KEYCORP /NEW/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.3 - EXHIBIT 99.3 - KEYCORP /NEW/	keycorp3q17erex993.htm
EX-99.2 - EXHIBIT 99.2 - KEYCORP /NEW/	key3q17confcallslidesvf.htm
8-K - 8-K - KEYCORP /NEW/	keycorp3q17er8-k.htm

KEYCORP REPORTS THIRD QUARTER 2017 NET INCOME OF $349 MILLION,

OR $.32 PER COMMON SHARE

3Q17 results included a net impact of $.03 per common share related to merger-related charges and a merchant services gain adjustment

3Q17 results reflected year-over-year positive operating leverage, momentum in fee-based businesses and strong returns

Return on Tangible

Earnings Per Share Cash Efficiency^(a)Common Equity^(a)

(a) Non-GAAP measure; see pages 15-17 for reconciliation

(b) Excludes notable items; see page 15 for detail

CLEVELAND, October 19, 2017 - KeyCorp (NYSE: KEY) today announced third quarter net income from continuing operations attributable to Key common shareholders of $349 million, or $.32 per common share, compared to $393 million or $.36 per common share, for the second quarter of 2017 and $165 million, or $.16 per common share, for the third quarter of 2016. During the third quarter of 2017, Key’s results included $36 million of merger-related charges and a $5 million merchant services gain adjustment, resulting in a pre-tax net impact of $41 million, or $.03 per common share.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

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Selected Financial Highlights

dollars in millions, except per share data											Change 3Q17 vs.
		3Q17			2Q17			3Q16			2Q17		3Q16
Income (loss) from continuing operations attributable to Key common shareholders		$	349		$	393		$	165		(11.2	)%	111.5	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution		.32			.36			.16			(11.1	)	100.0
Return on average total assets from continuing operations		1.07		%	1.23		%	.55		%	N/A		N/A
Common Equity Tier 1 ratio ^(a)		10.26			9.91			9.56			N/A		N/A
Book value at period end		$	13.18		$	13.02		$	12.78		1.2	%	3.1	%
Net interest margin (TE) from continuing operations		3.15		%	3.30		%	2.85		%	N/A		N/A


(a)	9/30/2017 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable



INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 3Q17 vs.
	3Q17		2Q17		3Q16		2Q17		3Q16
Net interest income (TE)	$	962	$	987	$	788	(2.5	)%	22.1	%
Noninterest income	592		653		549		(9.3	)	7.8
Total revenue	$	1,554	$	1,640	$	1,337	(5.2	)%	16.2	%

TE = Taxable Equivalent; N/M = Not Meaningful

Third quarter 2017 net interest income included $48 million of purchase accounting accretion related to the acquisition of First Niagara.

Taxable-equivalent net interest income was $962 million for the third quarter of 2017, and the net interest margin was 3.15%, compared to taxable-equivalent net interest income of $788 million and a net interest margin of 2.85% for the third quarter of 2016, reflecting the benefit from the First Niagara acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances.

Compared to the second quarter of 2017, taxable-equivalent net interest income decreased by $25 million, and the net interest margin decreased by 15 basis points. The decrease in net interest income and the net interest margin reflects a decline in purchase accounting accretion of $52 million, including $42 million from the finalization of previous estimates recognized in the second quarter. Lower purchase accounting accretion was partially offset by higher earning asset yields and balances.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $145 million from the third quarter of 2016 and $27 million from the second quarter of 2017.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

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Noninterest Income

dollars in millions							Change 3Q17 vs.
	3Q17		2Q17		3Q16		2Q17		3Q16
Trust and investment services income	$	135	$	134	$	122	.7	%	10.7	%
Investment banking and debt placement fees	141		135		156		4.4		(9.6	)
Service charges on deposit accounts	91		90		85		1.1		7.1
Operating lease income and other leasing gains	16		30		6		(46.7	)	166.7
Corporate services income	54		55		51		(1.8	)	5.9
Cards and payments income	75		70		66		7.1		13.6
Corporate-owned life insurance income	31		33		29		(6.1	)	6.9
Consumer mortgage income	7		6		6		16.7		16.7
Mortgage servicing fees	21		15		15		40.0		40.0
Net gains (losses) from principal investing	3		—		5		N/M		(40.0	)
Other income	18		85		8		(78.8	)	125.0
Total noninterest income	$	592	$	653	$	549	(9.3	)%	7.8	%

N/M = Not Meaningful

Key’s noninterest income was $592 million for the third quarter of 2017, compared to $549 million for the year-ago quarter. Growth was largely driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing momentum in Key's core businesses. Broad-based growth across many fee income categories more than offset a decline in investment banking and debt placement fees, related to strong market conditions in the year-ago period.

Compared to the second quarter of 2017, noninterest income decreased by $61 million. The largest driver of this decrease was a $64 million one-time gain related to Key’s merchant services business in the second quarter of 2017, recognized in other income. Excluding the one-time merchant services gain, noninterest income grew on a linked-quarter basis, driven by momentum in fee-based businesses, including growth in investment banking and debt placement fees, mortgage servicing fees, and cards and payments income, which also benefited from the recent merchant services acquisition. Operating lease income and other leasing gains decreased $14 million, related to lease residual losses in the third quarter of 2017.



Noninterest Expense

dollars in millions							Change 3Q17 vs.
	3Q17		2Q17		3Q16		2Q17		3Q16
Personnel expense	$	558	$	551	$	594	1.3	%	(6.1	)%
Non-personnel expense	434		444		488		(2.3	)	(11.1	)
Total noninterest expense	$	992	$	995	$	1,082	(.3	)	(8.3	)

Merger-related charges	36		44		189		(18.2	)	(81.0	)
Total noninterest expense excluding merger-related charges	$	956	$	951	$	893	.5	%	7.1	%

Key’s noninterest expense was $992 million for the third quarter of 2017, and included $36 million of merger-related charges. Merger-related charges for the quarter were made up of $25 million of personnel expense and $11 million of non-personnel expense, mostly reflected in marketing and computer processing expense.

Excluding merger-related charges, noninterest expense was $63 million higher than the third quarter of last year. The increase from the prior year, reflected in both personnel and non-personnel expense, was primarily driven by a full-quarter impact of the First Niagara acquisition, as well as ongoing business investments and recent acquisitions, partially offset by merger cost savings.

Excluding merger-related charges, noninterest expense increased $5 million from the second quarter of 2017. Key incurred a number of notable items in the second quarter of 2017, including a $20 million

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

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charitable contribution and a $4 million credit related to purchase accounting finalization. Excluding these notable items as well as merger-related charges, noninterest expense increased $21 million from the second quarter of 2017. The increase represents recent business acquisitions, including HelloWallet and merchant services, as well as seasonal trends in marketing and personnel. Business services and professional fees were also higher in the third quarter, related to short-term initiatives.

BALANCE SHEET HIGHLIGHTS



Average Loans

dollars in millions							Change 3Q17 vs.
	3Q17		2Q17		3Q16		2Q17		3Q16
Commercial and industrial ^(a)	$	41,416	$	40,666	$	37,318	1.8	%	11.0	%
Other commercial loans	21,598		21,990		19,110		(1.8	)	13.0
Home equity loans	12,314		12,473		11,968		(1.3	)	2.9
Other consumer loans	11,486		11,373		9,301		1.0		23.5
Total loans	$	86,814	$	86,502	$	77,697	.4	%	11.7	%


(a)	Commercial and industrial average loan balances include $117 million, $117 million, and $107 million of assets from commercial credit cards at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

Average loans were $86.8 billion for the third quarter of 2017, an increase of $9.1 billion compared to the third quarter of 2016, primarily reflecting a full-quarter impact of the First Niagara acquisition, as well as growth in commercial and industrial loans, which was broad-based and spread across Key's commercial lines of business.

Compared to the second quarter of 2017, average loans increased by $312 million, driven primarily by growth in commercial and industrial loans. Commercial real estate loans declined as a result of paydowns and clients taking advantage of attractive capital markets alternatives. Consumer loans were relatively stable, as the home equity portfolio continued to decline, largely the result of paydowns.

At September 30, 2017, the remaining fair value discount on the First Niagara acquired loan portfolio was $302 million, compared to $345 million at June 30, 2017.



Average Deposits

dollars in millions											Change 3Q17 vs.
		3Q17			2Q17			3Q16			2Q17		3Q16
Non-time deposits		$	92,039		$	92,018		$	85,683		—		7.4	%
Certificates of deposit ($100,000 or more)		6,402			6,111			4,204			4.8	%	52.3
Other time deposits		4,664			4,650			5,031			.3		(7.3	)
	Total deposits	$	103,105		$	102,779		$	94,918		.3	%	8.6	%

Cost of total deposits		.28		%	.26		%	.21		%	N/A		N/A

N/A = Not Applicable

Average deposits totaled $103.1 billion for the third quarter of 2017, an increase of $8.2 billion compared to the year-ago quarter, primarily reflecting a full-quarter impact of the First Niagara acquisition, and core retail and commercial deposit growth.

Compared to the second quarter of 2017, average deposits increased by $326 million, driven by growth in noninterest-bearing deposits from commercial deposit inflows and short-term escrows. Certificates of deposit balances also grew and helped offset the managed exit of certain public sector relationships.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

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ASSET QUALITY

dollars in millions										Change 3Q17 vs.
	3Q17			2Q17			3Q16			2Q17		3Q16
Net loan charge-offs	$	32		$	66		$	44		(51.5	)%	(27.3	)%
Net loan charge-offs to average total loans	.15		%	.31		%	.23		%	N/A		N/A
Nonperforming loans at period end ^(a)	$	517		$	507		$	723		2.0		(28.5	)
Nonperforming assets at period end ^(a)	556			556			760			—		(26.8	)
Allowance for loan and lease losses	880			870			865			1.1		1.7
Allowance for loan and lease losses to nonperforming loans ^(a)	170.2		%	171.6		%	119.6		%	N/A		N/A
Provision for credit losses	$	51		$	66		$	59		(22.7	)%	(13.6	)%


(a)	Nonperforming loan balances exclude $783 million, $835 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

N/A = Not Applicable

Key’s provision for credit losses was $51 million for the third quarter of 2017, compared to $59 million for the third quarter of 2016 and $66 million for the second quarter of 2017. The third quarter 2017 provision reflects a large recovery in the commercial and industrial portfolio. Key’s allowance for loan and lease losses was $880 million, or 1.02% of total period-end loans, at September 30, 2017, compared to 1.01% at September 30, 2016, and 1.01% at June 30, 2017.

Net loan charge-offs for the third quarter of 2017 totaled $32 million, or .15% of average total loans, reflecting a large recovery in the commercial and industrial portfolio. These results compare to $44 million, or .23%, for the third quarter of 2016, and $66 million, or .31%, for the second quarter of 2017.

At September 30, 2017, Key’s nonperforming loans totaled $517 million, which represented .60% of period-end portfolio loans. These results compare to .85% at September 30, 2016, and .59% at June 30, 2017. Nonperforming assets at September 30, 2017, totaled $556 million, and represented .64% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .89% at September 30, 2016, and .64% at June 30, 2017.

CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at September 30, 2017.



Capital Ratios

	9/30/2017		6/30/2017		9/30/2016
Common Equity Tier 1 ^(a)	10.26	%	9.91	%	9.56	%
Tier 1 risk-based capital ^(a)	11.11		10.73		10.53
Total risk based capital ^(a)	13.09		12.64		12.63
Tangible common equity to tangible assets ^(b)	8.49		8.56		8.27
Leverage ^(a)	9.83		9.95		10.22


(a)	9/30/2017 ratio is estimated.

(b)

The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “tangible common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. See below for further information on the Regulatory Capital Rules.

Key's capital position remained strong throughout the third quarter. As shown in the preceding table, at September 30, 2017, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.26% and 11.11%, respectively. The increase in these ratios was primarily driven by a change in methodology for multipurpose facilities. Key's tangible common equity ratio was 8.49% at September 30, 2017.

As a “standardized approach” banking organization, Key’s mandatory compliance with the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”) began on January 1,

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October 19, 2017

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2015, subject to transitional provisions extending to January 1, 2019. Key’s estimated Common Equity Tier 1 ratio as calculated under the fully phased-in Regulatory Capital Rules was 10.15% at September 30, 2017. This estimate exceeds the fully phased-in required minimum Common Equity Tier 1 and Capital Conservation Buffer of 7.00%.



Summary of Changes in Common Shares Outstanding

in thousands								Change 3Q17 vs.
		3Q17		2Q17		3Q16		2Q17		3Q16
Shares outstanding at beginning of period		1,092,739		1,097,479		842,703		(.4	)%	29.7	%
Open market repurchases and return of shares under employee compensation plans		(15,298	)	(5,072	)	(5,240	)	201.6		191.9
Shares issued under employee compensation plans (net of cancellations)		1,598		332		4,857		381.3		(67.1	)
Common shares issued to acquire First Niagara		—		—		239,735		N/M		NM
	Shares outstanding at end of period	1,079,039		1,092,739		1,082,055		(1.3	)%	(.3	)%

N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the third quarter of 2017, Key declared a dividend of $.095 per common share. Key also completed $277 million of common share repurchases during the quarter, including $271 million of common share repurchases in the open market and $6 million of share repurchases related to employee equity compensation programs.

LINE OF BUSINESS RESULTS

The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.



Major Business Segments

dollars in millions											Change 3Q17 vs.
		3Q17			2Q17			3Q16			2Q17		3Q16
Revenue from continuing operations (TE)
Key Community Bank		$	959		$	1,010		$	783		(5.0	)%	22.5	%
Key Corporate Bank		560			596			556			(6.0	)	.7
Other Segments		30			35			16			(14.3	)	87.5
	Total segments	1,549			1,641			1,355			(5.6	)	14.3
Reconciling Items		5			(1		)	(18		)	N/M		N/M
	Total	$	1,554		$	1,640		$	1,337		(5.2	)%	16.2	%

Income (loss) from continuing operations attributable to Key
Key Community Bank		$	161		$	196		$	97		(17.9	)%	66.0	%
Key Corporate Bank		190			222			160			(14.4	)	18.8
Other Segments		23			28			16			(17.9	)	43.8
	Total segments	374			446			273			(16.1	)	37.0
Reconciling Items ^(a)		(11		)	(39		)	(102		)	N/M		N/M
	Total	$	363		$	407		$	171		(10.8	)%	112.3	%


(a)	Reconciling items consists primarily of the unallocated portion of merger-related charges and items not allocated to the business segments because they do not reflect their normal operations.

TE = Taxable Equivalent, N/M = Not Meaningful

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October 19, 2017

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Key Community Bank


dollars in millions								Change 3Q17 vs.
		3Q17		2Q17		3Q16		2Q17		3Q16
Summary of operations
Net interest income (TE)		$	670	$	674	$	533	(.6	)%	25.7	%
Noninterest income		289		336		250		(14.0	)	15.6
	Total revenue (TE)	959		1,010		783		(5.0	)	22.5
Provision for credit losses		59		47		39		25.5		51.3
Noninterest expense		643		651		590		(1.2	)	9.0
	Income (loss) before income taxes (TE)	257		312		154		(17.6	)	66.9
Allocated income taxes (benefit) and TE adjustments		96		116		57		(17.2	)	68.4
	Net income (loss) attributable to Key	$	161	$	196	$	97	(17.9	)%	66.0	%

Average balances
Loans and leases		$	47,595	$	47,461	$	41,548	.3	%	14.6	%
Total assets		51,708		51,502		44,218		.4		16.9
Deposits		79,563		79,601		69,397		—		14.6

Assets under management at period end		$	38,660	$	37,613	$	36,752	2.8	%	5.2	%

TE = Taxable Equivalent



Additional Key Community Bank Data

dollars in millions											Change 3Q17 vs.
		3Q17			2Q17			3Q16			2Q17		3Q16
Noninterest income
Trust and investment services income		$	101		$	99		$	86		2.0	%	17.4	%
Service charges on deposit accounts		78			77			70			1.3		11.4
Cards and payments income		65			60			54			8.3		20.4
Other noninterest income		45			100			40			(55.0	)	12.5
	Total noninterest income	$	289		$	336		$	250		(14.0	)%	15.6	%

Average deposit balances
NOW and money market deposit accounts		$	44,481		$	45,127		$	38,417		(1.4	)%	15.8	%
Savings deposits		5,165			5,293			4,369			(2.4	)	18.2
Certificates of deposit ($100,000 or more)		4,195			4,016			2,606			4.5		61.0
Other time deposits		4,657			4,640			4,944			.4		(5.8	)
Noninterest-bearing deposits		21,065			20,525			19,061			2.6	%	10.5
	Total deposits	$	79,563		$	79,601		$	69,397		—		14.6	%

Home equity loans
Average balance		$	12,182		$	12,330		$	11,703
Combined weighted-average loan-to-value ratio (at date of origination)		69		%	71		%	70		%
Percent first lien positions		60			60			55

Other data
Branches		1,208			1,210			1,322
Automated teller machines		1,588			1,589			1,701

Key Community Bank Summary of Operations (3Q17 vs. 3Q16)


•	Positive operating leverage compared to prior year


•	Net income increased $64 million, or 66%, from prior year


•	Average commercial and industrial loans increased $2.7 billion, or 17.2%, from the prior year


•	Average deposits increased $10.2 billion, or 14.6%, from the prior year

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October 19, 2017

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Key Community Bank recorded net income attributable to Key of $161 million for the third quarter of 2017, compared to $97 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the full-quarter impact of the First Niagara acquisition.

Taxable-equivalent net interest income increased by $137 million, or 25.7%, from the third quarter of 2016. The increase was primarily attributable to the full-quarter impact of the First Niagara acquisition, as well as the benefit from higher interest rates. Average loans and leases increased $6 billion, or 14.6%, largely driven by a $2.7 billion, or 17.2%, increase in commercial and industrial loans. Additionally, average deposits increased $10.2 billion, or 14.6%, from one year ago.

Noninterest income was up $39 million, or 15.6%, from the year-ago quarter, driven by the full quarter impact of the First Niagara acquisition, including the addition of Key Insurance and Benefits Services. Strength in cards and payments, which includes the full-quarter impact of Key’s merchant services acquisition in the second quarter of 2017, and higher assets under management from market growth also contributed to the increase.

The provision for credit losses increased by $20 million, or 51.3%, and net loan charge-offs increased $10 million from the third quarter of 2016, primarily related to the acquisition of First Niagara.

Noninterest expense increased by $53 million, or 9%, from the year-ago quarter, largely driven by the full-quarter impact of the First Niagara acquisition, as well as core business activity, ongoing investments, recent acquisitions and seasonal trends. Personnel expense increased $29 million, while non-personnel expense increased by $24 million, including higher marketing expense and higher intangible amortization expense.



Key Corporate Bank


dollars in millions									Change 3Q17 vs.
		3Q17			2Q17		3Q16		2Q17		3Q16
Summary of operations
Net interest income (TE)		$	291		$	312	$	278	(6.7	)%	4.7	%
Noninterest income		269			284		278		(5.3	)	(3.2	)
	Total revenue (TE)	560			596		556		(6.0	)	.7
Provision for credit losses		(11		)	19		23		(157.9	)	(147.8	)
Noninterest expense		303			299		310		1.3		(2.3	)
	Income (loss) before income taxes (TE)	268			278		223		(3.6	)	20.2
Allocated income taxes and TE adjustments		78			56		63		39.3		23.8
	Net income (loss)	190			222		160		(14.4	)	18.8
Less: Net income (loss) attributable to noncontrolling interests		—			—		—		N/M		N/M
	Net income (loss) attributable to Key	$	190		$	222	$	160	(14.4	)%	18.8	%

Average balances
Loans and leases		$	38,040		$	37,721	$	34,561	.8	%	10.1	%
Loans held for sale		1,521			1,000		1,103		52.1		37.9
Total assets		45,276			44,148		40,584		2.6		11.6
Deposits		21,559			21,145		22,708		2.0	%	(5.1	)%

TE = Taxable Equivalent, N/M = Not Meaningful

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October 19, 2017

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Additional Key Corporate Bank Data

dollars in millions								Change 3Q17 vs.
		3Q17		2Q17		3Q16		2Q17		3Q16
Noninterest income
Trust and investment services income		$	34	$	35	$	36	(2.9	)%	(5.6	)%
Investment banking and debt placement fees		137		134		153		2.2		(10.5	)
Operating lease income and other leasing gains		13		22		10		(40.9	)	30.0

Corporate services income		41		38		36		7.9		13.9
Service charges on deposit accounts		13		13		15		—		(13.3	)
Cards and payments income		10		10		10		—		—
	Payments and services income	64		61		61		4.9		4.9

Mortgage servicing fees		18		12		13		50.0		38.5
Other noninterest income		3		20		5		(85.0	)	(40.0	)
	Total noninterest income	$	269	$	284	$	278	(5.3	)%	(3.2	)%

Key Corporate Bank Summary of Operations (3Q17 vs. 3Q16)


•	Positive operating leverage compared to prior year


•	Net income up $30 million, or 18.8%, from prior year


•	Average loan and lease balances up $3.5 billion, or 10.1%, from the prior year

Key Corporate Bank recorded net income attributable to Key of $190 million for the third quarter of 2017, compared to $160 million for the same period one year ago.

Taxable-equivalent net interest income increased by $13 million, or 4.7%, compared to the third quarter of 2016. Average loan and lease balances increased $3.5 billion, or 10.1%, from the year-ago quarter, driven by growth in commercial and industrial and commercial mortgage loans. Average deposit balances decreased $1.1 billion, or 5.1%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

Noninterest income was down $9 million, or 3.2%, from the prior year. This decline was mostly due to lower investment banking and debt placement fees, resulting from strong market conditions and activity in the third quarter of 2016. This decrease was partially offset by growth in mortgage servicing fees and corporate services income compared to the prior year.

During the third quarter of 2017, Key Corporate Bank benefited from a large recovery in the commercial and industrial portfolio, as well as improving credit quality in the overall portfolio. Accordingly, the provision for credit losses decreased $34 million, or 147.8%, compared to the third quarter of 2016, with $21 million less of net loan charge-offs.

Noninterest expense decreased by $7 million, or 2.3%, from the third quarter of 2016. The decrease from the prior year was largely driven by lower performance-based compensation. Slightly offsetting this decrease were higher levels of operating lease expense, business services and professional fees, and cards and payments expense.

Other Segments

Other Segments consist of Corporate Treasury, Key’s Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $23 million for the third quarter of 2017, compared to $16 million for the same period last year, driven by increases in operating lease income and other leasing gains and corporate-owned life insurance income.

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October 19, 2017

Page 10

*****

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $136.7 billion at September 30, 2017.

Key provides deposit, lending, cash management, insurance, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of more than 1,200 branches and more than 1,500 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 11



CONTACTS:

ANALYSTS	MEDIA
Vernon L. Patterson	Jack Sparks
216.689.0520	720.904.4554
Vernon_Patterson@KeyBank.com	Jack_Sparks@KeyBank.com
	Twitter: @keybank_news
Kelly L. Dillon
216.689.3133
Kelly_L_Dillon@KeyBank.com

Melanie S. Misconish
216.689.4545
Melanie_S_Misconish@KeyBank.com

INVESTOR	KEY MEDIA
RELATIONS: www.key.com/ir	NEWSROOM: www.key.com/newsroom

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as “goal,” “objective,” “plan,” “expect,” “assume,” “anticipate,” “intend,” “project,” “believe,” “estimate,” or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key’s actual results to differ from those described in the forward-looking statements can be found in KeyCorp’s Form 10-K for the year ended December 31, 2016, as well as in KeyCorp’s subsequent SEC filings, all of which have been filed with the Securities and Exchange Commission (the “SEC”) and are available on Key’s website (www.key.com/ir) and on the SEC’s website (www.sec.gov). These factors may include, among others: deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a reversal of the U.S. economic recovery due to financial, political, or other shocks, and the extensive and increasing regulation of the U.S. financial services industry. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

Notes to Editors:

A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on Thursday, October 19, 2017. An audio replay of the call will be available through October 29, 2017.

For up-to-date company information, media contacts, and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.

*****

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 12

KeyCorp

Third Quarter 2017

Financial Supplement



Page
13	Financial Highlights
15	GAAP to Non-GAAP Reconciliation
18	Consolidated Balance Sheets
19	Consolidated Statements of Income
20	Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
22	Noninterest Expense
22	Personnel Expense
23	Loan Composition
23	Loans Held for Sale Composition
23	Summary of Changes in Loans Held for Sale
24	Summary of Loan and Lease Loss Experience From Continuing Operations
25	Asset Quality Statistics From Continuing Operations
25	Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
25	Summary of Changes in Nonperforming Loans From Continuing Operations
26	Line of Business Results

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October 19, 2017

Page 13



Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			9/30/2017			6/30/2017			9/30/2016
Summary of operations
	Net interest income (TE)		$	962		$	987		$	788
	Noninterest income		592			653			549
		Total revenue (TE)	1,554			1,640			1,337
	Provision for credit losses		51			66			59
	Noninterest expense		992			995			1,082
	Income (loss) from continuing operations attributable to Key		363			407			171
	Income (loss) from discontinued operations, net of taxes ^(a)		1			5			1
	Net income (loss) attributable to Key		364			412			172

	Income (loss) from continuing operations attributable to Key common shareholders		349			393			165
	Income (loss) from discontinued operations, net of taxes ^(a)		1			5			1
	Net income (loss) attributable to Key common shareholders		350			398			166

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.32		$	.36		$	.17
	Income (loss) from discontinued operations, net of taxes ^(a)		—			—			—
	Net income (loss) attributable to Key common shareholders ^(b)		.32			.37			.17

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.32			.36			.16
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)		—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)		.32			.36			.17

	Cash dividends declared		.095			.095			.085
	Book value at period end		13.18			13.02			12.78
	Tangible book value at period end		10.52			10.40			10.14
	Market price at period end		18.82			18.74			12.17

Performance ratios
	From continuing operations:
	Return on average total assets		1.07		%	1.23		%	.55		%
	Return on average common equity		9.74			11.12			5.09
	Return on average tangible common equity ^(c)		12.21			13.80			6.16
	Net interest margin (TE)		3.15			3.30			2.85
	Cash efficiency ratio ^(c)		62.2			59.3			80.0

	From consolidated operations:
	Return on average total assets		1.06		%	1.23		%	.55		%
	Return on average common equity		9.77			11.26			5.12
	Return on average tangible common equity ^(c)		12.25			13.98			6.20
	Net interest margin (TE)		3.13			3.28			2.83
	Loan to deposit ^(d)		86.2			87.2			84.7

Capital ratios at period end
	Key shareholders’ equity to assets		11.15		%	11.23		%	11.04		%
	Key common shareholders’ equity to assets		10.40			10.48			10.18
	Tangible common equity to tangible assets ^(c)		8.49			8.56			8.27
	Common Equity Tier 1^(e)		10.26			9.91			9.56
	Tier 1 risk-based capital ^(e)		11.11			10.73			10.53
	Total risk-based capital ^(e)		13.09			12.64			12.63
	Leverage ^(e)		9.83			9.95			10.22

Asset quality — from continuing operations
	Net loan charge-offs		$	32		$	66		$	44
	Net loan charge-offs to average loans		.15		%	.31		%	.23		%
	Allowance for loan and lease losses		$	880		$	870		$	865
	Allowance for credit losses		937			918			918
	Allowance for loan and lease losses to period-end loans		1.02		%	1.01		%	1.01		%
	Allowance for credit losses to period-end loans		1.08			1.06			1.07
	Allowance for loan and lease losses to nonperforming loans ^(f)		170.2			171.6			119.6
	Allowance for credit losses to nonperforming loans ^(f)		181.2			181.1			127.0
	Nonperforming loans at period-end ^(f)		$	517		$	507		$	723
	Nonperforming assets at period-end ^(f)		556			556			760
	Nonperforming loans to period-end portfolio loans ^(f)		.60		%	.59		%	.85		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(f)		.64			.64			.89

Trust assets
	Assets under management		$	38,660		$	37,613		$	36,752

Other data
	Average full-time equivalent employees		18,548			18,344			17,079
	Branches		1,208			1,210			1,322

Taxable-equivalent adjustment			$	14		$	14		$	8

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October 19, 2017

Page 14




Financial Highlights (continued)
(dollars in millions, except per share amounts)
		Nine months ended
		9/30/2017			9/30/2016
Summary of operations
	Net interest income (TE)	$	2,878		$	2,005
	Noninterest income	1,822			1,453
	Total revenue (TE)	4,700			3,458
	Provision for credit losses	180			200
	Noninterest expense	3,000			2,536
	Income (loss) from continuing operations attributable to Key	1,094			557
	Income (loss) from discontinued operations, net of taxes ^(a)	6			5
	Net income (loss) attributable to Key	1,100			562

	Income (loss) from continuing operations attributable to Key common shareholders	$	1,038		$	540
	Income (loss) from discontinued operations, net of taxes ^(a)	6			5
	Net income (loss) attributable to Key common shareholders	1,044			545

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	.96		$	.61
	Income (loss) from discontinued operations, net of taxes ^(a)	.01			.01
	Net income (loss) attributable to Key common shareholders ^(b)	.97			.62

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	.95			.60
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)	.01			.01
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)	.96			.61

	Cash dividends paid	.275			.245

Performance ratios
	From continuing operations:
	Return on average total assets	1.10		%	.71		%
	Return on average common equity	9.89			6.28
	Return on average tangible common equity ^(c)	12.36			7.21
	Net interest margin (TE)	3.19			2.84
	Cash efficiency ratio ^(c)	62.4			72.5

	From consolidated operations:
	Return on average total assets	1.09		%	.70		%
	Return on average common equity	9.95			6.34
	Return on average tangible common equity ^(c)	12.43			7.27
	Net interest margin (TE)	3.17			2.81

Asset quality — from continuing operations
	Net loan charge-offs	156			133
	Net loan charge-offs to average total loans	.24		%	.27		%

Other data
	Average full-time equivalent employees	18,427			14,642

Taxable-equivalent adjustment		39			24


(a)	In April 2009, management decided to wind down the operations of Austin Capital Management, Ltd., a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, management decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank National Association.


(b)	Earnings per share may not foot due to rounding.

(c)

The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. For further information on the Regulatory Capital Rules, see the “Capital” section of this release.


(d)	Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.


(e)	September 30, 2017, ratio is estimated.


(f)	Nonperforming loan balances exclude $783 million, $835 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 15

GAAP to Non-GAAP Reconciliations

(dollars in millions)

The table below presents certain non-GAAP financial measures related to “tangible common equity,” “return on average tangible common equity,” “Common Equity Tier 1,” “pre-provision net revenue,” certain financial measures excluding merger-related charges and/or other notable items, and “cash efficiency ratio.”

Notable items include certain revenue or expense items that may occur in a reporting period which management does not consider indicative of ongoing financial performance. Management believes it is useful to consider certain financial metrics with and without merger-related charges and/or other notable items in order to enable a better understanding of Company results, increase comparability of period-to-period results, and to evaluate and forecast those results.

The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”). The Regulatory Capital Rules require higher and better-quality capital and introduced a new capital measure, “Common Equity Tier 1,” a non-GAAP financial measure. The mandatory compliance date for Key as a “standardized approach” banking organization began on January 1, 2015, subject to transitional provisions extending to January 1, 2019.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.

As previously disclosed, Key completed its purchase of First Niagara on August 1, 2016. The definitive agreement and plan of merger to acquire First Niagara was originally announced on October 30, 2015. As a result of this transaction, Key has recognized merger-related charges. For the second and third quarters of 2017, merger-related charges are included in the total for "notable items." The table below shows the computation of earnings per share excluding notable items, return on average tangible common equity excluding notable items, return on average assets from continuing operations excluding notable items, cash efficiency ratio excluding notable items, and pre-provision net revenue excluding notable items. Management believes that eliminating the effects of the merger-related charges and other notable items makes it easier to analyze the results by presenting them on a more comparable basis.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key’s intangible asset amortization from the calculation. The table below also shows the computation for the cash efficiency ratio excluding merger-related charges. Management believes these ratios provide greater consistency and comparability between Key’s results and those of its peer banks. Additionally, these ratios are used by analysts and investors as they develop earnings forecasts and peer bank analysis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.



	Three months ended									Nine months ended
	9/30/2017			6/30/2017			9/30/2016			9/30/2017			9/30/2016
Tangible common equity to tangible assets at period-end
Key shareholders’ equity (GAAP)	$	15,249		$	15,253		$	14,996
Less: Intangible assets ^(a)	2,870			2,866			2,855
Preferred Stock ^(b)	1,009			1,009			1,150
Tangible common equity (non-GAAP)	$	11,370.140566		$	11,378		$	10,991
Total assets (GAAP)	$	136,733		$	135,824		$	135,805
Less: Intangible assets ^(a)	2,870			2,866			2,855
Tangible assets (non-GAAP)	$	133,863		$	132,958		$	132,950
Tangible common equity to tangible assets ratio (non-GAAP)	8.49		%	8.56		%	8.27		%
Earnings per common share (EPS) excluding notable items
EPS from continuing operations attributable to Key common shareholders — assuming dilution	$	.32		$	.36		$	.16
Plus: EPS impact of notable items	.03			(.02		)	.14
EPS from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)	$	.35		$	.34		$	.30
Notable items
Merger-related charges	$	(36	)	$	(44	)	$	(207	)	$	(161	)	$	(276	)
Merchant services gain	(5		)	64			—			59			—
Purchase accounting finalization, net	—			43			—			43			—
Charitable contribution	—			(20		)	—			(20		)	—
Total notable items	$	(41	)	$	43		$	(207	)	$	(79	)	$	(276	)
Income taxes	(13		)	16			(75		)	(27		)	(101		)
Total notable items after tax	$	(28	)	$	27		$	(132	)	$	(52	)	$	(175	)

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October 19, 2017

Page 16



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended									Nine months ended
			9/30/2017			6/30/2017			9/30/2016			9/30/2017			9/30/2016
Pre-provision net revenue
	Net interest income (GAAP)		$	948		$	973		$	780		$	2,839		$	1,981
	Plus:	Taxable-equivalent adjustment	14			14			8			39			24
		Noninterest income	592			653			549			1,822			1,453
	Less:	Noninterest expense	992			995			1,082			3,000			2,536
		Pre-provision net revenue from continuing operations (non-GAAP)	$	562		$	645		$	255		$	1,700		$	922
	Plus:	Notable items	41			(43		)	207			79			276
		Pre-provision net revenue from continuing operations excluding notable items (non-GAAP)	$	603		$	602		$	462		$	1,779		$	1,198
Average tangible common equity
	Average Key shareholders’ equity (GAAP)		$	15,241		$	15,200		$	13,552		$	15,208		$	11,890
	Less:	Intangible assets (average) ^(c)	2,878			2,756			2,255			2,802			1,473
		Preferred Stock (average)	1,025			1,025			648			1,175			410
		Average tangible common equity (non-GAAP)	$	11,338		$	11,419		$	10,649		$	11,231		$	10,007
Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	349		$	393		$	165		$	1,038		$	540
	Plus:	Notable items, after tax	28			(27		)	132			52			175
	Net income (loss) from continuing operations attributable to Key common shareholders
		excluding notable items (non-GAAP)	$	377		$	366		$	297		$	1,090		$	715
	Average tangible common equity (non-GAAP)		11,338			11,419			10,649			11,231			10,007

	Return on average tangible common equity from continuing operations (non-GAAP)		12.21		%	13.80		%	6.16		%	12.36		%	7.21		%
	Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)		13.19			12.86			11.10			12.98			9.54
Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	350		$	398		$	166		$	1,044		$	545
	Average tangible common equity (non-GAAP)		11,338			11,419			10,649			11,231			10,007

	Return on average tangible common equity consolidated (non-GAAP)		12.25		%	13.98		%	6.20		%	12.43		%	7.27		%
Cash efficiency ratio
	Noninterest expense (GAAP)		$	992		$	995		$	1,082		$	3,000		$	2,536
	Less:	Intangible asset amortization	25			22			13			69			28
		Adjusted noninterest expense (non-GAAP)	967			973			1,069			2,931			2,508
	Less:	Notable items ^(d)	36			60			189			177			258
		Adjusted noninterest expense excluding notable items (non-GAAP)	$	931		$	913		$	880		$	2,754		$	2,250
	Net interest income (GAAP)		$	948		$	973		$	780		$	2,839		$	1,981
	Plus:	Taxable-equivalent adjustment	14			14			8			39			24
		Noninterest income	592			653			549			1,822			1,453
		Total taxable-equivalent revenue (non-GAAP)	1,554			1,640			1,337			4,700			3,458
	Plus:	Notable items ^(e)	5			(103		)	18			(98		)	18
		Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP)	$	1,559		$	1,537		$	1,355		$	4,602		$	3,476

	Cash efficiency ratio (non-GAAP)		62.2		%	59.3		%	80.0		%	62.4		%	72.5		%
	Cash efficiency ratio excluding notable items (non-GAAP)		59.7			59.4			64.9			59.8			64.7
Return on average total assets from continuing operations excluding notable items
	Income from continuing operations attributable to Key (GAAP)		$	363		$	407		$	171		$	1,094		$	557
	Plus:	Notable items, after tax	28			(27		)	132			52			175
		Income from continuing operations attributable to Key excluding notable items, after tax (non-GAAP)	$	391		$	380		$	303		$	1,146		$	732

	Average total assets from continuing operations (GAAP)		$	134,356		$	132,491		$	123,469		$	133,202		$	105,187

	Return on average total assets from continuing operations excluding notable items (non-GAAP)		1.15		%	1.15		%	.98		%	1.15		%	.93		%

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 17



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			9/30/2017
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
	Common Equity Tier 1 under current RCR		$	12,105
	Adjustments from current RCR to the fully phased-in RCR:
		Deferred tax assets and other intangible assets ^(f)	(60		)
		Common Equity Tier 1 anticipated under the fully phased-in RCR ^(g)	$	12,045

	Net risk-weighted assets under current RCR		$	118,013
	Adjustments from current RCR to the fully phased-in RCR:
		Mortgage servicing assets ^(h)	622
		All other assets	(12		)
		Total risk-weighted assets anticipated under the fully phased-in RCR ^(g)	$	118,623

	Common Equity Tier 1 ratio under the fully phased-in RCR ^(g)		10.15		%


(a)	For the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, intangible assets exclude $30 million, $33 million, and $51 million, respectively, of period-end purchased credit card receivables.


(b)	Net of capital surplus.

(c)

For the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, average intangible assets exclude $32 million, $36 million, and $47 million, respectively, of average purchased credit card receivables. For the nine months ended September 30, 2017, and September 30, 2016, average intangible assets exclude $36 million and $42 million, respectively, of average purchased credit card receivables.


(d)	Notable items for the three months ended September 30, 2017, includes $36 million of merger-related expense.


(e)	Notable items for the three months ended September 30, 2017, includes a $5 million adjustment related to the merchant services acquisition gain.


(f)	Includes the deferred tax assets subject to future taxable income for realization, primarily tax credit carryforwards, as well as intangible assets (other than goodwill and mortgage servicing assets) subject to the transition provisions of the final rule.


(g)	The anticipated amount of regulatory capital and risk-weighted assets is based upon the federal banking agencies’ Regulatory Capital Rules (as fully phased-in on January 1, 2019); Key is subject to the Regulatory Capital Rules under the “standardized approach.”


(h)	Item is included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250%.

GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 18



Consolidated Balance Sheets
(dollars in millions)

			9/30/2017			6/30/2017			9/30/2016
Assets
	Loans		$	86,492		$	86,503		$	85,528
	Loans held for sale		1,341			1,743			1,137
	Securities available for sale		19,012			18,024			20,540
	Held-to-maturity securities		10,276			10,638			8,995
	Trading account assets		783			1,081			926
	Short-term investments		3,993			2,522			3,216
	Other investments		728			732			747
		Total earning assets	122,625			121,243			121,089
	Allowance for loan and lease losses		(880		)	(870		)	(865		)
	Cash and due from banks		562			601			749
	Premises and equipment		916			919			1,023
	Operating lease assets		736			691			430
	Goodwill		2,487			2,464			2,480
	Other intangible assets		412			435			426
	Corporate-owned life insurance		4,113			4,100			4,035
	Derivative assets		622			636			1,304
	Accrued income and other assets		3,744			4,147			3,480
	Discontinued assets		1,396			1,458			1,654
		Total assets	$	136,733		$	135,824		$	135,805

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	53,734		$	53,342		$	56,432
		Savings deposits	6,366			7,056			5,335
		Certificates of deposit ($100,000 or more)	6,519			6,286			4,601
		Other time deposits	4,720			4,605			5,793
		Total interest-bearing deposits	71,339			71,289			72,161
		Noninterest-bearing deposits	32,107			31,532			32,024
		Total deposits	103,446			102,821			104,185
	Federal funds purchased and securities sold under repurchase agreements		372			1,780			602
	Bank notes and other short-term borrowings		616			924			809
	Derivative liabilities		232			308			850
	Accrued expense and other liabilities		1,717			1,475			1,739
	Long-term debt		15,100			13,261			12,622
		Total liabilities	121,483			120,569			120,807

Equity
	Preferred stock		1,025			1,025			1,165
	Common shares		1,257			1,257			1,257
	Capital surplus		6,310			6,310			6,359
	Retained earnings		10,125			9,878			9,260
	Treasury stock, at cost		(2,962		)	(2,711		)	(2,863		)
	Accumulated other comprehensive income (loss)		(506		)	(506		)	(182		)
		Key shareholders’ equity	15,249			15,253			14,996
	Noncontrolling interests		1			2			2
		Total equity	15,250			15,255			14,998
Total liabilities and equity			$	136,733		$	135,824		$	135,805

Common shares outstanding (000)			1,079,039			1,092,739			1,082,055

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 19



Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended						Nine months ended
			9/30/2017		6/30/2017		9/30/2016		9/30/2017		9/30/2016
Interest income
	Loans		$	928	$	948	$	746	$	2,753	$	1,875
	Loans held for sale		17		9		10		39		23
	Securities available for sale		91		90		88		276		237
	Held-to-maturity securities		55		55		30		161		78
	Trading account assets		7		7		4		21		17
	Short-term investments		6		5		7		14		17
	Other investments		5		3		5		12		10
		Total interest income	1,109		1,117		890		3,276		2,257

Interest expense
	Deposits		72		66		49		196		114
	Federal funds purchased and securities sold under repurchase agreements		—		—		—		1		—
	Bank notes and other short-term borrowings		3		4		2		12		7
	Long-term debt		86		74		59		228		155
		Total interest expense	161		144		110		437		276

Net interest income			948		973		780		2,839		1,981
Provision for credit losses			51		66		59		180		200
Net interest income after provision for credit losses			897		907		721		2,659		1,781

Noninterest income
	Trust and investment services income		135		134		122		404		341
	Investment banking and debt placement fees		141		135		156		403		325
	Service charges on deposit accounts		91		90		85		268		218
	Operating lease income and other leasing gains		16		30		6		69		41
	Corporate services income		54		55		51		163		154
	Cards and payments income		75		70		66		210		164
	Corporate-owned life insurance income		31		33		29		94		85
	Consumer mortgage income		7		6		6		19		11
	Mortgage servicing fees		21		15		15		54		37
	Net gains (losses) from principal investing		3		—		5		4		16
	Other income ^(a)		18		85		8		134		61
		Total noninterest income	592		653		549		1,822		1,453

Noninterest expense
	Personnel		558		551		594		1,665		1,425
	Net occupancy		74		78		73		239		193
	Computer processing		56		55		70		171		158
	Business services and professional fees		49		45		76		140		157
	Equipment		29		27		26		83		68
	Operating lease expense		24		21		15		64		42
	Marketing		34		30		32		85		66
	FDIC assessment		21		21		21		62		38
	Intangible asset amortization		25		22		13		69		28
	OREO expense, net		3		3		3		8		6
	Other expense		119		142		159		414		355
		Total noninterest expense	992		995		1,082		3,000		2,536
Income (loss) from continuing operations before income taxes			497		565		188		1,481		698
	Income taxes		134		158		16		386		141
Income (loss) from continuing operations			363		407		172		1,095		557
	Income (loss) from discontinued operations, net of taxes		1		5		1		6		5
Net income (loss)			364		412		173		1,101		562
	Less: Net income (loss) attributable to noncontrolling interests		—		—		1		1		—
Net income (loss) attributable to Key			$	364	$	412	$	172	$	1,100	$	562

Income (loss) from continuing operations attributable to Key common shareholders			$	349	$	393	$	165	$	1,038	$	540
Net income (loss) attributable to Key common shareholders			350		398		166		1,044		545

Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.32	$	.36	$	.17	$	.96	$	.61
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		.01
Net income (loss) attributable to Key common shareholders ^(b)			.32		.37		.17		.97		.62

Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.32	$	.36	$	.16	$	.95	$	.6
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		.01
Net income (loss) attributable to Key common shareholders ^(b)			.32		.36		.17		.96		.61

Cash dividends declared per common share			$	.095	$	.095	$	.085	$	.275	$	.245

Weighted-average common shares outstanding (000)			1,073,390		1,076,203		982,080		1,075,296		880,824
	Effect of common share options and other stock awards		15,451		16,836		12,580		16,359		8,965
Weighted-average common shares and potential common shares outstanding (000) ^(c)			1,088,841		1,093,039		994,660		1,091,655		889,789

(a)

For the three months ended September 30, 2017, net securities gains (losses) totaled less than $1 million. For the three months ended June 30, 2017, net securities gains (losses) totaled $1 million. For the three months ended September 30, 2016, net securities gains (losses) totaled less than $1 million. For the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, Key did not have any impairment losses related to securities.


(b)	Earnings per share may not foot due to rounding.


(c)	Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 20



Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)

		Third Quarter 2017							Second Quarter 2017							Third Quarter 2016
		Average					Yield/		Average					Yield/		Average					Yield/
		Balance			Interest ^(a)		Rate ^(a)		Balance			Interest ^(a)		Rate ^(a)		Balance			Interest ^(a)		Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	41,416		$	414	3.97	%	$	40,666		$	409	4.04	%	$	37,318		$	317	3.38	%
	Real estate — commercial mortgage	14,850			169		4.51		15,096			187		4.97		12,879			126		3.91
	Real estate — construction	2,054			23		4.51		2,204			31		5.51		1,723			21		4.67
	Commercial lease financing	4,694			46		3.89		4,690			50		4.33		4,508			38		3.33
	Total commercial loans	63,014			652		4.11		62,656			677		4.34		56,428			502		3.54
	Real estate — residential mortgage	5,493			54		3.92		5,509			52		3.77		4,453			45		3.96
	Home equity loans	12,314			136		4.41		12,473			135		4.31		11,968			122		4.07
	Consumer direct loans	1,774			33		7.26		1,743			31		7.07		1,666			30		7.20
	Credit cards	1,049			30		11.34		1,044			29		11.04		996			27		10.80
	Consumer indirect loans	3,170			37		4.64		3,077			38		5.02		2,186			28		5.23
	Total consumer loans	23,800			290		4.85		23,846			285		4.77		21,269			252		4.73
	Total loans	86,814			942		4.31		86,502			962		4.46		77,697			754		3.86
	Loans held for sale	1,607			17		4.13		1,082			9		3.58		1,152			10		3.48
	Securities available for sale ^{(b), (e)}	18,574			91		1.96		17,997			90		1.97		17,972			88		1.99
	Held-to-maturity securities ^(b)	10,469			55		2.12		10,469			55		2.09		6,250			30		1.86
	Trading account assets	889			7		2.74		1,042			7		3.00		860			4		2.12
	Short-term investments	2,166			6		1.21		1,970			5		.96		5,911			7		.48
	Other investments ^(e)	728			5		2.46		687			3		1.87		717			5		2.74
	Total earning assets	121,247			1,123		3.68		119,749			1,131		3.78		110,559			898		3.24
	Allowance for loan and lease losses	(868		)					(864		)					(847		)
	Accrued income and other assets	13,977							13,606							13,757
	Discontinued assets	1,417							1,477							1,676
	Total assets	$	135,773						$	133,968						$	125,145

Liabilities
	NOW and money market deposit accounts	$	53,826		37		.27		$	54,416		34		.25		$	51,318		25		.20
	Savings deposits	6,697			5		.25		6,854			4		.21		4,521			1		.07
	Certificates of deposit ($100,000 or more)	6,402			21		1.31		6,111			19		1.23		4,204			12		1.15
	Other time deposits	4,664			9		.81		4,650			9		.77		5,031			11		.85
	Total interest-bearing deposits	71,589			72		.40		72,031			66		.36		65,074			49		.30
	Federal funds purchased and securities sold under repurchase agreements	456			—		.23		466			—		.23		578			—		.16
	Bank notes and other short-term borrowings	865			3		1.49		1,216			4		1.43		1,186			2		.91
	Long-term debt ^{(f), (g)}	12,631			86		2.75		11,046			74		2.68		10,415			59		2.31
	Total interest-bearing liabilities	85,541			161		.75		84,759			144		.68		77,253			110		.57
	Noninterest-bearing deposits	31,516							30,748							29,844
	Accrued expense and other liabilities	2,057							1,782							2,818
	Discontinued liabilities ^(g)	1,417							1,477							1,676
	Total liabilities	120,531							118,766							111,591
Equity
	Key shareholders’ equity	15,241							15,200							13,552
	Noncontrolling interests	1							2							2
	Total equity	15,242							15,202							13,554
	Total liabilities and equity	$	135,773						$	133,968						$	125,145
Interest rate spread (TE)							2.93	%						3.10	%						2.67	%
Net interest income (TE) and net interest margin (TE)					962		3.15	%				987		3.30	%				788		2.85	%
TE adjustment ^(b)					14							14							8
	Net interest income, GAAP basis				$	948						$	973						$	780


(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.


(b)	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%.


(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.


(d)	Commercial and industrial average balances include $117 million, $117 million, and $107 million of assets from commercial credit cards for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively.


(e)	Yield is calculated on the basis of amortized cost.


(f)	Rate calculation excludes basis adjustments related to fair value hedges.


(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 21




Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations
(dollars in millions)

		Nine months ended September 30, 2017							Nine months ended September 30, 2016
		Average							Average
		Balance			Interest ^(a)		Yield/Rate ^(a)		Balance			Interest ^(a)		Yield/ Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	40,700		$	1,196	3.93	%	$	33,859		$	850	3.35	%
	Real estate — commercial mortgage	15,043			520		4.62		9,818			283		3.85
	Real estate — construction	2,203			80		4.86		1,205			39		4.30
	Commercial lease financing	4,673			140		3.99		4,139			111		3.57
	Total commercial loans	62,619			1,936		4.13		49,021			1,283		3.50
	Real estate — residential mortgage	5,507			160		3.88		2,986			91		4.05
	Home equity loans	12,465			402		4.32		10,773			327		4.06
	Consumer direct loans	1,760			94		7.10		1,619			82		6.77
	Credit cards	1,053			88		11.15		858			69		10.71
	Consumer indirect loans	3,081			112		4.85		1,118			47		5.67
	Total consumer loans	23,866			856		4.79		17,354			616		4.74
	Total loans	86,485			2,792		4.31		66,375			1,899		3.82
	Loans held for sale	1,293			39		4.01		864			23		3.58
	Securities available for sale ^{(b), (e)}	18,582			276		1.96		15,492			237		2.06
	Held-to-maturity securities ^(b)	10,311			161		2.08		5,320			78		1.94
	Trading account assets	966			21		2.84		881			17		2.60
	Short-term investments	1,918			14		1.00		4,971			17		.46
	Other investments ^(e)	708			12		2.20		658			10		2.05
	Total earning assets	120,263			3,315		3.68		94,561			2,281		3.23
	Allowance for loan and lease losses	(862		)					(828		)
	Accrued income and other assets	13,801							11,454
	Discontinued assets	1,477							1,739
	Total assets	$	134,679						$	106,926
Liabilities
	NOW and money market deposit accounts	$	54,178		103		.25		$	42,935		56		.18
	Savings deposits	6,635			10		.19		3,087			1		.04
	Certificates of deposit ($100,000 or more)	6,050			56		1.24		3,402			33		1.28
	Other time deposits	4,673			27		.78		3,832			24		.83
	Total interest-bearing deposits	71,536			196		.37		53,256			114		.29
	Federal funds purchased and securities sold under repurchase agreements	570			1		.27		451			—		.09
	Bank notes and other short-term borrowings	1,291			12		1.27		825			7		1.21
	Long-term debt ^{(f), (g)}	11,510			228		2.66		9,429			155		2.25
	Total interest-bearing liabilities	84,907			437		.69		63,961			276		.58
	Noninterest-bearing deposits	31,123							26,938
	Accrued expense and other liabilities	1,962							2,392
	Discontinued liabilities ^(g)	1,478							1,739
	Total liabilities	119,470							95,030
Equity
	Key shareholders’ equity	15,208							11,890
	Noncontrolling interests	1							6
	Total equity	15,209							11,896
	Total liabilities and equity	$	134,679						$	106,926
Interest rate spread (TE)							2.99	%						2.65	%
Net interest income (TE) and net interest margin (TE)					2,878		3.19	%				2,005		2.84	%
TE adjustment ^(b)					39							24
	Net interest income, GAAP basis				$	2,839						$	1,981


(a)	Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.


(b)	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%.


(c)	For purposes of these computations, nonaccrual loans are included in average loan balances.


(d)	Commercial and industrial average balances include $116 million and $93 million of assets from commercial credit cards for the nine months ended September 30, 2017, and September 30, 2016, respectively.


(e)	Yield is calculated on the basis of amortized cost.


(f)	Rate calculation excludes basis adjustments related to fair value hedges.


(g)	A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.

TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 22




Noninterest Expense
(dollars in millions)

	Three months ended						Nine months ended
	9/30/2017		6/30/2017		9/30/2016		9/30/2017		9/30/2016
Personnel ^(a)	$	558	$	551	$	594	$	1,665	$	1,425
Net occupancy	74		78		73		239		193
Computer processing	56		55		70		171		158
Business services and professional fees	49		45		76		140		157
Equipment	29		27		26		83		68
Operating lease expense	24		21		15		64		42
Marketing	34		30		32		85		66
FDIC assessment	21		21		21		62		38
Intangible asset amortization	25		22		13		69		28
OREO expense, net	3		3		3		8		6
Other expense	119		142		159		414		355
Total noninterest expense	$	992	$	995	$	1,082	$	3,000	$	2,536
Merger-related charges ^(b)	36		44		189		161		258
Total noninterest expense excluding merger-related charges	$	956	$	951	$	893	$	2,839	$	2,278
Average full-time equivalent employees ^(c)	18,548		18,344		17,079		18,427		14,642


(a)	Additional detail provided in Personnel Expense table below.


(b)	Additional detail provide in Merger-Related Charges table below.


(c)	The number of average full-time equivalent employees has not been adjusted for discontinued operations.



Personnel Expense
(in millions)

	Three months ended									Nine months ended
	9/30/2017			6/30/2017			9/30/2016			9/30/2017		9/30/2016
Salaries and contract labor	$	339		$	332		$	329		$	995	$	839
Incentive and stock-based compensation	134			137			162			398		352
Employee benefits	80			76			73			252		199
Severance	5			6			30			20		35
Total personnel expense	$	558		$	551		$	594		$	1,665	$	1,425
Merger-related charges	25			31			97			86		148
Total personnel expense excluding merger-related charges	$	533		$	520		$	497		$	1,579	$	1,277

Merger-Related Charges
(in millions)

	Three months ended									Nine months ended
	9/30/2017			6/30/2017			9/30/2016			9/30/2017		9/30/2016
Net interest income	—			—			$	(6	)	—		$	(6	)

Operating lease income and other leasing gains	—			—			(2		)	—		(2		)
Other income	—			—			(10		)	—		(10		)
Noninterest income	—			—			(12		)	—		(12		)

Personnel	$	25		$	31		97			$	86	148
Net occupancy	(2		)	(1		)	—			2		—
Business services and professional fees	2			6			32			13		44
Computer processing	4			2			15			11		15
Marketing	5			6			9			17		13
Other non-personnel expense	2			—			36			32		38
Noninterest expense	36			44			189			161		258
Total merger-related charges	$	36		$	44		$	207		$	161	$	276

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 23



Loan Composition
(dollars in millions)

							Percent change 9/30/2017 vs.
	9/30/2017		6/30/2017		9/30/2016		6/30/2017		9/30/2016
Commercial and industrial ^(a)	$	41,147	$	40,914	$	39,433	.6	%	4.3	%
Commercial real estate:
Commercial mortgage	14,929		14,813		14,979		.8		(.3	)
Construction	1,954		2,168		2,189		(9.9	)	(10.7	)
Total commercial real estate loans	16,883		16,981		17,168		(.6	)	(1.7	)
Commercial lease financing ^(b)	4,716		4,737		4,783		(.4	)	(1.4	)
Total commercial loans	62,746		62,632		61,384		.2		2.2
Residential — prime loans:
Real estate — residential mortgage	5,476		5,517		5,509		(.7	)	(.6	)
Home equity loans	12,238		12,405		12,757		(1.3	)	(4.1	)
Total residential — prime loans	17,714		17,922		18,266		(1.2	)	(3.0	)
Consumer direct loans	1,789		1,755		1,764		1.9		1.4
Credit cards	1,045		1,049		1,084		(.4	)	(3.6	)
Consumer indirect loans	3,198		3,145		3,030		1.7		5.5
Total consumer loans	23,746		23,871		24,144		(.5	)%	(1.6	)
Total loans^{(c), (d)}	$	86,492	$	86,503	$	85,528	—		1.1	%


(a)	Loan balances include $118 million, $118 million, and $117 million of commercial credit card balances at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.


(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $31 million, $47 million, and $76 million at September 30, 2017, June 30, 2017, and September 30, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables.


(c)	At September 30, 2017, total loans include purchased loans of $16.7 billion, of which $783 million were purchased credit impaired. At June 30, 2017, total loans include purchased loans of $17.8 billion, of which $835 million were purchased credit impaired. At September 30, 2016, total loans include purchased loans of $22.4 billion, of which $959 million were purchased credit impaired.


(d)	Total loans exclude loans of $1.4 billion at September 30, 2017, $1.4 billion at June 30, 2017, and $1.6 billion at September 30, 2016, related to the discontinued operations of the education lending business.



Loans Held for Sale Composition
(dollars in millions)

							Percent change 9/30/2017 vs.
	9/30/2017		6/30/2017		9/30/2016		6/30/2017		9/30/2016
Commercial and industrial	$	34	$	338	$	56	(89.9	)%	(39.3	)%
Real estate — commercial mortgage	1,246		1,332		1,016		(6.5	)	22.6
Commercial lease financing	1		10		3		(90.0	)	(66.7	)
Real estate — residential mortgage	60		63		62		(4.8	)	(3.2	)
Total loans held for sale ^(a)	$	1,341	$	1,743	$	1,137	(23.1	)%	17.9	%


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $60 million at September 30, 2017, $63 million at June 30, 2017, and $62 million at September 30, 2016.



Summary of Changes in Loans Held for Sale
(in millions)

	3Q17			2Q17			1Q17			4Q16			3Q16
Balance at beginning of period	$	1,743		$	1,384		$	1,104		$	1,137		$	442
Purchases	—			—			—			—			48
New originations	2,855			2,876			2,563			2,846			2,857
Transfers from (to) held to maturity, net	(63		)	(7		)	17			11			2
Loan sales	(3,191		)	(2,507		)	(2,299		)	(2,889		)	(2,180		)
Loan draws (payments), net	(3		)	(3		)	(1		)	(1		)	(32		)
Balance at end of period ^(a)	$	1,341		$	1,743		$	1,384		$	1,104		$	1,137


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $60 million at September 30, 2017, $63 million at June 30, 2017, and $62 million at March 31, 2017, December 31, 2016, and September 30, 2016.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 24



Summary of Loan and Lease Loss Experience From Continuing Operations
(dollars in millions)

	Three months ended									Nine months ended
	9/30/2017			6/30/2017			9/30/2016			9/30/2017			9/30/2016
Average loans outstanding	$	86,814		$	86,502		$	77,697		$	86,485		$	66,375
Allowance for loan and lease losses at beginning of period	$	870		$	870		$	854		$	858		$	796
Loans charged off:
Commercial and industrial	29			40			17			101			78

Real estate — commercial mortgage	6			3			—			9			3
Real estate — construction	2			—			9			2			9
Total commercial real estate loans	8			3			9			11			12
Commercial lease financing	1			1			5			9			11
Total commercial loans	38			44			31			121			101
Real estate — residential mortgage	—			4			1			2			4
Home equity loans	6			9			5			23			22
Consumer direct loans	8			8			6			26			18
Credit cards	11			12			9			34			25
Consumer indirect loans	8			5			3			24			9
Total consumer loans	33			38			24			109			78
Total loans charged off	71			82			55			230			179
Recoveries:
Commercial and industrial	25			2			2			32			8

Real estate — commercial mortgage	1			—			1			1			9
Real estate — construction	—			—			1			1			2
Total commercial real estate loans	1			—			2			2			11
Commercial lease financing	3			—			—			5			2
Total commercial loans	29			2			4			39			21
Real estate — residential mortgage	1			1			1			4			3
Home equity loans	4			5			3			12			10
Consumer direct loans	1			2			1			4			4
Credit cards	1			2			1			4			3
Consumer indirect loans	3			4			1			11			5
Total consumer loans	10			14			7			35			25
Total recoveries	39			16			11			74			46
Net loan charge-offs	(32		)	(66		)	(44		)	(156		)	(133		)
Provision (credit) for loan and lease losses	42			66			56			178			203
Foreign currency translation adjustment	—			—			(1		)	—			(1		)
Allowance for loan and lease losses at end of period	$	880		$	870		$	865		$	880		$	865

Liability for credit losses on lending-related commitments at beginning of period	$	48		$	48		$	50		$	55		$	56
Provision (credit) for losses on lending-related commitments	9			—			3			2			(3		)
Liability for credit losses on lending-related commitments at end of period ^(a)	$	57		$	48		$	53		$	57		$	53

Total allowance for credit losses at end of period	$	937		$	918		$	918		$	937		$	918

Net loan charge-offs to average total loans	.15		%	.31		%	.23		%	.24		%	.27		%
Allowance for loan and lease losses to period-end loans	1.02			1.01			1.01			1.02			1.01
Allowance for credit losses to period-end loans	1.08			1.06			1.07			1.08			1.07
Allowance for loan and lease losses to nonperforming loans	170.2			171.6			119.6			170.2			119.6
Allowance for credit losses to nonperforming loans	181.2			181.1			127.0			181.2			127.0

Discontinued operations — education lending business:
Loans charged off	$	10		$	4		$	6		$	20		$	21
Recoveries	2			2			3			6			8
Net loan charge-offs	$	(8	)	$	(2	)	$	(3	)	$	(14	)	$	(13	)


(a)	Included in "Accrued expense and other liabilities" on the balance sheet.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 25



Asset Quality Statistics From Continuing Operations
(dollars in millions)

	3Q17			2Q17			1Q17			4Q16			3Q16
Net loan charge-offs	$	32		$	66		$	58		$	72		$	44
Net loan charge-offs to average total loans	.15		%	.31		%	.27		%	.34		%	.23		%
Allowance for loan and lease losses	$	880		$	870		$	870		$	858		$	865
Allowance for credit losses ^(a)	937			918			918			913			918
Allowance for loan and lease losses to period-end loans	1.02		%	1.01		%	1.01		%	1.00		%	1.01		%
Allowance for credit losses to period-end loans	1.08			1.06			1.07			1.06			1.07
Allowance for loan and lease losses to nonperforming loans ^(b)	170.2			171.6			151.8			137.3			119.6
Allowance for credit losses to nonperforming loans ^(b)	181.2			181.1			160.2			146.1			127.0
Nonperforming loans at period end ^(b)	$	517		$	507		$	573		$	625		$	723
Nonperforming assets at period end ^(b)	556			556			623			676			760
Nonperforming loans to period-end portfolio loans ^(b)	.60		%	.59		%	.67		%	.73		%	.85		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(b)	.64			.64			.72			.79			.89


(a)	Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related unfunded commitments.


(b)	Nonperforming loan balances exclude $783 million, $835 million, $812 million, $865 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.



Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Commercial and industrial	$	169		$	178		$	258		$	297		$	335

Real estate — commercial mortgage	30			34			32			26			32
Real estate — construction	2			4			2			3			17
Total commercial real estate loans	32			38			34			29			49
Commercial lease financing	11			11			5			8			13
Total commercial loans	212			227			297			334			397
Real estate — residential mortgage	57			58			54			56			72
Home equity loans	227			208			207			223			225
Consumer direct loans	3			2			3			6			2
Credit cards	2			2			3			2			3
Consumer indirect loans	16			10			9			4			24
Total consumer loans	305			280			276			291			326
Total nonperforming loans ^(a)	517			507			573			625			723
OREO	39			48			49			51			35
Other nonperforming assets	—			1			1			—			2
Total nonperforming assets ^(a)	$	556		$	556		$	623		$	676		$	760
Accruing loans past due 90 days or more	$	86		$	85		$	79		$	87		$	49
Accruing loans past due 30 through 89 days	329			340			312			404			317
Restructured loans — accruing and nonaccruing ^(b)	315			333			302			280			304
Restructured loans included in nonperforming loans ^(b)	187			193			161			141			149
Nonperforming assets from discontinued operations — education lending business	8			5			4			5			5
Nonperforming loans to period-end portfolio loans ^(a)	.60		%	.59		%	.67		%	.73		%	.85		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(a)	.64			.64			.72			.79			.89


(a)	Nonperforming loan balances exclude $783 million, $835 million, $812 million, $865 million, and $959 million, of purchased credit impaired loans at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.

(b)

Restructured loans (i.e., troubled debt restructuring) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.



Summary of Changes in Nonperforming Loans From Continuing Operations
(in millions)
	3Q17			2Q17			1Q17			4Q16			3Q16
Balance at beginning of period	$	507		$	573		$	625		$	723		$	619
Loans placed on nonaccrual status	181			143			218			170			78
Nonperforming loans acquired from First Niagara ^(a)	—			—			—			(31		)	150
Charge-offs	(71		)	(82		)	(77		)	(81		)	(53		)
Loans sold	(1		)	—			(8		)	(9		)	—
Payments	(32		)	(84		)	(59		)	(30		)	(32		)
Transfers to OREO	(10		)	(8		)	(11		)	(21		)	(5		)
Transfers to other nonperforming assets	—			—			—			—			—
Loans returned to accrual status	(57		)	(35		)	(115		)	(96		)	(34		)
Balance at end of period^(b)	$	517		$	507		$	573		$	625		$	723


(a)	During the fourth quarter of 2016, Key adjusted the estimated fair value of the First Niagara acquired loan portfolio recorded during the third quarter of 2016, resulting in a $31 million decrease in the balance of acquired nonperforming loans.


(b)	Nonperforming loan balances exclude $783 million, $835 million, $812 million, $865 million, and $959 million of purchased credit impaired loans at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.

KeyCorp Reports Third Quarter 2017 Profit

October 19, 2017

Page 26



Line of Business Results
(dollars in millions)

																Percent change 3Q17 vs.
	3Q17			2Q17			1Q17			4Q16			3Q16			2Q17		3Q16
Key Community Bank
Summary of operations
Total revenue (TE)	$	959		$	1,010		$	905		$	902		$	783		(5.0	)%	22.5	%
Provision for credit losses	59			47			46			51			39			25.5		51.3
Noninterest expense	643			651			627			682			590			(1.2	)	9.0
Net income (loss) attributable to Key	161			196			146			106			97			(17.9	)	66.0
Average loans and leases	47,595			47,461			47,068			47,059			41,548			.3		14.6
Average deposits	79,563			79,601			79,148			79,266			69,397			—		14.6
Net loan charge-offs	41			47			43			42			31			(12.8	)	32.3
Net loan charge-offs to average total loans	.34		%	.40		%	.37		%	.36		%	.30		%	N/A		N/A
Nonperforming assets at period end	$	427		$	406		$	395		$	412		$	429		5.2		(.5	)
Return on average allocated equity	13.27		%	16.51		%	12.58		%	8.87		%	10.84		%	N/A		N/A
Average full-time equivalent employees	11,032			10,899			10,804			11,198			9,805			1.2		12.5

Key Corporate Bank
Summary of operations
Total revenue (TE)	$	560		$	596		$	578		$	630		$	556		(6.0	)%	.7	%
Provision for credit losses	(11		)	19			18			17			23			(157.9	)	(147.8	)
Noninterest expense	303			299			302			326			310			1.3		(2.3	)
Net income (loss) attributable to Key	190			222			181			224			160			(14.4	)	18.8
Average loans and leases	38,040			37,721			37,705			36,746			34,561			.8		10.1
Average loans held for sale	1,521			1,000			1,097			1,223			1,103			52.1		37.9
Average deposits	21,559			21,145			21,002			23,171			22,708			2.0		(5.1	)
Net loan charge-offs	(9		)	19			14			26			12			(147.4	)	(175.0	)
Net loan charge-offs to average total loans	(.09		)%	.20		%	.15		%	.28		%	.14		%	N/A		N/A
Nonperforming assets at period end	$	106		$	119		$	197		$	244		$	318		(10.9	)	(66.7	)
Return on average allocated equity	26.92		%	31.25		%	24.97		%	31.17		%	26.89		%	N/A		N/A
Average full-time equivalent employees	2,460			2,364			2,384			2,380			2,330			4.1		5.6

TE = Taxable Equivalent, N/A = Not Applicable, N/M = Not Meaningful

KEYCORP /NEW/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 19, 2017

Attached files

KEYCORP /NEW/ Reports