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Executives

Beth E. Mooney - Chairman, Chief Executive Officer, President, Chairman of Executive Committee, Chairman of Enterprise Risk Management Committee and Member of Executive Council

Paul N. Harris - Executive Vice President, General Counsel, Secretary and Member of Executive Council

Alexander M. Cutler - Lead Director, Chairman of Nominating & Corporate Governance Committee, Member of Executive Committee and Member of Compensation & Organization Committee

Edward Campbell

Analysts

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

Alan Straus

KeyCorp (KEY) 2013 Annual Shareholder Meeting May 16, 2013 8:30 AM ET

Beth E. Mooney

So good morning. The room is has fallen quiet. So I'm going to go ahead and take that as a sign that we could go ahead and call to order of 2013 Annual Meeting of Shareholders for KeyCorp. Welcome, and thank you for being here this morning. I am Beth Mooney, Chairman and CEO KeyCorp, and we thank you for those who are joining us today via webcast. At the front table with me is Paul Harris, the Secretary of KeyCorp. Paul will explain the formalities of this meeting before we proceed. And at the conclusion of the meeting, we will poll the shareholder for convocation. During the convocation, I will comment on the state and directions of our company. We will then open the floor to your questions. Paul, now I turn the meeting over to you.

Paul N. Harris

Thank you, Beth. As a Secretary of KeyCorp, I have available at this meeting the list of the corporation shareholders of record on March 19, 2013, the record date for today's meeting. A notice of this meeting was duly and properly mailed to shareholders and a certificate to that effect will be filed as part of the records of the meeting. Your Board of Directors has authorized a representative of Computershare Investor Services, our transfer agent, to act as the inspector of the meeting. His duties are: To determine the number of shares of stock represented at the meeting in person and by proxy; to determine the existence of a quorum; to confirm the validity of the proxies; to receive, count and tabulate all votes cast; and to determine and report the voting results. He also -- the inspector will also be filed as part of the records of this meeting.

The inspector has reported to me that we have a quorum present. Therefore, this meeting has been duly convened to transact any business properly brought before it. If you have not yet voted on the proposals described in the proxy statement, please see Michelle Potter, who can provide you with a ballot. Michelle is seated at the inspector's table to my left.

Under KeyCorp's code of regulations, a shareholder must provide advance notice to the Secretary of the corporation of any proposals to be presented to the shareholders or to present any nomine for election as a director at this annual meeting. Because I have not received any such notice within the period prescribed in the code of regulations, no proposal or director nomination from the floor will be accepted at this annual meeting.

The order of business for today's meeting is as follows: First, Beth will introduce the director nominees standing for election. Second, Beth will present KeyCorp's 3 additional proposals. Third, we will address any questions on the proposals. Fourth, we will vote on the proposals. And finally, we will announce the result of the votes. After the formal meeting has concluded, we will, as Beth noted, open our shareholder convocation, in which Beth will share her views on KeyCorp. Beth will then answer general questions concerning Key strategy and performance and the financial services industry in general.

During Beth's remarks and in answering any shareholder questions, Beth may make forward-looking statements about the company's future performance. A cautionary statement regarding forward-looking statements is printed on the back of the brochure you received when you registered for the meeting. It also appears on the slides made available to people viewing the meeting today by webcast. Please carefully review the statement as time allows. It applies to Beth's slides, her remarks and her answers to any shareholder questions.

As you entered the meeting, you received a brochure that specify the rules of conduct for today's meeting. We ask that participants please abide by those rules.

There will be 2 question-and-answer periods, one, limited to the proposals to be voted on today and another at the conclusion of Beth's remarks for general questions regarding Key's strategy and performance. During the question-and-answer period, a Key employee will be positioned in the aisle and will have a microphone for you. We are using microphones because the meeting is being webcast. We ask that you step to the aisle to ask your questions.

In order to facilitate full and fair shareholder participation, we do have a 2-question limit. Questioners are asked to state their names and we ask their questions or comments to be brief. Please direct all questions to Beth, who will determine whether another person should answer the question. That concludes the formalities of the meeting.

Beth E. Mooney

Thank you, Paul. The next order of business is to describe the proposals to be voted on at today's meeting. The first proposal is the election of directors to serve 1-year terms to expire in 2014 Annual Meeting of Shareholders or until their successors are duly elected and qualified. The Board of Directors has established the size of the Board at 12 members. And as I introduce the nominees, I ask each of them to stand and remain standing until all directors have been introduced, and please hold your applause until the end of the introductions. The nominees are all current members of the Board of Directors.

Joining me as nominees for election are: Sandy Cutler, Chairman and Chief Executive Officer of Eaton, and Sandy is our corporation's lead director; Ed Campbell, retired Chairman and Chief Executive Officer of Nordson Corporation; Joe Carrabba, Chairman and Chief Executive Officer of Cliffs Natural Resources; Charles Cooley, retired Chief Financial Officer of the Lubrizol Corporation; James Dallas, Senior Vice President of Quality and Operations of Medtronic Inc.; Betsy Gile, retired Managing Director of Deutsche Bank AG; Ruth Ann Gillis, Executive Vice President of Exelon Corporation; Bill Gisel, President and Chief Executive Officer of Rich Products Corporation; Dick Hipple, Chairman and Chief Executive Officer of Materion Corporation; Kris Manos, President of Wilsonart Americas; Barbara Snyder, President of Case Western Reserve University.

One of the long-standing strengths of Key has been the high-quality of the members of our Board of Directors and I would like to extend my appreciation on behalf of me and my colleagues for the valuable service that our directors provide to Key and to our shareholders. Please give all our directors a round of applause.

At this time, I would also like to recognize and thank the outstanding contributions of 2 members of our Board, Bill Sanford and Tom Stevens, as well as our Chief Financial Officer, Jeff Weeden, who will be -- all have announced that they will be retiring this year. Their experience, character and integrity are aptly reflected in their many contributions to Key. Please join me in applauding Bill, Tom and Jeff as well.

The next matter to be voted on is the ratification by our shareholders of the appointment of the audit committee of Ernst & Young as KeyCorp's independent auditor for 2013. Barry Eden, a representative of Ernst & Young, is present today and will be available to answer appropriate questions. The Board of Directors recommends that the shareholders vote in favor of the proposal.

The next proposal is an advisory vote on KeyCorp's executive compensation program. The Board of Directors has placed this proposal before the shareholders as required by the Dodd-Frank Act and applicable securities laws. The Board is of the opinion that Key's executive compensation program provides appropriate incentives to its executive officers and at the same time, does not encourage these officers to take unnecessary risks. For that reason, the Board recommends that the shareholders vote for the proposal.

The final proposal before the shareholders is a vote to approve the KeyCorp 2013 equity compensation plan. A copy of the plan was included as exhibit A to the proxy statement. The Board believes that the plan is necessary to properly incentivize Key employees and to align the interest of management with the interest of you, our shareholders. For that reason, the Board recommends that the shareholders vote for the proposal.

We will now take questions or comments on the proposals to be voted on today. Again, we ask you step to the aisle where microphones are available and limit your questions or comments to the proposals at hand for the vote.

Seeing none, it is now time to vote. If anyone is holding a ballot, please submit your ballot to Michelle Potter at the inspector's table, if you have not already done so.

[Voting]

Beth E. Mooney

I will know declare the voting is closed.

Because we permit voting by telephone, by proxy cards, over the Internet and in person, it may take a while to finalize the tabulation down to the final vote. And the final tabulation will be filed with the SEC on a Form 8-K within 4 days of this meeting. However, we can announce the preliminary outcome.

First, the inspector has informed me that each of the director nominees identified in the proxy statement has been elected. Second, the shareholders have ratified the appointment of Ernst & Young as the company's independent auditors. The issue received a favorable vote of 97% of the votes that were cast.

Third, more than 95% of the votes cast were to provide advisory approval of the company's executive program, and it has passed.

Lastly, KeyCorp's 2013 equity compensation plan has been approved with a favorable vote of 76% of the votes cast.

There being no further business, I declare this portion of the meeting duly adjourned. And we will now begin the shareholder convocation, after which, we will take your questions.

First, let me begin with an acknowledgment of our management committee that is here with us today. I would like to ask them to stand and be recognized. And in addition to the many shareholders that are here today, I would be remiss if I did not mention the number of employee shareholders that I see across this room as I look out this morning. Their attendance is a testament to their dedication to the company and to you, our shareholders. So thank you, all, for joining us today.

As Paul previously mentioned, this is our forward-looking disclosure statement. And to begin, I'd like to more make some general comments about the year more broadly. I am pleased with the measurable progress we made during 2012 on our strategic and financial goals. Although the operating environment remains challenging, our results reflect our success in executing on our strategies and further refining our relationship-based business model. Some of the key highlights include: We grew our top line with revenue up 10%. We experienced robust loan growth driven by continued strength in commercial lending. We had a record year for fee income in some of our commercial businesses. We strengthened our credit quality to levels not seen since 2007. And we managed our capital in a disciplined way. While maintaining our peer leading capital position, we were able to return 50% of our net income to our shareholders. And going forward, we look to leverage our momentum as we execute on our priorities and initiative to grow and position Key for the future.

In my letter to shareholders, I introduced the theme of focused forward. Let me share why I think it is an accurate description of where Key is today.

Being focused forward means that we will create value for our shareholders by meeting the challenges of the future, capitalizing on the opportunities and achieving steady growth by keeping the client at the center of all we do.

An important part of our growth strategy is the balance and diversity of our franchise. We are continually evaluating the success of our efforts and our market opportunities as we think about future investments, as well as our efficiency initiatives. Our footprint provides us with meaningful advantage in terms of pricing, risk management and opportunities to expand and grow.

Our branches are not only a primary source of stable, low-cost funding, but also give us a critical access point to our small business and middle-market banking clients where market presence and branding are differentiating factors in acquiring and serving those important relationships. In addition, our branches run off common technology and operating platforms that utilize many shared services and leverage our image-enabled back-office.

We believe that our competitive advantage and our path to growth are based in the alignment between our business model and our strategy. Our business model has real competitive differences and it's driven by several enablers. First, as our relationship-based Community Bank with the local delivery of ideas, advice and smart solutions by people who are closest to our clients. Second is our Corporate Bank that has specialized products, distinct capabilities and expertise that serves targeted middle-market client segments. And third is the alignment between our Community and Corporate Bank. Our collaborative approach allows us to serve clients along the continuum, seamlessly delivering the breadth of our offering. Working as a team, one bank, one Key, allows us to differentiate ourselves.

As a result, we have accelerated our revenue growth and strengthened our risk profile. Loan balances and core deposits have grown consistently, demonstrating the impact that we're having with our clients by focusing on opportunities when our relationship strategy and distinctive capabilities resonate.

Clients are coming to Key and staying with Key. We have seen 6 consecutive quarters of solid loan growth while core deposits have grown for 7 quarters. Importantly, the growth in commercial loans, an indicator of our success with targeted middle-market clients, has continued to outpace industry, demonstrating our ability to take market share.

Being focused forward also means actively managing our businesses. It requires directing our time, talent and resources to strengthen our business, grow revenue and improve profitability. In addition to focusing on organic growth through acquiring and expanding client relationship, it includes identifying specific opportunities to invest in capabilities that strengthen our product offering and our franchise.

For instance, in 2012, we acquired 37 branches in Western New York to strengthen our share in Buffalo and Rochester. This is a good example of how we selectively invest in markets. In some cases, like payments, online and mobile, we are making investments to ensure that we can fulfill client's evolving needs with great products delivered when, where and how they want to do business with Key.

We reentered the credit card business by acquiring a $725 million portfolio of current and former KeyBank clients that have broader relationships with Key. We also identified businesses that do not fit our relationship strategy and do not represent the best ongoing return for our investments.

In February, we announced the sale of Victory Capital Management, and we expect that transaction to close in the third quarter.

And finally, we announced last week the acquisition of the commercial mortgage servicing business from Bank of America and Berkadia.

These move position us as the third-largest servicer of commercial and multi-family loans in the United States.

In 2012, we continue to address the realities of the present operating environment with these challenges of a weak economy and a prolonged low interest rate environment. We did so through a series of comprehensive and rigorous efforts to improve efficiency across our entire organization. This puts us on the path for delivering results with a long-term plan for greater revenue growth, efficiency, productivity and value for our shareholders.

I'm pleased to share that we are on track to achieve our goal of capturing $200 million in cumulative annual expense reductions by December of 2013 and remain committed to achieving an efficiency ratio in the range of 60% to 65% by the first quarter of 2014. And we will not stop there. Our targets are not an endpoint, but they are an important milestone. Continuous improvement is firmly embedded within our company and we are already identifying new revenue and expense opportunities that can improve our future performance.

Our strategy is to grow by building enduring relationships through client-focused solutions and extraordinary service, and we are winning with service. There's an old saying that people may not remember what you said, they may not remember what you did, but they will always remember how you made them feel. That continues to be the cornerstone of our service culture here at Key. Our success in executing our service-based relationship strategy has been affirmed through several industry honors and recognitions. And service continues to be a differentiator for us. And it's clear not only from the recognition, but from the positive feedback we receive from clients each and everyday that we are doing many of the right things and will continue to do so.

To ensure that Key grows with its clients, we continue to optimize our network and offer complementary channels to deliver convenience and value. We have a constant focus on improving, integrating and strengthening each of our channels including our branches, online, mobile, our call center and ATMs. Consumer and business clients continue to value our branches, which provides an important face-to-face contact point. At the same time, rapidly evolving online and mobile preferences and new competitive entrants are changing clients' expectations of convenience and relationship. We understand these strengths and will continue to invest in ways that meet clients' needs where, when and how they want to do business with Key.

And at Key, our purpose is to help clients and communities thrive. We are dedicated to helping build stronger communities and to improving the lives of people we call neighbors in places we call home. This commitment to corporate responsibility is evident throughout our company as we direct our resources towards philanthropy, diversity, inclusion and sustainability, as well as investments in community development. We take a broad approach to investing in low-to-moderate income communities and nonprofit agencies to create greater economic independence, encourage our own employee volunteerism and stabilize families and neighborhoods. I'm proud and honored to share that we have earned an outstanding rating from the Office of the Comptroller of the Currency for exceeding the terms of the Community Reinvestment Act for the eighth consecutive time. Key is the first and only U.S. bank to be rated outstanding by the Office of the Comptroller of Currency for 8 consecutive review periods. It's a true testament to the character of our people and our commitment to serving all the markets in our footprints.

Capital management is a strategic priority for us. We recognize that how we invest, deploy and return our peer-leading capital are among the most important decisions we will make for you, our shareholders. In 2012, we returned 50% of our net income to shareholders for both increased dividends and $256 million in share repurchases.

In March of this year, the Federal Reserve notified us that they had no objection to the capital plan we submitted as part of the comprehensive capital analysis and review process. This allowed us to move forward with a new share repurchase program of up to $426 million. Additionally, we expect to be in position to execute on our capital plan to use the net proceeds of the Victory Capital Management sale for the repurchase of common shares. And at this time, I'm pleased to announce that our Board approved a 10% increase in our quarterly dividend to $0.055 per share beginning in the second quarter. I hope this news is well-received by our shareholders that are here today.

And one of the long-standing strengths of our company is the quality and the diversity of our Board of Directors and our strong corporate governance practices. Our Board includes 6 sitting [ph] or retired CEOs, as well as other individuals with extensive financial services and risk management backgrounds. Our Board continuously evaluates management, our strategy and plans to ensure we execute in a manner that is consistent with maximizing shareholder value.

In closing, as I reflect on my 2 years as your Chairman and CEO, I couldn't be prouder of the progress we've made. Our employees have never been more focused on the progress and where we are serving our clients and where we are seeing real traction in our markets. Customers are coming to us and staying with us because we're executing on our strategies and delivering a distinctive client experience. I won't claim victory yet. We still have a lot of hard work to do. But within our walls, we are focused forward, seeing progress everyday and have momentum that I am confident will continue to drive great outcomes for our clients, our communities, our employees and for you, our shareholders. So thank you for allowing me to give you an update on our company and we appreciate your participation in our meeting today.

At this time, I would be happy to take questions. And as Mr. Harris mentioned, we are webcasting our meeting today. So that those on the webcast may hear the questions, I ask that you please rise and make your way to an aisle where you would be greeted by one of our employees holding a microphone.

Question-and-Answer Session

Beth E. Mooney

Good morning, Mike. Good to see you again. Thank you for joining us.

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

Mike Mayo, I'm a securities analyst on Wall Street, covered the company for 2 decades. And I've 1 question in 3 parts. And my main question is does the Board have enough oversight? And I appreciate the access that Beth, you and your company has given me. I can speak to management, I feel as pretty frequently. That's positive. But my questions, really, I hope they can -- the independent directors, if they can answer the degree of oversight they have over management. And the first part of this is how does the Board, really, the independent directors, measure and report success to shareholders.

Beth E. Mooney

Mike, I'll go ahead and I'll key up an answer to that and then I will indeed pass it along. I think it is important to know that we have, as we outlined in my remarks, a very diverse, qualified and experienced Board who is very mindful of their fiduciary duty to all of you as shareholders. And I can tell you that they are actively involved in the oversight of our strategies, our plans, holding us accountable both for current year performance and also our forward view of our strategies as they evolve in this ever-changing industry of ours. So with that diversity and with that strength, I will tell you that we feel like we are indeed showing positive momentum, are indeed focused forward and well-positioned for the future. But I would let -- since request includes an opportunity to hear from the independent directors, I would ask Sandy Cutler if he has anything he'd like to add in that regard.

Alexander M. Cutler

Good morning, ladies and gentlemen. Mike -- there you are. Good to see you again. We did have a chance to talk a little bit about this subject yesterday afternoon, so I apologize if part of this is a repeat of what we talked about. Our Board does consist of all independent directors except for Beth and Tom. In keeping, I think, with the best governance standards that you find, really, as [ph] by the Business Roundtable, in the spirit of having all independent directors and all the committees of the Board indeed in place within Key. We conduct an annual peer review to assure the skill sets of each of the individuals on our Board are indeed adequate to deliver both against the strategies and the current challenges in the financial services industry. We think that process is contemporary in terms of assuring that we, as the Board, represent you as the shareholders and actively practice the governance, as necessary, to both have an independent point of view and also join and working with your management team to deliver against 3 very important initiatives. Those initiatives really are continuing to change the mix of the bank in such a way that we put the assets on a place where they both, from a risk profile and from an earnings profile, are advantageous for you as shareholders and for our customers. Second is to continue to improve the talent within the bank because clearly, any strategy is wonderful, but you really need the talent to ensure deliver it. And so we're really pleased both with gifted team of individual Key employees and all of the new people who have joined the bank over the last several years that really are providing us the skill sets coming from an even larger institutions. And the third is, of course, working very hard on issue of efficiency. Not simply cost, but ensuring that the type of delivery for our individual customers in whatever channel and whatever place they locate, are indeed delivered at the various highest level. Those are the issues we continue to focus on, in addition directly, Mike, to your question, the issue of Board governance. I think we have a contemporary set of governance principles. I believe that they are well-delivered. As Chairman of the Business Roundtables corporate governance task force, I can attest to you that the practices that are in place within Key are absolutely in line with the best expected across the country. Thanks, Mike for your question.

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

Part 2 of my question gets a little more specific. So how can the Board, especially the independent directors in the Board, hold management accountable when you're only financial target go -- it only goes out to the first quarter of next year? Without a financial target further out, how can the Board hold management accountable? Morgan Stanley has a target for 2014, Citigroup has a target for 2015. It'd be nice for shareholders to have some kind of metric for KeyCorp as a whole that goes further out. And also just as it relates to that efficiency target, I liked how you underlined further improve for your target for the first quarter of next year, but is that really a target when that -- if you achieve that target, it would still be worse than where you were as a firm back in 1994 at the creation of the company in its current form.

Beth E. Mooney

Yes, Mike, I'll go ahead and answer that. We have annually issued what we call our targets for success, which cover 6 different metrics that we are measuring our performance against. The first of those targets would include being core funded, the loan to deposit ratio of the company, which is very important. The second of those would be continuing to improve and stabilize our net interest margin in these very challenging interest rate times. The third one we always publish is our desire to have at least 40% of our income coming from non-interest income to address the diversity in the mix of our businesses. We look at a fourth target around net charge-off, which is reflective of the quality of our loan portfolio and our risk profile. We have set an efficiency target and I will say something further about that in a moment. And then we have an ROA target. So we have a set of 6 targets that we publish every year that we are managing to. They are included every quarter in our earnings conference call to show our progress against those targets. As I said in my earlier remarks, those targets can be viewed as milestones, not necessarily endpoints, and we review them annually to make sure that they are reflective of what we are attempting to accomplish and convey to the market. So for this year, those would be the 6 that we are managing to. We've had them for several years but they continue to evolve with our performance. As it relates to our efficiency target, as I had the opportunity to discuss, last year in the second quarter, we announced an initiative to reduce our run rate expenses by $200 million within this year within -- for the reasons of meeting, our target of 60% to 65% on our efficiency ratio. We felt like efficiency was important to talk about because it includes both revenue and expense, and so we are very mindful that we need to both be more cost-efficient but also doing things that are growing the top line, expanding our client base and also keeping -- creating revenue momentum for our company. We are on track. That's a commitment we've made, talk about it at every opportunity we get because it is an external commitment that we went to the market that said we will reach that by first quarter 2014. And as we discussed yesterday, it would be our anticipation that as we go into 2014, we will refresh our targets for success, give a path for where we succeeded against the things we committed to do and give another view of our continuing momentum and improvement as a company.

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

If I could just follow-up. I can re-queue, but just one follow-up to what you just said. And again, I appreciate having the access to company. But in response to that last question, if I could hear from an independent director on whether or not these management targets are aggressive enough. Great progress. Your first 2 years, Beth, as CEO, you see that in the stock price performance and the performance of the bank. But I think investors want to be reassured that, that will be continued. So if an independent director could comment on are these targets high enough? You're achieving it, but are you aiming high enough?

Beth E. Mooney

I assure you, we are focused forward, and I thank you for your comments on our performance and we're very proud of our total return to shareholders, since last year's annual meeting, of 40% -- actually 45% with the close of stock yesterday at $10.63. But I will go ahead and ask Sandy if he would like to make any further comments in response to the Board's view on those targets.

Alexander M. Cutler

Maybe I might suggest that we ask Ed as head of [ph] Committee since the incentive plans, Mike, obviously reflect our goals and stand that the Board has set for management to reach. I think Ed might be able to shed a little specific guideline on the -- or guidance on that for you.

Edward Campbell

Good morning, Mike. As chair of the Compensation Committee, we integrate our process directly with that of the strategic planning process that we go through each year in July in a 3-day retreat. And in that strategic planning process, of course, we start with strategies, we look at the financial implications of those, we look at the challenges, the degree of difficulty. And the Board engages in setting a series of targets that are used by both management, to guide the way to see if attainment is there, and then we, as the Compensation Committee and the Board more broadly, review and approve that plan and then the compensation incentive process is directly tied to that process. In the compensation level, we believe philosophically that incentives work and you need to be very careful about the measures that you use and how you set the goals against those measures because they will drive behaviors. And it's important that we have a direct linkage between the attainment of those goals and the compensation that executives receive. So each year, at the Compensation Committee, we look at the measures that we're getting use, both for the 1 year plan, as well as for a 3-year cumulative plan that measures the attainment of the strategies that I just talked about. And in this year's annual plan, we changed it up a bit. In addition to the normal financial measures that we used, for example, in 2012, we felt that it was important that we take in not insignificant portion of the total opportunity available to the corporate staff and management team collectively and tie those directly to the attainment of making progress against the initiatives that Beth's talked about up in her presentation just before. These include the cost reduction initiatives, the efforts to improve the efficiency ratios, some revenue targets with the expectation that if you don't make progress against those specific goals that are part of a longer-term strategy, it's going to have implications in terms of how compensation gets shaped. And then on the 3-year goals, we look at not just the attainment of financial measures but we ought to make sure that we anchor those in the reality of the marketplace in pure strategies and how peers are attaining progress against their own individual strategies. And so we have relative measures in the 3-year cumulative goals as well as absolute financial measures. And while there's no substitute for senior management holding the organization accountable and focusing on the execution of those strategies, we believe reinforcing that oversight by the Board with compensation measures that link directly to it is an effective way for us to provide the oversight you asked about.

Beth E. Mooney

Thank you, Ed. And thank you, Sandy, for augmenting those answers as well. I would look out and ask if there are any additional questions to be asked by any of our shareholders in attendance today? Yes, one from Alan.

Alan Straus

Alan Straus, Schroders Investment Management, shareholders of KeyCorp. I was just wondering -- the company had a 3-year aspirational goal of an ROE objective that you'd like to share with us because it's great to see that you have 1 year goals that are publicly published, but some of us invest for more than a 1-year timeframe.

Beth E. Mooney

Yes, Alan. We have not, at this time, disclose an ROE goal. Like I said, we have always talked in terms of the 6 metrics that I outlined. Part of our reasoning is capital rules are not yet clear so it is not clear what level of capital banks we'll be able to hold or need to hold. It is also subject to the capital review process with the Federal Reserve in terms of how we can deploy capital to our shareholders. So with what we call lack of clarity around the denominator, we think looking at ROE -- I mean ROA efficiency, our net interest margin, how -- what percentage of income we get from non-interest income, how we are doing our loan to deposit and the ever important quality metric around our loan quality in terms of net charge-offs, captures a balanced scorecard of our performance. And we think those are a good way to reflect how we are managing the company at this point in time. I will -- Mr. Mike wants one more question. Being young from others, I will go ahead and let you have the microphone.

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

Just one question and a follow-up. As I've read in my research, you know this, but since 1994, the creation of merger of equals, the stock is down by 1/3, certainly predates you, Beth. And that's versus the bank index having doubled and the S&P close to triple during that timeframe. So from my standpoint, the KeyCorp deciding merger was a failure. I've covered the company the entire time. We talked about this yesterday, and again, I do appreciate that access. As some of the reasons, there is some ill-conceived acquisitions, perhaps, that were retreated from some other issues and you're moving more in the right direction. But is there something more fundamental about the infrastructure, about the composition of businesses, going from Maine to Alaska? I know you mentioned common platforms, but is there something else you can do to be more aggressive than what you've already done? Because from my perspective, you've helped the company come out of a hole. I mean, look at the stock price, there's no question about it, it's successful so far. But to be more aggressive, what else can you do other than what you've already done?

Beth E. Mooney

That's a good question, Mike, and I will tell you that I think the team of focused forward does capture that we have had strong momentum over the last couple of years. And you were, again, kind of acknowledged that our progress being reflected. And I do you think the markets are seeing the strength of our repositioning and execution of our strategies with our stock up 26% year-to-date. And then like I said, year-over-year, when you factor in dividends and share repurchase, we've had a 45% TSR. But we are never satisfied. I think you've heard that tone in my comments, that we're always looking forward about what we can be doing. I will tell you that our business model, which is geographically diverse, is an asset to our company. It provides the source of stable low-cost funding and our branch network in this day and age, being supported by common platforms, image-enabled technology has nothing about it that is inherently inefficient and we have built around it, our model of executing our relationship-based strategy against targeted business clients and consumers where that local presence makes it different, and we, through our local bankers and our Community Bank, build those relationships, have that market presence and then we overlay some of our very distinctive capabilities for targeted middle-market clients that we have on our Corporate Bank. It's a differentiated strategy. It's winning in the market. And as we go to market, we do not see any other competitor who has this local access with corporate capabilities. So I would tell you as we look forward, I think continuing to execute on that relationship-based strategy, which, as I mentioned in my remarks, has achieved above peer loan growth. We increased our loan 17% year-over-year driven by the strength of our commercial lending. The ability to execute on our efficiency initiative, we take that incredibly seriously. Like I said, a public commitment we have made, and a public commitment we will meet, continuing to acquire the top talents in the business and make sure that we are constantly thinking about how do we optimize, grow, exit, manage our businesses. As we talked about last year, we had a series of moves between the announced sale of Victory Capital Management, acquiring branches, re-entering insuring credit card. We are a dynamic company that is focusing forward and is definitely committed to improving our returns and our performance for all of you, our shareholders. We'll allow one last and then we are bumping up on our time limit.

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

The separation of the Chairman and CEO role is not my issue. Sometimes they are separate. And you see Enron and Wilcom, they don't work. And sometimes, they're together and they work. Let's say Wells Fargo. Given your 2 years in the job, why do you think it's important to have the CEO and Chairman position combined for you?

Beth E. Mooney

I will tell you that I will also ask, because that is the decision that is made actually by the Board and specifically through our nominating and corporate governance committee. But I will tell you that when I was named Chairman and CEO, I know our Board went through a thoughtful process about what was the best leadership structure and governance structure for our committee. And it was a thorough process, a detailed process and a conscious choice for reasons that I will allow Sandy, our lead director, to outline, to have those as a combined Chair and CEO, and I think it has served us well. But I will allow those who make that decision to augment my response.

Alexander M. Cutler

Thanks, Beth. I think you for all of you who have watched the debate that has been ensuing over the last 15 or 20 years. The issue of leadership structure, and public loan companies is one that a lot has been written about. A lot of evidence has been presented on both sides of this argument. I think the piece that's often missed in this discussion is the role of the Board and the lead director. And I think for those of you who read carefully the governance principles for Key, you saw the winners [ph] last year, your Board has taken steps to strengthen the role of the lead director. Because really, what's important in this area of governance is that you have an independent oversight of the Chair and CEO, or simply the CEO with the shareholders represented by the Board, and obviously, management and the operating team being represented by the CEO. That's indeed in place today and so starting last fall, we made the change to strengthen that after we obviously tied a vote on this subject from all of you a year ago. And that was a very informative vote for us. Having practiced really under this new area -- and the principal change, really, was ensuring that all documents that are shared with the Board or reviewed by the lead director before they're sent to the Board, and the purpose of that review is to ensure the adequate time, the right subjects and in the period of time for deliberation of Key's subjects, is really a core to the Board so that really important strategic issues or personnel decisions, going down the list of acquisitions, divestitures, have adequate consideration and that the Board has all the relevant material to practice their independent role. We think that role of a combined chair and CEO, combined with an independent Board, and Beth went through the attributes and skills that represented our Board, lead by a lead director, does indeed provide that independence that you, as shareholders, want to ensure the proper governance of the company. So bending back directly to your question, Mike, in the issue that combines chair and CEO role, we feel one voice representing the company in terms of primary communications internally and externally, is advantageous in delivering specifically what Beth talked about here in the highlights of our comments this morning, a focused strategy, focused delivery, alignment across all of our different geographies, with all of our valuable members of employee team. That's the reason that your Board came with a decision to feel that we recommend to you a continued leadership structure with a combined chairman and CEO role and then the strength in lead director with a fully independent Board.

Beth E. Mooney

I would look out one last time to see if I have other questions from attendees, and yes, we have a question right here.

Unknown Shareholder

I'm [indiscernible]. I'm a shareholder. I am wondering if, not speaking specifically for Key obviously, but do you ever envision the era of large mergers and large acquisitions returning to the financial institutions segment? And if yes, under what circumstances?

Beth E. Mooney

That's a great question because I do think historical cycles would've suggested that the industry would have started a consolidation after the downturn of 2008 and 2009. And it certainly has not begun with any large-scale mergers again. And if you look at where there have been mergers, they have been for very specific and narrow and limited reasons. So I would tell you I think industry consensus and those who follow our industry still suggests that there could be a period in the future where merger and acquisition activity could pick up and become more prevalent, it has not been conducive in this particular economic environment, this particular interest rate environment. And I think if you listen to what many of the banks and our peers are saying, it's very much focused on organic growth or things where you -- such as the number of the items we listed last year, you add your capabilities, your offerings and augment your current platform. I feel like we are well-positioned. We have capital that is peer-leading so we are -- have everything we need to succeed as a company in our current configuration and our ability to invest in our platform and our products. And in the future, if mergers and acquisitions do begin, I think a number of the banks, as well as Key have said, you would selectively look, you would be incredibly disciplined, opportunistic if that something made sense, but it certainly has not been an environment that has promoted that kind of activity. And I think managing what you can control and being very focused on delivering on your strategies for growth is an important path forward.

Other questions? All right. Seeing none, has something I would like to end with today. It's a video that highlights our commitment to corporate responsibility, which was also something I mentioned in my remarks. I think you will see our value-based culture in action. I think you will see our commitments to our communities and our clients in action, because that's our purpose. We are here to help our clients and our communities thrive. And this is one that I think will showcase that to you. But there's also something I'd like to share because it's one of those things I'm incredibly proud of. And that's our Neighbors Make a Difference Day. It's an annual event and it is next week, Thursday, May 24. And what happens on Neighbors Make a Difference Day is over half of our employees from Maine to Alaska leave work at noon and go contribute volunteerism to their communities. We participate in over 1,000 community projects across the country and Key employees suited up in red T-shirts, they'll be neighbors in at homes -- in places we call home and make a difference.

So with that, I'd like to pause, share this video. And at the end of the video, our meeting will be adjourned. I want to thank you for your attendance today, your support of Key, your interest in being here. I hope you have a great rest of this day and let's take a view of Key and corporate responsibility. Thank you again.

[Presentation]

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