Regional bank KeyCorp said Tuesday it raised $1 billion through an “at the market” stock offer as part of its plan to bridge a capital reserve gap the government said it would face if the economy worsens.

The $1 billion was $250 million more than Key initially planned to raise through the “at the market” offer, which is when a firm sells shares of common stock at market prices in smaller batches over the course of a set period.

Last month, the government said Key would need an additional $1.8 billion in capital to protect against potential losses if the economy worsens. The government reviewed Key as part of a broader set of “stress tests” run on 19 of the nation’s largest financial firms.

Key sold about 205.4 million shares at an average price of $4.87 per share to raise the $1 billion. Key shares fell 8 cents to $4.66 in late morning trading.

Including the completion of the stock sale, Key has bolstered its capital position by $1.3 billion. It expects to reach the $1.8 billion requirement through the exchange of preferred shares to common stock and additional securities and asset sales, the company said in a statement.

Copyright 2009 The Associated Press.