Retiree Medical Plan premium cost-sharing structure will apply.

1.4 Provisions Applicable to Continued Retirement and Savings Plan Participation.

(a) If the Executive becomes entitled to payment of a lump sum severance benefit under either of Section 1.1 or Section 1.2, the rules set forth in the remainder of this Section 1.4(a) shall be applicable for purposes of all Relevant Plans:

(i) the entire Section 1.1 Benefit Period or Section 1.2 Benefit Period (each, a “Benefit Period”), as the case may be, shall be included in determining the Executive’s years of service,

(ii) amounts received by the Executive under clause (a)(i) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be base salary received by the Executive ratably during the applicable Benefit Period, and

(iii) amounts received by the Executive under clause (a)(ii) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be short term incentive compensation received by the Executive ratably during the applicable Benefit Period.

(b) If either Section 1.1(b) or Section 1.2(b) becomes applicable and at any time during the applicable Benefit Period, Key determines in good faith that continuing the Executive’s coverage by and participation in any of the Relevant Plans during the applicable Benefit Period is Impermissible, the Executive shall not be covered by and participate in such affected plan or plans during the applicable Benefit Period, but Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Executive continued to be covered by and to participate in all such affected plans throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the Termination Date, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the affected plan or plans in question.

(c) If either Section 1.1(b) or Section 1.2(b) becomes applicable and any of the Relevant Plans and/or the KeyCorp Deferred Savings Plan are Discontinued Plans, as to each such Discontinued Plan, Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Discontinued Plan continued through the end of the applicable Benefit Period without having become a Discontinued Plan and had the Executive continued to be covered

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by and to participate in that Discontinued Plan throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the date of the Change of Control, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the Discontinued Plan, and as a lump sum payment under the KeyCorp Deferred Savings Plan, provided however, that to the extent the Discontinued Plan has been substituted for by a Relevant Plan, the amount payable by Key under this Section 1.4(c) shall be offset by the amounts actually paid under that substitute plan.

2. Certain Compensation Guaranties During Two Years following a Change of Control. For so long as the Executive remains in the employ of Key or one of its Subsidiaries during the period beginning on the day after any Change of Control and continuing through the second anniversary of that Change of Control (the period of the Executive’s employment during such two year period being the “Guaranteed Compensation Period”), the Executive shall be entitled to the Incentive Compensation Guaranty set forth in Section 2.1 and to the Option/SAR Guaranty set forth in Section 2.2.

2.1 Guaranteed Level of Incentive Compensation. Except as otherwise provided in Section 2.3, Key shall cause the Executive to receive, during the Guaranteed Compensation Period, as incentive compensation, an amount that, on an annualized basis, is at least equal to the Executive’s Average Annual Incentive Compensation. The guaranty set forth in the immediately preceding sentence (the “Incentive Compensation Guaranty”) establishes a minimum amount of incentive compensation that must be paid to the Executive with respect to the Executive’s employment during the Guaranteed Compensation Period. Except as and to the extent otherwise permitted by any of the provisions of Section 2.3:

(a) Key shall make payments to the Executive in cash that satisfy the Incentive Compensation Guaranty quarterly in arrears, within 30 days after the end of each calendar quarter for each quarter or portion thereof during the Guaranteed Compensation Period;

(b) If the Executive’s employment terminates for any reason other than Cause, Key shall pay all unpaid guaranteed incentive compensation with respect to the Guaranteed Compensation Period to the Executive in a lump sum by not later than 30 business days after the Termination Date; and

(c) If the Executive’s employment is terminated by Key for Cause, Key shall not be required to pay to the Executive any amount of incentive compensation on account of the Incentive Compensation Guaranty that was not required to have been paid before the Termination Date.

2.2 Guaranteed Participation in Stock Option and SAR Plans. During the Guaranteed Compensation Period, the Executive shall participate fully (and at a level at least

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substantially equivalent to that of comparable senior executives of Key) in each and every stock option and stock appreciation right plan in which similarly situated executives of Key and its Subsidiaries generally participate. The guaranty of full participation set forth in this Section 2.2 is hereinafter sometimes referred to as the “Option/SAR Guaranty.”

2.3 Exceptions to and Alternative Means of Satisfying the Incentive Compensation Guaranty. For purposes of the exceptions and alternative means of satisfying the Incentive Compensation Guaranty that are set forth in this Section 2.3, the Incentive Compensation Guaranty shall be deemed to be made up of two parts, the “Short Term Part” and the “Long Term Part,” each of which shall bear the same proportion, respectively, to the entire Incentive Compensation Guaranty as Average Short Term Incentive Compensation and Average Long Term Incentive Compensation bear, respectively, to Average Annual Incentive Compensation.

(a) Bona fide Short Term Incentive Compensation Plan Exception. If (i) Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level; (ii) Key, in administering that plan in good faith and without discriminating against the Executive, utilizes a performance factor that is intended to rate for the short term compensation cycle in question either the corporation’s overall performance or the overall performance of the business unit in which the Executive works; (iii) that performance factor is uniformly applied (either in establishing an incentive compensation pool or against each participant’s target) to all participants in the plan or to all participants in the plan that work in the business unit in which the Executive works, as the case may be; and (iv) the application of that factor reduces the short term incentive compensation payable under that plan to a level below the Executive’s target level; then payment of the short term incentive compensation, if any, due to the Executive at the reduced level under that plan shall satisfy Key’s obligation under the Short Term Part for that particular short term compensation cycle.

(b) Annual Payment Exception. If Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level and that plan provides for payment of all amounts earned at regularly scheduled times not less frequently than once a year, Key may satisfy the Short Term Part by paying incentive compensation to the Executive under that plan (at not less than the Executive’s target level or as reduced if permitted by 2.3(a) above) at those regularly scheduled times, except that if Executive’s employment terminates for any reason other than Cause, Key shall make payments under that plan, pro rated to include all periods within the Compensation Guaranty Period as to which the Executive has not yet received incentive compensation under that plan, within 30 business days after the Termination Date.

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(c) Issuance of Restricted Stock Alternative. As an alternative to paying Executive cash to satisfy the Long Term Part, Key may make restricted stock grants of Common Shares to the Executive each year during the Guaranteed Compensation Period that:

(i) are made during the same calendar quarter of the year as the calendar quarter during which Key made LTIC Stock Grants in the year immediately preceding the Change Year (but if Key made such grants during more than one calendar quarter in the year immediately preceding the Change Year, then the new grant shall be made during the same calendar quarter of the year as the calendar quarter during which Key made grants to the highest number of officers in the year immediately preceding the Change Year);

(ii) have a Fair Market Value that on an annual basis is at least equal to the Executive’s Average Long Term Incentive Compensation;

(iii) provide for time lapsed vesting of the restricted stock subject to the grant so that the entire grant will be fully vested not later than the third anniversary of the date of grant if the Executive continues to be employed through that date; and

(iv) have the further provision that, upon any termination of the Executive’s employment other than a termination for Cause (including, without limitation, any termination by reason of death, disability, voluntary or involuntary retirement, or resignation), if, as of the Termination Date, less than a proportionate part of the Common Shares subject to the restricted stock grant granted to the Executive during the Guaranteed Compensation Period has vested, then an additional portion of those Common Shares shall vest immediately on the Termination Date so that, in the aggregate, a proportionate part has vested as of the Termination Date. For these purposes, “a proportionate part” means the full number of Common Shares in the restricted stock grant multiplied by a fraction, the numerator of which is the number of days between (x) January 1 of the calendar year in which the restricted stock grant was made and (y) the last day of the Guaranteed Compensation Period, inclusive, and the denominator of which is 1095 (i.e., 365 times three).

If Key makes restricted stock grants as provided in this 2.3(c), Key will have satisfied the Long Term Part.

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3. Other Benefits.

3.1 Reimbursement of Certain Expenses After a Change of Control.

(a) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of defending any action brought to have this Agreement declared invalid or unenforceable.

(b) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of prosecuting any action to compel Key to comply with the terms of this Agreement upon receipt from Executive of an undertaking to repay Key for such expenses if, and only if, it is ultimately determined by a court of competent jurisdiction that the Executive had no reasonable grounds for bringing that action (which determination need not be made simply because the Executive fails to succeed in the action).

(c) From and after a Change of Control, expenses (including attorney’s fees) incurred by the Executive in defending any action, suit, or proceeding commenced or threatened (whether before or after the Change of Control) against the Executive (i) for any action or failure to act as a director, employee, officer, or agent of Key or any Subsidiary or (ii) if the Executive is or was serving at the request of Key or any Subsidiary, for any action or failure to act as a director, trustee, officer, employee, member, manager, or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any employee benefit plan maintained by Key or any Subsidiary (“Plan”), shall be paid by Key, as they are incurred, in advance of final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the Executive in which the Executive agrees to reasonably cooperate with Key or the Subsidiary, as the case may be, concerning the action, suit, or proceeding, and (i) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a director, to repay the amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that the Executive’s action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to Key or a Subsidiary or undertaken with reckless disregard for the best interests of Key or a Subsidiary, or (ii) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a trustee, officer, employee, member, manager, or agent (including as a Plan fiduciary),to repay the amount if it is ultimately determined that the Executive is not entitled to be indemnified. The obligation of Key to advance expenses provided for in this Section 3.1(c) shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or regulations of Key or of any Subsidiary, any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise. Without limiting the preceding provisions of this Section 3.1, Key shall advance the Executive’s expenses provided

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for herein as incurred in connection with service as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee or any successor of either of the Committees.

3.2 Indemnification. From and after a Change of Control, Key shall indemnify the Executive, to the full extent permitted or authorized by the Ohio General Corporation Law as it may from time to time be amended, if the Executive is (whether before or after the Change of Control) made or threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or was a director, officer, employee or agent of Key or any Subsidiary, or is or was serving at the request of Key or any Subsidiary as a director, trustee, officer, employee, member, manager, or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any Plan, including serving as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee, or any successor of either of the Committees. The indemnification provided by this Section 3.2 shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or the regulations of Key or of any Subsidiary, or any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise, both as to action in the Executive’s official capacity and as to action in another capacity while holding such office, and shall continue as to the Executive after the Executive has ceased to be a director, trustee, officer, employee, member, manager, agent, committee member or other fiduciary and shall inure to the benefit of the heirs, executors, and administrators of the Executive. Notwithstanding the foregoing provisions of this Section 3.2, the Executive shall not be indemnified if it is judicially determined that the Executive’s action or failure to act constituted gross negligence or willful misconduct in carrying out the Executive’s duties as a fiduciary of a Plan.

3.3 Disability. If, after a Change of Control and prior to the Termination Date, the Executive is unable to perform services for Key or any Subsidiary for any period by reason of disability of the Executive, Key will pay and provide to the Executive all compensation and benefits to which the Executive would have been entitled had the Executive continued to be actively employed by Key or any Subsidiary through the earliest of the following dates: (a) the first date on which the Executive is no longer so disabled to such an extent that the Executive is unable to perform services for Key or any Subsidiary (whereupon the Executive shall be restored to his duties and this Agreement shall apply in accordance with its terms), (b) the date on which the Executive becomes eligible for payment of long term disability benefits under a long term disability plan generally applicable to executives of Key or a Subsidiary, (c) the date on which Key has paid and provided 24 months of compensation and benefits to the Executive during the Executive’s disability, or (d) the date of the Executive’s death.

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3.4 Gross-Up of Payments Deemed to be Excess Parachute Payments.

(a) Key and the Executive acknowledge that, following a Change of Control, one or more payments or distributions to be made by Key to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a “Payment”) may be determined to be an “excess parachute payment” that is not deductible by Key for federal income tax purposes and with respect to which the Executive will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Internal Revenue Code (hereinafter referred to respectively as “Section 280G” and “Section 4999”). If the Executive’s employment is terminated after a Change of Control occurs, the Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue Service, shall make all determinations required to be made under this Section 3.4, shall determine whether any Payment would be an excess parachute payment and shall communicate its determination, together with detailed supporting calculations, to Key and to the Executive within 30 days after the Termination Date or such earlier time as is requested by Key. Key and the Executive shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. Key shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Section 3.4.

(b) If the Accounting Firm determines that any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax), Key shall make additional cash payments to the Executive, from time to time and at the same time as any Payment constituting an excess parachute payment is paid or provided to the Executive, in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.

(c) If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax) in excess of the amount, if any, previously determined by the Accounting Firm, Key shall make further additional cash payments to the Executive not later than the due date of any payment indicated by the Internal Revenue Service with respect to these matters, in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest

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with respect to any such excise tax, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.

(d) If Key desires to contest any determination by the Internal Revenue Service with respect to the amount of excise tax under Section 4999, the Executive shall, upon receipt from Key of an unconditional written undertaking to indemnify and hold the Executive harmless (on an after tax basis) from any and all adverse consequences that might arise from the contesting of that determination, cooperate with Key in that contest at Key’s sole expense. Nothing in this clause (d) shall require the Executive to incur any expense other than expenses with respect to which Key has paid to the Executive sufficient sums so that after the payment of the expense by the Executive and taking into account the payment by Key with respect to that expense and any and all taxes that may be imposed upon the Executive as a result of the Executive’s receipt of that payment, the net effect is no cost to the Executive. Nothing in this clause (d) shall require the Executive to extend the statute of limitations with respect to any item or issue in the Executive’s tax returns other than, exclusively, the excise tax under Section 4999. If, as the result of the contest of any assertion by the Internal Revenue Service with respect to excise tax under Section 4999, the Executive receives a refund of a Section 4999 excise tax previously paid and/or any interest with respect thereto, the Executive shall promptly pay to Key such amount as will leave the Executive, net of the repayment and all tax effects, in the same position, after all taxes and interest, that the Executive would have been in if the refunded excise tax had never been paid.

4. No Set-Off; No Obligation to Seek Other Employment or to Otherwise Mitigate Damages; No Effect Upon Other Plans. Key’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim whatsoever that Key or any of its Subsidiaries may have against the Executive. The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. Except as provided in Section 1.3, the amount of any payment provided for under this Agreement shall not be reduced by any compensation or benefits earned by the Executive as the result of employment by another employer or otherwise after the termination of the Executive’s employment. Neither the provisions of this Agreement, nor the execution of the waiver and release referred to in Section 5.3 below, nor the making of any payment provided for hereunder shall reduce any amounts otherwise payable, or in any way diminish the Executive’s rights, under any incentive compensation plan, stock option or stock appreciation rights plan, deferred compensation plan, restricted stock plan or agreement, retirement or supplemental retirement plan, stock purchase and savings plan, disability or insurance plan, or other similar contract, plan, or arrangement of Key or any Subsidiary, all of which will continue to be governed by their respective terms.

5. Certain Limitations on Benefits.

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5.1 Election of Benefits Required; Payments in Lieu of Other Claims or Rights. If (a) the Executive is a party to either or both of an employment agreement (which includes any letter agreement regarding Executive’s employment with Key or any Subsidiary) or severance agreement with Key or any Subsidiary (singularly or collectively, the “Prior Agreement”), and (b) the Executive’s employment is terminated under circumstances giving rise to a right on the part of the Executive to receive continuing compensation, separation pay, or other severance benefits under the Prior Agreement and under this Agreement, the Executive shall have the right to elect to have either the Prior Agreement (if and only to the extent the Prior Agreement is applicable) or this Agreement (if and only to the extent this Agreement is applicable) , but not both, apply to the termination. If this Section 5.1 applies: (x) Key shall not make any payments arising out of the termination of the Executive’s employment, either under the Prior Agreement or under this Agreement, until after the Executive has delivered to Key a signed notice of election to receive payments under the Prior Agreement or under this Agreement, and (y) if the Executive elects to receive payments under the Prior Agreement, the provisions of Sections 3.1, 3.2, and 3.4 of this Agreement shall nevertheless continue to be applicable, but without duplication of payments. If the Executive receives any payments under Section 1.1(a) or Section 1.2(a), as the case may be, of this Agreement as a result of the termination of the Executive’s employment following a Change of Control, those payments shall be in lieu of any and all other claims or rights that the Executive may have for severance, separation, and/or salary continuation pay upon that termination of the Executive’s employment.

5.2 Taxes; Withholding of Taxes. Without limiting either the right of Key or its Subsidiary to withhold taxes pursuant to this Section 5.2 or the obligation of Key to make gross-up payments pursuant to Section 3.4, the Executive shall be responsible for all income, excise, and other taxes (federal, state, city, or other) imposed on or incurred by the Executive as a result of receiving the payments provided in this Agreement, including, without limitation, the payments provided under Section 1 of this Agreement. Key or its Subsidiary may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as Key shall determine to be required pursuant to any law or government regulation or ruling. Without limiting the generality of the foregoing, Key or its Subsidiary may withhold from any amount payable under either of Sections 1.1 or 1.2 of this Agreement amounts sufficient to satisfy any tax withholding requirements that may arise out of any payment made to the Executive by Key or any Subsidiary under Section 1.3 of this Agreement.

5.3 Waiver and Release. Key may condition the payment of any amounts otherwise due under Section 1 of this Agreement upon (a) the execution by the Executive of a waiver and release in the form attached to this Agreement as Exhibit A, with blanks appropriately filled and, in the case of clause (e) contained therein, completed with the number of days that Key determines is required under applicable law, but in no event more than 45 days, and (b) the observation of such waiting periods, if any, before and after execution of the waiver and release by the Executive as are required by law, such as, for example, the waiting periods required for a waiver and release to be effective with respect to claims under the Age Discrimination in Employment Act, provided that Key delivers to the Executive such a

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waiver and release, appropriately completed, within seven days of the date on which the Executive’s employment is terminated.

6. Term of this Agreement. This Agreement shall be effective upon the date first above written and shall thereafter apply to any Change of Control occurring on or before December 31, 2007. Unless this Agreement is terminated earlier pursuant to Section 6.1, on December 31, 2007 and on December 31 of each succeeding year thereafter (a “Renewal Date”), the term of this Agreement shall be automatically extended for an additional year unless either party has given notice to the other, at least one year in advance of that Renewal Date, that the Agreement shall not apply to any Change of Control occurring after that Renewal Date.

6.1 Termination of Agreement Upon Termination of Employment Before a Change of Control. This Agreement shall automatically terminate and cease to be of any further effect on the first date occurring before a Change of Control on which the Executive is no longer employed by Key or any Subsidiary, except that, for purposes of this Agreement, any termination of employment of the Executive that is effected before and in contemplation of a Change of Control that occurs after the date of the termination shall be deemed to be a termination of the Executive’s employment as of immediately after that Change of Control and this Agreement shall be deemed to be in effect immediately after that Change of Control.

6.2 No Termination of Agreement after a Change of Control. If a Change of Control occurs while this Agreement remains in effect, this Agreement shall remain effective indefinitely thereafter with respect to any and all consequences flowing from that Change of Control under the terms of this Agreement. However, after a Change of Control, Key may terminate this Agreement with respect to any further Change of Control that might occur after a future Renewal Date by giving notice, at least one year in advance of that future Renewal Date, as contemplated above in this Section 6, that the Agreement shall not apply to any Change of Control occurring after that future Renewal Date.

7. Miscellaneous.

7.1 Successor to Key. Key shall not consolidate with or merge into any other corporation, or transfer all or substantially all of its assets to another corporation or bank, unless such other corporation or bank shall assume this Agreement in a signed writing and deliver a copy thereof to the Executive. Upon such assumption the successor corporation or bank shall become obligated to perform the obligations of Key under this Agreement and the term “Key” as used in this Agreement shall be deemed to refer to such successor corporation or bank.

7.2 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly

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given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, and addressed, in the case of notices to Key or a Subsidiary, as follows:

KeyCorp
127 Public Square
Cleveland, Ohio 44114
Attention: Secretary

and, in the case of notices to the Executive, properly addressed to the Executive at the Executive’s most recent home address as shown on the records of Key or its Subsidiary, or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7.3 Employment Rights. Nothing expressed or implied in this Agreement shall create any right or duty on the part of Key or the Executive to have the Executive continue as an officer of Key or a Subsidiary or to remain in the employment of Key or a Subsidiary.

7.4 Administration. Key shall be responsible for the general administration of this Agreement and for making payments under this Agreement. All fees and expenses billed by the Accounting Firm for services contemplated under this Agreement shall be the responsibility of Key.

7.5 Source of Payments. Any payment specified in this Agreement to be made by Key may be made, at the election of Key, directly by Key or through any Subsidiary of Key. All payments under this Agreement shall be made solely from the general assets of Key or one of its Subsidiaries (or from a grantor trust, if any, established by Key for purposes of making payments under this Agreement and other similar agreements), and the Executive shall have the rights of an unsecured general creditor of Key with respect thereto.

7.6 Claims Review Procedure. Whenever Key decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Agreement by the Executive, Key shall transmit a written notice of its decision to the Executive, which notice shall be written in a manner calculated to be understood by the Executive and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Executive that, within 60 days of the date on which the Executive receives such notice, the Executive may obtain review of the decision of Key in accordance with the procedures hereinafter set forth. Within such 60-day period, the Executive or the Executive’s authorized representative may request that the claim denial be reviewed by filing with Key a written request therefor, which request shall contain the following information:

(a) the date on which the request was filed with Key,

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(b) the specific portions of the denial of the Executive’s claim that the Executive requests Key to review, and

(c) any written material that the Executive desires Key to examine.

Within 30 days of the date specified in clause (a) of this Section 7.6, Key shall conduct a full and fair review of its decision to deny the Executive’s claim for benefits and deliver to the Executive its written decision on review, written in a manner calculated to be understood by the Executive, specifying the reasons and the Agreement provisions upon which its decision is based. Nothing in this Section 7.6 shall be construed as limiting or restricting the Executive’s right to institute legal proceedings in a court of competent jurisdiction to enforce this Agreement after complying with the procedures set forth in this Section 7.6 or as limiting or restricting the scope of the court’s review (which review shall be de novo); provided, further, that the failure of the Executive to comply with the procedures set forth in this Section 7.6 shall not bar or prohibit the subsequent compliance by the Executive with those procedures and thereafter the Executive shall have the right to institute legal proceedings to enforce this Agreement.

7.7 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

7.8 Modification, Waiver, Etc. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the Executive and Key. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof has been made by either party that is not set forth expressly in this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, successors, heirs, and designees. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio.

7.9 Savings Clause. If any payments otherwise payable to the Executive under this Agreement are prohibited or limited by any statute or regulation in effect at the time the payments would otherwise be payable, including, without limitation, any regulation issued by the Federal Deposit Insurance Corporation (the “FDIC”) that limits executive change of control payments that can be made by an FDIC insured institution or its holding company if the institution is financially troubled (any such limiting statute or regulation a “Limiting Rule”):

(a) Key will use its best efforts to obtain the consent of the appropriate governmental agency (whether the FDIC or any other agency) to the payment by Key to the Executive of the maximum amount that is permitted (up to the amounts that would be due to the Executive absent the Limiting Rule); and

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(b) the Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable Key severance, separation pay, and/or salary continuation plan that may be in effect at the time of the Executive’s termination.

Following any such election, the Executive will be entitled to receive benefits under the agreement or plan elected only if and to the extent the agreement or plan is applicable and subject to its specific terms.

8. Definitions.

8.1 Accounting Firm. The term “Accounting Firm” means the independent auditors of Key for the fiscal year preceding the year in which the Change of Control occurred and such firm’s successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, Key shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for Key or any of its affiliates (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”)).

8.2 Average Annual Incentive Compensation. The term “Average Annual Incentive Compensation” means the sum of Average Short Term Incentive Compensation, as defined in Section 8.4 below, and Average Long Term Incentive Compensation, as defined in Section 8.3 below. For purposes of this Agreement:

(a) except as provided in (c) below, incentive compensation means any cash based incentive compensation, including bonuses and is calculated before any reduction on account of deferrals;

(b) notwithstanding the fact that they are made in restricted stock and/or performance shares rather than in cash, any LTIC Stock Grant shall be deemed to be long term incentive compensation;

(c) special hiring bonuses paid or awarded to a newly hired executive in connection with that hiring or extraordinary bonuses to an incumbent executive, outside and beyond Key’s regular incentive compensation program, such as special retention awards to induce an executive to stay with Key, shall not be treated as incentive compensation;

(d) short term incentive compensation means incentive compensation for periods of time of one year or less;

(e) targeted short term incentive compensation means:

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(i) if the short term incentive compensation plan, program, or arrangement in question designates a targeted amount or a targeted level of achievement for the Executive or the Executive’s job grade, it means that targeted amount or level;

(ii) if the short term incentive compensation plan, program, or arrangement in question has only one level of payout for the Executive or the Executive’s job grade (other than zero), it means that level (i.e., the level other than zero);

(iii) if the short term incentive compensation plan, program, or arrangement in question does not designate a targeted amount or level of achievement for the Executive or the Executive’s job grade but does have multiple anticipated levels of possible payout or achievement for the Executive or the Executive’s job grade, it means (in each case excluding from consideration any level that results in zero payout) the middle level of payout or achievement for the Executive or the Executive’s job grade (or if there are an even number of levels, the average of the two levels if there are only two levels or the average of the middle two levels if there are four or more levels); and

(iv) in all other cases, the amount anticipated or projected to be paid under the plan, program, or arrangement in question at the time the performance period in question commenced.

For purposes of calculating Average Annual Incentive Compensation under this Section 8.2, in determining the amount of incentive compensation (short or long term) payable to or targeted for the Executive for any past or current incentive compensation period or cycle, if the incentive compensation was for a partial period or cycle (such as where an executive becomes a participant in an incentive plan after the incentive compensation period or cycle has commenced so that the award payable to or targeted for the executive is prorated), such incentive compensation payable to or targeted for the Executive shall be determined as if the Executive had participated throughout the complete incentive compensation period or cycle in question. For example, if, with respect to a 12-month plan that would have paid the Executive short term incentive compensation of $12X if the Executive had been a participant for the full plan year, the Executive became a participant when only seven months were left in the plan year and the Executive was therefore paid incentive compensation of only $7X, the Executive would be treated for purposes of this Section 8.2 as if the Executive had been a participant for the full plan year and had been paid incentive compensation of $12X under the plan.

8.3 Average Long Term Incentive Compensation. The term “Average Long Term Incentive Compensation” means the higher of:

(i) the average of the dollar value of the LTIC Stock Grants made to the Executive in each of the two years immediately preceding the Change Year (e.g., the average of the 2006 LTIC Stock Grant and the 2007 LTIC Stock Grant if the Change Year is 2008), or, if for any reason an LTIC Stock Grant was made to

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Executive in only one of those two immediately preceding years, the dollar value of the LTIC Stock Grant for that single year, and

(ii) the dollar value of the LTIC Stock Grant for the Change Year;

except that, if the Executive first became employed by Key or a Subsidiary during the Change Year or during the year immediately preceding the Change Year and pursuant to an offer letter or agreement the terms of which were approved by the Committee, “Average Long Term Incentive Compensation” shall be not less than the dollar value of the LTIC Stock Grant target specified in that offer letter or agreement.

For purposes of this Section 8.3 the dollar value of any LTIC Stock Grant means the aggregate Fair Market Value of the Common Shares subject to that grant (whether those Common Shares are restricted Common Shares or Performance Shares) as of the date the grant is made, taking into account all and only all of the target level of those Common Shares that are subject to the particular LTIC Stock Grant, without regard to changes in Key’s stock price after the date of grant or to any restrictions on or contingencies concerning those Common Shares.

8.4 Average Short Term Incentive Compensation. The term “Average Short Term Incentive Compensation” means the higher of:

(a) the average of the short term incentive compensation payable to the Executive for each of the last two years immediately preceding the Change Year or, if, for any reason, short term incentive compensation was payable to the Executive for only one of those two years, the amount of short term incentive compensation payable to the Executive for that year, and

(b) the Executive’s targeted short term incentive compensation for the Change Year or for the year immediately preceding the Change Year, whichever is higher,

except that if the Executive first became a participant in Key’s short term incentive compensation program during the Change Year, Average Short Term Incentive Compensation means the Executive’s targeted short term incentive compensation for the Change Year.

8.5 Base Salary. The term “Base Salary” means the salary payable to the Executive from time to time before any reduction for voluntary contributions to the KeyCorp 401(k) Plan or any other deferral. Base Salary does not include imputed income from payment by Key of country club membership fees or other noncash benefits.

8.6 Cause. The employment of the Executive by Key or any of its Subsidiaries shall have been terminated for “Cause” if, after a Change of Control and prior to the termination of employment, any of the following has occurred:

(a) the Executive shall have been convicted of a felony,

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(b) the Executive commits an act or series of acts of dishonesty in the course of the Executive’s employment which are materially inimical to the best interests of Key or a Subsidiary and which constitutes the commission of a felony, all as determined by the vote of three fourths of all of the members of the Board of Directors of Key (other than the Executive, if the Executive is a Director of Key) which determination is confirmed by a panel of three arbitrators appointed and acting in accordance with the rules of the American Arbitration Association for the purpose of reviewing that determination,

(c) Key or any Subsidiary has been ordered or directed by any federal or state regulatory agency with jurisdiction to terminate or suspend the Executive’s employment and such order or directive has not been vacated or reversed upon appeal, or

(d) after being notified in writing by the Board of Directors of Key to cease any particular Competitive Activity, the Executive shall intentionally continue to engage in such Competitive Activity while the Executive remains in the employ of Key or a Subsidiary.

If (x) Key or any Subsidiary terminates the employment of the Executive during the two year period beginning on the date of a Change of Control and at a time when it has “Cause” therefor under clause (c), above, (y) the order or directive is subsequently vacated or reversed on appeal and the vacation or reversal becomes final and no longer subject to further appeal, and (z) Key or the Subsidiary fails to offer to reinstate the Executive to employment within ten days of the date on which the vacation or reversal becomes final and no longer subject to further appeal, Key or the Subsidiary will be deemed to have terminated the Executive without Cause during the two year period beginning on the date of the Change of Control.

8.7 Change of Control. A “Change of Control” shall be deemed to have occurred if, at any time while this Agreement is in effect pursuant to Section 6 hereof, there is a Change of Control under any of clauses (a), (b), (c), or (d) below. For these purposes, Key will be deemed to have become a subsidiary of another corporation if any other corporation (which term shall, for all purposes of this Section 8.7, include, in addition to a corporation, a limited liability company, partnership, trust, or other organization) owns, directly or indirectly, 50 percent or more of the total combined outstanding voting power of all classes of stock of Key or any successor to Key.

(a) A Change of Control will have occurred under this clause (a) if Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and either

(i) immediately after giving effect to that transaction, less than 65% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or

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were issued in exchange for voting securities of Key outstanding immediately prior to the transaction, or

(ii) immediately after giving effect to that transaction, individuals who were directors of Key on the day before the first public announcement of (x) the pendency of the transaction or (y) the intention of any person or entity to cause the transaction to occur, cease for any reason to constitute at least 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key.

(b) A Change of Control will have occurred under this clause (b) if a tender or exchange offer shall be made and consummated for 35% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 35% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as adopted under the 1934 Act, disclosing the acquisition of 35% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this clause (b));

(c) A Change of Control will have occurred under this clause (c) if either

(i) without the prior approval, solicitation, invitation, or recommendation of the Key Board of Directors any person or entity makes a public announcement of a bona fide intention (A) to engage in a transaction with Key that, if consummated, would result in a Change Event (as defined below in this clause (c)), or (B) to “solicit” (as defined in Rule 14a-1 under the 1934 Act) proxies in connection with a proposal that is not approved or recommended by the Key Board of Directors, or

(ii) any person or entity publicly announces a bona fide intention to engage in an election contest relating to the election of directors of Key (pursuant to Regulation 14A, including Rule 14a-11, under the 1934 Act),

and, at any time within the 24 month period immediately following the date of the announcement of that intention, individuals who, on the day before that announcement, constituted the directors of Key (the “Incumbent Directors”) cease for any reason to constitute at least a majority thereof unless both (A) the election, or the nomination for election by Key’s shareholders, of each new director was approved by a vote of at least two-thirds of the Incumbent Directors in office at the time of the election or nomination for election of such new director, and (B) prior to the time that the Incumbent Directors no longer constitute a majority of the Board of Directors, the Incumbent Directors then in office, by a vote of at least 75% of their number, reasonably determine in good faith that the change in Board membership that has occurred before the date of that determination and that is anticipated to thereafter occur within the balance of the 24 month period to cause the Incumbent Directors to no longer be a majority of the Board of Directors was not caused by

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or attributable to, in whole or in any significant part, directly or indirectly, proximately or remotely, any event under subclause (i) or (ii) of this clause (c).

For purposes of this clause (c), the term “Change Event” shall mean any of the events described in the following subclauses (x), (y), or (z) of this clause (c):

(x) A tender or exchange offer shall be made for 25% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 25% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as adopted under the 1934 Act, disclosing the acquisition of 25% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this subclause (x)).

(y) Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and, after giving effect to such transaction, less than 50% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to such transaction or less than 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key were directors of Key immediately prior to such transaction.

(z) There is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Key.

(d) A Change of Control will have occurred under this clause (d) if there is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Key.

8.8 Change Year. The term “Change Year” means the year in which a Change of Control occurred or, if more than one Change of Control has occurred, the year in which the earliest Change of Control occurred.

8.9 Common Shares. The term “Common Shares” means common shares of Key.

8.10 Committee. The term “Committee” means the Compensation and Organization Committee of the Board of Directors of Key or any successor to that committee.

     8.11 Competitive Activity. The Executive shall be deemed to have engaged in “Competitive Activity” if the Executive:

(a) engages in any business or business activity in which Key or any of its Subsidiaries engages, including, without limitation, engaging in any business activity

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in the banking or financial services industry (other than as a director, officer, or employee of Key or any of its Subsidiaries), or

(b) serves as a director, officer, or employee of any bank, bank holding company, savings and loan association, building and loan association, savings and loan holding company, insurance company, investment banking or securities company, mutual fund company, or other financial services company other than Key or any of its Subsidiaries (each of the foregoing being hereinafter referred to as a “Financial Services Company”), or renders services of a consultative or advisory nature or otherwise to any such Financial Services Company; provided, however, this clause (b) shall not prohibit or restrict the Executive from serving in any such capacity with the consent of Key.

8.12 Disability. For purposes of this Agreement, the Executive’s employment will have been terminated by Key or its Subsidiary by reason of “Disability” of the Executive only if (a) as a result of bodily injury or sickness, the Executive has been unable to perform the Executive’s normal duties for Key or its Subsidiary for a period of 180 consecutive days, and (b) the Executive begins to receive payments under the KeyCorp Long Term Disability Benefit Plan not later than 30 days after the Termination Date.

8.13 Discontinued Plan. The term “Discontinued Plan” includes any Retirement Plan, the Savings Plan and/or the KeyCorp Deferred Savings Plan that:

(a) the Executive was covered by and participating in immediately before the occurrence of a Change of Control, and

(b) was, between the date of the Change of Control and the Termination Date, either terminated or altered in such a way as to substantially reduce the benefits provided to the Executive thereunder without having been substituted for by a similar plan providing substantially similar benefits to the Executive.

8.14 Fair Market Value. The term “Fair Market Value” with respect to Common Shares means:

(a) if the Common Shares are traded on a national exchange, the mean between the high and low sales price per Common Share on the national exchange on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares, or

(b) if the Common Shares are not traded on a national exchange, the mean between the high and low sales price per Common Share in the over-the-counter market, National Market System, as report by the National Quotations Bureau, Inc. and NASDAQ on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares.

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8.15 Good Reason. The Executive shall be deemed to have “Good Reason” to terminate the Executive’s employment under this Agreement during a Window Period if, at any time after the occurrence of a Change of Control and before the end of the Window Period, either or both of the events listed in clauses (a) and (b) of this Section 8.15 occurs without the written consent of the Executive:

(a) following notice by the Executive to Key and an opportunity by Key to cure, the Executive determines in good faith that the Executive’s position, responsibilities, duties, or status with Key are at any time materially less than or reduced from those in effect before the Change of Control or that the Executive’s reporting relationships with superior executive officers have been materially changed from those in effect before the Change of Control; or

(b) Key’s headquarters is relocated outside of the greater Cleveland metropolitan area (but this clause (b) shall apply only if Key’s headquarters was the Executive’s principal place of employment before the Change of Control).

For purposes of clause (a), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the circumstance otherwise constituting Good Reason persists (as determined in good faith by the Executive, whose determination shall be conclusive) for more than seven calendar days after the Executive has given notice to Key of the existence of that circumstance.

8.16 Impermissible. The term “Impermissible,” when used in the context of the Executive’s continued coverage by and participation in any of the Retirement Plans or Savings Plans shall mean that such a continuation would violate the provisions of any such plan, would cause any such plan that is or is intended to be qualified under Section 401(a) of the Internal Revenue Code to fail to be so qualified, would require shareholder approval, or would be unlawful.

8.17 LTIC Stock Grant. The term “LTIC Stock Grant” means the grant, if any, of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made by the Committee to the Executive during any particular year as part of Key’s ongoing compensation program. For greater clarity, for purposes of this Agreement:

(a) “The terms “2006 LTIC Stock Grant”, “2007 LTIC Stock Grant,” “2008 LTIC Stock Grant,” etc. refer to LTIC Stock Grants, if any, made to the Executive by resolution adopted by the Committee in the specified year.

(b) An extraordinary grant or award of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made to a newly hired executive in connection with that hiring (i.e., any signing or hiring bonus) and a grant or award made to an incumbent executive outside of Key’s regular restricted stock

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and Performance Share program (e.g., a special retention grant or award) shall be treated as not being an LTIC Stock Grant and shall not be taken into account when calculating Average Long Term Incentive Compensation.

8.18 Mandatory Relocation. A “Mandatory Relocation” shall have occurred if, at any time after a Change of Control, the Executive is required to relocate the Executive’s principal place of employment for Key or its Subsidiary without the Executive’s written consent more than 35 miles from where the Executive was located prior to the Change of Control.

8.19 Performance Shares. The term “Performance Shares” means an award denominated in Common Shares or phantom Common Shares (regardless of whether payable in stock or cash) the vesting of which is contingent or accelerated upon attainment of one or more performance goals (absent death, disability, or a Change of Control) .

8.20 Reduction of Compensation. A “Reduction of Compensation” shall have occurred if any one or more of the following occurs:

(a) the Base Salary of the Executive is reduced at any time after a Change of Control;

(b) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Short Term Incentive Compensation Guaranty;

(c) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Long Term Incentive Compensation Guaranty; or

(d) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Option/SAR Guaranty.

For purposes of clauses (b), (c) and (d), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the failure to satisfy the Short Term Incentive Compensation Guaranty, the Long Term Incentive Compensation Guaranty, and/or the Option/SAR Guaranty, as the case may be, persists (as determined in good faith by the Executive) for more than seven calendar days after the Executive has given notice to Key of the existence of that failure.

8.21 Relevant Plans. The term “Relevant Plans” means:

(a) all Retirement Plans and Savings Plans that the Executive was covered by and participating in immediately before the Termination Date, and

(b) all Discontinued Plans (other than the KeyCorp Deferred Savings Plan).

Reference to a “Relevant Plan,” in the singular, means any of the Relevant Plans.

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8.22 Retirement Plans. The term “Retirement Plans” means the KeyCorp Cash Balance Pension Plan and the Supplemental Retirement Plan, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds,
replaces, or is substituted for any such plan, and all retirement plans of any nature maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Retirement Plan,” in the singular, means any of the Retirement Plans.

8.23 Savings Plans. The term “Savings Plans” means and includes the KeyCorp 401(k) Savings Plan, as from time to time amended, restated, or otherwise modified, including any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for such plan, and other than the KeyCorp Deferred Savings Plan, all salary reduction, savings, profit-sharing, or stock bonus plans (including, without limitation, all plans involving employer matching contributions, whether or not constituting a qualified cash or deferred arrangement under Section 401(k) of the Internal Revenue Code), maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Savings Plan,” in the singular, shall mean any of the Savings Plans.

8.24 Supplemental Retirement Plan. The term “Supplemental Retirement Plan” means the KeyCorp Supplemental Retirement Plan, the KeyCorp Excess Cash Balance Pension Plan, or the KeyCorp Executive Supplemental Pension Plan in which the Executive participates, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for any of such plans.

8.25 Subsidiary. A “Subsidiary” means any corporation, bank, partnership, or other entity a majority of the voting control of which is directly or indirectly owned or controlled at the time in question by Key.

8.26 Termination Date. The term “Termination Date” means the date on which the Executive’s employment with Key and its Subsidiaries terminates.

8.27 Window Period. The term “Window Period,” with respect to any particular Change of Control, means the three-month period beginning on the date that falls on the same day of the month as the date of the Change of Control in the fifteenth month after the month in which the Change of Control occurs. If at any time there has been more than one Change of Control, there shall be a separate Window Period with respect to each such Change of Control.

8.28 Agreement Supersedes Similar Agreement Previously Entered Into. This Agreement supersedes a similar agreement originally entered into between Key and the Executive as of [ORIGINAL DATE OF PREVIOUS AGREEMENT] and that agreement (as amended, if it has been heretofore amended) is no longer of any force or effect.

8.29 Compliance with American Jobs Creation Act. In the event that any provision

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of this Agreement is determined to constitute deferred compensation, as defined in accordance with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, the applicable provision will be administered in accordance with the requirements of Section 409A of the Code, including the delay of any payment otherwise payable under this Agreement for a period of 6 months following the Termination Date.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

KEYCORP
By
	Henry L. Meyer III
	Chairman and Chief Executive Officer
THE “EXECUTIVE”
XXXXXX

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Exhibit A

WAIVER AND RELEASE

DO NOT SIGN WITHOUT READING AND UNDERSTANDING

     In consideration of the payments to be made to me following termination of my employment with KeyCorp pursuant to the agreement between KeyCorp and me dated as of XXXXX XX, 200X (the “Change of Control Agreement”), which payments I acknowledge I am not entitled to receive without execution of this Waiver and Release, and which payments will not commence earlier than eight days after the execution of this Waiver and Release, I, for myself, my heirs, administrators, executors, and assigns, release and discharge KeyCorp, its affiliates, subsidiaries, divisions, successors, and assigns and the employees, officers, directors, and agents thereof (collectively referred to throughout this Waiver and Release as “Key”) from any and all causes of action, charges of discrimination, proceedings, or claims of every kind, nature, and character, arising out of or relating to my employment with Key and the termination of my employment with Key based upon or related to any contention (i) that my employment terminated because of any tortuous, wrongful, unlawful, or improper conduct or act or in violation or breach of any express or implied contract or agreement, or (ii) that Key engaged in any discriminatory act, event, pattern, or practice involving age, religion, creed, sex, national origin, ancestry, handicap, disability, veteran status, marital status, race, or color, or the continuing or future effects thereof (including, without limitation, the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., or any similar state law).

     I warrant that no promise or inducement has been offered to me other than as set forth in the Change of Control Agreement, that I am relying on no other statement or representation by Key, and that I have not assigned any of my rights. I have read this Waiver and Release; I have had a full opportunity to consider it (including the opportunity to consult with an attorney of my choice); and I understand that by signing it I am giving up important rights, including any right to sue under federal, state, or local law. I also verify that my entering into this Waiver and Release is wholly voluntary.

I further warrant that:

(a) I understand that I am specifically waiving rights or claims under the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq.;

(b) I understand that I am not hereby waiving any rights or claims that may arise after this Waiver and Release is executed by me;

(c) I understand that this Waiver and Release is being given by me in exchange for consideration that is more valuable to me than what I am entitled to without the Change of Control Agreement and the execution of this Waiver and Release;

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(d) I have been advised in writing by Key that I should have, at my expense, an attorney of my choice review this Waiver and Release;

(e) I have been advised by Key that I may take up to ___days from receipt of this Waiver and Release to determine whether to execute the same; and

(f) I have been advised by Key that this Waiver and Release may be revoked by me within seven (7) days following execution of this Waiver and Release whereupon this Waiver and Release shall be null and void.

     IN WITNESS WHEREOF, I have hereby set my hand this                      day of                     , ___.

Witness:

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Exhibit A
(cont’d)

Acknowledgment of Receipt of Waiver and Release

     I do hereby acknowledge that on                                         , ___, I received a copy of the Waiver and Release which is attached hereto, and I understand that I have ___* days from the date of receipt of the Waiver and Release to determine whether to execute it.

Witness:

*to be completed the same as clause (e) of the Waiver and Release.

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Exhibit A
(cont’d)

Director of Human Resources
KeyCorp
127 Public Square
Cleveland, Ohio 44114

Re:       Waiver and Release

Dear Sir or Madam:

          On                      ___, ___, I executed a Waiver and Release in favor of KeyCorp. More than seven (7) days have elapsed since I executed the Waiver and Release. I have at no time revoked my acceptance or execution of the Waiver and Release and, accordingly, I hereby request that KeyCorp commence making the payments due to me under my Change of Control Agreement.

	Very truly yours,
Witness:

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EX-10.53

EXHIBIT 10.53

AGREEMENT

          THIS AGREEMENT (“Agreement”) is made as of the XX day of XXXXX, 200X, between KEYCORP, an Ohio corporation (“Key”), and XXXXXX (the “Executive”).

          Key is entering into this Agreement in recognition of the importance of the Executive’s services to the continuity of management of Key and based upon its determination that it will be in the best interests of Key and its Subsidiaries to encourage the Executive’s continued attention and dedication to the Executive’s duties in the potentially disruptive circumstances of a possible Change of Control of Key. (As used in this Agreement, the terms “Subsidiaries” and “Change of Control” and certain other capitalized terms have the meanings ascribed to them in Section 8, at the end of this Agreement.)

          Key and the Executive agree, effective as of the date first set forth above, as follows:

1. Basic Severance Benefits. The benefits described in Sections 1.1, 1.2, and 1.3 below are subject to the limitations set forth in Sections 5.1 (which requires an election among applicable agreements providing severance benefits if more than one such agreement would apply in the particular circumstances of the termination of the Executive’s employment and stipulates that any payments received under this Agreement are in lieu of other claims or rights), 5.2 (regarding withholding), and 5.3 (requiring the execution of a waiver and release by the Executive).

1.1 If Employment is Terminated Without Cause, etc., Within Two Years of a Change of Control. If, within two years following the occurrence of a Change of Control, the Executive’s employment with Key and its Subsidiaries is terminated by Key or its Subsidiary for any reason other than Cause, Disability, or death or by the Executive after a Reduction of Compensation or a Mandatory Relocation has occurred:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to three times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation; and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.1(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending on the third anniversary of the Termination Date (the “Section 1.1 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.1 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue

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to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.1 Benefit Period. For purposes of this Section 1.1(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

1.2 If Employment is Terminated by Executive for Good Reason During a Window Period. Except as provided in the last sentence of this Section 1.2, if the Executive’s employment with Key and its Subsidiaries is terminated by the Executive for Good Reason during a Window Period:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to one and one half times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation, and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.2(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending eighteen months, to the day, after the Termination Date (the “Section 1.2 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.2 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

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(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.2 Benefit Period. For purposes of this Section 1.2(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

This Section 1.2 shall not apply if, at the Termination Date, (x) there has been either any Reduction of Compensation or any Mandatory Relocation (in which event Section 1.1 would apply to the termination) or (y) Key or any Subsidiary has Cause to terminate the Executive’s employment (in which case no lump sum severance or retirement benefits would be payable or provided under either of Sections 1.1 or 1.2).

1.3 Continued Medical Coverage

(a) Payment of Cost of COBRA Health Benefits. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive elects to continue to receive health benefits pursuant to an election that Key or any Subsidiary is required to provide to the Executive in order to comply with Section 4980B(f) of the Internal Revenue Code (commonly referred to as “COBRA continuation coverage”) during the period specified in Section 4980B(f) (the “COBRA continuation period”), Key will pay the cost of continuing those benefits from the Termination Date through the first to occur of (a) the end of the COBRA continuation period or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity.

(b) Payment of Retiree Medical Coverage. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive is age 50 with 15 years Vesting Service (as that term is defined under the KeyCorp Cash Balance Pension Plan) as of his or her Termination Date, the Executive may elect, in lieu of electing COBRA continuation coverage under the provisions of Section 1.3(a) hereof, to participate in the KeyCorp Retiree Medical Plan. Key will pay the premium cost for the Executive’s Retiree Medical Plan coverage from the Executive’s Termination Date through (a) the last day of the eighteen-month period following the Executive’s Termination Date, or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity, whichever shall first occur. If the Executive is not age 55 at the time that Key’s premium payment ends, the Executive shall be required to pay the full premium cost for his or her continued Retiree Medical Plan coverage until the Executive reaches age 55, at which time the KeyCorp Retiree Medical Plan premium cost-sharing structure will apply.

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1.4 Provisions Applicable to Continued Retirement and Savings Plan Participation.

(a) If the Executive becomes entitled to payment of a lump sum severance benefit under either of Section 1.1 or Section 1.2, the rules set forth in the remainder of this Section 1.4(a) shall be applicable for purposes of all Relevant Plans:

(i) the entire Section 1.1 Benefit Period or Section 1.2 Benefit Period (each, a “Benefit Period”), as the case may be, shall be included in determining the Executive’s years of service,

(ii) amounts received by the Executive under clause (a)(i) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be base salary received by the Executive ratably during the applicable Benefit Period, and

(iii) amounts received by the Executive under clause (a)(ii) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be short term incentive compensation received by the Executive ratably during the applicable Benefit Period.

(b) If either Section 1.1(b) or Section 1.2(b) becomes applicable and at any time during the applicable Benefit Period, Key determines in good faith that continuing the Executive’s coverage by and participation in any of the Relevant Plans during the applicable Benefit Period is Impermissible, the Executive shall not be covered by and participate in such affected plan or plans during the applicable Benefit Period, but Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Executive continued to be covered by and to participate in all such affected plans throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the Termination Date, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the affected plan or plans in question.

(c) If either Section 1.1(b) or Section 1.2(b) becomes applicable and any of the Relevant Plans and/or the KeyCorp Deferred Savings Plan are Discontinued Plans, as to each such Discontinued Plan, Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Discontinued Plan continued through the end of the applicable Benefit Period without having become a Discontinued Plan and had the Executive continued to be covered by and to participate in that Discontinued Plan throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the date of the Change

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of Control, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the Discontinued Plan, and as a lump sum payment under the KeyCorp Deferred Savings Plan, provided however, that to the extent the Discontinued Plan has been substituted for by a Relevant Plan, the amount payable by Key under this Section 1.4(c) shall be offset by the amounts actually paid under that substitute plan.

2. Certain Compensation Guaranties During Two Years following a Change of Control. For so long as the Executive remains in the employ of Key or one of its Subsidiaries during the period beginning on the day after any Change of Control and continuing through the second anniversary of that Change of Control (the period of the Executive’s employment during such two year period being the “Guaranteed Compensation Period”), the Executive shall be entitled to the Incentive Compensation Guaranty set forth in Section 2.1 and to the Option/SAR Guaranty set forth in Section 2.2.

2.1 Guaranteed Level of Incentive Compensation. Except as otherwise provided in Section 2.3, Key shall cause the Executive to receive, during the Guaranteed Compensation Period, as incentive compensation, an amount that, on an annualized basis, is at least equal to the Executive’s Average Annual Incentive Compensation. The guaranty set forth in the immediately preceding sentence (the “Incentive Compensation Guaranty”) establishes a minimum amount of incentive compensation that must be paid to the Executive with respect to the Executive’s employment during the Guaranteed Compensation Period. Except as and to the extent otherwise permitted by any of the provisions of Section 2.3:

(a) Key shall make payments to the Executive in cash that satisfy the Incentive Compensation Guaranty quarterly in arrears, within 30 days after the end of each calendar quarter for each quarter or portion thereof during the Guaranteed Compensation Period;

(b) If the Executive’s employment terminates for any reason other than Cause, Key shall pay all unpaid guaranteed incentive compensation with respect to the Guaranteed Compensation Period to the Executive in a lump sum by not later than 30 business days after the Termination Date; and

(c) If the Executive’s employment is terminated by Key for Cause, Key shall not be required to pay to the Executive any amount of incentive compensation on account of the Incentive Compensation Guaranty that was not required to have been paid before the Termination Date.

2.2 Guaranteed Participation in Stock Option and SAR Plans. During the Guaranteed Compensation Period, the Executive shall participate fully (and at a level at least substantially equivalent to that of comparable senior executives of Key) in each and every stock option and stock appreciation right plan in which similarly situated executives of Key

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and its Subsidiaries generally participate. The guaranty of full participation set forth in this Section 2.2 is hereinafter sometimes referred to as the “Option/SAR Guaranty.”

2.3 Exceptions to and Alternative Means of Satisfying the Incentive Compensation Guaranty. For purposes of the exceptions and alternative means of satisfying the Incentive Compensation Guaranty that are set forth in this Section 2.3, the Incentive Compensation Guaranty shall be deemed to be made up of two parts, the “Short Term Part” and the “Long Term Part,” each of which shall bear the same proportion, respectively, to the entire Incentive Compensation Guaranty as Average Short Term Incentive Compensation and Average Long Term Incentive Compensation bear, respectively, to Average Annual Incentive Compensation:

(a) Bona fide Short Term Incentive Compensation Plan Exception. If (i) Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level; (ii) Key, in administering that plan in good faith and without discriminating against the Executive, utilizes a performance factor that is intended to rate for the short term compensation cycle in question either the corporation’s overall performance or the overall performance of the business unit in which the Executive works; (iii) that performance factor is uniformly applied (either in establishing an incentive compensation pool or against each participant’s target) to all participants in the plan or to all participants in the plan that work in the business unit in which the Executive works, as the case may be; and (iv) the application of that factor reduces the short term incentive compensation payable under that plan to a level below the Executive’s target level; then payment of the short term incentive compensation, if any, due to the Executive at the reduced level under that plan shall satisfy Key’s obligation under the Short Term Part for that particular short term compensation cycle.

(b) Annual Payment Exception. If Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level and that plan provides for payment of all amounts earned at regularly scheduled times not less frequently than once a year, Key may satisfy the Short Term Part by paying incentive compensation to the Executive under that plan (at not less than the Executive’s target level or as reduced if permitted by 2.3(a) above) at those regularly scheduled times, except that if Executive’s employment terminates for any reason other than Cause, Key shall make payments under that plan, pro rated to include all periods within the Compensation Guaranty Period as to which the Executive has not yet received incentive compensation under that plan, within 30 business days after the Termination Date.

(c) Issuance of Restricted Stock Alternative. As an alternative to paying Executive cash to satisfy the Long Term Part, Key may make restricted stock grants of Common Shares to the Executive each year during the Guaranteed Compensation Period that:

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(i) are made during the same calendar quarter of the year as the calendar quarter during which Key made LTIC Stock Grants in the year immediately preceding the Change Year (but if Key made such grants during more than one calendar quarter in the year immediately preceding the Change Year, then the new grant shall be made during the same calendar quarter of the year as the calendar quarter during which Key made grants to the highest number of officers in the year immediately preceding the Change Year);

(ii) have a Fair Market Value that on an annual basis is at least equal to the Executive’s Average Long Term Incentive Compensation;

(iii) provide for time lapsed vesting of the restricted stock subject to the grant so that the entire grant will be fully vested not later than the third anniversary of the date of grant if the Executive continues to be employed through that date; and

(iv) have the further provision that, upon any termination of the Executive’s employment other than a termination for Cause (including, without limitation, any termination by reason of death, disability, voluntary or involuntary retirement, or resignation), if, as of the Termination Date, less than a proportionate part of the Common Shares subject to the restricted stock grant granted to the Executive during the Guaranteed Compensation Period has vested, then an additional portion of those Common Shares shall vest immediately on the Termination Date so that, in the aggregate, a proportionate part has vested as of the Termination Date. For these purposes, “a proportionate part” means the full number of Common Shares in the restricted stock grant multiplied by a fraction, the numerator of which is the number of days between (x) January 1 of the calendar year in which the restricted stock grant was made and (y) the last day of the Guaranteed Compensation Period, inclusive, and the denominator of which is 1095 (i.e., 365 times three).

If Key makes restricted stock grants as provided in this 2.3(c), Key will have satisfied the Long Term Part.

3. Other Benefits.

3.1 Reimbursement of Certain Expenses After a Change of Control.

(a) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of defending any action brought to have this Agreement declared invalid or unenforceable.

(b) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of prosecuting any action to compel Key to comply with the terms of this Agreement upon receipt from Executive of an undertaking to repay Key for such expenses if, and

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only if, it is ultimately determined by a court of competent jurisdiction that the Executive had no reasonable grounds for bringing that action (which determination need not be made simply because the Executive fails to succeed in the action).

(c) From and after a Change of Control, expenses (including attorney’s fees) incurred by the Executive in defending any action, suit, or proceeding commenced or threatened (whether before or after the Change of Control) against the Executive (i) for any action or failure to act as a director, employee, officer, or agent of Key or any Subsidiary or (ii) if the Executive is or was serving at the request of Key or any Subsidiary, for any action or failure to act as a director, trustee, officer, employee, member, manager, or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any employee benefit plan maintained by Key or any Subsidiary (“Plan”), shall be paid by Key, as they are incurred, in advance of final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the Executive in which the Executive agrees to reasonably cooperate with Key or the Subsidiary, as the case may be, concerning the action, suit, or proceeding, and (i) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a director, to repay the amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that the Executive’s action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to Key or a Subsidiary or undertaken with reckless disregard for the best interests of Key or a Subsidiary, or (ii) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a trustee, officer, employee, member, manager, or agent (including as a Plan fiduciary), to repay the amount if it is ultimately determined that the Executive is not entitled to be indemnified. The obligation of Key to advance expenses provided for in this Section 3.1(c) shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or regulations of Key or of any Subsidiary, any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise. Without limiting the preceding provisions of this Section 3.1, Key shall advance the Executive’s expenses provided for herein as incurred in connection with service as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee or any successor of either of the Committees.

3.2 Indemnification. From and after a Change of Control, Key shall indemnify the Executive, to the full extent permitted or authorized by the Ohio General Corporation Law as it may from time to time be amended, if the Executive is (whether before or after the Change of Control) made or threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or was a director, officer, employee or agent of Key or any Subsidiary, or is or was serving at the request of Key or any Subsidiary as a director, trustee, officer, employee, member, manager or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other

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enterprise, including serving as a committee member or other fiduciary of any Plan, including serving as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee, or any successor of either of the Committees. The indemnification provided by this Section 3.2 shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or the regulations of Key or of any Subsidiary, or any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise, both as to action in the Executive’s official capacity and as to action in another capacity while holding such office, and shall continue as to the Executive after the Executive has ceased to be a director, trustee, officer, employee, member, manager, agent, committee member or other fiduciary and shall inure to the benefit of the heirs, executors, and administrators of the Executive. Notwithstanding the foregoing provisions of this Section 3.2, the Executive shall not be indemnified if it is judicially determined that the Executive’s action or failure to act constituted gross negligence or willful misconduct in carrying out the Executive’s duties as a fiduciary of a Plan.

3.3 Disability. If, after a Change of Control and prior to the Termination Date, the Executive is unable to perform services for Key or any Subsidiary for any period by reason of disability of the Executive, Key will pay and provide to the Executive all compensation and benefits to which the Executive would have been entitled had the Executive continued to be actively employed by Key or any Subsidiary through the earliest of the following dates: (a) the first date on which the Executive is no longer so disabled to such an extent that the Executive is unable to perform services for Key or any Subsidiary (whereupon the Executive shall be restored to his duties and this Agreement shall apply in accordance with its terms), (b) the date on which the Executive becomes eligible for payment of long term disability benefits under a long term disability plan generally applicable to executives of Key or a Subsidiary, (c) the date on which Key has paid and provided 24 months of compensation and benefits to the Executive during the Executive’s disability, or (d) the date of the Executive’s death.

3.4 Gross-Up of Payments Deemed to be Excess Parachute Payments.

(a) Key and the Executive acknowledge that, following a Change of Control, one or more payments or distributions to be made by Key to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a “Payment”) may be determined to be an “excess parachute payment” that is not deductible by Key for federal income tax purposes and with respect to which the Executive will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Internal Revenue Code (hereinafter referred to respectively as “Section 280G” and “Section 4999”). If the Executive’s employment is terminated after a Change of Control occurs, the Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue Service, shall make all determinations required to be made under this Section 3.4, shall determine whether any Payment would be an excess parachute payment and shall communicate its determination, together with detailed supporting calculations, to Key and to the

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Executive within 30 days after the Termination Date or such earlier time as is requested by Key. Key and the Executive shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. Key shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Section 3.4.

(b) If the Accounting Firm determines that any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax), Key shall make additional cash payments to the Executive, from time to time and at the same time as any Payment constituting an excess parachute payment is paid or provided to the Executive, in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.

(c) If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax) in excess of the amount, if any, previously determined by the Accounting Firm, Key shall make further additional cash payments to the Executive not later than the due date of any payment indicated by the Internal Revenue Service with respect to these matters, in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.

(d) If Key desires to contest any determination by the Internal Revenue Service with respect to the amount of excise tax under Section 4999, the Executive shall, upon receipt from Key of an unconditional written undertaking to indemnify and hold the Executive harmless (on an after tax basis) from any and all adverse consequences that might arise from the contesting of that determination, cooperate with Key in that contest at Key’s sole expense. Nothing in this clause (d) shall require the Executive to incur any expense other than expenses with respect to which Key has paid to the Executive sufficient sums so that after the payment of the expense by the Executive and taking into account the payment by Key with respect to that expense and any and all taxes that may be imposed upon the Executive as a result of the Executive’s receipt of that payment, the net effect is no cost to the Executive. Nothing in this clause (d) shall require the Executive to extend the statute of limitations with respect

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to any item or issue in the Executive’s tax returns other than, exclusively, the excise tax under Section 4999. If, as the result of the contest of any assertion by the Internal Revenue Service with respect to excise tax under Section 4999, the Executive receives a refund of a Section 4999 excise tax previously paid and/or any interest with respect thereto, the Executive shall promptly pay to Key such amount as will leave the Executive, net of the repayment and all tax effects, in the same position, after all taxes and interest, that the Executive would have been in if the refunded excise tax had never been paid.

4. No Set-Off; No Obligation to Seek Other Employment or to Otherwise Mitigate Damages; No Effect Upon Other Plans. Key’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim whatsoever that Key or any of its Subsidiaries may have against the Executive. The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. Except as provided in Section 1.3, the amount of any payment provided for under this Agreement shall not be reduced by any compensation or benefits earned by the Executive as the result of employment by another employer or otherwise after the termination of the Executive’s employment. Neither the provisions of this Agreement, nor the execution of the waiver and release referred to in Section 5.3 below, nor the making of any payment provided for hereunder shall reduce any amounts otherwise payable, or in any way diminish the Executive’s rights, under any incentive compensation plan, stock option or stock appreciation rights plan, deferred compensation plan, restricted stock plan or agreement, retirement or supplemental retirement plan, stock purchase and savings plan, disability or insurance plan, or other similar contract, plan, or arrangement of Key or any Subsidiary, all of which will continue to be governed by their respective terms.

5. Certain Limitations on Benefits.

5.1 Election of Benefits Required; Payments in Lieu of Other Claims or Rights. If (a) the Executive is a party to either or both of an employment agreement (which includes any letter agreement regarding Executive’s employment with Key or any Subsidiary) or severance agreement with Key or any Subsidiary (singularly or collectively, the “Prior Agreement”), and (b) the Executive’s employment is terminated under circumstances giving rise to a right on the part of the Executive to receive continuing compensation, separation pay, or other severance benefits under the Prior Agreement and under this Agreement, the Executive shall have the right to elect to have either the Prior Agreement (if and only to the extent the Prior Agreement is applicable) or this Agreement (if and only to the extent this Agreement is applicable) , but not both, apply to the termination. If this Section 5.1 applies: (x) Key shall not make any payments arising out of the termination of the Executive’s employment, either under the Prior Agreement or under this Agreement, until after the Executive has delivered to Key a signed notice of election to receive payments under the Prior Agreement or under this Agreement, and (y) if the Executive elects to receive payments under the Prior Agreement, the provisions of Sections 3.1, 3.2, and 3.4 of this Agreement shall nevertheless continue to be applicable, but without duplication of payments. If the Executive receives any payments under Section 1.1(a) or Section 1.2(a), as the case may be, of this Agreement as a result of

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the termination of the Executive’s employment following a Change of Control, those payments shall be in lieu of any and all other claims or rights that the Executive may have for severance, separation, and/or salary continuation pay upon that termination of the Executive’s employment.

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5.2 Taxes; Withholding of Taxes. Without limiting either the right of Key or its Subsidiary to withhold taxes pursuant to this Section 5.2 or the obligation of Key to make gross-up payments pursuant to Section 3.4, the Executive shall be responsible for all income, excise, and other taxes (federal, state, city, or other) imposed on or incurred by the Executive as a result of receiving the payments provided in this Agreement, including, without limitation, the payments provided under Section 1 of this Agreement. Key or its Subsidiary may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as Key shall determine to be required pursuant to any law or government regulation or ruling. Without limiting the generality of the foregoing, Key or its Subsidiary may withhold from any amount payable under either of Sections 1.1 or 1.2 of this Agreement amounts sufficient to satisfy any tax withholding requirements that may arise out of any payment made to the Executive by Key or any Subsidiary under Section 1.3 of this Agreement.

5.3 Waiver and Release. Key may condition the payment of any amounts otherwise due under Section 1 of this Agreement upon (a) the execution by the Executive of a waiver and release in the form attached to this Agreement as Exhibit A, with blanks appropriately filled and, in the case of clause (e) contained therein, completed with the number of days that Key determines is required under applicable law, but in no event more than 45 days, and (b) the observation of such waiting periods, if any, before and after execution of the waiver and release by the Executive as are required by law, such as, for example, the waiting periods
required for a waiver and release to be effective with respect to claims under the Age Discrimination in Employment Act, provided that Key delivers to the Executive such a waiver and release, appropriately completed, within seven days of the date on which the Executive’s employment is terminated.

6. Term of this Agreement. This Agreement shall be effective upon the date first above written and shall thereafter apply to any Change of Control occurring on or before December 31, 2007. Unless this Agreement is terminated earlier pursuant to Section 6.1, on December 31, 2007 and on December 31 of each succeeding year thereafter (a “Renewal Date”), the term of this Agreement shall be automatically extended for an additional year unless either party has given notice to the other, at least one year in advance of that Renewal Date, that the Agreement shall not apply to any Change of Control occurring after that Renewal Date.

6.1 Termination of Agreement Upon Termination of Employment Before a Change of Control. This Agreement shall automatically terminate and cease to be of any further effect on the first date occurring before a Change of Control on which the Executive is no longer employed by Key or any Subsidiary, except that, for purposes of this Agreement, any termination of employment of the Executive that is effected before and in contemplation of a Change of Control that occurs after the date of the termination shall be deemed to be a termination of the Executive’s employment as of immediately after that Change of Control and this Agreement shall be deemed to be in effect immediately after that Change of Control.

6.2 No Termination of Agreement after a Change of Control. If a Change of Control occurs while this Agreement remains in effect, this Agreement shall remain effective indefinitely thereafter with respect to any and all consequences flowing from that Change of

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Control under the terms of this Agreement. However, after a Change of Control, Key may terminate this Agreement with respect to any further Change of Control that might occur after a future Renewal Date by giving notice, at least one year in advance of that future Renewal Date, as contemplated above in this Section 6, that the Agreement shall not apply to any Change of Control occurring after that future Renewal Date.

7. Miscellaneous.

7.1 Successor to Key. Key shall not consolidate with or merge into any other corporation, or transfer all or substantially all of its assets to another corporation or bank, unless such other corporation or bank shall assume this Agreement in a signed writing and deliver a copy thereof to the Executive. Upon such assumption the successor corporation or bank shall become obligated to perform the obligations of Key under this Agreement and the term “Key” as used in this Agreement shall be deemed to refer to such successor corporation or bank.

7.2 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, and addressed, in the case of notices to Key or a Subsidiary, as follows:

KeyCorp
127 Public Square
Cleveland, Ohio 44114
Attention: Secretary

and, in the case of notices to the Executive, properly addressed to the Executive at the Executive’s most recent home address as shown on the records of Key or its Subsidiary, or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7.3 Employment Rights. Nothing expressed or implied in this Agreement shall create any right or duty on the part of Key or the Executive to have the Executive continue as an officer of Key or a Subsidiary or to remain in the employment of Key or a Subsidiary.

7.4 Administration. Key shall be responsible for the general administration of this Agreement and for making payments under this Agreement. All fees and expenses billed by the Accounting Firm for services contemplated under this Agreement shall be the responsibility of Key.

7.5 Source of Payments. Any payment specified in this Agreement to be made by Key may be made, at the election of Key, directly by Key or through any Subsidiary of Key. All payments under this Agreement shall be made solely from the general assets of Key or one of its Subsidiaries (or from a grantor trust, if any, established by Key for purposes of making payments under this Agreement and other similar agreements), and the Executive shall have the rights of an unsecured general creditor of Key with respect thereto.

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7.6 Claims Review Procedure. Whenever Key decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Agreement by the Executive, Key shall transmit a written notice of its decision to the Executive, which notice shall be written in a manner calculated to be understood by the Executive and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Executive that, within 60 days of the date on which the Executive receives such notice, the Executive may obtain review of the decision of Key in accordance with the procedures hereinafter set forth. Within such 60-day period, the Executive or the Executive’s authorized representative may request that the claim denial be reviewed by filing with Key a written request therefor, which request shall contain the following information:

(a) the date on which the request was filed with Key,

(b) the specific portions of the denial of the Executive’s claim that the Executive requests Key to review, and

(c) any written material that the Executive desires Key to examine.

Within 30 days of the date specified in clause (a) of this Section 7.6, Key shall conduct a full and fair review of its decision to deny the Executive’s claim for benefits and deliver to the Executive its written decision on review, written in a manner calculated to be understood by the Executive, specifying the reasons and the Agreement provisions upon which its decision is based. Nothing in this Section 7.6 shall be construed as limiting or restricting the Executive’s right to institute legal proceedings in a court of competent jurisdiction to enforce this Agreement after complying with the procedures set forth in this Section 7.6 or as limiting or restricting the scope of the court’s review (which review shall be de novo); provided, further, that the failure of the Executive to comply with the procedures set forth in this Section 7.6 shall not bar or prohibit the subsequent compliance by the Executive with those procedures and thereafter the Executive shall have the right to institute legal proceedings to enforce this Agreement.

7.7 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

7.8 Modification, Waiver, Etc. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the Executive and Key. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof has been made by either party that is not set forth expressly in this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal

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representatives, executors, administrators, successors, heirs, and designees. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio.

7.9 Savings Clause. If any payments otherwise payable to the Executive under this Agreement are prohibited or limited by any statute or regulation in effect at the time the payments would otherwise be payable, including, without limitation, any regulation issued by the Federal Deposit Insurance Corporation (the “FDIC”) that limits executive change of control payments that can be made by an FDIC insured institution or its holding company if the institution is financially troubled (any such limiting statute or regulation a “Limiting Rule”):

(a) Key will use its best efforts to obtain the consent of the appropriate governmental agency (whether the FDIC or any other agency) to the payment by Key to the Executive of the maximum amount that is permitted (up to the amounts that would be due to the Executive absent the Limiting Rule); and

(b) the Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable Key severance, separation pay, and/or salary continuation plan that may be in effect at the time of the Executive’s termination.

Following any such election, the Executive will be entitled to receive benefits under the agreement or plan elected only if and to the extent the agreement or plan is applicable and subject to its specific terms.

8. Definitions.

8.1 Accounting Firm. The term “Accounting Firm” means the independent auditors of Key for the fiscal year preceding the year in which the Change of Control occurred and such firm’s successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, Key shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for Key or any of its affiliates (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”)).

8.2 Average Annual Incentive Compensation. The term “Average Annual Incentive Compensation” means Average Short Term Incentive Compensation, as defined in Section 8.4 below and Average Long Term Incentive Compensation, as defined in Section 8.3 below. For purposes of this Agreement:

(a) except as provided in (c) below, incentive compensation means any cash based incentive compensation, including bonuses and is calculated before any reduction on account of deferrals;

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(b) notwithstanding the fact that they are made in restricted stock and/or performance shares rather than in cash, any LTIC Stock Grant shall be deemed to be long term incentive compensation;

(c) special hiring bonuses paid or awarded to a newly hired executive in connection with that hiring or extraordinary bonuses to an incumbent executive, outside and beyond Key’s regular incentive compensation program, such as special retention awards to induce an executive to stay with Key, shall not be treated as incentive compensation;

(d) short term incentive compensation means incentive compensation for periods of time of one year or less;

(e) targeted short term incentive compensation means:

(i) if the short term incentive compensation plan, program, or arrangement in question designates a targeted amount or a targeted level of achievement for the Executive or the Executive’s job grade, it means that targeted amount or level;

(ii) if the short term incentive compensation plan, program, or arrangement in question has only one level of payout for the Executive or the Executive’s job grade (other than zero), it means that level (i.e.: the level other than zero);

(iii) if the short term incentive compensation plan, program, or arrangement in question does not designate a targeted amount or level of achievement for the Executive or the Executive’s job grade but does have multiple anticipated levels of possible payout or achievement for the Executive or the Executive’s job grade, it means (in each case excluding from consideration any level that results in zero payout) the middle level of payout or achievement for the Executive or the Executive’s job grade (or if there are an even number of levels, the average of the two levels if there are only two levels or the average of the middle two levels if there are four or more levels); and

(iv) in all other cases, the amount anticipated or projected to be paid under the plan, program, or arrangement in question at the time the performance period in question commenced.

For purposes of calculating Average Annual Incentive Compensation under this Section 8.2, in determining the amount of incentive compensation (short or long term) payable to or targeted for the Executive for any past or current incentive compensation period or cycle, if the incentive compensation was for a partial period or cycle (such as where an executive becomes a participant in an incentive plan after the incentive compensation period or cycle has commenced so that the award payable to or targeted for the executive is prorated), such incentive compensation payable to or targeted for the Executive shall be determined as if the Executive had participated throughout the complete incentive compensation period or cycle in question. For example, if, with respect to a 12-month plan that would have paid the

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Executive short term incentive compensation of $12X if the Executive had been a participant for the full plan year, the Executive became a participant when only seven months were left in the plan year and the Executive was therefore paid incentive compensation of only $7X, the Executive would be treated for purposes of this Section 8.2 as if the Executive had been a participant for the full plan year and had been paid incentive compensation of $12X under the plan.

8.3 Average Long Term Incentive Compensation. The term “Average Long Term Incentive Compensation” means the higher of:

(i) the average of the dollar value of the LTIC Stock Grants made to the Executive in each of the two years immediately preceding the Change Year (e.g., the average of the 2006 LTIC Stock Grant and the 2007 LTIC Stock Grant if the Change Year is 2008), or, if for any reason an LTIC Stock Grant was made to Executive in only one of those two immediately preceding years, the dollar value of the LTIC Stock Grant for that single year, and

(ii) the dollar value of the LTIC Stock Grant for the Change Year;

except that, if the Executive first became employed by Key or a Subsidiary during the Change Year or during the year immediately preceding the Change Year and pursuant to an offer letter or agreement the terms of which were approved by the Committee, “Average Long Term Incentive Compensation” shall be not less than the dollar value of the LTIC Stock Grant target specified in that offer letter or agreement.

For purposes of this Section 8.3 the dollar value of any LTIC Stock Grant means the aggregate Fair Market Value of the Common Shares subject to that grant (whether those Common Shares are restricted Common Shares or Performance Shares) as of the date the grant is made, taking into account all and only all of the target level of those Common Shares that are subject to the particular LTIC Stock Grant, without regard to changes in Key’s stock price after the date of grant or to any restrictions on or contingencies concerning those Common Shares.

8.4 Average Short Term Incentive Compensation. The term “Average Short Term Incentive Compensation” means the higher of:

(a) the average of the short term incentive compensation payable to the Executive for each of the last two years immediately preceding the Change Year or, if, for any reason, short term incentive compensation was payable to the Executive for only one of those two years, the amount of short term incentive compensation payable to the Executive for that year, and

(b) the Executive’s targeted short term incentive compensation for the Change Year or for the year immediately preceding the Change Year, whichever is higher,

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except that if the Executive first became a participant in Key’s short term incentive compensation program during the Change Year, Average Short Term Incentive Compensation means the Executive’s targeted short term incentive compensation for the Change Year.

8.5 Base Salary. The term “Base Salary” means the salary payable to the Executive from time to time before any reduction for voluntary contributions to the KeyCorp 401(k) Plan or any other deferral. Base Salary does not include imputed income from payment by Key of country club membership fees or other noncash benefits.

8.6 Cause. The employment of the Executive by Key or any of its Subsidiaries shall have been terminated for “Cause” if, after a Change of Control and prior to the termination of employment, any of the following has occurred:

(a) the Executive shall have been convicted of a felony,

(b) the Executive commits an act or series of acts of dishonesty in the course of the Executive’s employment which are materially inimical to the best interests of Key or a Subsidiary and which constitutes the commission of a felony, all as determined by the vote of three fourths of all of the members of the Board of Directors of Key (other than the Executive, if the Executive is a Director of Key) which determination is confirmed by a panel of three arbitrators appointed and acting in accordance with the rules of the American Arbitration Association for the purpose of reviewing that determination,

(c) Key or any Subsidiary has been ordered or directed by any federal or state regulatory agency with jurisdiction to terminate or suspend the Executive’s employment and such order or directive has not been vacated or reversed upon appeal, or

(d) after being notified in writing by the Board of Directors of Key to cease any particular Competitive Activity, the Executive shall intentionally continue to engage in such Competitive Activity while the Executive remains in the employ of Key or a Subsidiary.

If (x) Key or any Subsidiary terminates the employment of the Executive during the two year period beginning on the date of a Change of Control and at a time when it has “Cause” therefor under clause (c), above, (y) the order or directive is subsequently vacated or reversed on appeal and the vacation or reversal becomes final and no longer subject to further appeal, and (z) Key or the Subsidiary fails to offer to reinstate the Executive to employment within ten days of the date on which the vacation or reversal becomes final and no longer subject to further appeal, Key or the Subsidiary will be deemed to have terminated the Executive without Cause during the two year period beginning on the date of the Change of Control.

8.7 Change of Control. A “Change of Control” shall be deemed to have occurred if, at any time while this Agreement is in effect pursuant to Section 6 hereof, there is a Change of

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Control under any of clauses (a), (b), (c), or (d) below. For these purposes, Key will be deemed to have become a subsidiary of another corporation if any other corporation (which term shall, for all purposes of this Section 8.7, include, in addition to a corporation, a limited liability company, partnership, trust, or other organization) owns, directly or indirectly, 50 percent or more of the total combined outstanding voting power of all classes of stock of Key or any successor to Key.

(a) A Change of Control will have occurred under this clause (a) if Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and either

(i) immediately after giving effect to that transaction, less than 65% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to the transaction, or

(ii) immediately after giving effect to that transaction, individuals who were directors of Key on the day before the first public announcement of (x) the pendency of the transaction or (y) the intention of any person or entity to cause the transaction to occur, cease for any reason to constitute at least 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key.

(b) A Change of Control will have occurred under this clause (b) if a tender or exchange offer shall be made and consummated for 35% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 35% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as adopted under the 1934 Act, disclosing the acquisition of 35% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this clause (b));

(c) A Change of Control will have occurred under this clause (c) if either

(i) without the prior approval, solicitation, invitation, or recommendation of the Key Board of Directors any person or entity makes a public announcement of a bona fide intention (A) to engage in a transaction with Key that, if consummated, would result in a Change Event (as defined below in this clause (c)), or (B) to “solicit” (as defined in Rule 14a-1 under the 1934 Act) proxies in connection with a proposal that is not approved or recommended by the Key Board of Directors, or

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(ii) any person or entity publicly announces a bona fide intention to engage in an election contest relating to the election of directors of Key (pursuant to Regulation 14A, including Rule 14a-11, under the 1934 Act),

and, at any time within the 24 month period immediately following the date of the announcement of that intention, individuals who, on the day before that announcement, constituted the directors of Key (the “Incumbent Directors”) cease for any reason to constitute at least a majority thereof unless both (A) the election, or the nomination for election by Key’s shareholders, of each new director was approved by a vote of at least two-thirds of the Incumbent Directors in office at the time of the election or nomination for election of such new director, and (B) prior to the time that the Incumbent Directors no longer constitute a majority of the Board of Directors, the Incumbent Directors then in office, by a vote of at least 75% of their number, reasonably determine in good faith that the change in Board membership that has occurred before the date of that determination and that is anticipated to thereafter occur within the balance of the 24 month period to cause the Incumbent Directors to no longer be a majority of the Board of Directors was not caused by or attributable to, in whole or in any significant part, directly or indirectly, proximately or remotely, any event under subclause (i) or (ii) of this clause (c).

For purposes of this clause (c), the term “Change Event” shall mean any of the events described in the following subclauses (x), (y), or (z) of this clause (c):

(x) A tender or exchange offer shall be made for 25% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 25% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as adopted under the 1934 Act, disclosing the acquisition of 25% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this subclause (x)).

(y) Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and, after giving effect to such transaction, less than 50% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to such transaction or less than 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key were directors of Key immediately prior to such transaction.

(z) There is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Key.

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(d) A Change of Control will have occurred under this clause (d) if there is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Key.

8.8 Change Year. The term “Change Year” means the year in which a Change of Control occurred or, if more than one Change of Control has occurred, the year in which the earliest Change of Control occurred.

8.9 Common Shares. The term “Common Shares” means common shares of Key.

8.10 Committee. The term “Committee” means the Compensation and Organization Committee of the Board of Directors of Key or any successor to that committee.

8.11 Competitive Activity. The Executive shall be deemed to have engaged in “Competitive Activity” if the Executive:

(a) engages in any business or business activity in which Key or any of its Subsidiaries engages, including, without limitation, engaging in any business activity in the banking or financial services industry (other than as a director, officer, or employee of Key or any of its Subsidiaries), or

(b) serves as a director, officer, or employee of any bank, bank holding company, savings and loan association, building and loan association, savings and loan holding company, insurance company, investment banking or securities company, mutual fund company, or other financial services company other than Key or any of its Subsidiaries (each of the foregoing being hereinafter referred to as a “Financial Services Company”), or renders services of a consultative or advisory nature or otherwise to any such Financial Services Company; provided, however, this clause (b) shall not prohibit or restrict the Executive from serving in any such capacity with the consent of Key.

8.12 Disability. For purposes of this Agreement, the Executive’s employment will have been terminated by Key or its Subsidiary by reason of “Disability” of the Executive only if (a) as a result of bodily injury or sickness, the Executive has been unable to perform the Executive’s normal duties for Key or its Subsidiary for a period of 180 consecutive days, and (b) the Executive begins to receive payments under the KeyCorp Long Term Disability Benefit Plan not later than 30 days after the Termination Date.

8.13 Discontinued Plan. The term “Discontinued Plan” includes any Retirement Plan, the Savings Plan and/or the KeyCorp Deferred Savings Plan that:

(a) the Executive was covered by and participating in immediately before the occurrence of a Change of Control, and

(b) was, between the date of the Change of Control and the Termination Date, either terminated or altered in such a way as to substantially reduce the benefits provided to

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the Executive thereunder without having been substituted for by a similar plan providing substantially similar benefits to the Executive.

8.14 Fair Market Value. The term “Fair Market Value” with respect to Common Shares means:

(a) if the Common Shares are traded on a national exchange, the mean between the high and low sales price per Common Share on the national exchange on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares, or

(b) if the Common Shares are not traded on a national exchange, the mean between the high and low sales price per Common Share in the over-the-counter market, National Market System, as report by the National Quotations Bureau, Inc. and NASDAQ on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares.

8.15 Good Reason. The Executive shall be deemed to have “Good Reason” to terminate the Executive’s employment under this Agreement during a Window Period if, at any time after the occurrence of a Change of Control and before the end of the Window Period, either or both of the events listed in clauses (a) and (b) of this Section 8.15 occurs without the written consent of the Executive:

(a) following notice by the Executive to Key and an opportunity by Key to cure, the Executive determines in good faith that the Executive’s position, responsibilities, duties, or status with Key are at any time materially less than or reduced from those in effect before the Change of Control or that the Executive’s reporting relationships with superior executive officers have been materially changed from those in effect before the Change of Control; or

(b) Key’s headquarters is relocated outside of the greater Cleveland metropolitan area (but this clause (b) shall apply only if Key’s headquarters was the Executive’s principal place of employment before the Change of Control).

For purposes of clause (a), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the circumstance otherwise constituting Good Reason persists (as determined in good faith by the Executive, whose determination shall be conclusive) for more than seven calendar days after the Executive has given notice to Key of the existence of that circumstance.

8.16 Impermissible. The term “Impermissible,” when used in the context of the Executive’s continued coverage by and participation in any of the Retirement Plans or Savings Plans shall mean that such a continuation would violate the provisions of any such plan, would cause any such plan that is or is intended to be qualified under Section 401(a) of

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the Internal Revenue Code to fail to be so qualified, would require shareholder approval, or would be unlawful.

8.17 LTIC Stock Grant. The term “LTIC Stock Grant” means the grant, if any, of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made by the Committee to the Executive during any particular year as part of Key’s ongoing compensation program. For greater clarity, for purposes of this Agreement:

(a) “The terms “2006 LTIC Stock Grant”, “2007 LTIC Stock Grant,” “2008 LTIC Stock Grant,” etc. refer to LTIC Stock Grants, if any, made to the Executive by resolution adopted by the Committee in the specified year.

(b) An extraordinary grant or award of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made to a newly hired executive in connection with that hiring (i.e., any signing or hiring bonus) and a grant or award made to an incumbent executive outside of Key’s regular restricted stock and Performance Share program (e.g., a special retention grant or award) shall be treated as not being an LTIC Stock Grant and shall not be taken into account when calculating Average Long Term Incentive Compensation.

8.18 Mandatory Relocation. A “Mandatory Relocation” shall have occurred if, at any time after a Change of Control, the Executive is required to relocate the Executive’s principal place of employment for Key or its Subsidiary without the Executive’s written consent more than 35 miles from where the Executive was located prior to the Change of Control.

8.19 Performance Shares. The term “Performance Shares” means an award denominated in Common Shares or phantom Common Shares (regardless of whether payable in stock or cash) the vesting of which is contingent or accelerated upon attainment of one or more performance goals (absent death, disability, or a Change of Control) .

8.20 Reduction of Compensation. A “Reduction of Compensation” shall have occurred if any one or more of the following occurs:

(a) the Base Salary of the Executive is reduced at any time after a Change of Control;

(b) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Incentive Compensation Guaranty;

(c) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Option/SAR Guaranty.

For purposes of clauses (b) and (c), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the failure to satisfy the Incentive Compensation Guaranty, and/or the Option/SAR Guaranty, as the case may be, persists (as determined in

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good faith by the Executive) for more than seven calendar days after the Executive has given notice to Key of the existence of that failure.

8.21 Relevant Plans. The term “Relevant Plans” means:

(a) all Retirement Plans and Savings Plans that the Executive was covered by and participating in immediately before the Termination Date, and

(b) all Discontinued Plans (other than the KeyCorp Deferred Savings Plan).

Reference to a “Relevant Plan,” in the singular, means any of the Relevant Plans.

8.22 Retirement Plans. The term “Retirement Plans” means the KeyCorp Cash Balance Pension Plan and the Supplemental Retirement Plan, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds,
replaces, or is substituted for any such plan, and all retirement plans of any nature maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Retirement Plan,” in the singular, means any of the Retirement Plans.

8.23 Savings Plans. The term “Savings Plans” means and includes the KeyCorp 401(k) Savings Plan, as from time to time amended, restated, or otherwise modified, including any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for such plan, and other than the KeyCorp Deferred Savings Plan, all salary reduction, savings, profit-sharing, or stock bonus plans (including, without limitation, all plans involving employer matching contributions, whether or not constituting a qualified cash or deferred arrangement under Section 401(k) of the Internal Revenue Code), maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Savings Plan,” in the singular, shall mean any of the Savings Plans.

8.24 Supplemental Retirement Plan. The term “Supplemental Retirement Plan” means the KeyCorp Supplemental Retirement Plan, the KeyCorp Excess Cash Balance Pension Plan, or the KeyCorp Executive Supplemental Pension Plan in which the Executive participates, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for any of such plans.

8.25 Subsidiary. A “Subsidiary” means any corporation, bank, partnership, or other entity a majority of the voting control of which is directly or indirectly owned or controlled at the time in question by Key.

8.26 Termination Date. The term “Termination Date” means the date on which the Executive’s employment with Key and its Subsidiaries terminates.

8.27 Window Period. The term “Window Period,” with respect to any particular Change of Control, means the three-month period beginning on the date that falls on the same day of

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the month as the date of the Change of Control in the fifteenth month after the month in which the Change of Control occurs. If at any time there has been more than one Change of Control, there shall be a separate Window Period with respect to each such Change of Control.

8.28 Compliance with American Jobs Creation Act. In the event that any provision of this Agreement is determined to constitute deferred compensation, as defined in accordance with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, the applicable provision will be administered in accordance with the requirements of Section 409A of the Code, including the delay of any payment otherwise payable under this Agreement for a period of 6 months following the Termination Date.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

KEYCORP
By
	Henry L. Meyer III
	Chairman and Chief Executive Officer
THE “EXECUTIVE”
XXXXXXXXXX

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Exhibit A

WAIVER AND RELEASE

DO NOT SIGN WITHOUT READING AND UNDERSTANDING

     In consideration of the payments to be made to me following termination of my employment with KeyCorp pursuant to the agreement between KeyCorp and me dated as of XXXXX XX, 200X (the “Change of Control Agreement”), which payments I acknowledge I am not entitled to receive without execution of this Waiver and Release, and which payments will not commence earlier than eight days after the execution of this Waiver and Release, I, for myself, my heirs, administrators, executors, and assigns, release and discharge KeyCorp, its affiliates, subsidiaries, divisions, successors, and assigns and the employees, officers, directors, and agents thereof (collectively referred to throughout this Waiver and Release as “Key”) from any and all causes of action, charges of discrimination, proceedings, or claims of every kind, nature, and character, arising out of or relating to my employment with Key and the termination of my employment with Key based upon or related to any contention (i) that my employment terminated because of any tortuous, wrongful, unlawful, or improper conduct or act or in violation or breach of any express or implied contract or agreement, or (ii) that Key engaged in any discriminatory act, event, pattern, or practice involving age, religion, creed, sex, national origin, ancestry, handicap, disability, veteran status, marital status, race, or color, or the continuing or future effects thereof (including, without limitation, the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., or any similar state law).

     I warrant that no promise or inducement has been offered to me other than as set forth in the Change of Control Agreement, that I am relying on no other statement or representation by Key, and that I have not assigned any of my rights. I have read this Waiver and Release; I have had a full opportunity to consider it (including the opportunity to consult with an attorney of my choice); and I understand that by signing it I am giving up important rights, including any right to sue under federal, state, or local law. I also verify that my entering into this Waiver and Release is wholly voluntary.

I further warrant that:

(a) I understand that I am specifically waiving rights or claims under the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq.;

(b) I understand that I am not hereby waiving any rights or claims that may arise after this Waiver and Release is executed by me;

(c) I understand that this Waiver and Release is being given by me in exchange for consideration that is more valuable to me than what I am entitled to without the Change of Control Agreement and the execution of this Waiver and Release;

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(d) I have been advised in writing by Key that I should have, at my expense, an attorney of my choice review this Waiver and Release;

(e) I have been advised by Key that I may take up to ___days from receipt of this Waiver and Release to determine whether to execute the same; and

(f) I have been advised by Key that this Waiver and Release may be revoked by me within seven (7) days following execution of this Waiver and Release whereupon this Waiver and Release shall be null and void.

     IN WITNESS WHEREOF, I have hereby set my hand this                      day of                     ,      .

Witness:

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Exhibit A
(cont’d)

Acknowledgment of Receipt of Waiver and Release

     I do hereby acknowledge that on                     ,      , I received a copy of the Waiver and Release which is attached hereto, and I understand that I have      * days from the date of receipt of the Waiver and Release to determine whether to execute it.

Witness:

*to be completed the same as clause (e) of the Waiver and Release.

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Exhibit A
(cont’d)

Director of Human Resources
KeyCorp
127 Public Square
Cleveland, Ohio 44114

Re: Waiver and Release

Dear Sir or Madam:

          On                 ___,           , I executed a Waiver and Release in favor of KeyCorp. More than seven (7) days have elapsed since I executed the Waiver and Release. I have at no time revoked my acceptance or execution of the Waiver and Release and, accordingly, I hereby request that KeyCorp commence making the payments due to me under my Change of Control Agreement.

	Very truly yours,
Witness:

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EX-10.54

EXHIBIT 10.54

AGREEMENT

          THIS AGREEMENT (“Agreement”) is made as of the XX day of XXXXX, 200X, between KEYCORP, an Ohio corporation (“Key”), and XXXXXX (the “Executive”).

          Key is entering into this Agreement in recognition of the importance of the Executive’s services to the continuity of management of Key and based upon its determination that it will be in the best interests of Key and its Subsidiaries to encourage the Executive’s continued attention and dedication to the Executive’s duties in the potentially disruptive circumstances of a possible Change of Control of Key. (As used in this Agreement, the terms “Subsidiaries” and “Change of Control” and certain other capitalized terms have the meanings ascribed to them in Section 8, at the end of this Agreement.)

          Key and the Executive agree, effective as of the date first set forth above, as follows:

1. Basic Severance Benefits. The benefits described in Sections 1.1, 1.2, and 1.3 below are subject to the limitations set forth in Sections 5.1 (which requires an election among applicable agreements providing severance benefits if more than one such agreement would apply in the particular circumstances of the termination of the Executive’s employment and stipulates that any payments received under this Agreement are in lieu of other claims or rights), 5.2 (regarding withholding), and 5.3 (requiring the execution of a waiver and release by the Executive).

1.1 If Employment is Terminated Without Cause, etc., Within Two Years of a Change of Control. If, within two years following the occurrence of a Change of Control, the Executive’s employment with Key and its Subsidiaries is terminated by Key or its Subsidiary for any reason other than Cause, Disability, or death or by the Executive after a Reduction of Compensation or a Mandatory Relocation has occurred:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to two times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation; and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.1(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending on the second anniversary of the Termination Date (the “Section 1.1 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.1 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant

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Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.1 Benefit Period. For purposes of this Section 1.1(c), base salary shall be deemed to be the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

1.2 If Employment is Terminated by Executive for Good Reason During a Window Period. Except as provided in the last sentence of this Section 1.2, if the Executive’s employment with Key and its Subsidiaries is terminated by the Executive for Good Reason during a Window Period:

(a) Lump Sum Payment. Key shall pay to the Executive, within 30 business days after the Termination Date, a lump sum severance benefit equal to one and one half times the sum of (i) one year’s Base Salary (at the highest rate in effect at any time during the one year period ending on the date of the Change of Control) plus (ii) Average Short Term Incentive Compensation, and

(b) Retirement and Savings Plans. Effective as of the Termination Date, the Executive’s interest in all Relevant Plans shall become fully vested and nonforfeitable and the Executive’s right to and interest in all subsequent accruals provided for in the remainder of this Section 1.2(b) under any of the Relevant Plans shall also be fully vested and nonforfeitable. For the period beginning on the day after the Termination Date and ending eighteen months, to the day, after the Termination Date (the “Section 1.2 Benefit Period”), Key shall cause the Executive to continue to be covered by and to participate in all of the Relevant Plans in the same manner and to the same extent as if the Executive continued in the full-time employ of Key throughout the Section 1.2 Benefit Period, except that, if Key determines that such coverage or participation in any one or more of the Relevant Plans is Impermissible, the Executive shall continue to be covered by and participate as aforesaid in all of the Relevant Plans as to which such coverage or participation is not Impermissible and, with respect to each Relevant Plan as to which such continued coverage or participation is Impermissible, Section 1.4(b) shall apply. With respect to each Discontinued Plan, Section 1.4(c) shall apply.

(c) Deferred Savings Plan Benefit. Within 30 days of the Executive’s Termination Date, Key shall provide the Executive with a lump sum cash payment, which shall equal the amount of corporate contributions that the Executive otherwise would be eligible to receive under the KeyCorp Deferred Savings Plan as if the Executive actively deferred 6% or more of his base salary and 6% or more of his incentive compensation award to the KeyCorp Deferred Savings Plan during the Section 1.2 Benefit Period. For purposes of this Section 1.2(c), base salary shall be deemed to be

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the amount to be received by the Executive under clause (a)(i) above, and incentive compensation award shall be deemed to be the amount to be received by the Executive under clause (a)(ii) above.

This Section 1.2 shall not apply if, at the Termination Date, (x) there has been either any Reduction of Compensation or any Mandatory Relocation (in which event Section 1.1 would apply to the termination) or (y) Key or any Subsidiary has Cause to terminate the Executive’s employment (in which case no lump sum severance or retirement benefits would be payable or provided under either of Sections 1.1 or 1.2).

1.3 Continued Medical Coverage

(a) Payment of Cost of COBRA Health Benefits. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive elects to continue to receive health benefits pursuant to an election that Key or any Subsidiary is required to provide to the Executive in order to comply with Section 4980B(f) of the Internal Revenue Code (commonly referred to as “COBRA continuation coverage”) during the period specified in Section 4980B(f) (the “COBRA continuation period”), Key will pay the cost of continuing those benefits from the Termination Date through the first to occur of (a) the end of the COBRA continuation period or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity.

(b) Payment of Retiree Medical Coverage. If the Executive becomes entitled to payment of a lump sum severance benefit under either of Sections 1.1 or 1.2 of this Agreement and the Executive is age 50 with 15 years Vesting Service (as that term is defined under the KeyCorp Cash Balance Pension Plan) as of his or her Termination Date, the Executive may elect, in lieu of electing COBRA continuation coverage under the provisions of Section 1.3(a) hereof, to participate in the KeyCorp Retiree Medical Plan. Key will pay the premium cost for the Executive’s Retiree Medical Plan coverage from the Executive’s Termination Date through (a) the last day of the eighteen-month period following the Executive’s Termination Date, or (b) the date on which the Executive becomes employed (other than on a part-time or temporary basis) by any other person or entity, whichever shall first occur. If the Executive is not age 55 at the time that Key’s premium payment ends, the Executive shall be required to pay the full premium cost for his or her continued Retiree Medical Plan coverage until the Executive reaches age 55, at which time the KeyCorp Retiree Medical Plan premium cost-sharing structure will apply.

1.4 Provisions Applicable to Continued Retirement and Savings Plan Participation.

(a) If the Executive becomes entitled to payment of a lump sum severance benefit under either of Section 1.1 or Section 1.2, the rules set forth in the remainder of this Section 1.4(a) shall be applicable for purposes of all Relevant Plans:

(i) the entire Section 1.1 Benefit Period or Section 1.2 Benefit Period (each, a “Benefit Period”), as the case may be, shall be included in determining the Executive’s years of service,

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(ii) amounts received by the Executive under clause (a)(i) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be base salary received by the Executive ratably during the applicable Benefit Period, and

(iii) amounts received by the Executive under clause (a)(ii) of either of Section 1.1 or Section 1.2, as the case may be, shall be deemed to be short term incentive compensation received by the Executive ratably during the applicable Benefit Period.

(b) If either Section 1.1(b) or Section 1.2(b) becomes applicable and at any time during the applicable Benefit Period, Key determines in good faith that continuing the Executive’s coverage by and participation in any of the Relevant Plans during the applicable Benefit Period is Impermissible, the Executive shall not be covered by and participate in such affected plan or plans during the applicable Benefit Period, but Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Executive continued to be covered by and to participate in all such affected plans throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the Termination Date, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the affected plan or plans in question.

(c) If either Section 1.1(b) or Section 1.2(b) becomes applicable and any of the Relevant Plans and/or the KeyCorp Deferred Savings Plan are Discontinued Plans, as to each such Discontinued Plan, Key shall provide to the Executive under this Agreement, as a supplemental retirement benefit, payments and benefits that put the Executive in the same position that the Executive would have been in had the Discontinued Plan continued through the end of the applicable Benefit Period without having become a Discontinued Plan and had the Executive continued to be covered by and to participate in that Discontinued Plan throughout the applicable Benefit Period (taking into account the rules set forth in Section 1.4(a) above) to the same extent as the Executive was a participant immediately before the date of the Change of Control, with the supplemental payments and benefits under this sentence being payable to the Executive (or, if applicable, to the Executive’s spouse, estate, or designated beneficiary) at the same time and with the same payment options as would be applicable under the Discontinued Plan, and as a lump sum payment under the KeyCorp Deferred Savings Plan, provided however, that to the extent the Discontinued Plan has been substituted for by a Relevant Plan, the amount payable by Key under this Section 1.4(c) shall be offset by the amounts actually paid under that substitute plan.

2. Certain Compensation Guaranties During Two Years following a Change of Control. For so long as the Executive remains in the employ of Key or one of its Subsidiaries during the period beginning on the day after any Change of Control and continuing through the second anniversary of that Change of Control (the period of the Executive’s employment during such two year period being the “Guaranteed Compensation Period”), the Executive shall be entitled to

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the Incentive Compensation Guaranty set forth in Section 2.1 and to the Option/SAR Guaranty set forth in Section 2.2.

2.1 Guaranteed Level of Incentive Compensation. Except as otherwise provided in Section 2.3, Key shall cause the Executive to receive, during the Guaranteed Compensation Period, as incentive compensation, an amount that, on an annualized basis, is at least equal to the Executive’s Average Annual Incentive Compensation. The guaranty set forth in the immediately preceding sentence (the “Incentive Compensation Guaranty”) establishes a minimum amount of incentive compensation that must be paid to the Executive with respect to the Executive’s employment during the Guaranteed Compensation Period. Except as and to the extent otherwise permitted by any of the provisions of Section 2.3:

(a) Key shall make payments to the Executive in cash that satisfy the Incentive Compensation Guaranty quarterly in arrears, within 30 days after the end of each calendar quarter for each quarter or portion thereof during the Guaranteed Compensation Period;

(b) If the Executive’s employment terminates for any reason other than Cause, Key shall pay all unpaid guaranteed incentive compensation with respect to the Guaranteed Compensation Period to the Executive in a lump sum by not later than 30 business days after the Termination Date; and

(c) If the Executive’s employment is terminated by Key for Cause, Key shall not be required to pay to the Executive any amount of incentive compensation on account of the Incentive Compensation Guaranty that was not required to have been paid before the Termination Date.

2.2 Guaranteed Participation in Stock Option and SAR Plans. During the Guaranteed Compensation Period, the Executive shall participate fully (and at a level at least substantially equivalent to that of comparable senior executives of Key) in each and every stock option and stock appreciation right plan in which similarly situated executives of Key and its Subsidiaries generally participate. The guaranty of full participation set forth in this Section 2.2 is hereinafter sometimes referred to as the “Option/SAR Guaranty.”

2.3 Exceptions to and Alternative Means of Satisfying the Incentive Compensation Guaranty. For purposes of the exceptions and alternative means of satisfying the Incentive Compensation Guaranty that are set forth in this Section 2.3, the Incentive Compensation Guaranty shall be deemed to be made up of two parts, the “Short Term Part” and the “Long Term Part,” each of which shall bear the same proportion, respectively, to the entire Incentive Compensation Guaranty as Average Short Term Incentive Compensation and Average Long Term Incentive Compensation bear, respectively, to Average Annual Incentive Compensation:

(a) Bona fide Short Term Incentive Compensation Plan Exception. If (i) Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level; (ii) Key, in administering that plan in good faith and without discriminating against the Executive, utilizes a performance factor that is intended to rate for the short term compensation cycle in question either the corporation’s overall performance or the overall performance of the business unit in

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which the Executive works; (iii) that performance factor is uniformly applied (either in establishing an incentive compensation pool or against each participant’s target) to all participants in the plan or to all participants in the plan that work in the business unit in which the Executive works, as the case may be; and (iv) the application of that factor reduces the short term incentive compensation payable under that plan to a level below the Executive’s target level; then payment of the short term incentive compensation, if any, due to the Executive at the reduced level under that plan shall satisfy Key’s obligation under the Short Term Part for that particular short term compensation cycle.

(b) Annual Payment Exception. If Key maintains a bona fide short term incentive compensation plan that would satisfy the Short Term Part if the Executive received short term incentive compensation under that plan at the Executive’s target level and that plan provides for payment of all amounts earned at regularly scheduled times not less frequently than once a year, Key may satisfy the Short Term Part by paying incentive compensation to the Executive under that plan (at not less than the Executive’s target level or as reduced if permitted by 2.3(a) above) at those regularly scheduled times, except that if Executive’s employment terminates for any reason other than Cause, Key shall make payments under that plan, pro rated to include all periods within the Compensation Guaranty Period as to which the Executive has not yet received incentive compensation under that plan, within 30 business days after the Termination Date.

(c) Issuance of Restricted Stock Alternative. As an alternative to paying Executive cash to satisfy the Long Term Part, Key may make restricted stock grants of Common Shares to the Executive each year during the Guaranteed Compensation Period that:

(i) are made during the same calendar quarter of the year as the calendar quarter during which Key made LTIC Stock Grants in the year immediately preceding the Change Year (but if Key made such grants during more than one calendar quarter in the year immediately preceding the Change Year, then the new grant shall be made during the same calendar quarter of the year as the calendar quarter during which Key made grants to the highest number of officers in the year immediately preceding the Change Year);

(ii) have a Fair Market Value that on an annual basis is at least equal to the Executive’s Average Long Term Incentive Compensation;

(iii) provide for time lapsed vesting of the restricted stock subject to the grant so that the entire grant will be fully vested not later than the third anniversary of the date of grant if the Executive continues to be employed through that date; and

(iv) have the further provision that, upon any termination of the Executive’s employment other than a termination for Cause (including, without limitation, any termination by reason of death, disability, voluntary or involuntary retirement, or resignation), if, as of the Termination Date, less than a proportionate part of the Common Shares subject to the restricted stock grant granted to the Executive during the Guaranteed Compensation Period has vested, then an additional portion of those Common Shares shall vest immediately on the Termination Date so that, in the aggregate, a proportionate part has vested as of the Termination

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Date. For these purposes, “a proportionate part” means the full number of Common Shares in the restricted stock grant multiplied by a fraction, the numerator of which is the number of days between (x) January 1 of the calendar year in which the restricted stock grant was made and (y) the last day of the Guaranteed Compensation Period, inclusive, and the denominator of which is 1095 (i.e., 365 times three).

If Key makes restricted stock grants as provided in this 2.3(c), Key will have satisfied the Long Term Part.

3. Other Benefits.

3.1 Reimbursement of Certain Expenses After a Change of Control.

(a) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of defending any action brought to have this Agreement declared invalid or unenforceable.

(b) From and after a Change of Control, Key shall pay, as incurred, all expenses of the Executive, including the reasonable fees of counsel engaged by the Executive, of prosecuting any action to compel Key to comply with the terms of this Agreement upon receipt from Executive of an undertaking to repay Key for such expenses if, and only if, it is ultimately determined by a court of competent jurisdiction that the Executive had no reasonable grounds for bringing that action (which determination need not be made simply because the Executive fails to succeed in the action).

(c) From and after a Change of Control, expenses (including attorney’s fees) incurred by the Executive in defending any action, suit, or proceeding commenced or threatened (whether before or after the Change of Control) against the Executive (i) for any action or failure to act as a director, employee, officer, or agent of Key or any Subsidiary or (ii) if the Executive is or was serving at the request of Key or any subsidiary, for any action or failure to act as a director, trustee, officer, employee, member, manager, or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any employee benefit plan maintained by Key or any Subsidiary (“Plan”), shall be paid by Key, as they are incurred, in advance of final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the Executive in which the Executive agrees to reasonably cooperate with Key or the Subsidiary, as the case may be, concerning the action, suit, or proceeding, and (i) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a director, to repay the amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that the Executive’s action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to Key or a Subsidiary or undertaken with reckless disregard for the best interests of Key or a Subsidiary, or (ii) if the action, suit, or proceeding is commenced or threatened against the Executive for any action or failure to act as a trustee, officer, employee, member, manager, or agent (including as a Plan fiduciary), to repay the amount if it is ultimately determined that the Executive is not entitled to be

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indemnified. The obligation of Key to advance expenses provided for in this Section 3.1(c) shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or regulations of Key or of any Subsidiary, any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise. Without limiting the preceding provisions of this Section 3.1, Key shall advance the Executive’s expenses provided for herein as incurred in connection with service as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee or any successor of either of the Committees.

3.2 Indemnification. From and after a Change of Control, Key shall indemnify the Executive, to the full extent permitted or authorized by the Ohio General Corporation Law as it may from time to time be amended, if the Executive is (whether before or after the Change of Control) made or threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or was a director, officer, employee or agent of Key or any Subsidiary, or is or was serving at the request of Key or any Subsidiary as a director, trustee, officer, employee, member, manager or agent of a bank, corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust, or other enterprise, including serving as a committee member or other fiduciary of any Plan, including serving as a member of either the Key Cash Balance Pension Plan Trust Oversight Committee or the Key 401(k) Savings Plan Trust Oversight Committee, or any successor of either of the Committees. The indemnification provided by this Section 3.2 shall not be deemed exclusive of any other rights to which the Executive may be entitled under the articles of incorporation or the regulations of Key or of any Subsidiary, or any agreement, vote of shareholders or disinterested directors, insurance policy or similar protection, or otherwise, both as to action in the Executive’s official capacity and as to action in another capacity while holding such office, and shall continue as to the Executive after the Executive has ceased to be a director, trustee, officer, employee, member, manager, agent, committee member or other fiduciary and shall inure to the benefit of the heirs, executors, and administrators of the Executive. Notwithstanding the foregoing provisions of this Section 3.2, the Executive shall not be indemnified if it is judicially determined that the Executive’s action or failure to act constituted gross negligence or willful misconduct in carrying out the Executive’s duties as a fiduciary of a Plan.

3.3 Disability. If, after a Change of Control and prior to the Termination Date, the Executive is unable to perform services for Key or any Subsidiary for any period by reason of disability of the Executive, Key will pay and provide to the Executive all compensation and benefits to which the Executive would have been entitled had the Executive continued to be actively employed by Key or any Subsidiary through the earliest of the following dates: (a) the first date on which the Executive is no longer so disabled to such an extent that the Executive is unable to perform services for Key or any Subsidiary (whereupon the Executive shall be restored to his duties and this Agreement shall apply in accordance with its terms), (b) the date on which the Executive becomes eligible for payment of long term disability benefits under a long term disability plan generally applicable to executives of Key or a Subsidiary, (c) the date on which Key has paid and provided 24 months of compensation and benefits to the Executive during the Executive’s disability, or (d) the date of the Executive’s death.

3.4 Parachute Payments.

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     In the event that the payments or distributions to be made by Key to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a “Payment”) (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and (ii) but for this Section 3.4 would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the “Excise Tax”), then the Payment to the Executive shall be either:

(a) delivered in full, or

(b) delivered after reducing the Payment $1 below the safe harbor limit (as described in Section 280G(b)(2)(A)(ii) of the Internal Revenue Code) which would result in no portion of the Payment being subject to the Excise Tax,

whichever of the foregoing amounts, taking into account the applicable federal, state, and local income taxes and the Excise Tax, results in the receipt by the Executive on an after-tax basis, of the greater amount, notwithstanding that all or some portion of the Payment may be taxable under Section 4999 of the Internal Revenue Code. In the event that the Payment is required to be reduced by this Section 3.4, the Executive shall be entitled to designate the portion of the Payment to be so reduced to give effect to this Section 3.4. The Accounting Firm shall make all determinations required by this Section 3.4. Key and the Executive shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. Key shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Section 3.4.

4. No Set-Off; No Obligation to Seek Other Employment or to Otherwise Mitigate Damages; No Effect Upon Other Plans. Key’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim whatsoever that Key or any of its Subsidiaries may have against the Executive. The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. Except as provided in Section 1.3, the amount of any payment provided for under this Agreement shall not be reduced by any compensation or benefits earned by the Executive as the result of employment by another employer or otherwise after the termination of the Executive’s employment. Neither the provisions of this Agreement, nor the execution of the waiver and release referred to in Section 5.3 below, nor the making of any payment provided for hereunder shall reduce any amounts otherwise payable, or in any way diminish the Executive’s rights, under any incentive compensation plan, stock option or stock appreciation rights plan, deferred compensation plan, restricted stock plan or agreement, retirement or supplemental retirement plan, stock purchase and savings plan, disability or insurance plan, or other similar contract, plan, or arrangement of Key or any Subsidiary, all of which will continue to be governed by their respective terms.

5. Certain Limitations on Benefits.

5.1 Election of Benefits Required; Payments in Lieu of Other Claims or Rights. If (a) the Executive is a party to either or both of an employment agreement (which includes any letter agreement regarding Executive’s employment with Key or any Subsidiary) or severance agreement with Key or any Subsidiary (singularly or collectively, the “Prior Agreement”),

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and (b) the Executive’s employment is terminated under circumstances giving rise to a right on the part of the Executive to receive continuing compensation, separation pay, or other severance benefits under the Prior Agreement and under this Agreement, the Executive shall have the right to elect to have either the Prior Agreement (if and only to the extent the Prior Agreement is applicable) or this Agreement (if and only to the extent this Agreement is applicable) , but not both, apply to the termination. If this Section 5.1 applies: (x) Key shall not make any payments arising out of the termination of the Executive’s employment, either under the Prior Agreement or under this Agreement, until after the Executive has delivered to Key a signed notice of election to receive payments under the Prior Agreement or under this Agreement, and (y) if the Executive elects to receive payments under the Prior Agreement, the provisions of Sections 3.1 and 3.2 of this Agreement shall nevertheless continue to be applicable, but without duplication of payments. If the Executive receives any payments under Section 1.1(a) or Section 1.2(a), as the case may be, of this Agreement as a result of the termination of the Executive’s employment following a Change of Control, those payments shall be in lieu of any and all other claims or rights that the Executive may have for severance, separation, and/or salary continuation pay upon that termination of the Executive’s employment.

5.2 Taxes; Withholding of Taxes. Without limiting either the right of Key or its Subsidiary to withhold taxes pursuant to this Section 5.2, the Executive shall be responsible for all income, excise, and other taxes (federal, state, city, or other) imposed on or incurred by the Executive as a result of receiving the payments provided in this Agreement, including, without limitation, the payments provided under Section 1 of this Agreement. Key or its Subsidiary may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as Key shall determine to be required pursuant to any law or government regulation or ruling. Without limiting the generality of the foregoing, Key or its Subsidiary may withhold from any amount payable under either of Sections 1.1 or 1.2 of this Agreement amounts sufficient to satisfy any tax withholding requirements that may arise out of any payment made to the Executive by Key or any Subsidiary under Section 1.3 of this Agreement.

5.3 Waiver and Release. Key may condition the payment of any amounts otherwise due under Section 1 of this Agreement upon (a) the execution by the Executive of a waiver and release in the form attached to this Agreement as Exhibit A, with blanks appropriately filled and, in the case of clause (e) contained therein, completed with the number of days that Key determines is required under applicable law, but in no event more than 45 days, and (b) the observation of such waiting periods, if any, before and after execution of the waiver and release by the Executive as are required by law, such as, for example, the waiting periods
required for a waiver and release to be effective with respect to claims under the Age Discrimination in Employment Act, provided that Key delivers to the Executive such a waiver and release, appropriately completed, within seven days of the date on which the Executive’s employment is terminated.

6. Term of this Agreement. This Agreement shall be effective upon the date first above written and shall thereafter apply to any Change of Control occurring on or before December 31, 2007. Unless this Agreement is terminated earlier pursuant to Section 6.1, on December 31, 2007 and on December 31 of each succeeding year thereafter (a “Renewal Date”), the term of this Agreement shall be automatically extended for an additional year unless either party has given notice to the other, at least one year in advance of that Renewal Date, that the Agreement shall not apply to any Change of Control occurring after that Renewal Date.

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6.1 Termination of Agreement Upon Termination of Employment Before a Change of Control. This Agreement shall automatically terminate and cease to be of any further effect on the first date occurring before a Change of Control on which the Executive is no longer employed by Key or any Subsidiary, except that, for purposes of this Agreement, any termination of employment of the Executive that is effected before and in contemplation of a Change of Control that occurs after the date of the termination shall be deemed to be a termination of the Executive’s employment as of immediately after that Change of Control and this Agreement shall be deemed to be in effect immediately after that Change of Control.

6.2 No Termination of Agreement after a Change of Control. If a Change of Control occurs while this Agreement remains in effect, this Agreement shall remain effective indefinitely thereafter with respect to any and all consequences flowing from that Change of Control under the terms of this Agreement. However, after a Change of Control, Key may terminate this Agreement with respect to any further Change of Control that might occur after a future Renewal Date by giving notice, at least one year in advance of that future Renewal Date, as contemplated above in this Section 6, that the Agreement shall not apply to any Change of Control occurring after that future Renewal Date.

7. Miscellaneous.

7.1 Successor to Key. Key shall not consolidate with or merge into any other corporation, or transfer all or substantially all of its assets to another corporation or bank, unless such other corporation or bank shall assume this Agreement in a signed writing and deliver a copy thereof to the Executive. Upon such assumption the successor corporation or bank shall become obligated to perform the obligations of Key under this Agreement and the term “Key” as used in this Agreement shall be deemed to refer to such successor corporation or bank.

7.2 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, and addressed, in the case of notices to Key or a Subsidiary, as follows:

KeyCorp
127 Public Square
Cleveland, Ohio 44114
Attention: Secretary

and, in the case of notices to the Executive, properly addressed to the Executive at the Executive’s most recent home address as shown on the records of Key or its Subsidiary, or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7.3 Employment Rights. Nothing expressed or implied in this Agreement shall create any right or duty on the part of Key or the Executive to have the Executive continue as an officer of Key or a Subsidiary or to remain in the employment of Key or a Subsidiary.

7.4 Administration. Key shall be responsible for the general administration of this Agreement and for making payments under this Agreement. All fees and expenses billed by

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the Accounting Firm for services contemplated under this Agreement shall be the responsibility of Key.

7.5 Source of Payments. Any payment specified in this Agreement to be made by Key may be made, at the election of Key, directly by Key or through any Subsidiary of Key. All payments under this Agreement shall be made solely from the general assets of Key or one of its Subsidiaries (or from a grantor trust, if any, established by Key for purposes of making payments under this Agreement and other similar agreements), and the Executive shall have the rights of an unsecured general creditor of Key with respect thereto.

7.6 Claims Review Procedure. Whenever Key decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Agreement by the Executive, Key shall transmit a written notice of its decision to the Executive, which notice shall be written in a manner calculated to be understood by the Executive and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Executive that, within 60 days of the date on which the Executive receives such notice, the Executive may obtain review of the decision of Key in accordance with the procedures hereinafter set forth. Within such 60-day period, the Executive or the Executive’s authorized representative may request that the claim denial be reviewed by filing with Key a written request therefor, which request shall contain the following information:

(a) the date on which the request was filed with Key,

(b) the specific portions of the denial of the Executive’s claim that the Executive requests Key to review, and

(c) any written material that the Executive desires Key to examine.

Within 30 days of the date specified in clause (a) of this Section 7.6, Key shall conduct a full and fair review of its decision to deny the Executive’s claim for benefits and deliver to the Executive its written decision on review, written in a manner calculated to be understood by the Executive, specifying the reasons and the Agreement provisions upon which its decision is based. Nothing in this Section 7.6 shall be construed as limiting or restricting the Executive’s right to institute legal proceedings in a court of competent jurisdiction to enforce this Agreement after complying with the procedures set forth in this Section 7.6 or as limiting or restricting the scope of the court’s review (which review shall be de novo); provided, further, that the failure of the Executive to comply with the procedures set forth in this Section 7.6 shall not bar or prohibit the subsequent compliance by the Executive with those procedures and thereafter the Executive shall have the right to institute legal proceedings to enforce this Agreement.

7.7 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

7.8 Modification, Waiver, Etc. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the Executive and Key. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or

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conditions at the same time or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof has been made by either party that is not set forth expressly in this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, successors, heirs, and designees. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio.

7.9 Savings Clause. If any payments otherwise payable to the Executive under this Agreement are prohibited or limited by any statute or regulation in effect at the time the payments would otherwise be payable, including, without limitation, any regulation issued by the Federal Deposit Insurance Corporation (the “FDIC”) that limits executive change of control payments that can be made by an FDIC insured institution or its holding company if the institution is financially troubled (any such limiting statute or regulation a “Limiting Rule”):

(a) Key will use its best efforts to obtain the consent of the appropriate governmental agency (whether the FDIC or any other agency) to the payment by Key to the Executive of the maximum amount that is permitted (up to the amounts that would be due to the Executive absent the Limiting Rule); and

(b) the Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable Key severance, separation pay, and/or salary continuation plan that may be in effect at the time of the Executive’s termination.

Following any such election, the Executive will be entitled to receive benefits under the agreement or plan elected only if and to the extent the agreement or plan is applicable and subject to its specific terms.

8. Definitions.

8.1 Accounting Firm. The term “Accounting Firm” means the independent auditors of Key for the fiscal year preceding the year in which the Change of Control occurred and such firm’s successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, Key shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for Key or any of its affiliates (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”)).

8.2 Average Annual Incentive Compensation. The term “Average Annual Incentive Compensation” means Average Short Term Incentive Compensation, as defined in Section 8.4 below and Average Long Term Incentive Compensation, as defined in Section 8.3 below. For purposes of this Agreement:

(a) except as provided in (c) below, incentive compensation means any cash based incentive compensation, including bonuses and is calculated before any reduction on account of deferrals;

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(b) notwithstanding the fact that they are made in restricted stock and/or performance shares rather than in cash, any LTIC Stock Grant shall be deemed to be long term incentive compensation;

(c) special hiring bonuses paid or awarded to a newly hired executive in connection with that hiring or extraordinary bonuses to an incumbent executive, outside and beyond Key’s regular incentive compensation program, such as special retention awards to induce an executive to stay with Key, shall not be treated as incentive compensation;

(d) short term incentive compensation means incentive compensation for periods of time of one year or less;

(e) targeted short term incentive compensation means:

(i) if the short term incentive compensation plan, program, or arrangement in question designates a targeted amount or a targeted level of achievement for the Executive or the Executive’s job grade, it means that targeted amount or level;

(ii) if the short term incentive compensation plan, program, or arrangement in question has only one level of payout for the Executive or the Executive’s job grade (other than zero), it means that level (i.e., the level other than zero);

(iii) if the short term incentive compensation plan, program, or arrangement in question does not designate a targeted amount or level of achievement for the Executive or the Executive’s job grade but does have multiple anticipated levels of possible payout or achievement for the Executive or the Executive’s job grade, it means (in each case excluding from consideration any level that results in zero payout) the middle level of payout or achievement for the Executive or the Executive’s job grade (or if there are an even number of levels, the average of the two levels if there are only two levels or the average of the middle two levels if there are four or more levels); and

(iv) in all other cases, the amount anticipated or projected to be paid under the plan, program, or arrangement in question at the time the performance period in question commenced.

For purposes of calculating Average Annual Incentive Compensation under this Section 8.2, in determining the amount of incentive compensation (short or long term) payable to or targeted for the Executive for any past or current incentive compensation period or cycle, if the incentive compensation was for a partial period or cycle (such as where an executive becomes a participant in an incentive plan after the incentive compensation period or cycle has commenced so that the award payable to or targeted for the executive is prorated), such incentive compensation payable to or targeted for the Executive shall be determined as if the Executive had participated throughout the complete incentive compensation period or cycle in question. For example, if, with respect to a 12-month plan that would have paid the Executive short term incentive compensation of $12X if the Executive had been a participant for the full plan year, the Executive became a participant when only seven months were left in the plan year and the Executive was therefore paid incentive compensation of only $7X, the Executive would be treated for purposes of this Section 8.2 as if the Executive had been a

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participant for the full plan year and had been paid incentive compensation of $12X under the plan.

8.3 Average Long Term Incentive Compensation. The term “Average Long Term Incentive Compensation” means the higher of:

(i) the average of the dollar value of the LTIC Stock Grants made to the Executive in each of the two years immediately preceding the Change Year (e.g., the average of the 2006 LTIC Stock Grant and the 2007 LTIC Stock Grant if the Change Year is 2008), or, if for any reason an LTIC Stock Grant was made to Executive in only one of those two immediately preceding years, the dollar value of the LTIC Stock Grant for that single year, and

(ii) the dollar value of the LTIC Stock Grant for the Change Year;

except that, if the Executive first became employed by Key or a Subsidiary during the Change Year or during the year immediately preceding the Change Year and pursuant to an offer letter or agreement the terms of which were approved by the Committee, “Average Long Term Incentive Compensation” shall be not less than the dollar value of the LTIC Stock Grant target specified in that offer letter or agreement.

For purposes of this Section 8.3 the dollar value of any LTIC Stock Grant means the aggregate Fair Market Value of the Common Shares subject to that grant (whether those Common Shares are restricted Common Shares or Performance Shares) as of the date the grant is made, taking into account all and only all of the target level of those Common Shares that are subject to the particular LTIC Stock Grant, without regard to changes in Key’s stock price after the date of grant or to any restrictions on or contingencies concerning those Common Shares.

8.4 Average Short Term Incentive Compensation. The term “Average Short Term Incentive Compensation” means the higher of:

(a) the average of the short term incentive compensation payable to the Executive for each of the last two years immediately preceding the Change Year or, if, for any reason, short term incentive compensation was payable to the Executive for only one of those two years, the amount of short term incentive compensation payable to the Executive for that year, and

(b) the Executive’s targeted short term incentive compensation for the Change Year or for the year immediately preceding the Change Year, whichever is higher,

except that if the Executive first became a participant in Key’s short term incentive compensation program during the Change Year, Average Short Term Incentive Compensation means the Executive’s targeted short term incentive compensation for the Change Year.

8.5 Base Salary. The term “Base Salary” means the salary payable to the Executive from time to time before any reduction for voluntary contributions to the KeyCorp 401(k) Plan or any other deferral. Base Salary does not include imputed income from payment by Key of country club membership fees or other noncash benefits.

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8.6 Cause. The employment of the Executive by Key or any of its Subsidiaries shall have been terminated for “Cause” if, after a Change of Control and prior to the termination of employment, any of the following has occurred:

(a) the Executive shall have been convicted of a felony,

(b) the Executive commits an act or series of acts of dishonesty in the course of the Executive’s employment which are materially inimical to the best interests of Key or a Subsidiary and which constitutes the commission of a felony, all as determined by the vote of three fourths of all of the members of the Board of Directors of Key (other than the Executive, if the Executive is a Director of Key) which determination is confirmed by a panel of three arbitrators appointed and acting in accordance with the rules of the American Arbitration Association for the purpose of reviewing that determination,

(c) Key or any Subsidiary has been ordered or directed by any federal or state regulatory agency with jurisdiction to terminate or suspend the Executive’s employment and such order or directive has not been vacated or reversed upon appeal, or

(d) after being notified in writing by the Board of Directors of Key to cease any particular Competitive Activity, the Executive shall intentionally continue to engage in such Competitive Activity while the Executive remains in the employ of Key or a Subsidiary.

If (x) Key or any Subsidiary terminates the employment of the Executive during the two year period beginning on the date of a Change of Control and at a time when it has “Cause” therefor under clause (c), above, (y) the order or directive is subsequently vacated or reversed on appeal and the vacation or reversal becomes final and no longer subject to further appeal, and (z) Key or the Subsidiary fails to offer to reinstate the Executive to employment within ten days of the date on which the vacation or reversal becomes final and no longer subject to further appeal, Key or the Subsidiary will be deemed to have terminated the Executive without Cause during the two year period beginning on the date of the Change of Control.

8.7 Change of Control. A “Change of Control” shall be deemed to have occurred if, at any time while this Agreement is in effect pursuant to Section 6 hereof, there is a Change of Control under any of clauses (a), (b), (c), or (d) below. For these purposes, Key will be deemed to have become a subsidiary of another corporation if any other corporation (which term shall, for all purposes of this Section 8.7, include, in addition to a corporation, a limited liability company, partnership, trust, or other organization) owns, directly or indirectly, 50 percent or more of the total combined outstanding voting power of all classes of stock of Key or any successor to Key.

(a) A Change of Control will have occurred under this clause (a) if Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and either

(i) immediately after giving effect to that transaction, less than 65% of the then outstanding voting securities of the surviving or resulting corporation or (if Key

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becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to the transaction, or

(ii) immediately after giving effect to that transaction, individuals who were directors of Key on the day before the first public announcement of (x) the pendency of the transaction or (y) the intention of any person or entity to cause the transaction to occur, cease for any reason to constitute at least 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key.

(b) A Change of Control will have occurred under this clause (b) if a tender or exchange offer shall be made and consummated for 35% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 35% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as adopted under the 1934 Act, disclosing the acquisition of 35% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this clause (b));

(c) A Change of Control will have occurred under this clause (c) if either

(i) without the prior approval, solicitation, invitation, or recommendation of the Key Board of Directors any person or entity makes a public announcement of a bona fide intention (A) to engage in a transaction with Key that, if consummated, would result in a Change Event (as defined below in this clause (c)), or (B) to “solicit” (as defined in Rule 14a-1 under the 1934 Act) proxies in connection with a proposal that is not approved or recommended by the Key Board of Directors, or

(ii) any person or entity publicly announces a bona fide intention to engage in an election contest relating to the election of directors of Key (pursuant to Regulation 14A, including Rule 14a-11, under the 1934 Act),

and, at any time within the 24 month period immediately following the date of the announcement of that intention, individuals who, on the day before that announcement, constituted the directors of Key (the “Incumbent Directors”) cease for any reason to constitute at least a majority thereof unless both (A) the election, or the nomination for election by Key’s shareholders, of each new director was approved by a vote of at least two-thirds of the Incumbent Directors in office at the time of the election or nomination for election of such new director, and (B) prior to the time that the Incumbent Directors no longer constitute a majority of the Board of Directors, the Incumbent Directors then in office, by a vote of at least 75% of their number, reasonably determine in good faith that the change in Board membership that has occurred before the date of that determination and that is anticipated to thereafter occur within the balance of the 24 month period to cause the Incumbent Directors to no longer be a majority of the Board of Directors was not caused by or attributable to, in whole or in any significant part, directly or indirectly, proximately or remotely, any event under subclause (i) or (ii) of this clause (c).

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For purposes of this clause (c), the term “Change Event” shall mean any of the events described in the following subclauses (x), (y), or (z) of this clause (c):

(x) A tender or exchange offer shall be made for 25% or more of the outstanding voting stock of Key or any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the 1934 Act) is or becomes the beneficial owner of 25% or more of the outstanding voting stock of Key or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as adopted under the 1934 Act, disclosing the acquisition of 25% or more of the outstanding voting stock of Key in a transaction or series of transactions by any person (as defined earlier in this subclause (x)).

(y) Key is a party to a transaction pursuant to which Key is merged with or into, or is consolidated with, or becomes the subsidiary of another corporation and, after giving effect to such transaction, less than 50% of the then outstanding voting securities of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key represent or were issued in exchange for voting securities of Key outstanding immediately prior to such transaction or less than 51% of the directors of the surviving or resulting corporation or (if Key becomes a subsidiary in the transaction) of the ultimate parent of Key were directors of Key immediately prior to such transaction.

(z) There is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Key.

(d) A Change of Control will have occurred under this clause (d) if there is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Key.

8.8 Change Year. The term “Change Year” means the year in which a Change of Control occurred or, if more than one Change of Control has occurred, the year in which the earliest Change of Control occurred.

8.9 Common Shares. The term “Common Shares” means common shares of Key.

8.10 Committee. The term “Committee” means the Compensation and Organization Committee of the Board of Directors of Key or any successor to that committee.

8.11 Competitive Activity. The Executive shall be deemed to have engaged in “Competitive Activity” if the Executive:

(a) engages in any business or business activity in which Key or any of its Subsidiaries engages, including, without limitation, engaging in any business activity in the banking or financial services industry (other than as a director, officer, or employee of Key or any of its Subsidiaries), or

(b) serves as a director, officer, or employee of any bank, bank holding company, savings and loan association, building and loan association, savings and loan holding company, insurance company, investment banking or securities company, mutual fund company, or other financial services company other than Key or any of its

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Subsidiaries (each of the foregoing being hereinafter referred to as a “Financial Services Company”), or renders services of a consultative or advisory nature or otherwise to any such Financial Services Company; provided, however, this clause (b) shall not prohibit or restrict the Executive from serving in any such capacity with the consent of Key.

8.12 Disability. For purposes of this Agreement, the Executive’s employment will have been terminated by Key or its Subsidiary by reason of “Disability” of the Executive only if (a) as a result of bodily injury or sickness, the Executive has been unable to perform the Executive’s normal duties for Key or its Subsidiary for a period of 180 consecutive days, and (b) the Executive begins to receive payments under the KeyCorp Long Term Disability Benefit Plan not later than 30 days after the Termination Date.

8.13 Discontinued Plan. The term “Discontinued Plan” includes any Retirement Plan, the Savings Plan and/or the KeyCorp Deferred Savings Plan that:

(a) the Executive was covered by and participating in immediately before the occurrence of a Change of Control, and

(b) was, between the date of the Change of Control and the Termination Date, either terminated or altered in such a way as to substantially reduce the benefits provided to the Executive thereunder without having been substituted for by a similar plan providing substantially similar benefits to the Executive.

8.14 Fair Market Value. The term “Fair Market Value” with respect to Common Shares means:

(a) if the Common Shares are traded on a national exchange, the mean between the high and low sales price per Common Share on the national exchange on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares, or

(b) if the Common Shares are not traded on a national exchange, the mean between the high and low sales price per Common Share in the over-the-counter market, National Market System, as report by the National Quotations Bureau, Inc. and NASDAQ on the date for which the determination of fair market value is made or, if there are no sales of Common Shares on that date, then on the next preceding date on which there were any sales of Common Shares.

8.15 Good Reason. The Executive shall be deemed to have “Good Reason” to terminate the Executive’s employment under this Agreement during a Window Period if, at any time after the occurrence of a Change of Control and before the end of the Window Period, either
or both of the events listed in clauses (a) and (b) of this Section 8.15 occurs without the written consent of the Executive:

(a) following notice by the Executive to Key and an opportunity by Key to cure, the Executive determines in good faith that the Executive’s position, responsibilities, duties, or status with Key are at any time materially less than or reduced from those in effect before the Change of Control or that the Executive’s reporting relationships

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with superior executive officers have been materially changed from those in effect before the Change of Control; or

(b) Key’s headquarters is relocated outside of the greater Cleveland metropolitan area (but this clause (b) shall apply only if Key’s headquarters was the Executive’s principal place of employment before the Change of Control).

For purposes of clause (a), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the circumstance otherwise constituting Good Reason persists (as determined in good faith by the Executive, whose determination shall be conclusive) for more than seven calendar days after the Executive has given notice to Key of the existence of that circumstance.

8.16 Impermissible. The term “Impermissible,” when used in the context of the Executive’s continued coverage by and participation in any of the Retirement Plans or Savings Plans shall mean that such a continuation would violate the provisions of any such plan, would cause any such plan that is or is intended to be qualified under Section 401(a) of the Internal Revenue Code to fail to be so qualified, would require shareholder approval, or would be unlawful.

8.17 LTIC Stock Grant. The term “LTIC Stock Grant” means the grant, if any, of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made by the Committee to the Executive during any particular year as part of Key’s ongoing compensation program. For greater clarity, for purposes of this Agreement:

(a) “The terms “2006 LTIC Stock Grant”, “2007 LTIC Stock Grant,” “2008 LTIC Stock Grant,” etc. refer to LTIC Stock Grants, if any, made to the Executive by resolution adopted by the Committee in the specified year.

(b) An extraordinary grant or award of restricted stock, of Performance Shares, or of a combination of restricted stock and Performance Shares made to a newly hired executive in connection with that hiring (i.e., any signing or hiring bonus) and a grant or award made to an incumbent executive outside of Key’s regular restricted stock and Performance Share program (e.g., a special retention grant or award) shall be treated as not being an LTIC Stock Grant and shall not be taken into account when calculating Average Long Term Incentive Compensation.

8.18 Mandatory Relocation. A “Mandatory Relocation” shall have occurred if, at any time after a Change of Control, the Executive is required to relocate the Executive’s principal place of employment for Key or its Subsidiary without the Executive’s written consent more than 35 miles from where the Executive was located prior to the Change of Control.

8.19 Performance Shares. The term “Performance Shares” means an award denominated in Common Shares or phantom Common Shares (regardless of whether payable in stock or cash) the vesting of which is contingent or accelerated upon attainment of one or more performance goals (absent death, disability, or a Change of Control) .

8.20 Reduction of Compensation. A “Reduction of Compensation” shall have occurred if any one or more of the following occurs:

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(a) the Base Salary of the Executive is reduced at any time after a Change of Control;

(b) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Incentive Compensation Guaranty;

(c) following notice by the Executive to Key and an opportunity by Key to cure, Key fails to satisfy the Option/SAR Guaranty.

For purposes of clauses (b) and (c), Key will be deemed to have had an opportunity to cure and to have failed to effect a cure if the failure to satisfy the Incentive Compensation Guaranty, and/or the Option/SAR Guaranty, as the case may be, persists (as determined in good faith by the Executive) for more than seven calendar days after the Executive has given notice to Key of the existence of that failure.

8.21 Relevant Plans. The term “Relevant Plans” means:

(a) all Retirement Plans and Savings Plans that the Executive was covered by and participating in immediately before the Termination Date, and

(b) all Discontinued Plans (other than the KeyCorp Deferred Savings Plan).

Reference to a “Relevant Plan,” in the singular, means any of the Relevant Plans.

8.22 Retirement Plans. The term “Retirement Plans” means the KeyCorp Cash Balance Pension Plan and the Supplemental Retirement Plan, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds,
replaces, or is substituted for any such plan, and all retirement plans of any nature maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Retirement Plan,” in the singular, means any of the Retirement Plans.

8.23 Savings Plans. The term “Savings Plans” means and includes the KeyCorp 401(k) Savings Plan, as from time to time amended, restated, or otherwise modified, including any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for such plan, and other than the KeyCorp Deferred Savings Plan, all salary reduction, savings, profit-sharing, or stock bonus plans (including, without limitation, all plans involving employer matching contributions, whether or not constituting a qualified cash or deferred arrangement under Section 401(k) of the Internal Revenue Code), maintained by Key or any of its Subsidiaries in which the Executive was participating prior to the Termination Date. Reference to a “Savings Plan,” in the singular, shall mean any of the Savings Plans.

8.24 Supplemental Retirement Plan. The term “Supplemental Retirement Plan” means the KeyCorp Supplemental Retirement Plan, the KeyCorp Excess Cash Balance Pension Plan, or the KeyCorp Executive Supplemental Pension Plan in which the Executive participates, each as from time to time amended, restated, or otherwise modified, and any plan that, after the date of this Agreement, succeeds, replaces, or is substituted for any of such plans.

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8.25 Subsidiary. A “Subsidiary” means any corporation, bank, partnership, or other entity a majority of the voting control of which is directly or indirectly owned or controlled at the time in question by Key.

8.26 Termination Date. The term “Termination Date” means the date on which the Executive’s employment with Key and its Subsidiaries terminates.

8.27 Window Period. The term “Window Period,” with respect to any particular Change of Control, means the three-month period beginning on the date that falls on the same day of the month as the date of the Change of Control in the fifteenth month after the month in which the Change of Control occurs. If at any time there has been more than one Change of Control, there shall be a separate Window Period with respect to each such Change of Control.

8.28 Compliance with American Jobs Creation Act. In the event that any provision
of this Agreement is determined to constitute deferred compensation, as defined in accordance with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, the applicable provision will be administered in accordance with the requirements of Section 409A of the Code, including the delay of any payment otherwise payable under this Agreement for a period of 6 months following the Termination Date.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

KEYCORP
By
	Henry L. Meyer III
	Chairman and Chief Executive Officer
THE “EXECUTIVE”
XXXXXXXXXX

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Exhibit A

WAIVER AND RELEASE

DO NOT SIGN WITHOUT READING AND UNDERSTANDING

     In consideration of the payments to be made to me following termination of my employment with KeyCorp pursuant to the agreement between KeyCorp and me dated as of XXXXX XX, 200X (the “Change of Control Agreement”), which payments I acknowledge I am not entitled to receive without execution of this Waiver and Release, and which payments will not commence earlier than eight days after the execution of this Waiver and Release, I, for myself, my heirs, administrators, executors, and assigns, release and discharge KeyCorp, its affiliates, subsidiaries, divisions, successors, and assigns and the employees, officers, directors, and agents thereof (collectively referred to throughout this Waiver and Release as “Key”) from any and all causes of action, charges of discrimination, proceedings, or claims of every kind, nature, and character, arising out of or relating to my employment with Key and the termination of my employment with Key based upon or related to any contention (i) that my employment terminated because of any tortuous, wrongful, unlawful, or improper conduct or act or in violation or breach of any express or implied contract or agreement, or (ii) that Key engaged in any discriminatory act, event, pattern, or practice involving age, religion, creed, sex, national origin, ancestry, handicap, disability, veteran status, marital status, race, or color, or the continuing or future effects thereof (including, without limitation, the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., or any similar state law).

     I warrant that no promise or inducement has been offered to me other than as set forth in the Change of Control Agreement, that I am relying on no other statement or representation by Key, and that I have not assigned any of my rights. I have read this Waiver and Release; I have had a full opportunity to consider it (including the opportunity to consult with an attorney of my choice); and I understand that by signing it I am giving up important rights, including any right to sue under federal, state, or local law. I also verify that my entering into this Waiver and Release is wholly voluntary.

I further warrant that:

(a) I understand that I am specifically waiving rights or claims under the federal Age Discrimination in Employment Act, 29 U.S.C. §621 et seq.;

(b) I understand that I am not hereby waiving any rights or claims that may arise after this Waiver and Release is executed by me;

(c) I understand that this Waiver and Release is being given by me in exchange for consideration that is more valuable to me than what I am entitled to without the Change of Control Agreement and the execution of this Waiver and Release;

(d) I have been advised in writing by Key that I should have, at my expense, an attorney of my choice review this Waiver and Release;

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(e) I have been advised by Key that I may take up to                      days from receipt of this Waiver and Release to determine whether to execute the same; and

(f) I have been advised by Key that this Waiver and Release may be revoked by me within seven (7) days following execution of this Waiver and Release whereupon this Waiver and Release shall be null and void.

     IN WITNESS WHEREOF, I have hereby set my hand this                      day of                       ,                      .

Witness:

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Exhibit A
(cont’d)

Acknowledgment of Receipt of Waiver and Release

     I do hereby acknowledge that on                                         ,                      , I received a copy of the Waiver and Release which is attached hereto, and I understand that I have                     * days from the date of receipt of the Waiver and Release to determine whether to execute it.

Witness:

*to be completed the same as clause (e) of the Waiver and Release.

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Exhibit A
(cont’d)

Director of Human Resources
KeyCorp
127 Public Square
Cleveland, Ohio 44114

Re:      Waiver and Release

Dear Sir or Madam:

     On                                          ,                     , I executed a Waiver and Release in favor of KeyCorp. More than seven (7) days have elapsed since I executed the Waiver and Release. I have at no time revoked my acceptance or execution of the Waiver and Release and, accordingly, I hereby request that KeyCorp commence making the payments due to me under my Change of Control Agreement.

	Very truly yours,
Witness:

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EX-10.55

EXHIBIT 10.55

KEYCORP

DEFERRED SAVINGS PLAN

ARTICLE I

          The KeyCorp Deferred Savings Plan (the “Plan”), is hereby established effective December 30, 2006. In conjunction with its establishment, the KeyCorp Excess 401(k) Savings Plan, the KeyCorp Second Excess 401(k) Savings Plan, the KeyCorp Deferred Compensation Plan and the KeyCorp Second Deferred Compensation Plan are hereby merged into the Plan effective December 31, 2006. As structured, the Plan is intended to provide KeyCorp with a retention vehicle to ensure that Plan participants continue in their employment with Key, while providing Plan participants with an opportunity to save for their retirement on a tax deferred basis. It is the intention of KeyCorp and it is the understanding of those employees covered under the Plan, that the Plan constitutes a nonqualified deferred compensation plan for a select group of KeyCorp employees, and as such, it is unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). It is also the understanding of employees covered under the Plan that the Plan is subject to the requirements of Section 409A of the Code, and that it will be administered in accordance with the requirements of Section 409A.

ARTICLE II

DEFINITIONS

     2.1 Meaning of Definitions. For the purposes of this Plan, the following words and phrases shall have the meanings hereinafter set forth, unless a different meaning is clearly required by the context:

(a)	“Beneficiary” shall mean the person, persons or entity entitled under Article VIII to receive any Plan benefits payable after a Participant’s death.
(b)	“Board” shall mean the Board of Directors of KeyCorp, the Board’s Compensation & Organization Committee, or any other committee designated by the Board or subcommittee designated by the Board’s Compensation Committee.
(c)	“Change of Control” shall be deemed to have occurred if under a rabbi trust arrangement established by KeyCorp (“Trust”), as such Trust may from time to time be amended or substituted, the Corporation is required to fund the Trust because a “Change of Control”, as defined in the Trust, has occurred.
(d)	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with all regulations promulgated thereunder. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.
(e)	“Common Stock Account” shall mean the investment account established under the Plan for bookkeeping purposes in which a Participant may elect to have his or her Participant Deferrals credited. Participant Deferrals and Corporate Contributions invested in the Common Stock Account shall be credited based on a bookkeeping allocation of KeyCorp Common Shares (both whole and fractional rounded to the nearest one-hundredth of a share), which shall be equal to the amount of Participant Deferrals

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and Corporate Contributions invested in the Common Stock Account. The Common Stock Account shall also reflect on a bookkeeping basis all dividends, gains, and losses attributable to such Common Shares. All Corporate Contributions and all Participant Deferrals credited to the Common Stock Account shall be based on the New York Stock Exchange’s closing price for such Common Shares as of the day such Participant Deferrals are credited to the Participants’ Plan Accounts.

(f)

The “Compensation” of a Participant for any Plan Year or any partial Plan Year shall mean that portion of compensation that is paid to the Participant during such period by reason of his or her employment with an Employer, as reported for federal income tax purposes, which exceeds the compensation limits reflected in Section 401(a)(17) of the Code, as may be indexed from time to time. In determining whether the Participant has exceeded the compensation limits of Section 401(a)(17) of the Code, the compensation which would have been paid to the Participant but for (1) the timing of an Employer’s payroll processing operations, (2) the Participant’s deferral of compensation under the provisions of the KeyCorp Flexible Benefits Plan and transportation reimbursement plan, and (3) the Participant’s written deferral of his or her compensation to the KeyCorp 401(k) Savings Plan shall be included, provided, however, that the following compensation shall specifically not be included:

(i)	any amount attributable to the Employee’s receipt of stock appreciation rights, restricted stock awards, and the amount of any gain to the Employee upon the exercise of a stock option;
(ii)	any amount attributable to the Employee’s receipt of non-cash remuneration which is included in the Employee’s income for federal income tax purposes;
(iii)	any amount attributable to the Employee’s receipt of moving expenses and any relocation bonus paid to the Employee during the Plan Year;
(iv)	any amount attributable to any severance paid by an Employer or the Corporation to the Employee;
(v)	any amount attributable to fringe benefits (cash and non-cash), regardless of whether any or all such items are includible in such Participant’s gross income for federal tax purposes;
(vi)	any amount attributable to any bonus or payment made as an inducement for the Employee to accept employment with an Employer;
(vii)	any amount attributable to compensation of any type including bonus or incentive compensation payments paid on or after the Employee’s Severance From Service Date; or
(viii)	any other amounts attributable to compensation deferred by the Participant.

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(g)	“Corporate Contributions” shall mean the amount that an Employer has agreed to contribute on a bookkeeping basis to the Participant’s Plan Account in accordance with the provisions of Article V of the Plan.
(h)	“Corporation” shall mean KeyCorp, an Ohio corporation, its corporate successors, and any corporation or corporations into or with which it may be merged or consolidated.
(i)	“Deferral Period” shall mean each Plan Year, provided however, that a Participant’s initial Deferral Period shall be from his or her first day of participation in the Plan through the last day of the applicable Plan Year.
(j)	“Determination Date” shall mean the last day of each calendar month.
(k)	“Disability” shall mean (1) the physical or mental disability of a permanent nature which prevents a Participant from performing the duties such Participant was employed to perform for his or her Employer when such disability commenced, (2) qualifies for disability benefits under the federal Social Security Act within 30 months following the Participant’s disability, and (3) qualifies the Participant for disability coverage under the KeyCorp Long Term Disability Plan.
(l)	“Early Retirement” shall mean the Participant’s retirement from employment with an Employer on or after the Participant’s attainment of age 55 and completion of a minimum of five years of Vesting Service, but prior to the Participant’s Normal Retirement Date.
(m)	“Employee” shall mean a common law employee who is employed by an Employer.
(n)	“Employer” shall mean the Corporation and any of its subsidiaries, unless specifically excluded as an Employer for Plan purposes by written action of an officer of the Corporation. An Employer’s participation shall be subject to all conditions and requirements made by the Corporation, and each Employer shall be deemed to have appointed the Plan Administrator as its exclusive agent under the Plan as long as it continues as an Employer.
(o)	“Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Section 152(a) of the Code), the loss of the Participant’s property due to casualty, or such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The determination of an “unforeseeable emergency” and the ability of the Corporation to accelerate the Participant’s distribution of Participant Deferrals and Corporate contributions shall be determined in accordance with the requirements of Section 409A of the Code and applicable regulations issued thereunder.
(p)	“Incentive Compensation Award” shall mean the single annual incentive compensation award granted to a Participant under an Incentive Compensation Plan.
(q)	“Incentive Compensation Deferral” shall mean a percentage or whole dollar amount of the Participant’s annual Incentive Compensation Award that otherwise would be payable to the Participant during the applicable Plan Year, but for the Participant’s election to defer such Incentive Compensation Award under the Plan.

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(r)	“Incentive Compensation Plan” shall mean a line of business or management incentive compensation plan that is sponsored by KeyCorp or an affiliate of KeyCorp that the Corporation has determined constitutes an Incentive Compensation Plan for purposes of the Plan.
(s)	“Interest Bearing Account” shall mean the investment account established under the Plan for bookkeeping purposes in which a Participant may elect to have his or her Participant Deferrals credited. Participant Deferrals invested for bookkeeping purposes in the Interest Bearing Account shall be credited with earnings as of each month equal to 120% of the applicable long term federal rate as published by the Internal Revenue Service for that month, compounded monthly, and divided by 12.
(t)	“Investment Accounts” shall collectively mean those investment accounts established under the Plan for bookkeeping purposes in which the Participant’s Participant Deferrals will be credited. Investment Accounts shall include the Plan’s (1) Interest Bearing Account, (2) Common Stock Account, and (3) Investment Funds.
(u)	“Investment Funds” shall mean those Investment Accounts established under the Plan for bookkeeping purposes in which a Participant may elect to have his or her Participant Deferrals credited and which mirror the investment funds established under the KeyCorp 401(k) Savings Plan (“Savings Plan”), as may be modified from time to time, provided, however, that the Savings Plan’s Corporation Stock Fund, for Plan purposes, shall be excluded from the definition of Investment Funds. Participant Deferrals invested for bookkeeping purposes in the Investment Funds shall be credited on a bookkeeping basis with all earnings, gains, and losses experienced by the applicable Investment Fund.
(v)	“Normal Retirement” shall mean the Participant’s retirement under the KeyCorp Cash Balance Pension Plan on or after the Participant’s Normal Retirement Date.
(w)	“Participant” shall mean an Employee who meets the eligibility requirements set forth in Section 3.1(a) and who becomes a Plan Participant pursuant to Section 3.1(b) or Section 3.1(c) of the Plan.
(x)	“Participation Agreement” shall mean the agreement submitted by the Participant to the Corporation, which contains, in pertinent part, the Participant’s deferral commitment for the applicable Deferral Period. The Participants’ Participation Agreement for Salary Deferrals shall be provided to the Corporation by no later than the close of the year prior to the year in which the deferred salary is earned by the Participant. The Participants’ Participation Agreement for Incentive Compensation Deferrals shall be provided to the Corporation by no later than the close of the calendar year prior to the year in which such Incentive Compensation is earned by the Participant or as otherwise expressly permitted under the provisions of Section 409A of the Code.
(y)	“Participant Deferrals” shall mean the Incentive Compensation Deferrals and Salary Deferrals the Participant has elected to defer under the Plan for each applicable Deferral Period.
(z)	“Plan” shall mean the KeyCorp Deferred Savings Plan with all amendments hereafter made.

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(aa)	“Plan Account” shall mean those bookkeeping accounts established by the Corporation for each Plan Participant, which shall reflect all Corporate Contributions and Participant Deferrals, and if applicable, any Predecessor Plan Participant Deferrals, Predecessor Plan Corporate Contributions, and Rollover Contributions invested for bookkeeping purposes in the Plan’s Investment Accounts with all earnings, dividends, gains, and losses thereon. Plan Accounts shall not constitute separate Plan funds or separate Plan assets. Neither the maintenance of, nor the crediting of amounts to such Plan Accounts shall be treated (i) as the allocation of any Corporation assets to, or a segregation of any Corporation assets in any such Plan Accounts, or (ii) as otherwise creating a right in any person or Participant to receive specific assets of the Corporation. Benefits under the Plan shall be paid from the general assets of the Corporation.
(bb)	“Plan Year” shall mean the calendar year.
(cc)	“Retirement” shall mean the termination of a Participant’s employment under circumstances in which the Participant begins to receive an Early Retirement or Normal Retirement Date benefit under the KeyCorp Cash Balance Pension Plan.
(dd)	“Salary Deferrals” shall mean the amount of the Participant’s Compensation (other than Incentive Compensation) that the Participant has elected to defer to the Plan for the applicable Plan year.
(ee)	“Termination” shall mean the voluntary or involuntary and permanent termination of a Participant’s employment from his or her Employer and any other Employer, whether by resignation or otherwise, but shall not include the Participant’s Retirement or Termination under Limited Circumstances or as a result of the Participant’s death or Disability.
(ff)	“Termination Under Limited Circumstances” shall mean a Participant’s termination of employment from the Employer (i) within two years after a Change of Control under circumstances in which the Participant is entitled to severance benefits or salary continuation or similar benefits under a Change of Control agreement, employment agreement, or severance or separation pay plan, (ii) under circumstances in which the Participant is entitled to receive salary continuation benefits under the KeyCorp Separation Pay Plan, or (iii) as otherwise expressly approved by an officer of the Corporation.

     2.2 Additional Reference. All other words and phrases used herein shall have the meaning given them in the KeyCorp Cash Balance Pension Plan, unless a different meaning is clearly required by the context.

     2.3 Pronouns. The masculine pronoun wherever used herein includes the feminine in any case so requiring, and the singular may include the plural.

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ARTICLE III

ELIGIBILITY AND PARTICIPATION

     3.1 Eligibility and Participation.

(a)	Eligibility. An Employee shall be eligible to participate in the Plan if (1) the Employee is employed by an Employer in a benefits designator 86 (or if the position is not a graded position, then the equivalent to a job grade 86) or above, and (2) the Corporation selects such Employee to participate in the Plan. Notwithstanding the foregoing provisions of this Section 3.1(a), however, all participants in the KeyCorp Deferred Compensation Plan, the KeyCorp Second Deferred Compensation Plan, the KeyCorp Excess 401(k) Savings Plan, or the KeyCorp Second Excess 401(k) Savings Plan as of December 31, 2006 shall automatically become Participants in the Plan regardless of the Employees’ benefits designator.
(b)	Participation. An Employee meeting the eligibility criteria of Section 3.1(a) may elect to participate in the Plan by submitting a Participation Agreement to the Corporation prior to the beginning of the applicable Deferral Period.
(c)	Mid-Year Participation. When an Employee first becomes eligible to participate in the Plan during a Deferral Period, the Employee shall submit a Participation Agreement to the Corporation within thirty days (30) of the first date of the Employee’s Plan eligibility. Such Participation Agreement will become effective only if it is provided to the Corporation within 30 days of the Participant’s notice of Plan eligibility.
(d)	Loss of Plan Eligibility. In the event that a Participant who is not in a benefits designator 86 or above (or its equivalent) voluntarily fails to make Participant Deferrals to the Plan, then in such event, the Participant’s continued Plan eligibility will end and the Participant shall not be eligible to make Participant Deferrals to the Plan.

     3.2 Deferral Limitations. The following Participant Deferral limitations shall apply for each Deferral Period:

(a)	Salary Deferrals. A Participant may defer no more than 50% of the Participant’s Compensation (other than Incentive Compensation) during the applicable Deferral Period.
(b)	Incentive Compensation Deferrals. A Participant may defer up to 100% of the Participant’s annual Incentive Compensation Award payable to the Participant during the applicable Deferral Period.

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     3.3 Commitment Limited by Termination, Retirement, Disability or Death. As of the Participant’s Termination date, Retirement date, date of Disability or date of death, all Participant Deferrals under the Plan shall cease.

     3.4 Modification of Deferral Commitment. A Participant’s deferral commitment as evidenced by his or her Participation Agreement for the applicable Deferral Period shall be irrevocable.

     3.5 Change in Employment Status. If the Corporation determines that a Participant’s performance is no longer at a level that deserves to be rewarded through participation in the Plan, but does not terminate the Participant’s employment with his or her Employer, the Participant’s existing Participation Agreement shall terminate at the end of the Deferral Period, and no new Participation Agreement may be made by the Participant until the Plan year following the year in which the Corporation advises the Employee that he or she may resume Plan participation.

     3.6 Rollovers. At the Corporation’s direction, the Plan may accept on behalf of a Participant, a rollover of the Participant’s bookkeeping account balance from such other deferred compensation plan of the Employer in which the Participant also participates. The bookkeeping account balance so rolled shall be known as rollover contributions (“Rollover Contributions”). The Participant’s Rollover Contributions shall be credited to the Participant’s Plan Account on a bookkeeping basis in such a manner as the Corporation shall be able to separately identify such Plan Rollover Contributions and determine all net gains or losses attributable thereto. Such Plan Rollover Contributions shall, at all times, be invested in the Plan’s Common Stock Account and shall not be subject to the Participant’s investment direction or diversification. Plan Rollover Contributions shall be fully vested under the Plan and shall be subject to the distribution requirements contained within the Participant’s Rollover Election Form provided, however, that the Participant’s Rollover Contributions must be deferred under the Plan for a minimum of five (5) years from the date of the rollover regardless of the Participant’s Termination date, Retirement date, or the distribution instructions contained in the Participant’s Rollover Election Form, and provided further, that the rollover election and rollover must conform with subsequent deferral election requirements mandated under Section 409A of the Code.

ARTICLE IV

PARTICIPANT DEFERRALS

     4.1 Plan Account. All Participant Deferrals and Corporate Contributions shall be credited on a bookkeeping basis to a Plan Account established in the Participant’s name. Separate sub-accounts may be established to reflect the Participant’s investment elections, which shall reflect all earnings, gains or losses attributable to such investment elections.

     4.2 Investment of Participant Deferrals. Subject to the provisions of Section 4.3 hereof, each Participant shall direct the manner in which his or her Participant Deferrals are to be invested for bookkeeping purposes under the Plan. All Participant Deferrals may be invested for bookkeeping purposes in any one or more of the Plan’s Investment Accounts in such amounts as the Participant shall select. Subject to the provisions of Section 4.4 hereof, Participants may modify their investment elections at such times and in such manner as permitted by the Corporation.

     4.3 Compliance with Corporation’s Stock Ownership Guidelines. Notwithstanding the foregoing provisions of Section 4.2 hereof, Participants who have not met the Corporation’s Stock Ownership Guidelines shall be required to defer all Participant Deferrals into the Common Stock Account until such time as the Corporation Stock Ownership Guidelines have been met.

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     4.4 Investment of Participant Deferrals Invested in the Common Stock Account. The Participant’s election to have his or her Participant Deferrals invested on a bookkeeping basis in the Plan’s Common Stock Account shall be irrevocable; Participant Deferrals invested in the Common Stock Account shall not be subject to investment direction by the Participant.

     4.5 Crediting of Participant Deferrals; Withholding. Participant Salary Deferrals shall be credited to the Participant’s Plan Account as of the date that such Compensation would have been payable to the Participant but for the Participant’s election to defer such Compensation to the Plan. Participant Incentive Compensation Deferrals shall be credited to the Participant’s Plan Account as of the date such Incentive Compensation would have been payable to the Participant but for the Participant’s election to defer such Incentive Compensation to the Plan. The withholding of taxes with respect to Participant Deferrals as required by state, federal or local law will be withheld from the Participant’s Compensation to the maximum extent possible.

     4.6 Section 16 Officers Investment of Participant Deferrals in the Common Stock Account. Notwithstanding the provisions of Section 4.4 and Section 4.5, hereof, if the Participant is an “Officer” of the Corporation, as that term is defined in accordance with Section 16 of the Securities Act of 1934, the Participant’s Participant Deferrals shall be invested in the Plan’s Common Stock Account as follows:

(a)

Incentive Compensation Deferrals. Incentive Compensation Deferrals shall be credited on a bookkeeping basis to the Common Stock Account as of the date the Incentive Compensation Deferrals would have been payable to the Participant but for the Participant’s election to defer such Incentive Compensation to the Plan.

(b)

Salary Deferrals. Salary Deferrals shall be credited to the Interest Bearing Account as of the date the Participant’s Salary Deferrals would have been payable to the Participant but for the Participant’s election to defer such Salary Deferrals to the Plan. Thereafter, as of the last day of each calendar quarter (or last business day of the applicable calendar quarter), those Salary Deferrals that the Participant elected to invest in the Common Stock Account that have been credited to the Interest Bearing Account during such calendar quarter, with all earnings, gains and losses thereon shall automatically be transferred to the Plan’s Common Stock Account.

ARTICLE V

CORPORATE CONTRIBUTIONS

     5.1 Crediting of Corporation Contributions. Corporate Contributions shall be credited on a bookkeeping basis to the Participant’s Plan Account in proportion to the respective amount of the Participant’s Participant Deferrals made to the Plan during the applicable Deferral Period. Corporate Contributions shall equal up 100% of the Participant’s first 6% of Participant Deferrals credited to the Plan for the applicable pay period.

     Notwithstanding the forgoing provisions of this Section 5.1, however, if the Participant is an “Officer” of the Corporation, as that term is defined in accordance with Section 16 of the Securities Act of 1934, such Corporate Contributions shall be credited to the Participant’s Plan Account as follows:

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(a)	Incentive Compensation Deferrals. Corporate Contributions shall be credited on a bookkeeping basis to the Participant’s Plan Account as of the date the Participant’s Incentive Compensation Deferrals are credited, on a bookkeeping basis to the Participant’s Plan Account.
(b)	Salary Deferrals. Corporate Contributions shall be credited to the Participant’s Plan Account as of the last day of each calendar quarter (or last business day of the applicable calendar quarter).

     5.2 Investment of Corporate Contributions. All Corporate Contributions credited to the Participant’s Plan Account shall be invested for bookkeeping purposes in the Plan’s Common Stock Account. Corporate Contributions are not subject to Participant investment directions.

     5.3 Vesting in Corporate Contributions. Subject to the provisions of Section 7.4 of the Plan, a Participant shall become vested in those Corporate Contributions credited on a bookkeeping basis to the Participant’s Plan Account upon the Participant’s (1) completion of three years of vested service, (2) Disability, (3) death, or (4) Termination under Limited Circumstances. For purposes of this Section 5.3 hereof, the term “vested service” shall be calculated from the Participant’s employment commencement date through the Participant’s Termination, or Retirement date (whichever shall first occur), and shall be based on consecutive twelve-month periods during which time the Participant is employed with an Employer.

     5.4 Forfeiture of Corporate Contributions. In the event of the Participant’s Termination or Retirement, all not vested Corporate Contributions and any not vested Participant Predecessor Plan corporate contributions shall be forfeited as of the Participant’s last day of employment.

     5.5 Determination of Amount. The Plan Administrator shall verify the amount of Participant Deferrals, Corporate Contributions, and if applicable, Participant Predecessor Plan Participant Deferrals, Participant Predecessor Plan Corporate Contributions, and Rollover Contributions with all earnings, gains and losses, if any, to be credited to each Participant’s Plan Accounts in accordance with the provisions of the Plan. The reasonable and equitable decision of the Plan Administrator as to the value of each Investment Account shall be conclusive and binding upon all Participants and the Beneficiary of each deceased Participant having any interest, direct or indirect in the Participant’s Plan Account. The value of an Investment Account on any day not a Determination Date shall be the value on the last preceding Determination Date. As soon as reasonably practicable after the close of the Plan Year, the Corporation shall send to each Participant an itemized accounting statement which shall reflect the Participant’s Plan Account balance.

     5.6 Corporate Assets. All Participant Deferrals, Corporate Contributions, and if applicable, Participant Predecessor Plan Participant Deferrals, Participant Predecessor Plan Corporate Contributions, and Rollover Contributions with all dividends, earnings and any other gains and losses credited to a Participant’s Plan Account remain the assets and property of the Corporation, which shall be subject to distribution to the Participant only in accordance with Article VII, of the Plan. Payments made under the Plan shall be in the form of cash and common shares of the Corporation and shall be made from the general assets of the Corporation, and Participants and Beneficiaries shall have the status of general unsecured creditors of the Corporation. Nothing contained in the Plan shall create, or be construed as creating a trust of any kind or any other fiduciary relationship between the Participant, the Corporation, or any other person. It is the intention of the Corporation and the Participant that the Plan be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and Section 409A of the Code.

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     5.7 No Present Interest. Subject to any federal statute to the contrary, no right or benefit under the Plan and no right or interest in each Participant’s Plan Account shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit under the Plan, or Participant’s Plan Account shall be void. No right, interest, or benefit under the Plan or Participant’s Plan Account shall be liable for or subject to the debts, contracts, liabilities, or torts of the Participant or Beneficiary, including any domestic relations proceedings. If the Participant or Beneficiary becomes bankrupt or attempts to alienate, sell, assign, pledge, encumber, or charge any right under the Plan or Participant’s Plan Account, such attempt shall be void and unenforceable.

     5.8 Effect of Plan Termination. Notwithstanding anything to the contrary contained in the Plan, the termination of the Plan shall terminate the liability of the Corporation and all Employers to make further Corporate Contributions to the Plan.

ARTICLE VI

MERGER OF PREDECESSOR PLANS

     6.1 Merger of Predecessor Plans. Effective December 31, 2006, the KeyCorp Deferred Compensation Plan, the KeyCorp Second Deferred Compensation Plan, the KeyCorp Excess 401(k) Savings Plan, and the KeyCorp Second 401(k) Excess Savings Plan shall be merged into the Plan, and participants in such Predecessor Plan will automatically participate in the Plan. Hereinafter the KeyCorp Deferred Compensation Plan, the KeyCorp Second Deferred Compensation Plan, the KeyCorp Excess 401(k) Savings Plan, and the KeyCorp Second 401(k) Excess Savings Plan shall be referred to as the “Predecessor Plan.”

     6.2 Opening Account Balances. All Predecessor Plan participants shall have their Predecessor Plan benefits reflected, on a bookkeeping basis, as a single Predecessor Plan Opening Account Balance (“Opening Account Balance”). Such Opening Account Balance shall separately reflect Predecessor Plan (1) participant deferrals, (2) corporate contributions, and (3) any participant rollover balances, with all earnings, gains and losses thereon. All Predecessor Plan participant deferral elections made prior to December 31, 2006 shall be deferred to the Plan when paid, and shall be reflected as part of the Participant’s Predecessor Plan Opening Account Balance. Predecessor Plan benefits, as reflected in the Participant’s Opening Account Balance, will be subject to the distribution provisions of Section 6.4, Section 6.5 and Section 6.6 hereof, as well as the requirements of Article VII of the Plan.

     6.3 Investment of Predecessor Plan Benefits.

(a)

Participant Deferrals Subject to Investment Direction. Predecessor Plan participants on or prior to December 31, 2006 shall be required make an election to direct the investment of those participant deferrals that are subject to investment diversification under the Predecessor Plan. The Participant’s election to invest his or her Predecessor Plan participant deferrals in the Plan’s Common Stock Account will constitute an irrevocable election, and such participant deferrals thereafter will not be subject to investment diversification by the participant.

(b)

Participant Deferrals, Rollover Contributions, and Corporate Contributions Not Subject to Investment Direction. Predecessor Plan participant deferrals not subject to investment diversification, Predecessor Plan rollover contributions, and Predecessor Plan

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corporate contributions shall automatically be invested in the Plan’s Common Stock Account, and will not be subject to investment diversification by the participant.

     6.4 Vesting of Predecessor Plan Corporate Contributions. All Predecessor Plan corporate contributions that have not vested as of December 31, 2006 shall continue to vest under the vesting provisions of Section 5.3 hereof, and when vested, shall become a part of the Participant’s Plan benefit. Notwithstanding the foregoing provisions of this Section 6.4, however, in the event that the Participant elected to irrevocably invest his or her participant deferrals under the KeyCorp Deferred Compensation Plan and/or the KeyCorp Second Deferred Compensation Plan into the common stock account of those plans, and in exchange for this irrevocable investment election the Participant received an additional 4% corporate contribution amount on such participant deferrals, then in such event, this additional 4% corporate contribution amount, with all earnings and gains thereon, shall be forfeited in the event of the Participant’s Termination prior to his or her Normal Retirement.

     6.5 Distribution Election for Predecessor Plan Benefits. Predecessor Plan participants shall make a single, irrevocable election prior to December 31, 2006 to have all Predecessor Plan benefits distributed under the following distribution payment options:

(a)	a single lump sum distribution, and/or
(b)	a series of monthly installment distributions over a period of 60, 120, or 180 months.

If a Predecessor Plan participant fails to make a distribution election for his or her Predecessor Plan benefits, as provided for under this Section 6.4 hereof, the participant’s Predecessor Plan benefit with all earnings, gains and losses thereon shall be distributed to the participant as an installment distribution over a period of 120 months. The distribution of Predecessor Plan benefits shall be subject to all requirements of Article VII of the Plan.

     6.6 Constructive Receipt Limitation. Notwithstanding the foregoing provisions of Section 6.5 hereof, Participants’ Predecessor Plan distribution elections shall remain in effect and shall control all Participant Plan distributions occurring prior to July 1, 2007.

     6.7 Predecessor Plan Benefits in a Pay Status. All Predecessor Plan benefits in a pay status as of December 31, 2006 shall continue to be paid in accordance with the distribution elections in effect and in accordance with the terms of the Predecessor Plan.

ARTICLE VII

DISTRIBUTION OF PLAN BENEFITS

     7.1 Distribution of Plan Benefits. Subject to the provisions of Section 7.3 and Section 7.4 hereof, a Participant shall commence the distribution of his or her vested Plan Account balance and vested Opening Account Balance at the Participant’s Termination or Retirement (whichever shall first occur).

     7.2 Unforeseeable Emergency. Upon a finding that the Participant has suffered an Unforseeable Emergency, the Corporation shall permit the Participant to obtain an Emergency Withdrawal from his or her vested Plan Account. The amount of such Emergency Withdrawal shall be

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limited to the amount reasonably necessary to meet the Participant’s immediate emergency needs resulting from the Unforeseeable Emergency, as defined under Section 409A of the Code. Distributions made to a Participant pursuant to this Section 7.2 hereof shall be paid in a lump sum amount as soon as administratively practicable following the Participant’s Unforeseeable Emergency request.

     7.3 Distribution Options. Subject to the provisions of Section 7.4 and Section 7.5 hereof, a Participant shall elect, as reflected in the Participant’s Participation Agreement, to receive a distribution of his or her Participant Deferrals and Corporate Contributions for the applicable Deferral Period under the following payment options:

(a)	a single lump sum distribution, or
(b)	a series of monthly installment distributions over a period of 60, 120, or 180 months.

     Distribution of Participant Deferrals and Predecessor Plan participant deferrals from the Plan’s Investment Funds or Interest Bearing Account shall be made in cash. Distributions of Participant Deferrals, Rollover Contributions, Corporate Contributions, and Predecessor Plan participant deferrals, corporate contributions, and rollover contributions from the Company Stock Fund shall be made in KeyCorp common shares.

     7.4 Forfeiture of Plan Benefits. Notwithstanding any other provision of the Plan to the contrary, if the Participant engages in any Harmful Activity prior to or within twelve months following the Participant’s Termination or Retirement, then by operation of this Section 7.4 hereof, and without any further notice to the Participant, (a) (i) all Corporate Contributions and Predecessor Plan corporate contributions, and (ii) all earnings, dividends, and gains allocated to the Participant’s Plan Account with regard to both Participant Deferrals and Corporate Contributions as well as Predecessor Plan participant deferrals and corporate contributions shall become immediately forfeited (the Participant’s Participant Deferrals and Predecessor Plan participant deferrals shall be continue to be distributed to the Participant in accordance with the distribution instructions contained within the Participant’s Participation Agreements), and (b) all distributed Corporate Contributions and Predecessor Plan corporate contributions and all distributed earnings, gains and dividends on the Participant’s Participant Deferrals and Corporate Contributions and Predecessor Plan participant deferrals and corporate contributions that have been distributed to the Participant within one year of the Participant’s Termination or Retirement date shall be fully repaid by the Participant to the Corporation within 60 days following the Participant’s receipt of the Corporation’s notice of such Harmful Activity.

          The foregoing restrictions shall not apply in the event that the Participant’s employment with an Employer terminates within two years after a Change of Control if any of the following have occurred: a relocation of the Participant’s principal place of employment more than 35 miles from the Participant’s principal place of employment immediately prior to the Change of Control, a reduction in the Participant’s base salary after a Change of Control, or termination of employment under circumstances in which the Participant is entitled to severance benefits or salary continuation or similar benefits under a change of control agreement, employment agreement, or severance or separation pay plan. The determination by the Corporation as to whether a Participant has engaged in a “Harmful Activity” prior to or within twelve months after the Participant’s Termination or Retirement shall be final and conclusive upon the Participant and upon all other Persons.

     For purposes of this Section 7.4, a “Harmful Activity” shall have occurred if the Participant shall do any one or more of the following:

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(i)	Use, publish, sell, trade or otherwise disclose Non-Public Information of KeyCorp unless such prohibited activity was inadvertent, done in good faith and did not cause significant harm to KeyCorp.
(ii)	After notice from KeyCorp, fail to return to KeyCorp any document, data, or thing in his or her possession or to which the Participant has access that may involve Non-Public Information of KeyCorp.
(iii)	After notice from KeyCorp, fail to assign to KeyCorp all right, title, and interest in and to any confidential or non-confidential Intellectual Property which the Participant created, in whole or in part, during employment with KeyCorp, including, without limitation, copyrights, trademarks, service marks, and patents in or to (or associated with) such Intellectual Property.
(iv)	After notice from KeyCorp, fail to agree to do any acts and sign any document reasonably requested by KeyCorp to assign and convey all right, title, and interest in and to any confidential or non-confidential Intellectual Property which the Participant created, in whole or in part, during employment with KeyCorp, including, without limitation, the signing of patent applications and assignments thereof.
(v)	Upon the Participant’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, solicit or entice for employment or hire any KeyCorp employee.
(vi)	Upon the Participant’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, call upon, solicit, or do business with (other than business which does not compete with any business conducted by KeyCorp) any KeyCorp customer the Participant called upon, solicited, interacted with, or became acquainted with, or learned of through access to information (whether or not such information is or was non-public) while the Participant was employed at KeyCorp unless such prohibited activity was inadvertent, done in good faith, and did not involve a customer whom the Participant should have reasonably known was a customer of KeyCorp.
(vii)	Upon the Participant’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, after notice from KeyCorp, continue to engage in any business activity in competition with KeyCorp in the same or a closely related activity that the Participant was engaged in for KeyCorp during the one year period prior to the termination of the Participant’s employment.

For purposes of this Section 7.4, the term:

     “Intellectual Property” shall mean any invention, idea, product, method of doing business, market or business plan, process, program, software, formula, method, work of authorship, or other information, or thing relating to KeyCorp or any of its businesses.

     “Non-Public Information” shall mean, but is not limited to, trade secrets, confidential processes, programs, software, formulas, methods, business information or plans, financial information, and listings of names (e.g., employees, customers, and suppliers) that are developed, owned, utilized, or maintained by an employer such as

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KeyCorp, and that of its customers or suppliers, and that are not generally known by the public.

     “KeyCorp” shall include KeyCorp, its subsidiaries, and its affiliates.

     7.5 Distribution of Account Balances. The Participant’s vested Plan Account and vested Opening Account Balance shall be valued as of the Determination Date immediately preceding his or her Termination, Retirement or Disability (the “valuation date”).

(a)	Lump Sum Distributions. If a Participant has elected to receive a lump sum distribution of all or any portion of his or her vested Plan Account and/or vested Opening Account Balance, such lump sum distribution shall be made as soon as administratively practicable but in no event later than 60 days following the Participant’s Termination, Retirement or Disability date.
(b)	Installment Distributions. If a Participant has elected to receive an installment distribution of all or any portion of his or her vested Plan Account and/or vested Opening Account Balance, such installment distribution shall commence as soon as administratively practicable but in no event later than 60 days following the Participant’s Termination, Retirement or Disability date.

(i)

The Participant’s vested unpaid Plan Account balances invested for bookkeeping purposes in the Plan’s Investment Funds and/or Interest Bearing Account shall be reflected in a distribution sub-account, which shall be credited monthly with interest based on the average of the Interest Bearing Account’s rate of return for the 36 month period immediately preceding the Participant’s Termination, Retirement, or Disability date during the Participant’s installment distribution period. Distributions shall be made in substantially equal monthly installments over the Participant’s elected installment distribution period.

(ii)

The Participant’s vested unpaid Plan Account balance invested for bookkeeping purposes in the Plan’s Common Stock Account shall be reflected as a number of whole and fractional Common Shares in a distribution sub-account and shall be credited with dividends on a bookkeeping basis which shall be reinvested in the Plan’s Common Stock Account throughout the installment distribution period; all such reinvested dividends shall be paid to the Participant in Common Shares in conjunction with the Participant’s final installment payment under the Plan. Distributions shall be made in substantially equal annual installments over the Participant’s elected installment distribution period.

     7.6 Distribution of Small Accounts. Notwithstanding the provisions of Sections 7.2, 7.3, and 7.5, hereof, if the value of a Participant’s vested Account balance(s) as of the Determination Date immediately preceding the Participant’s Termination, Retirement or Disability date is under $50,000, the Participant’s Account balance(s) shall be distributed to the Participant as a single lump sum distribution as soon as administratively practicable following such date.

     7.7 Payment Limitation for Key Employees. Notwithstanding any other provision of the Plan to the contrary, including the provisions contained within this Article VII hereof, in the event that the Participant constitutes a “key” employee of the Corporation (as that term is defined in accordance with

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Section 416(i) of the Code without regard to paragraph (5) thereof), distributions of the Participant’s Plan benefits (including Predecessor Plan benefits) that otherwise would commence on the Participant’s separation from service may not commence before the date which is six months after the Participant’s date of separation from service (or, if earlier, the date of death of the Participant). The term “separation from service” shall be defined under Section 409A of the Code and regulations issued thereunder.

     7.8 Facility of Payment. If it is found that any individual to whom an amount is payable hereunder is incapable of attending to his or her financial affairs because of any mental or physical condition, including the infirmities of advanced age, such amount (unless prior claim therefore shall have been made by a duly qualified guardian or other legal representative) may, in the discretion of the Corporation, be paid to another person for the use or benefit of the individual found incapable of attending to his or her financial affairs or in satisfaction of legal obligations incurred by or on behalf of such individual. Any such payment shall be charged to the Participant’s Plan Account from which any such payment would otherwise have been paid to the individual found incapable of attending to his or her financial affairs, and shall be a complete discharge of any liability therefore under the Plan.

ARTICLE VIII

BENEFICIARY DESIGNATION

     8.1 Beneficiary Designation. Subject to Section 8.3 hereof, each Participant shall be required to designate one or more persons or an entity as Beneficiary (both primary as well as secondary) to whom benefits under this Plan shall be paid in the event of Participant’s death prior to complete distribution of the Participant’s Plan Account. Each Beneficiary designation shall be in a written form prescribed by the Corporation and shall be effective only when filed with the Corporation during the Participant’s lifetime.

     8.2 Changing Beneficiary. Subject to Section 8.3, any Beneficiary designation may be changed by a Participant without the consent of the previously named Beneficiary by the filing of a new designation with the Corporation. The filing of a new designation shall cancel all designations previously filed.

     8.3 No Beneficiary Designation. If any Participant fails to designate a Beneficiary in the manner provided above, if the designation is void, or if the Beneficiary (including all contingent Beneficiaries) designated by a deceased Participant dies before the Participant or before complete distribution of the Participant’s benefits, the Participant’s Beneficiary shall be the person in the first of the following classes in which there is a survivor:

(a)	The Participant’s spouse;
(b)	The Participant’s children in equal shares, except that if any of the children predeceases the Participant but leaves issue surviving, then such issue shall take, by right of representation the share the parent would have taken if living; and
(c)	The Participant’s estate.

     8.4 Distribution Upon Death. If a Participant dies after the distribution of his or her interest under the Plan has commenced, the remaining portion of the Participant’s entire interest under the Plan, if any, shall be distributed to the Participant’s Beneficiary in a single lump sum benefit. If the Participant dies before the distribution of the Participant’s Plan Account has commenced, the Participant’s entire

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interest under the Plan shall be valued as of the Determination Date immediately preceding the Participant’s date of death, and shall be distributed to his or her Beneficiary in a lump sum payment as soon as reasonably practicable following the Participant’s date of death.

ARTICLE IX

ADMINISTRATION

     9.1 Administration. The Plan Administrator shall be responsible for the general administration of the Plan, for carrying out the provisions hereof, and for making payments hereunder. The Plan Administrator shall have the sole and absolute discretionary authority and power to carry out the provisions of the Plan, including, but not limited to, the authority and power (a) to determine all questions relating to the eligibility for and the amount of any benefit to be paid under the Plan, (b) to determine all questions pertaining to claims for benefits and procedures for claim review, (c) to resolve all other questions arising under the Plan, including any questions of construction and/or interpretation, and (d) to take such further action as the Plan Administrator shall deem necessary or advisable in the administration of the Plan. All findings, decisions, and determinations of any kind made by the Plan Administrator shall not be disturbed unless the Plan Administrator has acted in an arbitrary and capricious manner. Subject to the requirements of law, the Plan Administrator shall be the sole judge of the standard of proof required in any claim for benefits and in any determination of eligibility for a benefit. All decisions of the Plan Administrator shall be final and binding on all parties. The Plan Administrator may employ such attorneys, investment counsel, agents, and accountants, as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The actions taken and the decisions made by the Plan Administrator hereunder shall be final and binding upon all interested parties subject, however, to the provisions of Section 9.2. The Plan Year, for purposes of Plan administration, shall be the calendar year.

     9.2 Claims Review Procedure. Whenever the Plan Administrator decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Plan filed by any person (herein referred to as the “Claimant”), the Plan Administrator shall transmit a written notice of its decision to the Claimant, which notice shall be written in a manner calculated to be understood by the Claimant and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Claimant that, within 60 days of the date on which he or she receives such notice, he or she may obtain review of the decision of the Plan Administrator in accordance with the procedures hereinafter set forth. Within such 60-day period, the Claimant or his or her authorized representative may request that the claim denial be reviewed by filing with the Plan’s Claims Review Committee a written request therefore, which request shall contain the following information:

(a)	the date on which the request was filed with the Plan Administrator; provided, however, that the date on which the request for review was in fact filed with the Plan’s Claims Review Committee shall control in the event that the date of the actual filing is later than the date stated by the Claimant pursuant to this paragraph (a);
(b)	the specific portions of the denial of his or her claim, which the Claimant requests the Plan’s Claims Review Committee to review;
(c)	a statement by the Claimant setting forth the basis upon which he or she believes the Plan’s Claims Review Committee should reverse its previous denial of the claim and accept the claim as made; and

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(d) any written material, which the Claimant desires the Plan’s Claims Review Committee to examine in its consideration of his or her position as stated pursuant to paragraph (b) above.

     In accordance with this Section, if the Claimant requests a review of the Plan Administrator’s decision, such review shall be made by the Plan’s Claims Review Committee, who shall, within sixty (60) days after receipt of the request form, review and render a written decision on the claim containing the specific reasons for the decision including reference to Plan provisions upon which the decision is based. All findings, decisions, and determinations of any kind made by the Plan’s Claims Review Committee shall not be modified unless the Plan’s Claims Review Committee has acted in an arbitrary and capricious manner. Subject to the requirements of law, the Plan’s Claims Review Committee shall be the sole judge of the standard of proof required in any claim for benefits, and any determination of eligibility for a benefit. All decisions of the Plan’s Claims Review Committee shall be binding on the claimant and upon all other Persons. If the Participant or Beneficiary shall not file written notice with the Plan’s Claims Review Committee at the times set forth above, such individual shall have waived all benefits under the Plan other than as already provided, if any, under the Plan.

ARTICLE X

AMENDMENT AND TERMINATION OF PLAN

10.1 Reservation of Rights. The Corporation reserves the right to amend or terminate the Plan at any time by action of the Board of Directors of the Corporation, or any duly authorized committee thereof, and to modify or amend the Plan, in whole or in part, at any time and for any reason. No amendment or termination will result in an acceleration of Plan Benefits in violation of Section 409A of the Code.

(a)

Preservation of Account Balance. No termination, amendment, or modification of the Plan shall reduce (i) the amount of Plan Rollover Contributions, Predecessor Plan benefits, Participant Deferrals and Corporate Contributions, and (ii) all earnings and gains on such Plan Rollover Contributions, Predecessor Plan benefits, Participant Deferrals, and Corporate Contributions that have accrued up to the effective date of the termination, amendment, or modification.

(b)

Changes in Earnings Rate. No amendment or modification of the Plan shall reduce the rate of earnings to be credited on all Plan Rollover Contributions, Predecessor Plan benefits, Participant Deferrals, and Corporate Contributions and all earnings accrued thereon until the close of the applicable Deferral Period in which such amendment or modification is made.

     10.2 Effect of Plan Termination. The Corporation may terminate the Plan by instructing the Plan Administrator to not accept any additional Participation Agreements. If such a termination occurs, the Plan shall continue to operate and be effective with regard to Participation Agreements entered into prior to the effective date of such termination.

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ARTICLE XI

CHANGE OF CONTROL

     11.1 Change of Control. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control as defined in accordance with Section 2.2 of the Plan, no amendment or modification of the Plan may be made at any time on or after such Change of Control (1) to reduce or modify a Participant’s Pre-Change of Control Account Balance, (2) to reduce or modify the choice of Investment Funds or method of crediting such earnings to a Participant’s Pre-Change of Control Account Balances, (3) to reduce or modify the Common Stock Accounts’ method of calculating all earnings, gains, and/or losses on a Participant’s Pre-Change of Control Account Balance, or (4) to reduce or modify the Participant’s Participant Deferrals and/or Corporate Contributions to be credited to a Participant’s Plan Account for the applicable Deferral Period. For purposes of this Section 11.1, the term “Pre-Change of Control Account Balance” shall mean, with regard to any Plan Participant, the aggregate amount of such Participant’s Plan Rollover Contributions, Predecessor Plan benefits, Participant Deferrals, and Corporate Contributions with all earnings, gains, and losses thereon which are credited to the Participant’s Plan Account and Opening Account Balance through the close of the calendar year in which such Change of Control occurs.

     11.2 Common Stock Conversion. In the event of a Change of Control in which the common shares of the Corporation are converted into or exchanged for securities, cash and/or other property as a result of any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with or into another corporation or entity, or the sale of all or substantially all of its assets to another corporation or entity, the Corporation shall cause the Common Stock Account to reflect on a bookkeeping basis the securities, cash and other property that would have been received in such reorganization, reclassification, consolidation, merger or sale on an equivalent amount of common shares equal to the balance in the Common Stock Account and, from and after such reorganization, reclassification, consolidation, merger or sale, the Common Stock Account shall reflect on a bookkeeping basis all dividends, interest, earnings and losses attributable to such securities, cash, and other property (with any cash earning interest at the rate applicable to the Interest Earning Account).

     11.3 Change of Control Provisions. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, (i) the Participant’s employment is terminated by his or her Employer and any other Employer without cause, or (ii) the Participant resigns within two years following a Change of Control as a result of the Participant’s mandatory relocation, reduction in the Participant’s base salary, reduction in the Participant’s average annual incentive compensation (unless such reduction is attributable to the overall corporate or business unit performance), or the Participant’s exclusion from stock option programs as compared to comparably situated Employees, the provisions of Section 6.4 of the Plan which limit a Participant’s ability to provide services to a financial services organization, business, or company upon the Participant’s Termination or Retirement, shall become null and void.

     11.4 Amendment in the Event of a Change of Control. On or after a Change of Control, the provisions of Article II, Article III, Article IV, Article V, Article VI, Article VII, Article VIII, Article IX, Article X, and Article XI may not be amended or modified as such Sections and Articles apply with regard to the Participants’ Pre-Change of Control Account Balances.

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ARTICLE XII

MISCELLANEOUS PROVISIONS

     12.1 Unfunded Plan. This Plan is an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly-compensated employees” within the meaning of Sections 201, 301, and 401 of ERISA, and therefore is exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA.

     12.2 No Commitment as to Employment. Nothing herein contained shall be construed as a commitment or agreement upon the part of any Employee hereunder to continue his or her employment with an Employer, and nothing herein contained shall be construed as a commitment on the part of any Employer to continue the employment, rate of compensation or terms and conditions of employment of any Employee hereunder for any period. All Participants shall remain subject to discharge to the same extent as if the Plan had never been put into effect.

     12.3 Benefits. Nothing in the Plan shall be construed to confer any right or claim upon any person, firm, or corporation other than the Participants, former Participants, and Beneficiaries.

     12.4 Absence of Liability. No member of the Board of Directors of the Corporation or a subsidiary or committee authorized by the Board of Directors, or any officer of the Corporation or a subsidiary or officer of a subsidiary shall be liable for any act or action hereunder, whether of commission or omission, taken by any other member, or by any officer, agent, or Employee, except in circumstances involving bad faith or willful misconduct, for anything done or omitted to be done.

     12.5 Expenses. The expenses of administration of the Plan shall be paid by the Corporation.

     12.6 Precedent. Except as otherwise specifically agreed to by the Corporation in writing, no action taken in accordance with the Plan by the Corporation shall be construed or relied upon as a precedent for similar action under similar circumstances.

     12.7 Withholding. The Corporation shall withhold any tax, which the Corporation in its discretion deems necessary to be withheld from any payment to any Participant, former Participant, or Beneficiary hereunder, by reason of any present or future law.

     12.8 Validity of Plan. The validity of the Plan shall be determined and the Plan shall be construed and interpreted in accordance with the provisions of ERISA, the Code, and, to the extent applicable, the laws of the State of Ohio. The invalidity or illegality of any provision of the Plan shall not affect the validity or legality of any other part thereof.

     12.9 Parties Bound. The Plan shall be binding upon the Employers, Participants, former Participants, and Beneficiaries hereunder, and, as the case may be, the heirs, executors, administrators, successors, and assigns of each of them.

     12.10 Headings. All headings used in the Plan are for convenience of reference only and are not part of the substance of the Plan.

     12.11 Duty to Furnish Information. The Corporation shall furnish to each Participant, former Participant, or Beneficiary any documents, reports, returns, statements, or other information that it reasonably deems necessary to perform its duties imposed hereunder or otherwise imposed by law.

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     12.12 Trust Fund. At its discretion, the Corporation may establish one or more trusts, with such trustees as the Corporation may approve, for the purpose of providing for the payment of benefits owed under the Plan. Although such a trust may be irrevocable, in the event of insolvency or bankruptcy of the Corporation, such assets will be subject to the claims of the Corporation’s general creditors. To the extent any benefits provided under the Plan are paid from any such trust, the Employer shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Employer.

     12.13 Validity. In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

     12.14 Notice. Any notice required or permitted under the Plan shall be deemed sufficiently provided if such notice is in writing and hand delivered or sent by registered or certified mail. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification. Mailed notice to the Corporation shall be directed to the Corporation’s address, attention: KeyCorp Compensation and Benefits Department. Mailed notice to a Participant or Beneficiary shall be directed to the individual’s last known address in the Employer’s records.

     12.15 Successors. The provisions of this Plan shall bind and inure to the benefit of each Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity, which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of an Employer.

ARTICLE XIII

COMPLIANCE WITH
SECTION 409A CODE

     13.1 Compliance With Section 409A. The Plan is intended to provide for the deferral of compensation in accordance with the provisions of Section 409A of the Code and regulations and published guidance issued pursuant thereto. Accordingly, the Plan shall be construed in a manner consistent with those provisions and may at any time be amended in the manner and to the extent determined necessary or desirable by the Corporation to reflect or otherwise facilitate compliance with such provisions with respect to amounts deferred. Moreover, to the extent permitted in guidance issued by the Secretary of the Treasury and in accordance with procedures established by the Corporation, a Participant shall make a new deferral election under the Plan with regard to amounts that have been deferred under Predecessor Plan. Notwithstanding any provision of the Plan to the contrary, no otherwise permissible election, deferral, accrual, or distribution shall be made or given effect under the Plan that would result in early taxation or assessment of penalties or interest of any amount under Section 409A of the Code.

          Notwithstanding any provision of the Plan to the contrary, Plan benefits shall not be distributed to a Participant earlier than:

(a) the Participant’s separation from service as determined by the Secretary of the Treasury (except as provided below with respect to a key employee of the Corporation);

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(b)	a specified time (or pursuant to a fixed schedule) specified under the Plan and Participant’s Participation Agreement prior to the date of the Participant’s deferral of Compensation;
(c)	the date of the Participant’s Disability; or
(d)	death of the Participant.

     If it is determined that a Participant constitutes a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of the Corporation, the Participant shall not commence any distribution of his or her Plan benefits that otherwise would commence at the Participant’s separation from service before the date which is six months after the date of the Participant’s separation from service (or, if earlier, the date of death of the Participant).

     WITNESS WHEREOF, KeyCorp has caused this KeyCorp Deferred Savings Plan to be executed by its duly authorized officer this 21^st day of December, to be effective as of December 30, 2006.

KEYCORP
By:	/s/ Thomas Helfrich
Title:	Executive Vice President

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EX-10.56

EXHIBIT 10.56

KEYCORP

SECOND SUPPLEMENTAL RETIREMENT PLAN

ARTICLE I

THE PLAN

     The KeyCorp Second Supplemental Retirement Plan (the “Plan”), as originally established on December 28, 2004 and made effective as of January 1, 2005, is hereby amended and restated as of December 31, 2006 to reflect the merger of the KeyCorp Supplemental Retirement Plan into the Plan effective December 31, 2006. The Plan, as amended and restated, is structured and designed to provide a nonqualified supplemental retirement benefit to a certain select group of employees of KeyCorp and its subsidiaries. It is the intention of KeyCorp and it is the understanding of those employees covered under the Plan, that the Plan constitutes a nonqualified retirement plan for a select group of management or highly compensated employees as described in Section 201(2), Section 301(3) and Section 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) and as such, the Plan is unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE II

DEFINITIONS

     2.1 Meanings of Definitions. As used herein, the following words and phrases shall have the meanings hereinafter set forth, unless a different meaning is plainly required by the context:

(a)	“Average Interest Credit” shall mean the average of the Interest Credits (as defined in the Retirement Plan) for the three (3) consecutive calendar years ending with the year of the Grandfathered Employee’s termination.
(b)	“Average Treasury Rate” shall mean the average of the Treasury Rates (as defined in the Retirement Plan) for the three (3) consecutive calendar years ending with the year of the Grandfathered Employee’s termination.
(c)	“Equity/Compensation Award” shall mean one-half (50%) of the value of an award granted under the KeyCorp 2004 Equity Compensation Plan for any Plan year. The term “Equity/Compensation Award” may include “Stock Appreciation Rights”, “Restricted Stock”, “Restricted Stock Units”, “Performance Shares”, and/or “Performance Units”, but shall specifically not include “Options” as those terms have been defined in accordance with the provisions of the KeyCorp 2004 Equity Compensation Plan.”
(d)	“Beneficiary” shall mean the Grandfathered Employee’s surviving spouse or such other Beneficiary determined pursuant to Article VII of the Retirement Plan in the event the Grandfathered Employee dies before his or her Supplemental Retirement Benefit shall have been distributed to him or her in full.

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(e) “Compensation” for any Plan year or any partial Plan year in which the Grandfathered Employee incurs a severance from service date shall mean the entire amount of base compensation paid to such Grandfathered Employee during such period by reason of his employment as an Employee as reported for federal income tax purposes, or such base compensation which would have been paid except for (1) the timing of an Employer’s payroll processing operations, (2) the Grandfathered Employee’s election to participate in the KeyCorp 401(k) Savings Plan, KeyCorp Excess 401(k) Savings Plan, the KeyCorp Flexible Benefits Plan, a transportation reimbursement plan, the KeyCorp Automatic Deferral Plan, and/or (3) the Grandfathered Employee’s election to defer such base compensation election of under the KeyCorp Deferred Compensation Plan or the KeyCorp Deferred Savings Plan for the applicable Plan year(s), provided, however, that the term Compensation shall specifically exclude:

(i)	any amount attributable to the Grandfathered Employee’s exercise of stock appreciation rights and the amount of any gain to the Grandfathered Employee upon the exercise of stock options;
(ii)	any amount attributable to the Grandfathered Employee’s receipt of non-cash remuneration whether or not it is included in the Grandfathered Employee’s income for federal income tax purposes;
(iii)	any amount attributable to the Grandfathered Employee’s receipt of moving expenses and any relocation bonus paid to the Grandfathered Employee during the Plan year;
(iv)	any amount attributable to a lump sum severance payment paid by an Employer or the Corporation to the Grandfathered Employee;
(v)	any amount attributable to fringe benefits (cash and non-cash);
(vi)	any amount attributable to any bonus or payment made as an inducement for the Grandfathered Employee to accept employment with an Employer;
(vii)	any amount paid to the Grandfathered Employee during the Plan year which is attributable to interest earned and any KeyCorp matching contributions allocated on compensation deferred under a plan of an Employer or the Corporation;
(viii)	any amount attributable to salary deferrals paid to the Grandfathered Employee during the Plan year, which have been previously included as compensation under the Plan; and
(ix)	any amount paid for any period after the Grandfathered Employee’s termination or retirement date.

(f)	“Corporation” shall mean KeyCorp, an Ohio corporation its corporate successors, and any corporation or corporations into or with which it may be merged or consolidated.
(g)	“Disability” shall mean (1) the physical or mental disability of a permanent nature which prevents a Participant from performing the duties such Participant was employed to perform for his or her Employer when such disability commenced, (2) qualifies for

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	disability benefits under the federal Social Security Act within 30 months following the Participant’s disability, and (3) qualifies the Participant for disability coverage under the KeyCorp Long Term Disability Plan. In addition to the foregoing, the disability requirements addressed in Section 409A of the Code are incorporated into the provisions of this definition.
(h)	“Early Retirement Date” shall mean the date of the Grandfathered Employee’s retirement from his or her employment with an Employer on or after the Grandfathered Employee’s attainment of age 55 and completion of a minimum of five years of Benefit Service, but prior to the Grandfathered Employee’s Normal Retirement Date.
(i)	“Employer” shall mean the Corporation and any of its subsidiaries or affiliates unless specifically excluded as an Employer for Plan purposes by written action of an officer of the Corporation. An Employer’s participation shall be subject to any conditions or requirements made by the Corporation, and each Employer shall be deemed to appoint the Corporation as its exclusive agent under the Plan as long as it continues as an Employer.
(j)	“Final Average Compensation” shall mean with respect to any Grandfathered Employee, the annual average of his or her highest aggregate Compensation for any period of five consecutive years within the period of ten consecutive full years immediately prior to his or her retirement or other termination of employment, or termination of the Plan, whichever first occurs; provided, however, that if a Grandfathered Employee is employed for less than five consecutive years prior to such date, the term shall mean the monthly average of the aggregate amount of his or her Compensation for the entire period of the Grandfathered Employee’s employment, multiplied by 12. If a Grandfathered Employee receives no Compensation for any portion of such five consecutive years because of absence from work, there shall be treated as Compensation received during such period of absence an amount equal to the Compensation he or she would have received had the Grandfathered Employee not been absent, such amount to be determined by the Corporation on the basis of such Grandfathered Employee’s salary or wage rate in effect immediately prior to such absence; provided, however, that no Compensation shall be credited hereunder for the period during which the Grandfathered Employee is permanently and totally disabled and for which he receives benefits under the long term disability program maintained in effect by his Employer.
(k)	“Grandfathered Employee” shall mean an Employee who is listed on Exhibit A attached hereto.
(l)	“Harmful Activity” shall have occurred if the Grandfathered Employee shall do any one or more of the following:

(i)	Use, publish, sell, trade or otherwise disclose Non-Public Information of KeyCorp unless such prohibited activity was inadvertent, done in good faith and did not cause significant harm to KeyCorp.
(ii)	After notice from KeyCorp, fail to return to KeyCorp any document, data, or thing in his or her possession or to which the Grandfathered Employee has access that may involve Non-Public Information of KeyCorp.

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(iii)	After notice from KeyCorp, fail to assign to KeyCorp all right, title, and interest in and to any confidential or non-confidential Intellectual Property which the Grandfathered Employee created, in whole or in part, during employment with KeyCorp, including, without limitation, copyrights, trademarks, service marks, and patents in or to (or associated with) such Intellectual Property.
(iv)	After notice from KeyCorp, fail to agree to do any acts and sign any document reasonably requested by KeyCorp to assign and convey all right, title, and interest in and to any confidential or non-confidential Intellectual Property which the Grandfathered Employee created, in whole or in part, during employment with KeyCorp, including, without limitation, the signing of patent applications and assignments thereof.
(v)	Upon the Grandfathered Employee’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, solicit or entice for employment or hire any KeyCorp employee.
(vi)	Upon the Grandfathered Employee’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, call upon, solicit, or do business with (other than business which does not compete with any business conducted by KeyCorp) any KeyCorp customer the Grandfathered Employee called upon, solicited, interacted with, or became acquainted with, or learned of through access to information (whether or not such information is or was non-public) while the Grandfathered Employee was employed at KeyCorp unless such prohibited activity was inadvertent, done in good faith, and did not involve a customer whom the Grandfathered Employee should have reasonably known was a customer of KeyCorp.
(vii)	Upon the Grandfathered Employee’s own behalf or upon behalf of any other person or entity that competes or plans to compete with KeyCorp, after notice from KeyCorp, continue to engage in any business activity in competition with KeyCorp in the same or a closely related activity that the Grandfathered Employee was engaged in for KeyCorp during the one year period prior to the termination of the Grandfathered Employee’s employment.
	For purposes of this Section 2.1(l) the term:
	“Intellectual Property” shall mean any invention, idea, product, method of doing business, market or business plan, process, program, software, formula, method, work of authorship, or other information, or thing relating to KeyCorp or any of its businesses.

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“Non-Public Information” shall mean, but is not limited to, trade secrets, confidential processes, programs, software, formulas, methods, business information or plans, financial information, and listings of names (e.g., employees, customers, and suppliers) that are developed, owned, utilized, or maintained by an employer such as KeyCorp, and that of its customers or suppliers, and that are not generally known by the public.

“KeyCorp” shall include KeyCorp, its subsidiaries, and its affiliates.

(m) “Incentive Compensation Award” for any Plan year shall collectively mean the short term incentive compensation award (whether in cash or common shares of the Corporation, and whether paid or deferred, or a combination of both) and the long term incentive compensation award (whether in cash or common shares of the Corporation, and whether paid or deferred, or a combination of both) (if any) granted to a Grandfathered Employee under an Incentive Compensation Plan, as follows:

• An incentive compensation award granted under the KeyCorp Annual Incentive Plan, the KeyCorp Short Term Incentive Compensation Plan, the KeyCorp Management Incentive Compensation Plan, and/or such other Employer-sponsored line of business Incentive Compensation Plan which shall constitute an Incentive Compensation Award for the year in which the award is earned (without regard to the actual time of payment).

• An incentive compensation award granted under the KeyCorp Long Term Incentive Compensation Plan (“LTIC Plan”) with respect to any multi-year performance period which shall be deemed to be for the last year of the multi-year period without regard to the actual time of payment of the award. Accordingly, an incentive compensation award granted under the LTIC Plan with respect to the three-year performance period of 1993, 1994, and 1995 will be deemed to be for 1995 (without regard to the actual time of payment), and the entire incentive compensation award under the LTIC Plan for that performance period will be an Incentive Compensation Award for the year 1995.

• An incentive compensation award granted under the KeyCorp Long Term Incentive Plan (“Long Term Plan”) with respect to any multi-year period which shall be deemed to be for the last year of the multi-year performance period and for the year immediately following such year (without regard to the actual time of payment). Accordingly, an award granted under the Long Term Plan with respect to the four-year performance period of 1998, 1999, 2000, and 2001 shall be deemed to be for the years 2001 and 2002, with one-half the award allocated to the year 2001, and one-half the award allocated to the year 2002.

• An incentive compensation award granted in the form of restricted stock under the KeyCorp Amended and Restated 1991 Equity Compensation Plan with respect to any multi-year period (but specifically excluding those awards applicable to the 2002-2003 multi-year period), which shall be deemed to be for the year in which

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	the award (grant) is made to the Grandfathered Employee; provided, however, that only those shares of restricted stock that have vested as of the Grandfathered Employee’s termination date shall be utilized for purposes of determining the Grandfathered Employee’s Incentive Compensation Award. The fair market value of such shares as of the date of the restricted stock grant multiplied by the number of vested shares as of the Grandfathered Employee’s termination date shall be included in determining the value of such award for purposes of calculating the Grandfathered Employee’s Supplemental Retirement Benefit under the provisions of Article III of the Plan.
	Notwithstanding the foregoing, however, in calculating the Grandfathered Employee’s Supplemental Retirement Benefit under the provisions of Article III of the Plan, if it is determined that an incentive compensation award granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan would produce a larger Plan benefit for the Grandfathered Employee if the award was included in the year in which the award (or any part of the award) was initially vested rather than in the year in which the award was granted, then such incentive compensation award shall be included for the year in which the award (or any part of the award) initially vested rather than for the year in which the award was granted.
	If at the time of the Grandfathered Employee’s termination date, the Grandfathered Employee maintains shares of not forfeited restricted stock and such restricted stock later vests in conjunction with the passage of time or with the Corporation’s attainment of certain performance criteria, or otherwise, then as of such subsequent vesting date the Grandfathered Employee’s Monthly Supplemental Retirement Benefit shall be recalculated to include such newly vested shares. Such newly vested shares shall relate to the award in which such shares were granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan and shall be included as a part of that award (based on either the date of grant or the date of initially vesting, whichever date was actually used by the Plan in calculating the Grandfathered Employee’s initial Monthly Supplemental Retirement Benefit).
•	An incentive compensation award granted in the form of either restricted stock and/or phantom shares (hereinafter collectively referred to as “shares”) under the KeyCorp Chief Executive Officer Plan with respect to any multi-year period (but specifically excluding those awards applicable to the 2002-2003 multi-year period), shall be deemed to be for the year in which the award (grant) is made to the Grandfathered Employee; provided, however, that only those shares that have vested as of the Grandfathered Employee’s termination date shall be utilized in calculating the Grandfathered Employee’s Incentive Compensation Award. The fair market value of such shares as of the date of the share grant multiplied by the number of vested shares as of the Grandfathered Employee’s termination date shall be used in determining value of such award for purposes of calculating the Grandfathered Employee’s Supplemental Retirement Benefit under the provisions of Article III of the Plan.

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•	Notwithstanding the foregoing, however, in calculating the Grandfathered Employee’s Supplemental Retirement Benefit under the provisions of Article III of the Plan, if it is determined that an incentive compensation award granted under the KeyCorp Chief Executive Officer Plan would produce a larger Plan benefit for the Grandfathered Employee if the award was included in the year in which the award (or any part of the award) initially vested rather than in the year in which the award was granted, then such incentive compensation award shall be included in year in which the award (or any part of the award) initially vested rather than for the year for which the award was granted.
	If at the time of the Grandfathered Employee’s termination date, the Grandfathered Employee maintains not forfeited shares, and such shares later vest in conjunction with the passage of time or with the Corporation’s attainment of certain performance criteria, or otherwise, then as of such subsequent vesting date, the Grandfathered Employee’s Monthly Supplemental Retirement Benefit shall be recalculated to include such newly vested shares. Such newly vested shares shall relate to the award in which such shares were granted under the under the KeyCorp Chief Executive Officer Plan, and shall be included as part of that award (based on either the date granted or the date initially vested, whichever date was actually used by the Plan in calculating the Grandfathered Employee’s initial Monthly Supplemental Retirement Benefit).
•	For those limited Grandfathered Employees who, for Plan purposes and in accordance with the provisions of this Section 2.1(m) received Incentive Compensation Award(s) granted in the form of time-lapsed restricted stock award(s) and/or performance shares under the KeyCorp Amended and Restated 1991 Equity Compensation Plan or the KeyCorp Chief Executive Officer Plan with respect to any multi-year period, the term Incentive Compensation Award shall also include those Equity/Compensation Award(s) granted to the Grandfathered Employee under the 2004 Equity Compensation Plan. An Equity/Compensation Award shall be deemed to be for the year in which the Equity/Compensation Award vests. If the Equity/Compensation Award is in the form of Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, the fair market value of such shares as of the date of the Equity/Compensation Award grant multiplied by the number of vested shares as of the Grandfathered Employee’s termination date shall determine the value of such Incentive Compensation Award for purposes of calculating the Grandfathered Employee’s Supplemental Retirement Benefit under the provisions of Article III of the Plan.
	Notwithstanding the foregoing provisions of this Section 2.1(m) hereof, in calculating a Grandfathered Employee’s Incentive Compensation Award for any 12 month period, there shall be included only one award granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan, the KeyCorp Chief Executive Officer Plan, or Equity/Compensation Award under the KeyCorp 2004 Equity Compensation Plan for purposes of determining the Grandfathered Employee’s Incentive Compensation Award for such 12 month period.

(n) “Incentive Compensation Plan” shall mean the KeyCorp Management Incentive Compensation Plan, the KeyCorp Annual Incentive Plan, the KeyCorp Short Term Incentive Compensation Plan, the KeyCorp Long Term Incentive Compensation Plan, the

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	KeyCorp Long Term Incentive Plan, the KeyCorp Amended and Restated 1991 Equity Compensation Plan, the KeyCorp Chief Executive Officer Plan, the KeyCorp 2004 Equity Compensation Plan, and/or such other Employer or KeyCorp-sponsored incentive compensation plan that KeyCorp in its sole discretion determines constitutes an “Incentive Compensation Plan” for purposes of this Section 2.1(n), as may be amended from time to time.”
(o)	“KeyCorp Chief Executive Officer Plan” shall mean the KeyCorp Chief Executive Officer Restricted Stock Plan, as may be amended from time to time, including any other successor or replacement plan.
(p)	“Normal Retirement Date” shall mean the first day of the month coinciding with or immediately following a Grandfathered Employee’s 65th birthday, or if later, the fifth anniversary of the Grandfathered Employee’s employment commencement date.
(q)	“Retirement Plan” shall mean the KeyCorp Cash Balance Pension Plan with all amendments, modifications and supplements which may be made thereto, as in effect on the date of a Grandfathered Employee’s retirement, death, or other termination of employment.
(r)	“Supplemental Retirement Benefit” shall mean the benefit paid under this Plan as determined under Article III of the Plan.

     All other capitalized and undefined terms used herein shall have the meanings given them in the Retirement Plan for Employees of Society Corporation and Subsidiaries (January 1, 1993 Restatement) (“Society Retirement Plan”), unless a different meaning is plainly required by the context.

     The masculine gender includes the feminine, and singular references include the plural, unless the context clearly requires otherwise.

ARTICLE III

SUPPLEMENTAL RETIREMENT BENEFIT

     3.1 Eligibility. A Grandfathered Employee shall be eligible for a Supplemental Retirement Benefit hereunder if the Grandfathered Employee (i) retires on or after age 65 with five or more years of Benefit Service, (ii) terminates employment with an Employer on or after age 55 with ten or more years of Benefit Service, (iii) terminates his or her active employment with an Employer upon becoming Disabled after completing five or more years of Benefit Service and disability benefits have ceased under the KeyCorp Long-Term Disability Plan due to the Grandfathered Employee’s election for Early or Normal Retirement under the Retirement Plan, or (iv) dies after completing five or more years of Benefit Service, and has a Beneficiary who is eligible for a benefit under the Retirement Plan.

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     A Grandfathered Employee shall also be eligible for a Supplemental Retirement Benefit if the Grandfathered Employee becomes involuntarily terminated from his or her employment with an Employer for reasons other than the Grandfathered Employee’s Discharge for Cause, and (i) as of the Grandfathered Employee’s termination date the Grandfathered Employee has a minimum of twenty-five (25) or more years of Benefit Service, and (ii) the Grandfathered Employee enters into a written non-solicitation and non-compete agreement under terms that are satisfactory to the Employer.

     For purposes of this Section 3.1, hereof, the term “Discharge for Cause” shall mean a Grandfathered Employee’s employment termination that is the result of the Grandfathered Employee’s violation of the Employer’s policies, practices or procedures, violation of city, state, or federal law, or failure to perform his or her assigned job duties in a satisfactory manner. The Employer in its sole and absolute discretion shall determine whether a Grandfathered Employee has been Discharged for Cause.

     3.2 Amount and Payment. Subject to the provisions of Section 3.4 hereof, a Grandfathered Employee’s Supplemental Retirement Benefit shall be calculated as follows:

The monthly Supplemental Retirement Benefit payable to a Grandfathered Employee shall be such amount as is required, when added to the monthly benefit payable (before the reduction applicable to any optional method of payment) under the Retirement Plan, to produce an aggregate monthly benefit equal to the monthly benefit which would have been payable in the form of a single life annuity (determined without regard to the annual limitation on Plan benefits imposed pursuant to Section 415 of the Code, the limitation on annual compensation imposed pursuant to Section 401(a)(17) of the Code, or the reduction applicable to any optional method of payment) under either the Society Retirement Plan formula in effect on and after January 1, 1989, or, if eligible, the applicable Society Retirement Plan formula in effect prior to January 1, 1989, whichever results in a larger monthly benefit, if there was added to the Grandfathered Employee’s Final Average Monthly Compensation an amount equal to the monthly average of the highest five Incentive Compensation Awards granted to the Grandfathered Employee under an Incentive Compensation Plan during the ten-year period preceding the earliest of his or her Retirement, death, disability, or other termination of employment (if the Grandfathered Employee was granted fewer than five Incentive Compensation Awards, such monthly average is determined by adding the amount of such awards and dividing by 60).

Solely for purposes of reference, the alternative benefit formulas in effect under the Society Retirement Plan prior to January 1, 1989, and the eligibility criteria applicable to each are reproduced in Exhibit B attached hereto.

     3.3 Early Retirement Election. Subject to the provisions of Section 3.4 hereof, if a Grandfathered Employee elects to receive his or her Supplemental Retirement Benefit on or after the Grandfathered Employee’s Early Retirement Date but prior to the Grandfathered Employee’s Normal Retirement Date, the Grandfathered Employee’s Supplemental Retirement Benefit shall be calculated in accordance with the provisions of Section 3.2 hereof, provided, however, that the benefit payable under the Retirement Plan for purposes of Section 3.2 and this Section 3.3 hereof, shall be the Grandfathered Employee’s Normal Retirement Date benefit. In calculating this Normal Retirement Date benefit, if the Grandfathered Employee is not eligible for, or chooses not to elect his or her monthly benefit under the provisions of Section 6.5(b) of the Retirement Plan, then such Grandfathered Employee’s Retirement Plan benefit as of his or her termination date shall be increased for purposes of this Plan with an imputed Average Interest Credit to reflect the Grandfathered Employee’s benefit at his or her Normal Retirement Date, and shall be converted to the form of a single life annuity option using the Average Treasury Rate and GATT Mortality Table. The amount of the Grandfathered Employee’s monthly Supplemental

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Retirement Benefit otherwise determined under Section 3.2 and this Section 3.3 hereof shall then be reduced by .3% for each month between the ages of 55 and 60 and .4% for each month after age 60 that the commencement of the Grandfathered Employee’s Supplemental Retirement Benefit precedes his or her Normal Retirement Date.

     3.4 Recalculation as a Result of Harmful Activity. Notwithstanding the foregoing provisions of Section 3.2 and Section 3.3 hereof, the Corporation reserves the right at all times to recalculate a Grandfathered Employee’s Supplemental Retirement Benefit, if it is determined that within six months of the Grandfathered Employee’s termination date the Grandfathered Employee engaged in any Harmful Activity, as that term is defined in accordance with Section 2.1(l) of the Plan, which resulted in the forfeiture of all or any portion of the Grandfathered Employee’s restricted share award(s) granted under the KeyCorp Amended and Restated 1991 Equity Compensation Plan, phantom share awards granted under the KeyCorp Chief Executive Officer Plan, or Equity/Compensation Awards granted under the KeyCorp 2004 Equity Compensation Plan. Such recalculation shall relate back to the Grandfathered Employee’s original date of termination, and any Supplemental Retirement Benefit payment paid to the Grandfathered Employee in excess of such recalculated Supplemental Retirement Benefit amount shall be offset against any future Supplemental Retirement Benefit payments to be paid to the Grandfathered Employee.

     3.5 Actuarial Factors. The Supplemental Retirement Benefit payable to a Grandfathered Employee or Grandfathered Employee’s Beneficiary in a form other than a single life annuity shall be actuarially equivalent to such single life annuity payment option. In making the determination provided for in this Article III, the Corporation shall rely upon calculations made by the independent actuaries for the Plan, who shall determine actuarially equivalent benefits under the Plan by applying the UP-1984 Mortality Table (set back two years) and using an interest rate of 6%.

ARTICLE IV

PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFIT

     4.1 Immediate Payment Upon Termination or Retirement of Grandfathered Employee. Subject to the provisions of Section 4.2 and Section 4.4 hereof, a Grandfathered Employee meeting the age and service eligibility requirements of Section 3.1 shall receive an immediate distribution of his or her Supplemental Retirement Benefit upon the Grandfathered Employee’s retirement or termination of employment, payable in the form of a single life annuity unless the Grandfathered Employee elects in writing a minimum of thirty days prior to his or her retirement or termination date to receive his or her Supplemental Retirement Benefit under a different form of payment. The forms of payment from which a Grandfathered Employee may elect shall be actuarially equivalent to the Grandfathered Employee’s single life annuity payment option, and shall be identical to those forms of payment specified in the Retirement Plan, provided, however, that the lump sum payment option available under the Retirement Plan shall not be available under this Plan. Such method of payment, once elected by the Grandfathered Employee, shall be irrevocable.

     4.2 Deferred Benefit Payment. A Grandfathered Employee who retires or terminates his or her employment with an Employer after meeting the age and service requirements of Section 3.1 hereof, may elect to defer the receipt of his or her Supplemental Retirement Benefit until a date specified by the Grandfathered Employee, subject to the following requirements: (i) the Grandfathered Employee notifies the Corporation in writing of his or her deferral election a minimum of one year prior to the Grandfathered Employee’s retirement or termination of employment, (ii) the Grandfathered Employee

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specifies the future date on which such Supplemental Retirement Benefit shall be distributed, (iii) the Grandfathered Employee’s requested deferral period is for a period of not less than five years following the Grandfathered Employee’s retirement or termination of employment, and (iv) the Grandfathered Employee commences distribution of his or her Supplemental Retirement Benefit no later than the first day of the month immediately following the Grandfathered Employee’s sixty-fifth (65th) birthday. The election to defer, once made by the Grandfathered Employee, shall be irrevocable.

     Notwithstanding the foregoing, in the case of an “unforeseeable emergency”, upon written application by the Grandfathered Employee to the Corporation, the Corporation may accelerate the distribution of the Grandfathered Employee’s deferred Supplemental Retirement Benefit. For purposes of this Section 4.2, the term “unforeseeable emergency” shall mean a severe financial hardship to the Grandfathered Employee resulting from a sudden and unexpected illness or accident of the Grandfathered Employee, the Grandfathered Employee’s spouse, or the Grandfathered Employee’s dependent (as defined in Section 152(a) of the Code), the loss of the Grandfathered Employee’s property due to casualty, or such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Grandfathered Employee. The determination of an “unforeseeable emergency” and the ability of the Corporation to accelerate the Grandfathered Employee’s Supplemental Retirement Benefit shall be determined in accordance with the requirements of Section 409A of the Code and applicable regulations issued thereunder.

     4.3 Payment Limitation for Key Employees. Notwithstanding any other provision of the Plan to the contrary, in the event that the Grandfathered Employee constitutes a “key” employee of the Corporation (as that term is defined in accordance with Section 416(i) of the Code without regard to paragraph (5) thereof), distributions of the Grandfathered Employee’s Supplemental Retirement Benefit may not be commenced before the date which is six months after the Grandfathered Employee’s date of separation from service (or, if earlier, the date of death of the Grandfathered Employee). The term “separation from service” shall be defined for Plan purposes in accordance with the requirements of Section 409A of the Code and applicable regulations issued thereunder.

     4.4 Payment Upon Death of Grandfathered Employee.

(a)

Upon the death of a Grandfathered Employee who has met the service requirement of Section 3.1, but who has not yet commenced distribution of his or her Supplemental Retirement Benefit there shall be paid to the Grandfathered Employee’s Beneficiary 50% of the Supplemental Retirement Benefit which the Grandfathered Employee would have been entitled to receive under the Provisions of Section 3.2 of the Plan calculated as if the Grandfathered Employee had retired on his or her Normal Retirement Date and elected to receive his or her Supplemental Retirement Benefit.

For purposes of this Section 4.4(a) only, the following shall apply:

(i)

The Grandfathered Employee’s Benefit Service shall be calculated as of the Grandfathered Employee’s date of death.

(ii)

The Grandfathered Employee’s Retirement Plan benefit shall be calculated under the provisions of Article IV of the Retirement Plan as if the Grandfathered Employee retired on his or her Normal Retirement Date, with such Retirement Plan benefit being increased for purposes of this Section 4.4(a) with an imputed Average Interest Credit to reflect what the Grandfathered Employee’s Retirement Plan benefit would have been as of the Grandfathered Employee’s Normal

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Retirement Date; such Retirement Plan benefit shall be converted to a single life annuity option using the Average Treasury Rate and the Gatt Mortality Table.

Payment of this death benefit shall be made in the form of a single life annuity, and will be subject to distribution any time after the date the Grandfathered Employee would have attained his or her Early Retirement Date, as actuarially adjusted in accordance with Section 3.3 hereof, if paid prior to the Grandfathered Employee’s Normal Retirement Date.

(b) In the event of a Grandfathered Employee’s death after the Grandfathered Employee has commenced distribution of his or her Supplemental Retirement Benefit, there shall be paid to the Grandfathered Employee’s Beneficiary only those survivor benefits provided under the form of benefit payment elected by the Grandfathered Employee

ARTICLE V

ADMINISTRATION AND CLAIMS PROCEDURE

     5.1 Administration. The Corporation, which shall be the “Administrator” of the Plan for purposes of ERISA and the “Plan Administrator” for purposes of the Code, shall be responsible for the general administration of the Plan, for carrying out the provisions hereof, and for making payments hereunder. The Corporation shall have the sole and absolute discretionary authority and power to carry out the provisions of the Plan, including, but not limited to, the authority and power (a) to determine all questions relating to the eligibility for and the amount of any benefit to be paid under the Plan, (b) to determine all questions pertaining to claims for benefits and procedures for claim review, (c) to resolve all other questions arising under the Plan, including any questions of construction, and (d) to take such further action as the Corporation shall deem necessary or advisable in the administration of the Plan. All findings, decisions, and determinations of any kind made by the Corporation shall not be disturbed unless the Corporation has acted in an arbitrary and capricious manner. Subject to the requirements of law, the Corporation shall be the sole judge of the standard of proof required in any claim for benefits and in any determination of eligibility for a benefit. All decisions of the Corporation shall be final and binding on all parties. The Corporation may employ such attorneys, investment counsel, agents, and accountants, as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The actions taken and the decisions made by the Corporation hereunder shall be final and binding upon all interested parties subject, however, to the provisions of Section 5.2. The Plan year, for purposes of Plan administration, shall be the calendar year.

     5.2 Claims Review Procedure. Whenever the Corporation decides for whatever reason to deny, whether in whole or in part, a claim for benefits under this Plan filed by any person (herein referred to as the “Claimant”), the Corporation shall transmit a written notice of its decision to the Claimant, which notice shall be written in a manner calculated to be understood by the Claimant and shall contain a statement of the specific reasons for the denial of the claim and a statement advising the Claimant that, within 60 days of the date on which he receives such notice, he may obtain review of the decision of the Corporation in accordance with the procedures hereinafter set forth. Within such 60-day period, the Claimant or his authorized representative may request that the claim denial be reviewed by filing with the Corporation a written request therefore, which request shall contain the following information:

(a) the date on which the request was filed with the Corporation; provided, however, that the date on which the request for review was in fact filed with the Corporation shall control

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	in the event that the date of the actual filing is later than the date stated by the Claimant pursuant to this paragraph (a);
(b)	the specific portions of the denial of his claim which the Claimant requests the Corporation to review;
(c)	a statement by the Claimant setting forth the basis upon which he believes the Corporation should reverse its previous denial of his or her claim and accept his or her claim as made; and
(d)	any written material which the Claimant desires the Corporation to examine in its consideration of the Claimant’s position as stated pursuant to paragraph (c) above.

     In accordance with this Section, if the Claimant requests a review of the Corporation’s decision, such review shall be made by the Corporation, who shall, within sixty (60) days after receipt of the request form, review and render a written decision on the claim containing the specific reasons for the decision including reference to Plan provisions upon which the decision is based. All findings, decisions, and determinations of any kind made by the Corporation shall not be modified unless the Corporation has acted in an arbitrary and capricious manner. Subject to the requirements of a law, the Corporation shall be the sole judge of the standard of proof required in any claim for benefits, and any determination of eligibility for a benefit. All decisions of the Corporation shall be binding on the Claimant and upon all other Persons. If the Claimant shall not file written notice with the Corporation at the times set forth above, such individual shall have waived all benefits under the Plan other than as already provided, if any, under the Plan.

ARTICLE VI

FUNDING

     All benefits under the Plan shall be payable solely in cash from the general assets of the Corporation or a subsidiary, and Grandfathered Employees, and Grandfathered Employees’ Beneficiaries shall have the status of general unsecured creditors of the Corporation. The obligations of the Corporation to make distributions in accordance with the provisions of the Plan constitute a mere promise to make payments in the future. The Corporation shall have no obligation to establish a trust or fund to fund its obligation to pay benefits under the Plan or to insure any benefits under the Plan. Notwithstanding any provision of this Plan, the Corporation may, in its sole discretion, combine the payment due and owing under this Plan with one or more other payments owing to a Grandfathered Employee, or a Grandfathered Employee’s Beneficiary under any other plan, contract, or otherwise (other than any payment due under the Retirement Plan), in one check, direct deposit, wire transfer, or other means of payment. Finally, it is the intention of the Corporation and the Grandfathered Employees that the Plan be unfunded for tax purposes and for the purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and that the Plan be administered in accordance with the requirements of Section 409A of the Code and applicable regulations issued thereunder.

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ARTICLE VII

AMENDMENT AND TERMINATION

     The Corporation reserves the right to amend or terminate the Plan at any time by action of its Board of Directors or a duly authorized committee of such Board of Directors; provided, however, that no such action shall adversely affect the benefit accrued up to the date of the Plan amendment or termination for any Grandfathered Employee who has met the age and service requirements of Section 3.1 of the Plan, or any Grandfathered Employee or Grandfathered Employee’s Beneficiary who is receiving a Supplemental Retirement Benefit, unless an equivalent benefit is provided under another plan maintained by an Employer. No amendment or termination will result in an acceleration of Supplemental Retirement Benefits in violation of Section 409A of the Code.

ARTICLE VIII

MISCELLANEOUS

     8.1 Interest of Grandfathered Employee. The obligation of the Corporation under the Plan to provide a Grandfathered Employee, or Grandfathered Employee’s Beneficiary, with a Supplemental Retirement Benefit merely constitutes the unsecured promise of the Corporation to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim on, any property of the Corporation.

     8.2 No Commitment as to Employment. Nothing herein contained shall be construed as a commitment or agreement upon the part of any Grandfathered Employee hereunder to continue his or her employment with an Employer, and nothing herein contained shall be construed as a commitment on the part of any Employer to continue the employment or rate of compensation of any Grandfathered Employee hereunder for any period. All Grandfathered Employees shall remain subject to discharge to the same extent as if the Plan had never been put into effect.

     8.3 Benefits. Nothing in the Plan shall be construed to confer any right or claim upon any person, firm, or corporation other than Grandfathered Employees, or Grandfathered Employees’ Beneficiaries who become entitled to a benefit under the Plan.

     8.4 Restrictions on Alienation. Except to the extent required by law, no benefit under the Plan shall be subject to anticipation, alienation, assignment (either at law or in equity), encumbrance, garnishment, levy, execution, or other legal or equitable process. No person shall have power in any manner to anticipate, transfer, assign, (either at law or in equity), alienate or subject to attachment, garnishment, levy, execution, or other legal or equitable process, or in any way encumber his benefits under the Plan, or any part thereof, and any attempt to do so shall be void.

     8.5 Absence of Liability. No member of the Board of Directors of the Corporation or a subsidiary or any officer of the Corporation or a subsidiary shall be liable for any act or action hereunder, whether of commission or omission, taken by any other member, or by any officer, agent, or employee, except in circumstances involving his bad faith or willful misconduct, for anything done or omitted to be done by himself.

     8.6 Expenses. The expenses of administration of the Plan shall be paid by the Corporation.

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     8.7 Precedent. Except as otherwise specifically provided, no action taken in accordance with the Plan by the Corporation shall be construed or relied upon as a precedent for similar action under similar circumstances.

     8.8 Duty to Furnish Information. The Corporation shall furnish to each Grandfathered Employee or Grandfathered Employee’s Beneficiary any documents, reports, returns statements, or other information that it reasonably deems necessary to perform its duties imposed hereunder or otherwise imposed by law.

     8.9 Withholding. The Corporation shall withhold any tax required by any present or future law to be withheld from any payment hereunder to any Grandfathered Employee or Grandfathered Employee’s Beneficiary.

     8.10 Validity of Plan. The validity of the Plan shall be determined and the Plan shall be construed and interpreted in accordance with the provisions of the Act, the Code, and, to the extent applicable, the laws of the State of Ohio. The invalidity or illegality of any provision of the Plan shall not affect the validity or legality of any other part thereof.

     8.11 Parties Bound. The Plan shall be binding upon the Employer, all Grandfathered Employees, and all Grandfathered Employees’ Beneficiaries, and the executors, administrators, successors, and assigns of each of them.

     8.12 Headings. All headings used in the Plan are for convenience of reference only and are not part of the substance of the Plan.

ARTICLE IX

CHANGE OF CONTROL

     Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, a Grandfathered Employee’s interest in his or her Supplemental Retirement Benefit shall vest. On and after a Change of Control, a Grandfathered Employee shall be entitled to receive an immediate distribution of his or her Supplemental Retirement Benefit if the Grandfathered Employee has at least five (5) years of Benefit Service, and (i) the Grandfathered Employee’s employment is terminated by his or her Employer and any other Employer without cause, or (ii) the Grandfathered Employee resigns within two years following a Change of Control as a result of the Grandfathered Employee’s mandatory relocation, reduction in the Grandfathered Employee’s base salary, reduction in the Grandfathered Employee’s average annual incentive compensation (unless such reduction is attributable to the overall corporate or business unit performance), or the Grandfathered Employee’s exclusion from stock option programs as compared to comparably situated Employees.

     For purposes of this Article IX hereof, a “Change of Control” shall be deemed to have occurred if under a rabbi trust arrangement established by KeyCorp (“Trust”), as such Trust may from time to time be amended or substituted, the Corporation is required to fund the Trust because a “Change of Control”, as defined in the Trust, has occurred.

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ARTICLE X

COMPLIANCE WITH
SECTION 409A CODE

     The Plan is intended to provide for the deferral of compensation in accordance with the provisions of Section 409A of the Code and regulations and published guidance issued pursuant thereto. Accordingly, the Plan shall be construed in a manner consistent with those provisions and may at any time be amended in the manner and to the extent determined necessary or desirable by the Corporation to reflect or otherwise facilitate compliance with such provisions with respect to amounts deferred on and after January 1, 2005, including as contemplated by Section 855(f) of the American Jobs Creation Act of 2004. Notwithstanding any provision of the Plan to the contrary, no otherwise permissible election or distribution shall be made or given effect under the Plan that would result in early taxation or assessment of penalties or interest of any amount under Section 409A of the Code.

     Notwithstanding any provision of the Plan to the contrary, Supplemental Retirement Benefits shall not be distributed to a Grandfathered Employee earlier than:

(a)	the Grandfathered Employee’s separation from service as determined by the Secretary of the Treasury (except as provided below with respect to a key employee of the Corporation);
(b)	death of the Grandfathered Employee;
(c)	upon the occurrence to the Grandfathered Employee, the Grandfathered Employee’s spouse, or the Grandfathered Employee’s dependent an unforeseeable emergency as defined in Section 409A(a)(2)(B)(ii) of the Code.

     If it is determined that a Grandfathered Employee constitutes a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of the Corporation, the Grandfathered Employee shall not commence the distribution of his or her Supplemental Retirement Benefits before the date which is six months after the date of the Grandfathered Employee’s separation from service (or, if earlier, the date of death of the Grandfathered Employee).

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ARTICLE XI

MERGER OF THE
KEYCORP SUPPLEMENTAL RETIREMENT PLAN
INTO THE PLAN

11.1 Merger. As of December 31, 2006 the KeyCorp Supplemental Retirement Plan shall be merged into this Plan, and as of that date the KeyCorp Supplemental Retirement Plan shall not exist separate and apart from this Plan and all benefits that have accrued under the KeyCorp Supplemental Retirement Plan shall be merged into and shall become a part of this Plan.

     IN WITNESS WHEREOF, KeyCorp has caused the KeyCorp Second Supplemental Retirement Plan to be executed by its duly authorized officer this 21^st day of December, to be effective as of December 31, 2006.

KEYCORP
By:	/s/ Thomas Helfrich
Title:	Executive Vice President

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EXHIBIT A

LIST OF GRANDFATHERED EMPLOYEES

Name of Employee	Name of Employee
Andrews, James	Klimas, Daniel
Auletta, Patrick	Knapp, Peter O.
Bailey, Raymond	Koontz, Cary
Barger, C. Michael	Kucler, Jack
Beran, John	Malone, Michael
Blake, John T.	Mayer, George
Brooks, Craig	McGuire, James
Bullard, Janet	McDaniel, D. A.
Carlini, Lawrence	McGinty, Kevin
Colao Jr., Anthony	Melluzzo, Sebastian
Cortelli, John	Meyer, John R.
Cruse Jr., Donald	Meyer III, Henry
Deal, Frederick	Moody Jr., John
Doland, Michael	Murray, Bruce
Dorland, David	Neel, Thomas M.
Edmonds, David	Newman, Michael
Egan, Richard	Noall, Roger
Fishell, James	Nucerino, Donald
Flowers, James	O’Donnell, F. Scott
Gill, Michael	Patrick, Robert
Gillespie, Jr., Robert	Platt, Craig, T.
Greer, Michael	Ponchak, Frank
Gula, Allen	Purinton II, Arthur
Haas, Robert	Rapacz, Richard
Hancock, John	Rasmussen, Eric
Hann, Jr., William	Roark, Michael
Hartman, Sheldon	Rusnak, Joseph
Hawthorne, Douglas	Saddler, Thomas
Hedberg, Douglas	Schaedel, Elroy
Heintel, Jr., Carl	Seink, Edward
Heisler, Jr., Robert	Simon, William
Herron, David	Smith, James J.
Heyworth, Anthony	Swisher, Trace
Hitchcock, Thomas	Tracy, Robert
Holloway, Ruben L.	Trigg, Michael
Johannsen, Rolland D.	Uzl, Ralph R.
Jones, Robert G.	Walker, Martin
Kamerer, James	Wall, Stephen
Kaplan, Stephen	Wert, James W.
Karnatz, William	Willet, Richard
Kleinhenz, Karen R.

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EXHIBIT B

     For periods of time prior to January 1, 1989, three alternative benefit formulas were in effect under the Society Retirement Plan. The monthly amount of the normal retirement benefit payable to an eligible Grandfathered Employee was equal to:

     (a) if he became a Grandfathered Employee and therefore began to accrue benefits under the Plan prior to July 1, 1981, the greater of:

(i) his final average monthly compensation multiplied by the sum of:

(A)	3.2% multiplied by his years of benefit service not in excess of 15, plus
(B)	1% multiplied by his years of benefit service in excess of 15 but not in excess of 25, plus
(C)	0.5% multiplied by his years of benefit service in excess of 25; reduced by:
(D)	3.33% of his Social Security Benefit Amount multiplied by his years of benefit service not in excess of 15; or

(ii) the amount determined in accordance with the formula set forth in paragraph (b) below which is otherwise applicable to a person who becomes an Employee on or after July 1, 1981; or

     (b) if he became an Employee and therefore began to accrue benefits under the Plan on or after July 1, 1981, his final average monthly compensation multiplied by the sum of:

(i)	2% multiplied by his years of benefit service not in excess of 30, plus
(ii)	0.5% multiplied by his years of benefit service in excess of 30; reduced by:
(iii)	1.67% of his Social Security Benefit Amount multiplied by his years of benefit service not in excess of 30 to a maximum of 50% of such Amount; or

     (c) if he became an Employee and therefore began to accrue benefits under the Plan on January 1, 1985, and immediately prior to such date was a Grandfathered Employee in The Third National Bank and Trust Company of Dayton, Ohio Retirement Plan, the greater of:

(i)	the amount determined in accordance with the formula set forth in paragraph (b) above which is otherwise applicable to a person who becomes an Employee on or after July 1, 1981; or
(ii)	the sum of:

(A) 2.2% of his final average monthly compensation, reduced by 2% of his Social Security Benefit Amount; the difference to be multiplied by his years of benefit service at normal retirement date not in excess of 25, plus

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(B) 1.1% of his final average monthly compensation, reduced by 1% of his Social Security Benefit Amount; the difference to be multiplied by his years of benefit service at normal retirement date in excess of 25, adjusted as necessary to produce the actuarial equivalent value on a straight life annuity basis of a benefit otherwise payable on a ten-year certain and continuous basis; provided, however, that in the case of each Employee who was in the employment of Society National Bank of Cleveland on December 31, 1971, and whose continuous service is not broken after the date and prior to the date of his retirement, the monthly amount of his normal retirement benefit otherwise determined under this Section shall be not less than the monthly amount of his normal retirement benefit determined under the normal retirement benefit formula of the Plan as in effect on December 31, 1971, based on the assumption that he received no increases in the rate of his compensation after December 31, 1971, and using the rules for computing continuous service specified in Article II of the Plan as in effect on June 30, 1976 (hereinafter referred to as his “minimum benefit”); and provided, further, that the monthly amount so determined under the provisions of this Exhibit B shall be reduced to the extent provided in Section 14.10 of the Society Retirement Plan as in effect on December 31, 1988. Notwithstanding anything to the contrary contained in the Society Retirement Plan, in no event shall an Employee receive a benefit commencing at his normal retirement date which is less than the largest early retirement benefit to which he had been entitled under the Society Retirement Plan prior to his normal retirement date.

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EX-10.57

EXHIBIT 10.57

AMENDMENT TO MERGE THE

KEYCORP EXCESS 401(K) SAVINGS PLAN

INTO THE KEYCORP DEFERRED SAVINGS PLAN

WHEREAS, KeyCorp has established the KeyCorp Excess 401(k) Savings Plan and the KeyCorp Second Excess 401(k) Savings Plan to provide a nonqualified excess retirement benefit to a select group of management or highly compensated employees as described in Section 201(2), 301(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and

WHEREAS, in maintaining the KeyCorp Excess 401(k) Savings Plan and the KeyCorp Second Excess 401(k) Savings Plan KeyCorp has been required to maintain duplicate administration structures for each respective plan, and

WHEREAS, to prevent this duplication of administration and the associated participant confusion associated with multiple plans it is desired that the KeyCorp Excess 401(k) Savings Plan be merged into the KeyCorp Deferred Savings Plan and that the KeyCorp Excess 401(k) Savings Plan cease to exist separate and apart from the KeyCorp Deferred Savings Plan.

NOW, THEREFORE, the KeyCorp Excess 401(k) Savings Plan is hereby amended to add a new Article XIV to the KeyCorp Excess 401(k) Savings Plan, to be effective as of December 31, 2006, to read in its entirety as follows:

“ARTICLE XIV
MERGER INTO THE KEYCORP DEFERRED SAVINGS PLAN

14.1 Merger of the Plan. Effective December 31, 2006 the Plan is hereby merged into and made a part of the KeyCorp Deferred Savings Plan, and all benefits that have accrued under the Plan shall be merged into and shall become a part of the KeyCorp Deferred Savings Plan.”

              IN WITNESS WHEREOF, KeyCorp has caused this Amendment to the KeyCorp Excess 401(k) Savings Plan to be executed by its duly authorized officer as of the 21^st day of December, 2006.

KEYCORP

By:	/s/ Thomas Helfrich
	Thomas Helfrich
	Executive Vice President

EX-10.58

EXHIBIT 10.58

AMENDMENT TO MERGE THE

KEYCORP SECOND EXCESS 401(K) SAVINGS PLAN

INTO THE KEYCORP DEFERRED SAVINGS PLAN

WHEREAS, KeyCorp established the KeyCorp Excess 401(k) Savings Plan and the KeyCorp Second Excess 401(k) Savings Plan to provide a nonqualified excess retirement benefit to a select group of management or highly compensated employees as described in Section 201(2), 301(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and

WHEREAS, in maintaining the KeyCorp Excess 401(k) Savings Plan and the KeyCorp Second Excess 401(k) Savings Plan KeyCorp has been required to maintain duplicate administration structures for each respective plan, and

WHEREAS, to prevent this duplication of administration and the associated participant confusion associated with multiple plans it is desired that the KeyCorp Second Excess 401(k) Savings Plan be merged into the KeyCorp Deferred Savings Plan and that the KeyCorp Second Excess 401(k) Savings Plan cease to exist separate and apart from the KeyCorp Deferred Savings Plan.

NOW, THEREFORE, the KeyCorp Second Excess 401(k) Savings Plan is hereby amended to add a new Article XIV to the KeyCorp Second Excess 401(k) Savings Plan to be effective as of December 31, 2006, to read in its entirety as follows:

“ARTICLE XIV
MERGER INTO THE KEYCORP DEFERRED SAVINGS PLAN

14.1 Merger of the Plan. Effective December 31, 2006 the Plan is hereby merged into and made a part of the KeyCorp Deferred Savings Plan, and all benefits that have accrued under the Plan shall be merged into and shall become a part of the KeyCorp Deferred Savings Plan.”

     IN WITNESS WHEREOF, KeyCorp has caused this Amendment to the KeyCorp Second Excess 401(k) Savings Plan to be executed by its duly authorized officer as of the 21^st day of December, 2006.

KEYCORP

By:	/s/ Thomas Helfrich
	Thomas Helfrich
	Executive Vice President

EX-10.59

EXHIBIT 10.59

AMENDMENT TO MERGE THE

KEYCORP DEFERRED COMPENSATION PLAN

INTO THE KEYCORP DEFERRED SAVINGS PLAN

WHEREAS, KeyCorp established the KeyCorp Deferred Compensation Plan and the KeyCorp Second Deferred Compensation Plan to provide a nonqualified deferred compensation benefit to a select group of management or highly compensated employees as described in Section 201(2), 301(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and

WHEREAS, in maintaining the KeyCorp Deferred Compensation Plan and the KeyCorp Second Deferred Compensation Plan, KeyCorp has been required to maintain duplicate administration structures for each respective plan, and

WHEREAS, to prevent this duplication of administration and the associated participant confusion associated with multiple plans it is desired that the KeyCorp Deferred Compensation Plan be merged into the KeyCorp Deferred Savings Plan and that the KeyCorp Deferred Compensation Plan cease to exist separate and apart from the KeyCorp Deferred Savings Plan.

NOW, THEREFORE, the KeyCorp Deferred Compensation Plan is hereby amended to add a new Article XIII to the KeyCorp Deferred Compensation Plan to be effective as of December 31, 2006, to read in its entirety as follows:

“ARTICLE XIII
MERGER INTO THE KEYCORP DEFERRED SAVINGS PLAN

13.1 Merger of the Plan. Effective December 31, 2006 the KeyCorp Deferred Compensation Plan is hereby merged into and made a part of the KeyCorp Deferred Savings Plan, and all benefits that have accrued under the Plan shall be merged into and shall become a part of the KeyCorp Deferred Savings Plan.”

     IN WITNESS WHEREOF, KeyCorp has caused this Amendment to the KeyCorp Deferred Compensation Plan to be executed by its duly authorized officer as of the 21^st day of December, 2006.

KEYCORP

By:	/s/ Thomas Helfrich
	Thomas Helfrich
	Executive Vice President

EX-10.60

EXHIBIT 10.60

AMENDMENT TO MERGE THE

KEYCORP SECOND DEFERRED COMPENSATION PLAN

INTO THE KEYCORP DEFERRED SAVINGS PLAN

WHEREAS, KeyCorp established the KeyCorp Deferred Compensation Plan and the KeyCorp Second Deferred Compensation Plan to provide a nonqualified deferred compensation benefit to a select group of management or highly compensated employees as described in Section 201(2), 301(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and

WHEREAS, in maintaining the KeyCorp Deferred Compensation Plan and the KeyCorp Second Deferred Compensation Plan KeyCorp has been required to maintain duplicate administration structures for each respective plan, and

WHEREAS, to prevent this duplication of administration and the associated participant confusion associated with multiple plans it is desired that the KeyCorp Second Deferred Compensation Plan be merged into the KeyCorp Deferred Savings Plan and that the KeyCorp Second Deferred Compensation Plan cease to exist separate and apart from the KeyCorp Deferred Savings Plan.

NOW, THEREFORE, the KeyCorp Second Deferred Compensation Plan is hereby amended to add a new Article XIV to the KeyCorp Second Deferred Compensation Plan to be effective as of December 31, 2006, to read in its entirety as follows:

“ARTICLE XIII
MERGER INTO THE KEYCORP DEFERRED SAVINGS PLAN

13.1 Merger of the Plan. Effective December 31, 2006 the KeyCorp Second Deferred Compensation Plan is hereby merged into and made a part of the KeyCorp Deferred Savings Plan, and all benefits that have accrued under the Plan shall be merged into and shall become a part of the KeyCorp Deferred Savings Plan.”

     IN WITNESS WHEREOF, KeyCorp has caused this Amendment to the KeyCorp Second Deferred Compensation Plan to be executed by its duly authorized officer as of the 21^st day of December, 2006.

KEYCORP

By:	/s/ Thomas Helfrich
	Thomas Helfrich
	Executive Vice President

EX-10.61

EXHIBIT 10.61

AMENDMENT TO MERGE THE

KEYCORP SUPPLEMENTAL RETIREMENT PLAN

INTO THE

KEYCORP SECOND SUPPLEMENTAL RETIREMENT PLAN

WHEREAS, KeyCorp established the KeyCorp Supplemental Retirement Plan (“Plan”) to provide a nonqualified supplemental retirement benefit to a select group of management or highly compensated employees as described in Section 201(2), 301(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and

WHEREAS, in conjunction with the enactment of Section 409A of the Internal Revenue Code of 1986, as amended, KeyCorp elected to freeze all future accruals to the Plan as of December 31, 2004, and to establish a KeyCorp Second Supplemental Retirement Plan that in large part mirrors the terms and conditions of the Plan while also meeting the requirements of Section 409A of the Code, and

WHEREAS, in maintaining the Plan and the KeyCorp Second Supplemental Retirement Plan KeyCorp has been required to maintain duplicate administration structures for each respective plan, and

WHEREAS, to prevent this duplication of administration and the associated confusion associated with multiple plans it is desired that the Plan be merged into the KeyCorp Second Supplemental Retirement Plan, and that the Plan cease to exist separate and apart from the KeyCorp Second Supplemental Retirement Plan.

NOW, THEREFORE, the Plan is hereby amended to add a new Article XII to the Plan, to be effective as of December 31, 2006, to read in its entirety as follows:

“ARTICLE XII
MERGER INTO THE KEYCORP SECOND SUPPLEMENTAL RETIREMENT PLAN

12.1 Merger of the Plan. Effective December 31, 2006 the Plan is hereby merged into and made a part of the KeyCorp Second Supplemental Retirement Plan, and all benefits that have accrued under the Plan shall be merged into and shall become a part of the KeyCorp Second Supplemental Retirement Plan.”

     IN WITNESS WHEREOF, KeyCorp has caused this Amendment to the Plan to be executed by its duly authorized officer as of the 21^st day of December, 2006 to be effective as written above.

KEYCORP

By:	/s/ Thomas Helfrich
	Thomas Helfrich
	Executive Vice President

EX-10.62

EXHIBIT 10.62

AMENDMENT TO MERGE THE
KEYCORP EXECUTIVE SUPPLEMENTAL PENSION PLAN
INTO THE
KEYCORP SECOND EXECUTIVE SUPPLEMENTAL PENSION PLAN

WHEREAS, KeyCorp established the KeyCorp Executive Supplemental Pension Plan (“Plan”) to provide a nonqualified supplemental retirement benefit to a select group of management or highly compensated employees as described in Section 201(2), 301(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and

WHEREAS, in conjunction with the enactment of Section 409A of the Internal Revenue Code of 1986, as amended, KeyCorp elected to freeze all future accruals to the Plan as of December 31, 2004, and to establish a KeyCorp Second Executive Supplemental Pension Plan that in large part mirrors the terms and conditions of the Plan while also meeting the requirements of Section 409A of the Code, and

WHEREAS, in maintaining the Plan and the KeyCorp Second Executive Supplemental Pension Plan KeyCorp has been required to maintain duplicate administration structures for each respective plan, and

WHEREAS, to prevent this duplication of administration and the associated confusion associated with multiple plans it is desired that the Plan be merged into the KeyCorp Second Executive Supplemental Pension Plan, and that the Plan cease to exist separate and apart from the KeyCorp Second Executive Supplemental Pension Plan.

NOW, THEREFORE, the Plan is hereby amended to add a new Article XI to the Plan, to be effective as of December 31, 2006, to read in its entirety as follows:

“ARTICLE XI
MERGER INTO THE KEYCORP SECOND EXECUTIVE SUPPLEMENTAL PENSION PLAN

11.1 Merger of the Plan. Effective December 31, 2006 the Plan is hereby merged into and made a part of the KeyCorp Second Executive Supplemental Pension Plan, and all benefits that have accrued under the Plan shall be merged into and shall become a part of the KeyCorp Second Executive Supplemental Pension Plan.”

IN WITNESS WHEREOF, KeyCorp has caused this Amendment to the Plan to be executed by its duly authorized officer as of the 21^st day of December, 2006, to be effective as written above.

KEYCORP

By:	/s/ Thomas Helfrich
	Thomas Helfrich
	Executive Vice President

EX-12

EXHIBIT 12

KEYCORP
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(dollars in millions)
(unaudited)

	Year ended December 31,
	2006			2005		2004		2003		2002
Computation of Earnings
Net income	$	1,055		$	1,129	$	954	$	903	$	976
Add: Provision for income taxes		450			436		405		320		325
Less: Income (loss) from discontinued operations, net of taxes		(143	)		39		47		31		18
Less: Cumulative effect of accounting change, net of taxes		5			—		—		—		—
Income before income taxes and cumulative effect of accounting change		1,643			1,526		1,312		1,192		1,283
Fixed charges, excluding interest on deposits		1,023			790		497		492		646
Total earnings for computation, excluding interest on deposits		2,666			2,316		1,809		1,684		1,929
Interest on deposits		1,576			976		640		703		897
Total earnings for computation, including interest on deposits	$	4,242		$	3,292	$	2,449	$	2,387	$	2,826
Computation of Fixed Charges
Net rental expense	$	123		$	150	$	126	$	127	$	125
Portion of net rental expense deemed representative of interest	$	34		$	39	$	31	$	30	$	24
Interest on short-term borrowed funds		201			153		64		110		169
Interest on long-term debt, including capital securities		788			598		402		352		453
Total fixed charges, excluding interest on deposits		1,023			790		497		492		646
Interest on deposits		1,576			976		640		703		897
Total fixed charges, including interest on deposits	$	2,599		$	1,766	$	1,137	$	1,195	$	1,543
Combined Fixed Charges and Preferred Stock Dividends
Preferred stock dividend requirement on a pre-tax basis		—			—		—		—		—
Total fixed charges, excluding interest on deposits	$	1,023		$	790	$	497	$	492	$	646
Combined fixed charges and preferred stock dividends, excluding interest on deposits		1,023			790		497		492		646
Interest on deposits		1,576			976		640		703		897
Combined fixed charges and preferred stock dividends, including interest on deposits	$	2,599		$	1,766	$	1,137	$	1,195	$	1,543
Ratio of Earnings to Fixed Charges
Excluding deposit interest		2.61x			2.93x		3.64x		3.42x		2.99x
Including deposit interest		1.63x			1.86x		2.15x		2.00x		1.83x
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
Excluding deposit interest		2.61x			2.93x		3.64x		3.42x		2.99x
Including deposit interest		1.63x			1.86x		2.15x		2.00x		1.83x

EX-13

Exhibit 13

FINANCIAL REVIEW 2006 KeyCorp Annual Report

18	Management’s Discussion & Analysis of Financial Condition & Results of Operations
18		Introduction
18		Terminology
18		Description of business
18		Long-term goals
19		Forward-looking statements
20		Corporate strategy
20		Economic overview
20		Critical accounting policies and estimates
22		Revenue recognition
23		Highlights of Key’s 2006 Performance
23		Financial performance
25		Strategic developments
25		Line of Business Results
26		Community Banking summary of operations
27		National Banking summary of continuing operations
28		Other Segments
29		Results of Operations
29		Net interest income
32		Noninterest income
34		Noninterest expense
36		Income taxes
36		Financial Condition
36		Loans and loans held for sale
41		Securities
42		Deposits and other sources of funds
43		Capital
45		Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
45		Off-balance sheet arrangements
46		Contractual obligations
46		Guarantees
47		Risk Management
47		Overview
47		Market risk management
49		Credit risk management
54		Liquidity risk management
57		Operational risk management
57		Fourth Quarter Results
59	Certifications
60	Management’s Annual Report on Internal Control Over Financial Reporting
61	Reports of Independent Registered Public Accounting Firm
63	Consolidated Financial Statements and Related Notes
63		Consolidated Balance Sheets
64		Consolidated Statements of Income
65		Consolidated Statements of Changes in Shareholders’ Equity
66		Consolidated Statements of Cash Flow
67		Summary of Significant Accounting Policies
74		Earnings Per Common Share
75		Acquisitions and Divestitures
76		Line of Business Results
80		Restrictions on Cash, Dividends and Lending Activities
80		Securities
82		Loans and Loans Held for Sale
83		Loan Securitizations, Servicing and Variable Interest Entities
85		Nonperforming Assets and Past Due Loans
85		Goodwill and Other Intangible Assets
86		Short-Term Borrowings
87		Long-Term Debt
88		Capital Securities Issued by Unconsolidated Subsidiaries
88		Shareholders’ Equity
89		Stock-Based Compensation
92		Employee Benefits
96		Income Taxes
97		Commitments, Contingent Liabilities and Guarantees
100		Derivatives and Hedging Activities
102		Fair Value Disclosures of Financial Instruments
103		Condensed Financial Information of the Parent Company

17

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

INTRODUCTION

This section generally reviews the financial condition and results of operations of KeyCorp and its subsidiaries for each of the past three years. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes that appear on pages 63 through 104.

Terminology

This report contains some shortened names and industry-specific terms. We want to explain some of these terms at the outset so you can better understand the discussion that follows.

• KeyCorp refers solely to the parent holding company.

• KBNA refers to KeyCorp’s subsidiary bank, KeyBank National Association.

• Key refers to the consolidated entity consisting of KeyCorp and its subsidiaries.

• A KeyCenter is one of KBNA’s full-service retail banking facilities or branches.

• In November 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business, and announced a separate agreement to sell Champion’s origination platform. As a result of these actions, Key has accounted for this business as a discontinued operation and restated consolidated results of operations, average balances and related performance ratios accordingly for prior periods. We use the phrase continuing operations in this document to mean all of Key’s business other than Champion.

• Key engages in capital markets activities. These activities encompass a variety of products and services. Among other things, we trade securities as a dealer, enter into derivative contracts (both to accommodate clients’ financing needs and for proprietary trading purposes), and conduct transactions in foreign currencies (both to accommodate clients’ needs and to benefit from fluctuations in exchange rates).

• All earnings per share data included in this discussion are presented on a diluted basis, which takes into account all common shares outstanding as well as potential common shares that could result from the exercise of outstanding stock options and other stock awards. Some of the financial information tables also include basic earnings per share, which takes into account only common shares outstanding.

• For regulatory purposes, capital is divided into two classes. Federal regulations prescribe that at least one-half of a bank or bank holding company’s total risk-based capital must qualify as Tier 1. Both total and Tier 1 capital serve as bases for several measures of capital adequacy, which is an important indicator of financial stability and condition. You will find a more detailed explanation of total and Tier 1 capital and how they are calculated in the section entitled “Capital,” which begins on page 43.

Description of business

KeyCorp is one of the nation’s largest bank-based financial services companies, with consolidated total assets of $92.3 billion at December 31, 2006. KeyCorp’s subsidiaries provide a wide range of retail and commercial banking, commercial leasing, investment management, consumer finance, and investment banking products and services to individual, corporate and institutional clients through two major business groups: Community Banking and National Banking. As of December 31, 2006, these services were provided through subsidiaries operating 950 KeyCenters, a telephone banking call center services group and 2,050 automated teller machines (“ATMs”), in sixteen states. Additional information pertaining to KeyCorp’s two business groups appears in the “Line of Business Results” section, which begins on page 25, and in Note 4 (“Line of Business Results”), which begins on page 76.

In addition to the customary banking services of accepting deposits and making loans, KeyCorp’s bank, registered investment advisor and trust company subsidiaries offer personal and corporate trust services, personal financial services, access to mutual funds, cash management services, investment banking and capital markets products, and international banking services. These subsidiaries also provide investment management services to clients that include large corporate and public retirement plans, foundations and endowments, high net worth individuals and Taft-Hartley plans (i.e., multiemployer trust funds established for providing pension, vacation or other benefits to employees).

KeyCorp provides other financial services — both inside and outside of its primary banking markets — through nonbank subsidiaries. These services include accident, health and credit-life insurance on loans made by KBNA, principal investing, community development financing, securities underwriting and brokerage, and other financial services. KeyCorp also is an equity participant in a joint venture with Key Merchant Services, LLC, which provides merchant services to businesses.

Long-term goals

Key’s long-term financial goals are to achieve an annual return on average equity in the range of 16% to 18% and to grow earnings per common share at an annual rate of 8% to 10%. The strategy for achieving these goals is described under the heading “Corporate strategy” on page 20.

During 2006, Key’s earnings per common share from continuing operations grew by 11%. This improvement was accomplished by growing revenue faster than expenses. Key from time-to-time uses capital that exceeds internal guidelines and minimum regulatory requirements to repurchase common shares in the open market or through privately-negotiated transactions. As a result of such repurchases, Key’s weighted-average fully-diluted common shares decreased to 410.2 million shares for 2006 from 414.0 million shares for 2005. Reducing the share count can foster both earnings per share growth and improved returns on average equity, but Key’s share repurchase activity was not significant enough to cause a material effect on either of these profitability measures in 2006 and 2005.

18

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Forward-looking statements

This report may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key’s long-term goals, financial condition, results of operations, earnings, levels of net loan charge-offs and nonperforming assets, interest rate exposure and profitability. These statements usually can be identified by the use of forward-looking language such as “our goal,” “our objective,” “our plan,” “will likely result,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “believes,” “estimates,” or other similar words or expressions or conditional verbs such as “will,” “would,” “could” and “should.”

Forward-looking statements express management’s current expectations, forecasts of future events or long-term goals and, by their nature, are subject to assumptions, risks and uncertainties. Although management believes that the expectations, forecasts and goals reflected in these forward-looking statements are reasonable, actual results could differ materially from the forward-looking statements for a variety of reasons, including the following factors.

Interest rates. Net interest income can be affected by changes in market interest rates (higher or lower) and the composition of Key’s interest-earning assets and interest-bearing liabilities.

Trade, monetary or fiscal policy. The trade, monetary and fiscal policies implemented by government and regulatory bodies, such as the Board of Governors of the Federal Reserve System may affect the economic environment in which Key operates and, therefore, impact Key’s financial condition and results of operations.

Economic conditions. Changes in general economic conditions, or in the condition of the local economies or industries in which Key has significant operations or assets, could, among other things, materially impact credit quality trends and our ability to generate loans.

Credit risk. Increases in interest rates and/or weakening economic conditions could diminish the ability of borrowers to repay outstanding loans or the value of the collateral securing those loans. Additionally, the allowance for loan losses may be insufficient if the estimates and judgments management used to establish that allowance prove to be inaccurate.

Market dynamics and competition. Key’s revenue is susceptible to changes in the markets Key serves, including changes resulting from mergers, acquisitions and consolidations among major clients and competitors. The prices charged for Key’s products and services and, hence, their profitability, could change depending on market demand, actions taken by competitors, and the introduction of new products and services.

Strategic initiatives. Results of operations could be affected by the success or lack of success of management’s initiatives to grow revenues and manage expenses or by changes in the composition of Key’s business (including changes from acquisitions and divestitures) and in the geographic locations in which Key operates.

Technological change. Key’s financial performance depends in part on our ability to utilize technology efficiently and effectively to develop, market and deliver new and innovative products and services.

Operational risk. Key may experience operational or risk management failures due to technological or other factors.

Regulatory compliance. KeyCorp and its subsidiaries are subject to voluminous and complex rules, regulations and guidelines imposed by a number of government authorities. Monitoring compliance with these requirements is a significant task, and failure to comply may result in penalties that could have an adverse effect on Key’s results of operations. In addition, regulatory practices, requirements or expectations may continue to expand.

Legal obligations. Key may become subject to new legal obligations, or the resolution of pending litigation may have an adverse effect on financial results.

Regulatory capital. KeyCorp and KBNA must meet specific capital requirements imposed by federal banking regulators. Sanctions for failure to meet applicable capital requirements may include regulatory enforcement actions that restrict dividend payments, require the adoption of remedial measures to increase capital, terminate Federal Deposit Insurance Corporation (“FDIC”) deposit insurance, and mandate the appointment of a conservator or receiver in severe cases.

Capital markets conditions. Changes in the stock markets, public debt markets and other capital markets could affect Key’s stock price, Key’s ability to raise necessary capital or other funding, or Key’s ability to securitize and sell loans. In addition, Key’s capital markets activities, such as underwriting and brokerage activities, investment and wealth management advisory businesses, and private equity investment activities, could be adversely affected by changes in the capital markets. Key’s access to the capital markets and liquidity could be adversely affected by direct circumstances, such as a credit downgrade, or indirect circumstances with market-wide consequences, such as terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund or hedge fund. Similarly, market speculation about Key or the banking industry in general may adversely affect the cost and availability of normal funding sources.

Business continuity. Although Key has disaster recovery plans in place, events such as natural disasters, terrorist activities or military actions could damage facilities or otherwise disrupt operations. Such events could have an adverse effect on Key’s results of operations.

International operations. Key meets the equipment leasing needs of companies worldwide. Economic and political uncertainties resulting from terrorist attacks, military actions or other events that affect the countries in which Key operates may have an adverse effect on results of operations.

Accounting principles and taxation. Changes in U.S. generally accepted accounting principles (“GAAP”) could have a significant adverse effect on Key’s reported financial results. Although these changes may not have an economic impact on Key’s business, they could affect our ability to attain targeted levels for certain performance measures. In addition, changes in domestic tax laws, rules and regulations, including the interpretation thereof by the Internal Revenue Service or other governmental bodies, could adversely affect Key’s financial condition or results of operations.

19

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

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.

Corporate strategy

The strategy for achieving Key’s long-term goals includes the following six primary elements:

• Focus on core businesses. We concentrate on businesses that enable Key to build client relationships. We focus on our “footprint” operations (i.e., businesses conducted primarily within the states that have KeyCenters) that serve individuals, small businesses and middle market companies. In addition, we focus nationwide on businesses such as commercial real estate lending, investment management and equipment leasing. We believe Key possesses resources of the scale necessary to compete nationally in the market for these services.

• Build relationships. We work to deepen relationships with existing clients and to build relationships with new clients, particularly those that have the potential to purchase multiple products and services or to generate repeat business. To that end, we emphasize deposit growth across all lines of business. We also put considerable effort into enhancing service quality.

• Enhance our business. We strive for continuous improvement in Key’s businesses. We continue to focus on increasing revenues, controlling expenses and maintaining the credit quality of Key’s loan portfolios. We will continue to leverage technology to reduce costs and to achieve these objectives.

• Cultivate a workforce that demonstrates Key’s values and works together for a common purpose. Key intends to achieve this by:

— attracting, developing and retaining a quality, high-performing and inclusive workforce;

— developing leadership at all staff and management levels;

— creating a positive, stimulating and entrepreneurial work environment; and

— paying for performance if achieved in ways that are consistent with Key’s values.

• Enhance performance measurement. We will continue to refine and to rely upon performance measurement mechanisms that help ensure that we are maximizing shareholder returns, that those returns are appropriate considering the inherent levels of risk involved and that Key’s incentive compensation plans are commensurate with the contributions employees make to profitability.

• Manage capital effectively. We will continue to manage Key’s equity capital effectively through dividends paid to shareholders, through the repurchase of Key common shares in the open market or through privately-negotiated transactions, and by investing in our businesses.

Economic overview

In 2006, U.S. economic growth was healthy as measured by the Gross Domestic Product (“GDP”). GDP growth averaged 3.4% during the first three quarters of 2006, exceeding the ten-year average of 3.2%. The nation’s unemployment rate averaged 4.7% during the year, while the economy created an average of 187,000 new jobs per month. New and existing home sales declined from record levels in mid-2005, but showed signs of stabilizing toward the end of the year. Energy prices reached record highs in July, but subsided substantially by the end of the year. Despite higher energy costs, personal spending remained robust as consumers continued to borrow against elevated real estate values. In an effort to keep inflation from escalating, the Federal Reserve raised the federal funds target rate from 4.25% to 5.25% during the first six months of the year. The federal funds target rate has remained at 5.25% since July 2006. Core consumer inflation rose at a 2.5% rate, exceeding the 2005 rate of 2.2%. In addition, continued domestic and foreign investor demand for high quality Treasury bonds served to keep long-term interest rates low, resulting in a relatively flat to inverted yield curve. The benchmark ten-year Treasury yield began 2006 trading at 4.37% and finished the year at 4.71%. The two-year Treasury yield began 2006 at 4.41% and closed the year at 4.81%. During 2006, the banking industry, including Key, continued to experience commercial and industrial loan growth.

Critical accounting policies and estimates

Key’s business is dynamic and complex. Consequently, management must exercise judgment in choosing and applying accounting policies and methodologies in many areas. These choices are important; not only are they necessary to comply with GAAP, they also reflect management’s view of the most appropriate manner in which to record and report Key’s overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Significant Accounting Policies”), which begins on page 67, should be reviewed for a greater understanding of how Key’s financial performance is recorded and reported.

In management’s opinion, some accounting policies are more likely than others to have a significant effect on Key’s financial results and to expose those results to potentially greater volatility. These policies apply to areas of relatively greater business importance, or require management to exercise judgment, and to make assumptions and estimates that affect amounts reported in the financial statements. Because these assumptions and estimates are based on current circumstances, they may change over time or prove to be inaccurate.

Key relies heavily on the use of judgment, assumptions and estimates in a number of important areas, including accounting for the allowance for loan losses; loan securitizations; contingent liabilities, guarantees and income taxes; derivatives and related hedging activities; principal investments; goodwill; and pension and other postretirement obligations. A brief discussion of each of these areas follows.

20

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Allowance for loan losses. The loan portfolio is the largest category of assets on Key’s balance sheet. Management determines probable losses inherent in Key’s loan portfolio and establishes an allowance that is sufficient to absorb those losses by considering factors including historical loss rates, expected cash flows and estimated collateral values. In assessing these factors, management benefits from a lengthy organizational history and experience with credit decisions and related outcomes. Nonetheless, if management’s underlying assumptions later prove to be inaccurate, the allowance for loan losses would have to be adjusted, possibly having an adverse effect on Key’s results of operations.

Management estimates the appropriate level of Key’s allowance for loan losses by applying historical loss rates to existing loans with similar risk characteristics and by exercising judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets. For an impaired loan, special treatment exists if the outstanding balance is greater than $2.5 million, and the resulting allocation is deemed insufficient to cover the extent of the impairment. In such cases, a specific allowance is assigned to the loan. A specific allowance may be assigned even when sources of repayment appear sufficient if management remains uncertain about whether the loan will be repaid in full.

Because the economic and business climate in any given industry or market, and its impact on a particular borrower, are difficult to gauge and can change rapidly, management continually assesses the risk profile of the loan portfolio and adjusts the allowance for loan losses when appropriate. Notwithstanding these procedures, it is still possible for management’s assessment to be significantly incorrect, requiring an additional adjustment to the allowance for loan losses.

Since Key’s total loan portfolio is well diversified in many respects, a change in the level of the allowance for one segment of the portfolio does not necessarily mean that a change is appropriate for any other segment. Also, the risk profile of certain segments of the loan portfolio may be improving while the risk profile of others may be deteriorating. As a result, changes in the appropriate level of the allowance for different segments may offset each other.

Adjustments to the allowance for loan losses can materially affect net income. Such adjustments may result from events that cause actual losses to vary abruptly and significantly from expected losses. For example, class action lawsuits brought against an industry segment (e.g., one that utilized asbestos in its product) can cause a precipitous deterioration in the risk profile of borrowers doing business in that segment. Conversely, the dismissal of such lawsuits can cause a significant improvement in the risk profile. In either case, historical loss rates for that industry segment would not have provided a precise basis for determining the appropriate level of allowance.

Because Key’s loan portfolio is large, even minor changes in the level of estimated losses can significantly affect management’s determination of the appropriate level of allowance. For example, an increase in estimated losses equal to one-tenth of one percent of Key’s December 31, 2006, consumer loan portfolio would result in an $18 million increase in the level of allowance deemed appropriate. The same level of increase in estimated losses for the commercial loan portfolio would result in a $48 million increase in the allowance. If these changes had actually occurred in 2006, they could have reduced Key’s net income by approximately $11 million, or $.03 per share, and $30 million, or $.07 per share, respectively.

Our accounting policy related to the allowance is disclosed in Note 1 under the heading “Allowance for Loan Losses” on page 69.

Loan securitizations. Key securitizes education loans and accounts for those transactions as sales when the criteria set forth in Statement of Financial Accounting Standards (“SFAS”) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” are met. If Key were to subsequently determine that the transactions did not meet the criteria prescribed by SFAS No. 140, the loans would have to be brought back onto the balance sheet, which could have an adverse effect on Key’s capital ratios and other unfavorable financial implications.

Management must make assumptions to determine the gain or loss resulting from securitization transactions and the subsequent carrying amount of retained interests; the most significant of these are described in Note 8 (“Loan Securitizations, Servicing and Variable Interest Entities”), which begins on page 83. Note 8 also includes information concerning the sensitivity of Key’s pre-tax earnings to immediate adverse changes in important assumptions. The use of alternative assumptions would change the amount of the initial gain or loss recognized and might result in changes in the carrying amount of retained interests, with related effects on results of operations. Our accounting policy related to loan securitizations is disclosed in Note 1 under the heading “Loan Securitizations” on page 69.

Contingent liabilities, guarantees and income taxes. Contingent liabilities arising from litigation and guarantees in various agreements with third parties under which Key is a guarantor, and the potential effects of these items on Key’s results of operations, are summarized in Note 18 (“Commitments, Contingent Liabilities and Guarantees”), which begins on page 97. In addition, it is not always clear how the Internal Revenue Code and various state tax laws apply to transactions undertaken by Key. In the normal course of business, Key may record tax benefits related to transactions, and then find those benefits contested by the Internal Revenue Service and/or state tax authorities. Key has provided tax reserves that management believes are adequate to absorb potential adjustments that such challenges may necessitate. For further information on Key’s accounting for income taxes, see Note 17 (“Income Taxes”), which begins on page 96.

Key records a liability for the fair value of the obligation to stand ready to perform over the term of a guarantee, but there is a risk that Key’s actual future payments in the event of a default by a third party could exceed the liability recorded on Key’s balance sheet. See Note 18 for a comparison of the liability recorded and the maximum potential undiscounted future payments for the various types of guarantees that Key had outstanding at December 31, 2006.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Derivatives and related hedging activities. Key uses derivatives known as interest rate swaps and caps to hedge interest rate risk for asset and liability management purposes. These instruments modify the repricing characteristics of specified on-balance sheet assets and liabilities. Key’s accounting policies related to derivatives reflect the accounting guidance in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as revised and further interpreted by SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” and other related accounting guidance. In accordance with this accounting guidance, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value. Accounting for changes in the fair value (i.e., gains or losses) of derivatives differs depending on whether the derivatives have been designated and qualify as part of a hedging relationship, and further, on the type of hedging relationship.

The application of hedge accounting requires significant judgment in the interpretation of the relevant accounting guidance as well as the assessment of hedge effectiveness, the identification of similar hedged item groupings, and the measurement of changes in the fair value of the hedged items. Management believes that Key’s methods of addressing these judgmental areas and applying the accounting guidance are in accordance with GAAP and consistent with industry practices. However, interpretations of SFAS No. 133 and related guidance continue to change and evolve. In the future, these evolving interpretations could result in material changes to Key’s accounting for derivative financial instruments and related hedging activities. Although such changes may not have a material effect on Key’s financial condition, they could have a material adverse effect on Key’s results of operations in the period they occur. Additional information relating to Key’s use of derivatives is included in Note 1 under the heading “Derivatives Used for Asset and Liability Management Purposes” on page 70 and Note 19, “Derivatives and Hedging Activities,” which begins on page 100.

Valuation methodologies. Valuation methodologies often involve a significant degree of judgment, particularly when there are no observable liquid markets for the items being valued. The outcomes of valuations performed by management have a direct bearing on the carrying amounts of assets and liabilities, including principal investments, goodwill, and pension and other postretirement benefit obligations. To determine the values of these assets and liabilities, as well as the extent to which related assets may be impaired, management makes assumptions and estimates related to discount rates, asset returns, prepayment rates and other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect Key’s results of operations.

Key’s principal investments include direct and indirect investments, predominantly in privately-held companies. The fair values of these investments are estimated by considering a number of factors, including the investee’s financial condition and results of operations, values of public companies in comparable businesses, market liquidity, and the nature and duration of resale restrictions. Due to the subjective nature of the valuation process, it is possible the actual fair values of these investments differ from the estimated values, thereby affecting Key’s financial condition and results of operations. The fair value of principal investments was $830 million at December 31, 2006; a 10% positive or negative variance in that fair value would have increased or decreased Key’s 2006 earnings by $83 million ($52 million after tax), or $.13 per share.

The valuation and testing methodologies used in Key’s analysis of goodwill impairment are summarized in Note 1 under the heading “Goodwill and Other Intangible Assets” on page 70. The first step in testing for impairment is to determine the fair value of each reporting unit. Key’s reporting units for purposes of this testing are its major business groups: Community Banking and National Banking. Two primary assumptions are used in determining these fair values: Key’s revenue growth rate and the future weighted-average cost of capital (“WACC”). Key’s goodwill impairment testing for 2006 assumed a revenue growth rate of 6.00% and a WACC of 11.50%. The second step of impairment testing is necessary only if the carrying amount of either reporting unit exceeds its fair value, suggesting goodwill impairment. Assuming that only one of the primary assumptions (revenue growth rate or WACC) changes at a time, the carrying amount of Key’s reporting units would exceed fair value in the following circumstances:

Community Banking — negative 11.81% rate of revenue growth or 28.34% WACC

National Banking — negative 9.42% rate of revenue growth or 22.11% WACC

These sensitivities are not completely realistic since a change in one of these assumptions is evaluated without changing the other. In reality, a change in one assumption could affect the other.

The primary assumptions used in determining Key’s pension and other postretirement benefit obligations and related expenses, including sensitivity analyses of these assumptions, are presented in Note 16 (“Employee Benefits”), which begins on page 92.

When a potential asset impairment is identified through testing, observable changes in liquid markets or other means, management also must exercise judgment in determining the nature of the potential impairment (i.e., whether the impairment is temporary or other-than-temporary) in order to apply the appropriate accounting treatment. For example, unrealized losses on securities available for sale that are deemed temporary are recorded in shareholders’ equity; those deemed “other-than-temporary” are recorded in earnings. Additional information regarding temporary and other-than-temporary impairment on securities available for sale at December 31, 2006, is provided in Note 6 (“Securities”), which begins on page 80.

Revenue recognition

Improprieties committed by various publicly traded companies related to revenue recognition have received a great deal of attention. Although all companies face the risk of intentional or unintentional misstatements, Key’s management believes that such misstatements are less likely in the financial services industry because most of the revenue (i.e., interest accruals) is driven by nondiscretionary formulas based on written contracts, such as loan agreements.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

HIGHLIGHTS OF KEY’S 2006 PERFORMANCE

Financial performance

Key’s 2006 income from continuing operations, before the cumulative effect of a change in accounting principle, was $1.193 billion, or $2.91 per diluted common share, representing the highest level of earnings in the company’s history. These results compare to $1.090 billion, or $2.63 per share, for 2005, and $907 million, or $2.18 per share, for 2004.

In November 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business, and announced a separate agreement to sell Champion’s origination platform. As a result of these actions, Key has applied discontinued operations accounting to this business for all periods presented in this report. For more detailed information regarding the Champion divestiture, including the gain resulting from the sale, see Note 3 (“Acquisitions and Divestitures”), which begins on page 75.

Key’s net income was $1.055 billion, or $2.57 per diluted common share, for 2006, compared to $1.129 billion, or $2.73 per share, for 2005, and $954 million, or $2.30 per share, for 2004.

Figure 1 summarizes Key’s continuing and discontinued operating results and related performance ratios for 2006, 2005 and 2004. Key’s financial performance for each of the past six years is summarized in Figure 2 on page 24.

FIGURE 1. RESULTS OF OPERATIONS

Year ended December 31,
dollars in millions, except per share amounts	2006			2005			2004
SUMMARY OF OPERATIONS
Income from continuing operations before cumulative effect of accounting change	$	1,193		$	1,090		$	907
Income (loss) from discontinued operations, net of taxes		(143	)a		39			47
Cumulative effect of accounting change, net of taxes		5			—			—
Net income	$	1,055		$	1,129		$	954
PER COMMON SHARE — ASSUMING DILUTIONb
Income from continuing operations before cumulative effect of accounting change	$	2.91		$	2.63		$	2.18
Income (loss) from discontinued operations		(.35	)a		.09			.11
Cumulative effect of accounting change		.01			—			—
Net income	$	2.57		$	2.73		$	2.30
PERFORMANCE RATIOS
From continuing operations:
Return on average total assets		1.30	%		1.24	%		1.09	%
Return on average equity		15.43			14.88			13.07
From consolidated operations:
Return on average total assets		1.12	%		1.24	%		1.10	%
Return on average equity		13.64			15.42			13.75

a	Includes a net after-tax charge of $165 million, or $.40 per share, consisting of: (1) a $170 million, or $.42 per share, write-off of goodwill associated with Key’s 1997 acquisition of Champion and (2) a net after-tax credit of $5 million, or $.01 per share, from the net gain on sale of the Champion Mortgage loan portfolio and disposal transaction costs.
b	Earnings per share may not foot due to rounding.

Key’s top four priorities for 2006 were to profitably grow revenue, institutionalize a culture of compliance and accountability, maintain a strong credit culture and improve operating leverage so that revenue growth would outpace expense growth. During 2006:

• Total revenue, which includes both net interest income and noninterest income, rose by $219 million, or 5%, due largely to solid commercial loan growth, higher income from fee-based businesses and growth in average core deposits, which increased by 8% from the 2005 level. The growth in Key’s commercial loan portfolio was geographically broad-based and spread among a number of industry sectors. The increase in fee income was attributable to a variety of sources, including trust and investment services, investment banking, operating leases, electronic banking and several other revenue components.

• Key continued to strengthen its compliance and operations infrastructure, which is designed to detect and prevent money laundering in accordance with the requirements of the Bank Secrecy Act.

• Asset quality remained solid. Both nonperforming assets and net loan charge-offs were down from the respective amounts reported one year ago. During 2006, net loan charge-offs represented .26% of Key’s average total loans from continuing operations. These favorable results reflected an improved economic environment and efforts to improve Key’s credit-risk profile by focusing on higher-return, relationship-oriented businesses.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 2. SELECTED FINANCIAL DATA

																			Compound
																			Annual Rate
																			of Change
dollars in millions, except per share amounts	2006			2005			2004			2003			2002			2001			(2001-2006)
YEAR ENDED DECEMBER 31,
Interest income	$	5,380		$	4,383		$	3,562		$	3,721		$	4,115		$	5,397			(.1	)%
Interest expense		2,565			1,727			1,106			1,165			1,519			2,704			(1.0	)
Net interest income		2,815			2,656			2,456			2,556			2,596			2,693			.9
Provision for loan losses		150			143			185			498			548			1,346			(35.5	)
Noninterest income		2,127			2,067			1,925			1,950			1,998			2,018			1.1
Noninterest expense		3,149			3,054			2,884			2,816			2,763			3,089			.4
Income from continuing operations before income taxes and cumulative effect of accounting changes		1,643			1,526			1,312			1,192			1,283			276			42.9
Income from continuing operations before cumulative effect of accounting changes		1,193			1,090			907			872			958			168			48.0
Income (loss) from discontinued operations, net of taxes		(143	)		39			47			31			18			(11	)		(67.0	)
Income before cumulative effect of accounting changes		1,050			1,129			954			903			976			157			46.2
Net income		1,055			1,129			954			903			976			132			51.5
PER COMMON SHARE
Income from continuing operations before cumulative effect of accounting changes	$	2.95		$	2.67		$	2.21		$	2.06		$	2.25		$	.40			49.1	%
Income (loss) from discontinued operations		(.35	)		.10			.11			.07			.04			(.03	)		(63.5	)
Income before cumulative effect of accounting changes		2.60			2.76			2.32			2.14			2.29			.37			47.7
Net income		2.61			2.76			2.32			2.14			2.29			.31			53.1
Income from continuing operations before cumulative effect of accounting changes — assuming dilution		2.91			2.63			2.18			2.05			2.22			.39			49.5
Income (loss) from discontinued operations — assuming dilution		(.35	)		.09			.11			.07			.04			(.03	)		(63.5	)
Income before cumulative effect of accounting changes — assuming dilution		2.56			2.73			2.30			2.12			2.27			.37			47.2
Net income — assuming dilution		2.57			2.73			2.30			2.12			2.27			.31			52.7
Cash dividends declared		1.38			1.30			1.24			1.22			1.20			1.18			3.2
Book value at year end		19.30			18.69			17.46			16.73			16.12			14.52			5.9
Market price at year end		38.03			32.93			33.90			29.32			25.14			24.34			9.3
Dividend payout ratio		52.87	%		47.10	%		53.45	%		57.01	%		52.40	%		380.65	%		N/A
Weighted-average common shares outstanding (000)		404,490			408,981			410,585			422,776			425,451			424,275			(1.0	)
Weighted-average common shares and potential common shares outstanding (000)		410,222			414,014			415,430			426,157			430,703			429,573			(.9	)
AT DECEMBER 31,
Loans	$	65,826		$	66,478		$	63,372		$	59,754		$	59,813		$	60,640			1.7	%
Earning assets		80,090			80,143			78,140			72,560			73,094			71,059			2.4
Total assets		92,337			93,126			90,747			84,498			85,214			80,947			2.7
Deposits		59,116			58,765			57,842			50,858			49,346			44,795			5.7
Long-term debt		14,533			13,939			14,846			15,294			15,605			14,554			—
Shareholders’ equity		7,703			7,598			7,117			6,969			6,835			6,155			4.6
PERFORMANCE RATIOS
From continuing operations:
Return on average total assets		1.30	%		1.24	%		1.09	%		1.07	%		1.21	%		.17	%		N/A
Return on average equity		15.43			14.88			13.07			12.63			14.68			2.21			N/A
Net interest margin (taxable equivalent)		3.67			3.65			3.62			3.73			3.91			3.74			N/A
From consolidated operations:
Return on average total assets		1.12	%		1.24	%		1.10	%		1.07	%		1.19	%		.16	%		N/A
Return on average equity		13.64			15.42			13.75			13.08			14.96			2.01			N/A
Net interest margin (taxable equivalent)		3.69			3.69			3.63			3.78			3.94			3.76			N/A
CAPITAL RATIOS AT DECEMBER 31,
Equity to assets		8.34	%		8.16	%		7.84	%		8.25	%		8.02	%		7.60	%		N/A
Tangible equity to tangible assets		7.01			6.68			6.35			6.94			6.73			6.29			N/A
Tier 1 risk-based capital		8.24			7.59			7.22			8.35			7.74			7.17			N/A
Total risk-based capital		12.43			11.47			11.47			12.57			12.11			11.07			N/A
Leverage		8.98			8.53			7.96			8.55			8.16			7.66			N/A
OTHER DATA
Average full-time equivalent employees		20,006			19,485			19,576			20,064			20,816			21,555			(1.5	)%
KeyCenters		950			947			935			906			910			911			.8

Key completed several acquisitions and divestitures during the six-year period shown in this table. One or more of these transactions may have had a significant effect on Key’s results, making it difficult to compare results from one year to the next. Note 3 (“Acquisitions and Divestitures”), which begins on page 75, contains specific information about the transactions Key completed during the past three years to help in understanding how they may have impacted Key’s financial condition and results of operations.

N/A = Not Applicable

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

• We continued to manage expenses effectively. Key’s total noninterest expense grew by 3% during 2006, compared to 6% during 2005. The growth in 2006 was due primarily to higher costs associated with business expansion, employee benefits, variable incentive compensation related to the improvement in Key’s fee-based businesses, and operating leases.

• Further, we continue to effectively manage our equity capital through dividends paid to shareholders, share repurchases, and investing in our businesses. During 2006, Key repurchased 17.5 million of its common shares. At December 31, 2006, Key’s tangible equity to tangible assets ratio was 7.01%.

The primary reasons that Key’s revenue and expense components changed over the past three years are reviewed in greater detail throughout the remainder of the Management’s Discussion & Analysis section.

Key’s positive 2006 results reflect strategic actions taken over the past several years to improve the company’s business mix. The decision in 2006 to sell the Champion Mortgage finance business and the McDonald Investments branch network as discussed below exemplify management’s disciplined focus on core relationship-oriented businesses.

Strategic developments

Key’s financial performance continued to improve in 2006, due in part to a number of specific actions taken during 2006 and 2005 to strengthen our market share positions and support our corporate strategy as summarized on page 20.

• On February 9, 2007, McDonald Investments Inc., a wholly-owned subsidiary of KeyCorp, sold its branch network, which includes approximately 570 financial advisors and field support staff, and certain fixed assets, to UBS Financial Services Inc., a subsidiary of UBS AG. In the transaction, Key received cash proceeds of approximately $219 million which may be subject to further adjustment under the terms of the sales agreement. Key has retained the corporate and institutional businesses, including Institutional Equities and Equity Research, Debt Capital Markets and Investment Banking. In addition, KBNA will continue the Wealth Management, Trust and Private Banking businesses.

• On November 29, 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business and announced a separate agreement to sell Champion’s origination platform. The platform sale is expected to close in the first quarter of 2007.

• On April 1, 2006, Key broadened its asset management product line by acquiring Austin Capital Management, Ltd., an investment firm headquartered in Austin, Texas with approximately $900 million in assets under management at the date of acquisition. Austin specializes in selecting and managing hedge fund investments for its principally institutional customer base.

• On December 8, 2005, Key acquired the commercial mortgage-backed servicing business of ORIX Capital Markets, LLC, headquartered in Dallas, Texas. The acquisition increased Key’s commercial mortgage servicing portfolio by approximately $27 billion.

• On July 1, 2005, Key expanded its Federal Housing Administration (“FHA”) financing and servicing capabilities by acquiring Malone Mortgage Company, based in Dallas, Texas. Key has made six commercial real estate acquisitions since January 31, 2000, as part of an ongoing strategy to expand commercial mortgage finance and servicing capabilities.

• During the first quarter of 2005, Key completed the sale of $992 million of indirect automobile loans, representing the prime segment of that portfolio. In April 2005, Key completed the sale of $635 million of automobile loans, representing the nonprime segment. The decision to sell these loans was driven by management’s strategies for improving Key’s returns and achieving desired interest rate and credit risk profiles.

LINE OF BUSINESS RESULTS

This section summarizes the financial performance and related strategic developments of Key’s two major business groups: Community Banking and National Banking. To better understand this discussion, see Note 4 (“Line of Business Results”), which begins on page 76. Note 4 describes the products and services offered by each of these business groups, provides more detailed financial information pertaining to the groups and their respective lines of business, and explains “Other Segments” and “Reconciling Items.”

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Figure 3 summarizes the contribution made by each major business group to Key’s taxable-equivalent revenue and income (loss) from continuing operations for each of the past three years.

FIGURE 3. MAJOR BUSINESS GROUPS — TAXABLE-EQUIVALENT REVENUE
AND INCOME (LOSS) FROM CONTINUING OPERATIONS

Year ended December 31,										Change 2006 vs 2005
dollars in millions	2006			2005			2004			Amount			Percent
REVENUE FROM CONTINUING OPERATIONS (TE)
Community Banking	$	2,642		$	2,589		$	2,508		$	53			2.0	%
National Banking		2,485			2,274			2,017			211			9.3
Other Segments		28			69			26			(41	)		(59.4	)
Total Segments		5,155			4,932			4,551			223			4.5
Reconciling Items		(110	)		(88	)		(76	)		(22	)		(25.0	)
Total	$	5,045		$	4,844		$	4,475		$	201			4.1	%
INCOME (LOSS) FROM CONTINUING OPERATIONS
Community Banking	$	427		$	420		$	412		$	7			1.7	%
National Banking		701			633			479			68			10.7
Other Segments		41			67			43			(26	)		(38.8	)
Total Segments		1,169			1,120			934			49			4.4
Reconciling Items		24			(30	)		(27	)		54			N/M
Total	$	1,193		$	1,090		$	907		$	103			9.4	%

TE = Taxable Equivalent, N/M = Not Meaningful

Community Banking summary of operations

As shown in Figure 4, net income for Community Banking was $427 million for 2006, up from $420 million for 2005 and $412 million for 2004. The increase in 2006 was the result of growth in net interest income, a modest increase in noninterest income and a lower provision for loan losses, offset in part by an increase in noninterest expense.

Taxable-equivalent net interest income grew by $49 million, or 3%, from 2005. Net interest income benefited from a 5% increase in average deposits, which also experienced a more favorable interest rate spread. Increased deposits were in the form of money market deposit accounts and certificates of deposit. The increase in money market deposits was attributable to the introduction of new products, while the growth in certificates of deposit reflected client preferences for these products in a rising interest rate environment.

Noninterest income rose by $4 million, or less than 1%. Increases of $12 million in annuity fee income, $9 million in electronic banking fees and $3 million in service charges on deposit accounts were substantially offset by decreases of $12 million in trust and investment services income and $8 million in income from investment banking and capital markets activities.

The provision for loan losses decreased by $13 million, or 12%, as a result of a $15 million reduction in net charge-offs, primarily within the Small Business lending unit.

Noninterest expense grew by $55 million, or 3%, from 2005, due primarily to higher personnel, marketing and occupancy expenses. A portion of these additional costs was incurred in connection with the anticipated sale of the McDonald Investments branch network discussed below.

In 2005, the $8 million increase in net income was attributable to a $121 million, or 8%, increase in taxable-equivalent net interest income and a $17 million, or 14%, reduction in the provision for loan losses. The positive effects of these changes were partially offset by a $40 million, or 4%, reduction in noninterest income, due primarily to a decrease in service charges on deposit accounts. In addition, noninterest expense rose by $84 million, or 5%, as a result of higher costs associated with marketing and occupancy, as well as increases in various indirect charges.

On February 9, 2007, McDonald Investments Inc., a wholly-owned subsidiary of KeyCorp, sold its branch network, which includes approximately 570 financial advisors and field support staff, and certain fixed assets, to UBS Financial Services Inc., a subsidiary of UBS AG. In the transaction, Key received cash proceeds of approximately $219 million which may be subject to further adjustment under the terms of the sales agreement. Key has retained the corporate and institutional businesses, including Institutional Equities and Equity Research, Debt Capital Markets and Investment Banking. In addition, KBNA will continue the Wealth Management, Trust and Private Banking businesses.

During the second half of 2004, Key improved market share position by acquiring EverTrust Financial Group, Inc., which is headquartered in Everett, Washington. At the date of acquisition, EverTrust had assets of approximately $780 million and deposits of approximately $570 million. Key also acquired ten branch offices and approximately $380 million of deposits of Sterling Bank & Trust FSB in suburban Detroit, Michigan.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 4. COMMUNITY BANKING

Year ended December 31,										Change 2006 vs 2005
dollars in millions	2006			2005			2004			Amount			Percent
SUMMARY OF OPERATIONS
Net interest income (TE)	$	1,750		$	1,701		$	1,580		$	49			2.9	%
Noninterest income		892			888			928			4			.5
Total revenue (TE)		2,642			2,589			2,508			53			2.0
Provision for loan losses		95			108			125			(13	)		(12.0	)
Noninterest expense		1,864			1,809			1,725			55			3.0
Income before income taxes (TE)		683			672			658			11			1.6
Allocated income taxes and TE adjustments		256			252			246			4			1.6
Net income	$	427		$	420		$	412		$	7			1.7	%
Percent of consolidated income from continuing operations		36	%		39	%		45	%		N/A			N/A
AVERAGE BALANCES
Loans and leases	$	26,728		$	27,058		$	26,243		$	(330	)		(1.2	)%
Total assets		29,669			29,995			29,185			(326	)		(1.1	)
Deposits		46,725			44,343			41,721			2,382			5.4

TE = Taxable Equivalent, N/A = Not Applicable

ADDITIONAL COMMUNITY BANKING DATA

Year ended December 31,									Change 2006 vs 2005
dollars in millions	2006			2005			2004		Amount			Percent
AVERAGE DEPOSITS OUTSTANDING
Noninterest-bearing	$	8,096		$	8,226		$	7,866	$	(130	)		(1.6	)%
Money market and other savings		22,283			21,322			19,769		961			4.5
Time		16,346			14,795			14,086		1,551			10.5
Total deposits	$	46,725		$	44,343		$	41,721	$	2,382			5.4	%
HOME EQUITY LOANS
Average balance	$	10,046		$	10,381
Weighted-average loan-to-value ratio		70	%		71	%
Percent first lien positions		59			61
OTHER DATA
On-line households/household penetration		682,955 / 53	%		622,957 / 50	%
KeyCenters		950			947
Automated teller machines		2,050			2,180

National Banking summary of continuing operations

As shown in Figure 5, income from continuing operations for National Banking rose to $701 million for 2006, up from $633 million for 2005 and $479 million for 2004. The increase in 2006 was a result of significant growth in net interest income and higher noninterest income, offset in part by a higher provision for loan losses and an increase in noninterest expense.

Taxable-equivalent net interest income grew by $124 million, or 10%, reflecting strong growth in deposits, average loans and leases. Deposits rose by $3.2 billion, or 43%, from 2005. Average loans and leases grew by $3.4 billion, or 10%, reflecting growth in the Real Estate Capital, Equipment Finance and Consumer Finance lines of business. In addition, the net interest margin for 2006 benefited from a $16 million lease accounting adjustment resulting from a change in effective state tax rates. These positive trends were moderated by tighter interest rate spreads on average earning assets in the Consumer Finance and Equipment Leasing lines of business.

Noninterest income rose by $87 million, or 9%, due to higher income from investment banking and capital markets activities, operating leases, and trust and investment services, and net gains from loan securitizations and sales. Results for 2005 included a $19 million gain recorded from the sale of the prime segment of the indirect automobile loan portfolio.

The provision for loan losses rose by $20 million, with most of the increase recorded in the Real Estate Capital and Equipment Finance lines of business.

27

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 5. NATIONAL BANKING

Year ended December 31,										Change 2006 vs 2005
dollars in millions	2006			2005			2004			Amount			Percent
SUMMARY OF OPERATIONS
Net interest income (TE)	$	1,406		$	1,282		$	1,176		$	124			9.7	%
Noninterest income		1,079			992			841			87			8.8
Total revenue (TE)		2,485			2,274			2,017			211			9.3
Provision for loan losses		55			35			60			20			57.1
Noninterest expense		1,308			1,225			1,158			83			6.8
Income from continuing operations before income taxes (TE)		1,122			1,014			799			108			10.7
Allocated income taxes and TE adjustments		421			381			320			40			10.5
Income from continuing operations		701			633			479			68			10.7
Income (loss) from discontinued operations, net of taxes		(143	)		39			47			(182	)		N/M
Net income	$	558		$	672		$	526		$	(114	)		(17.0	)%
Percent of consolidated income from continuing operations		59	%		58	%		53	%		N/A			N/A
AVERAGE BALANCES
Loans and leases	$	37,827		$	34,403		$	31,314		$	3,424			10.0	%
Loans held for sale		4,161			3,629			2,501			532			14.7
Total assets		48,172			44,008			39,924			4,164			9.5
Deposits		10,874			7,627			6,047			3,247			42.6

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

Noninterest expense grew by $83 million, or 7%, reflecting increases in personnel expense and additional costs incurred in connection with operating leases and business expansion. The increase in personnel expense was attributable to higher costs from business expansion, employee benefits and variable incentive compensation associated with the improvement in fee-based businesses.

In 2005, the $154 million increase in income from continuing operations came from three sources: a $106 million, or 9%, increase in net interest income; a $151 million, or 18%, increase in noninterest income, due in part to the $19 million gain on the sale of the indirect automobile loan portfolio discussed above; and a $25 million, or 42%, reduction in the provision for loan losses resulting from an improved credit risk profile. The positive effects of these changes were offset in part by a $67 million, or 6%, increase in noninterest expense. Noninterest expense for 2004 included a $55 million write-off of goodwill related to Key’s nonprime indirect automobile lending business.

During 2006, Key continued to take actions to improve its business mix and to emphasize relationship businesses. These actions included the November 2006 sale of the nonprime mortgage loan portfolio held by the Champion Mortgage finance business and the sale of Champion’s origination platform, which is expected to close in the first quarter of 2007. As a result of these actions, Key has applied discontinued operations accounting to this business. Further information regarding the Champion divestiture is included in Note 3 (“Acquisitions and Divestitures”), which begins on page 75.

Over the past three years, Key also has completed several acquisitions that expanded its market share positions and strengthened its business. In 2006, Key expanded the asset management product line by acquiring Austin Capital Management, Ltd., an investment firm headquartered in Austin, Texas. Austin specializes in selecting and managing hedge fund investments for its principally institutional customer base.

During 2005, Key completed two acquisitions that have helped to build upon success in commercial mortgage origination and servicing businesses. Key acquired the commercial mortgage-backed servicing business of ORIX Capital Markets, LLC, headquartered in Dallas, Texas, and expanded its FHA financing and servicing capabilities by acquiring Malone Mortgage Company, also based in Dallas.

During 2004, Key acquired American Express Business Finance Corporation, the equipment leasing unit of American Express’ small business division. This company provides capital for small and middle market businesses, mostly in the healthcare, information technology, office products and commercial vehicle/construction industries. Key also expanded its commercial mortgage financing and servicing capabilities by acquiring certain net assets of American Capital Resource, Inc., based in Atlanta, Georgia.

Other Segments

Other Segments consists of Corporate Treasury and Key’s Principal Investing unit. These segments generated net income of $41 million for 2006, compared to $67 million for 2005. Net income declined because of a decrease in net gains from principal investing and a $24 million charge recorded in the fourth quarter of 2006 in connection with the redemption of certain trust preferred securities.

28

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

In 2005, Other Segments generated net income of $67 million, compared to $43 million for 2004, due to increases in net gains from principal investing and net interest income.

RESULTS OF OPERATIONS

Net interest income

One of Key’s principal sources of earnings is net interest income. Net interest income is the difference between interest income received on earning assets (such as loans and securities) and loan-related fee income, and interest expense paid on deposits and borrowings. There are several factors that affect net interest income, including:

• the volume, pricing, mix and maturity of earning assets and interest-bearing liabilities;

• the volume and value of net free funds, such as noninterest-bearing deposits and capital;

• the use of derivative instruments to manage interest rate risk;

• interest rate fluctuations and competitive conditions within the marketplace; and

• asset quality.

To make it easier to compare results among several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in this discussion on a “taxable-equivalent basis” (i.e., as if it were all taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $154, an amount that — if taxed at the statutory federal income tax rate of 35% — would yield $100.

Figure 6, which spans pages 30 and 31, shows the various components of Key’s balance sheet that affect interest income and expense, and their respective yields or rates over the past six years. This figure also presents a reconciliation of taxable-equivalent net interest income for each of those years to net interest income reported in accordance with GAAP.

Taxable-equivalent net interest income for 2006 was $2.9 billion, representing a $141 million, or 5%, increase from 2005. The net interest margin, which is an indicator of the profitability of the earning assets portfolio, is calculated by dividing net interest income by average earning assets. During 2006, Key’s net interest margin increased by 2 basis points to 3.67%. A basis point is equal to one one-hundredth of a percentage point, meaning 2 basis points equals .02%.

The improvement in net interest income and the net interest margin was attributable to 7% growth in average commercial loans and an 8% increase in average core deposits, combined with a 9% rise in the volume of noninterest-bearing funds. As a result of the rising interest rate environment, noninterest-bearing funds were of significantly greater value during 2006 as they added approximately 25 basis points to the net interest margin. Key’s net interest margin also benefited from a slight asset-sensitive interest rate risk position in a rising interest rate environment. The increase in the net interest margin was offset in part by the sale of certain assets that had higher yields and credit costs, but did not fit Key’s relationship banking strategy. In addition, during 2006, Key experienced a tighter interest rate spread, which represents the difference between the yield on average earning assets and the rate paid for interest-bearing funds.

As shown in Figure 6, Key’s interest rate spread narrowed by 23 basis points from 2005 as a result of competitive pressure on loan and deposit pricing, and a change in deposit mix, as consumers shifted funds from money market deposit accounts to time deposits. Management expects these conditions and the continuing flat-to-inverted yield curve to maintain pressure on the net interest margin heading into 2007.

Average earning assets for 2006 totaled $79.5 billion, which was $3.5 billion, or 5%, higher than the 2005 level, due largely to the 7% increase in commercial loans.

In 2005, taxable-equivalent net interest income was $2.8 billion, representing a $227 million, or 9%, increase from 2004. The growth reflected a 6% increase in average earning assets due to strong growth in all major components of the commercial loan portfolio. Growth in commercial lending, which was bolstered by the acquisitions of EverTrust Financial Group, Inc. and American Express Business Finance Corporation during the fourth quarter of 2004, and an increase in loans held for sale more than offset declines in consumer loans and short-term investments. The decline in consumer loans was due primarily to loan sales. Net interest income for 2005 also benefited from a 3 basis point improvement in the net interest margin to 3.65%.

Over the past two years, the growth and composition of Key’s earning assets has been affected by the following loan sales, most of which came from the held-for-sale portfolio:

• Key sold commercial mortgage loans of $2.6 billion during 2006 and $2.2 billion during 2005. Since some of these loans have been sold with limited recourse (i.e., there is a risk that Key will be held accountable for certain events or representations made in the sales agreements), Key established and has maintained a loss reserve in an amount estimated by management to be appropriate. More information about the related recourse agreement is provided in Note 18 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with Federal National Mortgage Association” on page 99.

• Key sold education loans of $1.4 billion ($1.1 billion through a securitization) during 2006 and $1.2 billion ($937 million through a securitization) during 2005. Key has used the securitization market for education loans to diversify funding sources.

• Key sold other loans totaling $3.2 billion during 2006 and $2.7 billion during 2005. During the fourth quarter of 2006, Key sold the $2.5 billion nonprime mortgage loan portfolio held by the Champion Mortgage finance business. The Champion business no longer fits strategically with Key’s longer-term business goals and continued focus on Community Banking and relationship-oriented businesses.

• During the first quarter of 2005, Key completed the sale of $992 million of indirect automobile loans, representing the prime segment of that portfolio. In April 2005, Key completed the sale of $635 million of automobile loans, representing the nonprime segment. The decision to sell these loans was driven by management’s strategies for improving Key’s returns and achieving better interest rate and credit risk profiles.

29

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 6. AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND YIELDS/RATES FROM CONTINUING OPERATIONS

Year ended December 31,	2006								2005								2004
	Average					Yield/			Average					Yield/			Average					Yield/
dollars in millions	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Loansa,b
Commercial, financial and agriculturalc	$	21,679		$	1,547		7.13	%	$	19,480		$	1,083		5.56	%	$	17,119		$	762		4.45	%
Real estate — commercial mortgage		8,167			628		7.68			8,403			531		6.32			7,032			354		5.03
Real estate — construction		7,802			635		8.14			6,263			418		6.67			4,926			250		5.08
Commercial lease financingc		9,773			595		6.08			10,122			628		6.21			8,269			487		5.90
Total commercial loans		47,421			3,405		7.18			44,268			2,660		6.01			37,346			1,853		4.96
Real estate — residential		1,430			93		6.49			1,468			90		6.10			1,563			94		6.01
Home equity		10,971			775		7.07			11,094			687		6.20			11,903			625		5.25
Consumer — direct		1,639			152		9.26			1,834			158		8.60			2,048			154		7.52
Consumer — indirect		3,535			238		6.73			3,333			217		6.51			5,366			411		7.66
Total consumer loans		17,575			1,258		7.16			17,729			1,152		6.50			20,880			1,284		6.15
Total loans		64,996			4,663		7.17			61,997			3,812		6.15			58,226			3,137		5.39
Loans held for sale		4,168			325		7.80			3,637			254		6.99			2,509			114		4.55
Investment securitiesa		47			3		7.43			76			5		7.30			85			8		8.69
Securities available for saled		7,302			347		4.71			7,118			327		4.58			7,214			327		4.55
Short-term investments		1,648			63		3.82			1,860			52		2.79			2,184			35		1.56
Other investmentsd		1,362			82		5.78			1,379			54		3.79			1,257			35		2.77
Total earning assets		79,523			5,483		6.88			76,067			4,504		5.92			71,475			3,656		5.11
Allowance for loan losses		(952	)							(1,103	)							(1,276	)
Accrued income and other assets		13,131								12,945								13,090
Total assets	$	91,702							$	87,909							$	83,289
LIABILITIES AND SHAREHOLDERS’ EQUITY
NOW and money market deposit accounts	$	25,044			710		2.84		$	22,696			360		1.59		$	20,175			147		.73
Savings deposits		1,728			4		.23			1,941			5		.26			2,007			5		.23
Certificates of deposit ($100,000 or more)e		5,581			261		4.67			4,957			189		3.82			4,834			178		3.71
Other time deposits		11,592			481		4.14			10,789			341		3.16			10,564			304		2.88
Deposits in foreign officef		2,305			120		5.22			2,662			81		3.06			1,438			6		.40
Total interest-bearing deposits		46,250			1,576		3.41			43,045			976		2.27			39,018			640		1.64
Federal funds purchased and securities sold under repurchase agreementsf		2,215			107		4.80			2,577			71		2.74			3,129			22		.71
Bank notes and other short-term borrowings		2,284			94		4.12			2,796			82		2.94			2,631			42		1.59
Long-term debte,f,g,h		13,983			788		5.62			14,094			598		4.32			14,304			402		2.93
Total interest-bearing liabilities		64,732			2,565		3.96			62,512			1,727		2.77			59,082			1,106		1.89
Noninterest-bearing deposits		13,053								12,001								11,172
Accrued expense and other liabilities		6,183								6,073								6,098
Shareholders’ equity		7,734								7,323								6,937
Total liabilities and shareholders’ equity	$	91,702							$	87,909							$	83,289
Interest rate spread (TE)							2.92	%							3.15	%							3.22	%
Net interest income (TE) and net interest margin (TE)					2,918		3.67	%					2,777		3.65	%					2,550		3.62	%
TE adjustmenta					103								121								94
Net interest income, GAAP basis				$	2,815							$	2,656							$	2,456
Capital securities		—			—					—			—					—			—

^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 During the first quarter of 2006, Key reclassified $760 million of average loans and related interest income from the commercial lease financing portfolio to the commercial, financial and agricultural portfolio to more accurately reflect the nature of these receivables. Balances presented for prior periods were not reclassified as the historical data was not available.

^d Yield is calculated on the basis of amortized cost.

^e Rate calculation excludes basis adjustments related to fair value hedges. See Note 19 (“Derivatives and Hedging Activities”), which begins on page 100, for an explanation of fair value hedges.

^f 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.

^g Rate calculation excludes ESOP debt for the year ended December 31, 2001.

^h Long-term debt includes capital securities prior to July 1, 2003. Effective July 1, 2003, the business trusts that issued the capital securities were de-consolidated in accordance with FASB Revised Interpretation No. 46.

TE = Taxable Equivalent, N/M = Not Meaningful

30

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

																						Compound Annual
																						Rate of Change
2003						2002								2001								(2001-2006)
Average			Yield/			Average					Yield/			Average					Yield/			Average
Balance	Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest
$16,467	$	794		4.82	%	$	17,126		$	875		5.11	%	$	18,875		$	1,321		7.00	%		2.8	%		3.2	%
6,571		343		5.22			6,956			403		5.79			7,382			550		7.46			2.0			2.7
5,333		274		5.14			5,849			315		5.38			5,651			411		7.27			6.7			9.1
7,457		446		5.99			6,695			447		6.68			6,430			432		6.73			8.7			6.6
35,828		1,857		5.18			36,626			2,040		5.57			38,338			2,714		7.08			4.3			4.6
1,802		117		6.47			2,165			151		6.98			3,640			278		7.64			(17.0	)		(19.7	)
12,036		656		5.46			10,927			691		6.32			9,074			747		8.24			3.9			.7
2,135		157		7.36			2,199			183		8.30			2,420			231		9.55			(7.5	)		(8.0	)
5,585		475		8.50			6,560			597		9.10			8,147			747		9.17			(15.4	)		(20.4	)
21,558		1,405		6.52			21,851			1,622		7.42			23,281			2,003		8.60			(5.5	)		(8.9	)
57,386		3,262		5.69			58,477			3,662		6.26			61,619			4,717		7.66			1.1			(.2	)
2,447		112		4.60			2,247			123		5.52			2,217			169		7.64			13.5			14.0
112		11		9.03			181			16		8.67			279			25		8.76			(30.0	)		(34.6	)
7,854		355		4.54			6,341			387		6.13			6,596			451		6.84			2.1			(5.1	)
1,595		25		1.57			1,429			23		1.61			1,635			56		3.44			.2			2.4
1,023		27		2.62			871			24		2.57			849			24		2.86			9.9			27.9
70,417		3,792		5.39			69,546			4,235		6.09			73,195			5,442		7.44			1.7			.2
(1,401)							(1,545	)							(1,081	)							(2.5	)
12,517							11,360								10,926								3.7
$81,533						$	79,361							$	83,040								2.0
$17,913		149		.83		$	13,761			131		.95		$	12,942			263		2.03			14.1			22.0
2,072		10		.50			1,986			13		.67			1,952			21		1.05			(2.4	)		(28.2	)
4,796		186		3.93			4,741			218		4.63			5,284			301		5.71			1.1			(2.8	)
11,330		336		2.96			12,859			496		3.86			14,208			786		5.53			(4.0	)		(9.4	)
1,885		22		1.13			2,336			39		1.67			2,715			107		3.94			(3.2	)		2.3
37,996		703		1.85			35,683			897		2.52			37,101			1,478		3.98			4.5			1.3
4,739		50		1.06			5,527			90		1.63			5,197			198		3.80			(15.7	)		(11.6	)
2,612		60		2.29			2,943			79		2.67			6,829			302		4.43			(19.7	)		(20.8	)
13,287		352		2.76			14,615			453		3.14			14,113			726		5.17			(.2	)		1.7
58,634		1,165		2.01			58,768			1,519		2.59			63,240			2,704		4.28			.5			(1.0	)
10,347							9,098								8,354								9.3
5,649							4,971								4,874								4.9
6,903							6,524								6,572								3.3
$81,533						$	79,361							$	83,040								2.0
				3.38	%							3.50	%							3.16	%
		2,627		3.73	%					2,716		3.91	%					2,738		3.74	%					1.3	%
		71								120								45								18.0
	$	2,556							$	2,596							$	2,693								.9	%
$629	$	36				$	1,254		$	78				$	1,309		$	89								N/M

31

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Figure 7 shows how the changes in yields or rates and average balances from the prior year affected net interest income. The section entitled “Financial Condition,” which begins on page 36, contains more discussion about changes in earning assets and funding sources.

FIGURE 7. COMPONENTS OF NET INTEREST INCOME CHANGES

	2006 vs 2005									2005 vs 2004
	Average			Yield/			Net			Average			Yield/			Net
in millions	Volume			Rate			Change			Volume			Rate			Change
INTEREST INCOME
Loans	$	191		$	660		$	851		$	212		$	463		$	675
Loans held for sale		39			32			71			64			76			140
Investment securities		(1	)		(1	)		(2	)		(1	)		(2	)		(3	)
Securities available for sale		9			11			20			(4	)		4			—
Short-term investments		(6	)		17			11			(6	)		23			17
Other investments		(1	)		29			28			4			15			19
Total interest income (TE)		231			748			979			269			579			848
INTEREST EXPENSE
NOW and money market deposit accounts		41			309			350			20			193			213
Savings deposits		(1	)		—			(1	)		—			—			—
Certificates of deposit ($100,000 or more)		26			46			72			5			6			11
Other time deposits		27			113			140			7			30			37
Deposits in foreign office		(12	)		51			39			9			66			75
Total interest-bearing deposits		81			519			600			41			295			336
Federal funds purchased and securities sold under repurchase agreements		(11	)		47			36			(5	)		54			49
Bank notes and other short-term borrowings		(17	)		29			12			3			37			40
Long-term debt		(5	)		195			190			(6	)		202			196
Total interest expense		48			790			838			33			588			621
Net interest income (TE)	$	183		$	(42	)	$	141		$	236		$	(9	)	$	227

The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

TE = Taxable Equivalent

Noninterest income

Noninterest income for 2006 was $2.1 billion, representing a $60 million, or 3%, increase from 2005. In 2005, noninterest income rose by $142 million, or 7%, from 2004.

As shown in Figure 8, the 2006 growth in noninterest income was driven by increases of $38 million in operating lease income, $13 million in insurance income, $11 million in income from trust and investment services, and $9 million in electronic banking fees. These positive results were moderated by a $23 million decrease in “miscellaneous income” caused by a $24 million charge recorded during the fourth quarter of 2006 in connection with the redemption of certain trust preferred securities.

FIGURE 8. NONINTEREST INCOME

Year ended December 31,							Change 2006 vs 2005
dollars in millions	2006		2005		2004		Amount			Percent
Trust and investment services income	$	553	$	542	$	564	$	11			2.0	%
Service charges on deposit accounts		304		304		331		—			—
Investment banking and capital markets income		230		229		217		1			.4
Operating lease income		229		191		183		38			19.9
Letter of credit and loan fees		188		181		158		7			3.9
Corporate-owned life insurance income		105		109		110		(4	)		(3.7	)
Electronic banking fees		105		96		85		9			9.4
Net gains from loan securitizations and sales		76		69		9		7			10.1
Net securities gains		1		1		4		—			—
Other income:
Insurance income		64		51		47		13			25.5
Loan securitization servicing fees		20		19		3		1			5.3
Credit card fees		17		14		13		3			21.4
Net gains from principal investing		53		56		44		(3	)		(5.4	)
Miscellaneous income		182		205		157		(23	)		(11.2	)
Total other income		336		345		264		(9	)		(2.6	)
Total noninterest income	$	2,127	$	2,067	$	1,925	$	60			2.9	%

32

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

In 2005, the growth in noninterest income resulted from increases of $60 million in net gains from loan securitizations and sales, $23 million in letter of credit and loan fees, $16 million in loan securitization servicing fees, $12 million in income from investment banking and capital markets activities, $12 million in net gains from principal investing and $11 million in electronic banking fees. In addition, “miscellaneous income” rose by $48 million, due largely to higher net gains on the residual values of leased vehicles and equipment sold, and growth in various service charges. These increases were offset in part by a $27 million decline in service charges on deposit accounts and a $22 million decrease in income from trust and investment services.

The following discussion explains the composition of certain elements of Key’s noninterest income and the factors that caused those elements to change.

Trust and investment services income. Trust and investment services is Key’s largest source of noninterest income. The primary components of revenue generated by these services are shown in Figure 9.

FIGURE 9. TRUST AND INVESTMENT SERVICES INCOME

Year ended December 31,							Change 2006 vs 2005
dollars in millions	2006		2005		2004		Amount			Percent
Brokerage commissions and fee income	$	235	$	247	$	265	$	(12	)		(4.9	)%
Personal asset management and custody fees		156		153		156		3			2.0
Institutional asset management and custody fees		162		142		143		20			14.1
Total trust and investment services income	$	553	$	542	$	564	$	11			2.0	%

A significant portion of Key’s trust and investment services income depends on the value and mix of assets under management. At December 31, 2006, Key’s bank, trust and registered investment advisory subsidiaries had assets under management of $84.7 billion, representing a 10% increase from $77.1 billion at December 31, 2005. As shown in Figure 10, the increase was due primarily to Key’s equity portfolio, reflecting improvement in the equity markets in general. Key’s securities lending business and the higher-yielding hedge funds obtained in the acquisition of Austin Capital Management, Ltd. on April 1, 2006, also contributed to the increase.

FIGURE 10. ASSETS UNDER MANAGEMENT

December 31,							Change 2006 vs 2005
dollars in millions	2006		2005		2004		Amount			Percent
Assets under management by investment type:
Equity	$	41,877	$	35,370	$	34,788	$	6,507			18.4	%
Securities lending		21,146		20,938		16,082		208			1.0
Fixed income		11,242		11,264		12,885		(22	)		(.2	)
Money market		9,402		9,572		10,802		(170	)		(1.8	)
Hedge funds		1,032		—		—		1,032			N/M
Total	$	84,699	$	77,144	$	74,557	$	7,555			9.8	%
Proprietary mutual funds included in assets under management:
Money market	$	7,579	$	7,884	$	9,103	$	(305	)		(3.9	)%
Equity		5,713		4,594		3,651		1,119			24.4
Fixed income		629		722		827		(93	)		(12.9	)
Total	$	13,921	$	13,200	$	13,581	$	721			5.5	%

N/M = Not Meaningful

When clients’ securities are lent to a borrower, the borrower must provide Key with cash collateral, which is invested during the term of the loan. The difference between the revenue generated from the investment and the cost of the collateral is shared with the lending client. This business, although profitable, generates a significantly lower rate of return (commensurate with the lower level of risk) than other types of assets under management.

33

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Service charges on deposit accounts. In 2005, service charges on deposit accounts decreased, due primarily to reductions in the levels of overdraft and maintenance fees, and fees charged to commercial clients for cash management services. The decline in overdraft fees reflects enhanced capabilities, such as “real time” posting, that allow clients to better manage their accounts. Maintenance fees decreased because a higher proportion of Key’s clients have elected to use Key’s free checking products. In addition, as interest rates increase, commercial clients are able to cover a larger portion of their service charges with credits earned on compensating balances.

Investment banking and capital markets income. As shown in Figure 11, the level of investment banking and capital markets income was essentially unchanged from 2005 as significant growth in investment banking income was offset by reductions in dealer trading and derivatives income, and income from other investments. A significant reason that dealer trading and derivatives income declined was the $11 million of derivative income recorded during the first quarter of 2005 in connection with the sale of Key’s indirect automobile loan portfolio. Income from other investments for 2006 includes a $25 million gain from the initial public offering completed by the New York Stock Exchange in March 2006.

FIGURE 11. INVESTMENT BANKING AND CAPITAL MARKETS INCOME

Year ended December 31,							Change 2006 vs 2005
dollars in millions	2006		2005		2004		Amount			Percent
Investment banking income	$	112	$	87	$	122	$	25			28.7	%
Dealer trading and derivatives income		33		54		14		(21	)		(38.9	)
Income from other investments		43		48		40		(5	)		(10.4	)
Foreign exchange income		42		40		41		2			5.0
Total investment banking and capital markets income	$	230	$	229	$	217	$	1			.4	%

During 2005, the growth in investment banking and capital markets income was due to improved results from dealer trading and derivatives, and higher income from other investments. These positive results were moderated by a decrease in investment banking income caused by a slowdown in activity within the client segments served by Key.

Operating lease income. The 2006 increase in operating lease income reflected a higher volume of activity in the Equipment Finance line of business. Depreciation expense related to the leased equipment is presented in Figure 12 as “operating lease expense.”

Letter of credit and loan fees. The significant increase in non-yield-related loan fees in 2005 was attributable primarily to higher syndication fees generated by Key’s commercial mortgage lending business. The improvement reflected a stronger demand for commercial real estate loans.

Net gains from loan securitizations and sales. Key sells or securitizes loans to achieve desired interest rate and credit risk profiles, to improve the profitability of the overall loan portfolio or to diversify funding sources. During the first quarter of 2005, Key completed the sale of the prime segment of the indirect automobile loan portfolio, resulting in a gain of $19 million. This gain was partially offset by a $9 million impairment charge in the education lending business recorded during the same quarter. The types of loans sold during 2006 and 2005 are presented in Figure 17 on page 40.

Net gains from principal investing. Principal investments consist of direct and indirect investments in predominantly privately-held companies. Key’s principal investing income is susceptible to volatility since most of it is derived from mezzanine debt and equity investments in small to medium-sized businesses. These investments are carried on the balance sheet at fair value ($830 million at December 31, 2006, and $800 million at December 31, 2005). The net gains presented in Figure 8 stem from changes in estimated fair values as well as actual gains on sales of principal investments. During the fourth quarter of 2006, Key received an $8 million distribution in the form of a dividend from principal investing activities. During the second quarter of 2005, Key received a similar $15 million distribution in the form of dividends and interest. Both distributions were recorded in “net interest income.”

Noninterest expense

Noninterest expense for 2006 was $3.1 billion, representing a $95 million, or 3%, increase from 2005. In 2005, noninterest expense rose by $170 million, or 6%.

Personnel expense for 2006 grew by $104 million. As shown in Figure 12, total nonpersonnel expense was down $9 million, due largely to decreases of $26 million in net occupancy expense and $12 million in franchise and business tax expense. These reductions were offset in part by a $26 million increase in operating lease expense.

34

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 12. NONINTEREST EXPENSE

Year ended December 31,										Change 2006 vs 2005
dollars in millions	2006			2005			2004			Amount			Percent
Personnel	$	1,692		$	1,588		$	1,533		$	104			6.5	%
Net occupancy		250			276			232			(26	)		(9.4	)
Computer processing		212			209			187			3			1.4
Operating lease expense		184			158			151			26			16.5
Professional fees		134			126			110			8			6.3
Equipment		102			110			118			(8	)		(7.3	)
Marketing		97			88			81			9			10.2
Other expense:
Postage and delivery		50			50			51			—			—
Franchise and business taxes		22			34			16			(12	)		(35.3	)
Telecommunications		28			30			29			(2	)		(6.7	)
OREO expense, net		6			8			17			(2	)		(25.0	)
Credit for losses on lending-related commitments		(6	)		(7	)		(4	)		1			14.3
Miscellaneous expense		378			384			363			(6	)		(1.6	)
Total other expense		478			499			472			(21	)		(4.2	)
Total noninterest expense	$	3,149		$	3,054		$	2,884		$	95			3.1	%
Average full-time equivalent employeesa		20,006			19,485			19,576			521			2.7	%

^a The number of average full-time equivalent employees has not been adjusted for discontinued operations.

In 2005, personnel expense grew by $55 million and total nonpersonnel expense was up $115 million. The increase in nonpersonnel expense reflected higher costs associated with net occupancy, computer processing, professional fees, franchise and business taxes, and “miscellaneous expense.”

The following discussion explains the composition of certain elements of Key’s noninterest expense and the factors that caused those elements to change.

Personnel. As shown in Figure 13, personnel expense, the largest category of Key’s noninterest expense, rose by $104 million, or 7%, in 2006 and $55 million, or 4%, in 2005. The 2006 increase was attributable to higher costs from business expansion through acquisitions, variable incentive compensation related to the improvement in Key’s fee-based businesses, and employee benefits. In 2005, the increase resulted from growth in all personnel expense components, due in part to the impact of normal salary increases, increased business activity, and expansion through acquisitions such as American Express Business Finance Corporation in December 2004.

FIGURE 13. PERSONNEL EXPENSE

Year ended December 31,							Change 2006 vs 2005
dollars in millions	2006		2005		2004		Amount			Percent
Salaries	$	940	$	873	$	848	$	67			7.7	%
Incentive compensation		388		367		366		21			5.7
Employee benefits		287		254		248		33			13.0
Stock-based compensationa		64		79		61		(15	)		(19.0	)
Severance		13		15		10		(2	)		(13.3	)
Total personnel expense	$	1,692	$	1,588	$	1,533	$	104			6.5	%

^a Excludes directors’ stock-based compensation of $.1 million in 2006, $2 million in 2005 and $1 million in 2004 reported as “miscellaneous expense” in Figure 12.

35

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Effective January 1, 2006, Key adopted SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R changed the manner in which forfeited stock-based awards must be accounted for and reduced Key’s stock-based compensation expense for 2006 by $8 million. Additional information pertaining to this accounting change is presented in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Stock-Based Compensation” on page 71.

For 2006, the average number of full-time equivalent employees was 20,006, compared to 19,485 for 2005 and 19,576 for 2004.

Net occupancy. During the first quarter of 2005, the Securities and Exchange Commission (“SEC”) issued interpretive guidance, applicable to all publicly held companies, related to the accounting for operating leases. As a result of this guidance, Key recorded a net occupancy charge of $30 million to correct the accounting for rental expense associated with such leases from an escalating to a straight-line basis. This error correction accounted for almost 70% of the $44 million, or 19%, increase in net occupancy expense in 2005.

Operating lease expense. The 2006 increase in operating lease expense reflected a higher volume of activity in the Equipment Finance line of business. Income related to the rental of leased equipment is presented in Figure 8 as “operating lease income.”

Professional fees. In both 2006 and 2005, the increase in professional fees was due in part to higher costs associated with Key’s efforts to strengthen compliance controls.

Franchise and business taxes. The fluctuation in franchise and business taxes shown in Figure 12 was attributable to several factors. In 2006, the $12 million decrease in these taxes resulted from settlements of disputed amounts. Franchise and business taxes rose by $18 million in 2005, in part because the 2004 amount was unusually low. In the first quarter of 2004, Key recorded a $7 million adjustment to reverse certain business taxes that had been overaccrued.

Miscellaneous expense. In 2005, the $21 million, or 6%, growth in “miscellaneous expense” included a $15 million increase in loan servicing expense. In addition, miscellaneous expense for 2005 included contributions of $35 million to Key’s charitable trust, Key Foundation, and a $16 million reserve established in connection with Key’s education lending business. This reserve was established to absorb noncredit-related losses expected to result from Key’s decision to discontinue the funding of new student loans for certain schools. The amount of the reserve was based on Key’s evaluation of the likelihood that the schools will close, and the dollar amount of unfunded loan commitments to students of those schools through the end of 2005. At December 31, 2006, the balance remaining in the reserve was $9 million. A $55 million write-off of goodwill recorded during the fourth quarter of 2004 in connection with Key’s nonprime indirect automobile lending business substantially offset the overall increase in “miscellaneous expense” for 2005.

Income taxes

The provision for income taxes from continuing operations was $450 million for 2006, compared to $436 million for 2005 and $405 million for 2004. The effective tax rate, which is the provision for income taxes from continuing operations as a percentage of income from continuing operations before income taxes, was 27.4% for 2006, compared to 28.6% for 2005 and 30.9% for 2004.

The lower effective tax rate for 2006 was due primarily to the settlement of various federal and state tax audit disputes, offset in part by an increase in effective state tax rates applied to Key’s lease financing business. Excluding these items, the effective tax rate for 2006 was 28.2%.

The higher effective tax rate for 2004 was due largely to the $55 million nondeductible write-off of goodwill discussed above, and a $43 million reduction in deferred tax assets that resulted from a comprehensive analysis of Key’s deferred tax accounts. Excluding these charges, the effective tax rate for 2004 was 27.6%.

The effective tax rates for the past three years (excluding the items mentioned above) are substantially below Key’s combined federal and state tax rate of 37.5%, primarily because Key generates income from investments in tax-advantaged assets such as corporate-owned life insurance, earns credits associated with investments in low-income housing projects and records tax deductions associated with dividends paid on Key common shares held in Key’s 401(k) savings plan. In addition, a lower tax rate is applied to portions of the equipment lease portfolio that are managed by a foreign subsidiary in a lower tax jurisdiction. Since Key intends to permanently reinvest the earnings of this foreign subsidiary overseas, no deferred income taxes are recorded on those earnings in accordance with SFAS No. 109, “Accounting for Income Taxes.”

FINANCIAL CONDITION

Loans and loans held for sale

Figure 14 shows the composition of Key’s loan portfolio at December 31 for each of the past five years.

At December 31, 2006, total loans outstanding were $65.8 billion, compared to $66.5 billion at the end of 2005 and $63.4 billion at the end of 2004. Key’s commercial loan portfolio grew over the past twelve months, but that growth was substantially offset by a third quarter 2006 transfer of home equity loans to loans held for sale in connection with an expected sale of the Champion Mortgage finance business.

36

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 14. COMPOSITION OF LOANS

December 31,
	2006					2005					2004
dollars in millions	Amount		% of Total			Amount		% of Total			Amount		% of Total
COMMERCIAL
Commercial, financial and agricultural	$	21,412		32.5	%	$	20,579		31.0	%	$	18,730		29.6	%
Commercial real estate:a
Commercial mortgage		8,426		12.8			8,360		12.6			8,131		12.8
Construction		8,209		12.5			7,109		10.7			5,508		8.7
Total commercial real estate loans		16,635		25.3			15,469		23.3			13,639		21.5
Commercial lease financing		10,259		15.6			10,352		15.5			10,155		16.0
Total commercial loans		48,306		73.4			46,400		69.8			42,524		67.1
CONSUMER
Real estate — residential mortgage		1,442		2.2			1,458		2.2			1,473		2.3
Home equity		10,826		16.4			13,488		20.3			14,062		22.2
Consumer — direct		1,536		2.3			1,794		2.7			1,983		3.1
Consumer — indirect:
Automobile lease financing		—		—			19		—			89		.1
Automobile loans		—		—			—		—			—		—
Marine		3,077		4.7			2,715		4.1			2,624		4.2
Other		639		1.0			604		.9			617		1.0
Total consumer — indirect loans		3,716		5.7			3,338		5.0			3,330		5.3
Total consumer loans		17,520		26.6			20,078		30.2			20,848		32.9
Total	$	65,826		100.0	%	$	66,478		100.0	%	$	63,372		100.0	%

	2003					2002
	Amount		% of Total			Amount		% of Total
COMMERCIAL
Commercial, financial and agricultural	$	16,336		27.3	%	$	16,748		28.0	%
Commercial real estate:a
Commercial mortgage		6,329		10.6			6,662		11.1
Construction		4,977		8.3			5,657		9.5
Total commercial real estate loans		11,306		18.9			12,319		20.6
Commercial lease financing		7,939		13.3			6,972		11.7
Total commercial loans		35,581		59.5			36,039		60.3
CONSUMER
Real estate — residential mortgage		1,643		2.8			2,006		3.3
Home equity		15,038		25.2			13,804		23.1
Consumer — direct		2,114		3.5			2,155		3.6
Consumer — indirect:
Automobile lease financing		305		.5			873		1.5
Automobile loans		2,025		3.4			2,181		3.6
Marine		2,506		4.2			2,088		3.5
Other		542		.9			667		1.1
Total consumer — indirect loans		5,378		9.0			5,809		9.7
Total consumer loans		24,173		40.5			23,774		39.7
Total	$	59,754		100.0	%	$	59,813		100.0	%

^a See Figure 15 for a more detailed breakdown of Key’s commercial real estate loan portfolio at December 31, 2006.

37

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Commercial loan portfolio. Commercial loans outstanding increased by $1.9 billion, or 4%, from 2005, reflecting improvement in the economy. The overall growth in the commercial loan portfolio was geographically broad-based and spread among a number of industry sectors.

Commercial real estate loans for both owner- and nonowner-occupied properties constitute one of the largest segments of Key’s commercial loan portfolio. At December 31, 2006, Key’s commercial real estate portfolio included mortgage loans of $8.4 billion and construction loans of $8.2 billion. The average mortgage loan originated during 2006 was $1.0 million, and the largest mortgage loan at year end had a balance of $44 million. At December 31, 2006, the average construction loan commitment was $5 million. The largest construction loan commitment was $125 million, of which $113 million was outstanding.

Key’s commercial real estate lending business is conducted through two primary sources: a thirteen-state banking franchise and Real Estate Capital, a national line of business that cultivates relationships both within and beyond the branch system. Real Estate Capital deals exclusively with nonowner-occupied properties (generally properties in which the owner occupies less than 60% of the premises) and accounted for approximately 61% of Key’s total average commercial real estate loans during 2006. Key’s commercial real estate business generally focuses on larger real estate developers and, as shown in Figure 15, is diversified by both industry type and geographic location of the underlying collateral.

FIGURE 15. COMMERCIAL REAL ESTATE LOANS

December 31, 2006	Geographic Region
													Total		Percent of
dollars in millions	Northeast		Southeast		Southwest		Midwest		Central		West		Amount		Total
Nonowner-occupied:
Residential properties	$	273	$	1,335	$	286	$	189	$	472	$	1,656	$	4,211		25.3	%
Multi-family properties		251		277		164		226		518		456		1,892		11.4
Retail properties		85		423		85		420		321		258		1,592		9.6
Land and development		48		200		150		104		175		136		813		4.9
Office buildings		112		163		46		97		71		210		699		4.2
Warehouses		72		90		51		126		69		144		552		3.3
Health facilities		47		85		13		58		30		103		336		2.0
Manufacturing facilities		7		1		16		37		4		20		85		.5
Hotels/Motels		1		20		—		1		14		2		38		.2
Other		123		29		2		162		45		147		508		3.1
		1,019		2,623		813		1,420		1,719		3,132		10,726		64.5
Owner-occupied		1,178		199		58		1,817		799		1,858		5,909		35.5
Total	$	2,197	$	2,822	$	871	$	3,237	$	2,518	$	4,990	$	16,635		100.0	%
Nonowner-occupied:
Nonperforming loans	$	1	$	12		—	$	8		—		—	$	21		N/M
Accruing loans past due 90 days or more		—		—		—		3		—		—		3		N/M
Accruing loans past due 30 through 89 days		—		—	$	18		3	$	32	$	25		78		N/M

Northeast — Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont

Southeast — Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington D.C. and West Virginia

Southwest — Arizona, Nevada and New Mexico

Midwest — Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin

Central — Arkansas, Colorado, Oklahoma, Texas and Utah

West — Alaska, California, Hawaii, Montana, Oregon, Washington and Wyoming

N/M = Not Meaningful

During 2005, Key expanded its FHA financing and mortgage servicing capabilities by acquiring Malone Mortgage Company and the commercial mortgage-backed securities servicing business of ORIX Capital Markets, LLC, both headquartered in Dallas, Texas. These acquisitions, which added more than $28 billion to Key’s commercial mortgage servicing portfolio, are just two in a series of acquisitions initiated over the past several years to build upon Key’s success in the commercial mortgage business.

Management believes Key has both the scale and array of products to compete on a world-wide basis in the specialty of equipment lease financing. These financing arrangements are conducted through the Equipment Finance line of business and have increased in both volume and number following the fourth quarter 2004 acquisition of American Express Business Finance Corporation (“AEBF”), the equipment leasing unit of American Express’ small business division. AEBF had commercial loan and lease financing receivables of approximately $1.5 billion at the date of acquisition.

38

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

During the first quarter of 2006, Key reclassified $792 million of loans from the commercial lease financing portfolio to the commercial, financial and agricultural portfolio to more accurately reflect the nature of these receivables. Prior period balances were not reclassified as the historical data was not available.

Consumer loan portfolio. Consumer loans outstanding decreased by $2.6 billion, or 13%, from 2005. The decline was largely attributable to the third quarter 2006 transfer of $2.5 billion of home equity loans to loans held for sale in connection with the November 2006 sale of the Champion Mortgage finance business discussed below. The portfolio also was affected by a general slowdown in the level of home equity loan originations during 2006. Excluding loan sales, acquisitions and the transfer to loans held for sale, consumer loans would have decreased by $215 million, or 1%, during the past twelve months.

The home equity portfolio is by far the largest segment of Key’s consumer loan portfolio. This portfolio is derived primarily from the Regional Banking line of business (responsible for 91% of home equity loans at December 31, 2006); the remainder originated from the National Home Equity unit within our Consumer Finance line of business. Prior to November 2006, the National Home Equity unit had two components: Champion Mortgage, a home equity finance business, and Key Home Equity Services, which works with home improvement contractors to provide home equity and home improvement financing solutions. In November 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business and announced a separate agreement to sell Champion’s origination platform. This sale is expected to close in the first quarter of 2007.

Figure 16 summarizes Key’s home equity loan portfolio at December 31 for each of the last five years, as well as certain asset quality statistics and yields on the portfolio as a whole.

FIGURE 16. HOME EQUITY LOANS

December 31,
dollars in millions	2006			2005			2004			2003			2002
SOURCES OF LOANS OUTSTANDING
Regional Banking	$	9,805		$	10,237		$	10,554		$	9,853		$	8,867
Champion Mortgagea		—			2,460			2,866			2,857			2,210
Key Home Equity Services		1,021			791			642			2,328			2,727
National Home Equity unit		1,021			3,251			3,508			5,185			4,937
Total	$	10,826		$	13,488		$	14,062		$	15,038		$	13,804
Nonperforming loans at year enda	$	50		$	79		$	80		$	153		$	146
Net charge-offs for the year		23			21			57			55			52
Yield for the yearb		7.07	%		6.20	%		5.25	%		5.46	%		6.32	%

a	On August 1, 2006, Key transferred $2.5 billion of home equity loans from the loan portfolio to loans held for sale and 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.
b	From continuing operations.

Loans held for sale. As shown in Note 7 (“Loans and Loans Held for Sale”), which begins on page 82, Key’s loans held for sale rose to $3.6 billion at December 31, 2006, from $3.4 billion at December 31, 2005, due primarily to originations in the commercial mortgage portfolio.

Sales and securitizations. Key continues to use alternative funding sources like loan sales and securitizations to support its loan origination capabilities. In addition, several acquisitions completed over the past several years have improved Key’s ability to originate and sell new loans, and to securitize and service loans generated by others, especially in the area of commercial real estate.

During 2006, Key sold $2.6 billion of commercial real estate loans, $2.5 billion of home equity loans, $1.4 billion of education loans ($1.1 billion through a securitization), $360 million of residential real estate loans, and $355 million of commercial loans and leases. Most of these sales came from the held-for-sale portfolio.

Among the factors that Key considers in determining which loans to sell or securitize are:

• whether particular lending businesses meet established performance standards or fit with Key’s relationship banking strategy;

• Key’s asset/liability management needs;

• whether the characteristics of a specific loan portfolio make it conducive to securitization;

• the cost of alternative funding sources;

• the level of credit risk; and

• capital requirements.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Figure 17 summarizes Key’s loan sales (including securitizations) for 2006 and 2005.

FIGURE 17. LOANS SOLD (INCLUDING LOANS HELD FOR SALE)

			Commercial		Commercial		Residential		Home		Consumer
in millions	Commercial		Real Estate		Lease Financing		Real Estate		Equity		—Indirect		Education		Total
2006
Fourth quarter	$	80	$	1,070	$	13	$	100	$	2,474		—	$	983	$	4,720
Third quarter		37		679		16		109		2		—		143		986
Second quarter		64		483		—		97		—		—		110		754
First quarter		40		406		105		54		—		—		172		777
Total	$	221	$	2,638	$	134	$	360	$	2,476	$	—	$	1,408	$	7,237
2005
Fourth quarter	$	44	$	792	$	110	$	95	$	264		—	$	834	$	2,139
Third quarter		40		710		—		99		3	$	111		48		1,011
Second quarter		21		336		—		99		—		635		128		1,219
First quarter		18		389		—		98		31		992		208		1,736
Total	$	123	$	2,227	$	110	$	391	$	298	$	1,738	$	1,218	$	6,105

Figure 18 shows loans that are either administered or serviced by Key, but not recorded on the balance sheet. Included are loans that have been both securitized and sold, or simply sold outright. As discussed previously, the acquisitions of Malone Mortgage Company and the commercial mortgage-backed securities servicing business of ORIX Capital Markets, LLC added more than $28 billion to our commercial mortgage servicing portfolio during 2005.

FIGURE 18. LOANS ADMINISTERED OR SERVICED

December 31,
in millions	2006			2005		2004		2003		2002
Commercial real estate loans	$	93,611	a	$	72,902	$	33,252	$	25,376	$	19,508
Education loans		5,475			5,083		4,916		4,610		4,605
Home equity loans		2,360	b		59		130		215		456
Commercial lease financing		508			354		188		120		105
Commercial loans		268			242		210		167		123
Automobile loans		—			—		—		—		54
Total	$	102,222		$	78,640	$	38,696	$	30,488	$	24,851

a	During 2006, Key acquired the servicing for seven commercial mortgage loan portfolios with an aggregate principal balance of $16.4 billion.
b	In November 2006, Key sold the $2.5 billion nonprime mortgage loan portfolio held by the Champion Mortgage finance business but continues to service these loans in accordance with the terms of the sales agreement.

In the event of default by a borrower, Key is subject to recourse with respect to approximately $619 million of the $102.2 billion of loans administered or serviced at December 31, 2006. Additional information about this recourse arrangement is included in Note 18 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with Federal National Mortgage Association” on page 99.

Key derives income from several sources when loans are securitized or sold, but Key retains the right to administer or service them. Key earns noninterest income (recorded as “other income”) from fees for servicing or administering loans. In addition, Key earns interest income from securitized assets retained and from investing funds generated by escrow deposits collected in connection with the servicing of commercial real estate loans. These deposits have contributed to the growth in Key’s average noninterest-bearing deposits over the past twelve months.

Figure 19 shows the remaining final maturities of certain commercial and real estate loans, and the sensitivity of those loans to changes in interest rates. At December 31, 2006, approximately 37% of these outstanding loans were scheduled to mature within one year. Loans with remaining final maturities greater than one year include $20.2 billion with floating or adjustable rates and $4.7 billion with predetermined rates.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 19. REMAINING FINAL MATURITIES AND SENSITIVITY OF CERTAIN LOANS
TO CHANGES IN INTEREST RATES

December 31, 2006	Within		1-5		Over
in millions	1 Year		Years		5 Years		Total
Commercial, financial and agricultural	$	9,024	$	10,306	$	2,082	$	21,412
Real estate — construction		3,473		4,396		340		8,209
Real estate — residential and commercial mortgage		2,033		4,012		3,823		9,868
	$	14,530	$	18,714	$	6,245	$	39,489
Loans with floating or adjustable interest ratesa			$	15,880	$	4,335
Loans with predetermined interest ratesb				2,834		1,910
			$	18,714	$	6,245

a	“Floating” and “adjustable” rates vary in relation to other interest rates (such as the base lending rate) or a variable index that may change during the term of the loan.
b	“Predetermined” interest rates either are fixed or may change during the term of the loan according to a specific formula or schedule.

Securities

At December 31, 2006, the securities portfolio totaled $9.2 billion and included $7.8 billion of securities available for sale, $41 million of investment securities and $1.4 billion of other investments (primarily principal investments). In comparison, the total portfolio at December 31, 2005, was $8.7 billion, including $7.3 billion of securities available for sale, $91 million of investment securities and $1.3 billion of other investments.

Securities available for sale. The majority of Key’s securities available-for-sale portfolio consists of collateralized mortgage obligations (“CMO”). A CMO is a debt security that is secured by a pool of mortgages or mortgage-backed securities. Key’s CMOs generate interest income and serve as collateral to support certain pledging agreements. At December 31, 2006, Key had $7.3 billion invested in CMOs and other mortgage-backed securities in the available-for-sale portfolio, compared to $6.5 billion at December 31, 2005. Substantially all of Key’s mortgage-backed securities are issued or backed by federal agencies. The CMO securities held by Key are shorter-duration class bonds that are structured to have more predictable cash flows than longer-term class bonds.

The weighted-average maturity of the securities available-for-sale portfolio was 2.6 years at December 31, 2006, compared to 2.4 years at December 31, 2005.

The size and composition of Key’s securities available-for-sale portfolio depend largely on management’s assessment of current economic conditions, including the interest rate environment, but those features also vary with Key’s needs for liquidity, and the extent to which Key is required (or elects) to hold these assets as collateral to secure public funds and trust deposits. Although debt securities are generally used for this purpose, other assets, such as securities purchased under resale agreements, may be used temporarily when they provide more favorable yields or risks.

Figure 20 shows the composition, yields and remaining maturities of Key’s securities available for sale. For more information about securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 6 (“Securities”), which begins on page 80.

FIGURE 20. SECURITIES AVAILABLE FOR SALE

											Other
	U.S. Treasury,			States and			Collateralized				Mortgage-				Retained										Weighted
	Agencies and			Political			Mortgage				Backed				Interests in			Other							Average
dollars in millions	Corporations			Subdivisions			Obligationsa			Securitiesa				Securitizationsa				Securitiesb			Total					Yieldc
DECEMBER 31, 2006
Remaining maturity:
One year or less	$	81		$	1		$	565			$	3			$	9		$	68			$	727			3.67	%
After one through five years		7			4			6,436				232				113			88				6,880			4.76
After five through ten years		1			4			—				89				86			3				183			8.75
After ten years		5			6			—				10				—			16				37			6.15
Fair value	$	94		$	15		$	7,001			$	334			$	208		$	175			$	7,827			—
Amortized cost		94			14			7,098				336				151			165				7,858			4.78	%
Weighted-average yieldc		5.06	%		7.87	%		4.42	%			5.40	%			19.60	%		5.77	% d			4.78	% d		—
Weighted-average maturity	.9 years			9.5 years			2.4 years				5.2 years				5.3 years			4.3 years				2.6 years				—
DECEMBER 31, 2005
Fair value	$	268		$	18		$	6,298			$	234			$	182		$	269			$	7,269			—
Amortized cost		267			17			6,455				233				115			261				7,348			4.42	%
DECEMBER 31, 2004
Fair value	$	227		$	22		$	6,370			$	330			$	193		$	309			$	7,451			—
Amortized cost		227			21			6,460				322				103			302				7,435			4.26	%

a	Maturity is based upon expected average lives rather than contractual terms.
b	Includes primarily marketable equity securities.
c	Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a taxable-equivalent basis using the    statutory federal income tax rate of 35%.
d	Excludes securities of $162 million at December 31, 2006, that have no stated yield.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Investment securities. Commercial paper and securities issued by states and political subdivisions constitute most of Key’s investment securities.

Figure 21 shows the composition, yields and remaining maturities of these securities.

FIGURE 21. INVESTMENT SECURITIES

	States and						Weighted
	Political		Other				Average
dollars in millions	Subdivisions		Securities		Total		Yield
DECEMBER 31, 2006
Remaining maturity:
One year or less	$	10	$	2	$	12		7.74	%
After one through five years		10		19		29		6.62
After five through ten years		—		—		—		—
Amortized cost	$	20	$	21	$	41		7.05	%
Fair value		21		21		42		—
Weighted-average maturity	1.7 years		2.6 years		2.1 years			—
DECEMBER 31, 2005
Amortized cost	$	35	$	56	$	91		5.25	%
Fair value		36		56		92		—
DECEMBER 31, 2004
Amortized cost	$	58	$	13	$	71		8.01	%
Fair value		61		13		74		—

^a Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

Other investments. Principal investments, which consist of investments in equity and mezzanine instruments, represent approximately 61% of “other investments” at December 31, 2006. Principal investments are carried at fair value, which aggregated $830 million at December 31, 2006, and $800 million at December 31, 2005. Key’s Principal Investing unit invests predominantly in privately-held companies. Some of these investments are “direct,” meaning they are made in a particular company. Others are “indirect,” meaning they are made through funds that include other investors.

In addition to principal investments, “other investments” include other equity and mezzanine instruments that do not have readily determinable fair values. These securities include certain real estate-related investments that are carried at estimated fair value, as well as other types of securities that generally are carried at cost. Neither these securities nor principal investments have stated maturities.

Deposits and other sources of funds

“Core deposits” — domestic deposits other than certificates of deposit of $100,000 or more — are Key’s primary source of funding. These deposits generally are stable, have a relatively low cost and typically react more slowly to changes in interest rates than market-based deposits. During 2006, core deposits averaged $51.4 billion, and represented 65% of the funds Key used to support loans and other earning assets, compared to $47.4 billion and 62% during 2005, and $43.9 billion and 61% during 2004. The composition of Key’s deposits is shown in Figure 6, which spans pages 30 and 31.

The increase in the level of Key’s average core deposits during 2006 and 2005 was due to growth in money market deposit accounts, time deposits and noninterest-bearing deposits. These results reflect client preferences for investments that provide significant liquidity in a changing interest rate environment. In addition, money market deposit accounts increased because Key introduced new products in 2006 and 2005. Average noninterest-bearing deposits increased because management intensified cross-selling efforts, focused sales and marketing efforts on Key’s free checking products, and collected more escrow deposits associated with the servicing of commercial real estate loans.

Purchased funds, comprising large certificates of deposit, deposits in the foreign branch and short-term borrowings, averaged $12.4 billion during 2006, compared to $13.0 billion during 2005 and $12.0 billion in 2004. The decrease from 2005 to 2006 was attributable to declines in short-term borrowings and foreign branch deposits, offset in part by an increase in large certificates of deposit. The need for purchased funds has diminished due to Key’s strong core deposit growth, higher level of capital and other interest-free funds, and loan sales, including the November 2006 sale of the Champion nonprime mortgage loan portfolio. Management continues to consider loan sales and securitizations as a funding alternative when market conditions are favorable.

Key has a program under which deposit balances (above a defined threshold) in certain NOW accounts and noninterest-bearing checking accounts are transferred to money market deposit accounts, thereby reducing the level of deposit reserves required to be maintained with the Federal Reserve. Based on certain limitations, funds are periodically transferred back to the checking accounts to cover checks presented for payment or withdrawals. As a result of this program, average deposit balances for 2006 include demand deposits of $8.7 billion that are classified as money market deposit accounts. In Figure 6, these demand deposits continue to be reported as noninterest-bearing checking accounts.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

At December 31, 2006, Key had $7.6 billion in time deposits of $100,000 or more. Figure 22 shows the maturity distribution of these deposits.

FIGURE 22. MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE

December 31, 2006	Domestic		Foreign
in millions	Offices		Office		Total
Remaining maturity:
Three months or less	$	2,513	$	1,684	$	4,197
After three through six months		1,062		—		1,062
After six through twelve months		1,004		—		1,004
After twelve months		1,362		—		1,362
Total	$	5,941	$	1,684	$	7,625

Capital

Shareholders’ equity. Total shareholders’ equity at December 31, 2006, was $7.7 billion, up $105 million from December 31, 2005.

Effective December 31, 2006, Key adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” which requires an employer to recognize an asset or liability for the overfunded or underfunded status, respectively, of its defined benefit plans. As a result of adopting this guidance, Key recorded an after-tax charge of $154 million to the accumulated other comprehensive loss component of shareholders’ equity during the fourth quarter. Additional information about this new accounting guidance is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Accounting Pronouncements Adopted in 2006” on page 72. Other factors contributing to the change in shareholders’ equity during 2006 are shown in the Consolidated Statements of Changes in Shareholders’ Equity presented on page 65.

Common shares outstanding. KeyCorp’s common shares are traded on the New York Stock Exchange under the symbol KEY. At December 31, 2006:

• Book value per common share was $19.30, based on 399.2 million shares outstanding, compared to $18.69, based on 406.6 million shares outstanding, at December 31, 2005.

• The closing market price of a KeyCorp common share was $38.03. This price was 197% of year-end book value per share, and would produce a dividend yield of 3.63%.

• There were 40,801 holders of record of KeyCorp common shares.

In 2006, the quarterly dividend was $.345 per common share, up from $.325 per common share in 2005. On January 18, 2007, the quarterly dividend per common share was increased by 5.8% to $.365, effective with the March 2007 dividend payment. Figure 37 on page 58 shows the market price ranges of KeyCorp’s common shares, per common share earnings and dividends paid by quarter for each of the last two years.

Figure 23 compares the price performance of KeyCorp’s common shares (based on an initial investment of $100 on December 31, 2001, and assuming reinvestment of dividends) to that of the Standard & Poor’s 500 Index and a group of other banks that constitute KeyCorp’s peer group. The peer group consists of the banks that make up the Standard & Poor’s 500 Regional Bank Index and the banks that make up the Standard & Poor’s 500 Diversified Bank Index. KeyCorp is included in the Standard & Poor’s 500 Index and the peer group.

FIGURE 23. COMMON SHARE PRICE PERFORMANCE (2001-2006)^a

^a Share price performance is not necessarily indicative of future price performance.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Figure 24 below shows activities that caused the change in Key’s outstanding common shares over the past two years.

FIGURE 24. CHANGES IN COMMON SHARES OUTSTANDING

				2006 Quarters
in thousands	2006			Fourth			Third			Second			First			2005
SHARES OUTSTANDING AT BEGINNING OF PERIOD		406,624			402,748			402,672			405,273			406,624			407,570
Issuance of shares under employee benefit and dividend reinvestment plans		10,029			1,405			2,576			1,399			4,649			6,054
Repurchase of common shares		(17,500	)		(5,000	)		(2,500	)		(4,000	)		(6,000	)		(7,000	)
SHARES OUTSTANDING AT END OF PERIOD		399,153			399,153			402,748			402,672			405,273			406,624

Key repurchases its common shares periodically under a repurchase program authorized by the Board of Directors. Key repurchased 17.5 million shares during 2006, leaving 5.0 million shares remaining for repurchase as of December 31, 2006. Key’s repurchase activity for each of the three months ended December 31, 2006, is summarized in Figure 25.

FIGURE 25. SHARE REPURCHASES

					Number of		Remaining Number
					Shares Purchased		of Shares that may
	Number of		Average		under a Publicly		be Purchased Under
	Shares		Price Paid		Announced		the Program as
in thousands, except per share data	Purchased		per Share		Programa		of each Month-Enda
October 1-31, 2006		1,725	$	37.53		1,725		8,236
November 1-30, 2006		275		37.19		275		7,961
December 1-31, 2006		3,000		37.39		3,000		4,961
Total		5,000	$	37.43		5,000

^a In January 2007, the Board of Directors authorized the repurchase of 25.0 million common shares, in addition to the shares remaining from a repurchase program authorized in July 2004. This action brought the total repurchase authorization to 30.0 million shares. These shares may be repurchased in the open market or through privately-negotiated transactions. The program does not have an expiration date.

At December 31, 2006, Key had 92.7 million treasury shares. Management expects to reissue those shares as needed in connection with the employee stock purchase and dividend reinvestment plans, stock-based compensation awards and other corporate purposes. During 2006, Key reissued 10.0 million treasury shares.

Capital adequacy. Capital adequacy is an important indicator of financial stability and performance. Overall, Key’s capital position remains strong: the ratio of total shareholders’ equity to total assets was 8.34% at December 31, 2006, compared to 8.16% at December 31, 2005. Key’s ratio of tangible equity to tangible assets was 7.01% at December 31, 2006, compared to 6.68% at December 31, 2005. Management believes that Key’s capital position provides the flexibility to take advantage of investment opportunities, to repurchase shares when appropriate and to pay dividends.

Banking industry regulators prescribe minimum capital ratios for bank holding companies and their banking subsidiaries. Note 14 (“Shareholders’ Equity”), which begins on page 88, explains the implications of failing to meet these specific capital requirements.

Risk-based capital guidelines require a minimum level of capital as a percent of “risk-weighted assets,” which is total assets plus certain off-balance sheet items, both adjusted for predefined credit risk factors. Currently, banks and bank holding companies must maintain, at a minimum, Tier 1 capital as a percent of risk-weighted assets of 4.00%, and total capital as a percent of risk-weighted assets of 8.00%. As of December 31, 2006, Key’s Tier 1 capital ratio was 8.24%, and its total capital ratio was 12.43%.

Another indicator of capital adequacy, the leverage ratio, is defined as Tier 1 capital as a percentage of average quarterly tangible assets. Leverage ratio requirements vary with the condition of the financial institution. Bank holding companies that either have the highest supervisory rating or have implemented the Federal Reserve’s risk-adjusted measure for market risk — as KeyCorp has — must maintain a minimum leverage ratio of 3.00%. All other bank holding companies must maintain a minimum ratio of 4.00%. As of December 31, 2006, Key had a leverage ratio of 8.98%.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Federal bank regulators group FDIC-insured depository institutions into five categories, ranging from “critically undercapitalized” to “well capitalized.” Key’s affiliate bank, KBNA, qualified as “well capitalized” at December 31, 2006, since it exceeded the prescribed thresholds of 10.00% for total capital, 6.00% for Tier 1 capital and 5.00% for the leverage ratio. If these provisions applied to bank holding companies, Key also would qualify as “well capitalized” at December 31, 2006. The FDIC-defined capital categories serve a limited supervisory function. Investors should not treat them as a representation of the overall financial condition or prospects of KeyCorp or KBNA.

Figure 26 presents the details of Key’s regulatory capital position at December 31, 2006 and 2005.

FIGURE 26. CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS

December 31,
dollars in millions	2006			2005
TIER 1 CAPITAL
Common shareholders’ equitya	$	7,924		$	7,678
Qualifying capital securities		1,792			1,542
Less: Goodwill		1,202			1,355
Other assetsb		176			178
Total Tier 1 capital		8,338			7,687
TIER 2 CAPITAL
Allowance for losses on loans and lending-related commitments		997			1,025
Net unrealized gains on equity securities available for sale		5			4
Qualifying long-term debt		3,227			2,899
Total Tier 2 capital		4,229			3,928
Total risk-based capital	$	12,567		$	11,615
RISK-WEIGHTED ASSETS
Risk-weighted assets on balance sheet	$	77,490		$	76,724
Risk-weighted off-balance sheet exposure		24,968			25,619
Less: Goodwill		1,202			1,355
Other assetsb		819			785
Plus: Market risk-equivalent assets		698			1,064
Total risk-weighted assets	$	101,135		$	101,267
AVERAGE QUARTERLY TOTAL ASSETS	$	94,896		$	92,278
CAPITAL RATIOS
Tier 1 risk-based capital ratio		8.24	%		7.59	%
Total risk-based capital ratio		12.43			11.47
Leverage ratioc		8.98			8.53

a	Common shareholders’ equity does not include net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, or the amount resulting from the adoption of SFAS No. 158.
b	Other assets deducted from Tier 1 capital and risk-weighted assets consist of intangible assets (excluding goodwill) recorded after February 19, 1992, deductible portions of purchased mortgage servicing rights and deductible portions of nonfinancial equity investments.
c	This ratio is Tier 1 capital divided by the difference between average quarterly total assets and (i) goodwill, (ii) the nonqualifying intangible assets described in footnote (b), (iii) deductible portions of nonfinancial equity investments, and (iv) net unrealized gains or losses on securities available for sale.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

Off-balance sheet arrangements

Key is party to various types of off-balance sheet arrangements, which could expose it to contingent liabilities or risks of loss that are not reflected on the balance sheet.

Variable interest entities. A variable interest entity (“VIE”) is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria:

• The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

• The entity’s investors lack the authority to make decisions about the activities of the entity through voting rights or similar rights, as well as the obligation to absorb the entity’s expected losses and the right to receive the entity’s expected residual returns.

• The voting rights of some investors are not proportional to their economic interest in the entity, and substantially all of the entity’s activities involve or are conducted on behalf of investors with disproportionately few voting rights.

Revised Interpretation No. 46, “Consolidation of Variable Interest Entities,” requires VIEs to be consolidated by the party that is exposed to a majority of the VIE’s expected losses and/or residual returns (i.e., the primary beneficiary). This interpretation is summarized in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Basis of Presentation” on page 67 and Note 8.

Key holds a significant interest in several VIEs for which it is not the primary beneficiary. In accordance with Revised Interpretation No. 46, these entities are not consolidated. Key defines a “significant interest” in a VIE as a subordinated interest that exposes Key to a significant portion, but not the majority, of the VIE’s expected losses or residual returns. Key’s involvement with these VIEs is described in Note 8 under the heading “Unconsolidated VIEs” on page 84.

Loan securitizations. Key originates, securitizes and sells education loans. A securitization involves the sale of a pool of loan receivables to investors through either a public or private issuance (generally by a qualifying special purpose entity (“SPE”)) of asset-backed securities. Generally, the assets are transferred to a trust that sells interests in the form of certificates of ownership. In accordance with Revised Interpretation No. 46, qualifying SPEs, including securitization trusts established by Key under SFAS No. 140, are exempt from consolidation.

In some cases, Key retains a residual interest in self-originated, securitized loans that may take the form of an interest-only strip, residual asset, servicing asset or security. Key reports servicing assets in “accrued income and other assets” on the balance sheet. Key accounts for all other retained interests as debt securities and classifies them as either available-for-sale securities or trading account assets. By retaining an interest in securitized loans, Key bears risk that the loans will be prepaid (which would reduce expected interest income) or not paid at all. In the event that cash flows generated by the securitized loans become inadequate to service the obligations of the trusts, the investors in the asset-backed securities would have no further recourse against Key. Additional information pertaining to Key’s retained interests in loan securitizations is summarized

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

in Note 1 under the heading “Loan Securitizations” on page 69, Note 6 (“Securities”), which begins on page 80, and Note 8 under the heading “Retained Interests in Loan Securitizations” on page 83.

Commitments to extend credit or funding. Loan commitments provide for financing on predetermined terms as long as the client continues to meet specified criteria. These commitments generally carry variable rates of interest and have fixed expiration dates or other termination clauses. In many cases, a client must pay a fee to obtain a loan commitment from Key. Since a commitment may expire without resulting in a loan, the total amount of outstanding commitments may exceed Key’s eventual cash outlay significantly. Further information about Key’s loan commitments at December 31, 2006, is presented in Note 18 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Commitments to Extend Credit or Funding” on page 97. Figure 27 includes the remaining contractual amount of each class of commitments to extend credit or funding. For loan commitments and commercial letters of credit, this amount represents Key’s maximum possible accounting loss if the borrower were to draw upon the full amount of the commitment and subsequently default on payment for the total amount of the then outstanding loan.

Other off-balance sheet arrangements. Other off-balance sheet arrangements include financial instruments that do not meet the definition of a guarantee as specified in Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” and other relationships, such as liquidity support provided to asset-backed commercial paper conduits, indemnification agreements and intercompany guarantees. Information about such arrangements is provided in Note 18 under the heading “Other Off-Balance Sheet Risk” on page 99.

Contractual obligations
Figure 27 summarizes Key’s significant contractual obligations, and lending-related and other off-balance sheet commitments at December 31, 2006, by the specific time periods in which related payments are due or commitments expire.

FIGURE 27. CONTRACTUAL OBLIGATIONS AND OTHER OFF-BALANCE SHEET COMMITMENTS

			After		After
December 31, 2006	Within		1 Through		3 Through		After
in millions	1 Year		3 Years		5 Years		5 Years		Total
Contractual obligations:a
Deposits with no stated maturity	$	39,535		—		—		—	$	39,535
Time deposits of $100,000 or more		6,263	$	593	$	242	$	527		7,625
Other time deposits		8,819		1,781		400		956		11,956
Federal funds purchased and securities sold under repurchase agreements		3,643		—		—		—		3,643
Bank notes and other short-term borrowings		1,192		—		—		—		1,192
Long-term debt		3,885		3,543		1,670		5,435		14,533
Noncancelable operating leases		125		209		147		256		737
Purchase obligations:
Banking and financial data services		72		61		14		—		147
Telecommunications		22		9		—		—		31
Professional services		24		6		2		—		32
Technology equipment and software		69		25		14		—		108
Other		15		12		4		1		32
Total purchase obligations		202		113		34		1		350
Total	$	63,664	$	6,239	$	2,493	$	7,175	$	79,571
Lending-related and other off-balance sheet commitments:
Commercial, including real estate	$	11,629	$	9,802	$	8,887	$	1,953	$	32,271
Home equity		—		—		63		7,625		7,688
When-issued and to be announced securities commitments		—		—		—		671		671
Commercial letters of credit		188		54		2		2		246
Principal investing commitments		1		12		31		200		244
Liabilities of certain limited partnerships and other commitments		2		5		—		133		140
Total	$	11,820	$	9,873	$	8,983	$	10,584	$	41,260

^a Deposits and borrowings exclude interest.

Guarantees

Key is a guarantor in various agreements with third parties. As guarantor, Key may be contingently liable to make payments to the guaranteed party based on changes in a specified interest rate, foreign exchange rate or other variable (including the occurrence or nonoccurrence of a specified event).

These variables, known as underlyings, may be related to an asset or liability, or another entity’s failure to perform under a contract. Additional information regarding these types of arrangements is presented in Note 18 under the heading “Guarantees” on page 98.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

RISK MANAGEMENT

Overview

Like other financial services companies, Key engages in business activities with inherent risks. The ability to properly and effectively identify, measure, monitor and report such risks is essential to maintaining safety and soundness and to maximizing profitability. Management believes that the most significant risks facing Key are market risk, credit risk, liquidity risk and operational risk. Each type of risk is defined and discussed in greater detail in the remainder of this section.

Key’s Board of Directors has established and follows a corporate governance program that serves as the foundation for managing and mitigating risk. In accordance with this program, the Board focuses on the interests of shareholders, encourages strong internal controls, demands management accountability, mandates adherence to Key’s code of ethics and administers an annual self-assessment process. The Board has established Audit and Risk Management committees whose appointed members help the Board meet its risk oversight responsibilities.

• The Audit Committee provides review and oversight of the integrity of Key’s financial statements, compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence, and the performance of Key’s internal audit function and independent auditors.

• The Risk Management Committee (formerly known as the Finance Committee) assists the Board in its review and oversight of risk management policies, strategies and activities that fall outside the purview of the Audit Committee. This committee also assists in the review and oversight of policies, strategies and activities related to capital management, asset and liability management, capital expenditures and various other financing and investing activities.

The Audit and Risk Management committees meet jointly, as appropriate, to discuss matters that relate to each committee’s responsibilities. Key’s Board and its committees meet bi-monthly. However, more frequent contact is not uncommon. In addition to regularly scheduled meetings, the Audit Committee convenes to discuss the content of Key’s financial disclosures and press releases related to quarterly earnings. Committee chairpersons routinely meet with management during interim months to plan agendas for upcoming meetings and to discuss events that have transpired since the preceding meeting. Also, during interim months, all members of the Board receive a formal report designed to keep them abreast of significant developments.

Market risk management

The values of some financial instruments vary not only with changes in market interest rates, but also with changes in foreign exchange rates. Financial instruments also are susceptible to factors influencing valuations in the equity securities markets and other market-driven rates or prices. For example, the value of a fixed-rate bond will decline if market interest rates increase. Similarly, the value of the U.S. dollar regularly fluctuates in relation to other currencies. When the value of an instrument is tied to such external factors, the holder faces “market risk.” Most of Key’s market risk is derived from interest rate fluctuations.

Interest rate risk management

Interest rate risk, which is inherent in the banking business, is measured by the potential for fluctuations in net interest income. Such fluctuations may result from changes in interest rates and differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. To minimize the volatility of net interest income and the economic value of equity, Key manages exposure to interest rate risk in accordance with guidelines established by the Asset/Liability Management Policy Committee (“ALCO”). This committee, which consists of senior finance and business executives, meets monthly, and periodically reports Key’s interest rate risk positions to the Risk Management Committee of the Board of Directors.

Interest rate risk positions can be influenced by a number of factors other than changes in market interest rates, including economic conditions, the competitive environment within Key’s markets, consumer preferences for specific loan and deposit products, and the level of interest rate exposure arising from basis risk, gap risk, yield curve risk and option risk.

• Key faces “basis risk” when floating-rate assets and floating-rate liabilities reprice at the same time, but in response to different market factors or indices. Under those circumstances, even if equal amounts of assets and liabilities are repricing, interest expense and interest income may not change by the same amount.

• “Gap risk” occurs if interest-bearing liabilities and the interest-earning assets they fund (for example, deposits used to fund loans) do not mature or reprice at the same time.

• “Yield curve risk” exists when short-term and long-term interest rates change by different amounts. For example, when U.S. Treasury and other term rates decline, the rates on automobile loans also will decline, but the cost of money market deposits and short-term borrowings may remain elevated.

• A financial instrument presents “option risk” when one party to the instrument can take advantage of changes in interest rates without penalty. For example, when interest rates decline, borrowers may choose to prepay fixed-rate loans by refinancing at a lower rate. Such a prepayment gives Key a return on its investment (the principal plus some interest), but unless there is a prepayment penalty, that return may not be as high as the return that would have been generated had payments been received over the original term of the loan. Floating-rate loans that are capped against potential interest rate increases and deposits that can be withdrawn on demand also present option risk.

Net interest income simulation analysis. The primary tool used by management to measure Key’s interest rate risk is a simulation analysis. For purposes of this analysis, management estimates Key’s net interest income based on the composition of its balance sheet and the current interest rate environment. The simulation assumes that growth in the balance sheet will reflect recent product trends, as well as consensus economic forecasts.

The amount of net interest income at risk is measured by simulating the change in the level of net interest income that would occur if the Fed Funds Target rate were to gradually increase or decrease by 200 basis points over the next twelve months, and term rates were to move in a similar fashion, but not as dramatically. The amount of net interest income at risk is

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

compared to the base case of an unchanged interest rate environment. The analysis also considers sensitivity to changes in a number of other variables, including other market interest rates and deposit mix. In addition, management assesses the potential effect of different shapes in the yield curve, including a sustained flat yield curve, an inverted slope yield curve and yield curve twists. (The yield curve depicts the relationship between the yield on a particular type of security and its term to maturity.) Management also performs stress tests to measure the effect on net interest income of an immediate change in market interest rates.

Simulation analysis produces only a sophisticated estimate of interest rate exposure based on assumptions and judgments related to balance sheet growth, customer behavior, new products, new business volume, pricing and anticipated hedging activities. Management tailors the assumptions used in simulation analysis to the specific interest rate environment and yield curve shape being modeled, and validates those assumptions on a periodic basis. Consistent with current practice, simulations are performed with the assumption that interest rate risk positions will be actively managed through the use of on- and off-balance sheet financial instruments to achieve the desired risk profile. Actual results may differ from those derived in simulation analysis due to the timing, magnitude and frequency of interest rate changes, actual hedging strategies employed and changes in balance sheet composition. Figure 28 illustrates the variability of the simulation results that can arise from changes in certain major assumptions.

FIGURE 28. NET INTEREST INCOME VOLATILITY

Per $100 Million of New Business	Net Interest Income Volatility	Interest Rate Risk Profile
Floating-rate commercial loans at 6.50% funded short-term.	Increases annual net interest income $1.3 million.	No change.
Two-year fixed-rate CDs at 4.75% that reduce short-term funding.	Rates unchanged: Increases annual net interest income $.5 million.	Reduces the “standard” simulated net interest income at risk to rising rates by .03%.
	Rates up 200 basis points over 12 months:
	Increases annual net interest income $1.6 million.
Five-year fixed-rate home equity loans at 7.50% funded short-term.	Rates unchanged: Increases annual net interest income $2.3 million.	Increases the “standard” simulated net interest income at risk to rising rates by .03%.
	Rates up 200 basis points over 12 months:
	Increases annual net interest income $1.2 million.
Premium money market deposits at 4.75% that reduce short-term funding.	Rates unchanged: Increases annual net interest income $.5 million.	Reduces the “standard” simulated net interest income at risk to rising rates by .01%.
	Rates up 200 basis points over 12 months:
	Increases annual net interest income $.7 million.

Information presented in the above figure assumes a short-term funding rate of 5.25%.

Figure 29 presents the results of the simulation analysis at December 31, 2006 and 2005. At December 31, 2006, Key’s simulated exposure to a rising interest rate environment was essentially neutral, though exposure to a falling interest rate environment decreased from 2005. ALCO policy guidelines for risk management call for preventive measures if simulation modeling demonstrates that a gradual 200 basis point increase or decrease in short-term rates over the next twelve months would adversely affect net interest income over the same period by more than 2%. As shown in Figure 29, Key is operating within these guidelines.

FIGURE 29. SIMULATED CHANGE IN NET INTEREST INCOME

Basis point change assumption (short-term rates)	-200		+200
ALCO policy guidelines	-2.00	%	-2.00	%
INTEREST RATE RISK ASSESSMENT
December 31, 2006	+1.29	%	-.07	%
December 31, 2005	+.51		+.75

During 2005 and the first half of 2006, Key was operating with a slightly asset-sensitive position, which protected net interest income as interest rates increased. Since July 2006, the Federal Reserve has held short-term interest rates constant, and there is uncertainty with regard to the future direction of these rates. Accordingly, management has taken action to move toward a relatively neutral position. Key’s long term bias is to be modestly liability-sensitive, which will help protect net interest income in a declining interest rate environment.

Management also conducts simulations that measure the effect of changes in market interest rates in the second year of a two-year horizon. These simulations are conducted in a manner similar to those based on a twelve-month horizon. To capture longer-term exposures, management simulates changes to the economic value of equity as discussed below.

Economic value of equity modeling. Economic value of equity (“EVE”) measures the extent to which the economic values of assets, liabilities and off-balance sheet instruments may change in response to changes in interest rates. EVE is calculated by subjecting the balance sheet to an immediate 200 basis point increase or decrease in interest rates, and measuring the resulting change in the values of assets and liabilities.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

This analysis is highly dependent upon assumptions applied to assets and liabilities with noncontractual maturities. Those assumptions are based on historical behaviors, as well as management’s expectations. EVE complements net interest income simulation analysis since it provides estimates of risk exposure beyond twelve and twenty-four month horizons. Management takes preventative measures to ensure that Key’s EVE will not decrease by more than 15% in response to an immediate 200 basis point increase or decrease in interest rates. Key is operating within these guidelines.

Management of interest rate exposure. Management uses the results of its various simulation analyses to formulate strategies to achieve the desired risk profile within the parameters of Key’s capital and liquidity guidelines. Interest rate risk positions are actively managed through the purchase of investment securities, the issuance of term debt with floating or fixed interest rates, and the use of derivatives — predominantly in the form of interest rate swaps. These swaps modify the interest rate characteristics of certain assets and liabilities by converting them from a fixed rate to a floating rate, from a floating rate to a fixed rate, or from one floating index to another.

Figure 30 shows the maturity structure for all swap positions held for asset/liability management (“A/LM”) purposes. These positions are used to convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index. For example, fixed-rate debt is converted to a floating rate through a “receive fixed, pay variable” interest rate swap. For more information about how Key uses interest rate swaps to manage its balance sheet, see Note 19 (“Derivatives and Hedging Activities”), which begins on page 100.

FIGURE 30. PORTFOLIO SWAPS BY INTEREST RATE RISK MANAGEMENT STRATEGY

	December 31, 2006													December 31, 2005
	Notional		Fair			Maturity		Weighted-Average Rate						Notional		Fair
dollars in millions	Amount		Value			(Years)		Receive			Pay			Amount		Value
Receive fixed/pay variable — conventional A/LMa	$	8,138	$	(2	)		1.5		5.1	%		5.4	%	$	2,050	$	(8	)
Receive fixed/pay variable — conventional debt		5,164		(8	)		16.5		5.4			5.5			5,961		85
Receive fixed/pay variable — forward starting		250		—			2.7		5.1			5.3			1,000		—
Pay fixed/receive variable — conventional debt		839		(11	)		5.0		4.5			4.3			911		(20	)
Foreign currency — conventional debt		3,335		149			3.3		4.1			5.5			2,868		(137	)
Basis swapsb		300		—			1.2		5.4			5.4			13,000		(3	)
Total portfolio swaps	$	18,026	$	128			6.3		5.0	%		5.4	%	$	25,790	$	(83	)

a	Portfolio swaps designated as A/LM are used to manage interest rate risk tied to both assets and liabilities.
b	These portfolio swaps are not designated as hedging instruments under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

Trading portfolio risk management

Key’s trading portfolio is described in Note 19.

Management uses a value at risk (“VAR”) simulation model to measure the potential adverse effect of changes in interest rates, foreign exchange rates, equity prices and credit spreads on the fair value of Key’s trading portfolio. Using two years of historical information, the model estimates the maximum potential one-day loss with a 95% confidence level. Statistically, this means that losses will exceed VAR, on average, five out of 100 trading days, or three to four times each quarter. Key’s Financial Markets Committee has established VAR limits for Key’s trading units. At December 31, 2006, the aggregate one-day trading limit set by the committee was $4.4 million. In addition to comparing VAR exposure against limits on a daily basis, management monitors loss limits, uses sensitivity measures and conducts stress tests.

Key is operating within the above constraints. During 2006, Key’s aggregate daily average, minimum and maximum VAR amounts were $1.1 million, $.7 million and $2.1 million, respectively. During 2005, Key’s aggregate daily average, minimum and maximum VAR amounts were $2.1 million, $.8 million and $5.3 million, respectively.

As noted in the discussion of investment banking and capital markets income on page 34, Key used interest rate swaps to manage the economic risk associated with the sale of the indirect automobile loan portfolio. Even though these derivatives were not subject to VAR trading limits, Key measured their exposure on a daily basis, and the results are included in the VAR amounts indicated above for 2005. The daily average, minimum and maximum VAR exposures for these derivatives were $.8 million, zero and $3.6 million, respectively.

Credit risk management

Credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Like other financial service institutions, Key makes loans, extends credit, purchases securities and enters into financial derivative contracts, all of which expose Key to credit risk.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Credit policy, approval and evaluation. Key manages credit risk exposure through a multi-faceted program. Independent committees approve both retail and commercial credit policies. These policies are communicated throughout Key to foster a consistent approach to granting credit.

The Credit Risk Management department performs credit approval. Credit Risk Management is independent of Key’s lines of business and comprises senior officers who have extensive experience in structuring and approving loans. Only Credit Risk Management officers are authorized to grant significant exceptions to credit policies. It is not unusual to make exceptions to established policies when mitigating circumstances dictate, but most major lending units have been assigned specific thresholds to keep exceptions within a manageable level.

Key has a well-established process known as the quarterly Underwriting Standards Review (“USR”) for monitoring compliance with credit policies. The quarterly USR report provides data on all commercial loans over $2 million at the time of their approval. Each quarter, the data is analyzed to determine if lines of business have adhered to established exception limits. Further, the USR report identifies grading trends of new business, exceptions to internally established benchmarks for returns on equity, transactions with higher risk and other pertinent lending information. This process enables management to take timely action to modify lending practices when necessary.

Credit Risk Management is responsible for assigning loan grades at the time of origination and as the loans season. Most extensions of credit at Key are subject to loan grading or scoring. This risk rating methodology blends management’s judgment and quantitative modeling. On the commercial side, loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second reflects expected recovery rates on the credit facility. The assessment of default probability is based, among other factors, on the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector and an assessment of industry risk within the context of the general economic outlook. Types of exposure and transaction structure, including credit risk mitigants, affect the expected recovery assessment.

Credit Risk Management uses externally- and internally-developed risk models to evaluate consumer loans. These models (“scorecards”) forecast probability of serious delinquency and default for an applicant. The scorecards are embedded in Key’s application processing system, which allows for real-time scoring and automated decisions for many of Key’s products. Key periodically validates the loan grading and scoring processes.

Key maintains an active concentration management program to encourage diversification in the credit portfolios. For exposures to individual obligors, Key employs a sliding scale of exposure (“hold limits”), which is dictated by the strength of the borrower. Key’s legal lending limit is well in excess of $1 billion for any individual borrower. However, internal hold limits generally restrict the largest exposures to less than half that amount. As of December 31, 2006, Key had eight client relationships with loan commitments of more than $200 million. The average amount outstanding on these commitments at December 31 was $60 million. In general, Key’s philosophy is to maintain a diverse portfolio with regard to credit exposures.

Key manages industry concentrations using several methods. On smaller portfolios, limits may be set according to a percentage of Key’s overall loan portfolio. On larger, or higher risk portfolios, Key may establish a specific dollar commitment level or a level of economic capital that cannot be exceeded.

In addition, Key actively manages the overall loan portfolio in a manner consistent with asset quality objectives. This process entails the use of credit derivatives — primarily credit default swaps — to mitigate Key’s credit risk. Credit default swaps enable Key to transfer a portion of the credit risk associated with the underlying extension of credit to a third party, and to manage portfolio concentration and correlation risks. At December 31, 2006, credit default swaps with a notional amount of $989 million were used to manage the credit risk associated with specific commercial lending obligations. Key also provides credit protection to other lenders through the sale of credit default swaps. These transactions may generate fee income and can diversify overall exposure to credit loss. At December 31, 2006, the notional amount of credit default swaps sold by Key was $25 million.

Credit default swaps are recorded on the balance sheet at fair value. Related gains or losses, as well as the premium paid or received for credit protection, are included in the trading income component of noninterest income. These swaps did not have a significant effect on Key’s operating results for 2006.

Other actions used to manage the loan portfolio include loan securitizations, portfolio swaps, or bulk purchases and sales. The overarching goal is to continually manage the loan portfolio within a desirable range of asset quality.

Watch and criticized credits. Watch credits are troubled loans with the potential for further deterioration in quality due to the client’s current financial condition and possible inability to perform in accordance with the terms of the loan. Criticized credits are troubled loans that show additional signs of weakness that may lead to an interruption in scheduled repayments from primary sources, potentially requiring Key to rely on repayment from secondary sources, such as collateral liquidation.

At December 31, 2006, the level of watch commitments was higher than that experienced a year earlier. This increase was attributable to a number of client segments across a range of loan portfolios; most notably Commercial Floor Plan and Real Estate Capital. During 2006, the level of criticized commitments increased modestly, due to a number of offsetting changes across multiple portfolios. Increases in the Commercial Floor Plan and Real Estate Capital portfolios were substantially offset by decreases in a number of other portfolios. Management continues to closely monitor fluctuations in Key’s watch and criticized commitments.

Allowance for loan losses. The allowance for loan losses at December 31, 2006, was $944 million, or 1.43% of loans, compared to $966 million, or 1.45%, at December 31, 2005. The allowance includes $14 million that was specifically allocated for impaired loans of $34 million at December 31, 2006, compared to $6 million that was allocated for impaired loans of $9 million one year ago. For more information about impaired loans, see Note 9 (“Nonperforming Assets and Past Due Loans”) on page 85. At December 31, 2006, the allowance for loan losses was 439.07% of nonperforming loans, compared to 348.74% at December 31, 2005.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

During the first quarter of 2004, Key reclassified $70 million of its allowance for loan losses to a separate allowance for probable credit losses inherent in lending-related commitments. Earnings for 2004 and prior period balances were not affected by this reclassification. The separate allowance is included in “accrued expense and other liabilities” on the balance sheet and totaled $53 million at December 31, 2006, compared to $59 million at December 31, 2005. Management establishes the amount of this allowance by considering both historical trends and current market conditions quarterly, or more often if deemed necessary.

Management estimates the appropriate level of the allowance for loan losses on a quarterly (and at times more frequent) basis. The methodology used is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan Losses” on page 69. Briefly, management estimates the appropriate level of Key’s allowance for loan losses by applying historical loss rates to existing loans with similar risk characteristics and by exercising judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets. For an impaired loan, special treatment exists if the outstanding balance is greater than $2.5 million and the resulting allocation is deemed insufficient to cover the extent of the impairment. In such cases, a specific allowance is assigned to the loan. A specific allowance may be assigned even when sources of repayment appear sufficient if management remains uncertain about whether the loan will be repaid in full. The aggregate balance of the allowance for loan losses at December 31, 2006, represents management’s best estimate of the losses inherent in the loan portfolio at that date.

As shown in Figure 31, Key’s allowance for loan losses decreased by $22 million, or 2%, during 2006. This reduction was attributable to improving credit quality trends, as well as the third quarter 2006 transfer of $2.5 billion of home equity loans from the loan portfolio to loans held for sale in connection with Key’s expected sale of the Champion Mortgage finance business.

FIGURE 31. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

December 31,	2006								2005								2004
			Percent of			Percent of					Percent of			Percent of					Percent of			Percent of
			Allowance			Loan Type					Allowance			Loan Type					Allowance			Loan Type
			to Total			to Total					to Total			to Total					to Total			to Total
dollars in millions	Amount		Allowance			Loans			Amount		Allowance			Loans			Amount		Allowance			Loans
Commercial, financial and agricultural	$	341		36.1	%		32.5	%	$	338		35.0	%		31.0	%	$	385		33.8	%		29.6	%
Real estate — commercial mortgage		170		18.0			12.8			168		17.4			12.6			178		15.6			12.8
Real estate — construction		132		14.0			12.5			94		9.7			10.7			99		8.7			8.7
Commercial lease financing		139		14.7			15.6			183		19.0			15.5			258		22.7			16.0
Total commercial loans		782		82.8			73.4			783		81.1			69.8			920		80.8			67.1
Real estate — residential mortgage		12		1.3			2.2			13		1.3			2.2			15		1.3			2.3
Home equity		74		7.8			16.4			95		9.8			20.3			101		8.9			22.2
Consumer — direct		29		3.1			2.3			31		3.2			2.7			39		3.4			3.1
Consumer — indirect		47		5.0			5.7			44		4.6			5.0			63		5.6			5.3
Total consumer loans		162		17.2			26.6			183		18.9			30.2			218		19.2			32.9
Total	$	944		100.0	%		100.0	%	$	966		100.0	%		100.0	%	$	1,138		100.0	%		100.0	%

	2003								2002
			Percent of			Percent of					Percent of			Percent of
			Allowance			Loan Type					Allowance			Loan Type
			to Total			to Total					to Total			to Total
dollars in millions	Amount		Allowance			Loans			Amount		Allowance			Loans
Commercial, financial and agricultural	$	515		36.6	%		27.3	%	$	577		39.7	%		28.0	%
Real estate — commercial mortgage		237		16.9			10.6			272		18.7			11.1
Real estate — construction		132		9.4			8.3			152		10.5			9.5
Commercial lease financing		286		20.3			13.3			255		17.6			11.7
Total commercial loans		1,170		83.2			59.5			1,256		86.5			60.3
Real estate — residential mortgage		17		1.2			2.8			15		1.0			3.3
Home equity		110		7.8			25.2			89		6.1			23.1
Consumer — direct		41		2.9			3.5			32		2.3			3.6
Consumer — indirect		68		4.9			9.0			60		4.1			9.7
Total consumer loans		236		16.8			40.5			196		13.5			39.7
Total	$	1,406		100.0	%		100.0	%	$	1,452		100.0	%		100.0	%

51

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

During the third quarter of 2006, Key refined its methodology for allocating the allowance for loan losses. The refinements include a more accurate assignment of the allowance by loan type within each of the specific lines of business. Prior to this refinement, the allowance assigned to a specific line of business was allocated to the predominant loan types within the line. The allowance for loan losses at December 31 for each of the years presented in Figure 31 has been reallocated among the various loan types within Key’s loan portfolio to reflect this refinement. The reduction in the allowance allocated to the home equity loan portfolio from December 31, 2005, to December 31, 2006, was due in part to the transfer of the Champion portfolio to held-for-sale status.

Net loan charge-offs. Net loan charge-offs for 2006 were $170 million, or .26% of average loans from continuing operations, representing Key’s lowest level of net charge-offs since 1995 and the fifth consecutive year in which this asset quality measure has improved. These results compare to net charge-offs of $315 million, or .51%, for 2005, and $431 million, or .74%, for 2004. The composition of Key’s loan charge-offs and recoveries by type of loan is shown in Figure 32. The largest decreases in net charge-offs for 2006 occurred in the commercial lease financing and consumer installment portfolios. During 2005, net charge-offs included $135 million related to commercial passenger airline leases.

FIGURE 32. SUMMARY OF LOAN LOSS EXPERIENCE

Year ended December 31,
dollars in millions	2006			2005			2004			2003			2002
Average loans outstanding from continuing operations	$	64,996		$	61,997		$	58,226		$	57,386		$	58,477
Allowance for loan losses at beginning of year	$	966		$	1,138		$	1,406		$	1,452		$	1,677
Loans charged off:
Commercial, financial and agricultural		92			80			145			280			403
Real estate — commercial mortgage		24			19			35			42			81
Real estate — construction		4			5			5			7			22
Total commercial real estate loansa		28			24			40			49			103
Commercial lease financing		40			183			52			60			94
Total commercial loans		160			287			237			389			600
Real estate — residential mortgage		7			7			17			11			7
Home equity		30			26			63			60			56
Consumer — direct		33			38			42			47			51
Consumer — indirect		38			51			224			171			191
Total consumer loans		108			122			346			289			305
		268			409			583			678			905
Recoveries:
Commercial, financial and agricultural		34			21			41			36			44
Real estate — commercial mortgage		5			3			8			11			6
Real estate — construction		1			3			4			3			2
Total commercial real estate loansa		6			6			12			14			8
Commercial lease financing		27			35			14			13			9
Total commercial loans		67			62			67			63			61
Real estate — residential mortgage		1			1			1			1			1
Home equity		7			5			6			5			4
Consumer — direct		7			8			9			9			8
Consumer — indirect		16			18			69			52			51
Total consumer loans		31			32			85			67			64
		98			94			152			130			125
Net loans charged off		(170	)		(315	)		(431	)		(548	)		(780	)
Provision for loan losses from continuing operations		150			143			185			498			548
Provision for loan losses from discontinued operations		(3	)		—			—			3			5
Reclassification of allowance for credit losses on lending-related commitmentsb		—			—			(70	)		—			—
Allowance related to loans acquired, net		—			—			48			—			2
Foreign currency translation adjustment		1			—			—			1			—
Allowance for loan losses at end of year	$	944		$	966		$	1,138		$	1,406		$	1,452
Net loan charge-offs to average loans from continuing operations		.26	%		.51	%		.74	%		.95	%		1.33	%
Allowance for loan losses to year-end loans		1.43			1.45			1.80			2.35			2.43
Allowance for loan losses to nonperforming loans		439.07			348.74			369.48			202.59			153.98

a	See Figure 15 and the accompanying discussion on page 38 for more information related to Key’s commercial real estate portfolio.
b	Included in “accrued expenses and other liabilities” on the consolidated balance sheet.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Nonperforming assets. Figure 33 shows the composition of Key’s nonperforming assets, which at December 31, 2006, were at their lowest level in twelve years. These assets totaled $273 million at December 31, 2006, and represented .41% of loans, other real estate owned (known as “OREO”) and other nonperforming assets, compared to $307 million, or .46%, at December 31, 2005. See Note 1 under the headings “Impaired and Other Nonaccrual Loans” and “Allowance for Loan Losses” on pages 68 and 69 for a summary of Key’s nonaccrual and charge-off policies.

FIGURE 33. SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS

December 31,
dollars in millions	2006			2005			2004			2003			2002
Commercial, financial and agricultural	$	38		$	63		$	42		$	252		$	448
Real estate — commercial mortgage		48			38			25			79			146
Real estate — construction		10			2			20			25			50
Total commercial real estate loansa		58			40			45			104			196
Commercial lease financing		22			39			84			103			69
Total commercial loans		118			142			171			459			713
Real estate — residential mortgage		34			46			46			45			47
Home equity		50			79			80			153			146
Consumer — direct		2			2			3			14			13
Consumer — indirect		11			8			8			23			24
Total consumer loans		97			135			137			235			230
Total nonperforming loans		215			277			308			694			943
Nonperforming loans held for sale		3			3			8			—			—
OREO		57			25			53			61			48
Allowance for OREO losses		(3	)		(2	)		(4	)		(4	)		(3	)
OREO, net of allowance		54			23			49			57			45
Other nonperforming assetsb		1			4			14			2			5
Total nonperforming assets	$	273		$	307		$	379		$	753		$	993
Accruing loans past due 90 days or more	$	120		$	90		$	122		$	152		$	198
Accruing loans past due 30 through 89 days		644			491			491			613			790
Nonperforming loans to year-end portfolio loans		.33	%		.42	%		.49	%		1.16	%		1.58	%
Nonperforming assets to year-end portfolio loans plus OREO and other nonperforming assets		.41			.46			.60			1.26			1.66

a	See Figure 15 and the accompanying discussion on page 38 for more information related to Key’s commercial real estate portfolio.
b	Primarily collateralized mortgage-backed securities.

Most of the 2006 reduction in nonperforming assets occurred within three loan portfolios: commercial, financial and agricultural; commercial lease financing and home equity. The decreases in the two commercial portfolios was due in part to an improved risk profile, while the decrease in nonperforming home equity loans was attributable to the November 2006 sale of the nonprime mortgage loan portfolio held by the Champion Mortgage finance business. These reductions were partially offset by an increase in OREO.

At December 31, 2006, Key’s 20 largest nonperforming loans totaled $67 million, representing 31% of total loans on nonperforming status.

The level of Key’s delinquent loans rose during 2006, following a downward trend over the past several years. Over the course of a normal business cycle, fluctuations in the level of Key’s delinquent loans are to be expected.

53

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Credit exposure by industry classification in the largest sector of Key’s loan portfolio, “commercial, financial and agricultural loans,” is presented in Figure 34. The types of activity that caused the change in Key’s nonperforming loans during 2006 are summarized in Figure 35.

FIGURE 34. COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS

					Nonperforming Loans
December 31, 2006	Total		Loans				% of Loans
dollars in millions	Commitmentsa		Outstanding		Amount		Outstanding
Industry classification:
Manufacturing	$	10,572	$	3,769	$	2		.1	%
Services		9,639		2,992		10		.3
Retail trade		6,033		3,409		3		.1
Public utilities		3,876		575		—		—
Property management		3,482		1,551		—		—
Financial services		3,298		1,258		1		.1
Wholesale trade		3,199		1,395		2		.1
Building contractors		2,428		1,049		3		.3
Insurance		2,331		113		—		—
Transportation		2,195		1,515		5		.3
Public administration		1,088		388		—		—
Agriculture/forestry/fishing		947		597		2		.3
Communications		885		316		—		—
Mining		802		262		—		—
Individuals		38		17		—		—
Other		3,005		2,206		10		.5
Total	$	53,818	$	21,412	$	38		.2	%

a Total commitments include unfunded loan commitments, unfunded letters of credit (net of amounts conveyed to others) and loans outstanding.

FIGURE 35. SUMMARY OF CHANGES IN NONPERFORMING LOANS

				2006 Quarters
in millions	2006			Fourth			Third			Second			First			2005
BALANCE AT BEGINNING OF PERIOD	$	277		$	223		$	279		$	295		$	277		$	308
Loans placed on nonaccrual status		447			115			134			98			100			361
Charge-offs		(268	)		(74	)		(70	)		(59	)		(65	)		(315	)
Loans sold		(35	)		(5	)		(22	)		(6	)		(2	)		(10	)
Payments		(126	)		(23	)		(43	)		(45	)		(15	)		(41	)
Transfer to held-for-sale portfolio a		(55	)		—			(55	)		—			—			—
Transfers to OREO		(16	)		(12	)		—			(4	)		—			(16	)
Loans returned to accrual status		(9	)		(9	)		—			—			—			(10	)
BALANCE AT END OF PERIOD	$	215		$	215		$	223		$	279		$	295		$	277

^a   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.

Liquidity risk management

Key defines “liquidity” as the ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner and without adverse consequences. Liquidity management involves maintaining sufficient and diverse sources of funding to accommodate planned as well as unanticipated changes in assets and liabilities under both normal and adverse conditions.

Key manages liquidity for all of its affiliates on an integrated basis. This approach considers the unique funding sources available to each entity and the differences in their capabilities to manage through adverse conditions. It also recognizes that the access of all affiliates to money market funding would be similarly affected by adverse market conditions or other events that could negatively affect the level or cost of liquidity. As part of the management process, Key’s management has established guidelines or target ranges that relate to the maturities of various types

54

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

of wholesale borrowings, such as money market funding and term debt. In addition, management assesses Key’s needs for future reliance on wholesale borrowings and then develops strategies to address those needs. Moreover, Key will, on occasion, guarantee a subsidiary’s obligations in transactions with third parties. Management closely monitors the extension of such guarantees to ensure that Key retains ample liquidity in the event it must step in to provide financial support.

Key’s liquidity could be adversely affected by both direct and indirect circumstances. An example of a direct (but hypothetical) event would be a downgrade in Key’s public credit rating by a rating agency due to deterioration in asset quality, a large charge to earnings, a decline in profitability or other financial measures, or a significant merger or acquisition. Examples of indirect (but hypothetical) events unrelated to Key that could have an effect on Key’s access to liquidity would be terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund or hedge fund. Similarly, market speculation or rumors about Key or the banking industry in general may adversely affect the cost and availability of normal funding sources.

In accordance with A/LM policy, Key performs stress tests to consider the effect that a potential downgrade in its debt ratings could have on liquidity over various time periods. These debt ratings, which are presented in Figure 36 on page 56, have a direct impact on Key’s cost of funds and ability to raise funds under normal as well as adverse conditions. The results of the stress tests indicate that, following the occurrence of an adverse event, Key can continue to meet its financial obligations and to fund its operations for at least one year. The stress test scenarios include major disruptions to Key’s access to funding markets and consider the potential adverse effect of core client activity on cash flows. To compensate for the effect of these activities, alternative sources of liquidity are incorporated into the analysis over different time periods to project how fluctuations on the balance sheet would be managed. Key actively manages several alternatives for enhancing liquidity, including generating client deposits, securitizing or selling loans, extending the maturity of wholesale borrowings, purchasing deposits from other banks, and developing relationships with fixed income investors. Management also measures Key’s capacity to borrow using various debt instruments and funding markets.

Key maintains a liquidity contingency plan that outlines the process for addressing a liquidity crisis. The plan provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities for effectively managing liquidity through a problem period. Key has access to various sources of money market funding (such as federal funds purchased, securities sold under repurchase agreements, eurodollars and commercial paper) and also can borrow from the Federal Reserve Bank’s discount window to meet short-term liquidity requirements. Key did not have any borrowings from the Federal Reserve Bank outstanding at December 31, 2006.

Key monitors its funding sources and measures its capacity to obtain funds in a variety of wholesale funding markets in an effort to maintain an appropriate mix of funds, considering both cost and availability. Key uses several tools to actively manage and maintain sufficient liquidity on an ongoing basis.

• Key maintains a portfolio of securities that generates monthly principal cash flows and payments at maturity.

• Key can access the whole loan sale and securitization markets for a variety of loan types.

• KBNA’s 950 KeyCenters generate a sizable volume of core deposits. Management monitors deposit flows and uses alternative pricing structures to attract deposits as appropriate. For more information about core deposits, see the section entitled “Deposits and other sources of funds,” which begins on page 42.

• Key has access to the term debt markets through various programs described in the section entitled “Additional sources of liquidity” on page 56.

In addition to cash flows from operations, Key’s cash flows come from both investing and financing activities. Over the past three years, prepayments and maturities of securities available for sale have been primary sources of cash from investing activities. Loan securitizations and sales also provided significant cash inflow during 2004.

Investing activities that have required the greatest use of cash include acquisitions completed during the fourth quarter of 2004, lending and purchases of new securities.

Key utilizes financing activities to meet the cash flow needs generated by operating and investing activities that cannot be met by deposit growth. These cash needs may be addressed by increasing short- and/or long-term borrowings. Conversely, excess cash generated by operating, investing and deposit-gathering activities may be used to repay outstanding debt.

During 2004, Key used the excess cash generated by deposit-gathering activities to pay down both short-and long-term debt. In 2005, borrowings were used to support loan growth in excess of deposit growth. In 2006, cash generated by the sale of discontinued operations was used to pay down short-term borrowings.

The Consolidated Statements of Cash Flow on page 66 summarize Key’s sources and uses of cash by type of activity for each of the past three years.

Figure 27 on page 46 summarizes Key’s significant contractual cash obligations at December 31, 2006, by specific time periods in which related payments are due or commitments expire.

Liquidity for KeyCorp (the “parent company”)

The parent company has sufficient liquidity when it can service its debt, support customary corporate operations and activities (including acquisitions), at a reasonable cost, in a timely manner and without adverse consequences, and pay dividends to shareholders.

Management’s primary tool for assessing parent company liquidity is the net short-term cash position, which measures the ability to fund debt maturing in twelve months or less with existing liquid assets. Another key measure of parent company liquidity is the “liquidity gap,” which represents the difference between projected liquid assets and anticipated financial obligations over specified time horizons. Key generally relies upon the issuance of term debt to manage the liquidity gap within targeted ranges assigned to various time periods.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

The parent has met its liquidity requirements principally through regular dividends from KBNA. Federal banking law limits the amount of capital distributions that a bank can make to its holding company without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several factors, including net profits (as defined by statute) for the two previous calendar years and for the current year up to the date of dividend declaration. During 2006, KBNA paid the parent a total of $1.2 billion in dividends, and nonbank subsidiaries paid the parent a total of $11 million in dividends. As of the close of business on December 31, 2006, KBNA had an additional $68 million available to pay dividends to the parent without prior regulatory approval and without affecting its status as “well-capitalized” under FDIC-defined capital categories. These capital categories are summarized in Note 14 (“Shareholders’ Equity”) under the heading “Capital Adequacy” on page 89.

The parent company generally maintains excess funds in short-term investments in an amount sufficient to meet projected debt maturities over the next twelve months. At December 31, 2006, the parent company held $2.5 billion in short-term investments, which management projected to be sufficient to meet debt repayment obligations over a period of approximately 32 months.

Additional sources of liquidity

Management has implemented several programs that enable the parent company and KBNA to raise funding in the public and private markets when necessary. The proceeds from most of these programs can be used for general corporate purposes, including acquisitions. Each of the programs is replaced or renewed as needed. There are no restrictive financial covenants in any of these programs.

Bank note program. KBNA’s bank note program provides for the issuance of both long- and short-term debt of up to $20.0 billion. During 2006, there were $500 million of notes issued under this program. These notes have original maturities in excess of one year and are included in “long-term debt.” At December 31, 2006, $18.7 billion was available for future issuance.

Euro medium-term note program. Under Key’s euro medium-term note program, the parent company and KBNA may issue both long- and short-term debt of up to $10.0 billion in the aggregate ($9.0 billion by KBNA and $1.0 billion by the parent company). The notes are offered exclusively to non-U.S. investors and can be denominated in U.S. dollars or foreign currencies. During 2006, there were $666 million of notes issued under this program. At December 31, 2006, $6.1 billion was available for future issuance.

KeyCorp medium-term note program. In January 2005, the parent company registered $2.9 billion of securities under a shelf registration statement filed with the SEC. Of this amount, $1.9 billion has been allocated for the issuance of both long- and short-term debt in the form of medium-term notes. During 2006, there were $750 million of notes issued under this program. At December 31, 2006, unused capacity under this shelf registration statement totaled $1.9 billion.

Commercial paper. The parent company has a commercial paper program that provides funding availability of up to $500 million. As of December 31, 2006, there were no borrowings outstanding under this program.

KBNA has a separate commercial paper program at a Canadian subsidiary that provides funding availability of up to C$1.0 billion in Canadian currency. The borrowings under this program can be denominated in Canadian or U.S. dollars. As of December 31, 2006, borrowings outstanding under this commercial paper program totaled C$387 million in Canadian currency and $119 million in U.S. currency (equivalent to C$139 million in Canadian currency).

Key’s debt ratings are shown in Figure 36 below. Management believes that these debt ratings, under normal conditions in the capital markets, allow for future offerings of securities by the parent company or KBNA that would be marketable to investors at a competitive cost.

FIGURE 36. DEBT RATINGS

						Enhanced
			Senior	Subordinated		Trust
	Short-term		Long-Term	Long-Term	Capital	Preferred
December 31, 2006	Borrowings		Debt	Debt	Securities	Securities
KEYCORP (THE PARENT COMPANY)
Standard & Poor’s	A-2		A–	BBB+	BBB	BBB
Moody’s	P-1		A2	A3	A3	Baa1
Fitch	F1		A	A–	A–	A–
KBNA
Standard & Poor’s	A-1		A	A–	N/A	N/A
Moody’s	P-1		A1	A2	N/A	N/A
Fitch	F1		A	A–	N/A	N/A
KEY NOVA SCOTIA FUNDING COMPANY (“KNSF”)
Dominion Bond Rating Servicea	R-1(middle	)	N/A	N/A	N/A	N/A

a	Reflects the guarantee by KBNA of KNSF’s issuance of Canadian commercial paper.
N/A = Not Applicable

56

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Operational risk management

Key, like all businesses, is subject to operational risk, which is the risk of loss resulting from human error, inadequate or failed internal processes and systems, and external events. Operational risk also encompasses compliance (legal) risk, which is the risk of loss from violations of, or noncompliance with, laws, rules, regulations, prescribed practices or ethical standards. Resulting losses could take the form of explicit charges, increased operational costs, harm to Key’s reputation or forgone opportunities. Key seeks to mitigate operational risk through a system of internal controls.

Management continuously strives to strengthen Key’s system of internal controls to ensure compliance with laws, rules and regulations, and to improve the oversight of Key’s operational risk. For example, a loss-event database is used to track the amounts and sources of operational losses. This tracking mechanism serves as another resource to identify weaknesses and the need to take corrective action. Management also relies upon sophisticated software programs designed to assist in monitoring Key’s control processes. This technology has enhanced the reporting of the effectiveness of Key’s controls to senior management and the Board.

Primary responsibility for managing and monitoring internal control mechanisms lies with the managers of Key’s various lines of business. Key’s Risk Review function periodically assesses the overall effectiveness of Key’s system of internal controls. Risk Review reports the results of reviews on internal controls and systems to senior management and the Audit Committee, and independently supports the Audit Committee’s oversight of these controls. Finally, a senior management committee, known as the Operational Risk Committee, oversees Key’s level of operational risk, and directs and supports Key’s operational infrastructure and related activities.

Regulatory agreements. On October 17, 2005, KeyCorp entered into a memorandum of understanding with the Federal Reserve Bank of Cleveland (“FRBC”), and KBNA entered into a consent order with the Comptroller of the Currency (“OCC”), concerning compliance-related matters, particularly arising under the Bank Secrecy Act. Management does not expect these actions to have a material effect on Key’s operating results; neither the OCC nor the FRBC imposed a fine or civil money penalty in the matter. As part of the consent order and memorandum of understanding, Key has agreed to continue to strengthen its anti-money laundering and other compliance controls. Management believes significant progress has been made in this regard and continues to work on making the necessary improvements, including enhanced training for employees, upgraded client due diligence procedures and advanced technologies.

FOURTH QUARTER RESULTS

Key’s financial performance for each of the past eight quarters is summarized in Figure 37. Highlights of Key’s fourth quarter results are summarized below.

Earnings. Key had income from continuing operations of $311 million, or $.76 per diluted common share, compared to $284 million, or $.69 per share, for the fourth quarter of 2005. Earnings per share from continuing operations increased 10% compared to the fourth quarter of 2005.

In November 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business, and announced a separate agreement to sell Champion’s origination platform. As a result of these actions, Key has applied discontinued operations accounting to this business for all periods presented in this report. For more detailed information regarding the Champion divestiture, including the gain resulting from the sale, see Note 3 (“Acquisitions and Divestitures”), which begins on page 75.

Net income totaled $146 million, or $.36 per diluted common share, for the fourth quarter of 2006, compared to net income of $296 million, or $.72 per share, for the fourth quarter of 2005.

The growth in income from continuing operations resulted from increases in both net interest income and noninterest income, along with a slight reduction in noninterest expense. These positive changes were offset in part by a rise in Key’s provision for loan losses.

On an annualized basis, Key’s return on average total assets from continuing operations for the fourth quarter of 2006 was 1.33%, compared to 1.26% for the fourth quarter of 2005. The annualized return on average equity from continuing operations was 15.63% for the fourth quarter of 2006, compared with 14.96% for the year-ago quarter.

Net interest income. Net interest income increased to $712 million for the fourth quarter of 2006 from $686 million for the same period last year. Average earning assets grew by 4%, due primarily to a 5% increase in commercial loans. The net interest margin was 3.66%, compared to 3.68% for the same period one year ago. During the fourth quarter of 2006, Key’s net interest margin benefited from a $16 million lease accounting adjustment resulting from a change in effective state tax rates, and an $8 million principal investing distribution received in the form of a dividend. These two items added approximately 12 basis points to the taxable-equivalent net interest margin.

Noninterest income. Key’s noninterest income was $558 million for the fourth quarter of 2006, compared to $552 million for the year-ago quarter. Increases in income from trust and investment services, investment banking and capital markets activities, operating leases and loan fees drove the improvement. These increases were offset in part by an $11 million reduction in income from principal investing activities. However, as discussed above, during the fourth quarter of 2006, the Principal Investing unit received $8 million in the form of a dividend included in net interest income.

Noninterest expense. Key’s noninterest expense for the fourth quarter of 2006 was $809 million, down from $812 million for the same period last year. Personnel expense rose by $36 million from the year-ago quarter, due to higher costs associated with business expansion, employee benefits and variable compensation associated with the improvement in Key’s fee-based businesses. Nonpersonnel expense was down $39 million. Key experienced a $9 million decrease in professional fees, and franchise and business tax expense declined by $16 million, due to settlements of disputed amounts during the fourth quarter of 2006. In addition, miscellaneous expense for the fourth quarter of 2005 included a $15 million contribution to Key’s charitable trust, Key Foundation.

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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

FIGURE 37. SELECTED QUARTERLY FINANCIAL DATA

	2006 Quarters												2005 Quarters
dollars in millions, except per share amounts	Fourth			Third			Second			First			Fourth			Third			Second			First
FOR THE QUARTER
Interest income	$	1,413		$	1,389		$	1,327		$	1,251		$	1,202		$	1,114		$	1,058		$	1,009
Interest expense		701			684			623			557			516			455			399			357
Net interest income		712			705			704			694			686			659			659			652
Provision for loan losses		53			35			23			39			35			43			19			46
Noninterest income		558			543			545			481			552			531			485			499
Noninterest expense		809			790			798			752			812			762			730			750
Income from continuing operations before income taxes and cumulative effect of accounting change		408			423			428			384			391			385			395			355
Income from continuing operations before cumulative effect of accounting change		311			305			303			274			284			269			284			253
Income (loss) from discontinued operations, net of taxes		(165	)		7			5			10			12			9			7			11
Income before cumulative effect of accounting change		146			312			308			284			296			278			291			264
Net income		146			312			308			289			296			278			291			264
PER COMMON SHARE
Income from continuing operations before cumulative effect of accounting change	$	.77		$	.76		$	.75		$	.67		$	.70		$	.66		$	.69		$	.62
Income (loss) from discontinued operations		(.41	)		.02			.01			.02			.03			.02			.02			.03
Income before cumulative effect of accounting change		.36			.77			.76			.70			.72			.68			.71			.65
Net income		.36			.77			.76			.71			.72			.68			.71			.65
Income from continuing operations before cumulative effect of accounting change — assuming dilution		.76			.74			.74			.66			.69			.65			.69			.61
Income (loss) from discontinued operations — assuming dilution		(.40	)		.02			.01			.02			.03			.02			.02			.03
Income before cumulative effect of accounting change — assuming dilution		.36			.76			.75			.69			.72			.67			.70			.64
Net income — assuming dilution		.36			.76			.75			.70			.72			.67			.70			.64
Cash dividends declared		.345			.345			.345			.345			.325			.325			.325			.325
Book value at period end		19.30			19.73			19.21			18.85			18.69			18.41			18.01			17.58
Market price:
High		38.63			38.15			38.31			37.67			34.05			35.00			33.80			34.07
Low		35.73			34.48			34.24			32.68			30.10			31.65			31.52			31.00
Close		38.03			37.44			35.68			36.80			32.93			32.25			33.15			32.45
Weighted-average common shares outstanding (000)		402,329			403,780			404,528			407,386			408,431			410,456			408,754			408,264
Weighted-average common shares and potential common shares outstanding (000)		407,828			409,428			410,559			413,140			412,542			415,441			414,309			413,762
AT PERIOD END
Loans	$	65,826		$	65,551		$	67,408		$	66,980		$	66,478		$	65,575		$	64,690		$	64,018
Earning assets		80,090			83,132			81,737			81,087			80,143			80,096			78,548			77,937
Total assets		92,337			96,155			94,794			93,391			93,126			92,323			91,015			90,276
Deposits		59,116			61,429			60,838			59,402			58,765			58,071			58,063			57,127
Long-term debt		14,533			13,654			14,050			14,032			13,939			14,037			13,588			14,100
Shareholders’ equity		7,703			7,947			7,737			7,638			7,598			7,522			7,352			7,162
PERFORMANCE RATIOS
From continuing operations:
Return on average total assets		1.33	%		1.31	%		1.33	%		1.25	%		1.26	%		1.22	%		1.31	%		1.17	%
Return on average equity		15.63			15.52			15.85			14.94			14.96			14.36			15.76			14.46
Net interest margin (taxable equivalent)		3.66			3.61			3.68			3.72			3.68			3.63			3.67			3.62
From consolidated operations:
Return of average total assets		.61	%		1.30	%		1.32	%		1.26	%		1.27	%		1.22	%		1.30	%		1.18	%
Return of average equity		7.34			15.88			16.11			15.48			15.59			14.84			16.15			15.09
Net interest margin (taxable equivalent)		3.69			3.63			3.69			3.77			3.71			3.67			3.71			3.66
CAPITAL RATIOS AT PERIOD END
Equity to assets		8.34	%		8.26	%		8.16	%		8.18	%		8.16	%		8.15	%		8.08	%		7.93	%
Tangible equity to tangible assets		7.01			6.81			6.68			6.71			6.68			6.68			6.60			6.43
Tier 1 risk-based capital		8.30			8.02			7.90			7.64			7.59			7.72			7.68			7.34
Total risk-based capital		12.53			12.13			12.08			11.91			11.47			11.83			11.72			11.58
Leverage		8.94			8.89			8.82			8.52			8.53			8.60			8.49			7.91
TRUST AND BROKERAGE ASSETS
Assets under management	$	84,699		$	84,060		$	80,349		$	79,558		$	77,144		$	76,341		$	76,807		$	76,334
Nonmanaged and brokerage assets		56,292			55,221			57,682			56,944			56,509			57,313			57,006			61,375
OTHER DATA
Average full-time equivalent employees		20,006			20,264			19,931			19,694			19,417			19,456			19,429			19,571
KeyCenters		950			949			946			945			947			946			945			940

Note 3 (“Acquisitions and Divestitures”), which begins on page 75, contains specific information about the acquisitions that Key completed during the past three years to help in understanding how those transactions may have impacted Key’s financial condition and results of operations.

58

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES

Provision for loan losses. Key’s provision for loan losses from continuing operations was $53 million for the fourth quarter of 2006, compared to $35 million for the year-ago quarter. Net loan charge-offs for the quarter totaled $54 million, or .33% of average loans from continuing operations, compared to $164 million, or 1.02%, for the fourth quarter of 2005. The fourth quarter of 2005 included net charge-offs of $127 million related to commercial passenger airline leases.

Income taxes. The provision for income taxes from continuing operations was $97 million for the fourth quarter of 2006, compared to $107 million for the fourth quarter of 2005. The effective tax rate for the fourth quarter was 23.8% compared to 27.4% for the year-ago quarter. The lower effective tax rate for the fourth quarter of 2006 was due primarily to the settlement of various federal and state tax audit disputes, offset in part by an increase in effective state tax rates applied to Key’s lease financing business. Excluding these items, the effective tax rate for the fourth quarter of 2006 was 26.7%.

CERTIFICATIONS

KeyCorp has filed, as exhibits to its Annual Report on Form 10-K for the year ended December 31, 2006, the certifications of its Chief Executive Officer and Chief Financial Officer required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

On May 31, 2006, KeyCorp submitted to the New York Stock Exchange the Annual CEO Certification required pursuant to Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.

59

KEYCORP AND SUBSIDIARIES

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Key’s management is responsible for the preparation, content and integrity of the financial statements and other statistical data and analyses compiled for this annual report. The financial statements and related notes have been prepared in conformity with U.S. generally accepted accounting principles and reflect management’s best estimates and judgments. Management believes the financial statements and notes present fairly Key’s financial position, results of operations and cash flows in all material respects.

Management is responsible for establishing and maintaining a system of internal control that is designed to protect Key’s assets and the integrity of its financial reporting. This corporate-wide system of controls includes self-monitoring mechanisms, written policies and procedures, proper delegation of authority and division of responsibility, and the selection and training of qualified personnel.

All employees are required to comply with Key’s code of ethics. Management conducts an annual certification process to provide assurance that Key’s employees meet this obligation. Although any system of internal control can be compromised by human error or intentional circumvention of required procedures, management believes Key’s system provides reasonable assurance that financial transactions are recorded and reported properly, providing an adequate basis for reliable financial statements.

The Board of Directors discharges its responsibility for Key’s financial statements through its Audit Committee. This committee, which draws its members exclusively from the outside directors, also hires the independent auditors.

Management’s Assessment of Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for Key. Management has assessed the effectiveness of Key’s internal control and procedures over financial reporting using criteria described in “Internal Control —Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management believes Key maintained an effective system of internal control over financial reporting as of December 31, 2006. Key’s independent auditors have issued an attestation report, dated February 23, 2007, on management’s assessment of Key’s internal control over financial reporting, which is included in this annual report.

Henry L. Meyer III
Chairman and Chief Executive Officer

Jeffrey B. Weeden
Senior Executive Vice President and Chief Financial Officer

60

KEYCORP AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Shareholders and Board of Directors
KeyCorp

We have audited management’s assessment, included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting appearing under Management’s Annual Report on Internal Control Over Financial Reporting, that KeyCorp and subsidiaries (“Key”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Key’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Key maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Key maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Key as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in shareholders’ equity, and cash flow for each of the three years in the period ended December 31, 2006 and our report dated February 23, 2007 expressed an unqualified opinion thereon.

Cleveland, Ohio
February 23, 2007

61

KEYCORP AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
KeyCorp

We have audited the accompanying consolidated balance sheets of KeyCorp and subsidiaries (“Key”) as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in shareholders’ equity, and cash flow for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of Key’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Key as of December 31, 2006 and 2005, and the consolidated results of their operations and their cash flow for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, Key changed its method of accounting for defined benefit pension and other postretirement plans as of December 31, 2006, in accordance with the Financial Accounting Standards Board Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, and its method of accounting for stock-based compensation as of January 1, 2006, in accordance with Financial Accounting Standards Board Statement No. 123R, Share-Based Payment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Key’s internal control over financial reporting as of December 31, 2006, based on criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2007 expressed an unqualified opinion thereon.

Cleveland, Ohio
February 23, 2007

62

KEYCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,
dollars in millions	2006			2005
ASSETS
Cash and due from banks	$	2,264		$	3,108
Short-term investments		1,407			1,592
Securities available for sale		7,827			7,269
Investment securities (fair value: $42 and $92)		41			91
Other investments		1,352			1,332
Loans, net of unearned income of $2,136 and $2,153		65,826			66,478
Less: Allowance for loan losses		944			966
Net loans		64,882			65,512
Loans held for sale		3,637			3,381
Premises and equipment		595			656
Operating lease assets		1,124			955
Goodwill		1,202			1,355
Other intangible assets		120			125
Corporate-owned life insurance		2,782			2,690
Derivative assets		1,091			1,039
Accrued income and other assets		4,013			4,021
Total assets	$	92,337		$	93,126
LIABILITIES
Deposits in domestic offices:
NOW and money market deposit accounts	$	24,340		$	24,241
Savings deposits		1,642			1,840
Certificates of deposit ($100,000 or more)		5,941			5,156
Other time deposits		11,956			11,170
Total interest-bearing		43,879			42,407
Noninterest-bearing		13,553			13,335
Deposits in foreign office — interest-bearing		1,684			3,023
Total deposits		59,116			58,765
Federal funds purchased and securities sold under repurchase agreements		3,643			4,835
Bank notes and other short-term borrowings		1,192			1,780
Derivative liabilities		922			1,060
Accrued expense and other liabilities		5,228			5,149
Long-term debt		14,533			13,939
Total liabilities		84,634			85,528
SHAREHOLDERS’ EQUITY
Preferred stock, $1 par value; authorized 25,000,000 shares, none issued		—			—
Common shares, $1 parvalue; authorized1,400,000,000 shares; issued 491,888,780 shares		492			492
Capital surplus		1,602			1,534
Retained earnings		8,377			7,882
Treasury stock, at cost (92,735,595 and 85,265,173 shares)		(2,584	)		(2,204	)
Accumulated other comprehensive loss		(184	)		(106	)
Total shareholders’ equity		7,703			7,598
Total liabilities and shareholders’ equity	$	92,337		$	93,126

See Notes to Consolidated Financial Statements.

63

KEYCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Year ended December 31,
dollars in millions, except per share amounts	2006			2005		2004
INTEREST INCOME
Loans	$	4,561		$	3,693	$	3,046
Loans held for sale		325			254		114
Investment securities		2			3		5
Securities available for sale		347			327		327
Short-term investments		63			52		35
Other investments		82			54		35
Total interest income		5,380			4,383		3,562
INTEREST EXPENSE
Deposits		1,576			976		640
Federal funds purchased and securities sold under repurchase agreements		107			71		22
Bank notes and other short-term borrowings		94			82		42
Long-term debt		788			598		402
Total interest expense		2,565			1,727		1,106
NET INTEREST INCOME		2,815			2,656		2,456
Provision for loan losses		150			143		185
Net interest income after provision for loan losses		2,665			2,513		2,271
NONINTEREST INCOME
Trust and investment services income		553			542		564
Service charges on deposit accounts		304			304		331
Investment banking and capital markets income		230			229		217
Operating lease income		229			191		183
Letter of credit and loan fees		188			181		158
Corporate-owned life insurance income		105			109		110
Electronic banking fees		105			96		85
Net gains from loan securitizations and sales		76			69		9
Net securities gains		1			1		4
Other income		336			345		264
Total noninterest income		2,127			2,067		1,925
NONINTEREST EXPENSE
Personnel		1,692			1,588		1,533
Net occupancy		250			276		232
Computer processing		212			209		187
Operating lease expense		184			158		151
Professional fees		134			126		110
Equipment		102			110		118
Marketing		97			88		81
Other expense		478			499		472
Total noninterest expense		3,149			3,054		2,884
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE		1,643			1,526		1,312
Income taxes		450			436		405
INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE		1,193			1,090		907
Income (loss) from discontinued operations, net of taxes of $16, $23 and $29 (see Note 3)		(143	)		39		47
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE		1,050			1,129		954
Cumulative effect of accounting change, net of taxes (see Note 1)		5			—		—
NET INCOME	$	1,055		$	1,129	$	954
Per common share:
Income from continuing operations before cumulative effect of accounting change	$	2.95		$	2.67	$	2.21
Income before cumulative effect of accounting change		2.60			2.76		2.32
Net income		2.61			2.76		2.32
Per common share — assuming dilution:
Income from continuing operations before cumulative effect of accounting change		2.91			2.63		2.18
Income before cumulative effect of accounting change		2.56			2.73		2.30
Net income		2.57			2.73		2.30
Cash dividends declared per common share		1.38			1.30		1.24
Weighted-average common shares outstanding (000)		404,490			408,981		410,585
Weighted-average common shares and potential common shares outstanding (000)		410,222			414,014		415,430

See Notes to Consolidated Financial Statements.

64

KEYCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

	Common													Accumulated
	Shares										Treasury			Other
	Outstanding			Common		Capital		Retained			Stock,			Comprehensive			Comprehensive
dollars in millions, except per share amounts	(000)			Shares		Surplus		Earnings			at Cost			Loss			Income
BALANCE AT DECEMBER 31, 2003		416,494		$	492	$	1,448	$	6,838		$	(1,801	)	$	(8	)
Net income									954								$	954
Other comprehensive income (losses):
Net unrealized gains on securities available for sale, net of income taxes of $2a															6			6
Net unrealized losses on derivative financial instruments, net of income taxes of ($23)															(40	)		(40	)
Net unrealized gains on common investment funds held in employee welfare benefits trust, net of income taxes of $1															1			1
Foreign currency translation adjustments															23			23
Minimum pension liability adjustment, net of income taxes of ($2)															(4	)		(4	)
Total comprehensive income																	$	940
Deferred compensation							17
Cash dividends declared on common shares ($1.24 per share)									(508	)
Issuance of common shares and stock options granted under employee benefit and dividend reinvestment plans		7,614					26					185
Repurchase of common shares		(16,538	)									(512	)
BALANCE AT DECEMBER 31, 2004		407,570		$	492	$	1,491	$	7,284		$	(2,128	)	$	(22	)
Net income									1,129								$	1,129
Other comprehensive income (losses):
Net unrealized losses on securities available for sale, net of income taxes of ($35)a															(60	)		(60	)
Net unrealized gains on derivative financial instruments, net of income taxes of $5															9			9
Net unrealized gains on common investment funds held in employee welfare benefits trust, net of income taxes															1			1
Foreign currency translation adjustments															(33	)		(33	)
Minimum pension liability adjustment, net of income taxes															(1	)		(1	)
Total comprehensive income																	$	1,045
Deferred compensation							30
Cash dividends declared on common shares ($1.30 per share)									(531	)
Issuance of common shares and stock options granted under employee benefit and dividend reinvestment plans		6,054					13					153
Repurchase of common shares		(7,000	)									(229	)
BALANCE AT DECEMBER 31, 2005		406,624		$	492	$	1,534	$	7,882		$	(2,204	)	$	(106	)
Net income									1,055								$	1,055
Other comprehensive income (losses):
Net unrealized gains on securities available for sale, net of income taxes of $20a															28			28
Net unrealized gains on derivative financial instruments, net of income taxes of $6															12			12
Foreign currency translation adjustments															31			31
Minimum pension liability adjustment, net of income taxes															5			5
Total comprehensive income																	$	1,131
Adjustment to initially apply SFAS No. 158, net of income taxes of ($92)															(154	)
Deferred compensation							20		(3	)
Cash dividends declared on common shares ($1.38 per share)									(557	)
Issuance of common shares and stock options granted under employee benefit and dividend reinvestment plans		10,029					48					264
Repurchase of common shares		(17,500	)									(644	)
BALANCE AT DECEMBER 31, 2006		399,153		$	492	$	1,602	$	8,377		$	(2,584	)	$	(184	)

^a   Net of reclassification adjustments. Reclassification adjustments represent net unrealized gains (losses) as of December 31 of the prior year on securities available for sale that were sold during the current year. The reclassification adjustments were ($10) million (($6) million after tax) in 2006, ($7) million (($4) million after tax) in 2005 and ($34) million (($22) million after tax) in 2004.

See Notes to Consolidated Financial Statements.

65

KEYCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

Year ended December 31,
in millions	2006			2005			2004
OPERATING ACTIVITIES
Net income	$	1,055		$	1,129		$	954
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		147			143			185
Depreciation and amortization expense		397			358			345
Write-off of goodwill		170			—			55
Net securities gains		(1	)		(1	)		(4	)
Gain from sale of discontinued operations		(22	)		—			—
Net gains from principal investing		(53	)		(56	)		(44	)
Net gains from loan securitizations and sales		(76	)		(69	)		(9	)
Deferred income taxes		27			105			416
Net (increase) decrease in loans held for sale from continuing operations		(280	)		972			(1,979	)
Net (increase) decrease in trading account assets		(62	)		13			170
Other operating activities, net		(297	)		(426	)		(304	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		1,005			2,168			(215	)
INVESTING ACTIVITIES
Proceeds from sale of discontinued operations		2,520			—			—
Cash used in acquisitions, net of cash acquired		(34	)		(219	)		(1,733	)
Net (increase) decrease in other short-term investments		247			(133	)		(38	)
Purchases of securities available for sale		(4,640	)		(3,770	)		(2,110	)
Proceeds from sales of securities available for sale		201			187			448
Proceeds from prepayments and maturities of securities available for sale		3,933			3,686			1,839
Purchases of investment securities		(7	)		(43	)		—
Proceeds from prepayments and maturities of investment securities		60			23			26
Purchases of other investments		(542	)		(445	)		(621	)
Proceeds from sales of other investments		234			280			301
Proceeds from prepayments and maturities of other investments		293			270			88
Net increase in loans, excluding acquisitions, sales and transfers		(2,384	)		(3,964	)		(5,876	)
Purchases of loans		(133	)		(42	)		(55	)
Proceeds from loan securitizations and sales		454			604			3,789
Purchases of premises and equipment		(120	)		(155	)		(102	)
Proceeds from sales of premises and equipment		6			12			7
Proceeds from sales of other real estate owned		33			67			75
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		121			(3,642	)		(3,962	)
FINANCING ACTIVITIES
Net increase in deposits		361			943			6,429
Net increase (decrease) in short-term borrowings		(1,780	)		1,955			(1,060	)
Net proceeds from issuance of long-term debt		3,016			3,048			3,687
Payments on long-term debt		(2,638	)		(3,187	)		(4,277	)
Purchases of treasury shares		(644	)		(229	)		(512	)
Net proceeds from issuance of common stock		244			129			160
Tax benefits in excess of recognized compensation cost for stock-based awards		28			—			—
Cash dividends paid		(557	)		(531	)		(508	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		(1,970	)		2,128			3,919
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		(844	)		654			(258	)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR		3,108			2,454			2,712
CASH AND DUE FROM BANKS AT END OF YEAR	$	2,264		$	3,108		$	2,454
Additional disclosures relative to cash flow:
Interest paid	$	2,704		$	1,737		$	1,143
Income taxes paid		467			195			102
Noncash items:
Loans transferred from portfolio to held for sale	$	2,474			—		$	1,737
Loans transferred to other real estate owned		72		$	47			81
Assets acquired		—			81			2,413
Liabilities assumed		—			7			1,109

See Notes to Consolidated Financial Statements.

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

KeyCorp, an Ohio corporation and bank holding company headquartered in Cleveland, Ohio, is one of the nation’s largest bank-based financial services companies. KeyCorp’s subsidiaries provide retail and commercial banking, commercial leasing, investment management, consumer finance, and investment banking products and services to individual, corporate and institutional clients through two major business groups: Community Banking and National Banking. As of December 31, 2006, KeyCorp’s banking subsidiaries operated 950 KeyCenters, a telephone banking call center services group and 2,050 ATMs in sixteen states.

As used in these Notes, KeyCorp refers solely to the parent company and Key refers to the consolidated entity consisting of KeyCorp and its subsidiaries.

USE OF ESTIMATES

Key’s accounting policies conform to U.S. generally accepted accounting principles and prevailing practices within the financial services industry. Management must make certain estimates and judgments when determining the amounts presented in Key’s consolidated financial statements and the related notes. If these estimates prove to be inaccurate, actual results could differ from those reported.

BASIS OF PRESENTATION

Consolidation. The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements include any voting rights entity in which Key has a controlling financial interest. In accordance with Financial Accounting Standards Board (“FASB”) Revised Interpretation No. 46, “Consolidation of Variable Interest Entities,” a variable interest entity (“VIE”) is consolidated if Key has a variable interest in the entity and is exposed to the majority of its expected losses and/or residual returns (i.e., Key is considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements and financial instruments. See Note 8 (“Loan Securitizations, Servicing and Variable Interest Entities”), which begins on page 83, for information on Key’s involvement with VIEs.

Management uses the equity method to account for unconsolidated investments in voting rights entities or VIEs in which Key has significant influence over operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not a controlling interest). Unconsolidated investments in voting rights entities or VIEs in which Key has a voting or economic interest of less than 20% generally are carried at cost. Investments held by KeyCorp’s broker/dealer and investment company subsidiaries (primarily principal investments) are carried at estimated fair value.

Qualifying special purpose entities (“SPEs”), including securitization trusts, established by Key under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” are not consolidated. Information on SFAS No. 140 is included in this note under the heading “Loan Securitizations” on page 69.

Reclassifications. Some previously reported results have been reclassified to conform to current reporting practices. The most significant of these reclassifications affected the composition of the loan portfolio. Specifically during the first quarter of 2006, Key reclassified certain loans from the “commercial lease financing” portfolio to the “commercial, financial and agricultural” portfolio to more accurately reflect the nature of these receivables. Prior period balances were not reclassified as the historical data was not available. The reclassification did not have any effect on Key’s total loans or net income.

BUSINESS COMBINATIONS

Key accounts for its business combinations using the purchase method of accounting. Under this method of accounting, the acquired company’s net assets are recorded at fair value at the date of acquisition and the results of operations of the acquired company are combined with Key’s results from that date forward. Purchase premiums and discounts, including intangible assets with finite lives, are amortized over the remaining useful lives of the related assets or liabilities. The difference between the purchase price and the fair value of the net assets acquired (including intangible assets with finite lives) is recorded as goodwill. Key’s accounting policy for intangible assets is summarized in this note under the heading “Goodwill and Other Intangible Assets” on page 70.

STATEMENTS OF CASH FLOW

Cash and due from banks are considered “cash and cash equivalents” for financial reporting purposes.

SECURITIES

Key classifies each security held into one of four categories: trading, available for sale, investment or other investments.

Trading account securities. These are debt and equity securities that Key purchases and holds with the intent of selling them in the near term. Trading account securities are reported at fair value ($912 million at December 31, 2006, and $850 million at December 31, 2005) and are included in “short-term investments” on the balance sheet. Realized and unrealized gains and losses on trading account securities are reported in “investment banking and capital markets income” on the income statement.

Securities available for sale. These are securities that Key intends to hold for an indefinite period of time and that may be sold in response to changes in interest rates, prepayment risk, liquidity needs or other factors. Securities available for sale, which include debt and marketable equity securities with readily determinable fair values, are reported at fair

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

value. Unrealized gains and losses (net of income taxes) deemed temporary are recorded in shareholders’ equity as a component of “accumulated other comprehensive loss” on the balance sheet. Unrealized losses on specific securities deemed to be “other-than-temporary” are included in “net securities gains (losses)” on the income statement, as are actual gains and losses resulting from the sales of specific securities. Additional information regarding unrealized gains and losses on debt and marketable equity securities with readily determinable fair values is included in Note 6 (“Securities”), which begins on page 80.

When Key retains an interest in loans it securitizes, it bears risk that the loans will be prepaid (which would reduce expected interest income) or not paid at all. Key accounts for these retained interests as debt securities and classifies them as available for sale.

“Other securities” held in the available-for-sale portfolio are primarily marketable equity securities.

Investment securities. These are debt securities that Key has the intent and ability to hold until maturity. Debt securities are carried at cost, adjusted for amortization of premiums and accretion of discounts using the interest method. This method produces a constant rate of return on the adjusted carrying amount. “Other securities” held in the investment securities portfolio are foreign bonds.

Other investments. Principal investments — investments in equity and mezzanine instruments made by Key’s Principal Investing unit —represent the majority of other investments. These securities include direct investments (investments made in a particular company), as well as indirect investments (investments made through funds that include other investors). Principal investments are predominantly made in privately-held companies and are carried at fair value ($830 million at December 31, 2006, and $800 million at December 31, 2005). Changes in estimated fair values, and actual gains and losses on sales of principal investments, are included in “other income” on the income statement.

In addition to principal investments, “other investments” include other equity and mezzanine instruments that do not have readily determinable fair values. These securities include certain real estate-related investments that are carried at estimated fair value, as well as other types of securities that generally are carried at cost. The carrying amount of the securities carried at cost is adjusted for declines in value that are considered to be other-than-temporary. These adjustments are included in “investment banking and capital markets income” on the income statement.

LOANS

Loans are carried at the principal amount outstanding, net of unearned income, including net deferred loan fees and costs. Key defers certain nonrefundable loan origination and commitment fees, and the direct costs of originating or acquiring loans. The net deferred amount is amortized over the estimated lives of the related loans as an adjustment to the yield.

Direct financing leases are carried at the aggregate of lease payments receivable plus estimated residual values, less unearned income and deferred initial direct costs. Unearned income on direct financing leases is amortized over the lease terms using a method that approximates the interest method. This method amortizes unearned income to produce a constant rate of return on the lease. Deferred initial direct costs are amortized over the lease term as an adjustment to the yield.

Leveraged leases are carried net of nonrecourse debt. Revenue on leveraged leases is recognized on a basis that produces a constant rate of return on the outstanding investment in the lease, net of related deferred tax liabilities, in the years in which the net investment is positive.

The residual value component of a lease represents the estimated fair value of the leased asset at the end of the lease term. Key relies on industry data, historical experience, independent appraisals and the experience of its equipment leasing asset management team to estimate residual values. The asset management team is familiar with the life cycle of the leased equipment and pending product upgrades and has insight into competing products due to the team’s relationships with a number of equipment vendors.

In accordance with SFAS No. 13, “Accounting for Leases,” residual values are reviewed at least annually to determine if there has been an other-than-temporary decline in value. This review is conducted using the same sources of knowledge as those described above. If a decline occurs and is considered to be other-than-temporary, the residual value is adjusted to its fair value. Impairment charges, as well as net gains or losses on sales of lease residuals, are included in “other income” on the income statement.

LOANS HELD FOR SALE

Key’s loans held for sale at December 31, 2006 and 2005, are disclosed in Note 7 (“Loans and Loans Held for Sale”), which begins on page 82. These loans, which management intends to sell, are carried at the lower of aggregate cost or fair value. Fair value is determined based on prevailing market prices for loans with similar characteristics. If a loan is transferred from the loan portfolio to the held for sale category, any writedown in the carrying amount of the loan at the date of transfer is recorded as a charge-off. Subsequent declines in fair value are recognized either as a charge-off or a charge to noninterest income, depending on the length of time the loan has been recorded as held for sale. When a loan is placed in the held for sale category, Key ceases to amortize the related deferred fees and costs. The remaining unamortized fees and costs are recognized as part of the cost basis of the loan at the time it is sold.

IMPAIRED AND OTHER NONACCRUAL LOANS

Key generally will stop accruing interest on a loan (i.e., designate the loan “nonaccrual”) when the borrower’s payment is 90 days or more past due, unless the loan is well-secured and in the process of collection. Also, loans are placed on nonaccrual status when payment is not past due but management has serious doubts about the borrower’s ability to comply with existing loan repayment terms. Once a loan is designated nonaccrual, the interest accrued but not collected generally is charged against the allowance for loan losses, and payments subsequently received generally are applied to principal. However, if management believes that all principal and interest on a nonaccrual loan ultimately are collectible, interest income may be recognized as received.

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Nonaccrual loans, other than smaller-balance homogeneous loans (i.e., home equity loans, loans to finance automobiles, etc.), are designated “impaired.” Impaired loans and other nonaccrual loans are returned to accrual status if management determines that both principal and interest are collectible. This generally requires a sustained period of timely principal and interest payments.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio at the balance sheet date. Management establishes the amount of the allowance for loan losses by analyzing the quality of the loan portfolio at least quarterly, and more often if deemed necessary.

Commercial loans are generally charged off in full or charged down to the fair value of the underlying collateral when the borrower’s payment is 180 days past due. Key’s charge-off policy for consumer loans is similar, but takes effect when the payments are 120 days past due. Home equity and residential mortgage loans generally are charged down to the fair value of the underlying collateral when payment is 180 days past due.

Management estimates the appropriate level of Key’s allowance for loan losses by applying historical loss rates to existing loans with similar risk characteristics. The loss rates used to establish the allowance may be adjusted to reflect management’s current assessment of many factors, including:

• changes in national and local economic and business conditions;

• changes in experience, ability and depth of Key’s lending management and staff, in lending policies, or in the mix and volume of the loan portfolio;

• trends in past due, nonaccrual and other loans; and

• external forces, such as competition, legal developments and regulatory guidelines.

For an impaired loan, special treatment exists if the outstanding balance is greater than $2.5 million, and the resulting allocation is deemed insufficient to cover the extent of the impairment. In such cases, a specific allowance is assigned to the loan. Management estimates the extent of impairment by comparing the carrying amount of the loan with the estimated present value of its future cash flows, including, if applicable, the fair value of any collateral. A specific allowance also may be assigned even when sources of repayment appear sufficient if management remains uncertain about whether the loan will be repaid in full.

ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS

During the first quarter of 2004, management reclassified $70 million of Key’s allowance for loan losses to a separate allowance for credit losses inherent in lending-related commitments, such as letters of credit and unfunded loan commitments. The separate allowance is included in “accrued expense and other liabilities” on the balance sheet and totaled $53 million at December 31, 2006, and $59 million at December 31, 2005. Management establishes the amount of this allowance by considering both historical trends and current market conditions quarterly, or more often if deemed necessary.

LOAN SECURITIZATIONS

Key sells education loans in securitizations. A securitization involves the sale of a pool of loan receivables to investors through either a public or private issuance (generally by a qualifying SPE) of asset-backed securities. Securitized loans are removed from the balance sheet, and a net gain or loss is recorded when the combined net sales proceeds and (if applicable) residual interests differ from the loans’ allocated carrying amount. Net gains and losses resulting from securitizations are recorded as one component of “net gains from loan securitizations and sales” on the income statement. A servicing asset also may be recorded if Key purchases or retains the right to service securitized loans and receives related fees that exceed the going market rate. Income earned under servicing or administration arrangements is recorded in “other income.”

In some cases, Key retains one or more residual interests in securitized loans in the form of an interest-only strip, residual asset, servicing asset or security. Servicing assets are accounted for under SFAS No. 140, as further described below under the heading “Servicing Assets.” All other retained interests are accounted for as debt securities and classified as either securities available for sale or trading account assets. Some of the assumptions used in determining the fair values of Key’s retained interests are disclosed in Note 8 (“Loan Securitizations, Servicing and Variable Interest Entities”), which begins on page 83.

In accordance with Revised Interpretation No. 46, qualifying SPEs, including securitization trusts, established by Key under SFAS No. 140, are exempt from consolidation. Information on Revised Interpretation No. 46 appears in this note under the heading “Basis of Presentation” on page 67.

Key conducts a quarterly review to determine whether all retained interests are valued appropriately in the financial statements. Management reviews the historical performance of each retained interest as well as the assumptions used to project future cash flows, and revises assumptions and recalculates the present values of cash flows as appropriate.

The present value of these cash flows is referred to as the “retained interest fair value.” Generally, if the carrying amount of a retained interest classified as securities available for sale exceeds its fair value, impairment is indicated and recognized in earnings. Conversely, if the fair value of the retained interest exceeds its carrying amount, the write-up to fair value is recorded in equity as a component of “accumulated other comprehensive income (loss),” and the yield on the retained interest is adjusted prospectively. For retained interests classified as trading account assets, any increase or decrease in the asset’s fair value is recognized in “other income” on the income statement.

SERVICING ASSETS

Servicing assets that Key purchases or retains in a sale or securitization of loans are reported at the lower of amortized cost or fair value ($282 million at December 31, 2006, and $275 million at December 31, 2005) and included in “accrued income and other assets” on the balance sheet. In accordance with SFAS No. 140, fair value initially is determined by allocating the previous carrying amount of the assets sold or securitized to the retained interests and the assets sold based on their relative fair values at the date of transfer. Fair value is determined by estimating the present value of future cash flows associated with

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

servicing the loans. The estimate is based on a number of assumptions, including the cost of servicing, discount rate, prepayment rate and default rate. The amortization of servicing assets is determined in proportion to, and over the period of, the estimated net servicing income and is recorded in “other income” on the income statement.

Servicing assets are evaluated quarterly for possible impairment by grouping the assets based on the types of loans serviced and their associated interest rates and estimating the fair value of each group. If the evaluation indicates that the carrying amount of the servicing assets exceeds their fair value, the carrying amount would be reduced through a charge to income in the amount of such excess.

PREMISES AND EQUIPMENT

Premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Management determines depreciation of premises and equipment using the straight-line method over the estimated useful lives of the particular assets. Leasehold improvements are amortized using the straight-line method over the terms of the leases. Accumulated depreciation and amortization on premises and equipment totaled $1.2 billion at December 31, 2006 and 2005.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the amount by which the cost of net assets acquired in a business combination exceeds their fair value. Other intangible assets primarily are customer relationships and the net present value of future economic benefits to be derived from the purchase of core deposits. Other intangible assets are amortized on either an accelerated or straight-line basis over periods ranging from three to thirty years. Goodwill and other intangible assets deemed to have indefinite lives are not amortized.

Under SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and certain intangible assets are subject to impairment testing, which must be conducted at least annually. Key’s reporting units for purposes of this testing are its major business groups: Community Banking and National Banking.

The first step in impairment testing is to determine the fair value of each reporting unit. If the carrying amount of a reporting unit exceeds its fair value, goodwill impairment may be indicated. In such a case, Key would estimate a purchase price for the reporting unit (representing the unit’s fair value) and then compare that hypothetical purchase price to the fair value of the unit’s assets (excluding goodwill) and liabilities. Any excess of the estimated purchase price over the fair value of the reporting unit’s assets and liabilities represents the implied fair value of goodwill. An impairment loss would be recognized as a charge to earnings to the extent the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of goodwill.

Key performs the goodwill impairment testing required by SFAS No. 142 in the fourth quarter of each year. Key’s annual goodwill impairment testing was performed as of October 1, 2006, and management determined that no impairment existed at that date. On December 1, Key announced that it sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business on November 29, and also announced that it had entered into a separate agreement to sell Champion’s loan origination platform. As a result, $170 million of goodwill related to the Champion Mortgage finance business was written off during the fourth quarter of 2006. During the fourth quarter of 2004, $55 million of goodwill related to Key’s nonprime indirect automobile lending business was written off.

INTERNALLY DEVELOPED SOFTWARE

Key relies on both company personnel and independent contractors to plan, develop, install, customize and enhance computer systems applications that support corporate and administrative operations. Software development costs, such as those related to program coding, testing, configuration and installation, are capitalized and included in “accrued income and other assets” on the balance sheet. The resulting asset ($115 million at December 31, 2006, and $131 million at December 31, 2005) is amortized using the straight-line method over its expected useful life (not to exceed five years). Costs incurred during the planning and post-development phases of an internal software project are expensed as incurred.

Software that is no longer used is written off to earnings immediately. When management decides to replace software, amortization of such software is accelerated to the expected replacement date.

DERIVATIVES USED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES

Key uses derivatives known as interest rate swaps and caps to hedge interest rate risk. These instruments modify the repricing characteristics of specified on-balance sheet assets and liabilities.

Key’s accounting policies related to derivatives reflect the accounting guidance in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as revised and further interpreted by SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” and other related accounting guidance. In accordance with this accounting guidance, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value.

Accounting for changes in fair value (i.e., gains or losses) of derivatives differs depending on whether the derivatives have been designated and qualify as part of a hedging relationship, and further, on the type of hedging relationship. For derivatives that are not designated as hedging instruments, the gain or loss is recognized immediately in earnings. A derivative that is designated and qualifies as a hedging instrument must be designated a fair value hedge, a cash flow hedge or a hedge of a net investment in a foreign operation. Key does not have any derivatives that hedge net investments in foreign operations.

“Effectiveness” measures the extent to which changes in the fair value of a derivative instrument offset changes in the fair value of the hedged item. If the relationship between the change in the fair value of the derivative instrument and the fair value of the hedged item falls within a range considered to be the industry norm, the hedge is considered “highly effective” and qualifies for hedge accounting. A hedge is “ineffective” if the offsetting difference between the fair values falls outside the acceptable range.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

A fair value hedge is used to limit exposure to changes in the fair value of existing assets, liabilities and firm commitments caused by changes in interest rates or other economic factors. Key recognizes the gain or loss on these derivatives, as well as the related gain or loss on the underlying hedged item, in earnings during the period in which the fair value changes. If a hedge is perfectly effective, the change in the fair value of the hedged item will be offset, resulting in no net effect on earnings.

A cash flow hedge is used to minimize the variability of future cash flows that is caused by changes in interest rates or other economic factors. The effective portion of a gain or loss on any cash flow hedge is reported as a component of “accumulated other comprehensive income (loss)” and reclassified into earnings in the same period or periods that the hedged transaction affects earnings. Any ineffective portion of the derivative gain or loss is recognized in earnings during the current period.

DERIVATIVES USED FOR CREDIT RISK MANAGEMENT PURPOSES

Key uses credit derivatives — primarily credit default swaps — to mitigate credit risk by transferring a portion of the risk associated with the underlying extension of credit to a third party, and to manage portfolio concentration and correlation risks. Key also provides credit protection to other lenders through the sale of credit default swaps.

These derivatives are recorded on the balance sheet at fair value, which is based on the creditworthiness of the borrowers. Similar to derivatives used for trading purposes, changes in fair value (including payments and receipts), as well as the premium paid or received for credit protection, are included in “investment banking and capital markets income” on the income statement.

DERIVATIVES USED FOR TRADING PURPOSES

Key also enters into derivative contracts to make a market for clients and for proprietary trading purposes. Derivatives used for trading purposes typically include financial futures, credit and energy derivatives, foreign exchange forward and spot contracts, written and purchased options (including currency options), and interest rate swaps, caps and floors.

All derivatives used for trading purposes are recorded at fair value. Fair value is determined by estimating the present value of future cash flows. Changes in fair value (including payments and receipts) are recorded in “investment banking and capital markets income” on the income statement.

GUARANTEES

Key’s accounting policies related to certain guarantees reflect the guidance in FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Based on this guidance, Key has recognized a liability, which is included in “accrued expense and other liabilities” on the balance sheet, for the fair value of its obligation under certain guarantees issued or modified on or after January 1, 2003.

If Key receives a fee for a guarantee requiring liability recognition, the amount of the fee represents the initial fair value of the “stand ready” obligation. If there is no fee, the fair value of the “stand ready” obligation is determined using expected present value measurement techniques, unless observable transactions for comparable guarantees are available. The subsequent accounting for these “stand ready” obligations depends on the nature of the underlying guarantees. Key accounts for its release from risk under a particular guarantee when the guarantee expires or is settled, or by a systematic and rational amortization method, depending on the risk profile of the guarantee.

Additional information regarding guarantees is included in Note 18 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Guarantees” on page 98.

REVENUE RECOGNITION

Key recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectibility is reasonably assured. Key’s principal source of revenue is interest income. This revenue is recognized on an accrual basis primarily according to nondiscretionary formulas in written contracts such as loan agreements or securities contracts.

STOCK-BASED COMPENSATION

Prior to January 1, 2006, Key used the fair value method of accounting as outlined in SFAS No. 123, “Accounting for Stock-Based Compensation.” Key voluntarily adopted this method of accounting effective January 1, 2003, when it transitioned from the accounting under Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees.” Key opted to apply the new rules of SFAS No. 123 prospectively to all awards as permitted under SFAS No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure.”

Effective January 1, 2006, Key adopted SFAS No. 123R, “Share-Based Payment,” using the modified prospective method of transition. SFAS No. 123R, which replaces SFAS No. 123, requires stock-based compensation to be measured using the fair value method of accounting, with the measured cost to be recognized over the period during which the recipient is required to provide service in exchange for the award. As of the effective date, Key did not have any nonvested awards outstanding that had not previously been accounted for using the fair value method. Consequently, the adoption of SFAS No. 123R did not have a significant impact on Key’s financial condition or results of operations. However, the adoption of the new accounting standard did prompt three other changes in Key’s accounting, as discussed below.

First, SFAS No. 123R changes the manner of accounting for forfeited stock-based awards. Under the new standard, companies are no longer permitted to account for forfeitures as they occur. Instead, companies that have been using this alternative method of accounting for forfeitures must now estimate expected forfeitures at the date the awards are granted and record compensation expense only for those that are expected to vest. As of the effective date, companies must estimate expected forfeitures and reduce their related compensation obligation for expense previously recognized in the financial statements. The after-tax amount of this reduction must be presented on the income statement as a cumulative effect of a change in accounting principle. Key’s cumulative after-tax adjustment increased first quarter 2006 earnings by $5 million, or $.01 per diluted common share.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Second, prior to the adoption of SFAS No. 123R, Key recognized total compensation cost for stock-based, mandatory deferred incentive compensation awards in the plan year that the performance-related services necessary to earn the awards were rendered. Effective January 1, 2006, Key began recognizing compensation cost for these awards using the accelerated method of amortization over a period of approximately four years (the current year performance period and three-year vesting period, which starts generally in the first quarter following the performance period). The impact of this change on Key’s earnings was not material.

Third, prior to the adoption of SFAS No. 123R, Key presented all tax benefits of deductions resulting from the exercise of stock options or the issuance of shares under other stock-based compensation programs as operating cash flows in the statement of cash flow. SFAS No. 123R requires the cash flows resulting from the tax benefits of deductions in excess of the compensation cost recognized for stock-based awards to be classified as financing cash flows.

Generally, employee stock options granted by Key become exercisable at the rate of 33-1/3% per year beginning one year from their grant date, and expire no later than ten years from their grant date. Key recognizes stock-based compensation expense for stock options with graded vesting using an accelerated method of amortization.

Key uses shares repurchased from time-to-time under a repurchase program (treasury shares) for share issuances under all stock-based compensation programs other than the discounted stock purchase plan. Shares issued under the stock purchase plan are purchased on the open market.

SFAS No. 123R requires companies like Key that have used the intrinsic value method to account for employee stock options as outlined in APB No. 25 to provide pro forma disclosures of the net income and earnings per share effect of accounting for stock options using the fair value method. Management estimates the fair value of options granted using the Black-Scholes option-pricing model as further described in Note 15 (“Stock-Based Compensation”), which begins on page 89. The pro forma effect of applying the fair value method of accounting to all forms of stock-based compensation (primarily stock options, restricted stock, performance shares, discounted stock purchase plans and certain deferred compensation-related awards) for the years ended December 31, 2005 and 2004, is shown in the following table and would, if recorded, have been included in “personnel expense” on the income statement.

Year ended December 31,
in millions, except per share amounts	2005		2004
Net income, as reported	$	1,129	$	954
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects:
Stock options expense		20		15
All other stock-based employee compensation expense		15		11
		35		26
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects:
Stock options expense		21		21
All other stock-based employee compensation expense		15		11
		36		32
Net income — pro forma	$	1,128	$	948
Per common share:
Net income	$	2.76	$	2.32
Net income — pro forma		2.76		2.31
Net income assuming dilution		2.73		2.30
Net income assuming dilution — pro forma		2.73		2.28

As shown in the preceding table, the pro forma effect is calculated as the after-tax difference between: (i) compensation expense included in each year’s reported net income in accordance with the prospective application transition provisions of SFAS No. 148, and (ii) compensation expense that would have been recorded had all existing forms of stock-based compensation been accounted for under the fair value method of accounting.

MARKETING COSTS

Key expenses all marketing-related costs, including advertising costs, as incurred.

ACCOUNTING PRONOUNCEMENTS ADOPTED IN 2006

Employers’ accounting for defined benefit pension and other postretirement plans. In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” which requires an employer to recognize an asset or liability for the overfunded or underfunded status, respectively, of its defined benefit plans. The overfunded or underfunded status is to be measured solely by the difference between the fair value of plan assets and the projected benefit obligation. In addition, any change in a plan’s funded status must be recognized in comprehensive income in the year in which it occurs. Most requirements of SFAS No. 158 are

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

effective for fiscal years ending after December 15, 2006 (effective December 31, 2006, for Key). However, the requirement to measure plan assets and liabilities as of the end of an employer’s fiscal year will not be effective until fiscal years ending after December 15, 2008 (effective December 31, 2008, for Key). As a result of adopting this guidance, Key recorded an after-tax charge of $154 million to the accumulated other comprehensive loss component of shareholders’ equity for the year ended December 31, 2006. For more information about Key’s defined benefit plans, see Note 16 (“Employee Benefits”), which begins on page 92.

Stock-based compensation. As discussed under the heading “Stock-Based Compensation” on page 71, effective January 1, 2006, Key adopted SFAS No. 123R, which replaced SFAS No. 123. This new accounting standard changes the way stock-based compensation is measured and recognized in the financial statements, and the manner of accounting for forfeited stock-based awards. SFAS No. 123R also requires additional disclosures pertaining to stock-based compensation plans. Key’s required disclosures are presented under the heading referred to above and in Note 15 (“Stock-Based Compensation”), which begins on page 89.

Consolidation of limited partnerships. In June 2005, the FASB ratified Emerging Issues Task Force Issue No. 04-5, “Determining Whether a General Partner, or the General Partners of a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.” Issue No. 04-5 initially was effective for all limited partnerships created or modified after June 29, 2005, and became effective for all other limited partnerships on January 1, 2006. Adoption of this guidance did not have a material effect on Key’s financial condition or results of operations.

Accounting changes and error corrections. In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” This guidance requires retrospective application for the reporting of voluntary changes in accounting principles and changes required by an accounting pronouncement when transition provisions are not specified. SFAS No. 154 was effective for accounting changes and corrections of errors made after December 31, 2005. Adoption of this guidance did not have a material effect on Key’s financial condition or results of operations.

ACCOUNTING PRONOUNCEMENTS PENDING ADOPTION

Fair value measurements. In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This guidance applies only when other guidance requires or permits assets or liabilities to be measured at fair value; it does not expand the use of fair value in any new circumstances. SFAS No. 157 will be effective for fiscal years beginning after November 15, 2007 (effective January 1, 2008, for Key). Management is evaluating the potential effect this guidance may have on Key’s financial condition or results of operations.

Accounting for uncertain tax positions. In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the application of SFAS No. 109, “Accounting for Income Taxes,” by defining the minimum threshold that a tax position must meet before any associated benefit may be recognized in a company’s financial statements. This interpretation also provides guidance on measurement and derecognition of tax benefits, and requires expanded disclosures. The interpretation will be effective for fiscal years beginning after December 15, 2006 (effective January 1, 2007, for Key). Management has concluded that adoption of this guidance will not have a material impact on Key’s financial condition or results of operations. Additional information relating to this interpretation is included in Note 17 (“Income Taxes”), which begins on page 96.

Accounting for leveraged leases. In July 2006, the FASB issued Staff Position No. 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” which provides additional guidance on the application of SFAS No. 13, “Accounting for Leases.” This guidance will affect when earnings from leveraged lease transactions would be recognized when there are changes or projected changes in the timing of cash flows, including changes due to or expected to be due to settlements of tax matters. Previously, leveraged lease transactions were required to be recalculated only when there was an actual change in the total cash flows. This guidance will be effective for fiscal years beginning after December 15, 2006 (effective January 1, 2007, for Key). Management has concluded that adoption of this guidance will result in a cumulative after-tax charge of approximately $52 million to Key’s retained earnings. However, future earnings are expected to increase over the remaining term of the affected leases by a similar amount.

Accounting for servicing of financial assets. In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets,” which requires that servicing assets and liabilities be initially measured at fair value, if practicable. SFAS No. 156 also requires the subsequent remeasurement of servicing assets and liabilities at each reporting date using one of two methods: amortization over the servicing period or measurement at fair value. This guidance will be effective for fiscal years beginning after September 15, 2006 (effective January 1, 2007, for Key). Adoption of this guidance did not have a material effect on Key’s financial condition or results of operations.

Accounting for certain hybrid financial instruments. In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments.” A hybrid financial instrument is one in which a derivative is embedded. SFAS No. 155 will permit fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require the financial instrument and derivative to be separated. This guidance also will eliminate the prohibition on a qualifying SPE from holding certain derivative financial instruments. SFAS No. 155 will be effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006 (effective January 1, 2007, for Key). Adoption of this guidance did not have a material effect on Key’s financial condition or results of operations.

73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

2. EARNINGS PER COMMON SHARE

Key’s basic and diluted earnings per common share are calculated as follows:

Year ended December 31,
dollars in millions, except per share amounts	2006			2005		2004
EARNINGS
Income from continuing operations before cumulative effect of accounting change	$	1,193		$	1,090	$	907
Income (loss) from discontinued operations, net of taxes		(143	)		39		47
Income before cumulative effect of accounting change		1,050			1,129		954
Net income		1,055			1,129		954
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)		404,490			408,981		410,585
Effect of dilutive common stock options and other stock awards (000)		5,732			5,033		4,845
Weighted-average common shares and potential common shares outstanding (000)		410,222			414,014		415,430
EARNINGS PER COMMON SHARE
Income per common share from continuing operations before cumulative effect of accounting change	$	2.95		$	2.67	$	2.21
Income (loss) per common share from discontinued operations		(.35	)		.10		.11
Income per common share before cumulative effect of accounting change		2.60			2.76		2.32
Net income per common share		2.61			2.76		2.32
Income per common share from continuing operations before cumulative effect of accounting change — assuming dilution		2.91			2.63		2.18
Income (loss) per common share from discontinued operations — assuming dilution		(.35	)		.09		.11
Income per common share before cumulative effect of accounting change — assuming dilution		2.56			2.73		2.30
Net income per common share — assuming dilution		2.57			2.73		2.30

During the years ended December 31, 2006, 2005 and 2004, certain weighted-average options to purchase common shares were outstanding but not included in the calculation of “net income per common share —assuming dilution” during any quarter in which the exercise prices of the options were greater than the average market price of the common shares because including the options in the calculations would have been antidilutive. The calculations for the full years shown in the following table were made by averaging the results of the four quarterly calculations for each year.

Year ended December 31,	2006		2005		2004
Weighted-average options excluded from the calculation of net income per common share — assuming dilution		384,907		4,548,100		4,451,498
Exercise prices for weighted-average options excluded	$36.22 to $50.00		$32.84 to $50.00		$30.33 to $50.00

In addition, during the years ended December 31, 2006, 2005 and 2004, weighted-average contingently issuable performance-based awards for 1,700,305, 966,287 and 430,647 common shares, respectively, were outstanding, but not included in the calculation of “net income per common share — assuming dilution.” These awards vest contingently upon Key’s achievement of certain cumulative three-year financial performance targets and were not included in the calculation because the measuring time period had not yet expired.

74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

3. ACQUISITIONS AND DIVESTITURES

Acquisitions completed and divestitures completed or announced by Key during the past three years are summarized below. In the case of each acquisition, the terms of the transaction were not material.

ACQUISITIONS

Austin Capital Management, Ltd.

On April 1, 2006, Key acquired Austin Capital Management, Ltd., an investment firm headquartered in Austin, Texas with approximately $900 million in assets under management at the date of acquisition. Austin specializes in selecting and managing hedge fund investments for its principally institutional customer base.

ORIX Capital Markets, LLC

On December 8, 2005, Key acquired the commercial mortgage-backed securities servicing business of ORIX Capital Markets, LLC (“ORIX”), headquartered in Dallas, Texas. ORIX had a servicing portfolio of approximately $27 billion at the date of acquisition.

Malone Mortgage Company

On July 1, 2005, Key acquired Malone Mortgage Company, a mortgage company headquartered in Dallas, Texas that serviced approximately $1.3 billion in loans at the date of acquisition.

American Express Business Finance Corporation

On December 1, 2004, Key acquired American Express Business Finance Corporation (“AEBF”), the equipment leasing unit of American Express’ small business division. AEBF had commercial loan and lease financing receivables of approximately $1.5 billion at the date of acquisition.

EverTrust Financial Group, Inc.

On October 15, 2004, Key acquired EverTrust Financial Group, Inc. (“EverTrust”), the holding company for EverTrust Bank, a state-chartered bank headquartered in Everett, Washington. EverTrust had assets of approximately $780 million and deposits of approximately $570 million at the date of acquisition. On November 12, 2004, EverTrust Bank was merged into KeyBank National Association (“KBNA”).

Sterling Bank & Trust FSB

Effective July 22, 2004, Key purchased ten branch offices and approximately $380 million of deposits of Sterling Bank & Trust FSB, a federally-chartered savings bank headquartered in Southfield, Michigan.

DIVESTITURE

Champion Mortgage

On November 29, 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business to a wholly-owned subsidiary of HSBC Finance Corporation for cash proceeds of $2.5 billion. The loan portfolio totaled $2.5 billion at the date of sale. Key also announced that it had entered into a separate agreement to sell Champion’s loan origination platform to an affiliate of Fortress Investment Group LLC, a global alternative investment and asset management firm. The sale of the platform is expected to close in the first quarter of 2007.

As a result of these actions, Key has applied discontinued operations accounting to this business for all periods presented in this report. The results of the discontinued Champion Mortgage finance business are presented on one line as “income (loss) from discontinued operations, net of taxes” in the Consolidated Statements of Income on page 64. The components of income (loss) from discontinued operations are as follows:

Year ended December 31,
in millions	2006			2005		2004
Income, net of taxes of $13, $23 and $29a	$	22		$	39	$	47
Write-off of goodwill		(170	)		—		—
Gain on disposal, net of taxes of $8		14			—		—
Disposal transaction costs, net of taxes of ($5)		(9	)		—		—
Income (loss) from discontinued operations	$	(143	)	$	39	$	47

^a Includes after-tax charges of $65 million for 2006, $63 million for 2005 and $47 million for 2004 determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support Champion’s operations.

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

The discontinued assets and liabilities of Champion Mortgage included in the Consolidated Balance Sheets on page 63 are as follows:

December 31,
in millions	2006		2005
Cash and due from banks		—	$	2
Short-term investments		—		10
Loans	$	10		2,461
Loans held for sale		179		—
Accrued income and other assets		22		242
Total assets	$	211	$	2,715
Deposits	$	88	$	17
Accrued expense and other liabilities		17		11
Total liabilities	$	105	$	28

DIVESTITURE PENDING AS OF DECEMBER 31, 2006

McDonald Investments branch network

On February 9, 2007, McDonald Investments Inc., a wholly-owned subsidiary of KeyCorp, sold its branch network, which includes approximately 570 financial advisors and field support staff, and certain fixed assets, to UBS Financial Services Inc., a subsidiary of UBS AG. In the transaction, Key received cash proceeds of approximately $219 million which may be subject to further adjustment under the terms of the sales agreement. Key has retained the corporate and institutional businesses, including Institutional Equities and Equity Research, Debt Capital Markets and Investment Banking. In addition, KBNA will continue the Wealth Management, Trust and Private Banking businesses.

4. LINE OF BUSINESS RESULTS

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, brokerage, 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 the owner occupies less than 60% of the premises).

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 and National Home Equity.

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.

National Home Equity works with home improvement contractors to provide home equity and home improvement financing solutions. On November 29, 2006, Key sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business, a separate component of National Home Equity, and announced a separate agreement to sell Champion’s loan origination platform to another party. The sale of the origination platform is expected to close in the first quarter of 2007. Additional information related to these transactions is included in Note 3 (“Acquisitions and Divestitures”) under the heading “Divestiture” on page 75.

OTHER SEGMENTS

Other Segments consist of Corporate Treasury and Key’s Principal Investing unit.

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

RECONCILING ITEMS

Total assets included under “Reconciling Items” primarily represent the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling Items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

The table that spans pages 78 and 79 shows selected financial data for each major business group for the years ended December 31, 2006, 2005 and 2004. This table is accompanied by supplementary information for each of the lines of business that make up these groups. The information was derived from the internal financial reporting system that management uses to monitor and manage Key’s financial performance. U.S. generally accepted accounting principles (“GAAP”) guide financial accounting, but there is no authoritative guidance for “management accounting” — the way management uses its judgment and experience to make reporting decisions. Consequently, the line of business results Key reports may not be comparable with line of business results presented by other companies.

The selected financial data are based on internal accounting policies designed to compile results on a consistent basis and in a manner that reflects the underlying economics of the businesses. According to our policies:

• Net interest income is determined by assigning a standard cost for funds used to assets or a standard credit for funds provided to liabilities based on their assumed maturity, prepayment and/or repricing characteristics. The net effect of this funds transfer pricing is charged to the lines of business based on the total loan and deposit balances of each line.

• Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent to which each line actually uses the services.

• Key’s consolidated provision for loan losses is allocated among the lines of business primarily based on their actual net charge-offs, adjusted periodically for loan growth and changes in risk profile. The level of the consolidated provision is based on the methodology that management uses to estimate Key’s consolidated allowance for loan losses. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan Losses” on page 69.

• Income taxes are allocated based on the statutory federal income tax rate of 35% (adjusted for tax-exempt interest income, income from corporate-owned life insurance and tax credits associated with investments in low-income housing projects) and a blended state income tax rate (net of the federal income tax benefit) of 2.5%.

• Capital is assigned based on management’s assessment of economic risk factors (primarily credit, operating and market risk) directly attributable to each line.

Developing and applying the methodologies that management uses to allocate items among Key’s lines of business is a dynamic process. Accordingly, financial results may be revised periodically to reflect accounting enhancements, changes in the risk profile of a particular business or changes in Key’s organizational structure.

Effective January 1, 2006, Key reorganized and renamed its major business groups and some of its lines of business. The Community Banking group now includes Key businesses that operate primarily within our KeyCenter (branch) network. This group’s activities are conducted through two primary lines of business: Regional Banking and Commercial Banking. Key’s other major business group, National Banking, includes those corporate and consumer business units that operate both within and outside of the branch network to serve customers across the country and internationally through four primary lines of business: Real Estate Capital, Equipment Finance, Institutional and Capital Markets, and Consumer Finance. These changes are reflected in the financial data reported for all periods presented in the line of business tables.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Year ended December 31,	Community Banking									National Banking
dollars in millions	2006			2005			2004			2006			2005			2004
SUMMARY OF OPERATIONS
Net interest income (TE)	$	1,750		$	1,701		$	1,580		$	1,406		$	1,282		$	1,176
Noninterest income		892			888			928			1,079			992			841
Total revenue (TE)a		2,642			2,589			2,508			2,485			2,274			2,017
Provision for loan losses		95			108			125			55			35			60
Depreciation and amortization expense		148			144			141			246			212			257
Other noninterest expense		1,716			1,665			1,584			1,062			1,013			901
Income (loss) from continuing operations before income taxes and cumulative effect of accounting change (TE)		683			672			658			1,122			1,014			799
Allocated income taxes and TE adjustments		256			252			246			421			381			320
Income (loss) from continuing operations before cumulative effect of accounting change		427			420			412			701			633			479
Income (loss) from discontinued operations, net of taxes		—			—			—			(143	)		39			47
Income (loss) before cumulative effect of accounting change		427			420			412			558			672			526
Cumulative effect of accounting change, net of taxes		—			—			—			—			—			—
Net income (loss)	$	427		$	420		$	412		$	558		$	672		$	526
Percent of consolidated income from continuing operations		36	%		39	%		45	%		59	%		58	%		53	%
Percent of total segments income from continuing operations		37			37			44			60			57			51
AVERAGE BALANCESc
Loans and leases	$	26,728		$	27,058		$	26,243		$	37,827		$	34,403		$	31,314
Total assetsa		29,669			29,995			29,185			48,172			44,008			39,924
Deposits		46,725			44,343			41,721			10,874			7,627			6,047
OTHER FINANCIAL DATA
Expenditures for additions to long-lived assetsa,c	$	69		$	82		$	211		$	32		$	31		$	168
Net loan charge-offs		99			114			174			71			201			257
Return on average allocated equityc		18.50	%		18.22	%		18.43	%		18.76	%		18.03	%		14.58	%
Return on average allocated equity		18.50			18.22			18.43			14.01			17.76			14.76
Average full-time equivalent employees		8,962			8,704			8,961			4,520			4,477			4,176

a	Substantially all revenue generated by Key’s major business groups is derived from clients resident in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software and goodwill held by Key’s major business groups are located in the United States.
b	“Other noninterest expense” includes a $30 million ($19 million after tax) charge recorded during the first quarter of 2005 to correct the accounting for rental expense associated with operating leases from an escalating to a straight-line basis.
c	From continuing operations.

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

SUPPLEMENTARY INFORMATION (COMMUNITY BANKING LINES OF BUSINESS)

Year ended December 31,	Regional Banking									Commercial Banking
dollars in millions	2006			2005			2004			2006			2005			2004
Total revenue (TE)	$	2,246		$	2,192		$	2,158		$	396		$	397		$	350
Provision for loan losses		80			91			102			15			17			23
Noninterest expense		1,666			1,616			1,550			198			193			175
Net income		313			303			316			114			117			96
Average loans and leases		18,712			19,129			19,103			8,016			7,929			7,140
Average deposits		43,105			40,870			38,811			3,620			3,473			2,910
Net loan charge-offs		81			96			109			18			18			65
Return on average allocated equity		19.71	%		19.08	%		20.91	%		15.83	%		16.32	%		13.24	%
Average full-time equivalent employees		8,642			8,385			8,658			320			319			303

TE = Taxable Equivalent

78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Other Segments								Total Segments									Reconciling Items									Key
2006		2005			2004			2006			2005			2004			2006			2005			2004			2006			2005			2004
$ (113	)	$	(107	)	$	(126	)	$	3,043		$	2,876		$	2,630		$	(125	)	$	(99	)	$	(80	)	$	2,918		$	2,777		$	2,550
141			176			152			2,112			2,056			1,921			15			11			4			2,127			2,067			1,925
28			69			26			5,155			4,932			4,551			(110	)		(88	)		(76	)		5,045			4,844			4,475
—			—			—			150			143			185			—			—			—			150			143			185
—			—			—			394			356			398			—			—			—			394			356			398
28			30			27			2,806			2,708			2,512			(51	)		(10	)b		(26	)		2,755			2,698			2,486
—			39			(1	)		1,805			1,725			1,456			(59	)		(78	)		(50	)		1,746			1,647			1,406
(41	)		(28	)		(44	)		636			605			522			(83	)		(48	)		(23	)		553			557			499
41			67			43			1,169			1,120			934			24			(30	)		(27	)		1,193			1,090			907
—			—			—			(143	)		39			47			—			—			—			(143	)		39			47
41			67			43			1,026			1,159			981			24			(30	)		(27	)		1,050			1,129			954
—			—			—			—			—			—			5			—			—			5			—			—
$41		$	67		$	43		$	1,026		$	1,159		$	981		$	29		$	(30	)	$	(27	)	$	1,055		$	1,129		$	954
3	%		6	%		5	%		98	%		103	%		103	%		2	%		(3	)%		(3	)%		100	%		100	%		100	%
3			6			5			100			100			100			N/A			N/A			N/A			N/A			N/A			N/A
$298		$	392		$	522		$	64,853		$	61,853		$	58,079		$	143		$	144		$	147		$	64,996		$	61,997		$	58,226
11,624			11,668			11,781			89,465			85,671			80,890			2,237			2,238			2,399			91,702			87,909			83,289
1,890			3,280			2,591			59,489			55,250			50,359			(186	)		(204	)		(169	)		59,303			55,046			50,190
—			—			—		$	101		$	113		$	379		$	104		$	58		$	106		$	205		$	171		$	485
—			—			—			170			315			431			—			—			—			170			315			431
N/M			N/M			N/M			18.03	%		17.94	%		15.73	%		N/M			N/M			N/M			15.43	%		14.88	%		13.07	%
N/M			N/M			N/M			15.25			17.79			15.78			N/M			N/M			N/M			13.64			15.42			13.75
40			39			37			13,522			13,220			13,174			6,484			6,265			6,402			20,006			19,485			19,576

SUPPLEMENTARY INFORMATION (NATIONAL BANKING LINES OF BUSINESS)

Year ended December 31,	Real Estate Capital									Equipment Finance									Institutional and Capital Markets									Consumer Finance
dollars in millions	2006			2005			2004			2006			2005			2004			2006			2005			2004			2006			2005			2004
Total revenue (TE)	$	686		$	552		$	412		$	543		$	505		$	411		$	799		$	712		$	713		$	457		$	505		$	481
Provision for loan losses		27			3			(8	)		23			6			21			(10	)		1			(19	)		15			25			66
Noninterest expense		273			234			182			317			300			243			466			410			414			252			281			319
Income from continuing operations		241			197			149			127			124			92			214			188			198			119			124			40
Net income (loss)		241			197			149			127			124			92			214			188			198			(24	)		163			87
Average loans and leasesa		12,745			10,931			7,946			9,943			9,110			7,290			7,573			7,677			6,756			7,566			6,685			9,322
Average loans held for salea		856			476			366			20			—			—			275			18			—			3,010			3,135			2,135
Average depositsa		3,596			1,955			1,304			16			13			12			6,566			5,032			4,221			696			627			510
Net loan charge-offs (recoveries)		12			7			7			32			146			27			(5	)		5			26			32			43			197
Return on average allocated equitya		21.35	%		19.74	%		17.37	%		14.96	%		15.88	%		17.62	%		19.45	%		17.46	%		17.82	%		18.06	%		18.99	%		5.04	%
Return on average allocated equity		21.35			19.74			17.37			14.96			15.88			17.62			19.45			17.46			17.82			(2.65	)		17.58			8.11
Average full-time equivalent employees		972			804			680			929			979			664			1,272			1,222			1,214			1,347			1,472			1,618

a	From continuing operations.
TE = Taxable Equivalent

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

5. RESTRICTIONS ON CASH, DIVIDENDS AND LENDING ACTIVITIES

Federal law requires depository institutions to maintain a prescribed amount of cash or noninterest-bearing balances with the Federal Reserve Bank. KBNA, KeyCorp’s bank subsidiary, maintained average reserve balances aggregating $319 million in 2006 to fulfill these requirements.

KeyCorp’s principal source of cash flow to pay dividends on its common shares, to service its debt and to finance corporate operations is capital distributions from KBNA and other subsidiaries. Federal banking law limits the amount of capital distributions that national banks can make to their holding companies without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several factors, including net profits (as defined by statute) for the two previous calendar years and for the current year up to the date of dividend declaration.

During 2006, KBNA paid KeyCorp a total of $1.2 billion in dividends, and nonbank subsidiaries paid a total of $11 million. As of the close of business on December 31, 2006, KBNA had an additional $68 million available to pay dividends to KeyCorp without prior regulatory approval and without affecting its status as “well-capitalized” under the FDIC-defined capital categories.

Federal law also restricts loans and advances from bank subsidiaries to their parent companies (and to nonbank subsidiaries of their parent companies), and requires those transactions to be secured.

6. SECURITIES

The amortized cost, unrealized gains and losses, and approximate fair value of Key’s securities available for sale and investment securities were as follows:

December 31,	2006								2005
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
in millions	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations	$	94		—		—	$	94	$	267	$	1		—	$	268
States and political subdivisions		14	$	1		—		15		17		1		—		18
Collateralized mortgage obligations		7,098		13	$	110		7,001		6,455		2	$	159		6,298
Other mortgage-backed securities		336		2		4		334		233		5		4		234
Retained interests in securitizations		151		57		—		208		115		67		—		182
Other securities		165		10		—		175		261		8		—		269
Total securities available for sale	$	7,858	$	83	$	114	$	7,827	$	7,348	$	84	$	163	$	7,269
INVESTMENT SECURITIES
States and political subdivisions	$	20	$	1		—	$	21	$	35	$	1		—	$	36
Other securities		21		—		—		21		56		—		—		56
Total investment securities	$	41	$	1		—	$	42	$	91	$	1		—	$	92

When Key retains an interest in loans it securitizes, it bears risk that the loans will be prepaid (which would reduce expected interest income) or not paid at all. Key accounts for these retained interests as debt securities and classifies them as available for sale.

“Other securities” held in the available-for-sale portfolio are primarily marketable equity securities. “Other securities” held in the investment securities portfolio are foreign bonds.

Realized gains and losses related to securities available for sale were as follows:

Year ended December 31,
in millions	2006		2005		2004
Realized gains	$	137	$	13	$	43
Realized losses		136		12		39
Net securities gains	$	1	$	1	$	4

80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

The following table summarizes Key’s securities that were in an unrealized loss position.

	Duration of Unrealized Loss Position
	Less Than 12 Months				12 Months or Longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
in millions	Value		Losses		Value		Losses		Value		Losses
DECEMBER 31, 2006
Securities available for sale:
Agency collateralized mortgage obligations	$	766	$	1	$	4,354	$	109	$	5,120	$	110
Other mortgage-backed securities		138		1		86		3		224		4
Total temporarily impaired securities	$	904	$	2	$	4,440	$	112	$	5,344	$	114
DECEMBER 31, 2005
Securities available for sale:
Collateralized mortgage obligations:
Commercial mortgage-backed securities		—		—	$	14	$	12	$	14	$	12
Agency collateralized mortgage obligations	$	1,677	$	22		4,265		125		5,942		147
Other mortgage-backed securities		32		1		76		3		108		4
Total temporarily impaired securities	$	1,709	$	23	$	4,355	$	140	$	6,064	$	163

Of the $114 million of gross unrealized losses at December 31, 2006, $110 million relates to fixed-rate agency collateralized mortgage obligations, which Key invests in as part of an overall asset/liability management strategy. Since these instruments have fixed interest rates, their fair value is sensitive to movements in market interest rates. During 2006, interest rates generally increased, so the fair value of these 151 instruments, which had a weighted-average maturity of 2.4 years at December 31, 2006, remained below their amortized cost.

Other mortgage-backed securities consist of fixed-rate mortgage-backed securities issued primarily by the Government National Mortgage Association, with gross unrealized losses of $4 million at December 31, 2006. Similar to the fixed-rate securities discussed above, these instruments are sensitive to movements in interest rates. During 2006, there was a general increase in interest rates, which caused the fair value of these 91 instruments, which had a weighted-average maturity of 5.0 years at December 31, 2006, to remain below their amortized cost.

The unrealized losses discussed above are considered temporary since Key has the ability and intent to hold the securities until they mature or recover in value. Accordingly, these investments have not been reduced to their fair value through the income statement.

At December 31, 2006, securities available for sale and investment securities with an aggregate amortized cost of approximately $6.9 billion were pledged to secure public and trust deposits, securities sold under repurchase agreements, and for other purposes required or permitted by law.

The following table shows securities by remaining maturity. Collateralized mortgage obligations, other mortgage-backed securities and retained interests in securitizations — all of which are included in the securities available-for-sale portfolio — are presented based on their expected average lives. The remaining securities, including all of those in the investment securities portfolio, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

	Securities				Investment
	Available for Sale				Securities
December 31, 2006	Amortized		Fair		Amortized		Fair
in millions	Cost		Value		Cost		Value
Due in one year or less	$	735	$	727	$	12	$	12
Due after one through five years		6,903		6,880		29		29
Due after five through ten years		182		183		—		1
Due after ten years		38		37		—		—
Total	$	7,858	$	7,827	$	41	$	42

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

7. LOANS AND LOANS HELD FOR SALE

Key’s loans by category are summarized as follows:

December 31,
in millions	2006		2005
Commercial, financial and agriculturala	$	21,412	$	20,579
Commercial real estate:
Commercial mortgage		8,426		8,360
Construction		8,209		7,109
Total commercial real estate loans		16,635		15,469
Commercial lease financinga		10,259		10,352
Total commercial loans		48,306		46,400
Real estate — residential mortgage		1,442		1,458
Home equityb		10,826		13,488
Consumer — direct		1,536		1,794
Consumer — indirect:
Marine		3,077		2,715
Other		639		623
Total consumer — indirect loans		3,716		3,338
Total consumer loans		17,520		20,078
Total loans	$	65,826	$	66,478

Key uses interest rate swaps to manage interest rate risk; these swaps modify the repricing characteristics of certain loans. For more information about such swaps, see Note 19 (“Derivatives and Hedging Activities”), which begins on page 100.

a	On March 31, 2006, Key reclassified $792 million of loans from the commercial lease financing component of the commercial loan portfolio to the commercial, financial and agricultural component to more accurately reflect the nature of these receivables. Balances presented for prior periods were not reclassified as the historical data was not available.
b	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 an expected sale of the Champion Mortgage finance business.

Key’s loans held for sale by category are summarized as follows:

December 31,
in millions	2006		2005
Commercial, financial and agricultural	$	47	$	85
Real estate — commercial mortgage		946		525
Real estate — construction		36		51
Commercial lease financing		3		—
Real estate — residential mortgage		21		11
Home equity		180		—
Education		2,390		2,687
Automobile		14		22
Total loans held for sale	$	3,637	$	3,381

Commercial and consumer lease financing receivables primarily are direct financing leases, but also include leveraged leases. The composition of the net investment in direct financing leases is as follows:

December 31,
in millions	2006			2005
Direct financing lease receivable	$	6,955		$	7,324
Unearned income		(738	)		(763	)
Unguaranteed residual value		549			520
Deferred fees and costs		72			54
Net investment in direct financing leases	$	6,838		$	7,135

Minimum future lease payments to be received at December 31, 2006, are as follows: 2007 — $2.3 billion; 2008 — $1.9 billion; 2009 — $1.1 billion; 2010 — $677 million; 2011 — $337 million; and all subsequent years — $384 million.

Changes in the allowance for loan losses are summarized as follows:

Year ended December 31,
in millions	2006			2005			2004
Balance at beginning of year	$	966		$	1,138		$	1,406
Charge-offs		(268	)		(409	)		(583	)
Recoveries		98			94			152
Net loans charged off		(170	)		(315	)		(431	)
Provision for loan losses from continuing operations		150			143			185
Provision for loan losses from discontinued operations		(3	)		—			—
Reclassification of allowance for credit losses on lending-related commitmentsa		—			—			(70	)
Allowance related to loans acquired, net		—			—			48
Foreign currency translation adjustment		1			—			—
Balance at end of year	$	944		$	966		$	1,138

^a Included in “accrued expense and other liabilities” on the consolidated balance sheet.

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

Year ended December 31,
in millions	2006			2005			2004
Balance at beginning of year	$	59		$	66			—
Reclassification of allowance for credit losses		—			—		$	70
Credit for losses on lending- related commitments		(6	)		(7	)		(4	)
Balance at end of yeara	$	53		$	59		$	66

^a Included in “accrued expense and other liabilities” on the consolidated balance sheet.

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

8. LOAN SECURITIZATIONS, SERVICING AND VARIABLE INTEREST ENTITIES

RETAINED INTERESTS IN LOAN SECURITIZATIONS

Key sells education loans in securitizations. A securitization involves the sale of a pool of loan receivables to investors through either a public or private issuance (generally by a qualifying SPE) of asset-backed securities. Generally, the assets are transferred to a trust that sells interests in the form of certificates of ownership.

In some cases, Key retains an interest in securitized loans in the form of an interest-only strip, residual asset, servicing asset or security. Additional information pertaining to Key’s retained interests is disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Loan Securitizations” on page 69.

Key securitized and sold $1.1 billion of education loans (including accrued interest) in 2006 and $976 million in 2005. The securitizations resulted in an aggregate gain of $24 million in 2006 (from gross cash proceeds of $1.1 billion) and $19 million in 2005 (from gross cash proceeds of $1.0 billion). In both years, Key retained residual interests. In the 2006 securitization, Key retained servicing assets of $10 million and interest-only strips of $29 million, and in the 2005 securitization, Key retained servicing assets of $7 million and interest-only strips of $34 million.

Management uses certain assumptions and estimates to determine the fair value to be allocated to retained interests at the date of transfer and at subsequent measurement dates. Primary economic assumptions used to measure the fair value of Key’s retained interests in education loans and the sensitivity of the current fair value of residual cash flows to immediate adverse changes in those assumptions at December 31, 2006, are as follows:

dollars in millions
Fair value of retained interests	$     243
Weighted-average life (years)	.3 — 8.1
PREPAYMENT SPEED ASSUMPTIONS (ANNUAL RATE)	4.00% — 30.00	%
Impact on fair value of 1% CPR adverse change	$     (16	)
Impact on fair value of 2% CPR adverse change	(20	)
EXPECTED CREDIT LOSSES (STATIC RATE)	.10% — 20.00	%
Impact on fair value of .25% adverse change	$      (5	)
Impact on fair value of .50% adverse change	(11	)
RESIDUAL CASH FLOWS DISCOUNT RATE (ANNUAL RATE)	8.50% — 12.00	%
Impact on fair value of 1% adverse change	$     (10	)
Impact on fair value of 2% adverse change	(20	)
EXPECTED STATIC DEFAULT (STATIC RATE)	5.00% — 25.00	%
Impact on fair value of 1% adverse change	$     (32	)
Impact on fair value of 2% adverse change	(51	)
VARIABLE RETURNS TO TRANSFEREES	(a	)

These sensitivities are hypothetical and should be relied upon with caution. Sensitivity analysis is based on the nature of the asset, the seasoning (i.e., age and payment history) of the portfolio and the results experienced. Changes in fair value based on a 1% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may cause changes in another. For example, increases in market interest rates may result in lower prepayments and increased credit losses, which might magnify or counteract the sensitivities.

^a Forward London Interbank Offered Rate (known as “LIBOR”) plus contractual spread over LIBOR ranging from .00% to 1.30%, or Treasury plus contractual spread over Treasury ranging from .65% to 1.00%, or fixed-rate yield.

CPR = Constant Prepayment Rate

The table below shows the relationship between the education loans Key manages and those held in the loan portfolio. Managed loans include those held in portfolio and those securitized and sold, but still serviced by Key. Related delinquencies and net credit losses also are presented.

	December 31,
					Loans Past Due				Net Credit Losses
	Loan Principal				60 Days or More				During the Year
in millions	2006		2005		2006		2005		2006		2005
Education loans managed	$	8,211	$	8,136	$	178	$	150	$	75	$	60
Less: Loans securitized		5,475		5,083		151		125		47		36
Loans held for sale or securitization		2,390		2,687		24		22		23		21
Loans held in portfolio	$	346	$	366	$	3	$	3	$	5	$	3

MORTGAGE SERVICING ASSETS

Key originates and periodically sells commercial real estate loans and continues to service those loans for the buyers. Changes in the carrying amount of mortgage servicing assets are summarized as follows:

Year ended December 31,
in millions	2006			2005
Balance at beginning of year	$	248		$	113
Servicing retained from loan sales		15			15
Purchases		50			150
Amortization		(66	)		(30	)
Balance at end of year	$	247		$	248
Fair value at end of year	$	332		$	301

The fair value of mortgage servicing assets is estimated by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. Primary economic assumptions used to measure the fair value of Key’s mortgage servicing assets at December 31, 2006 and 2005, are as follows:

• prepayment speed generally at an annual rate of 0.00% to 25.00%;

• expected credit losses at a static rate of 2.00%; and

• residual cash flows discount rate of 8.50% to 15.00%.

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 under the heading “Servicing Assets” on page 69.

VARIABLE INTEREST ENTITIES

A VIE is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria:

• The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

• The entity’s investors lack the authority to make decisions about the activities of the entity through voting rights or similar rights, as well as the obligation to absorb the entity’s expected losses and the right to receive the entity’s expected residual returns.

• The voting rights of some investors are not proportional to their economic interest in the entity, and substantially all of the entity’s activities involve or are conducted on behalf of investors with disproportionately few voting rights.

Revised Interpretation No. 46 requires a VIE to be consolidated by the party that is exposed to a majority of the VIE’s expected losses and/or residual returns (i.e., the primary beneficiary). However, parties that transfer assets to qualifying special purpose entities meeting the requirements of SFAS No. 140 are exempt from Revised Interpretation No. 46. As a result, substantially all of Key’s securitization trusts are exempt from consolidation. Interests in securitization trusts formed by Key that do not qualify for this exception are insignificant. Information related to Key’s consolidation of VIEs is included in Note 1 under the heading “Basis of Presentation” on page 67.

Key adopted Revised Interpretation No. 46 effective March 31, 2004. The Interpretation did not have a material effect on Key’s financial condition or results of operations.

Key’s involvement with VIEs is described below.

Consolidated VIEs

Commercial paper conduit. Key, among others, refers third-party assets and borrowers and provides liquidity and credit enhancement to an asset-backed commercial paper conduit. At December 31, 2006, the conduit had assets of $195 million, of which $188 million are recorded in “loans;” nearly all the rest are recorded in “securities available for sale” on the balance sheet. These assets serve as collateral for the conduit’s obligations to commercial paper holders. The commercial paper holders have no recourse to Key’s general credit other than through Key’s committed credit enhancement facility of $28 million.

Additional information pertaining to Key’s involvement with the conduit is included in Note 18 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Guarantees” on page 98 and the heading “Other Off-Balance Sheet Risk” on page 99.

Low-Income Housing Tax Credit (“LIHTC”) guaranteed funds. Key Affordable Housing Corporation (“KAHC”) formed limited partnerships (funds) that invested in LIHTC operating partnerships. Interests in these funds were offered in syndication to qualified investors who paid a fee to KAHC for a guaranteed return. Key also earned syndication fees from these funds and continues to earn asset management fees. The funds’ assets primarily are investments in LIHTC operating partnerships, which totaled $330 million at December 31, 2006. These investments are recorded in “accrued income and other assets” on the balance sheet and serve as collateral for the funds’ limited obligations. In October 2003, Key ceased to form new funds or add LIHTC partnerships. However, Key continues to act as asset manager and provides occasional funding for existing funds under a guarantee obligation. Additional information on return guarantee agreements with LIHTC investors is summarized in Note 18 under the heading “Guarantees.”

The partnership agreement for each guaranteed fund requires the fund to be dissolved by a certain date. In accordance with SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” the noncontrolling interests associated with these funds are considered mandatorily redeemable instruments and are recorded in “accrued expense and other liabilities” on the balance sheet. The FASB has indefinitely deferred the measurement and recognition provisions of SFAS No. 150 for mandatorily redeemable noncontrolling interests associated with finite-lived subsidiaries. Key currently accounts for these interests as minority interests and adjusts the financial statements each period for the investors’ share of the funds’ profits and losses. At December 31, 2006, the settlement value of these noncontrolling interests was estimated to be between $355 million and $421 million, while the recorded value, including reserves, totaled $345 million.

Unconsolidated VIEs

LIHTC nonguaranteed funds. Although Key holds significant interests in certain nonguaranteed funds that Key formed and funded, management has determined that Key is not the primary beneficiary of those funds. At December 31, 2006, assets of these unconsolidated nonguaranteed funds were estimated to be $186 million. Key’s maximum exposure to loss in connection with these funds is minimal. In October 2003, management elected to cease forming these funds.

LIHTC investments. Through the Community Banking line of business, Key has made investments directly in LIHTC operating partnerships formed by third parties. As a limited partner in these operating partnerships, Key is allocated tax credits and deductions associated with the underlying properties. At December 31, 2006, assets of these unconsolidated LIHTC operating partnerships totaled approximately $748 million. Key’s maximum exposure to loss in connection with these partnerships is the unamortized investment balance of $163 million at December 31, 2006, plus $63 million of tax credits claimed, but subject to recapture. In 2006, Key did not obtain significant direct investments (either individually or in the aggregate) in LIHTC operating partnerships.

Key has additional investments in unconsolidated LIHTC operating partnerships as a result of consolidating the LIHTC guaranteed funds discussed above. Total assets of these operating partnerships are approximately $1.8 billion at December 31, 2006. The tax credits and deductions associated with these properties are allocated to the funds’ investors based on their ownership percentages. Information regarding Key’s exposure to loss in connection with these guaranteed funds is included in Note 18 under the heading “Return guarantee agreement with LIHTC investors” on page 99.

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Commercial and residential real estate investments and principal investments. Key’s Principal Investing unit and the KeyBank Real Estate Capital line of business make equity and mezzanine investments in entities, some of which are VIEs. These investments are held by nonregistered investment companies subject to the provisions of the American Institute of Certified Public Accountants (“AICPA”) Audit and Accounting Guide, “Audits of Investment Companies.” The FASB deferred the effective date of Revised Interpretation No. 46 for such nonregistered investment companies until the AICPA clarifies the scope of the Audit Guide. As a result, Key is not currently applying the accounting or disclosure provisions of Revised Interpretation No. 46 to its principal and real estate mezzanine and equity investments, which remain unconsolidated.

9. NONPERFORMING ASSETS AND PAST DUE LOANS

Impaired loans totaled $95 million at December 31, 2006, compared to $105 million at December 31, 2005. Impaired loans averaged $113 million for 2006, $95 million for 2005 and $189 million for 2004.

Key’s nonperforming assets and past due loans were as follows:

December 31,
in millions	2006			2005
Impaired loans	$	95		$	105
Other nonaccrual loansa		120			172
Total nonperforming loans		215			277
Nonperforming loans held for sale		3			3
Other real estate owned (“OREO”)		57			25
Allowance for OREO losses		(3	)		(2	)
OREO, net of allowance		54			23
Other nonperforming assets		1			4
Total nonperforming assets	$	273		$	307
Impaired loans with a specifically allocated allowance	$	34		$	9
Allowance for loan losses allocated to impaired loans		14			6
Accruing loans past due 90 days or more	$	120		$	90
Accruing loans past due 30 through 89 days		644			491

^a 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.

At December 31, 2006, Key did not have any significant commitments to lend additional funds to borrowers with loans on nonperforming status.

Management evaluates the collectibility of Key’s loans by applying historical loss experience rates to loans with similar risk characteristics. These loss rates are adjusted to reflect emerging credit trends and other factors to determine the appropriate level of allowance for loan losses to be allocated to each loan type. As described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan Losses” on page 69, special treatment exists for impaired loans with larger balances if the resulting allocation is deemed insufficient to cover the extent of the impairment. Management does not perform a loan-specific impairment valuation for smaller-balance, homogeneous, nonaccrual loans (shown in the preceding table as “Other nonaccrual loans”). These typically are smaller-balance commercial loans and consumer loans, including residential mortgages, home equity loans and various types of installment loans.

The following table shows the amount by which loans and loans held for sale classified as nonperforming at December 31 reduced Key’s expected interest income.

Year ended December 31,
in millions	2006		2005		2004
Interest income receivable under original terms	$	20	$	20	$	20
Less: Interest income recorded during the year		8		8		9
Net reduction to interest income	$	12	$	12	$	11

10. GOODWILL AND OTHER INTANGIBLE ASSETS

Key’s total intangible asset amortization expense was $21 million for 2006, $16 million for 2005 and $12 million for 2004. Estimated amortization expense for intangible assets for each of the next five years is as follows: 2007 — $21 million; 2008 — $23 million; 2009 — $16 million; 2010 — $13 million; and 2011 — $7 million.

The following table shows the gross carrying amount and the accumulated amortization of intangible assets that are subject to amortization.

December 31,	2006				2005
	Gross Carrying		Accumulated		Gross Carrying		Accumulated
in millions	Amount		Amortization		Amount		Amortization
Intangible assets subject to amortization:
Core deposit intangibles	$	240	$	227	$	241	$	222
Other intangible assets		145		38		128		22
Total	$	385	$	265	$	369	$	244

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

During 2006, Key acquired other intangible assets with a fair value of $18 million in conjunction with the purchase of Austin Capital Management, Ltd. These assets are being amortized using the straight-line method over periods ranging from five to ten years. During 2005, Key acquired other intangible assets with fair values of $21 million and $12 million in conjunction with the purchase of ORIX and Malone Mortgage Company, respectively. These assets are being amortized based on expected cash flows over periods ranging from three to five years. During 2005, other intangible assets acquired from AEBF in December 2004 were adjusted by $22 million. Additional information pertaining to these acquisitions is included in Note 3 (“Acquisitions and Divestitures”), which begins on page 75.

Changes in the carrying amount of goodwill by major business group are as follows:

	Community			National
in millions	Banking			Banking			Total
BALANCE AT DECEMBER 31, 2004	$	786		$	573		$	1,359
Acquisition of Payroll Online		—			5			5
Adjustment to EverTrust goodwill		(4	)		—			(4	)
Adjustment to AEBF goodwill		—			(15	)		(15	)
Acquisition of ORIX		—			9			9
Acquisition of Malone Mortgage Company		—			1			1
BALANCE AT DECEMBER 31, 2005	$	782		$	573		$	1,355
Acquisition of Austin Capital Management		—			17			17
Divestiture of Champion Mortgage finance business		—			(170	)		(170	)
BALANCE AT DECEMBER 31, 2006	$	782		$	420		$	1,202

Key’s annual goodwill impairment testing was performed as of October 1, 2006, and management determined that no impairment existed at that date. On December 1, Key announced that it sold the nonprime mortgage loan portfolio held by the Champion Mortgage finance business on November 29, and also announced that it had entered into a separate agreement to sell Champion’s loan origination platform. As a result, $170 million of goodwill related to the Champion Mortgage finance business was written off during the fourth quarter of 2006. During the fourth quarter of 2004, $55 million of goodwill related to Key’s nonprime indirect automobile lending business was written off.

11. SHORT-TERM BORROWINGS

Selected financial information pertaining to the components of Key’s short-term borrowings is as follows:

dollars in millions	2006			2005			2004
FEDERAL FUNDS PURCHASED
Balance at year end	$	1,899		$	3,074		$	421
Average during the yeara		1,142			1,489			1,801
Maximum month-end balance		3,147			3,109			4,222
Weighted-average rate during the yeara		5.43	%		3.09	%		.89	%
Weighted-average rate at December 31		5.45			4.20			2.01
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Balance at year end	$	1,744		$	1,761		$	1,724
Average during the yeara		1,073			1,088			1,328
Maximum month-end balance		1,932			1,966			2,300
Weighted-average rate during the yeara		4.19	%		2.30	%		.45	%
Weighted-average rate at December 31		4.86			3.83			1.97
SHORT-TERM BANK NOTES
Balance at year end		—		$	101			—
Average during the year	$	48			27		$	36
Maximum month-end balance		101			101			100
Weighted-average rate during the year		4.26	%		4.07	%		1.05	%
Weighted-average rate at December 31		—			4.24			—
OTHER SHORT-TERM BORROWINGS
Balance at year end	$	1,192		$	1,679		$	2,515
Average during the year		2,236			2,769			2,595
Maximum month-end balance		2,594			3,390			2,853
Weighted-average rate during the year		3.89	%		2.67	%		1.16	%
Weighted-average rate at December 31		3.32			4.41			1.63

Rates presented in the above table exclude the effects of interest rate swaps and caps, which modify the repricing characteristics of certain short-term borrowings. For more information about such financial instruments, see Note 19 (“Derivatives and Hedging Activities”), which begins on page 100.

^a From continuing operations.

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Key has several programs through KeyCorp and KBNA that support short-term financing needs.

Bank note program. KBNA’s bank note program provides for the issuance of both long- and short-term debt of up to $20.0 billion. During 2006, there were $500 million of notes issued under this program. At December 31, 2006, $18.7 billion was available for future issuance.

Euro medium-term note program. Under Key’s euro medium-term note program, KeyCorp and KBNA may issue both long- and short-term debt of up to $10.0 billion in the aggregate ($9.0 billion by KBNA and $1.0 billion by KeyCorp). The notes are offered exclusively to non-U.S. investors and can be denominated in U.S. dollars and foreign currencies. During 2006, there were $666 million of notes issued under this program. At December 31, 2006, $6.1 billion was available for future issuance.

KeyCorp medium-term note program. In January 2005, KeyCorp registered $2.9 billion of securities under a shelf registration statement filed with the Securities and Exchange Commission. Of this amount, $1.9 billion has been allocated for the issuance of both long- and short-term debt in the form of medium-term notes. During 2006, there were $750 million of notes issued under this program. At December 31, 2006, unused capacity under this shelf registration statement totaled $1.9 billion.

Commercial paper. KeyCorp has a commercial paper program that provides funding availability of up to $500 million. At December 31, 2006, there were no borrowings outstanding under this program.

KBNA has a separate commercial paper program at a Canadian subsidiary that provides funding availability of up to C$1.0 billion in Canadian currency. The borrowings under this program can be denominated in Canadian or U.S. dollars. As of December 31, 2006, borrowings outstanding under this commercial paper program totaled C$387 million in Canadian currency and $119 million in U.S. currency (equivalent to C$139 million in Canadian currency).

Federal Reserve Bank discount window. KBNA has overnight borrowing capacity at the Federal Reserve Bank. At December 31, 2006, this capacity was approximately $18.6 billion and was secured by approximately $23.9 billion of loans, primarily those in the commercial portfolio. There were no borrowings outstanding under this facility at December 31, 2006.

12. LONG-TERM DEBT

The components of Key’s long-term debt, presented net of unamortized discount where applicable, were as follows:

December 31,
dollars in millions		2006		2005
Senior medium-term notes due through 2009a		$	1,924	$	1,573
Subordinated medium-term notes due through 2006a			—		450
Senior euro medium-term notes due through 2011b			759		759
7.826%	Subordinated notes due 2026c		—		361
8.250%	Subordinated notes due 2026c		—		154
6.112%	Subordinated notes due 2028c		205		205
6.875%	Subordinated notes due 2029c		165		165
7.750%	Subordinated notes due 2029c		197		197
5.875%	Subordinated notes due 2033c		180		180
6.125%	Subordinated notes due 2033c		77		77
5.700%	Subordinated notes due 2035c		258		258
7.000%	Subordinated notes due 2066c		250		—
6.750%	Subordinated notes due 2066c		500		—
All other long-term debti			83		53
Total parent company			4,598		4,432
Senior medium-term notes due through 2039d			1,977		2,102
Senior euro medium-term notes due through 2013e			3,226		2,554
6.50%	Subordinated remarketable notes due 2027f		308		310
7.125%	Subordinated notes due 2006f		—		250
7.55%	Subordinated notes due 2006f		—		75
7.375%	Subordinated notes due 2008f		70		70
7.50%	Subordinated notes due 2008f		165		165
7.00%	Subordinated notes due 2011f		502		503
7.30%	Subordinated notes due 2011f		106		106
5.70%	Subordinated notes due 2012f		300		300
5.70%	Subordinated notes due 2017f		200		200
5.80%	Subordinated notes due 2014f		767		770
4.625%	Subordinated notes due 2018f		100		100
6.95%	Subordinated notes due 2028f		300		300
4.95%	Subordinated notes due 2015f		250		250
5.45%	Subordinated notes due 2016f		500		—
Lease financing debt due through 2015g			551		342
Federal Home Loan Bank advances due through 2036h			547		958
All other long-term debti			66		152
Total subsidiaries			9,935		9,507
Total long-term debt		$	14,533	$	13,939

Key uses interest rate swaps and caps, which modify the repricing characteristics of certain long-term debt, to manage interest rate risk. For more information about such financial instruments, see Note 19 (“Derivatives and Hedging Activities”) on page 100.

a	The senior medium-term notes had weighted-average interest rates of 5.04% at December 31, 2006, and 4.19% at December 31, 2005. These notes had a combination of fixed and floating interest rates. The subordinated medium-term notes had a weighted-average interest rate of 7.17% at December 31, 2005. None of the senior medium-term notes may be redeemed prior to their maturity dates.
b	Senior euro medium-term notes had weighted-average interest rates of 5.58% at December 31, 2006, and 3.62% at December 31, 2005. These notes had a floating interest rate based on the three-month LIBOR and may not be redeemed prior to their maturity dates.
c	These notes had weighted-average interest rates of 6.57% at December 31, 2006, and 6.75% at December 31, 2005. With one exception, the interest rates on these notes are fixed. The 6.112% note has a floating interest rate equal to three-month LIBOR plus 74 basis points; it reprices quarterly. See Note 13 (“Capital Securities Issued by Unconsolidated Subsidiaries”) on page 88 for a description of these notes.
d	Senior medium-term notes of KBNA had weighted-average interest rates of 5.18% at December 31, 2006, and 4.53% at December 31, 2005. These notes had a combination of fixed and floating interest rates and may not be redeemed prior to their maturity dates.
e	Senior euro medium-term notes had weighted-average interest rates of 5.53% at December 31, 2006, and 4.23% at December 31, 2005. These notes, which are obligations of KBNA, had a combination of fixed interest rates and floating interest rates based on LIBOR and may not be redeemed prior to their maturity dates.
f	These notes are all obligations of KBNA. None of the subordinated notes, with the exception of the subordinated remarketable notes due 2027, may be redeemed prior to their maturity dates.
g	Lease financing debt had weighted-average interest rates of 5.18% at December 31, 2006, and 6.53% at December 31, 2005. This category of debt consists primarily of nonrecourse debt collateralized by leased equipment under operating, direct financing and sales-type leases.
h	Long-term advances from the Federal Home Loan Bank had weighted-average interest rates of 5.35% at December 31, 2006, and 4.49% at December 31, 2005. These advances, which had a combination of fixed and floating interest rates, were secured by real estate loans and securities totaling $739 million at December 31, 2006, and $1.3 billion at December 31, 2005.
i	Other long-term debt, consisting of industrial revenue bonds, capital lease obligations, and various secured and unsecured obligations of corporate subsidiaries, had weighted-average interest rates of 5.82% at December 31, 2006, and 5.67% at December 31, 2005.

Scheduled principal payments on long-term debt at December 31, 2006, are as follows:

in millions	Parent		Subsidiaries		Total
2007	$	1,128	$	2,757	$	3,885
2008		249		732		981
2009		999		1,563		2,562
2010		353		20		373
2011		40		1,257		1,297
All subsequent years		1,829		3,606		5,435

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

13. CAPITAL SECURITIES ISSUED BY UNCONSOLIDATED SUBSIDIARIES

KeyCorp owns the outstanding common stock of business trusts that issued corporation-obligated mandatorily redeemable preferred capital securities. The trusts used the proceeds from the issuance of their capital securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the capital securities.

The capital securities provide an attractive source of funds; they constitute Tier 1 capital for regulatory reporting purposes, but have the same tax advantages as debt for federal income tax purposes. During the first quarter of 2005, the Federal Reserve Board adopted a rule that allows bank holding companies to continue to treat capital securities as Tier 1 capital, but imposed stricter quantitative limits that take effect after a five-year transition period ending March 31, 2009. Management believes the new rule will not have any material effect on Key’s financial condition.

KeyCorp unconditionally guarantees the following payments or distributions on behalf of the trusts:

• required distributions on the capital securities;

• the redemption price when a capital security is redeemed; and

• amounts due if a trust is liquidated or terminated.

In 2006, the KeyCorp Capital VIII trust issued $250 million of securities, and the KeyCorp Capital IX trust issued $500 million of securities. In 2005, the KeyCorp Capital VII trust issued $250 million of securities.

On December 1, 2006, KeyCorp redeemed the KeyCorp Institutional Capital A debentures with a face value of $350 million, and on December 15, 2006, KeyCorp redeemed the KeyCorp Institutional Capital B debentures with a face value of $150 million. These debentures were redeemable at the option of KeyCorp, at a premium, on or after December 1, 2006, and December 15, 2006, respectively. KeyCorp recorded a $24 million charge to noninterest income in connection with the redemptions. The capital securities were subject to mandatory redemption upon repayment of the debentures.

The capital securities, common stock and related debentures are summarized as follows:

					Principal		Interest Rate			Maturity
	Capital				Amount of		of Capital			of Capital
	Securities,		Common		Debentures,		Securities and			Securities and
dollars in millions	Net of Discounta		Stock		Net of Discountb		Debenturesc			Debentures
DECEMBER 31, 2006
KeyCorp Capital I	$	197	$	8	$	205		6.112	%		2028
KeyCorp Capital II		174		8		165		6.875			2029
KeyCorp Capital III		221		8		197		7.750			2029
KeyCorp Capital V		163		5		180		5.875			2033
KeyCorp Capital VI		73		2		77		6.125			2033
KeyCorp Capital VII		228		8		258		5.700			2035
KeyCorp Capital VIII		254		—		250		7.000			2066
KeyCorp Capital IX		494		—		500		6.750			2066
Total	$	1,804	$	39	$	1,832		6.613	%		—
DECEMBER 31, 2005	$	1,617	$	54	$	1,597		6.794	%		—

a	The capital securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of capital securities carries an interest rate identical to that of the related debenture. Included in certain capital securities at December 31, 2006 and 2005, are basis adjustments of $11 million and $74 million, respectively, related to fair value hedges. See Note 19 (“Derivatives and Hedging Activities”), which begins on page 100, for an explanation of fair value hedges.
b	KeyCorp has the right to redeem its debentures: (i) in whole or in part, on or after July 1, 2008 (for debentures owned by Capital I), March 18, 1999 (for debentures owned by Capital II), July 16, 1999 (for debentures owned by Capital III), July 21, 2008 (for debentures owned by Capital V), December 15, 2008 (for debentures owned by Capital VI), June 15, 2011 (for debentures owned by Capital VIII), and December 15, 2011 (for debentures owned by Capital IX); and, (ii) in whole at any time within 90 days after and during the continuation of a “tax event,” an “investment company event” or a “capital treatment event” (as defined in the applicable indenture). If the debentures purchased by Capital I, Capital V, Capital VI, Capital VII, Capital VIII or Capital IX are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by Capital II or Capital III are redeemed before they mature, the redemption price will be the greater of: (a) the principal amount, plus any accrued but unpaid interest or (b) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points (25 basis points for Capital III), plus any accrued but unpaid interest. When debentures are redeemed in response to tax or capital treatment events, the redemption price generally is slightly more favorable to KeyCorp.
c	The interest rates for Capital II, Capital III, Capital V, Capital VI, Capital VII, Capital VIII and Capital IX are fixed. Capital I has a floating interest rate equal to three-month LIBOR plus 74 basis points; it reprices quarterly. The rates shown as the total at December 31, 2006 and 2005, are weighted-average rates.

14. SHAREHOLDERS’ EQUITY

SHAREHOLDER RIGHTS PLAN

KeyCorp has a shareholder rights plan which was adopted in 1989 and subsequently amended. Under the plan, each shareholder received one Right — initially representing the right to purchase a common share for $82.50 — for each KeyCorp common share owned. All of the Rights expire on May 14, 2007, but KeyCorp may redeem Rights earlier for $.005 apiece, subject to certain limitations.

Rights will become exercisable if a person or group acquires 15% or more of KeyCorp’s outstanding shares. Until that time, the Rights will trade with the common shares; any transfer of a common share also will transfer the associated Right. If the Rights become exercisable, they will begin to trade apart from the common shares. If one of a number of “flip-in events” occurs, each Right will entitle the holder to purchase a KeyCorp common share for $1.00 (the par value per share), and the Rights held by a 15% or more shareholder will become void.

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

CAPITAL ADEQUACY

KeyCorp and KBNA must meet specific capital requirements imposed by federal banking regulators. Sanctions for failure to meet applicable capital requirements may include regulatory enforcement actions that restrict dividend payments, require the adoption of remedial measures to increase capital, terminate FDIC deposit insurance, and mandate the appointment of a conservator or receiver in severe cases. In addition, failure to maintain a well-capitalized status affects the evaluation of regulatory applications for certain dealings, including acquisitions, continuation and expansion of existing activities, and commencement of new activities, and could make our clients and potential investors less confident. As of December 31, 2006, KeyCorp and KBNA met all regulatory capital requirements.

Federal bank regulators apply certain capital ratios to assign FDIC-insured depository institutions to one of five categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” At December 31, 2006 and 2005, the most recent regulatory notification classified KBNA as “well capitalized.” Management believes there have not been any changes in condition or events since the most recent notification that would cause KBNA’s classification to change.

Bank holding companies are not assigned to any of the five capital categories applicable to insured depository institutions. However, if those categories applied to bank holding companies, management believes Key would satisfy the criteria for a “well capitalized” institution at December 31, 2006 and 2005. The FDIC-defined capital categories serve a limited regulatory function and may not accurately represent the overall financial condition or prospects of KeyCorp or its affiliates.

The following table presents Key’s and KBNA’s actual capital amounts and ratios, minimum capital amounts and ratios prescribed by regulatory guidelines, and capital amounts and ratios required to qualify as “well capitalized” under the Federal Deposit Insurance Act.

											To Qualify as
						To Meet Minimum					Well Capitalized
						Capital Adequacy					Under Federal Deposit
	Actual					Requirements					Insurance Act
dollars in millions	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2006
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	12,567		12.43	%	$	8,091		8.00	%		N/A		N/A
KBNA		11,046		11.13			7,932		8.00		$	9,915		10.00	%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	8,338		8.24	%	$	4,045		4.00	%		N/A		N/A
KBNA		6,819		6.87			3,966		4.00		$	5,949		6.00	%
TIER 1 CAPITAL TO AVERAGE QUARTERLY TANGIBLE ASSETS
Key	$	8,338		8.98	%	$	2,786		3.00	%		N/A		N/A
KBNA		6,819		7.56			3,604		4.00		$	4,505		5.00	%
December 31, 2005
TOTAL CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	11,615		11.47	%	$	8,101		8.00	%		N/A		N/A
KBNA		10,670		10.77			7,916		8.00		$	9,895		10.00	%
TIER 1 CAPITAL TO NET RISK-WEIGHTED ASSETS
Key	$	7,687		7.59	%	$	4,051		4.00	%		N/A		N/A
KBNA		6,742		6.81			3,958		4.00		$	5,937		6.00	%
TIER 1 CAPITAL TO AVERAGE QUARTERLY TANGIBLE ASSETS
Key	$	7,687		8.53	%	$	2,766		3.00	%		N/A		N/A
KBNA		6,742		7.74			3,479		4.00		$	4,348		5.00	%

N/A = Not Applicable

15. STOCK-BASED COMPENSATION

Key maintains several stock-based compensation plans, which are described below. Total compensation expense for these plans was $64 million for 2006, $81 million for 2005 and $62 million for 2004. The total income tax benefit recognized in the income statement for these plans was $24 million for 2006, $30 million for 2005 and $23 million for 2004. Stock-based compensation expense related to awards granted to employees is recorded in “personnel expense” on the income statement, whereas compensation expense related to awards granted to directors is recorded in “other expense.”

Key’s compensation plans allow KeyCorp to grant stock options, restricted stock, performance shares, discounted stock purchases, and the right to make certain deferred compensation-related awards to eligible employees and directors. At December 31, 2006, KeyCorp had 68,177,682 common shares available for future grant under its compensation plans. In accordance with a resolution adopted by the Compensation and Organization Committee of Key’s Board of Directors, KeyCorp may not grant options to purchase common shares, restricted stock or other shares under its long-term compensation plans in an amount that exceeds 6% of KeyCorp’s outstanding common shares in any rolling three-year period.

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

STOCK OPTION PLANS

Stock options granted to employees generally become exercisable at the rate of 33-1/3% per year beginning one year from their grant date; options expire no later than ten years from their grant date. The exercise price is the average of the high and low price of Key’s common shares on the date of grant, and cannot be less than the fair market value of Key’s common shares on the grant date.

Management estimates the fair value of options granted using the Black-Scholes option-pricing model. This model was originally developed to estimate the fair value of exchange-traded equity options, which (unlike employee stock options) have no vesting period or transferability restrictions. Because of these differences, the Black-Scholes model is not a perfect indicator of the value of an employee stock option, but it is commonly used for this purpose. The model assumes that the estimated fair value of an option is amortized as compensation expense over the option’s vesting period.

The Black-Scholes model requires several assumptions, which management developed and updates based on historical trends and current market observations. The accuracy of these assumptions is critical to the accuracy of management’s estimates of the fair value of options. The assumptions pertaining to options issued during 2006, 2005 and 2004, are shown in the following table.

Year ended December 31,	2006			2005			2004
Average option life	6.0 years			5.1 years			5.1 years
Future dividend yield		3.79	%		3.79	%		4.21	%
Historical share price volatility		.199			.274			.279
Weighted-average risk-free interest rate		5.0	%		4.0	%		3.8	%

Key’s annual stock option grant to executives and certain other employees occurs in July, upon approval by the Compensation and Organization Committee.

The following table summarizes activity, pricing and other information for Key’s stock options for the year ended December 31, 2006:

				Weighted-Average		Weighted-Average		Aggregate
	Number of			Exercise Price		Remaining Life		Intrinsic
dollars in millions, except per share amounts	Options			Per Option		(Years)		Valuea
OUTSTANDING AT DECEMBER 31, 2005		37,265,859		$	28.35
Granted		6,666,614			36.39
Exercised		(9,410,635	)		26.89
Lapsed or canceled		(1,129,396	)		31.99
OUTSTANDING AT DECEMBER 31, 2006		33,392,442		$	30.25		6.4	$	260
Expected to vest		20,423,059		$	29.99		6.6	$	244
Exercisable at December 31, 2006		20,660,608		$	27.89		5.6	$	209

^a The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of the option.

The weighted-average grant-date fair value of options was $6.34 for options granted during 2006, $6.92 for options granted during 2005 and $5.67 for options granted during 2004. The total intrinsic value of exercised options was $91 million for 2006, $41 million for 2005 and $60 million for 2004. As of December 31, 2006, unrecognized compensation cost related to nonvested options expected to vest under the plans totaled $33 million. Management expects to recognize this cost over a weighted-average period of 2.1 years.

Cash received from options exercised was $244 million for 2006, $129 million for 2005 and $160 million for 2004. The actual tax benefit realized for the tax deductions from options exercised totaled $28 million for 2006, $12 million for 2005 and $21 million for 2004.

LONG-TERM INCENTIVE COMPENSATION PROGRAM

Key’s Long-Term Incentive Compensation Program rewards senior executives who are critical to Key’s long-term financial success. The Program covers three-year performance cycles with a new cycle beginning each year. Awards under the Program are primarily in the form of time-lapsed restricted stock, performance-based restricted stock, and performance shares payable primarily in stock. The time-lapsed restricted stock generally vests after the end of the three-year cycle. The vesting of the performance-based restricted stock and performance shares is contingent upon Key’s attainment of defined performance levels.

The following table summarizes activity and pricing information for the nonvested shares in the Program for the year ended December 31, 2006:

						Vesting Contingent on
	Vesting Contingent on					Performance and
	Service Conditions					Service Conditions
				Weighted-					Weighted-
	Number of			Average		Number of			Average
	Nonvested			Grant-Date		Nonvested			Grant-Date
	Shares			Fair Value		Shares			Fair Value
OUTSTANDING AT DECEMBER 31, 2005		476,034		$	31.43		1,190,458		$	31.05
Granted		222,797			35.42		738,002			33.51
Vested		(2,768	)		33.80		(180	)		35.42
Forfeited		(54,723	)		33.02		(94,515	)		31.83
OUTSTANDING AT DECEMBER 31, 2006		641,340		$	32.67		1,833,765		$	32.00

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

The compensation cost of time-lapsed restricted stock awards granted under the Program is calculated using the average of the high and low trading price of Key’s common shares on the grant date. Unlike the time-lapsed and performance-based restricted stock, the performance shares payable in stock do not pay dividends during the vesting period. Consequently, the fair value of performance shares is calculated by reducing the share price at the date of grant by the present value of estimated future dividends forgone during the vesting period, discounted at an appropriate risk-free interest rate.

The weighted-average grant-date fair value of awards granted under the Program, was $33.95 during 2006, $32.28 during 2005 and $30.65 during 2004. As of December 31, 2006, unrecognized compensation cost related to nonvested shares expected to vest under the Program totaled $19 million. Management expects to recognize this cost over a weighted-average period of 1.7 years. The total fair value of shares vested was $.1 million during 2006, $2 million during 2005 and $6 million during 2004.

OTHER RESTRICTED STOCK AWARDS

Key also may grant, upon approval by the Compensation and Organization Committee, special time-lapsed restricted stock awards to certain executives and employees in recognition of outstanding performance. These awards generally vest after three years of service.

The following table summarizes activity and pricing information for the nonvested shares under these awards for the year ended December 31, 2006:

				Weighted-
	Number of			Average
	Nonvested			Grant-Date
	Shares			Fair Value
OUTSTANDING AT DECEMBER 31, 2005		254,548		$	28.77
Granted		13,379			33.22
Vested		(118,801	)		27.58
Forfeited		(7,200	)		27.77
OUTSTANDING AT DECEMBER 31, 2006		141,926		$	30.24

The weighted-average grant-date fair value of awards granted was $33.22 during 2006, $32.05 during 2005 and $29.33 during 2004. As of December 31, 2006, unrecognized compensation cost related to nonvested restricted stock expected to vest under these special awards totaled $1 million. Management expects to recognize this cost over a weighted-average period of 1.7 years. The total fair value of restricted stock vested was $4 million during 2006, $.7 million during 2005 and $.1 million during 2004.

DEFERRED COMPENSATION PLANS

Key’s deferred compensation arrangements include voluntary and mandatory deferral programs that award Key common shares to certain employees and directors. Mandatory deferred incentive awards, together with a 15% employer matching contribution, vest at the rate of 33-1/3% per year beginning one year after the deferral date. Deferrals under the voluntary programs, which include a nonqualified excess 401(k) savings plan, are immediately vested, except for any employer match. Key’s excess 401(k) savings plan permits certain employees to defer up to 6% of their eligible compensation, with the entire deferral eligible for an employer match in the form of Key common shares. All other voluntary deferral programs provide an employer match ranging from 6% to 15% of the deferral. The employer match under all voluntary programs generally vests after three years of service. Effective December 29, 2006, Key discontinued the excess 401(k) savings plan, and balances were merged into a new deferred savings plan that went into effect January 1, 2007.

Several of Key’s deferred compensation arrangements allow for deferrals to be redirected by participants from Key common shares, into other investment elections that provide for distributions payable in cash. Key accounts for these participant-directed deferred compensation arrangements as stock-based liabilities and remeasures the related compensation cost based on the most recent fair value of Key’s common shares. Key paid stock-based liabilities of $1.8 million during 2006, $2.0 million during 2005 and $2.6 million during 2004. The compensation cost of all other nonparticipant-directed deferrals are measured based on the average of the high and low trading price of Key’s common shares on the deferral date.

The following table summarizes activity and pricing information for the nonvested shares in Key’s deferred compensation plans for the year ended December 31, 2006:

				Weighted-
	Number of			Average
	Nonvested			Grant-Date
	Shares			Fair Value
OUTSTANDING AT DECEMBER 31, 2005		809,824		$	31.74
Granted		759,302			36.41
Dividend equivalents		126,362			36.85
Vested		(646,317	)		33.10
Forfeited		(64,798	)		33.56
OUTSTANDING AT DECEMBER 31, 2006		984,373		$	34.99

The weighted-average grant-date fair value of awards granted was $36.41 during 2006, $32.77 during 2005 and $29.85 during 2004. As of December 31, 2006, unrecognized compensation cost related to nonvested shares expected to vest under Key’s deferred compensation plans totaled $11 million. Management expects to recognize this cost over a weighted-average period of 2.2 years. The total fair value of shares vested was $24 million during 2006, $23 million during 2005 and $26 million during 2004.

DISCOUNTED STOCK PURCHASE PLAN

Key’s Discounted Stock Purchase Plan provides employees the opportunity to purchase Key’s common shares at a 10% discount through payroll deductions or cash payments. Purchases are limited to $10,000 in any month and $50,000 in any calendar year and are immediately vested. To accommodate employee purchases, Key acquires shares on the open market on or around the fifteenth day of the month following the month of payment. During 2006, Key issued 134,390 shares at a weighted-average cost of $36.24. During 2005, Key issued 143,936 shares at a weighted-average cost of $32.99. During 2004, Key issued 133,262 shares at a weighted-average cost of $31.09.

Information pertaining to Key’s method of accounting for stock-based compensation is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Stock-Based Compensation” on page 71.

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

16. EMPLOYEE BENEFITS

On December 31, 2006, Key adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” which requires an employer to recognize an asset or liability for the overfunded or underfunded status, respectively, of its defined benefit plans. The overfunded or underfunded status is to be measured solely as the difference between the fair value of plan assets and the projected benefit obligation. In addition, any change in a plan’s funded status must be recognized in comprehensive income in the year in which it occurs. Most requirements of SFAS No. 158 were effective for Key for the year ended December 31, 2006. However, the requirement to measure plan assets and liabilities as of the end of the fiscal year will not be effective until the year ending December 31, 2008. As a result of adopting this guidance, Key recorded an after-tax charge of $154 million to the accumulated other comprehensive loss component of shareholders’ equity for the year ended December 31, 2006.

The charge to accumulated other comprehensive loss represents the net unrecognized actuarial losses and unrecognized prior service costs remaining from the initial adoption of SFAS No. 87, “Employers’ Accounting for Pensions,” both of which were previously netted against the plans’ funded status. These amounts will be subsequently recognized as net pension cost. In addition, actuarial gains and losses that arise in subsequent periods that are not recognized as net pension cost in the same period will be recognized as a component of comprehensive income.

The incremental pre-tax effect of adopting SFAS No. 158 on Key’s Consolidated Balance Sheet is shown below:

	Before			Effect of
	Adoption			Adopting
December 31, 2006	of SFAS			SFAS			As
in millions	No. 158			No. 158			Reported
Other intangible assets	$	121		$	(1	)	$	120
Accrued income and other assets		4,128			(115	)		4,013
Accrued expense and other liabilities		5,190			38			5,228
Accumulated other comprehensive loss		(30	)		(154	)		(184	)

PENSION PLANS

The components of pre-tax accumulated other comprehensive loss not yet recognized as net pension cost are shown below:

December 31,
in millions	2006
Net unrecognized losses	$	252
Net unrecognized prior service cost		1
Total unrecognized accumulated other comprehensive loss	$	253

During 2007, Key expects to recognize $28 million of pre-tax accumulated other comprehensive loss, relating entirely to net losses, as net pension cost.

Net pension cost for all funded and unfunded plans includes the following components:

Year ended December 31,
in millions	2006			2005			2004
Service cost of benefits earned	$	48		$	49		$	46
Interest cost on projected benefit obligation		55			57			56
Expected return on plan assets		(88	)		(93	)		(92	)
Amortization of prior service benefit		(1	)		(1	)		—
Amortization of losses		31			21			22
Net pension cost	$	45		$	33		$	32

The information related to Key’s pension plans presented in the following tables as of or for the years ended December 31 is based on current actuarial reports using a September 30 measurement date.

Changes in the projected benefit obligation (“PBO”) related to Key’s pension plans are summarized as follows:

Year ended December 31,
in millions	2006			2005
PBO at beginning of year	$	1,094		$	1,037
Service cost		48			49
Interest cost		55			57
Actuarial losses		6			35
Benefit payments		(91	)		(84	)
PBO at end of year	$	1,112		$	1,094

Changes in the fair value of pension plan assets (“FVA”) are summarized as follows:

Year ended December 31,
in millions	2006			2005
FVA at beginning of year	$	1,096		$	1,027
Actual return on plan assets		102			141
Employer contributions		12			12
Benefit payments		(91	)		(84	)
FVA at end of year	$	1,119		$	1,096

The funded status of the pension plans, reconciled to the amounts recognized in the consolidated balance sheets at December 31, 2006 and 2005, is as follows:

December 31,
in millions	2006			2005
Funded statusa	$	7		$	2
Unrecognized net loss		—			291
Benefits paid subsequent to measurement date		3			3
Net prepaid pension cost recognized	$	10		$	296
Net prepaid pension cost recognized consists of:
Prepaid benefit cost	$	$185		$	418
Accrued benefit liability		(175	)		(177	)
Deferred tax asset		—			20
Intangible asset		—			1
Accumulated other comprehensive loss		—			34
Net prepaid pension cost recognized	$	10		$	296

^a The excess of the fair value of plan assets over the projected benefit obligation.

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

At December 31, 2006, Key’s qualified plans were sufficiently funded under the requirements of the Employee Retirement Income Security Act of 1974. Consequently, Key is not required to make minimum contributions to the plans in 2007. If Key makes any discretionary contributions during 2007, those contributions are not expected to be significant.

Benefits from all funded and unfunded pension plans at December 31, 2006, are expected to be paid as follows: 2007 — $98 million; 2008 — $102 million; 2009 — $105 million; 2010 — $107 million; 2011 — $114 million; and $604 million in the aggregate from 2012 through 2016.

The accumulated benefit obligation (“ABO”) for all of Key’s pension plans was $1.1 billion at December 31, 2006 and 2005. Information for those pension plans that had an ABO in excess of plan assets is as follows:

December 31,
in millions	2006		2005
Projected benefit obligation	$	230	$	234
Accumulated benefit obligation		228		230
Fair value of plan assets		52		52

Key’s primary qualified Cash Balance Pension Plan is excluded from the preceding table because that plan was overfunded (i.e., the fair value of plan assets exceeded the projected benefit obligation) by $185 million at December 31, 2006, and $184 million at December 31, 2005.

Prior to December 31, 2006, SFAS No. 87, “Employers’ Accounting for Pensions,” required employers to recognize an additional minimum liability (“AML”) to the extent of any excess of the unfunded ABO over the liability already recognized as unfunded accrued pension cost. Key’s AML, which excluded the overfunded Cash Balance Pension Plan mentioned above, was $55 million at December 31, 2005. In accordance with SFAS No. 158, this balance and the amount of any subsequent change in the AML were reversed during 2006. The after-tax change in AML included in “accumulated other comprehensive loss” for 2006, 2005 and 2004 is shown in the Consolidated Statements of Changes in Shareholders’ Equity on page 65.

To determine the actuarial present value of benefit obligations, management assumed the following weighted-average rates:

December 31,	2006			2005
Discount rate		5.50	%		5.25	%
Compensation increase rate		4.00			4.00

To determine net pension cost, management assumed the following weighted-average rates:

Year ended December 31,	2006			2005			2004
Discount rate		5.25	%		5.75	%		6.00	%
Compensation increase rate		4.00			4.00			4.00
Expected return on plan assets		8.75			9.00			9.00

Management estimates that Key’s net pension cost will be $50 million for 2007, compared to $45 million for 2006 and $33 million for 2005. The estimated increase in cost for 2007 is attributable primarily to increased amortization of unrecognized actuarial obligation losses, which represent the difference between expected and actual participant census data experience.

The increase in 2006 cost was attributable primarily to increased amortization of unrecognized losses and a 25 basis point reduction in the expected rate of return on plan assets discussed below. The unrecognized losses amortized in 2006 resulted primarily from asset losses, representing the difference between expected and actual returns on plan assets in 2002 and 2001. Asset and obligation losses and gains are not recognized in the year they occur; rather they are combined with any other cumulative asset- and obligation-related unrecognized gains and losses. These unrecognized gains and losses are subject to expense amortization gradually and systematically over future years, subject to certain constraints and recognition rules. Key determines the expected return on plan assets using a calculated market-related value of plan assets that smoothes what otherwise might be significant year-to-year volatility in net pension cost. Asset gains and losses are reflected evenly in the market-related value over the following five years, so long as the market-related value does not vary more than 10% from the plan’s FVA. As asset gains and losses are reflected in the market-related value, they are included in the cumulative unrecognized gains and losses subject to expense amortization.

Management estimates that a 25 basis point decrease in the expected return on plan assets would increase Key’s net pension cost for 2007 by approximately $3 million. Conversely, management estimates that a 25 basis point increase in the expected return on plan assets would decrease Key’s net pension cost for 2007 by the same amount. In addition, pension cost is affected by an assumed discount rate and an assumed compensation increase rate. Management estimates that a 25 basis point change in either or both of these assumed rates would change net pension cost for 2007 by less than $1 million.

Management determines the assumed discount rate based on the rate of return on a hypothetical portfolio of high quality corporate bonds with interest rates and maturities that provide the necessary cash flows to pay benefits when due. The expected return on plan assets is determined by considering a number of factors, but the most significant factors are:

• Management’s expectations for returns on plan assets over the long term, weighted for the investment mix of the assets. These expectations consider, among other factors, historical capital market returns of equity and fixed income securities and forecasted returns that are modeled under various economic scenarios.

• Historical returns on Key’s plan assets. Management’s expected return on plan assets for 2006 was reduced to 8.75% from the 9% assumption used in 2005 and 2004. The 9% assumption is consistent with actual returns since 1991. However, an annual reassessment of current and expected future capital market returns suggested that 8.75% is a more appropriate rate.

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

The investment objectives of the pension funds are developed to reflect the characteristics of the plans, such as the plans’ pension formulas and cash lump sum distribution features, and the liability profiles created by the plans’ participants. An executive oversight committee reviews the plans’ investment performance at least quarterly, and compares performance against appropriate market indices. The pension funds’ investment allocation policies specify that fund assets are to be invested within the following ranges:

Asset Class	Investment Range
Equity securities		65%—80	%
Fixed income securities		15   —25
Convertible securities		0   —10
Cash equivalents and other assets		0   —  5

Key’s weighted-average asset allocations for its pension funds are summarized as follows:

December 31,	2006			2005
Equity securities		73	%		72	%
Fixed income securities		17			17
Convertible securities		8			9
Cash equivalents and other assets		2			2
Total		100	%		100	%

Although the investment policies conditionally permit the use of derivative contracts, no such contracts have been entered into, and management does not expect to employ such contracts in the future.

OTHER POSTRETIREMENT BENEFIT PLANS

Key sponsors a contributory postretirement healthcare plan that covers substantially all active and retired employees hired before 2001 who meet certain eligibility criteria. Retirees’ contributions are adjusted annually to reflect certain cost-sharing provisions and benefit limitations. Key also sponsors life insurance plans covering certain grandfathered employees. These plans are principally noncontributory. Separate Voluntary Employee Beneficiary Association (“VEBA”) trusts are used to fund the healthcare plan and one of the life insurance plans.

The components of pre-tax accumulated other comprehensive loss not yet recognized as net postretirement benefit cost are shown below:

December 31,
in millions	2006
Transition obligation	$	24
Net unrecognized losses		15
Net unrecognized prior service cost		1
Total unrecognized accumulated other comprehensive loss	$	40

During 2007, Key expects to recognize $4 million of pre-tax accumulated other comprehensive loss, relating entirely to amortization of the transition obligation, as net postretirement benefit cost.

Net postretirement benefit cost for all funded and unfunded plans includes the following components:

Year ended December 31,
in millions	2006			2005			2004
Service cost of benefits earned	$	6		$	4		$	4
Interest cost on accumulated postretirement benefit obligation		8			8			7
Expected return on plan assets		(4	)		(3	)		(3	)
Amortization of unrecognized transition obligation		4			4			4
Amortization of losses		2			2			1
Net postretirement benefit cost	$	16		$	15		$	13

Key determines the expected return on plan assets using the plans’ FVA.

The information related to Key’s postretirement benefit plans presented in the following tables as of or for the years ended December 31 is based on current actuarial reports using a September 30 measurement date.

Changes in the accumulated postretirement benefit obligation (“APBO”) are summarized as follows:

Year ended December 31,
in millions	2006			2005
APBO at beginning of year	$	148		$	141
Service cost		6			4
Interest cost		8			8
Plan participants’ contributions		9			8
Actuarial (gains) losses		(13	)		4
Benefit payments		(19	)		(17	)
APBO at end of year	$	139		$	148

Changes in the fair value of postretirement plan assets are summarized as follows:

Year ended December 31,
in millions	2006			2005
FVA at beginning of year	$	74		$	64
Employer contributions		10			11
Plan participants’ contributions		9			8
Benefit payments		(19	)		(17	)
Actual return on plan assets		8			8
FVA at end of year	$	82		$	74

The funded status of the postretirement plans, reconciled to the amounts recognized in the consolidated balance sheets at December 31, 2006 and 2005, is as follows:

December 31,
in millions	2006			2005
Funded statusa	$	(57	)	$	(74	)
Unrecognized net loss		—			33
Unrecognized prior service cost		—			2
Unrecognized transition obligation		—			27
Contributions/benefits paid subsequent to measurement date		2			4
Accrued postretirement benefit cost recognized	$	(55	)	$	(8	)

^a The excess of the accumulated postretirement benefit obligation over the fair value of plan assets.

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

There are no regulatory provisions that require contributions to the VEBA trusts. Consequently, there is no minimum funding requirement. Key is permitted to make discretionary contributions to the VEBAs, subject to certain Internal Revenue Service restrictions and limitations. Management anticipates that Key will make $4 million in such discretionary contributions in 2007.

Benefits from all funded and unfunded other postretirement plans at December 31, 2006, are expected to be paid as follows: 2007 — $8 million; 2008 — $8 million; 2009 — $9 million; 2010 — $9 million; 2011 — $ 9 million; and $45 million in the aggregate from 2012 through 2016. Federal subsidies related to prescription drug coverage under the “Medicare Prescription Drug, Improvement and Modernization Act of 2003” discussed below are expected to be $1 million in 2007 and $2 million in the aggregate from 2008 through 2016.

To determine the APBO, management assumed weighted-average discount rates of 5.50% at December 31, 2006, and 5.25% at December 31, 2005.

To determine net postretirement benefit cost, management assumed the following weighted-average rates:

Year ended December 31,	2006			2005			2004
Discount rate		5.25	%		5.75	%		6.00	%
Expected return on plan assets		5.64			5.79			5.78

The realized net investment income for the postretirement healthcare plan VEBA trust is subject to federal income taxes. Consequently, the weighted-average expected return on plan assets shown above reflects the effect of income taxes. Management assumptions regarding healthcare cost trend rates are as follows:

December 31,	2006			2005
Healthcare cost trend rate assumed for 2007:
Under age 65		11.00	%		9.50	%
Age 65 and over		10.50			9.50
Rate to which the cost trend rate is assumed to decline		5.00			5.00
Year that the rate reaches the ultimate trend rate		2016			2015

Increasing or decreasing the assumed healthcare cost trend rate by one percentage point each future year would not have a material impact on net postretirement benefit cost or obligations since the postretirement plans have cost-sharing provisions and benefit limitations.

Management estimates the expected returns on plan assets for VEBA trusts much the same way it estimates returns on Key’s pension funds. The primary investment objectives of the VEBA trusts also are similar. In accordance with Key’s current investment policies, weighted-average target allocation ranges for the trust’s assets are as follows:

Asset Class	Investment Range
Equity securities		70%—90	%
Fixed income securities		0   —10
Convertible securities		0   —10
Cash equivalents and other assets		10   —30

Key’s weighted-average asset allocations for its postretirement VEBA trusts are summarized as follows:

December 31,	2006			2005
Equity securities		85	%		85	%
Cash equivalents		15			15
Total		100	%		100	%

Although the investment policy conditionally permits the use of derivative contracts, no such contracts have been entered into, and management does not expect to employ such contracts in the future.

The “Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which became effective in 2006, introduced a prescription drug benefit under Medicare, as well as a federal subsidy to sponsors of retiree healthcare benefit plans that offer “actuarially equivalent” prescription drug coverage to retirees. Based on regulations regarding the manner in which actuarial equivalence must be determined, management has determined that the prescription drug coverage related to Key’s retiree healthcare benefit plan is actuarially equivalent. The subsidy did not have a material effect on Key’s APBO and net postretirement benefit cost.

EMPLOYEE 401(K) SAVINGS PLAN

A substantial majority of Key’s employees are covered under a savings plan that is qualified under Section 401(k) of the Internal Revenue Code. Key’s plan permits employees to contribute from 1% to 25% of eligible compensation, with up to 6% being eligible for matching contributions in the form of Key common shares. The plan also permits Key to distribute a discretionary profit-sharing component. Key also maintains nonqualified excess 401(k) savings plans that provide certain employees with benefits that they otherwise would not have been eligible to receive under the qualified plan because of contribution limits imposed by the IRS. Effective December 29, 2006, Key discontinued the excess 401(k) savings plan, and balances were merged into a new deferred savings plan that went into effect January 1, 2007. Total expense associated with the above plans was $59 million in 2006, $61 million in 2005 and $60 million in 2004.

95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

17. INCOME TAXES

Income taxes included in the consolidated statements of income are summarized below. Key files a consolidated federal income tax return.

Year ended December 31,
in millions	2006		2005		2004
Currently payable:
Federal	$	402	$	289	$	(12	)
State		21		42		1
		423		331		(11	)
Deferred:
Federal		13		98		377
State		14		7		39
		27		105		416
Total income tax expensea	$	450	$	436	$	405

^a Income tax expense on securities transactions totaled $.4 million in 2006, $.2 million in 2005 and $2 million in 2004. Income tax expense in the above table excludes equity- and gross receipts-based taxes, which are assessed in lieu of an income tax in certain states in which Key operates. These taxes are recorded in “noninterest expense” on the income statement and totaled $13 million in 2006, $18 million in 2005 and ($9) million in 2004.

Significant components of Key’s deferred tax assets and liabilities, included in “accrued income and other assets” and “accrued expense and other liabilities,” respectively, on the balance sheet, are as follows:

December 31,
in millions	2006		2005
Provision for loan losses	$	430	$	405
Net unrealized securities losses		21		48
Other		395		216
Total deferred tax assets		846		669
Leasing income reported using the operating method for tax purposes		2,762		2,809
Depreciation		—		6
Other		75		49
Total deferred tax liabilities		2,837		2,864
Net deferred tax liabilities	$	1,991	$	2,195

At December 31, 2006, Key had state net operating loss carryforwards of $319 million (for which it has recorded a $10 million tax benefit) that are subject to various limitations imposed by tax laws and, if not used, will expire in varying amounts from 2007 through 2025.

The following table shows how Key arrived at total income tax expense and the resulting effective tax rate.

Year ended December 31,	2006						2005						2004
dollars in millions	Amount			Rate			Amount			Rate			Amount			Rate
Income before income taxes times 35% statutory federal tax rate	$	575			35.0	%	$	534			35.0	%	$	459			35.0	%
State income tax, net of federal tax benefit		4			.2			31			2.0			26			2.0
Write-off of nondeductible goodwill		—			—			—			—			19			1.5
Tax-exempt interest income		(14	)		(.8	)		(12	)		(.8	)		(13	)		(1.0	)
Corporate-owned life insurance income		(38	)		(2.3	)		(40	)		(2.6	)		(41	)		(3.1	)
Tax credits		(69	)		(4.2	)		(64	)		(4.2	)		(51	)		(3.9	)
Reduced tax rate on lease income		(42	)		(2.6	)		(65	)		(4.3	)		(44	)		(3.4	)
Reduction of deferred tax asset		—			—			8			.6			43			3.3
Other		34			2.1			44			2.9			7			.5
Total income tax expense	$	450			27.4	%	$	436			28.6	%	$	405			30.9	%

A lower tax rate is applied to portions of the equipment lease portfolio that are managed by a foreign subsidiary in a lower tax jurisdiction. Since Key intends to permanently reinvest the earnings of this foreign subsidiary overseas, deferred income taxes of $269 million, $219 million and $157 million have not been recorded as of December 31, 2006, 2005 and 2004, respectively, in accordance with SFAS No. 109, “Accounting for Income Taxes.”

LEASE FINANCING TRANSACTIONS

In the ordinary course of business, Key’s equipment finance business unit (“KEF”) enters into various types of lease financing transactions. Between 1996 and 2004, KEF entered into three types of lease financing transactions with both foreign and domestic customers (primarily municipal authorities) for terms ranging from ten to fifty years.

Lease in, Lease out (“LILO”) transactions are leveraged leasing transactions in which KEF leases property from an unrelated third party and then leases the property back to that party. The transaction is similar to a sale-leaseback, except that the property is leased by KEF, rather than purchased. Qualified Technical Equipment Leases (“QTEs”) and Service Contract Leases are even more like sale-leaseback transactions, as KEF is considered to be the purchaser of the equipment for tax purposes. LILO and Service Contract transactions involve commuter rail equipment, public utility facilities, and commercial aircraft. QTE transactions involve sophisticated high technology hardware and related software, such as telecommunications equipment.

Like other forms of leasing transactions, LILO transactions generate income tax deductions for Key from net rental expense associated with the leased property, interest expense on nonrecourse debt incurred to fund the transaction, and transaction costs. QTE and Service Contract

96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

transactions generate rental income, as well as deductions from the depreciation of the property, interest expense on nonrecourse debt incurred to fund the transaction, and transaction costs.

Prior to 2004, LILO, QTE and Service Contract Leases were prevalent in the financial services industry and in certain other industries. The tax treatment that Key applied was based on applicable statutes, regulations, and judicial authority in effect at the time Key entered into these transactions. Subsequently, the Internal Revenue Service (“IRS”) has challenged the tax treatment of these transactions by a number of bank holding companies and other corporations.

The IRS has completed audits of Key’s income tax returns for the 1995 through 2000 tax years and has disallowed all deductions taken in tax years 1995 through 1997 pertaining to LILOs, and all deductions in tax years 1998 through 2000 that relate to LILOs, QTEs and Service Contract Leases. In addition, the IRS is currently conducting audits of Key’s income tax returns for the 2001 through 2003 tax years, and Key expects that the IRS will disallow all similar deductions taken by Key in those tax years.

Key appealed the examination results for the tax years 1995 through 1997, which pertained to LILOs only, to the Appeals Division of the IRS. During the fourth quarter of 2005, discussions with the Appeals Division were discontinued without a resolution. In April 2006, Key received a final assessment from the IRS disallowing all LILO deductions taken in those tax years. The assessment, which relates principally to the 1997 tax year, consists of federal tax, interest and a penalty. Key paid the assessment and filed a refund claim for the total amount. Key has also filed an appeal with the Appeals Division of the IRS with regard to the proposed disallowance of LILO, QTE and Service Contract Lease deductions taken in the 1998 through 2000 tax years.

The payment of the 1997 tax year assessment did not impact Key’s earnings since the taxes had been included in previously recorded deferred taxes as required under GAAP. The payment of the interest and penalty did not materially impact Key’s earnings, in part due to Key’s tax reserves, and also because Key is recording a receivable on its balance sheet for amounts that are not charged to Key’s tax reserve.

Management believes that these LILO, QTE and Service Contract Lease transactions were entered into in conformity with the tax laws in effect at the time, and Key intends to vigorously pursue the IRS appeals process and litigation alternatives. Key cannot currently estimate the financial outcome of this dispute, but if Key does not prevail or enters into a settlement agreement with the IRS, Key would owe interest and possibly penalties, which could be material in amount, in addition to previously accrued tax amounts. Such an outcome would not have a material effect on Key’s financial condition, but could have a material adverse effect on Key’s results of operations in the period it occurs.

TAX-RELATED ACCOUNTING PRONOUNCEMENTS PENDING ADOPTION

In July 2006, the FASB issued Staff Position No. 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” which provides additional guidance on the application of SFAS No. 13, “Accounting for Leases.” This guidance will affect when earnings from leveraged lease transactions may be recognized when there are changes or projected changes in the timing of cash flows, including changes due to or expected to be due to settlements of tax matters. Previously, leveraged lease transactions were required to be recalculated only when a change in the total cash flows occurred. This guidance will be effective for fiscal years beginning after December 15, 2006 (effective January 1, 2007, for Key). Management has concluded that adoption of this guidance will result in a cumulative after-tax charge of approximately $52 million to Key’s retained earnings. However, future earnings are expected to increase over the remaining term of the affected leases by a similar amount.

In July 2006, the FASB also issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the application of SFAS No. 109, “Accounting for Income Taxes,” by defining the minimum threshold that a tax position must meet before any associated benefit may be recognized in a company’s financial statements. In accordance with this guidance, a company may recognize a benefit if management concludes that the tax position, based solely on its technical merits, is “more likely than not” to be sustained upon examination. If such a conclusion is reached, the tax benefit is to be measured as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. This interpretation also provides guidance on measurement and derecognition of tax benefits, and requires expanded disclosures. The interpretation will be effective for fiscal years beginning after December 15, 2006 (effective January 1, 2007, for Key). Management has concluded that the adoption of this guidance will not have a material impact on Key’s financial condition or results of operations.

18. COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES

OBLIGATIONS UNDER NONCANCELABLE LEASES

Key is obligated under various noncancelable operating leases for land, buildings and other property consisting principally of data processing equipment. Rental expense under all operating leases totaled $136 million in 2006 and 2005 and $138 million in 2004. Minimum future rental payments under noncancelable operating leases at December 31, 2006, are as follows: 2007 — $123 million; 2008 — $112 million; 2009 — $96 million; 2010 — $82 million; 2011 — $65 million; all subsequent years — $256 million.

COMMITMENTS TO EXTEND CREDIT OR FUNDING

Loan commitments provide for financing on predetermined terms as long as the client continues to meet specified criteria. These agreements generally carry variable rates of interest and have fixed expiration dates or termination clauses. Generally, a client must pay a fee to obtain a loan commitment from Key. Since a commitment may expire without resulting in a loan, the total amount of outstanding commitments may significantly exceed Key’s eventual cash outlay.

97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Loan commitments involve credit risk not reflected on Key’s balance sheet. Key mitigates exposure to credit risk with internal controls that guide how applications for credit are reviewed and approved, how credit limits are established and, when necessary, how demands for collateral are made. In particular, Key evaluates the credit-worthiness of each prospective borrower on a case-by-case basis and, when appropriate, adjusts the allowance for probable credit losses inherent in all commitments. Additional information pertaining to this allowance is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Credit Losses on Lending-Related Commitments” on page 69.

The following table shows the remaining contractual amount of each class of commitments related to extensions of credit or the funding of principal investments as of the date indicated. For loan commitments and commercial letters of credit, this amount represents Key’s maximum possible accounting loss if the borrower were to draw upon the full amount of the commitment and then subsequently default on payment for the total amount of the then outstanding loan.

December 31,
in millions	2006		2005
Loan commitments:
Commercial and other	$	24,747	$	25,104
Home equity		7,688		7,331
Commercial real estate and construction		7,524		6,456
Total loan commitments		39,959		38,891
When-issued and to be announced securities commitments		671		2,222
Commercial letters of credit		246		336
Principal investing commitments		244		214
Liabilities of certain limited partnerships and other commitments		140		58
Total loan and other commitments	$	41,260	$	41,721

LEGAL PROCEEDINGS

Residual value insurance litigation. Key has previously reported on its on-going litigation with Swiss Reinsurance America Corporation (“Swiss Re”) in the United States Federal District Court in Ohio relating to insurance coverage of the residual value of certain automobile leases through Key Bank USA (the “Residual Value Litigation”).

As previously reported, on February 13, 2007, Key and Swiss Re entered into an agreement to settle the Residual Value Litigation, subject to certain conditions. On February 16, 2007, the conditions to settlement were satisfied. Under the settlement agreement, Swiss Re will pay Key $279 million in two installments: $50 million on March 15, 2007, and $229 million on June 29, 2007. As a result of the settlement, Key will record a one-time gain of approximately $26 million ($17 million after tax, or $.04 per diluted common share), representing the difference between the proceeds received and the receivable recorded on Key’s balance sheet.

Other litigation. In the ordinary course of business, Key is subject to legal actions that involve claims for substantial monetary relief. Based on information presently known to management, management does not believe there is any legal action to which KeyCorp or any of its subsidiaries is a party, or involving any of their properties, that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Key’s financial condition.

TAX CONTINGENCY

In the ordinary course of business, Key enters into certain transactions that have tax consequences. On occasion, the IRS may challenge a particular tax position taken by Key. The IRS has completed its review of Key’s tax returns for the 1995 through 2000 tax years and has disallowed all LILO deductions taken in the 1995 through 1997 tax years and all deductions taken in the 1998 through 2000 tax years that relate to certain lease financing transactions. In addition, the IRS is currently conducting audits of the 2001 through 2003 tax years. Key expects that the IRS will disallow all similar deductions taken in those years. Further information on Key’s position on these matters and on the potential implications to Key is included in Note 17 (“Income Taxes”) under the heading “Lease Financing Transactions” on page 96.

GUARANTEES

Key is a guarantor in various agreements with third parties. The following table shows the types of guarantees that Key had outstanding at December 31, 2006. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Guarantees” on page 71.

	Maximum Potential
	Undiscounted		Liability
in millions	Future Payments		Recorded
Financial guarantees:
Standby letters of credit	$	13,294	$	34
Credit enhancement for asset-backed commercial paper conduit		28		—
Recourse agreement with FNMA		619		8
Return guarantee agreement with LIHTC investors		421		43
Default guarantees		12		1
Written interest rate capsa		80		5
Total	$	14,454	$	91

^a As of December 31, 2006, the weighted-average interest rate of written interest rate caps was 5.1% and the weighted-average strike rate was 5.5%. Maximum potential undiscounted future payments were calculated assuming a 10% interest rate.

Standby letters of credit. These instruments, issued on behalf of clients, obligate Key to pay a specified third party when a client fails to repay an outstanding loan or debt instrument, or fails to perform some contractual nonfinancial obligation. Many of Key’s lines of business issue standby letters of credit to address clients’ financing needs. Any amounts drawn under standby letters of credit are treated as loans; they bear interest (generally at variable rates) and pose the same credit risk to Key as a loan. At December 31, 2006, Key’s standby letters of credit had a remaining weighted-average life of approximately 2.6 years, with remaining actual lives ranging from less than one year to as many as twelve years.

98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Credit enhancement for asset-backed commercial paper conduit. Key provides credit enhancement in the form of a committed facility to ensure the continuing operations of an asset-backed commercial paper conduit that is owned by a third party and administered by an unaffiliated financial institution. The commitment to provide credit enhancement extends until September 21, 2007, and specifies that in the event of default by certain borrowers whose loans are held by the conduit, Key will provide financial relief to the conduit in an amount that is based on defined criteria that consider the level of credit risk involved and other factors.

At December 31, 2006, Key’s maximum potential funding requirement under the credit enhancement facility totaled $28 million but there were no drawdowns under the facility during the year. Key has no recourse or other collateral available to offset any amounts that may be funded under this credit enhancement facility. Management periodically evaluates Key’s commitment to provide credit enhancement to the conduit.

Recourse agreement with Federal National Mortgage Association. KBNA participates as a lender in the Federal National Mortgage Association (“FNMA”) Delegated Underwriting and Servicing (“DUS”) program. As a condition to FNMA’s delegation of responsibility for originating, underwriting and servicing mortgages, KBNA has agreed to assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan KBNA sells to FNMA. Accordingly, KBNA maintains a reserve for such potential losses in an amount estimated by management to approximate the fair value of KBNA’s liability. At December 31, 2006, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of 8.1 years, and the unpaid principal balance outstanding of loans sold by KBNA as a participant in this program was approximately $1.9 billion. The maximum potential amount of undiscounted future payments that may be required under this program is generally equal to one-third of the principal balance of loans outstanding at December 31, 2006. If payment is required under this program, Key would have an interest in the collateral underlying the commercial mortgage loan on which the loss occurred.

Return guarantee agreement with LIHTC investors. KAHC, a subsidiary of KBNA, offered limited partnership interests to qualified investors. Partnerships formed by KAHC invested in low-income residential rental properties that qualify for federal LIHTCs under Section 42 of the Internal Revenue Code. In certain partnerships, investors pay a fee to KAHC for a guaranteed return that is based on the financial performance of the property and the property’s confirmed LIHTC status throughout a fifteen-year compliance period. If KAHC defaults on its obligation to provide the guaranteed return, Key is obligated to make any necessary payments to investors. In October 2003, management elected to discontinue new partnerships under this program. Additional information regarding these partnerships is included in Note 8 (“Loan Securitizations, Servicing and Variable Interest Entities”), which begins on page 83.

No recourse or collateral is available to offset Key’s guarantee obligation other than the underlying income stream from the properties. These guarantees have expiration dates that extend through 2018. Key meets its obligations pertaining to the guaranteed returns generally by distributing tax credits and deductions associated with the specific properties.

As shown in the table on page 98, KAHC maintained a reserve in the amount of $43 million at December 31, 2006, which management believes will be sufficient to cover estimated future obligations under the guarantees. The maximum exposure to loss reflected in the preceding table represents undiscounted future payments due to investors for the return on and of their investments. In accordance with Interpretation No. 45, the amount of all fees received in consideration for any return guarantee agreements entered into or modified with LIHTC investors on or after January 1, 2003, has been recognized in the liability recorded.

Various types of default guarantees. Some lines of business provide or participate in guarantees that obligate Key to perform if the debtor fails to satisfy all of its payment obligations to third parties. Key generally undertakes these guarantees to support or protect its underlying investment or where the risk profile of the debtor should provide an investment return. The terms of these default guarantees range from less than one year to as many as sixteen years. Although no collateral is held, Key would have recourse against the debtor for any payments made under a default guarantee.

Written interest rate caps. In the ordinary course of business, Key “writes” interest rate caps for commercial loan clients that have variable rate loans with Key and wish to limit their exposure to interest rate increases. At December 31, 2006, these caps had a weighted-average life of approximately 2.3 years.

Key is obligated to pay the client if the applicable benchmark interest rate exceeds a specified level (known as the “strike rate”). These instruments are accounted for as derivatives. Key’s potential amount of future payments under these obligations is mitigated by offsetting positions with third parties.

OTHER OFF-BALANCE SHEET RISK

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in Interpretation No. 45 and from other relationships.

Significant liquidity facilities that support asset-backed commercial paper conduits. Key provides liquidity facilities to various asset-backed commercial paper conduits. These facilities obligate Key to provide funding in the event of a disruption in credit markets or other factors that preclude the issuance of commercial paper by the conduits. Key’s commitments to provide liquidity are periodically evaluated by management. One of these liquidity facilities obligates Key through December 8, 2007, to provide funding of up to $948 million to a commercial paper conduit consolidated by Key. The amount available to be drawn, which is based on the amount of current commitments to borrowers, was $201 million at December 31, 2006, but there were no drawdowns under this committed facility at that date. Additional information pertaining to this conduit is included in this note under the heading “Guarantees” on page 98 and in Note 8 under the heading “Consolidated VIEs” on page 84.

99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

Key also provides liquidity facilities to several third-party commercial paper conduits. These liquidity facilities, which expire at various dates through October 30, 2009, obligate Key to provide funding of up to $562 million in total, with individual facilities ranging from $10 million to $100 million. The amounts available to be drawn, which are based on the amount of current commitments to borrowers, totaled $561 million at December 31, 2006, but there were no drawdowns under these committed facilities at that date.

Indemnifications provided in the ordinary course of business. Key provides certain indemnifications primarily through representations and warranties in contracts that are entered into in the ordinary course of business in connection with loan sales and other ongoing activities, as well as in connection with purchases and sales of businesses. Amounts paid, if any, with respect to these indemnifications have not had a significant effect on Key’s financial condition or results of operations in the past.

Intercompany guarantees. KeyCorp and certain other Key affiliates are parties to various guarantees that facilitate the ongoing business activities of other Key affiliates. These business activities encompass debt issuance, certain lease and insurance obligations, investments and securities, and certain leasing transactions involving clients.

19. DERIVATIVES AND HEDGING ACTIVITIES

Key, mainly through its subsidiary bank, KBNA, is party to various derivative instruments that are used for asset and liability management, credit risk management and trading purposes. The primary derivatives that Key uses are interest rate swaps, caps and futures, and foreign exchange forward contracts. Generally, these instruments help Key manage exposure to market risk, mitigate the credit risk inherent in the loan portfolio and meet client’s financing needs. Market risk represents the possibility that economic value or net interest income will be adversely affected by changes in interest rates or other economic factors.

At December 31, 2006, Key had $210 million of derivative assets and $51 million of derivative liabilities on its balance sheet that arose from derivatives that were being used for hedging purposes. As of the same date, derivative assets and liabilities classified as trading derivatives totaled $881 million and $871 million, respectively. Derivative assets and liabilities are recorded at fair value on the balance sheet.

COUNTERPARTY CREDIT RISK

The following table summarizes the fair value of Key’s derivative assets by type. These assets represent Key’s exposure to potential loss, as described below, before taking into account the effects of master netting arrangements and other means used to mitigate risk.

December 31,
in millions	2006		2005
Interest rate	$	697	$	800
Credit		43		39
Foreign exchange		321		167
Equity		45		42
Energy		29		—
Total	$	1,135	$	1,048

Like other financial instruments, derivatives contain an element of “credit risk” — the possibility that Key will incur a loss because a counterparty, which may be a bank or a broker/dealer, fails to meet its contractual obligations. This risk is measured as the expected positive replacement value of contracts. To mitigate credit risk when managing asset, liability and trading positions, Key deals exclusively with counterparties that have high credit ratings.

Key uses two additional means to manage exposure to credit risk on derivative contracts. First, Key generally enters into bilateral collateral and master netting arrangements. These agreements provide for the net settlement of all contracts with a single counterparty in the event of default. Second, Key’s Credit Administration department monitors credit risk exposure to the counterparty on each contract to determine appropriate limits on Key’s total credit exposure and decide whether to demand collateral. If Key determines that collateral is required, it is generally collected immediately. Key generally holds collateral in the form of cash and highly rated Treasury and agency-issued securities.

At December 31, 2006, Key was party to derivative contracts with 53 different counterparties. These derivatives include interest rate swaps and caps, credit derivatives, energy derivatives and foreign exchange contracts. Among these were contracts entered into to offset the risk of client exposure. Key had aggregate exposure of $292 million on these instruments to 27 of the 53 counterparties. However, at December 31, 2006, Key held approximately $153 million in pooled collateral to mitigate that exposure, resulting in net exposure of $139 million. The largest exposure to an individual counterparty was approximately $81 million, which Key secured with approximately $69 million in collateral.

ASSET AND LIABILITY MANAGEMENT

Fair value hedging strategies. Key uses interest rate swap contracts known as “receive fixed/pay variable” swaps to modify its exposure to interest rate risk. These contracts convert specific fixed-rate deposits, short-term borrowings and long-term debt into variable-rate obligations. As a result, Key receives fixed-rate interest payments in exchange for variable-rate payments over the lives of the contracts without exchanges of the underlying notional amounts.

The effective portion of a change in the fair value of a hedging instrument designated as a fair value hedge is recorded in earnings at the same time as a change in fair value of the hedged item, resulting in no effect on net income. The ineffective portion of a change in the fair value of such a hedging instrument is recorded in earnings with no corresponding offset. Key recognized a net gain of approximately $2 million in 2006, a net gain of approximately $1 million in 2005 and a net loss of

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

approximately $1 million in 2004 related to the ineffective portion of its fair value hedging instruments. The ineffective portion recognized is included in “other income” on the income statement. Key did not exclude any portions of hedging instruments from the assessment of hedge effectiveness in any of the above years.

Cash flow hedging strategies. Key also enters into “pay fixed/receive variable” interest rate swap contracts that effectively convert a portion of its floating-rate debt into fixed-rate debt to reduce the potential adverse impact of interest rate increases on future interest expense. These contracts allow Key to exchange variable-rate interest payments for fixed-rate payments over the lives of the contracts without exchanges of the underlying notional amounts. Similarly, Key has converted certain floating-rate commercial loans to fixed-rate loans by entering into interest rate swap contracts.

Key also uses “pay fixed/receive variable” interest rate swaps to manage the interest rate risk associated with anticipated sales or securitizations of certain commercial real estate loans. These swaps protect against a possible short-term decline in the value of the loans that could result from changes in interest rates between the time they are originated and the time they are securitized or sold. Key’s general policy is to sell or securitize these loans within one year of origination.

During 2006, 2005 and 2004, the net amount recognized by Key in connection with the ineffective portion of its cash flow hedging instruments was not significant and is included in “other income” on the income statement. Key did not exclude any portions of hedging instruments from the assessment of hedge effectiveness in any of these years.

The change in “accumulated other comprehensive loss” resulting from cash flow hedges is as follows:

						Reclassification
	December 31,			2006		of Losses to		December 31,
in millions	2005			Hedging Activity		Net Income		2006
Accumulated other comprehensive loss resulting from cash flow hedges	$	(31	)	$	1	$	11	$	(19	)

Key reclassifies gains and losses from “accumulated other comprehensive loss” to earnings when a hedged item causes Key to pay variable-rate interest on debt, receive variable-rate interest on commercial loans, or sell or securitize commercial real estate loans. Key expects to reclassify an estimated $27 million of net gains on derivative instruments from “accumulated other comprehensive loss” to earnings during the next twelve months.

CREDIT RISK MANAGEMENT

Key uses credit derivatives — primarily credit default swaps — to mitigate credit risk by transferring a portion of the risk associated with the underlying extension of credit to a third party. These instruments are also used to manage portfolio concentration and correlation risks. At December 31, 2006, the notional amount of credit default swaps purchased by Key was $989 million. Key also provides credit protection to other lenders through the sale of credit default swaps. These transactions may generate fee income and can diversify overall exposure to credit loss. At December 31, 2006, the notional amount of credit default swaps sold by Key was $25 million.

These derivatives are recorded on the balance sheet at fair value, which is based on the creditworthiness of the borrowers. Related gains or losses, as well as the premium paid or received for credit protection, are included in the trading income component of noninterest income. Key does not apply hedge accounting to credit derivatives.

TRADING PORTFOLIO

Futures contracts and interest rate swaps, caps and floors. Key uses these instruments for dealer activities, which generally are for the benefit of Key’s commercial loan clients. Specifically, Key enters into positions with third parties that are intended to offset or mitigate the interest rate risk of the client positions. The transactions entered into with clients generally are limited to conventional interest rate swaps. All futures contracts and interest rate swaps, caps and floors are recorded at their estimated fair values. Adjustments to the fair values are included in “investment banking and capital markets income” on the income statement.

Foreign exchange forward contracts. Foreign exchange forward contracts provide for the delayed delivery or purchase of foreign currency. Key uses these instruments to accommodate clients’ business needs and for proprietary trading purposes. Key mitigates the associated risk by entering into other foreign exchange contracts with third parties. Adjustments to the fair value of all foreign exchange forward contracts are included in “investment banking and capital markets income” on the income statement.

Options and futures. Key uses these instruments for proprietary trading purposes. Adjustments to the fair value of options and futures are included in “investment banking and capital markets income” on the income statement.

Key has established a reserve in the amount of $11 million at December 31, 2006, which management believes will be sufficient to cover estimated future losses on the trading portfolio in the event of client default. This reserve is recorded in “accrued income and other assets” on the balance sheet.

101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

20. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

The carrying amount and estimated fair value of Key’s financial instruments are shown below in accordance with the requirements of SFAS No. 107, “Disclosures About Fair Value of Financial Instruments.”

December 31,	2006				2005
	Carrying		Fair		Carrying		Fair
in millions	Amount		Value		Amount		Value
ASSETS
Cash and short-term investmentsa	$	3,671	$	3,671	$	4,700	$	4,700
Securities available for saleb		7,858		7,827		7,348		7,269
Investment securitiesb		41		42		91		92
Other investmentsc		1,352		1,352		1,332		1,332
Loans, net of allowanced		64,882		66,788		65,512		66,892
Loans held for salea		3,637		3,637		3,381		3,381
Servicing assetse		282		396		275		346
Derivative assetsf		1,091		1,091		1,039		1,039
LIABILITIES
Deposits with no stated maturitya	$	39,535	$	39,535	$	39,416	$	39,416
Time depositse		19,581		19,817		19,349		19,428
Short-term borrowingsa		4,835		4,835		6,615		6,615
Long-term debte		14,533		13,758		13,939		13,804
Derivative liabilitiesf		922		922		1,060		1,060

Valuation Methods and Assumptions

a	Fair value equals or approximates carrying amount.
b	Fair values of securities available for sale and investment securities generally were based on quoted market prices. Where quoted market prices were not available, fair values were based on quoted market prices of similar instruments.
c	Fair values of most other investments were estimated based on the issuer’s financial condition and results of operations, prospects, values of public companies in comparable businesses, market liquidity, and the nature and duration of resale restrictions. Where fair values were not readily determinable, they were based on fair values of similar instruments, or the investments were included at their carrying amounts.
d	Fair values of most loans were estimated using discounted cash flow models. Lease financing receivables were included at their carrying amounts in the estimated fair value of loans.
e	Fair values of servicing assets, time deposits and long-term debt were estimated based on discounted cash flows.
f	Fair values of interest rate swaps and caps were based on discounted cash flow models. Foreign exchange forward contracts were valued based on quoted market prices and had a fair value that approximated their carrying amount.

Residential real estate mortgage loans with carrying amounts of $1.4 billion at December 31, 2006, and $1.5 billion at December 31, 2005, are included in the amount shown for “Loans, net of allowance.” The estimated fair values of residential real estate mortgage loans and deposits do not take into account the fair values of related long-term client relationships.

For financial instruments with a remaining average life to maturity of less than six months, carrying amounts were used as an approximation of fair values.

If management used different assumptions (related to discount rates and cash flow) and estimation methods, the estimated fair values shown in the table could change significantly. Accordingly, these estimates do not necessarily reflect the amounts Key’s financial instruments would command in a current market exchange. Similarly, because SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, the fair value amounts shown in the table do not, by themselves, represent the underlying value of Key as a whole.

102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

21. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

CONDENSED BALANCE SHEETS
December 31,
in millions	2006		2005
ASSETS
Interest-bearing deposits	$	2,469	$	1,934
Loans and advances to subsidiaries:
Banks		—		32
Nonbank subsidiaries		1,606		1,654
		1,606		1,686
Investment in subsidiaries:
Banks		6,853		6,936
Nonbank subsidiaries		1,195		1,037
		8,048		7,973
Accrued income and other assets		998		1,055
Total assets	$	13,121	$	12,648
LIABILITIES
Accrued expense and other liabilities	$	737	$	532
Short-term borrowings		83		86
Long-term debt due to:
Subsidiaries		1,832		1,597
Unaffiliated companies		2,766		2,835
		4,598		4,432
Total liabilities		5,418		5,050
SHAREHOLDERS’ EQUITYa		7,703		7,598
Total liabilities and shareholders’ equity	$	13,121	$	12,648

^a See page 65 for KeyCorp’s Consolidated Statements of Changes in Shareholders’ Equity.

CONDENSED STATEMENTS OF INCOME
Year ended December 31,
in millions	2006			2005			2004
INCOME
Dividends from subsidiaries:
Banks	$	1,165		$	700		$	786
Nonbank subsidiaries		11			929			75
Interest income from subsidiaries		163			87			56
Other income		(4	)		16			105
		1,335			1,732			1,022
EXPENSES
Interest on long-term debt with subsidiary trusts		103			64			36
Interest on other borrowed funds		149			106			64
Personnel and other expense		129			170			223
		381			340			323
Income before income tax benefit and equity in net income less dividends from subsidiaries		954			1,392			699
Income tax benefit		114			64			26
		1,068			1,456			725
Cumulative effect of accounting change, net of taxes (see Note 1)		5			—			—
Equity in net income less dividends from subsidiariesa		(18	)		(327	)		229
NET INCOME	$	1,055		$	1,129		$	954

^a Includes results of discontinued operations (see Note 3 (“Acquisitions and Divestitures”), which begins on page 75).

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOW
Year ended December 31,
in millions	2006			2005			2004
OPERATING ACTIVITIES
Net income	$	1,055		$	1,129		$	954
Adjustments to reconcile net income to net cash provided by operating activities:
Net securities gains		—			(1	)		(10	)
Deferred income taxes		27			23			—
Equity in net income less dividends from subsidiariesa		18			327			(229	)
Net (increase) decrease in other assets		(281	)		(276	)		43
Net increase (decrease) in other liabilities		361			25			(4	)
Net decrease in accrued restructuring charges		—			—			(6	)
Other operating activities, net		113			71			(27	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,293			1,298			721
INVESTING ACTIVITIES
Cash used in acquisitions, net of cash acquired		—			—			(195	)
Net increase in interest-bearing deposits		(535	)		(641	)		(294	)
Purchases of securities available for sale		(11	)		(2	)		(4	)
Proceeds from sales, prepayments and maturities of securities available for sale		1			1			16
Net (increase) decrease in loans and advances to subsidiaries		80			(496	)		(119	)
(Increase) decrease in investments in subsidiaries		(28	)		105			(101	)
NET CASH USED IN INVESTING ACTIVITIES		(493	)		(1,033	)		(697	)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings		(3	)		(66	)		11
Net proceeds from issuance of long-term debt		1,500			861			1,330
Payments on long-term debt		(1,368	)		(429	)		(505	)
Purchases of treasury shares		(644	)		(229	)		(512	)
Net proceeds from issuance of common stock		244			129			160
Tax benefits in excess of recognized compensation cost for stock-based awards		28			—			—
Cash dividends paid		(557	)		(531	)		(508	)
NET CASH USED IN FINANCING ACTIVITIES		(800	)		(265	)		(24	)
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		—			—			—
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR		—			—			—
CASH AND DUE FROM BANKS AT END OF YEAR		—			—			—

^a Includes results of discontinued operations (see Note 3 (“Acquisitions and Divestitures”), which begins on page 75).

KeyCorp paid $252 million in interest on borrowed funds in 2006, $159 million in 2005 and $96 million in 2004.

104

EX-21

EXHIBIT 21

KEYCORP
SUBSIDIARIES OF THE REGISTRANT AT DECEMBER 31, 2006

	Jurisdiction of Incorporation
Subsidiaries(a)	or Organization	Parent Company
KeyBank National Association	United States	KeyCorp

(a) Subsidiaries of KeyCorp other than KeyBank National Association are not listed above since, in the aggregate, they would not constitute a significant subsidiary. KeyBank National Association is 100% owned by KeyCorp.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Annual Report (Form 10-K) of KeyCorp and subsidiaries (“Key”) of our reports dated February 23, 2007, with respect to the consolidated financial statements of Key, Key management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of Key, included in the 2006 Annual Report to Shareholders of Key.

We consent to the incorporation by reference in the following Registration Statements of Key:

Form S-3 No. 333-55959
Form S-3 No. 333-59175
Form S-3 No. 333-64601
Form S-3 No. 333-76619
Form S-3 No. 333-85189
Form S-3 No. 333-88934
Form S-3 No. 333-121553	(Amendment No. 1)
Form S-3 No. 333-124023
Form S-3 No. 333-134937	(Amendment No. 1)
Form S-4 No. 33-31569
Form S-4 No. 33-44657
Form S-4 No. 33-51717
Form S-4 No. 33-55573
Form S-4 No. 33-57329
Form S-4 No. 33-61539
Form S-4 No. 333-61025
Form S-8 No. 2-97452
Form S-8 No. 33-21643
Form S-8 No. 333-49609
Form S-8 No. 333-49633
Form S-8 No. 333-65391
Form S-8 No. 333-70669
Form S-8 No. 333-70703
Form S-8 No. 333-70775
Form S-8 No. 333-72189
Form S-8 No. 333-92881
Form S-8 No. 333-45320
Form S-8 No. 333-45322
Form S-8 No. 333-99493
Form S-8 No. 333-99495
Form S-8 No. 33-31569	(Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 33-44657	(Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 33-51717	(Post-Effective Amendment No. 1 to Form S-4)
Form S-8 No. 333-66057	(Post-Effective Amendment No. 1 to Form S-4 No. 333-61025)
Form S-8 No. 333-107074
Form S-8 No. 333-107075
Form S-8 No. 333-107076
Form S-8 No. 333-109273
Form S-8 No. 333-112225
Form S-8 No. 333-116120

of our reports dated February 23, 2007, with respect to the consolidated financial statements of Key, Key management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of Key, included in the 2006 Annual Report to Shareholders of Key, which is incorporated by reference in the Annual Report (Form 10-K) of Key.

/s/ Ernst & Young LLP

Cleveland, Ohio
February 23, 2007

EX-24

EXHIBIT 24

KEYCORP
POWER OF ATTORNEY

The undersigned, an officer or director, or both an officer and director, of KeyCorp, an Ohio corporation, which anticipates filing with the United States Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the “Annual Report”), hereby constitutes and appoints Paul N. Harris, Thomas C. Stevens, and Daniel R. Stolzer, and each of them, as attorney for the undersigned, with full power of substitution and resubstitution, for and in the name, place, and stead of the undersigned, to sign and file the Annual Report and exhibits thereto, and any and all amendments thereto, with full power and authority to do and perform any and all acts and things requisite and necessary to be done, hereby ratifying and approving the acts of such attorney or any such substitute or substitutes.

This Power of Attorney may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned has hereto set his or her hand as of February 27, 2007.

/s/ Henry L. Meyer III Henry L. Meyer III	/s/ Jeffrey B. Weeden Jeffrey B. Weeden
/s/ Robert L. Morris	/s/ Ralph Alvarez
Robert L. Morris	Ralph Alvarez
/s/ William G. Bares	/s/ Edward P. Campbell
William G. Bares	Edward P. Campbell
/s/ Dr. Carol A. Cartwright	/s/ Alexander M. Cutler
Dr. Carol A. Cartwright	Alexander M. Cutler
/s/ H. James Dallas	/s/ Charles R. Hogan
H. James Dallas	Charles R. Hogan
/s/ Lauralee E. Martin	/s/ Eduardo R. Menascé
Lauralee E. Martin	Eduardo R. Menascé
/s/ Bill R. Sanford	/s/ Thomas C. Stevens
Bill R. Sanford	Thomas C. Stevens
/s/ Peter G. Ten Eyck, II Peter G. Ten Eyck, II

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Henry L. Meyer III, certify that:

1. I have reviewed this annual report on Form 10-K of KeyCorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Henry L. Meyer III

Henry L. Meyer III

Chairman, President and

Chief Executive Officer

Date: February 28, 2007

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Jeffrey B. Weeden, certify that:

1. I have reviewed this annual report on Form 10-K of KeyCorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Jeffrey B. Weeden

Jeffrey B. Weeden

Chief Financial Officer

Date: February 28, 2007

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the “Company”) hereby certifies that the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Henry L. Meyer III

Henry L. Meyer III

Chairman, President and

Chief Executive Officer

February 28, 2007

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the “Company”) hereby certifies that the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Jeffrey B. Weeden

Jeffrey B. Weeden

Chief Financial Officer

February 28, 2007

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.