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

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EX-99.3 - KEYCORP /NEW/	a1q18erex993.htm
EX-99.2 - KEYCORP /NEW/	key1q18confcallslidesvf.htm
8-K - 8-K - KEYCORP /NEW/	a1q18er8-k.htm

KEYCORP REPORTS FIRST QUARTER 2018 NET INCOME OF $402 MILLION,

OR $.38 PER COMMON SHARE

First quarter results reflect solid underlying trends in core businesses and ongoing benefits from recent investments

CLEVELAND, April 19, 2018 - KeyCorp (NYSE: KEY) today announced first quarter net income from continuing operations attributable to Key common shareholders of $402 million, or $.38 per common share, compared to $181 million, or $.17 per common share, for the fourth quarter of 2017 and $296 million, or $.27 per common share, for the first quarter of 2017. Key's reported results in the fourth quarter of 2017 included merger-related charges and the estimated impact of tax reform and related actions, resulting in a net impact of $.19 per common share. Key's results in the first quarter of 2017 included merger-related charges, resulting in an impact of $.05 per common share.



Selected Financial Highlights

dollars in millions, except per share data										Change 1Q18 vs.
	1Q18			4Q17			1Q17			4Q17		1Q17
Income (loss) from continuing operations attributable to Key common shareholders	$	402		$	181		$	296		122.1	%	35.8	%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution	.38			.17			.27			123.5		40.7
Return on average tangible common equity from continuing operations ^(a)	14.89		%	6.35		%	10.98		%	N/A		N/A
Return on average total assets from continuing operations	1.25			.57			.99			N/A		N/A
Common Equity Tier 1 ratio ^(b)	10.03			10.16			9.91			N/A		N/A
Book value at period end	$	13.07		$	13.09		$	12.71		(.2	)%	2.8	%
Net interest margin (TE) from continuing operations	3.15		%	3.09		%	3.13		%	N/A		N/A


(a)	The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “Return on average tangible common equity from continuing operations.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.


(b)	3/31/2018 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 2



INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 1Q18 vs.
	1Q18		4Q17		1Q17		4Q17		1Q17
Net interest income (TE)	$	952	$	952	$	929	—		2.5	%
Noninterest income	601		656		577		(8.4	)%	4.2
Total revenue	$	1,553	$	1,608	$	1,506	(3.4	)%	3.1	%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $952 million for the first quarter of 2018, and the net interest margin was 3.15%, compared to taxable-equivalent net interest income of $929 million and a net interest margin of 3.13% for the first quarter of 2017, reflecting the benefit from higher interest rates and low deposit betas. First quarter 2018 net interest income included $33 million of purchase accounting accretion, a decline of $20 million from the first quarter of 2017.

Compared to the fourth quarter of 2017, taxable-equivalent net interest income was stable, and the net interest margin increased by six basis points. Both net interest income and the net interest margin benefited from higher interest rates and Key’s asset sensitive balance sheet position, as well as an expected reduction from elevated liquidity levels in the fourth quarter. These benefits were offset by two fewer days in the first quarter of 2018, a lower taxable-equivalent adjustment resulting from the Tax Cuts and Jobs Act, and a decline in purchase accounting accretion.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $43 million from the first quarter of 2017 and increased $5 million compared to the fourth quarter of 2017.



Noninterest Income

dollars in millions							Change 1Q18 vs.
	1Q18		4Q17		1Q17		4Q17		1Q17
Trust and investment services income	$	133	$	131	$	135	1.5	%	(1.5	)%
Investment banking and debt placement fees	143		200		127		(28.5	)	12.6
Service charges on deposit accounts	89		89		87		—		2.3
Operating lease income and other leasing gains	32		27		23		18.5		39.1
Corporate services income	62		56		54		10.7		14.8
Cards and payments income	62		77		65		(19.5	)	(4.6	)
Corporate-owned life insurance income	32		37		30		(13.5	)	6.7
Consumer mortgage income	7		7		6		—		16.7
Mortgage servicing fees	20		17		18		17.6		11.1
Other income	21		15		32		40.0		(34.4	)
Total noninterest income	$	601	$	656	$	577	(8.4	)%	4.2	%

N/M = Not meaningful

Key’s noninterest income was $601 million for the first quarter of 2018, compared to $577 million for the year-ago quarter. In the first quarter of 2018, Key benefited from investments in several fee-based businesses. The largest driver year-over-year was an increase in investment banking and debt placement fees, related to the Cain Brothers acquisition, as well as strength across the company's capital markets platform. In the first quarter of 2018, commercial mortgage banking and mergers and acquisitions advisory fees contributed to the strong performance. Operating lease income and other leasing gains also contributed to the increase, up $9 million from the year-ago period, driven by higher originations, and corporate services income grew $8 million related to higher loan and derivative trading income. These increases were partially offset by a decline in other income.

Compared to the fourth quarter of 2017, noninterest income decreased by $55 million. The decline was largely due to seasonal impacts in several fee income categories, including investment banking and debt

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 3

placement fees, cards and payments income, and corporate-owned life insurance. Investment banking and debt placement fees declined from record results in the fourth quarter of 2017, though still reported a record first quarter for the business. These declines were partially offset by increases in other income, as well as operating lease income and other leasing gains related to higher originations.



Noninterest Expense

dollars in millions							Change 1Q18 vs.
	1Q18		4Q17		1Q17		4Q17		1Q17
Personnel expense	$	594	$	608	$	556	(2.3	)%	6.8	%
Nonpersonnel expense	412		490		457		(15.9	)	(9.8	)
Total noninterest expense	$	1,006	$	1,098	$	1,013	(8.4	)	(.7	)

Notable items ^(a)	—		85		81		N/M		N/M
Total noninterest expense excluding notable items	$	1,006	$	1,013	$	932	(.7	)%	7.9	%

N/M = Not meaningful

(a)

Notable items for the fourth quarter of 2017 includes $56 million of merger-related charges and $29 million of estimated impacts of tax reform and related actions. Notable items for the first quarter of 2017 includes $81 million of merger-related charges. See the table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement which presents the computations of certain financial measures related to “notable items.”

Key’s noninterest expense was $1 billion for the first quarter of 2018, compared to $932 million, excluding notable items in the year-ago period. The year-over-year increase was primarily related to higher personnel costs, largely due to recent acquisitions, as well as accelerated technology investments and higher performance-based compensation. Higher marketing expense, operating lease expense, and intangible amortization expense drove the increase in nonpersonnel expense, but was partially offset by lower occupancy and other expense.

Noninterest expense decreased $7 million from the fourth quarter of 2017, excluding notable items in the prior period. Personnel expense reflected seasonally high employee benefits expense, as well as the aforementioned accelerated technology investments. These increases were more than offset by lower incentive compensation compared to the prior quarter, as well as lower nonpersonnel expense related to lower business services and professional fees, a seasonal decline in marketing expense, and a continued reduction in net occupancy expense.

BALANCE SHEET HIGHLIGHTS



Average Loans

dollars in millions							Change 1Q18 vs.
	1Q18		4Q17		1Q17		4Q17		1Q17
Commercial and industrial ^(a)	$	42,733	$	41,289	$	40,002	3.5	%	6.8	%
Other commercial loans	20,705		21,040		22,175		(1.6	)	(6.6	)
Home equity loans	11,877		12,128		12,611		(2.1	)	(5.8	)
Other consumer loans	11,612		11,549		11,345		.5		2.4
Total loans	$	86,927	$	86,006	$	86,133	1.1	%	.9	%


(a)	Commercial and industrial average loan balances include $120 million, $119 million, and $114 million of assets from commercial credit cards at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.

Average loans were $86.9 billion for the first quarter of 2018, an increase of $794 million compared to the first quarter of 2017, reflecting broad-based growth in commercial and industrial loans with middle-market clients, as well as strength in auto lending, as the company expands into existing geographies and dealer relationships. In addition, reductions in commercial real estate loans over the past year reflect significantly higher debt placements and paydowns.

Compared to the fourth quarter of 2017, average loans increased by $921 million, largely the result of growth in commercial and industrial loans. Key realized growth across commercial client segments, with commercial and industrial loans up 2% in the Community Bank and 5% in the Corporate Bank, unannualized.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 4



Average Deposits

dollars in millions										Change 1Q18 vs.
	1Q18			4Q17			1Q17			4Q17		1Q17
Non-time deposits	$	90,719		$	92,251		$	91,745		(1.7	)%	(1.1	)%
Certificates of deposit ($100,000 or more)	6,972			6,776			5,627			2.9		23.9
Other time deposits	4,865			4,771			4,706			2.0		3.4
Total deposits	$	102,556		$	103,798		$	102,078		(1.2	)%	.5	%

Cost of total deposits	.36		%	.31		%	.23		%	N/A		N/A

N/A = Not Applicable

Average deposits totaled $102.6 billion for the first quarter of 2018, an increase of $478 million compared to the year-ago quarter. Certificates of deposits and other time deposits increased $1.5 billion, reflecting strength in Key’s retail banking franchise and growth from commercial relationships. Additionally, consumer noninterest-bearing balances grew 10% from the prior year. NOW and money-market deposit accounts declined $792 million, partially driven by a shift to higher-yielding deposit products and the managed exit of certain higher cost corporate and public sector deposits.

Compared to the fourth quarter of 2018, average deposits decreased by $1.2 billion, driven by a decline in noninterest-bearing deposits, which were elevated during the fourth quarter of 2017 due to short-term escrows and seasonal deposit inflows. This decline was partially offset by growth in consumer noninterest-bearing deposits.



ASSET QUALITY

dollars in millions										Change 1Q18 vs.
	1Q18			4Q17			1Q17			4Q17		1Q17
Net loan charge-offs	$	54		$	52		$	58		3.8	%	(6.9	)%
Net loan charge-offs to average total loans	.25		%	.24		%	.27		%	N/A		N/A
Nonperforming loans at period end ^(a)	$	541		$	503		$	573		7.6		(5.6	)
Nonperforming assets at period end ^(a)	569			534			623			6.6		(8.7	)
Allowance for loan and lease losses	881			877			870			.5		1.3
Allowance for loan and lease losses to nonperforming loans ^(a)	162.8		%	174.4		%	151.8		%	N/A		N/A
Provision for credit losses	$	61		$	49		$	63		24.5	%	(3.2	)%


(a)	Nonperforming loan balances exclude $690 million, $738 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.

N/A = Not Applicable

Key’s provision for credit losses was $61 million for the first quarter of 2018, compared to $63 million for the first quarter of 2017 and $49 million for the fourth quarter of 2017. Key’s allowance for loan and lease losses was $881 million, or 1.00% of total period-end loans, at March 31, 2018, compared to 1.01% at March 31, 2017, and 1.01% at December 31, 2017.

Net loan charge-offs for the first quarter of 2018 totaled $54 million, or .25% of average total loans. These results compare to $58 million, or .27%, for the first quarter of 2017, and $52 million, or .24%, for the fourth quarter of 2018.

At March 31, 2018, Key’s nonperforming loans totaled $541 million, which represented .61% of period-end portfolio loans. These results compare to .67% at March 31, 2017, and .58% at December 31, 2017. Nonperforming assets at March 31, 2018, totaled $569 million, and represented .65% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .72% at March 31, 2017, and .62% at December 31, 2017.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 5

CAPITAL

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at March 31, 2018.



Capital Ratios

	3/31/2018		12/31/2017		3/31/2017
Common Equity Tier 1 ^(a)	10.03	%	10.16	%	9.91	%
Tier 1 risk-based capital ^(a)	10.84		11.01		10.74
Total risk based capital ^(a)	12.75		12.92		12.69
Tangible common equity to tangible assets ^(b)	8.22		8.23		8.51
Leverage ^(a)	9.84		9.73		9.81


(a)	3/31/2018 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 in the first quarter. As shown in the preceding table, at March 31, 2018, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.03% and 10.84%, respectively. Key's tangible common equity ratio was 8.22% at March 31, 2018.

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, 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 9.88% at March 31, 2018. 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 1Q18 vs.
		1Q18		4Q17		1Q17		4Q17		1Q17
Shares outstanding at beginning of period		1,069,084		1,079,039		1,079,314		(.9	)%	(.9	)%
Open market repurchases and return of shares under employee compensation plans		(9,399	)	(10,617	)	(8,673	)	(11.5	)	8.4
Shares issued under employee compensation plans (net of cancellations)		5,254		662		6,270		693.7		(16.2	)
Common Shares exchanged for Series A Preferred Stock		—		—		20,568		N/M		N/M
	Shares outstanding at end of period	1,064,939		1,069,084		1,097,479		(.4	)%	(3.0	)%

N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the first quarter of 2018, Key declared a dividend of $.105 per common share, and completed $199 million of common share repurchases during the quarter. These repurchases included $156 million of common share repurchases in the open market and $43 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.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

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Major Business Segments

dollars in millions											Change 1Q18 vs.
		1Q18			4Q17			1Q17			4Q17		1Q17
Revenue from continuing operations (TE)
Key Community Bank		$	973		$	972		$	905		.1	%	7.5	%
Key Corporate Bank		559			605			578			(7.6	)	(3.3	)
Other Segments		22			30			29			(26.7	)	(24.1	)
	Total segments	1,554			1,607			1,512			(3.3	)	2.8
Reconciling Items		(1		)	1			(6		)	N/M		N/M
	Total	$	1,553		$	1,608		$	1,506		(3.4	)%	3.1	%

Income (loss) from continuing operations attributable to Key
Key Community Bank		$	196		$	151		$	147		29.8	%	33.3	%
Key Corporate Bank		207			222			180			(6.8	)	15.0
Other Segments		19			50			21			(62.0	)	(9.5	)
	Total segments	422			423			348			(.2	)	21.3
Reconciling Items ^(a)		(6		)	(228		)	(24		)	N/M		N/M
	Total	$	416		$	195		$	324		113.3	%	28.4	%


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

TE = Taxable Equivalent, N/M = Not Meaningful



Key Community Bank


dollars in millions							Change 1Q18 vs.
	1Q18		4Q17		1Q17		4Q17		1Q17
Summary of operations
Net interest income (TE)	$	688	$	674	$	628	2.1	%	9.6	%
Noninterest income	285		298		277		(4.4	)	2.9
Total revenue (TE)	973		972		905		.1		7.5
Provision for credit losses	48		57		46		(15.8	)	4.3
Noninterest expense	668		677		625		(1.3	)	6.9
Income (loss) before income taxes (TE)	257		238		234		8.0		9.8
Allocated income taxes (benefit) and TE adjustments	61		87		87		(29.9	)	(29.9	)
Net income (loss) attributable to Key	$	196	$	151	$	147	29.8	%	33.3	%

Average balances
Loans and leases	$	47,680	$	47,405	$	47,085	.6	%	1.3	%
Total assets	51,681		51,471		51,063		.4		1.2
Deposits	79,945		80,352		79,148		(.5	)	1.0

Assets under management at period end	$	39,003	$	39,588	$	37,417	(1.5	)%	4.2	%

TE = Taxable Equivalent

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 7



Additional Key Community Bank Data

dollars in millions										Change 1Q18 vs.
	1Q18			4Q17			1Q17			4Q17		1Q17
Noninterest income
Trust and investment services income	$	104		$	98		$	98		6.1	%	6.1	%
Service charges on deposit accounts	76			76			75			—		1.3
Cards and payments income	51			67			55			(23.9	)	(7.3	)
Other noninterest income	54			57			49			(5.3	)	10.2
Total noninterest income	$	285		$	298		$	277		(4.4	)%	2.9	%

Average deposit balances
NOW and money market deposit accounts	$	44,291		$	44,415		$	44,780		(.3	)%	(1.1	)%
Savings deposits	5,056			5,090			5,268			(.7	)	(4.0	)
Certificates of deposit ($100,000 or more)	4,961			4,628			3,879			7.2		27.9
Other time deposits	4,856			4,765			4,692			1.9		3.5
Noninterest-bearing deposits	20,781			21,454			20,529			(3.1	)	1.2
Total deposits	$	79,945		$	80,352		$	79,148		(.5	)%	1.0	%

Home equity loans
Average balance	$	11,763		$	12,005		$	12,456
Combined weighted-average loan-to-value ratio (at date of origination)	70		%	70		%	70		%
Percent first lien positions	60			60			60

Other data
Branches	1,192			1,197			1,216
Automated teller machines	1,569			1,572			1,594

Key Community Bank Summary of Operations (1Q18 vs. 1Q17)


•	Positive operating leverage compared to prior year


•	Net income increased $49 million, or 33.3%, from prior year


•	Average commercial and industrial loans increased $1.1 billion, or 6.1%, from the prior year

Key Community Bank recorded net income attributable to Key of $196 million for the first quarter of 2018, compared to $147 million for the year-ago quarter, benefiting from momentum in Key's core businesses, First Niagara related synergies, and a lower tax rate as a result of tax reform.

Taxable-equivalent net interest income increased by $60 million, or 9.6%, from the first quarter of 2017. The increase was primarily attributable to the benefit from higher interest rates and growth in loans. Average loans and leases increased $595 million, or 1.3%, largely driven by a $1.1 billion, or 6.1%, increase in commercial and industrial loans. Additionally, average deposits increased $797 million, or 1.0%, from one year ago.

Noninterest income increased $8 million, or 2.9%, from the year-ago quarter, driven by higher assets under management from market growth, as well as increases across several fee categories.

The provision for credit losses increased by $2 million, or 4.3%, from the first quarter of 2017. Net loan charge-offs were flat from the first quarter of 2017, as overall credit quality was stable.

Noninterest expense increased $43 million, or 6.9%, from the year-ago quarter. Personnel expense increased $17 million, primarily driven by recent acquisitions and ongoing investments, including residential mortgage and HelloWallet. Nonpersonnel expense increased by $26 million, driven by technology development costs, marketing expenses, higher volume-related expenses, and the impact of recent acquisitions, including HelloWallet and merchant services.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 8



Key Corporate Bank


dollars in millions								Change 1Q18 vs.
	1Q18		4Q17			1Q17		4Q17		1Q17
Summary of operations
Net interest income (TE)	$	272	$	284		$	304	(4.2	)%	(10.5	)%
Noninterest income	287		321			274		(10.6	)	4.7
Total revenue (TE)	559		605			578		(7.6	)	(3.3	)
Provision for credit losses	14		(6		)	18		N/M		(22.2	)
Noninterest expense	314		354			304		(11.3	)	3.3
Income (loss) before income taxes (TE)	231		257			256		(10.1	)	(9.8	)
Allocated income taxes and TE adjustments	24		35			76		(31.4	)	(68.4	)
Net income (loss) attributable to Key	$	207	$	222		$	180	(6.8	)%	15.0	%

Average balances
Loans and leases	$	38,260	$	37,460		$	37,688	2.1	%	1.5	%
Loans held for sale	1,118		1,345			1,097		(16.9	)	1.9
Total assets	45,549		44,504			44,124		2.3		3.2
Deposits	20,815		21,558			21,002		(3.4	)	(.9	)

TE = Taxable Equivalent, N/M = Not Meaningful



Additional Key Corporate Bank Data

dollars in millions								Change 1Q18 vs.
	1Q18		4Q17			1Q17		4Q17		1Q17
Noninterest income
Trust and investment services income	$	29	$	33		$	37	(12.1	)%	(21.6	)%
Investment banking and debt placement fees	141		195			124		(27.7	)	13.7
Operating lease income and other leasing gains	27		25			21		8.0		28.6

Corporate services income	43		40			38		7.5		13.2
Service charges on deposit accounts	13		13			12		—		8.3
Cards and payments income	11		10			9		10.0		22.2
Payments and services income	67		63			59		6.3		13.6

Mortgage servicing fees	17		14			16		21.4		6.3
Other noninterest income	6		(9		)	17		N/M		(64.7	)
Total noninterest income	$	287	$	321		$	274	(10.6	)%	4.7	%

N/M = Not Meaningful

Key Corporate Bank Summary of Operations (1Q18 vs. 1Q17)


•	Commercial and industrial loans up $1.7 billion, or 7.9%, from prior year


•	Investment banking and debt placement fees up $17 million, or 14%, from prior year


•	Net income up $27 million, or 15.0%, from prior year

Key Corporate Bank recorded net income attributable to Key of $207 million for the first quarter of 2018, compared to $180 million for the same period one year ago.

Taxable-equivalent net interest income decreased by $32 million, or 10.5%, compared to the first quarter of 2017, $7 million of which was related to lower purchase accounting accretion, with the remaining due to lower spreads on earning assets. Average loan and lease balances increased $572 million, or 1.5%, from the year-ago quarter, driven by growth in commercial and industrial loans. Average deposit balances decreased $187 million, or .9%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

Noninterest income was up $13 million, or 4.7%, from the prior year. This increase was largely due to higher investment banking and debt placement fees, which were up $17 million, related to the acquisition of Cain Brothers, as well as continued growth in the core Key franchise. Operating lease income and other

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 9

leasing gains increased $6 million due higher originations, and corporate services income increased $5 million, mostly due to higher derivatives revenue. These increases were partially offset by a decline in other noninterest income of $11 million, related to lower gains from certain real estate investments.

During the first quarter of 2018, the provision for credit losses decreased $4 million, or 22.2%, and net loan charge-offs declined $3 million, compared to the first quarter of 2017, related to improving credit quality in the overall portfolio.

Noninterest expense increased by $10 million, or 3.3%, from the first quarter of 2017. The increase from the prior year was largely driven by higher operating lease expense and intangible asset amortization.

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 $19 million for the first quarter of 2018, compared to $21 million for the same period last year.

*****

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 $137.0 billion at March 31, 2018.

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 approximately 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 First Quarter 2018 Profit

April 19, 2018

Page 10



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, 2017, 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 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, April 19, 2018. An audio replay of the call will be available through April 29, 2018.

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 First Quarter 2018 Profit

April 19, 2018

Page 11

KeyCorp

First Quarter 2018

Financial Supplement



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

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April 19, 2018

Page 12



Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			3/31/2018			12/31/2017			3/31/2017
Summary of operations
	Net interest income (TE)		$	952		$	952		$	929
	Noninterest income		601			656			577
		Total revenue (TE)	1,553			1,608			1,506
	Provision for credit losses		61			49			63
	Noninterest expense		1,006			1,098			1,013
	Income (loss) from continuing operations attributable to Key		416			195			324
	Income (loss) from discontinued operations, net of taxes ^(a)		2			1			—
	Net income (loss) attributable to Key		418			196			324

	Income (loss) from continuing operations attributable to Key common shareholders		402			181			296
	Income (loss) from discontinued operations, net of taxes ^(a)		2			1			—
	Net income (loss) attributable to Key common shareholders		404			182			296

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.38		$	.17		$	.28
	Income (loss) from discontinued operations, net of taxes ^(a)		—			—			—
	Net income (loss) attributable to Key common shareholders ^(b)		.38			.17			.28

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.38			.17			.27
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)		—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)		.38			.17			.27

	Cash dividends declared		.105			.105			.085
	Book value at period end		13.07			13.09			12.71
	Tangible book value at period end		10.35			10.35			10.21
	Market price at period end		19.55			20.17			17.78

Performance ratios
	From continuing operations:
	Return on average total assets		1.25		%	.57		%	.99		%
	Return on average common equity		11.76			5.04			8.76
	Return on average tangible common equity ^(c)		14.89			6.35			10.98
	Net interest margin (TE)		3.15			3.09			3.13
	Cash efficiency ratio ^(c)		62.9			66.7			65.8

	From consolidated operations:
	Return on average total assets		1.24		%	.57		%	.98		%
	Return on average common equity		11.82			5.07			8.76
	Return on average tangible common equity ^(c)		14.97			6.39			10.98
	Net interest margin (TE)		3.13			3.07			3.11
	Loan to deposit ^(d)		86.9			84.4			85.6

Capital ratios at period end
	Key shareholders’ equity to assets		10.90		%	10.91		%	11.14		%
	Key common shareholders’ equity to assets		10.16			10.17			10.37
	Tangible common equity to tangible assets ^(c)		8.22			8.23			8.51
	Common Equity Tier 1^(e)		10.03			10.16			9.91
	Tier 1 risk-based capital ^(e)		10.84			11.01			10.74
	Total risk-based capital ^(e)		12.75			12.92			12.69
	Leverage ^(e)		9.84			9.73			9.81

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 13




Financial Highlights (continued)
(dollars in millions)
		Three months ended
		3/31/2018			12/31/2017			3/31/2017
Asset quality — from continuing operations
	Net loan charge-offs	$	54		$	52		$	58
	Net loan charge-offs to average loans	.25		%	.24		%	.27		%
	Allowance for loan and lease losses	$	881		$	877		$	870
	Allowance for credit losses	941			934			918
	Allowance for loan and lease losses to period-end loans	1.00		%	1.01		%	1.01		%
	Allowance for credit losses to period-end loans	1.07			1.08			1.07
	Allowance for loan and lease losses to nonperforming loans ^(f)	162.8			174.4			151.8
	Allowance for credit losses to nonperforming loans ^(f)	173.9			185.7			160.2
	Nonperforming loans at period end ^(f)	$	541		$	503		$	573
	Nonperforming assets at period end ^(f)	569			534			623
	Nonperforming loans to period-end portfolio loans ^(f)	.61		%	.58		%	.67		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(f)	.65			.62			.72

Trust assets
	Assets under management	$	39,003		$	39,588		$	37,417

Other data
	Average full-time equivalent employees	18,540			18,379			18,386
	Branches	1,192			1,197			1,216

Taxable-equivalent adjustment		$	8		$	14		$	11


(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)	March 31, 2018, ratio is estimated.


(f)	Nonperforming loan balances exclude $690 million, $738 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 14

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, including the impact of tax reform and related actions, 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, we no longer recognize merger-related charges beginning in the first quarter of 2018. Prior to that, Key recognized merger-related charges as a result of 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 had recognized merger-related charges. For the first and fourth quarters of 2017, merger-related charges were included in the total for "notable items." The table below shows the computation of earnings per share excluding notable items, pre-provision net revenue excluding notable items, return on average tangible common equity excluding notable items, cash efficiency ratio excluding notable items, and return on average assets from continuing operations 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
	3/31/2018			12/31/2017			3/31/2017
Tangible common equity to tangible assets at period-end
Key shareholders’ equity (GAAP)	$	14,944		$	15,023		$	14,976
Less: Intangible assets ^(a)	2,902			2,928			2,751
Preferred Stock ^(b)	1,009			1,009			1,009
Tangible common equity (non-GAAP)	$	11,033		$	11,086		$	11,216
Total assets (GAAP)	$	137,049		$	137,698		$	134,476
Less: Intangible assets ^(a)	2,902			2,928			2,751
Tangible assets (non-GAAP)	$	134,147		$	134,770		$	131,725
Tangible common equity to tangible assets ratio (non-GAAP)	8.22		%	8.23		%	8.51		%
Earnings per common share (EPS) excluding notable items
EPS from continuing operations attributable to Key common shareholders — assuming dilution	$	.38		$	.17		$	.27
Plus: EPS impact of notable items	—			.19			.05
EPS from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)	$	.38		$	.36		$	.32
Notable items
Merger-related charges	—			$	(56	)	$	(81	)
Estimated impacts of tax reform and related actions	—			(30		)	—
Total notable items	—			$	(86	)	$	(81	)
Income taxes	—			(26		)	(30		)
Reevaluation of certain tax related assets	—			147			—
Total notable items, after tax	—			$	(207	)	$	(51	)

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 15



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			3/31/2018			12/31/2017			3/31/2017
Pre-provision net revenue
	Net interest income (GAAP)		$	944		$	938		$	918
	Plus:	Taxable-equivalent adjustment	8			14			11
		Noninterest income	601			656			577
	Less:	Noninterest expense	1,006			1,098			1,013
		Pre-provision net revenue from continuing operations (non-GAAP)	$	547		$	510		$	493
	Plus:	Notable items	—			86			81
		Pre-provision net revenue from continuing operations excluding notable items (non-GAAP)	$	547		$	596		$	574
Average tangible common equity
	Average Key shareholders’ equity (GAAP)		$	14,889		$	15,268		$	15,184
	Less:	Intangible assets (average) ^(c)	2,916			2,939			2,772
		Preferred Stock (average)	1,025			1,025			1,480
		Average tangible common equity (non-GAAP)	$	10,948		$	11,304		$	10,932
Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	402		$	181		$	296
	Plus:	Notable items, after tax	—			207			51
	Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)		$	402		$	388		$	347
	Average tangible common equity (non-GAAP)		10,948			11,304			10,932

	Return on average tangible common equity from continuing operations (non-GAAP)		14.89		%	6.35		%	10.98		%
	Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)		14.89			13.62			12.87
Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	404		$	182		$	296
	Average tangible common equity (non-GAAP)		10,948			11,304			10,932

	Return on average tangible common equity consolidated (non-GAAP)		14.97		%	6.39		%	10.98		%
Cash efficiency ratio
	Noninterest expense (GAAP)		$	1,006		$	1,098		$	1,013
	Less:	Intangible asset amortization	29			26			22
		Adjusted noninterest expense (non-GAAP)	977			1,072			991
	Less:	Notable items	—			85			81
		Adjusted noninterest expense excluding notable items (non-GAAP)	$	977		$	987		$	910
	Net interest income (GAAP)		$	944		$	938		$	918
	Plus:	Taxable-equivalent adjustment	8			14			11
		Noninterest income	601			656			577
		Total taxable-equivalent revenue (non-GAAP)	1,553			1,608			1,506
	Plus:	Notable items	—			1			—
		Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP)	$	1,553		$	1,609		$	1,506

	Cash efficiency ratio (non-GAAP)		62.9		%	66.7		%	65.8		%
	Cash efficiency ratio excluding notable items (non-GAAP)		62.9			61.3			60.4
Return on average total assets from continuing operations excluding notable items
	Income from continuing operations attributable to Key (GAAP)		$	416		$	195		$	324
	Plus:	Notable items, after tax	—			207			51
		Income from continuing operations attributable to Key excluding notable items, after tax (non-GAAP)	$	416		$	402		$	375

	Average total assets from continuing operations (GAAP)		$	134,915		$	135,255		$	132,741

	Return on average total assets from continuing operations excluding notable items (non-GAAP)		1.25		%	1.18		%	1.15		%

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April 19, 2018

Page 16



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			3/31/2018
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
	Common Equity Tier 1 under current RCR		$	12,165
	Adjustments from current RCR to the fully phased-in RCR:
		Deferred tax assets and other intangible assets ^(d)	(78		)
		Common Equity Tier 1 anticipated under the fully phased-in RCR ^(e)	$	12,087

	Net risk-weighted assets under current RCR		$	121,343
	Adjustments from current RCR to the fully phased-in RCR:
		Mortgage servicing assets ^(f)	700
		Deferred tax assets	318
		All other assets	(77		)
		Total risk-weighted assets anticipated under the fully phased-in RCR ^(e)	$	122,284

	Common Equity Tier 1 ratio under the fully phased-in RCR ^(e)		9.88		%


(a)	For the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, intangible assets exclude $23 million, $26 million, and $38 million, respectively, of period-end purchased credit card receivables.


(b)	Net of capital surplus.


(c)	For the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, average intangible assets exclude $24 million, $28 million, and $40 million, respectively, of average purchased credit card receivables.


(d)	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.


(e)	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.”


(f)	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 First Quarter 2018 Profit

April 19, 2018

Page 17



Consolidated Balance Sheets
(dollars in millions)

			3/31/2018			12/31/2017			3/31/2017
Assets
	Loans		$	88,089		$	86,405		$	86,125
	Loans held for sale		1,667			1,107			1,384
	Securities available for sale		17,888			18,139			18,431
	Held-to-maturity securities		12,189			11,830			10,186
	Trading account assets		769			836			921
	Short-term investments		1,644			4,447			2,525
	Other investments		715			726			689
		Total earning assets	122,961			123,490			120,261
	Allowance for loan and lease losses		(881		)	(877		)	(870		)
	Cash and due from banks		643			671			549
	Premises and equipment		916			930			935
	Operating lease assets		838			821			563
	Goodwill		2,538			2,538			2,427
	Other intangible assets		387			416			362
	Corporate-owned life insurance		4,142			4,132			4,087
	Accrued income and other assets		4,216			4,237			4,642
	Discontinued assets		1,289			1,340			1,520
		Total assets	$	137,049		$	137,698		$	134,476

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	54,606		$	53,627		$	55,095
		Savings deposits	6,321			6,296			6,306
		Certificates of deposit ($100,000 or more)	7,295			6,849			5,859
		Other time deposits	4,928			4,798			4,694
		Total interest-bearing deposits	73,150			71,570			71,954
		Noninterest-bearing deposits	31,601			33,665			32,028
		Total deposits	104,751			105,235			103,982
	Federal funds purchased and securities sold under repurchase agreements		616			377			442
	Bank notes and other short-term borrowings		1,133			634			943
	Accrued expense and other liabilities		1,854			2,094			1,807
	Long-term debt		13,749			14,333			12,324
		Total liabilities	122,103			122,673			119,498

Equity
	Preferred stock		1,025			1,025			1,025
	Common shares		1,257			1,257			1,257
	Capital surplus		6,289			6,335			6,287
	Retained earnings		10,624			10,335			9,584
	Treasury stock, at cost		(3,260		)	(3,150		)	(2,623		)
	Accumulated other comprehensive income (loss)		(991		)	(779		)	(554		)
		Key shareholders’ equity	14,944			15,023			14,976
	Noncontrolling interests		2			2			2
		Total equity	14,946			15,025			14,978
Total liabilities and equity			$	137,049		$	137,698		$	134,476

Common shares outstanding (000)			1,064,939			1,069,084			1,097,479

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 18



Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended
			3/31/2018		12/31/2017		3/31/2017
Interest income
	Loans		$	940	$	924	$	877
	Loans held for sale		12		13		13
	Securities available for sale		95		93		95
	Held-to-maturity securities		69		61		51
	Trading account assets		7		6		7
	Short-term investments		8		12		3
	Other investments		6		5		4
		Total interest income	1,137		1,114		1,050
Interest expense
	Deposits		91		82		58
	Federal funds purchased and securities sold under repurchase agreements		4		—		1
	Bank notes and other short-term borrowings		6		3		5
	Long-term debt		92		91		68
		Total interest expense	193		176		132
Net interest income			944		938		918
Provision for credit losses			61		49		63
Net interest income after provision for credit losses			883		889		855
Noninterest income
	Trust and investment services income		133		131		135
	Investment banking and debt placement fees		143		200		127
	Service charges on deposit accounts		89		89		87
	Operating lease income and other leasing gains		32		27		23
	Corporate services income		62		56		54
	Cards and payments income		62		77		65
	Corporate-owned life insurance income		32		37		30
	Consumer mortgage income		7		7		6
	Mortgage servicing fees		20		17		18
	Other income ^(a)		21		15		32
		Total noninterest income	601		656		577
Noninterest expense
	Personnel		594		608		556
	Net occupancy		78		92		87
	Computer processing		52		54		60
	Business services and professional fees		41		52		46
	Equipment		26		31		27
	Operating lease expense		27		28		19
	Marketing		25		35		21
	FDIC assessment		21		20		20
	Intangible asset amortization		29		26		22
	OREO expense, net		2		3		2
	Other expense		111		149		153
		Total noninterest expense	1,006		1,098		1,013
Income (loss) from continuing operations before income taxes			478		447		419
	Income taxes		62		251		94
Income (loss) from continuing operations			416		196		325
	Income (loss) from discontinued operations, net of taxes		2		1		—
Net income (loss)			418		197		325
	Less: Net income (loss) attributable to noncontrolling interests		—		1		1
Net income (loss) attributable to Key			$	418	$	196	$	324

Income (loss) from continuing operations attributable to Key common shareholders			$	402	$	181	$	296
Net income (loss) attributable to Key common shareholders			404		182		296
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.38	$	.17	$	.28
Income (loss) from discontinued operations, net of taxes			—		—		—
Net income (loss) attributable to Key common shareholders ^(b)			.38		.17		.28
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.38	$	.17	$	.27
Income (loss) from discontinued operations, net of taxes			—		—		—
Net income (loss) attributable to Key common shareholders ^(b)			.38		.17		.27

Cash dividends declared per common share			$	.105	$	.105	$	.085

Weighted-average common shares outstanding (000)			1,056,037		1,062,348		1,068,609
	Effect of common share options and other stock awards		15,749		16,982		17,931
Weighted-average common shares and potential common shares outstanding (000) ^(c)			1,071,786		1,079,330		1,086,540


(a)	For the three months ended March 31, 2018, and December 31, 2017, net securities gains (losses) totaled less than $1 million. For the three months ended March 31, 2017, net securities gains totaled $1 million. For the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, 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, as applicable.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 19



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

		First Quarter 2018							Fourth Quarter 2017							First Quarter 2017
		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)	$	42,733		$	434	4.11	%	$	41,289		$	417	4.01	%	$	40,002		$	373	3.77	%
	Real estate — commercial mortgage	14,085			165		4.76		14,386			167		4.60		15,187			164		4.39
	Real estate — construction	1,957			22		4.64		1,967			23		4.55		2,353			26		4.54
	Commercial lease financing	4,663			41		3.53		4,687			45		3.86		4,635			44		3.76
	Total commercial loans	63,438			662		4.23		62,329			652		4.15		62,177			607		3.95
	Real estate — residential mortgage	5,479			54		3.95		5,474			54		3.95		5,520			54		3.94
	Home equity loans	11,877			134		4.56		12,128			134		4.39		12,611			131		4.22
	Consumer direct loans	1,766			33		7.53		1,782			32		7.15		1,762			30		6.97
	Credit cards	1,080			30		11.32		1,061			30		11.14		1,067			29		11.06
	Consumer indirect loans	3,287			35		4.29		3,232			36		4.42		2,996			37		4.91
	Total consumer loans	23,489			286		4.91		23,677			286		4.80		23,956			281		4.75
	Total loans	86,927			948		4.41		86,006			938		4.33		86,133			888		4.17
	Loans held for sale	1,187			12		4.10		1,420			13		3.81		1,188			13		4.28
	Securities available for sale ^{(b), (e)}	17,889			95		2.06		18,447			93		1.97		19,181			95		1.95
	Held-to-maturity securities ^(b)	12,041			69		2.30		11,121			61		2.20		9,988			51		2.04
	Trading account assets	907			7		2.99		898			6		2.72		968			7		2.75
	Short-term investments	2,048			8		1.51		3,684			12		1.29		1,610			3		.79
	Other investments ^(e)	723			6		2.96		725			5		2.80		709			4		2.26
	Total earning assets	121,722			1,145		3.78		122,301			1,128		3.66		119,777			1,061		3.57
	Allowance for loan and lease losses	(875		)					(871		)					(855		)
	Accrued income and other assets	14,068							13,825							13,819
	Discontinued assets	1,304							1,358							1,540
	Total assets	$	136,219						$	136,613						$	134,281
Liabilities
	NOW and money market deposit accounts	$	53,503		46		.34		$	53,601		40		.29		$	54,295		32		.24
	Savings deposits	6,232			5		.29		6,372			3		.24		6,351			1		.10
	Certificates of deposit ($100,000 or more)	6,972			27		1.58		6,776			26		1.50		5,627			16		1.16
	Other time deposits	4,865			13		1.12		4,771			13		1.05		4,706			9		.76
	Total interest-bearing deposits	71,572			91		.51		71,520			82		.45		70,979			58		.33
	Federal funds purchased and securities sold under repurchase agreements	1,421			4		1.11		360			—		.08		795			1		.32
	Bank notes and other short-term borrowings	1,342			6		1.87		693			3		1.72		1,802			5		1.06
	Long-term debt ^{(f), (g)}	12,465			92		2.95		13,140			91		2.76		10,833			68		2.54
	Total interest-bearing liabilities	86,800			193		.90		85,713			176		.81		84,409			132		.63
	Noninterest-bearing deposits	30,984							32,278							31,099
	Accrued expense and other liabilities	2,241							1,994							2,048
	Discontinued liabilities ^(g)	1,304							1,359							1,540
	Total liabilities	121,329							121,344							119,096
Equity
	Key shareholders’ equity	14,889							15,268							15,184
	Noncontrolling interests	1							1							1
	Total equity	14,890							15,269							15,185
	Total liabilities and equity	$	136,219						$	136,613						$	134,281
Interest rate spread (TE)							2.88	%						2.85	%						2.94	%
Net interest income (TE) and net interest margin (TE)					952		3.15	%				952		3.09	%				929		3.13	%
TE adjustment ^(b)					8							14							11
	Net interest income, GAAP basis				$	944						$	938						$	918


(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 in effect for that period.


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


(d)	Commercial and industrial average balances include $120 million, $119 million, and $114 million of assets from commercial credit cards for the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, 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 First Quarter 2018 Profit

April 19, 2018

Page 20




Noninterest Expense
(dollars in millions)

	Three months ended
	3/31/2018		12/31/2017		3/31/2017
Personnel ^(a)	$	594	$	608	$	556
Net occupancy	78		92		87
Computer processing	52		54		60
Business services and professional fees	41		52		46
Equipment	26		31		27
Operating lease expense	27		28		19
Marketing	25		35		21
FDIC assessment	21		20		20
Intangible asset amortization	29		26		22
OREO expense, net	2		3		2
Other expense	111		149		153
Total noninterest expense	$	1,006	$	1,098	$	1,013
Notable items ^(b)	—		85		81
Total noninterest expense excluding notable items	$	1,006	$	1,013	$	932
Average full-time equivalent employees ^(c)	18,540		18,379		18,386


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

(b)


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



Personnel Expense
(in millions)

	Three months ended
	3/31/2018		12/31/2017		3/31/2017
Salaries and contract labor	$	339	$	346	$	324
Incentive and stock-based compensation	145		168		127
Employee benefits	105		90		96
Severance	5		4		9
Total personnel expense	$	594	$	608	$	556
Notable items ^(a)	—		42		30
Total personnel expense excluding notable items	$	594	$	566	$	526


(a)	Notable items for the fourth quarter of 2017 includes $26 million of merger-related charges and $16 million of estimated impacts of tax reform related actions. Notable items for the first quarter of 2017 includes $30 million of merger-related charges.



Merger-Related Charges
(in millions)

	Three months ended
	3/31/2018	12/31/2017		3/31/2017
Personnel	—	$	26	$	30
Net occupancy	—	12		5
Business services and professional fees	—	3		5
Computer processing	—	1		5
Marketing	—	5		6
Other nonpersonnel expense	—	9		30
Total merger-related charges	—	$	56	$	81

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 21



Loan Composition
(dollars in millions)

							Percent change 3/31/2018 vs.
	3/31/2018		12/31/2017		3/31/2017		12/31/2017		3/31/2017
Commercial and industrial ^(a)	$	44,313	$	41,859	$	40,112	5.9	%	10.5	%
Commercial real estate:
Commercial mortgage	13,997		14,088		15,260		(.6	)	(8.3	)
Construction	1,871		1,960		2,270		(4.5	)	(17.6	)
Total commercial real estate loans	15,868		16,048		17,530		(1.1	)	(9.5	)
Commercial lease financing ^(b)	4,598		4,826		4,665		(4.7	)	(1.4	)
Total commercial loans	64,779		62,733		62,307		3.3		4.0
Residential — prime loans:
Real estate — residential mortgage	5,473		5,483		5,507		(.2	)	(.6	)
Home equity loans	11,720		12,028		12,541		(2.6	)	(6.5	)
Total residential — prime loans	17,193		17,511		18,048		(1.8	)	(4.7	)
Consumer direct loans	1,758		1,794		1,735		(2.0	)	1.3
Credit cards	1,068		1,106		1,037		(3.4	)	3.0
Consumer indirect loans	3,291		3,261		2,998		.9		9.8
Total consumer loans	23,310		23,672		23,818		(1.5	)	(2.1	)
Total loans^(c)	$	88,089	$	86,405	$	86,125	1.9	%	2.3	%


(a)	Loan balances include $121 million, $119 million, and $114 million of commercial credit card balances at March 31, 2018, December 31, 2017, and March 31, 2017, respectively.


(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $16 million, $24 million, and $55 million at March 31, 2018, December 31, 2017, and March 31, 2017, respectively. Principal reductions are based on the cash payments received from these related receivables.


(c)	Total loans exclude loans of $1.3 billion at March 31, 2018, $1.3 billion at December 31, 2017, and $1.5 billion at March 31, 2017, related to the discontinued operations of the education lending business.



Loans Held for Sale Composition
(dollars in millions)

							Percent change 3/31/2018 vs.
	3/31/2018		12/31/2017		3/31/2017		12/31/2017		3/31/2017
Commercial and industrial	$	194	$	139	$	171	39.6	%	13.5	%
Real estate — commercial mortgage	1,426		897		1,150		59.0		24.0
Commercial lease financing	—		—		1		N/M		N/M
Real estate — residential mortgage	47		71		62		(33.8	)	(24.2	)
Total loans held for sale ^(a)	$	1,667	$	1,107	$	1,384	50.6	%	20.4	%


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $47 million at March 31, 2018, $71 million at December 31, 2017, and $62 million at March 31, 2017.

N/M = Not Meaningful



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

	1Q18			4Q17			3Q17			2Q17			1Q17
Balance at beginning of period	$	1,107		$	1,341		$	1,743		$	1,384		$	1,104
New originations	3,280			3,566			2,855			2,876			2,563
Transfers from (to) held to maturity, net	(14		)	(10		)	(63		)	(7		)	17
Loan sales	(2,705		)	(3,783		)	(3,191		)	(2,507		)	(2,299		)
Loan draws (payments), net	(1		)	(7		)	(3		)	(3		)	(1		)
Balance at end of period ^(a)	$	1,667		$	1,107		$	1,341		$	1,743		$	1,384


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $47 million at March 31, 2018, $71 million at December 31, 2017, $60 million at September 30, 2017, $63 million at June 30, 2017, and $62 million at March 31, 2017.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 22



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

	Three months ended
	3/31/2018			12/31/2017			3/31/2017
Average loans outstanding	$	86,927		$	86,006		$	86,133
Allowance for loan and lease losses at beginning of period	$	877		$	880		$	858
Loans charged off:
Commercial and industrial	37			32			32

Real estate — commercial mortgage	1			2			—
Real estate — construction	—			—			—
Total commercial real estate loans	1			2			—
Commercial lease financing	1			5			7
Total commercial loans	39			39			39
Real estate — residential mortgage	1			1			(2		)
Home equity loans	4			7			8
Consumer direct loans	8			8			10
Credit cards	12			10			11
Consumer indirect loans	8			7			11
Total consumer loans	33			33			38
Total loans charged off	72			72			77
Recoveries:
Commercial and industrial	6			8			5

Real estate — commercial mortgage	—			1			—
Real estate — construction	1			—			1
Total commercial real estate loans	1			1			1
Commercial lease financing	1			1			2
Total commercial loans	8			10			8
Real estate — residential mortgage	—			—			2
Home equity loans	3			3			3
Consumer direct loans	2			2			1
Credit cards	1			1			1
Consumer indirect loans	4			4			4
Total consumer loans	10			10			11
Total recoveries	18			20			19
Net loan charge-offs	(54		)	(52		)	(58		)
Provision (credit) for loan and lease losses	58			49			70
Foreign currency translation adjustment	—			—			—
Allowance for loan and lease losses at end of period	$	881		$	877		$	870

Liability for credit losses on lending-related commitments at beginning of period	$	57		$	57		$	55
Provision (credit) for losses on lending-related commitments	3			—			(7		)
Liability for credit losses on lending-related commitments at end of period ^(a)	$	60		$	57		$	48

Total allowance for credit losses at end of period	$	941		$	934		$	918

Net loan charge-offs to average total loans	.25		%	.24		%	.27		%
Allowance for loan and lease losses to period-end loans	1.00			1.01			1.01
Allowance for credit losses to period-end loans	1.07			1.08			1.07
Allowance for loan and lease losses to nonperforming loans	162.8			174.4			151.8
Allowance for credit losses to nonperforming loans	173.9			185.7			160.2

Discontinued operations — education lending business:
Loans charged off	$	4		$	6		$	6
Recoveries	2			2			2
Net loan charge-offs	$	(2	)	$	(4	)	$	(4	)


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

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 23



Asset Quality Statistics From Continuing Operations
(dollars in millions)
	1Q18			4Q17			3Q17			2Q17			1Q17
Net loan charge-offs	$	54		$	52		$	32		$	66		$	58
Net loan charge-offs to average total loans	.25		%	.24		%	.15		%	.31		%	.27		%
Allowance for loan and lease losses	$	881		$	877		$	880		$	870		$	870
Allowance for credit losses ^(a)	941			934			937			918			918
Allowance for loan and lease losses to period-end loans	1.00		%	1.01		%	1.02		%	1.01		%	1.01		%
Allowance for credit losses to period-end loans	1.07			1.08			1.08			1.06			1.07
Allowance for loan and lease losses to nonperforming loans ^(b)	162.8			174.4			170.2			171.6			151.8
Allowance for credit losses to nonperforming loans ^(b)	173.9			185.7			181.2			181.1			160.2
Nonperforming loans at period end ^(b)	$	541		$	503		$	517		$	507		$	573
Nonperforming assets at period end ^(b)	569			534			556			556			623
Nonperforming loans to period-end portfolio loans ^(b)	.61		%	.58		%	.60		%	.59		%	.67		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(b)	.65			.62			.64			.64			.72


(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 $690 million, $738 million, $783 million, $835 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017, respectively.



Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	3/31/2018			12/31/2017			9/30/2017			6/30/2017			3/31/2017
Commercial and industrial	$	189		$	153		$	169		$	178		$	258

Real estate — commercial mortgage	33			30			30			34			32
Real estate — construction	2			2			2			4			2
Total commercial real estate loans	35			32			32			38			34
Commercial lease financing	5			6			11			11			5
Total commercial loans	229			191			212			227			297
Real estate — residential mortgage	59			58			57			58			54
Home equity loans	229			229			227			208			207
Consumer direct loans	4			4			3			2			3
Credit cards	2			2			2			2			3
Consumer indirect loans	18			19			16			10			9
Total consumer loans	312			312			305			280			276
Total nonperforming loans ^(a)	541			503			517			507			573
OREO	28			31			39			48			49
Other nonperforming assets	—			—			—			1			1
Total nonperforming assets ^(a)	$	569		$	534		$	556		$	556		$	623
Accruing loans past due 90 days or more	$	82		$	89		$	86		$	85		$	79
Accruing loans past due 30 through 89 days	305			359			329			340			312
Restructured loans — accruing and nonaccruing ^(b)	317			317			315			333			302
Restructured loans included in nonperforming loans ^(b)	179			189			187			193			161
Nonperforming assets from discontinued operations — education lending business	6			7			8			5			4
Nonperforming loans to period-end portfolio loans ^(a)	.61		%	.58		%	.60		%	.59		%	.67		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(a)	.65			.62			.64			.64			.72


(a)	Nonperforming loan balances exclude $690 million, $738 million, $783 million, $835 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017, 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)
	1Q18			4Q17			3Q17			2Q17			1Q17
Balance at beginning of period	$	503		$	517		$	507		$	573		$	625
Loans placed on nonaccrual status	182			137			181			143			218
Charge-offs	(70		)	(67		)	(71		)	(82		)	(77		)
Loans sold	—			—			(1		)	—			(8		)
Payments	(29		)	(52		)	(32		)	(84		)	(59		)
Transfers to OREO	(4		)	(8		)	(10		)	(8		)	(11		)
Loans returned to accrual status	(41		)	(24		)	(57		)	(35		)	(115		)
Balance at end of period^(a)	$	541		$	503		$	517		$	507		$	573


(a)	Nonperforming loan balances exclude $690 million, $738 million, $783 million, $835 million, and $812 million of purchased credit impaired loans at March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017, respectively.

KeyCorp Reports First Quarter 2018 Profit

April 19, 2018

Page 24



Line of Business Results
(dollars in millions)

																Percent change 1Q18 vs.
	1Q18			4Q17			3Q17			2Q17			1Q17			4Q17		1Q17
Key Community Bank
Summary of operations
Total revenue (TE)	$	973		$	972		$	961		$	1,012		$	905		.1	%	7.5	%
Provision for credit losses	48			57			59			47			46			(15.8	)	4.3
Noninterest expense	668			677			641			654			625			(1.3	)	6.9
Net income (loss) attributable to Key	196			151			164			195			147			29.8		33.3
Average loans and leases	47,680			47,405			47,611			47,477			47,085			.6		1.3
Average deposits	79,945			80,352			79,563			79,601			79,148			(.5	)	1.0
Net loan charge-offs	42			35			41			47			43			20.0		(2.3	)
Net loan charge-offs to average total loans	.36		%	.29		%	.34		%	.40		%	.37		%	N/A		N/A
Nonperforming assets at period end	$	425		$	405		$	427		$	406		$	395		4.9		7.6
Return on average allocated equity	16.48		%	12.35		%	13.44		%	16.30		%	12.56		%	N/A		N/A
Average full-time equivalent employees	10,988			10,957			11,032			10,899			10,804			.3		1.7

Key Corporate Bank
Summary of operations
Total revenue (TE)	$	559		$	605		$	561		$	597		$	578		(7.6	)%	(3.3	)%
Provision for credit losses	14			(6		)	(11		)	19			18			N/M		(22.2	)
Noninterest expense	314			354			304			297			304			(11.3	)	3.3
Net income (loss) attributable to Key	207			222			189			224			180			(6.8	)	15.0
Average loans and leases	38,260			37,460			38,024			37,704			37,688			2.1		1.5
Average loans held for sale	1,118			1,345			1,521			1,000			1,097			(16.9	)	1.9
Average deposits	20,815			21,558			21,559			21,145			21,002			(3.4	)	(.9	)
Net loan charge-offs	11			16			(9		)	19			14			(31.3	)	(21.4	)
Net loan charge-offs to average total loans	.12		%	.17		%	(.09		)%	.20		%	.15		%	N/A		N/A
Nonperforming assets at period end	$	127		$	109		$	106		$	119		$	197		16.5		(35.5	)
Return on average allocated equity	29.46		%	31.33		%	26.90		%	31.66		%	24.94		%	N/A		N/A
Average full-time equivalent employees	2,543			2,418			2,460			2,364			2,384			5.2		6.7

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

KEYCORP /NEW/ - FORM 8-K - EX-99.1 - April 19, 2018

Attached files

KEYCORP /NEW/ Reports