KeyCorp Reports Fourth Quarter 2017 Net Income Of $181 Million, Or $.17 Per Common Share

Earnings per common share of $.36, excluding $.19 per common share from notable items: merger-related charges and the estimated impact of tax reform and related actions

News provided by

KeyCorp

Jan 18, 2018, 06:30 ET

CLEVELAND, Jan. 18, 2018 /PRNewswire/ --

	Earnings Per Share	Cash Efficiency^(a)	Return on Tangible Common Equity^(a)

Reported	$.17	66.7%	6.4%

Adjusted (Non-GAAP)^(b)	$.36	61.3%	13.6%


(a)	Non-GAAP measure; see financial supplement for reconciliation
(b)	Excludes notable items; see financial supplement for detail

KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $181 million, or $.17 per common share, compared to $349 million or $.32 per common share, for the third quarter of 2017 and $213 million, or $.20 per common share, for the fourth quarter of 2016. During the fourth quarter of 2017, Key's results included a number of notable items resulting in a net impact of $.19 per common share, including merger-related charges and the estimated impact of tax reform and related actions. Notable items had a net impact of $.03 per common share in the third quarter of 2017 and $.11 per common share in the fourth quarter of 2016. Excluding notable items, earnings per common share were $.36 for the fourth quarter of 2017, compared to $.35 for the third quarter of 2017 and $.31 for the fourth quarter of 2016.

For the year ended December 31, 2017, net income from continuing operations attributable to Key common shareholders was $1.2 billion, or $1.12 per common share, compared to $753 million, or $.80 per common share, for the same period one year ago.

"Key's fourth quarter results were a solid finish to the year, with continued momentum in our core businesses. Revenue trends benefited from growth in our fee-based businesses, with investment banking and debt placement fees reaching new record levels for the fourth quarter and full year. Expenses this quarter reflect the strength of our capital markets business, along with a number of notable items, including merger-related charges and the impact from recent tax reform. We expect the new tax law will benefit both Key and our clients, by strengthening the competitive position of U.S businesses and promoting stronger economic growth.

Our full-year results reflected growth in both our Community Bank and Corporate Bank, as well as the successful integration of our First Niagara acquisition. Key's return on average tangible common equity, excluding notable items, was 13.1%, and we generated positive operating leverage for the fifth consecutive year. We have also benefited from recent investments, including the acquisition of the investment banking firm Cain Brothers, which closed early in the fourth quarter.

Our capital position remains strong, which allowed us to complete the second increase in our common share dividend this year, along with the repurchase of $199 million in common shares during the quarter. We believe that we are well-positioned to return higher levels of capital to our shareholders."

- Beth Mooney, Chairman and CEO

Estimated Impact of Tax Reform and Related Actions

As a result of the recent passage of the Tax Cuts and Jobs Act on December 22, 2017, Key took a number of actions, including the revaluation of deferred tax assets and liabilities, as well as certain tax-advantaged assets. This revaluation resulted in an estimated tax expense of $147 million recognized in the fourth quarter of 2017. Noninterest expense increased by $29 million in the quarter related to the impairment of certain tax-advantaged assets and an additional contribution to employee retirement accounts. The total impact of tax reform and related actions was $.16 per common share in the fourth quarter of 2017. The changes resulting from recent tax legislation are reasonable estimates as of December 31, 2017, and may be refined in future periods.

Beginning January 1, 2018, the new tax law will lower Key's marginal federal corporate income tax rate from 35% to 21%. Key's effective tax rate will also continue to benefit from the company's investments in certain tax-advantaged assets. Key will be sharing the expected tax benefits with its employees by increasing its minimum wage and making the additional retirement plan contribution referenced above. These actions will benefit over 80% of our workforce and allow us to reward and invest in the financial wellness of our employees.

Selected Financial Highlights

dollars in millions, except per share data							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Income (loss) from continuing operations attributable to Key common shareholders	$	181	$	349	$	213	(48.1)%	(15.0)%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution	.17		.32		.20		(46.9)	(15.0)
Return on average total assets from continuing operations	.57%		1.07%		.69%		N/A	N/A
Common Equity Tier 1 ratio ^(a)	10.08		10.26		9.54		N/A	N/A
Book value at period end	$	13.09	$	13.18	$	12.58	(.7)%	4.1%
Net interest margin (TE) from continuing operations	3.09%		3.15%		3.12%		N/A	N/A


(a) 12/31/2017 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable

INCOME STATEMENT HIGHLIGHTS

Revenue

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Net interest income (TE)	$	952	$	962	$	948	(1.0)%	.4%
Noninterest income	656		592		618		10.8	6.1
Total revenue	$	1,608	$	1,554	$	1,566	3.5%	2.7%

TE = Taxable Equivalent

Taxable-equivalent net interest income was $952 million for the fourth quarter of 2017, and the net interest margin was 3.09%, compared to taxable-equivalent net interest income of $948 million and a net interest margin of 3.12% for the fourth quarter of 2016, reflecting the benefit from higher interest rates and low deposit betas, partly offset by a shift in funding mix into certificates of deposit. Fourth quarter 2017 net interest income included $38 million of purchase accounting accretion related to the acquisition of First Niagara, a decline of $54 million from the fourth quarter of 2016, which included $34 million related to the refinement of third quarter 2016 purchase accounting estimates.

Compared to the third quarter of 2017, taxable-equivalent net interest income declined by $10 million, and the net interest margin decreased by six basis points. The decrease in net interest income and the net interest margin reflects a decline in purchase accounting accretion of $10 million. Additionally, higher interest rates and relatively low deposit betas partially offset a decline in average loan balances, resulting from paydowns and clients continuing to take advantage of attractive capital markets alternatives in the fourth quarter of 2017.

Excluding purchase accounting accretion, taxable-equivalent net interest income increased $58 million from the fourth quarter of 2016 and was stable compared to the third quarter of 2017.

Noninterest Income

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Trust and investment services income	$	131	$	135	$	123	(3.0)%	6.5%
Investment banking and debt placement fees	200		141		157		41.8	27.4
Service charges on deposit accounts	89		91		84		(2.2)	6.0
Operating lease income and other leasing gains	27		16		21		68.8	28.6
Corporate services income	56		54		61		3.7	(8.2)
Cards and payments income	77		75		69		2.7	11.6
Corporate-owned life insurance income	37		31		40		19.4	(7.5)
Consumer mortgage income	7		7		6		—	16.7
Mortgage servicing fees	17		21		20		(19.0)	(15.0)
Net gains (losses) from principal investing	3		3		4		—	(25.0)
Other income	12		18		33		(33.3)	(63.6)
Total noninterest income	$	656	$	592	$	618	10.8%	6.1%

Key's noninterest income was $656 million for the fourth quarter of 2017, compared to $618 million for the year-ago quarter. Growth was largely driven by another record quarter of investment banking and debt placement fees, up $43 million from the year-ago period, related to the recent acquisition of Cain Brothers, as well as ongoing growth in the core Key franchise, including strength in commercial mortgage banking. Momentum continued in many fee-based businesses, as cards and payments income and trust and investment services income each grew $8 million from the year-ago period, as a result of higher credit card and merchant fees and strength in the equity markets, respectively. These increases were partially offset by a decline in other income, including $7 million of impairments of certain tax-advantaged assets, which were offset by a reduction of related income tax expense.

Compared to the third quarter of 2017, noninterest income increased by $64 million. The increase is largely driven by broad-based growth in investment banking and debt placement fees, which grew $59 million from the prior quarter. Operating lease income and other leasing gains increased $11 million, related to lease residual losses in the prior quarter. Slightly offsetting these increases was a decline in other income.

Noninterest Expense

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Personnel expense	$	608	$	558	$	648	9.0%	(6.2)%
Non-personnel expense	490		434		572		12.9	(14.3)
Total noninterest expense	$	1,098	$	992	$	1,220	10.7	(10.0)

Notable items ^(a)	85		36		207		136.1	(58.9)
Total noninterest expense excluding notable items	$	1,013	$	956	$	1,013	6.0%	—

(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. For the third quarter of 2017 and fourth quarter of 2016, notable items includes $36 million and $207 million of merger-related charges, respectively. 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 $1.098 billion for the fourth quarter of 2017, and included a number of notable items, including merger-related charges and the estimated impact of tax reform and related actions. Merger-related charges included $26 million of personnel expense and $30 million of non-personnel expense, mostly reflected in net occupancy, marketing and other expense. The fourth quarter of 2017 was the last quarter that merger charges related to the First Niagara acquisition will be reported. The estimated impact of tax reform and other related actions had an impact of $29 million on expenses in the fourth quarter of 2017, including the impairment of certain tax-advantaged assets, as well as a one-time additional contribution to employee retirement accounts.

Excluding notable items, noninterest expense was unchanged from the year-ago period. Expenses related to acquisitions and investments, including Cain Brothers, as well as higher operating lease expense were offset by the realization of First Niagara cost savings.

Excluding notable items, noninterest expense increased $57 million from the third quarter of 2017. The increase in personnel expense was largely the result of the acquisition of Cain Brothers early in the fourth quarter, which added $36 million of noninterest expense, as well as increased incentive compensation related to a strong capital markets performance. The increase in nonpersonnel expense was primarily related to higher other expense, as well as increases in net occupancy and operating lease expense.

BALANCE SHEET HIGHLIGHTS

Average Loans

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Commercial and industrial ^(a)	$	41,289	$	41,416	$	39,495	(.3)%	4.5%
Other commercial loans	21,040		21,598		21,617		(2.6)	(2.7)
Home equity loans	12,128		12,314		12,812		(1.5)	(5.3)
Other consumer loans	11,549		11,486		11,436		.5	1.0
Total loans	$	86,006	$	86,814	$	85,360	(.9)%	.8%

(a)	Commercial and industrial average loan balances include $119 million, $117 million, and $119 million of assets from commercial credit cards at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.

Average loans were $86.0 billion for the fourth quarter of 2017, an increase of $646 million compared to the fourth quarter of 2016, reflecting growth in commercial and industrial loans and indirect auto lending.

Compared to the third quarter of 2017, average loans decreased by $808 million. Reductions in commercial real estate loans reflected significantly higher debt placements and paydowns throughout the quarter. Additionally, commercial loan balances declined due to lower line utilization in the fourth quarter of 2017. On a period-end basis, commercial and industrial loans increased $712 million, with growth very late in the quarter, therefore having a limited impact on average balances for the quarter.

At December 31, 2017, the remaining fair value discount on the First Niagara acquired loan portfolio was $266 million, compared to $302 million at September 30, 2017.

Average Deposits

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Non-time deposits	$	92,251	$	92,039	$	94,414	.2%	(2.3)%
Certificates of deposit ($100,000 or more)	6,776		6,402		5,428		5.8	24.8
Other time deposits	4,771		4,664		4,849		2.3	(1.6)
Total deposits	$	103,798	$	103,105	$	104,691	.7%	(.9)%

Cost of total deposits	.31%		.28%		.22%		N/A	N/A

N/A = Not Applicable

Average deposits totaled $103.8 billion for the fourth quarter of 2017, a decrease of $893 million compared to the year-ago quarter. NOW and money-market deposit accounts declined $1.8 billion, largely the result of lower escrow deposits and higher short-term commercial deposits in the fourth quarter of 2016. Certificates of deposits increased $1.3 billion, reflecting strength in Key's retail banking franchise and core growth from commercial clients.

Compared to the third quarter of 2017, average deposits increased by $693 million. Noninterest-bearing deposits increased by $762 million from seasonal deposit inflows, and certificates of deposits and other time deposits increased $481 million, reflecting growth in core retail deposits. This growth was partly offset by declines in NOW and money market deposit accounts and savings deposits.

ASSET QUALITY

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Net loan charge-offs	$	52	$	32	$	72	62.5%	(27.8)%
Net loan charge-offs to average total loans	.24%		.15%		.34%		N/A	N/A
Nonperforming loans at period end ^(a)	$	503	$	517	$	625	(2.7)	(19.5)
Nonperforming assets at period end ^(a)	534		556		676		(4.0)	(21.0)
Allowance for loan and lease losses	877		880		858		(0.3)	2.2
Allowance for loan and lease losses to nonperforming loans ^(a)	174.4%		170.2%		137.3%		N/A	N/A
Provision for credit losses	$	49	$	51	$	66	(3.9)%	(25.8)%

(a)	Nonperforming loan balances exclude $738 million, $783 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.

N/A = Not Applicable

Key's provision for credit losses was $49 million for the fourth quarter of 2017, compared to $66 million for the fourth quarter of 2016 and $51 million for the third quarter of 2017. Key's allowance for loan and lease losses was $877 million, or 1.01% of total period-end loans, at December 31, 2017, compared to 1.00% at December 31, 2016, and 1.02% at September 30, 2017.

Net loan charge-offs for the fourth quarter of 2017 totaled $52 million, or .24% of average total loans. These results compare to $72 million, or .34%, for the fourth quarter of 2016, and $32 million, or .15%, for the third quarter of 2017.

At December 31, 2017, Key's nonperforming loans totaled $503 million, which represented .58% of period-end portfolio loans. These results compare to .73% at December 31, 2016, and .60% at September 30, 2017. Nonperforming assets at December 31, 2017, totaled $534 million, and represented .62% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .79% at December 31, 2016, and .64% at September 30, 2017.

CAPITAL

Key's estimated risk-based capital ratios included in the following table continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2017.

Capital Ratios

	12/31/2017	9/30/2017	12/31/2016
Common Equity Tier 1 ^(a)	10.08%	10.26%	9.54%
Tier 1 risk-based capital ^(a)	10.93	11.11	10.89
Total risk based capital ^(a)	12.84	13.09	12.85
Tangible common equity to tangible assets ^(b)	8.23	8.49	8.09
Leverage ^(a)	9.64	9.83	9.90

(a)	12/31/2017 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 in the fourth quarter. As shown in the preceding table, at December 31, 2017, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.08% and 10.93%, respectively. The decline in Key's capital ratios in the fourth quarter of 2017 was largely due to the estimated impact of recent tax reform. This does not change Key's previously announced capital actions. Key's tangible common equity ratio was 8.23% at December 31, 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, 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 9.97% at December 31, 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 4Q17 vs.
	4Q17	3Q17	4Q16	3Q17	4Q16
Shares outstanding at beginning of period	1,079,039	1,092,739	1,082,055	(1.3)%	(.3)%
Open market repurchases and return of shares under employee compensation plans	(10,617)	(15,298)	(4,380)	(30.6)	142.4
Shares issued under employee compensation plans (net of cancellations)	662	1,598	1,642	(58.6)	(59.7)
Common shares issued to acquire First Niagara	—	—	(3)	N/M	N/M
Shares outstanding at end of period	1,069,084	1,079,039	1,079,314	(.9)%	(.9)%

N/M = Not Meaningful

Consistent with Key's 2017 Capital Plan, during the fourth quarter of 2017, Key declared a dividend of $.105 per common share, an 11% increase from the prior quarter, and the second common share dividend increase of 2017. Key also completed $199 million of common share repurchases during the quarter, including $198 million of common share repurchases in the open market and $1 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 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Revenue from continuing operations (TE)
Key Community Bank	$	969	$	959	$	902	1.0%	7.4%
Key Corporate Bank	603		560		630		7.7	(4.3)
Other Segments	35		30		38		16.7	(7.9)
Total segments	1,607		1,549		1,570		3.7	2.4
Reconciling Items	1		5		(4)		(80.0)	N/M
Total	$	1,608	$	1,554	$	1,566	3.5%	2.7%

Income (loss) from continuing operations attributable to Key
Key Community Bank	$	146	$	162	$	106	(9.9)%	37.7%
Key Corporate Bank	221		190		224		16.3	(1.3)
Other Segments	53		23		34		130.4	55.9
Total segments	420		375		364		12.0	15.4
Reconciling Items ^(a)	(225)		(12)		(131)		N/M	N/M
Total	$	195	$	363	$	233	(46.3)%	(16.3)%

(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 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Summary of operations
Net interest income (TE)	$	671	$	670	$	629	.1%	6.7%
Noninterest income	298		289		273		3.1	9.2
Total revenue (TE)	969		959		902		1.0	7.4
Provision for credit losses	57		59		51		(3.4)	11.8
Noninterest expense	682		643		682		6.1	—
Income (loss) before income taxes (TE)	230		257		169		(10.5)	36.1
Allocated income taxes (benefit) and TE adjustments	84		95		63		(11.6)	33.3
Net income (loss) attributable to Key	$	146	$	162	$	106	(9.9)%	37.7%

Average balances
Loans and leases	$	47,403	$	47,595	$	47,059	(.4)%	.7%
Total assets	51,469		51,708		51,002		(.5)	.9
Deposits	80,352		79,563		79,266		1.0	1.4

Assets under management at period end	$	39,588	$	38,660	$	36,592	2.4%	8.2%

TE = Taxable Equivalent

Additional Key Community Bank Data

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Noninterest income
Trust and investment services income	$	98	$	101	$	88	(3.0)%	11.4%
Service charges on deposit accounts	77		78		71		(1.3)	8.5
Cards and payments income	67		65		59		3.1	13.6
Other noninterest income	56		45		55		24.4	1.8
Total noninterest income	$	298	$	289	$	273	3.1%	9.2%

Average deposit balances
NOW and money market deposit accounts	$	44,415	$	44,481	$	44,276	(.1)%	.3%
Savings deposits	5,090		5,165		5,326		(1.5)	(4.4)
Certificates of deposit ($100,000 or more)	4,628		4,195		3,658		10.3	26.5
Other time deposits	4,765		4,657		4,836		2.3	(1.5)
Noninterest-bearing deposits	21,454		21,065		21,170		1.8	1.3
Total deposits	$	80,352	$	79,563	$	79,266	1.0%	1.4%

Home equity loans
Average balance	$	12,005	$	12,182	$	12,560
Combined weighted-average loan-to-value ratio (at date of origination)	70%		69%		71%
Percent first lien positions	60		60		57

Other data
Branches	1,197		1,208		1,217
Automated teller machines	1,572		1,588		1,593

Key Community Bank Summary of Operations (4Q17 vs. 4Q16)

Positive operating leverage compared to prior year
Net income increased $40 million, or 37.7%, from prior year
Average commercial and industrial loans increased $1.0 billion, or 6.0%, from the prior year

Key Community Bank recorded net income attributable to Key of $146 million for the fourth quarter of 2017, compared to $106 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as First Niagara-related synergies.

Taxable-equivalent net interest income increased by $42 million, or 6.7%, from the fourth quarter of 2016. The increase was primarily attributable to the benefit from higher interest rates and a larger balance sheet. Average loans and leases increased $344 million, or .7%, largely driven by a $1.0 billion, or 6.0%, increase in commercial and industrial loans. Additionally, average deposits increased $1.1 billion, or 1.4%, from one year ago.

Noninterest income was up $25 million, or 9.2%, from the year-ago quarter, driven by strength in cards and payments, which includes the impact of Key's merchant services acquisition in the second quarter of 2017, higher assets under management from market growth, and higher deposit service charges driven by investments in commercial payments.

The provision for credit losses increased by $6 million, or 11.8%, from the fourth quarter of 2016. Net loan charge-offs decreased $7 million from the fourth quarter of 2016, primarily related to lower losses on consumer loans.

Noninterest expense was flat from the year-ago quarter. Personnel expense increased $14 million driven by on-going investments and business acquisitions, including HelloWallet. Nonpersonnel expense decreased by $14 million benefiting from First Niagara related expense synergies and includes the impact of business acquisitions of HelloWallet and Key's merchant services acquisition.

Key Corporate Bank


dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Summary of operations
Net interest income (TE)	$	283	$	291	$	332	(2.7)%	(14.8)%
Noninterest income	320		269		298		19.0	7.4
Total revenue (TE)	603		560		630		7.7	(4.3)
Provision for credit losses	(6)		(11)		17		N/M	N/M
Noninterest expense	353		303		326		16.5	8.3
Income (loss) before income taxes (TE)	256		268		287		(4.5)	(10.8)
Allocated income taxes and TE adjustments	34		78		64		N/M	N/M
Net income (loss)	222		190		223		16.8	(.4)
Less: Net income (loss) attributable to noncontrolling interests	1		—		(1)		N/M	N/M
Net income (loss) attributable to Key	$	221	$	190	$	224	16.3%	(1.3)%

Average balances
Loans and leases	$	37,462	$	38,040	$	36,746	(1.5)%	1.9%
Loans held for sale	1,345		1,521		1,223		(11.6)	10.0
Total assets	44,506		45,276		43,215		(1.7)	3.0
Deposits	21,558		21,559		23,171		—	(7.0)

TE = Taxable Equivalent, N/M = Not Meaningful

Additional Key Corporate Bank Data

dollars in millions							Change 4Q17 vs.
	4Q17		3Q17		4Q16		3Q17	4Q16
Noninterest income
Trust and investment services income	$	33	$	34	$	35	(2.9)%	(5.7)%
Investment banking and debt placement fees	195		137		154		42.3	26.6
Operating lease income and other leasing gains	24		13		18		84.6	33.3

Corporate services income	40		40		43		—	(7.0)
Service charges on deposit accounts	12		13		12		(7.7)	—
Cards and payments income	10		10		10		—	—
Payments and services income	62		63		65		(1.6)	(4.6)

Mortgage servicing fees	14		18		18		(22.2)	(22.2)
Other noninterest income	(8)		4		8		N/M	N/M
Total noninterest income	$	320	$	269	$	298	19.0%	7.4%

Key Corporate Bank Summary of Operations (4Q17 vs. 4Q16)

Record quarter and year for investment banking and debt placement fees
Positive operating leverage compared to prior year
Net income down $3 million, or 1.3%, from prior year

Key Corporate Bank recorded net income attributable to Key of $221 million for the fourth quarter of 2017, compared to $224 million for the same period one year ago.

Taxable-equivalent net interest income decreased by $49 million, or 14.8%, compared to the fourth quarter of 2016, largely related to lower accretion of purchase accounting. Average loan and lease balances increased $716 million, or 1.9%, from the year-ago quarter, driven by growth in commercial and industrial loans. Average deposit balances decreased $1.6 billion, or 7.0%, from the year-ago quarter, driven by the managed exit of higher cost corporate and public sector deposits.

Noninterest income was up $22 million, or 7.4%, from the prior year. This increase was largely due to higher investment banking and debt placement fees, which were up $41 million, related to the recent acquisition of Cain Brothers, as well as continued growth in the core Key franchise. This increase was partially offset by a decline in other noninterest income of $16 million, including impairments of certain tax-advantaged assets, as well as a decline in mortgage fees of $4 million.

During the fourth quarter of 2017, the provision for credit losses decreased $23 million, or 135.3%, and net loan charge-offs declined $10 million, compared to the fourth quarter of 2016, related to improving credit quality in the overall portfolio.

Noninterest expense increased by $27 million, or 8.3%, from the fourth quarter of 2016. The increase from the prior year was largely driven by the recent acquisition of Cain Brothers as well as impairments to certain tax-advantaged assets related to tax reform.

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 $53 million for the fourth quarter of 2017, compared to $34 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 $137.7 billion at December 31, 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 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.

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, January 18, 2018. An audio replay of the call will be available through January 28, 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.

*****

Financial Highlights
(dollars in millions, except per share amounts)
		Three months ended
		12/31/2017			9/30/2017			12/31/2016
Summary of operations
	Net interest income (TE)	$	952		$	962		$	948
	Noninterest income	656			592			618
	Total revenue (TE)	1,608			1,554			1,566
	Provision for credit losses	49			51			66
	Noninterest expense	1,098			992			1,220
	Income (loss) from continuing operations attributable to Key	195			363			233
	Income (loss) from discontinued operations, net of taxes ^(a)	1			1			(4)
	Net income (loss) attributable to Key	196			364			229

	Income (loss) from continuing operations attributable to Key common shareholders	181			349			213
	Income (loss) from discontinued operations, net of taxes ^(a)	1			1			(4)
	Net income (loss) attributable to Key common shareholders	182			350			209

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	.17		$	.32		$	.20
	Income (loss) from discontinued operations, net of taxes ^(a)	—			—			—
	Net income (loss) attributable to Key common shareholders ^(b)	.17			.32			.20

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	.17			.32			.20
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)	—			—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)	.17			.32			.19

	Cash dividends declared	.105			.095			.085
	Book value at period end	13.09			13.18			12.58
	Tangible book value at period end	10.35			10.52			9.99
	Market price at period end	20.17			18.82			18.27

Performance ratios
	From continuing operations:
	Return on average total assets	.57		%	1.07		%	.69		%
	Return on average common equity	5.04			9.74			6.22
	Return on average tangible common equity ^(c)	6.35			12.21			7.88
	Net interest margin (TE)	3.09			3.15			3.12
	Cash efficiency ratio ^(c)	66.7			62.2			76.2

	From consolidated operations:
	Return on average total assets	.57		%	1.06		%	.67		%
	Return on average common equity	5.07			9.77			6.10
	Return on average tangible common equity ^(c)	6.39			12.25			7.73
	Net interest margin (TE)	3.07			3.13			3.09
	Loan to deposit ^(d)	84.4			86.2			85.2

Capital ratios at period end
	Key shareholders' equity to assets	10.91		%	11.15		%	11.17		%
	Key common shareholders' equity to assets	10.17			10.40			9.95
	Tangible common equity to tangible assets ^(c)	8.23			8.49			8.09
	Common Equity Tier 1^(e)	10.08			10.26			9.54
	Tier 1 risk-based capital ^(e)	10.93			11.11			10.89
	Total risk-based capital ^(e)	12.84			13.09			12.85
	Leverage ^(e)	9.64			9.83			9.90

Asset quality — from continuing operations
	Net loan charge-offs	$	52		$	32		$	72
	Net loan charge-offs to average loans	.24		%	.15		%	.34		%
	Allowance for loan and lease losses	$	877		$	880		$	858
	Allowance for credit losses	934			937			913
	Allowance for loan and lease losses to period-end loans	1.01		%	1.02		%	1.00		%
	Allowance for credit losses to period-end loans	1.08			1.08			1.06
	Allowance for loan and lease losses to nonperforming loans ^(f)	174.4			170.2			137.3
	Allowance for credit losses to nonperforming loans ^(f)	185.7			181.2			146.1
	Nonperforming loans at period-end ^(f)	$	503		$	517		$	625
	Nonperforming assets at period-end ^(f)	534			556			676
	Nonperforming loans to period-end portfolio loans ^(f)	.58		%	.60		%	.73		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(f)	.62			.64			.79

Trust assets
	Assets under management	$	39,588		$	38,660		$	36,592

Other data
	Average full-time equivalent employees	18,379			18,548			18,849
	Branches	1,197			1,208			1,217

Taxable-equivalent adjustment		$	14		$	14		$	10


Financial Highlights (continued)
(dollars in millions, except per share amounts)
		Twelve months ended
		12/31/2017			12/31/2016
Summary of operations
	Net interest income (TE)	$	3,830		$	2,953
	Noninterest income	2,478			2,071
	Total revenue (TE)	6,308			5,024
	Provision for credit losses	229			266
	Noninterest expense	4,098			3,756
	Income (loss) from continuing operations attributable to Key	1,289			790
	Income (loss) from discontinued operations, net of taxes ^(a)	7			1
	Net income (loss) attributable to Key	1,296			791

	Income (loss) from continuing operations attributable to Key common shareholders	$	1,219		$	753
	Income (loss) from discontinued operations, net of taxes ^(a)	7			1
	Net income (loss) attributable to Key common shareholders	1,226			754

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders	$	1.13		$	.81
	Income (loss) from discontinued operations, net of taxes ^(a)	.01			—
	Net income (loss) attributable to Key common shareholders ^(b)	1.14			.81

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	1.12			.80
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)	.01			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)	1.13			.80

	Cash dividends paid	.38			.33

Performance ratios
	From continuing operations:
	Return on average total assets	.96		%	.70		%
	Return on average common equity	8.65			6.26
	Return on average tangible common equity ^(c)	10.84			7.39
	Net interest margin (TE)	3.17			2.92
	Cash efficiency ratio ^(c)	63.5			73.7

	From consolidated operations:
	Return on average total assets	.96		%	.69		%
	Return on average common equity	8.70			6.27
	Return on average tangible common equity ^(c)	10.90			7.40
	Net interest margin (TE)	3.15			2.91

Asset quality — from continuing operations
	Net loan charge-offs	208			205
	Net loan charge-offs to average total loans	.24		%	.29		%

Other data
	Average full-time equivalent employees	18,415			15,700

Taxable-equivalent adjustment		53			34

(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)	December 31, 2017, ratio is estimated.
(f)	Nonperforming loan balances exclude $738 million, $783 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles

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, 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 third and fourth 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									Twelve months ended
	12/31/2017			9/30/2017			12/31/2016			12/31/2017		12/31/2016
Tangible common equity to tangible assets at period-end
Key shareholders' equity (GAAP)	$	15,023		$	15,249		$	15,240
Less: Intangible assets ^(a)	2,928			2,870			2,788
Preferred Stock ^(b)	1,009			1,009			1,640
Tangible common equity (non-GAAP)	$	11,086		$	11,370		$	10,812
Total assets (GAAP)	$	137,698		$	136,733		$	136,453
Less: Intangible assets ^(a)	2,928			2,870			2,788
Tangible assets (non-GAAP)	$	134,770		$	133,863		$	133,665
Tangible common equity to tangible assets ratio (non-GAAP)	8.23		%	8.49		%	8.09		%
Earnings per common share (EPS) excluding notable items
EPS from continuing operations attributable to Key common shareholders — assuming dilution	$	.17		$	.32		$	.20
Plus: EPS impact of notable items	.19			.03			.11
EPS from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)	$	.36		$	.35		$	.31
Notable items
Merger-related charges	$	(56)		$	(36)		$	(198)		$	(217)	$	(474)
Estimated impacts of tax reform and related actions	(30)			—			—			(30)		—
Merchant services gain	—			(5)			—			59		—
Purchase accounting finalization, net	—			—			—			43		—
Charitable contribution	—			—			—			(20)		—
Total notable items	$	(86)		$	(41)		$	(198)		$	(165)	$	(474)
Income taxes	(26)			(13)			(74)			(53)		(175)
Reevaluation of certain tax related assets	147			—			—			147		—
Total notable items, after tax	$	(207)		$	(28)		$	(124)		$	(259)	$	(299)

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended									Twelve months ended
			12/31/2017			9/30/2017			12/31/2016			12/31/2017			12/31/2016
Pre-provision net revenue
	Net interest income (GAAP)		$	938		$	948		$	938		$	3,777		$	2,919
	Plus:	Taxable-equivalent adjustment	14			14			10			53			34
		Noninterest income	656			592			618			2,478			2,071
	Less:	Noninterest expense	1,098			992			1,220			4,098			3,756
		Pre-provision net revenue from continuing operations (non-GAAP)	$	510		$	562		$	346		$	2,210		$	1,268
	Plus:	Notable items	86			41			198			165			474
		Pre-provision net revenue from continuing operations excluding notable items (non-GAAP)	$	596		$	603		$	544		$	2,375		$	1,742
Average tangible common equity
	Average Key shareholders' equity (GAAP)		$	15,268		$	15,241		$	14,901		$	15,224		$	12,647
	Less:	Intangible assets (average) ^(c)	2,939			2,878			2,874			2,837			1,825
		Preferred Stock (average)	1,025			1,025			1,274			1,137			627
		Average tangible common equity (non-GAAP)	$	11,304		$	11,338		$	10,753		$	11,250		$	10,195
Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	181		$	349		$	213		$	1,219		$	753
	Plus:	Notable items, after tax	207			28			124			259			299
	Net income (loss) from continuing operations attributable to Key common shareholders excluding notable items (non-GAAP)		$	388		$	377		$	337		$	1,478		$	1,052
	Average tangible common equity (non-GAAP)		11,304			11,338			10,753			11,250			10,195

	Return on average tangible common equity from continuing operations (non- GAAP)		6.35		%	12.21		%	7.88		%	10.84		%	7.39		%
	Return on average tangible common equity from continuing operations excluding notable items (non-GAAP)		13.62			13.19			12.47			13.14			10.32
Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	182		$	350		$	209		$	1,226		$	754
	Average tangible common equity (non-GAAP)		11,304			11,338			10,753			11,250			10,195

	Return on average tangible common equity consolidated (non-GAAP)		6.39		%	12.25		%	7.73		%	10.90		%	7.40		%
Cash efficiency ratio
	Noninterest expense (GAAP)		$	1,098		$	992		$	1,220		$	4,098		$	3,756
	Less:	Intangible asset amortization	26			25			27			95			55
		Adjusted noninterest expense (non-GAAP)	1,072			967			1,193			4,003			3,701
	Less:	Notable items ^(d)	85			36			207			262			465
		Adjusted noninterest expense excluding notable items (non-GAAP)	$	987		$	931		$	986		$	3,741		$	3,236
	Net interest income (GAAP)		$	938		$	948		$	938		$	3,777		$	2,919
	Plus:	Taxable-equivalent adjustment	14			14			10			53			34
		Noninterest income	656			592			618			2,478			2,071
		Total taxable-equivalent revenue (non-GAAP)	1,608			1,554			1,566			6,308			5,024
	Plus:	Notable items ^(e)	1			5			(9)			(97)			9
		Adjusted total taxable-equivalent revenue excluding notable items (non-GAAP)	$	1,609		$	1,559		$	1,557		$	6,211		$	5,033

	Cash efficiency ratio (non-GAAP)		66.7		%	62.2		%	76.2		%	63.5		%	73.7		%
	Cash efficiency ratio excluding notable items (non-GAAP)		61.3			59.7			63.3			60.2			64.3
Return on average total assets from continuing operations excluding notable items
	Income from continuing operations attributable to Key (GAAP)		$	195		$	363		$	233		$	1,289		$	790
	Plus:	Notable items, after tax	207			28			124			259			299
		Income from continuing operations attributable to Key excluding notable items, after tax (non-GAAP)	$	402		$	391		$	357		$	1,548		$	1,089

	Average total assets from continuing operations (GAAP)		$	135,255		$	134,356		$	134,428		$	133,719		$	112,537

	Return on average total assets from continuing operations excluding notable items (non-GAAP)		1.18		%	1.15		%	1.06		%	1.16		%	.97		%

GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			12/31/2017
Common Equity Tier 1 under the Regulatory Capital Rules ("RCR") (estimates)
	Common Equity Tier 1 under current RCR		$	11,930
	Adjustments from current RCR to the fully phased-in RCR:
		Deferred tax assets and other intangible assets ^(f)	(67)
		Common Equity Tier 1 anticipated under the fully phased-in RCR ^(g)	$	11,863

	Net risk-weighted assets under current RCR		$	118,377
	Adjustments from current RCR to the fully phased-in RCR:
		Mortgage servicing assets ^(h)	664
		Deferred tax assets	60
		All other assets	(83)
		Total risk-weighted assets anticipated under the fully phased-in RCR ^(g)	$	119,018

	Common Equity Tier 1 ratio under the fully phased-in RCR ^(g)		9.97		%


(a)	For the three months ended December 31, 2017, September 30, 2017, and December 31, 2016, intangible assets exclude $26 million, $30 million, and $42 million, respectively, of period-end purchased credit card receivables.
(b)	Net of capital surplus.
(c)	For the three months ended December 31, 2017, September 30, 2017, and December 31, 2016, average intangible assets exclude $28 million, $32 million, and $46 million, respectively, of average purchased credit card receivables. For the twelve months ended December 31, 2017, and December 31, 2016, average intangible assets exclude $34 million and $43 million, respectively, of average purchased credit card receivables.
(d)	Notable items for the three months ended December 31, 2017, includes $56 million of merger-related charges and $29 million of estimated impacts of tax reform and related actions.
(e)	Notable items for the three months ended December 31, 2017, includes $1 million of estimated impacts of tax reform and related actions.
(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

Consolidated Balance Sheets
(dollars in millions)

			12/31/2017		9/30/2017		12/31/2016
Assets
	Loans		$	86,405	$	86,492	$	86,038
	Loans held for sale		1,107		1,341		1,104
	Securities available for sale		18,139		19,012		20,212
	Held-to-maturity securities		11,830		10,276		10,232
	Trading account assets		836		783		867
	Short-term investments		4,447		3,993		2,775
	Other investments		726		728		738
		Total earning assets	123,490		122,625		121,966
	Allowance for loan and lease losses		(877)		(880)		(858)
	Cash and due from banks		671		562		677
	Premises and equipment		930		916		978
	Operating lease assets		821		736		540
	Goodwill		2,538		2,487		2,446
	Other intangible assets		416		412		384
	Corporate-owned life insurance		4,132		4,113		4,068
	Derivative assets		669		622		803
	Accrued income and other assets		3,568		3,744		3,864
	Discontinued assets		1,340		1,396		1,585
		Total assets	$	137,698	$	136,733	$	136,453

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	53,627	$	53,734	$	54,590
		Savings deposits	6,296		6,366		6,491
		Certificates of deposit ($100,000 or more)	6,849		6,519		5,483
		Other time deposits	4,798		4,720		4,698
		Total interest-bearing deposits	71,570		71,339		71,262
		Noninterest-bearing deposits	33,665		32,107		32,825
		Total deposits	105,235		103,446		104,087
	Federal funds purchased and securities sold under repurchase agreements		377		372		1,502
	Bank notes and other short-term borrowings		634		616		808
	Derivative liabilities		291		232		636
	Accrued expense and other liabilities		1,803		1,717		1,796
	Long-term debt		14,333		15,100		12,384
		Total liabilities	122,673		121,483		121,213

Equity
	Preferred stock		1,025		1,025		1,665
	Common shares		1,257		1,257		1,257
	Capital surplus		6,335		6,310		6,385
	Retained earnings		10,194		10,125		9,378
	Treasury stock, at cost		(3,150)		(2,962)		(2,904)
	Accumulated other comprehensive income (loss)		(638)		(506)		(541)
		Key shareholders' equity	15,023		15,249		15,240
	Noncontrolling interests		2		1		—
		Total equity	15,025		15,250		15,240
Total liabilities and equity			$	137,698	$	136,733	$	136,453

Common shares outstanding (000)			1,069,084		1,079,039		1,079,314

Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended						Twelve months ended
			12/31/2017		9/30/2017		12/31/2016		12/31/2017		12/31/2016
Interest income
	Loans		$	924	$	928	$	898	$	3,677	$	2,773
	Loans held for sale		13		17		11		52		34
	Securities available for sale		93		91		92		369		329
	Held-to-maturity securities		61		55		44		222		122
	Trading account assets		6		7		6		27		23
	Short-term investments		12		6		5		26		22
	Other investments		5		5		6		17		16
		Total interest income	1,114		1,109		1,062		4,390		3,319
Interest expense
	Deposits		82		72		57		278		171
	Federal funds purchased and securities sold under repurchase agreements		—		—		1		1		1
	Bank notes and other short-term borrowings		3		3		3		15		10
	Long-term debt		91		86		63		319		218
		Total interest expense	176		161		124		613		400
Net interest income			938		948		938		3,777		2,919
Provision for credit losses			49		51		66		229		266
Net interest income after provision for credit losses			889		897		872		3,548		2,653
Noninterest income
	Trust and investment services income		131		135		123		535		464
	Investment banking and debt placement fees		200		141		157		603		482
	Service charges on deposit accounts		89		91		84		357		302
	Operating lease income and other leasing gains		27		16		21		96		62
	Corporate services income		56		54		61		219		215
	Cards and payments income		77		75		69		287		233
	Corporate-owned life insurance income		37		31		40		131		125
	Consumer mortgage income		7		7		6		26		17
	Mortgage servicing fees		17		21		20		71		57
	Net gains (losses) from principal investing		3		3		4		7		20
	Other income ^(a)		12		18		33		146		94
		Total noninterest income	656		592		618		2,478		2,071
Noninterest expense
	Personnel		608		558		648		2,273		2,073
	Net occupancy		92		74		112		331		305
	Computer processing		54		56		97		225		255
	Business services and professional fees		52		49		78		192		235
	Equipment		31		29		30		114		98
	Operating lease expense		28		24		17		92		59
	Marketing		35		34		35		120		101
	FDIC assessment		20		21		23		82		61
	Intangible asset amortization		26		25		27		95		55
	OREO expense, net		3		3		3		11		9
	Other expense		149		119		150		563		505
		Total noninterest expense	1,098		992		1,220		4,098		3,756
Income (loss) from continuing operations before income taxes			447		497		270		1,928		968
	Income taxes		251		134		38		637		179
Income (loss) from continuing operations			196		363		232		1,291		789
	Income (loss) from discontinued operations, net of taxes		1		1		(4)		7		1
Net income (loss)			197		364		228		1,298		790
	Less: Net income (loss) attributable to noncontrolling interests		1		—		(1)		2		(1)
Net income (loss) attributable to Key			$	196	$	364	$	229	$	1,296	$	791

Income (loss) from continuing operations attributable to Key common shareholders			$	181	$	349	$	213	$	1,219	$	753
Net income (loss) attributable to Key common shareholders			182		350		209		1,226		754
Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.17	$	.32	$	.20	$	1.13	$	.81
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		—
Net income (loss) attributable to Key common shareholders ^(b)			.17		.32		.20		1.14		.81
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.17	$	.32	$	.20	$	1.12	$	.80
Income (loss) from discontinued operations, net of taxes			—		—		—		.01		—
Net income (loss) attributable to Key common shareholders ^(b)			.17		.32		.19		1.13		.80

Cash dividends declared per common share			$	.105	$	.095	$	.085	$	.38	$	.33

Weighted-average common shares outstanding (000)			1,062,348		1,073,390		1,067,771		1,072,078		927,816
	Effect of common share options and other stock awards		16,982		15,451		15,946		16,515		10,720
Weighted-average common shares and potential common shares outstanding (000) ^(c)			1,079,330		1,088,841		1,083,717		1,088,593		938,536

(a)	For the three months ended December 31, 2017, and September 30, 2017 net securities gains (losses) totaled less than $1 million. For the three months ended December 31, 2016, net securities gains totaled $6 million. For the three months ended December 31, 2017, September 30, 2017, and December 31, 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.

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

		Fourth Quarter 2017						Third Quarter 2017						Fourth 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)	$	41,289	$	417	4.01	%	$	41,416	$	414	3.97	%	$	39,495	$	365	3.68	%
	Real estate — commercial mortgage	14,386		167		4.60		14,850		169		4.51		14,771		168		4.50
	Real estate — construction	1,967		23		4.55		2,054		23		4.51		2,222		37		6.72
	Commercial lease financing	4,687		45		3.86		4,694		46		3.89		4,624		50		4.34
	Total commercial loans	62,329		652		4.15		63,014		652		4.11		61,112		620		4.04
	Real estate — residential mortgage	5,474		54		3.95		5,493		54		3.92		5,554		57		4.17
	Home equity loans	12,128		134		4.39		12,314		136		4.41		12,812		129		3.99
	Consumer direct loans	1,782		32		7.15		1,774		33		7.26		1,785		31		6.84
	Credit cards	1,061		30		11.14		1,049		30		11.34		1,088		29		10.78
	Consumer indirect loans	3,232		36		4.42		3,170		37		4.64		3,009		42		5.50
	Total consumer loans	23,677		286		4.80		23,800		290		4.85		24,248		288		4.73
	Total loans	86,006		938		4.33		86,814		942		4.31		85,360		908		4.24
	Loans held for sale	1,420		13		3.81		1,607		17		4.13		1,323		11		3.39
	Securities available for sale ^{(b), (e)}	18,447		93		1.97		18,574		91		1.96		20,145		92		1.82
	Held-to-maturity securities ^(b)	11,121		61		2.20		10,469		55		2.12		9,121		44		1.95
	Trading account assets	898		6		2.72		889		7		2.74		892		6		2.54
	Short-term investments	3,684		12		1.29		2,166		6		1.21		3,717		5		.49
	Other investments ^(e)	725		5		2.80		728		5		2.46		741		6		3.23
	Total earning assets	122,301		1,128		3.66		121,247		1,123		3.68		121,299		1,072		3.52
	Allowance for loan and lease losses	(871)						(868)						(855)
	Accrued income and other assets	13,825						13,977						13,984
	Discontinued assets	1,358						1,417						1,610
	Total assets	$	136,613					$	135,773					$	136,038
Liabilities
	NOW and money market deposit accounts	$	53,601	40		.29		$	53,826	37		.27		$	55,444	31		.22
	Savings deposits	6,372		3		.24		6,697		5		.25		6,546		2		.10
	Certificates of deposit ($100,000 or more)	6,776		26		1.50		6,402		21		1.31		5,428		15		1.11
	Other time deposits	4,771		13		1.05		4,664		9		.81		4,849		9		.77
	Total interest-bearing deposits	71,520		82		.45		71,589		72		.40		72,267		57		.32
	Federal funds purchased and securities sold under repurchase agreements	360		—		.08		456		—		.23		592		1		.11
	Bank notes and other short-term borrowings	693		3		1.72		865		3		1.49		934		3		1.11
	Long-term debt ^{(f), (g)}	13,140		91		2.76		12,631		86		2.75		10,914		63		2.38
	Total interest-bearing liabilities	85,713		176		.81		85,541		161		.75		84,707		124		.58
	Noninterest-bearing deposits	32,278						31,516						32,424
	Accrued expense and other liabilities	1,994						2,057						2,394
	Discontinued liabilities ^(g)	1,359						1,417						1,610
	Total liabilities	121,344						120,531						121,135
Equity
	Key shareholders' equity	15,268						15,241						14,901
	Noncontrolling interests	1						1						2
	Total equity	15,269						15,242						14,903
	Total liabilities and equity	$	136,613					$	135,773					$	136,038
Interest rate spread (TE)						2.85	%					2.93	%					2.94	%
Net interest income (TE) and net interest margin (TE)				952		3.09	%			962		3.15	%			948		3.12	%
TE adjustment ^(b)				14						14						10
	Net interest income, GAAP basis			$	938					$	948					$	938

(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 $119 million, $117 million, and $119 million of assets from commercial credit cards for the three months ended December 31, 2017, September 30, 2017, and December 31, 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


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

		Twelve months ended December 31, 2017						Twelve months ended December 31, 2016
		Average						Average
		Balance		Interest ^(a)		Yield/Rate ^(a)		Balance		Interest ^(a)		Yield/ Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial and industrial ^(d)	$	40,848	$	1,613	3.95	%	$	35,276	$	1,215	3.45	%
	Real estate — commercial mortgage	14,878		687		4.62		11,063		451		4.07
	Real estate — construction	2,143		103		4.78		1,460		76		5.22
	Commercial lease financing	4,677		185		3.96		4,261		161		3.78
	Total commercial loans	62,546		2,588		4.14		52,060		1,903		3.66
	Real estate — residential mortgage	5,499		214		3.89		3,632		148		4.09
	Home equity loans	12,380		536		4.33		11,286		456		4.04
	Consumer direct loans	1,765		126		7.12		1,661		113		6.79
	Credit cards	1,055		118		11.15		916		98		10.73
	Consumer indirect loans	3,120		148		4.75		1,593		89		5.58
	Total consumer loans	23,819		1,142		4.79		19,088		904		4.74
	Total loans	86,365		3,730		4.32		71,148		2,807		3.95
	Loans held for sale	1,325		52		3.96		979		34		3.51
	Securities available for sale ^{(b), (e)}	18,548		369		1.96		16,661		329		1.98
	Held-to-maturity securities ^(b)	10,515		222		2.11		6,275		122		1.94
	Trading account assets	949		27		2.81		884		23		2.59
	Short-term investments	2,363		26		1.11		4,656		22		.47
	Other investments ^(e)	712		17		2.35		679		16		2.37
	Total earning assets	120,777		4,443		3.67		101,282		3,353		3.31
	Allowance for loan and lease losses	(865)						(835)
	Accrued income and other assets	13,807						12,090
	Discontinued assets	1,448						1,707
	Total assets	$	135,167					$	114,244
Liabilities
	NOW and money market deposit accounts	$	54,032	143		.26		$	46,079	87		.19
	Savings deposits	6,569		13		.20		3,957		3		.07
	Certificates of deposit ($100,000 or more)	6,233		82		1.31		3,911		48		1.22
	Other time deposits	4,698		40		.85		4,088		33		.81
	Total interest-bearing deposits	71,532		278		.39		58,035		171		.30
	Federal funds purchased and securities sold under repurchase agreements	517		1		.24		487		1		.10
	Bank notes and other short-term borrowings	1,140		15		1.34		852		10		1.18
	Long-term debt ^{(f), (g)}	11,921		319		2.69		9,802		218		2.29
	Total interest-bearing liabilities	85,110		613		.72		69,176		400		.58
	Noninterest-bearing deposits	31,414						28,317
	Accrued expense and other liabilities	1,970						2,393
	Discontinued liabilities ^(g)	1,448						1,706
	Total liabilities	119,942						101,592
Equity
	Key shareholders' equity	15,224						12,647
	Noncontrolling interests	1						5
	Total equity	15,225						12,652
	Total liabilities and equity	$	135,167					$	114,244
Interest rate spread (TE)						2.95	%					2.73	%
Net interest income (TE) and net interest margin (TE)				3,830		3.17	%			2,953		2.92	%
TE adjustment ^(b)				53						34
	Net interest income, GAAP basis			$	3,777					$	2,919

(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 and $99 million of assets from commercial credit cards for the twelve months ended December 31, 2017, and December 31, 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


Noninterest Expense
(dollars in millions)

	Three months ended						Twelve months ended
	12/31/2017		9/30/2017		12/31/2016		12/31/2017		12/31/2016
Personnel ^(a)	$	608	$	558	$	648	$	2,273	$	2,073
Net occupancy	92		74		112		331		305
Computer processing	54		56		97		225		255
Business services and professional fees	52		49		78		192		235
Equipment	31		29		30		114		98
Operating lease expense	28		24		17		92		59
Marketing	35		34		35		120		101
FDIC assessment	20		21		23		82		61
Intangible asset amortization	26		25		27		95		55
OREO expense, net	3		3		3		11		9
Other expense	149		119		150		563		505
Total noninterest expense	$	1,098	$	992	$	1,220	$	4,098	$	3,756
Notable items ^(b)	85		36		207		262		465
Total noninterest expense excluding notable items	$	1,013	$	956	$	1,013	$	3,836	$	3,291
Average full-time equivalent employees ^(c)	18,379		18,548		18,849		18,415		15,700


(a)	Additional detail provided in Personnel Expense table below.
(b)	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. For the third quarter of 2017 and fourth quarter of 2016, notable items includes $36 million and $207 million of merger-related charges, respectively. Notable items for the twelve months ended December 31, 2017, includes $217 million of merger-related charges, $29 million of estimated impacts of tax reform and related actions, $4 million of purchase accounting finalization, and $20 million of a charitable contribution. Notable items for the twelve months ended December 31, 2016, include $465 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."
(c)	The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Personnel Expense
(in millions)

	Three months ended						Twelve months ended
	12/31/2017		9/30/2017		12/31/2016		12/31/2017		12/31/2016
Salaries and contract labor	$	346	$	339	$	352	$	1,341	$	1,191
Incentive and stock-based compensation	168		134		185		566		537
Employee benefits	90		80		98		342		297
Severance	4		5		13		24		48
Total personnel expense	$	608	$	558	$	648	$	2,273	$	2,073
Notable items ^(a)	42		25		80		128		228
Total personnel expense excluding notable items	$	566	$	533	$	568	$	2,145	$	1,845

(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. For the third quarter of 2017 and fourth quarter of 2016, notable items includes $25 million and $80 million of merger-related charges, respectively. For the twelve months ended December 31, 2017, notable items includes $112 million of merger-related charges and $16 million of estimated impacts of tax reform related actions. For the twelve months ended December 31, 2016, notable items includes $228 million of merger-related charges.

Merger-Related Charges
(in millions)

	Three months ended						Twelve months ended
	12/31/2017		9/30/2017		12/31/2016		12/31/2017		12/31/2016
Net interest income	—		—		—		—		$	(6)

Operating lease income and other leasing gains	—		—		—		—		(2)
Other income	—		—		$	9	—		(1)
Noninterest income	—		—		9		—		(3)

Personnel	$	26	$	25	80		$	112	228
Net occupancy	12		(2)		29		14		29
Business services and professional fees	3		2		22		16		66
Computer processing	1		4		38		12		53
Marketing	5		5		13		22		26
Other non-personnel expense	9		2		25		41		63
Noninterest expense	56		36		207		217		465
Total merger-related charges	$	56	$	36	$	198	$	217	$	474

Loan Composition
(dollars in millions)

							Percent change 12/31/2017 vs.
	12/31/2017		9/30/2017		12/31/2016		9/30/2017		12/31/2016
Commercial and industrial ^(a)	$	41,859	$	41,147	$	39,768	1.7	%	5.3	%
Commercial real estate:
Commercial mortgage	14,088		14,929		15,111		(5.6)		(6.8)
Construction	1,960		1,954		2,345		.3		(16.4)
Total commercial real estate loans	16,048		16,883		17,456		(4.9)		(8.1)
Commercial lease financing ^(b)	4,826		4,716		4,685		2.3		3.0
Total commercial loans	62,733		62,746		61,909		—		1.3
Residential — prime loans:
Real estate — residential mortgage	5,483		5,476		5,547		.1		(1.2)
Home equity loans	12,028		12,238		12,674		(1.7)		(5.1)
Total residential — prime loans	17,511		17,714		18,221		(1.1)		(3.9)
Consumer direct loans	1,794		1,789		1,788		.3		.3
Credit cards	1,106		1,045		1,111		5.8		(.5)
Consumer indirect loans	3,261		3,198		3,009		2.0		8.4
Total consumer loans	23,672		23,746		24,129		(.3)	%	(1.9)
Total loans^{(c), (d)}	$	86,405	$	86,492	$	86,038	(.1)		.4	%


(a)	Loan balances include $119 million, $118 million, and $116 million of commercial credit card balances at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.
(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $24 million, $31 million, and $68 million at December 31, 2017, September 30, 2017, and December 31, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)	At December 31, 2017, total loans include purchased loans of $15.4 billion, of which $738 million were purchased credit impaired. At September 30, 2017, total loans include purchased loans of $16.7 billion, of which $783 million were purchased credit impaired. At December 31, 2016, total loans include purchased loans of $21.0 billion, of which $865 million were purchased credit impaired.
(d)	Total loans exclude loans of $1.3 billion at December 31, 2017, $1.4 billion at September 30, 2017, and $1.6 billion at December 31, 2016, related to the discontinued operations of the education lending business.

Loans Held for Sale Composition
(dollars in millions)

							Percent change 12/31/2017 vs.
	12/31/2017		9/30/2017		12/31/2016		9/30/2017		12/31/2016
Commercial and industrial	$	139	$	34	$	19	308.8	%	631.6	%
Real estate — commercial mortgage	897		1,246		1,022		(28.0)		(12.2)
Commercial lease financing	—		1		—		N/M		N/M
Real estate — residential mortgage	71		60		62		18.3		14.5
Real estate — construction	—		—		1		N/M		N/M
Total loans held for sale ^(a)	$	1,107	$	1,341	$	1,104	(17.4)	%	.3	%


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $71 million at December 31, 2017, $60 million at September 30, 2017, and $62 million at December 31, 2016.

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

	4Q17		3Q17		2Q17		1Q17		4Q16
Balance at beginning of period	$	1,341	$	1,743	$	1,384	$	1,104	$	1,137
Purchases	—		—		—		—		—
New originations	3,566		2,855		2,876		2,563		2,846
Transfers from (to) held to maturity, net	(10)		(63)		(7)		17		11
Loan sales	(3,783)		(3,191)		(2,507)		(2,299)		(2,889)
Loan draws (payments), net	(7)		(3)		(3)		(1)		(1)
Balance at end of period ^(a)	$	1,107	$	1,341	$	1,743	$	1,384	$	1,104


(a)	Total loans held for sale include Real estate — residential mortgage loans held for sale at fair value of $71 million at December 31, 2017, $60 million at September 30, 2017, $63 million at June 30, 2017, and $62 million at both March 31, 2017, and December 31, 2016.

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

	Three months ended									Twelve months ended
	12/31/2017			9/30/2017			12/31/2016			12/31/2017			12/31/2016
Average loans outstanding	$	86,006		$	86,814		$	85,360		$	86,365		$	71,148
Allowance for loan and lease losses at beginning of period	$	880		$	870		$	865		$	858		$	796
Loans charged off:
Commercial and industrial	32			29			40			133			118

Real estate — commercial mortgage	2			6			2			11			5
Real estate — construction	—			2			—			2			9
Total commercial real estate loans	2			8			2			13			14
Commercial lease financing	5			1			1			14			12
Total commercial loans	39			38			43			160			144
Real estate — residential mortgage	1			—			—			3			4
Home equity loans	7			6			8			30			30
Consumer direct loans	8			8			9			34			27
Credit cards	10			11			10			44			35
Consumer indirect loans	7			8			12			31			21
Total consumer loans	33			33			39			142			117
Total loans charged off	72			71			82			302			261
Recoveries:
Commercial and industrial	8			25			3			40			11

Real estate — commercial mortgage	1			1			—			2			9
Real estate — construction	—			—			—			1			2
Total commercial real estate loans	1			1			—			3			11
Commercial lease financing	1			3			1			6			3
Total commercial loans	10			29			4			49			25
Real estate — residential mortgage	—			1			(2)			4			1
Home equity loans	3			4			4			15			14
Consumer direct loans	2			1			1			6			5
Credit cards	1			1			1			5			4
Consumer indirect loans	4			3			2			15			7
Total consumer loans	10			10			6			45			31
Total recoveries	20			39			10			94			56
Net loan charge-offs	(52)			(32)			(72)			(208)			(205)
Provision (credit) for loan and lease losses	49			42			64			227			267
Foreign currency translation adjustment	—			—			1			—			—
Allowance for loan and lease losses at end of period	$	877		$	880		$	858		$	877		$	858

Liability for credit losses on lending-related commitments at beginning of period	$	57		$	48		$	53		$	55		$	56
Provision (credit) for losses on lending-related commitments	—			9			2			2			(1)
Liability for credit losses on lending-related commitments at end of period ^(a)	$	57		$	57		$	55		$	57		$	55

Total allowance for credit losses at end of period	$	934		$	937		$	913		$	934		$	913

Net loan charge-offs to average total loans	.24		%	.15		%	.34		%	.24		%	.29		%
Allowance for loan and lease losses to period-end loans	1.01			1.02			1.00			1.01			1.00
Allowance for credit losses to period-end loans	1.08			1.08			1.06			1.08			1.06
Allowance for loan and lease losses to nonperforming loans	174.4			170.2			137.3			174.4			137.3
Allowance for credit losses to nonperforming loans	185.7			181.2			146.1			185.7			146.1

Discontinued operations — education lending business:
Loans charged off	$	6		$	10		$	7		$	26		$	28
Recoveries	2			2			3			8			11
Net loan charge-offs	$	(4)		$	(8)		$	(4)		$	(18)		$	(17)


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

Asset Quality Statistics From Continuing Operations
(dollars in millions)
	4Q17			3Q17			2Q17			1Q17			4Q16
Net loan charge-offs	$	52		$	32		$	66		$	58		$	72
Net loan charge-offs to average total loans	.24		%	.15		%	.31		%	.27		%	.34		%
Allowance for loan and lease losses	$	877		$	880		$	870		$	870		$	858
Allowance for credit losses ^(a)	934			937			918			918			913
Allowance for loan and lease losses to period-end loans	1.01		%	1.02		%	1.01		%	1.01		%	1.00		%
Allowance for credit losses to period-end loans	1.08			1.08			1.06			1.07			1.06
Allowance for loan and lease losses to nonperforming loans ^(b)	174.4			170.2			171.6			151.8			137.3
Allowance for credit losses to nonperforming loans ^(b)	185.7			181.2			181.1			160.2			146.1
Nonperforming loans at period end ^(b)	$	503		$	517		$	507		$	573		$	625
Nonperforming assets at period end ^(b)	534			556			556			623			676
Nonperforming loans to period-end portfolio loans ^(b)	.58		%	.60		%	.59		%	.67		%	.73		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(b)	.62			.64			.64			.72			.79


(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 $738 million, $783 million, $835 million, $812 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.

Summary of Nonperforming Assets and Past Due Loans From Continuing Operations
(dollars in millions)
	12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016
Commercial and industrial	$	153		$	169		$	178		$	258		$	297

Real estate — commercial mortgage	30			30			34			32			26
Real estate — construction	2			2			4			2			3
Total commercial real estate loans	32			32			38			34			29
Commercial lease financing	6			11			11			5			8
Total commercial loans	191			212			227			297			334
Real estate — residential mortgage	58			57			58			54			56
Home equity loans	229			227			208			207			223
Consumer direct loans	4			3			2			3			6
Credit cards	2			2			2			3			2
Consumer indirect loans	19			16			10			9			4
Total consumer loans	312			305			280			276			291
Total nonperforming loans ^(a)	503			517			507			573			625
OREO	31			39			48			49			51
Other nonperforming assets	—			—			1			1			—
Total nonperforming assets ^(a)	$	534		$	556		$	556		$	623		$	676
Accruing loans past due 90 days or more	$	89		$	86		$	85		$	79		$	87
Accruing loans past due 30 through 89 days	359			329			340			312			404
Restructured loans — accruing and nonaccruing ^(b)	317			315			333			302			280
Restructured loans included in nonperforming loans ^(b)	189			187			193			161			141
Nonperforming assets from discontinued operations — education lending business	7			8			5			4			5
Nonperforming loans to period-end portfolio loans ^(a)	.58		%	.60		%	.59		%	.67		%	.73		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(a)	.62			.64			.64			.72			.79


(a)	Nonperforming loan balances exclude $738 million, $783 million, $835 million, $812 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 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)
	4Q17		3Q17		2Q17		1Q17		4Q16
Balance at beginning of period	$	517	$	507	$	573	$	625	$	723
Loans placed on nonaccrual status	137		181		143		218		170
Nonperforming loans acquired from First Niagara ^(a)	—		—		—		—		(31)
Charge-offs	(67)		(71)		(82)		(77)		(81)
Loans sold	—		(1)		—		(8)		(9)
Payments	(52)		(32)		(84)		(59)		(30)
Transfers to OREO	(8)		(10)		(8)		(11)		(21)
Loans returned to accrual status	(24)		(57)		(35)		(115)		(96)
Balance at end of period^(b)	$	503	$	517	$	507	$	573	$	625


(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 $738 million, $783 million, $835 million, $812 million, and $865 million of purchased credit impaired loans at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.

Line of Business Results
(dollars in millions)

																Percent change 4Q17 vs.
	4Q17			3Q17			2Q17			1Q17			4Q16			3Q17		4Q16
Key Community Bank
Summary of operations
Total revenue (TE)	$	969		$	959		$	1,010		$	905		$	902		1.0	%	7.4	%
Provision for credit losses	57			59			47			46			51			(3.4)		11.8
Noninterest expense	682			643			651			627			682			6.1		—
Net income (loss) attributable to Key	146			162			196			146			106			(9.9)		37.7
Average loans and leases	47,403			47,595			47,461			47,068			47,059			(.4)		.7
Average deposits	80,352			79,563			79,601			79,148			79,266			1.0		1.4
Net loan charge-offs	35			41			47			43			42			(14.6)		(16.7)
Net loan charge-offs to average total loans	.29		%	.34		%	.40		%	.37		%	.36		%	N/A		N/A
Nonperforming assets at period end	$	405		$	427		$	406		$	395		$	412		(5.2)		(1.7)
Return on average allocated equity	12.02		%	13.36		%	16.51		%	12.58		%	8.87		%	N/A		N/A
Average full-time equivalent employees	10,957			11,032			10,899			10,804			11,198			(.7)		(2.2)

Key Corporate Bank
Summary of operations
Total revenue (TE)	$	603		$	560		$	596		$	578		$	630		7.7	%	(4.3)	%
Provision for credit losses	(6)			(11)			19			18			17			N/M		N/M
Noninterest expense	353			303			299			302			326			16.5		8.3
Net income (loss) attributable to Key	221			190			222			181			224			16.3		(1.3)
Average loans and leases	37,462			38,040			37,721			37,705			36,746			(1.5)		1.9
Average loans held for sale	1,345			1,521			1,000			1,097			1,223			(11.6)		10.0
Average deposits	21,558			21,559			21,145			21,002			23,171			—		(7.0)
Net loan charge-offs	16			(9)			19			14			26			N/M		(38.5)
Net loan charge-offs to average total loans	.17		%	(.09)		%	.20		%	.15		%	.28		%	N/A		N/A
Nonperforming assets at period end	$	109		$	106		$	119		$	197		$	244		2.8		(55.3)
Return on average allocated equity	31.77		%	26.92		%	31.25		%	24.97		%	31.17		%	N/A		N/A
Average full-time equivalent employees	2,418			2,460			2,364			2,384			2,380			(1.7)		1.6