KEYCORP /NEW/ (Form: 8-K, Received: 01/19/2017 06:42:31)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 19, 2017



	(Exact name of registrant as specified in charter)

Ohio		001-11302	34-6542451
(State or other jurisdiction of incorporation)		Commission File Number	(I.R.S. Employer Identification No.)

127 Public Square, Cleveland, Ohio			44114-1306
(Address of principal executive offices)			(Zip Code)

(216) 689-3000
Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Results of Operations and Financial Condition .

On January 19, 2017 , KeyCorp issued a press release announcing its financial results for the three and twelve-month periods ended December 31, 2016 (the “Press Release”), and posted on its website its fourth quarter 2016 Supplemental Information Package (the “Supplemental Information Package”). The Press Release and Supplemental Information Package are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively.

The information in the preceding paragraph, as well as Exhibit 99.1 and Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”).

KeyCorp’s Consolidated Balance Sheets and Consolidated Statements of Income (collectively, the “Financial Statements”), included as part of the Press Release, are filed as Exhibit 99.3 to this report. Exhibit 99.3 is deemed “filed” for purposes of Section 18 of the Exchange Act and, therefore, may be incorporated by reference in filings under the Securities Act.

Financial Statements and Exhibits .

The following exhibits are furnished, or filed in the case of Exhibit 99.3, herewith:

Press Release, dated January 19, 2017 , announcing financial results for the three and twelve-month periods ended December 31, 2016 .

Supplemental Information Package reviewed during the conference call and webcast.

Financial Statements.



SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



		KEYCORP
		(Registrant)


Date: January 19, 2017		/s/ Douglas M. Schosser
		By: Douglas M. Schosser
		Chief Accounting Officer

FOR IMMEDIATE RELEASE

KEYCORP REPORTS FOURTH QUARTER 2016

NET INCOME OF $ 213 MILLION, OR $ .20 PER COMMON SHARE; EARNINGS PER COMMON SHARE OF $.31, EXCLUDING $.11 OF MERGER-RELATED CHARGES

4Q16 earnings per common share up 15% from the year-ago quarter, excluding merger-related charges

Successful integration of First Niagara with systems conversion completed during the quarter;

on track to realize financial targets

Positive operating leverage for 4Q16 and full-year 2016, excluding merger-related charges,

with pre-provision net revenue up 23% from 2015

Solid loan growth in 2016, driven by commercial loans and the First Niagara acquisition

Strong fee income, with another record quarter and year for investment banking

and debt placement fees

Return on average tangible common equity, excluding merger-related charges, of 12.5% for

CLEVELAND, January 19, 2017 – KeyCorp (NYSE: KEY) today announced fourth quarter net income from continuing operations attributable to Key common shareholders of $ 213 million , or $ .20 per common share, compared to $165 million , or $ .16 per common share, for the third quarter of 2016 , and $224 million , or $ .27 per common share, for the fourth quarter of 2015 . During the fourth quarter of 2016 , Key incurred merger-related charges totaling $198 million, or $.11 per common share, compared to $207 million, or $.14 per common share, in the third quarter of 2016 . Excluding merger-related charges, earnings per common share were $.31 for the fourth quarter of 2016 and $.30 for the third quarter of 2016 . Merger-related charges were $6 million in the fourth quarter of 2015 .

"Key’s fourth quarter results reflect continued momentum in our core businesses and the successful integration of the largest acquisition in our company’s history,” said Chairman and Chief Executive Officer Beth Mooney. “Excluding merger-related charges, we generated positive operating leverage for the quarter, our return on tangible common equity was 12.5% , and our cash efficiency ratio declined to 63.3%, reflecting solid performance across Key’s businesses and early progress on merger synergies.”

“We continued to see positive trends in the Community Bank and Corporate Bank this quarter, with both segments contributing to our overall revenue growth. Noninterest income increased as we continued to do more with our clients and see results from our investments,” Mooney continued. "We had our strongest quarter ever in investment banking and debt placement fees, and for the full year generated $482 million in fees, marking another record year, with results up 8% from last year.”

“The contribution from our First Niagara acquisition and quality of our new team members continue to exceed our expectations,” added Mooney. “As we continue to realize cost savings and begin to see traction on revenue opportunities, we remain confident in reaching our financial targets.”

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 2



Selected Financial Highlights

dollars in millions, except per share data											Change 4Q16 vs.
		4Q16			3Q16			4Q15			3Q16		4Q15
Income (loss) from continuing operations attributable to Key common shareholders		$	213		$	165		$	224		29.1	%	(4.9	)%
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution		.20			.16			.27			25.0		(25.9	)
Return on average total assets from continuing operations		.69		%	.55		%	.97		%	N/A		N/A
Common Equity Tier 1 ratio (non-GAAP) ^{(a), (b)}		9.59			9.56			10.94			N/A		N/A
Book value at period end		$	12.58		$	12.78		$	12.51		(1.6	)%	.6	%
Net interest margin (TE) from continuing operations		3.12		%	2.85		%	2.87		%	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 “Common Equity Tier 1.” 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.
(b)	12-31-16 ratio is estimated.

TE = Taxable Equivalent, N/A = Not Applicable



INCOME STATEMENT HIGHLIGHTS

Net interest income

dollars in millions								Change 4Q16 vs.
	4Q16		3Q16			4Q15		3Q16		4Q15
Net interest income (TE)	$	948	$	788		$	610	20.3	%	55.4	%
Merger-related charges	—		(6		)	—		N/M		N/M
Total net interest income excluding merger-related charges	$	948	$	794		$	610	19.4	%	55.4	%

TE = Taxable Equivalent

Fourth quarter 2016 net interest income included $92 million of purchase accounting accretion related to the acquisition of First Niagara, including $34 million related to refinement of third quarter 2016 purchase accounting estimates.

Taxable-equivalent net interest income was $948 million for the fourth quarter of 2016 , and the net interest margin was 3.12% , compared to taxable-equivalent net interest income of $610 million and a net interest margin of 2.87% for the fourth quarter of 2015 , reflecting the benefit from the First Niagara acquisition and ongoing business activity.

Compared to the third quarter of 2016 , taxable-equivalent net interest income increased by $160 million, and the net interest margin increased by 27 basis points. The increases in both net interest income and the net interest margin reflect the benefit from a full-quarter impact of the First Niagara acquisition and refinement of third quarter 2016 purchase accounting estimates. The net interest margin also benefited from the redeployment of excess liquidity into investment securities.

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

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Noninterest Income

dollars in millions								Change 4Q16 vs.
	4Q16		3Q16			4Q15		3Q16		4Q15
Trust and investment services income	$	123	$	122		$	105	.8	%	17.1	%
Investment banking and debt placement fees	157		156			127		.6		23.6
Service charges on deposit accounts	84		85			64		(1.2	)	31.3
Operating lease income and other leasing gains	21		6			15		250.0		40.0
Corporate services income	61		51			55		19.6		10.9
Cards and payments income	69		66			47		4.5		46.8
Corporate-owned life insurance income	40		29			36		37.9		11.1
Consumer mortgage income	6		6			2		—		200.0
Mortgage servicing fees	20		15			15		33.3		33.3
Net gains (losses) from principal investing	4		5			—		(20.0	)	N/M
Other income	33		8			19		312.5		73.7
Total noninterest income	$	618	$	549		$	485	12.6	%	27.4	%
Merger-related charges	9		(12		)	—		N/M		N/M
Total noninterest income excluding merger-related charges	$	609	$	561		$	485	8.6	%	25.6	%

N/M = Not Meaningful

Fourth quarter 2016 reported noninterest income includes a benefit of $9 million associated with merger-related charges that includes adjustments to purchase accounting, compared to charges of $12 million in the third quarter of 2016.

Key’s noninterest income was $ 618 million for the fourth quarter of 2016 , compared to $ 485 million for the year-ago quarter. The increase was driven by the acquisition of First Niagara, as well as continued positive momentum in Key’s core businesses. Investment banking and debt placement fees, cards and payments income, service charges on deposit accounts, and other income all contributed to the growth.

Compared to the third quarter of 2016 , noninterest income increase d by $ 69 million . The increase included a full-quarter impact of the First Niagara acquisition as well as adjustments to purchase accounting that have been recorded as merger-related charges. Operating lease income and other leasing gains increased $15 million, with prior quarter results impacted by lease residual losses. Additionally, corporate-owned life insurance income increased $11 million, reflecting normal seasonality. Other income was impacted by merger-related charges, which contributed $19 million to the linked quarter increase.



Noninterest Expense

dollars in millions							Change 4Q16 vs.
	4Q16		3Q16		4Q15		3Q16		4Q15
Personnel expense	$	648	$	594	$	429	9.1	%	51.0	%
Nonpersonnel expense	572		488		307		17.2		86.3
Total noninterest expense	$	1,220	$	1,082	$	736	12.8		65.8

Merger-related charges	207		189		6		9.5		N/M
Total noninterest expense excluding merger-related charges	$	1,013	$	893	$	730	13.4	%	38.8	%

N/M = Not Meaningful

Key’s noninterest expense was $ 1.2 billion for the fourth quarter of 2016 , which included $207 million of merger-related charges, as well as a pension settlement charge of $18 million. The merger-related charges were primarily made up of $80 million in personnel expense related to systems conversions, as well as fully-dedicated personnel for merger and integration efforts. The remaining $127 million of merger-related charges were nonpersonnel expense, largely recognized in net occupancy, computer processing, business

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January 19, 2017

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services and professional fees, and marketing expense. In the third quarter of 2016, noninterest expense included $189 million of merger-related charges, while $6 million of merger-related charges were incurred in the fourth quarter of 2015 .

Excluding merger-related charges, noninterest expense was $283 million higher than the fourth quarter of last year. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, as well as higher incentive and stock-based compensation. Additionally, Key incurred $14 million in an increased pension settlement charge, and intangible asset amortization increased $18 million.

Compared to the third quarter of 2016 , excluding merger-related charges, noninterest expense increase d by $120 million. The increase , reflected in both personnel and nonpersonnel expense, was largely driven by an extra month of impact from First Niagara, as well as a pension settlement charge of $18 million during the fourth quarter. Incentive and stock-based compensation also increased, primarily related to stock-based compensation plans, reflecting the impact of Key's higher share price. In the fourth quarter of 2016, intangible asset amortization increased $14 million.

BALANCE SHEET HIGHLIGHTS

In the fourth quarter of 2016 , Key had average assets of $ 136 billion compared to $ 96.1 billion in the fourth quarter of 2015 and $ 125.1 billion in the third quarter of 2016 , primarily reflecting the acquisition of First Niagara.

Average securities available-for-sale and held-to-maturity securities totaled $29.3 billion in the fourth quarter of 2016, compared to $19.1 billion in the fourth quarter of 2015 and $24.2 billion in the third quarter of 2016. The increase compared to both the year-ago quarter and prior quarter primarily reflects the impact of the First Niagara acquisition and the redeployment of excess liquidity into the investment portfolio.



Average Loans

dollars in millions							Change 4Q16 vs.
	4Q16		3Q16		4Q15		3Q16		4Q15
Commercial, financial and agricultural ^(a)	$	39,495	$	37,318	$	30,884	5.8	%	27.9	%
Other commercial loans	21,617		19,110		12,996		13.1		66.3
Home equity loans	12,812		11,968		10,418		7.1		23.0
Other consumer loans	11,436		9,301		5,278		23.0		116.7
Total loans	$	85,360	$	77,697	$	59,576	9.9	%	43.3	%

Commercial, financial and agricultural average loan balances include $ 119 million , $ 107 million , and $ 87 million of assets from commercial credit cards at December 31, 2016 , September 30, 2016 , and December 31, 2015 , respectively.

During the fourth quarter, Key adjusted the fair value mark on the First Niagara acquired loan portfolio from $686 million to $548 million.

Average loans were $85.4 billion for the fourth quarter of 2016 , an increase of $ 25.8 billion compared to the fourth quarter of 2015 , primarily reflecting the impact of the First Niagara acquisition and growth in commercial, financial and agricultural loans.

Compared to the third quarter of 2016 , average loans increased by $ 7.7 billion, with the change reflecting the full-quarter impact of the First Niagara acquisition, September branch divestitures, and the exit of acquired non-relationship commercial loans. On a period-end basis, Key’s loan portfolio increased $510

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January 19, 2017

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million, driven by growth in commercial, financial and agricultural loans and improvement in the fair value mark on the acquired portfolio.



Average Deposits

dollars in millions											Change 4Q16 vs.
		4Q16			3Q16			4Q15			3Q16		4Q15
Non-time deposits ^(a)		$	94,414		$	85,683		$	66,270		10.2	%	42.5	%
Certificates of deposit ($100,000 or more)		5,428			4,204			2,150			29.1		152.5
Other time deposits		4,849			5,031			3,047			(3.6	)	59.1
	Total deposits	$	104,691		$	94,918		$	71,467		10.3	%	46.5	%

Cost of total deposits ^(a)		.22		%	.21		%	.15		%	N/A		N/A

Excludes deposits in foreign office.

N/A = Not Applicable

Average deposits, excluding deposits in foreign office, totaled $ 104.7 billion for the fourth quarter of 2016 , an increase of $ 33.2 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and higher interest-bearing deposits resulting from core deposit growth in Key’s retail banking franchise and growth in escrow deposits from the commercial mortgage servicing business.

Compared to the third quarter of 2016 , average deposits increase d by $ 9.8 billion, reflecting the full-quarter impact of the First Niagara acquisition, core deposit growth in Key’s retail banking franchise, and deposit inflows from Key’s commercial clients.



ASSET QUALITY

dollars in millions										Change 4Q16 vs.
	4Q16			3Q16			4Q15			3Q16		4Q15
Net loan charge-offs	$	73		$	44		$	37		65.9	%	97.3	%
Net loan charge-offs to average total loans	.34		%	.23		%	.25		%	N/A		N/A
Nonperforming loans at period end ^(a)	$	625		$	723		$	387		(13.6	)	61.5
Nonperforming assets at period end ^(a)	676			760			403			(11.1	)	67.7
Allowance for loan and lease losses	858			865			796			(.8	)	7.8
Allowance for loan and lease losses to nonperforming loans ^(a)	137.3		%	119.6		%	205.7		%	N/A		N/A
Provision for credit losses	$	66		$	59		$	45		11.9	%	46.7	%

Nonperforming loan balances exclude $ 865 million , $ 959 million , and $11 million of purchased credit impaired loans at December 31, 2016 , September 30, 2016 , and December 31, 2015 , respectively.

N/A = Not Applicable

Key’s provision for credit losses was $ 66 million for the fourth quarter of 2016 , compared to $ 45 million for the fourth quarter of 2015 and $ 59 million for the third quarter of 2016 . Key’s allowance for loan and lease losses was $858 million , or 1.00% of total period-end loans, at December 31, 2016 , compared to 1.33 % at December 31, 2015 , and 1.01 % at September 30, 2016 .

Net loan charge-offs for the fourth quarter of 2016 totaled $ 73 million , or .34 % of average total loans, reflecting regulatory guidance on consumer bankruptcies and conforming First Niagara charge-off policies to Key. These results compare to $ 37 million, or .25 %, for the fourth quarter of 2015 , and $ 44 million, or .23 %, for the third quarter of 2016 .

At December 31, 2016 , Key’s nonperforming loans totaled $ 625 million , which represented .73 % of period-end portfolio loans. These results compare to .65% at December 31, 2015 , and .85 % at September 30,

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January 19, 2017

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2016 . Nonperforming assets at December 31, 2016 , totaled $ 676 million , and represented .79 % of period-end portfolio loans and OREO and other nonperforming assets. These results compare to .67% at December 31, 2015 , and .89% at September 30, 2016 .

Key’s estimated risk-based capital ratios included in the following table continued to exceed all “well-capitalized” regulatory benchmarks at December 31, 2016 .



Capital Ratios

	12/31/2016		9/30/2016		12/31/2015
Common Equity Tier 1 ^{(a), (b)}	9.59	%	9.56	%	10.94	%
Tier 1 risk-based capital ^(a)	10.95		10.53		11.35
Total risk based capital ^(a)	12.92		12.63		12.97
Tangible common equity to tangible assets ^(b)	8.09		8.27		9.98
Leverage ^(a)	9.89		10.22		10.72

12/31/2016 ratio is estimated.

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” and “Common Equity Tier 1.” 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.

As shown in the preceding table, at December 31, 2016 , Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 9.59 % and 10.95 %, respectively. In addition, the tangible common equity ratio was 8.09 % at December 31, 2016 .

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 9.47% at December 31, 2016 . 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 4Q16 vs.
		4Q16		3Q16		4Q15	3Q16		4Q15
Shares outstanding at beginning of period		1,082,055		842,703		835,285	28.4	%	29.5	%
Common shares repurchased		(4,380	)	(5,240	)	—	(16.4	)	N/M
Shares reissued (returned) under employee benefit plans		1,642		4,857		466	(66.2	)	252.4
Common shares issued to acquire First Niagara		(3	)	239,735		—	N/M		N/M
	Shares outstanding at end of period	1,079,314		1,082,055		835,751	(.3	)%	29.1	%

N/M = Not Meaningful

During the fourth quarter of 2016, Key completed $68 million of common share repurchases, including repurchases to offset issuances of common shares under our employee compensation plans, in accordance with Key's 2016 Capital Plan.

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January 19, 2017

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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 4Q16 vs.
		4Q16			3Q16			4Q15			3Q16		4Q15
Revenue from continuing operations (TE)
Key Community Bank		$	901		$	779		$	588		15.7	%	53.2	%
Key Corporate Bank		630			554			479			13.7		31.5
Other Segments		40			17			31			135.3		29.0
	Total segments	1,571			1,350			1,098			16.4		43.1
Reconciling Items		(5		)	(13		)	(3		)	N/M		N/M
	Total	$	1,566		$	1,337		$	1,095		17.1	%	43.0	%

Income (loss) from continuing operations attributable to Key
Key Community Bank		$	115		$	104		$	70		10.6	%	64.3	%
Key Corporate Bank		221			159			142			39.0		55.6
Other Segments		29			16			25			81.3		16.0
	Total segments	365			279			237			30.8		54.0
Reconciling Items ^(a)		(132		)	(108		)	(7		)	N/M		N/M
	Total	$	233		$	171		$	230		36.3	%	1.3	%

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

TE = Taxable Equivalent, N/M = Not Meaningful



Key Community Bank


dollars in millions								Change 4Q16 vs.
		4Q16		3Q16		4Q15		3Q16		4Q15
Summary of operations
Net interest income (TE)		$	628	$	530	$	388	18.5	%	61.9	%
Noninterest income		273		249		200		9.6		36.5
	Total revenue (TE)	901		779		588		15.7		53.2
Provision for credit losses		44		37		20		18.9		120.0
Noninterest expense		673		577		456		16.6		47.6
	Income (loss) before income taxes (TE)	184		165		112		11.5		64.3
Allocated income taxes (benefit) and TE adjustments		69		61		42		13.1		64.3
	Net income (loss) attributable to Key	$	115	$	104	$	70	10.6	%	64.3	%

Average balances
Loans and leases		$	47,032	$	41,548	$	30,925	13.2	%	52.1	%
Total assets		50,940		44,219		33,056		15.2		54.1
Deposits		79,357		69,397		52,219		14.4		52.0

Assets under management at period end		$	36,592	$	36,752	$	33,983	(.4	)%	7.7	%

TE = Taxable Equivalent

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Additional Key Community Bank Data

dollars in millions											Change 4Q16 vs.
		4Q16			3Q16			4Q15			3Q16		4Q15
Noninterest income
Trust and investment services income		$	88		$	86		$	73		2.3	%	20.5	%
Service charges on deposit accounts		71			70			54			1.4		31.5
Cards and payments income		59			55			44			7.3		34.1
Other noninterest income		55			38			29			44.7		89.7
	Total noninterest income	$	273		$	249		$	200		9.6	%	36.5	%

Average deposit balances
NOW and money market deposit accounts		$	44,368		$	38,417		$	28,862		15.5	%	53.7	%
Savings deposits		5,326			4,369			2,330			21.9		128.6
Certificates of deposit ($100,000 or more)		3,658			2,607			1,686			40.3		117.0
Other time deposits		4,836			4,943			3,045			(2.2	)	58.8
Deposits in foreign office		—			—			208			N/M		N/M
Noninterest-bearing deposits		21,169			19,061			16,088			11.1		31.6
	Total deposits	$	79,357		$	69,397		$	52,219		14.4	%	52.0	%

Home equity loans
Average balance		$	12,560		$	11,703		$	10,203
Combined weighted-average loan-to-value ratio (at date of origination)		71		%	70		%	71		%
Percent first lien positions		57			55			61

Other data
Branches		1,217			1,322			966
Automated teller machines		1,593			1,701			1,256

N/M = Not Meaningful

Key Community Bank Summary of Operations (4Q16 vs. 4Q15)

Positive operating leverage from prior year

Net income increased $45 million, or 64.3% from prior year

Average commercial, financial, and agricultural loans increased $4.9 billion, or 38.6% from the prior year

Average deposits increased $27.1 billion, or 52% from the prior year

Key Community Bank recorded net income attributable to Key of $115 million for the fourth quarter of 2016, compared to $70 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the impact of the First Niagara acquisition.

Taxable-equivalent net interest income increased by $240 million, or 61.9%, from the fourth quarter of 2015. The increase is primarily attributable to the acquisition of First Niagara. Average loans and leases increased $16.1 billion, or 52.1%, largely driven by a $4.9 billion, or 38.6% increase in commercial, financial, and agricultural loans. Additionally, average deposits increased $27.1 billion, or 52% from one year ago.

Noninterest income increased $73 million, or 36.5%, from the year-ago quarter, with positive trends in cards and payments income and service charges on deposit accounts.

The provision for credit losses increased by $24 million, or 120%, from the fourth quarter of 2015, primarily related to the acquisition of First Niagara, which was partially offset by enhancements to the approach utilized to determine the consumer allowance for loan and lease losses in the fourth quarter of 2016. Net loan charge-offs increased $19 million, primarily related to the acquisition of First Niagara.

Noninterest expense increased by $217 million, or 47.6%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as core business activity and investments. Personnel expense increased $73 million while non-personnel expense increased by $144 million, including higher intangible amortization expense and higher FDIC assessment expense.

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January 19, 2017

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Key Corporate Bank


dollars in millions								Change 4Q16 vs.
		4Q16		3Q16		4Q15		3Q16		4Q15
Summary of operations
Net interest income (TE)		$	332	$	276	$	224	20.3	%	48.2	%
Noninterest income		298		278		255		7.2		16.9
	Total revenue (TE)	630		554		479		13.7		31.5
Provision for credit losses		21		25		26		(16.0	)	(19.2	)
Noninterest expense		325		307		257		5.9		26.5
	Income (loss) before income taxes (TE)	284		222		196		27.9		44.9
Allocated income taxes and TE adjustments		63		63		51		—		23.5
	Net income (loss)	221		159		145		39.0		52.4
Less: Net income (loss) attributable to noncontrolling interests		—		—		3		N/M		N/M
	Net income (loss) attributable to Key	$	221	$	159	$	142	39.0	%	55.6	%

Average balances
Loans and leases		$	36,769	$	34,561	$	26,981	6.4	%	36.3	%
Loans held for sale		1,223		1,103		820		10.9		49.1
Total assets		43,209		40,581		32,639		6.5		32.4
Deposits		23,173		22,708		19,080		2.0	%	21.5	%

TE = Taxable Equivalent, N/M = Not Meaningful



Additional Key Corporate Bank Data

dollars in millions								Change 4Q16 vs.
		4Q16		3Q16		4Q15		3Q16		4Q15
Noninterest income
Trust and investment services income		$	35	$	36	$	32	(2.8	)%	9.4	%
Investment banking and debt placement fees		154		153		125		.7		23.2
Operating lease income and other leasing gains		19		10		13		90.0		46.2

Corporate services income		43		36		44		19.4		(2.3	)
Service charges on deposit accounts		13		15		10		(13.3	)	30.0
Cards and payments income		10		11		3		(9.1	)	233.3
	Payments and services income	66		62		57		6.5		15.8

Mortgage servicing fees		18		13		15		38.5		20.0
Other noninterest income		6		4		13		50.0		(53.8	)
	Total noninterest income	$	298	$	278	$	255	7.2	%	16.9	%

Key Corporate Bank Summary of Operations (4Q16 vs. 4Q15)

Record quarter and year for investment banking and debt placement fees

Net income increased $79 million, or 55.6% from the prior year

Average loans and leases increased $9.8 billion, or 36.3% from the prior year

Average deposits increased $4.1 billion, or 21.5% from the prior year

Key Corporate Bank recorded net income attributable to Key of $221 million for the fourth quarter of 2016 , compared to $142 million for the same period one year ago, reflecting the impact of the First Niagara acquisition as well as positive trends in Key's core businesses.

Taxable-equivalent net interest income increased by $108 million, or 48.2%, compared to the fourth quarter of 2015. Average loan and lease balances increased $9.8 billion, or 36.3%, from the year-ago quarter,

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 10

primarily driven by the First Niagara acquisition as well as growth in commercial, financial and agricultural loans. Average deposit balances increased $4.1 billion, or 21.5%, from the year-ago quarter, mostly driven by the First Niagara acquisition, as well as growth in commercial escrow deposits.

Noninterest income increased $43 million, or 16.9%, from the prior year. This growth was mostly due to investment banking and debt placement fees, which increased $29 million, or 23.2%, cards and payments income which increased $7 million, and operating lease income and other leasing gains which increased $6 million.

The provision for credit losses decreased $5 million, or 19.2%, compared to the fourth quarter of 2015.

Noninterest expense increased by $68 million, or 26.5%, from the fourth quarter of 2015. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was largely driven by the acquisition of First Niagara, higher performance-based compensation and various other items, including operating lease and cards and payments expenses.

Key Corporate Bank also continued to benefit from a higher volume of low income housing and energy tax credits.

Other Segments consist of Corporate Treasury, Key’s Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $29 million for the fourth quarter of 2016 , compared to $25 million for the same period last year, largely due to higher net gains from principal investing.

KeyCorp's roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $136.5 billion at December 31, 2016 .

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

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 11



CONTACTS:

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

Melanie S. Misconish
216.689.4545
Melanie_S_Misconish@KeyBank.com

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

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as “goal,” “objective,” “plan,” “expect,” “assume,” “anticipate,” “intend,” “project,” “believe,” “estimate,” or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key’s actual results to differ from those described in the forward-looking statements can be found in KeyCorp’s Form 10-K for the year ended December 31, 2015, 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.

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

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

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 12

Financial Supplement



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

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Page 13



Financial Highlights
(dollars in millions, except per share amounts)
			Three months ended
			12/31/2016			9/30/2016			12/31/2015
Summary of operations
	Net interest income (TE)		$	948		$	788		$	610
	Noninterest income		618			549			485
		Total revenue (TE)	1,566			1,337			1,095
	Provision for credit losses		66			59			45
	Noninterest expense		1,220			1,082			736
	Income (loss) from continuing operations attributable to Key		233			171			230
	Income (loss) from discontinued operations, net of taxes ^(a)		(4		)	1			(4		)
	Net income (loss) attributable to Key		229			172			226

	Income (loss) from continuing operations attributable to Key common shareholders		213			165			224
	Income (loss) from discontinued operations, net of taxes ^(a)		(4		)	1			(4		)
	Net income (loss) attributable to Key common shareholders		209			166			220

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.20		$	.17		$	.27
	Income (loss) from discontinued operations, net of taxes ^(a)		—			—			(.01		)
	Net income (loss) attributable to Key common shareholders ^(b)		.20			.17			.27

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.20			.16			.27
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)		—			—			(.01		)
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)		.19			.17			.26

	Cash dividends declared per common share		.085			.085			.075
	Book value at period end		12.58			12.78			12.51
	Tangible book value at period end		9.99			10.14			11.22
	Market price at period end		18.27			12.17			13.19

Performance ratios
	From continuing operations:
	Return on average total assets		.69		%	.55		%	.97		%
	Return on average common equity		6.22			5.09			8.51
	Return on average tangible common equity ^(c)		7.88			6.16			9.50
	Net interest margin (TE)		3.12			2.85			2.87
	Cash efficiency ratio ^(c)		76.2			80.0			66.4

	From consolidated operations:
	Return on average total assets		.67		%	.55		%	.93		%
	Return on average common equity		6.10			5.12			8.36
	Return on average tangible common equity ^(c)		7.73			6.20			9.33
	Net interest margin (TE)		3.09			2.83			2.84
	Loan to deposit ^(d)		85.2			84.7			87.8

Capital ratios at period end
	Key shareholders’ equity to assets		11.17		%	11.04		%	11.30		%
	Key common shareholders’ equity to assets		9.95			10.18			10.99
	Tangible common equity to tangible assets ^(c)		8.09			8.27			9.98
	Common Equity Tier 1 ^{(c), (e)}		9.59			9.56			10.94
	Tier 1 risk-based capital ^(e)		10.95			10.53			11.35
	Total risk-based capital ^(e)		12.92			12.63			12.97
	Leverage ^(e)		9.89			10.22			10.72

Asset quality — from continuing operations
	Net loan charge-offs		$	73		$	44		$	37
	Net loan charge-offs to average loans		.34		%	.23		%	.25		%
	Allowance for loan and lease losses		$	858		$	865		$	796
	Allowance for credit losses		912			918			852
	Allowance for loan and lease losses to period-end loans		1.00		%	1.01		%	1.33		%
	Allowance for credit losses to period-end loans		1.06			1.07			1.42
	Allowance for loan and lease losses to nonperforming loans ^(f)		137.3			119.6			205.7
	Allowance for credit losses to nonperforming loans ^(f)		146.1			127.0			220.2
	Nonperforming loans at period end ^(f)		$	625		$	723		$	387
	Nonperforming assets at period end ^(f)		676			760			403
	Nonperforming loans to period-end portfolio loans ^(f)		.73		%	.85		%	.65		%
	Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets ^(f)		.79			.89			.67

Trust and brokerage assets
	Assets under management		$	36,592		$	36,752		$	33,983
	Nonmanaged and brokerage assets		45,358			45,338			47,681

Other data
	Average full-time equivalent employees		18,849			17,079			13,359
	Branches		1,217			1,322			966

Taxable-equivalent adjustment			$	10		$	8		$	8

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January 19, 2017

Page 14



Financial Highlights (continued)
(dollars in millions, except per share amounts)
			Twelve months ended
			12/31/2016			12/31/2015
Summary of operations
	Net interest income (TE)		$	2,953		$	2,348
	Noninterest income		2,071			1,880
		Total revenue (TE)	5,024			4,256
	Provision for credit losses		266			166
	Noninterest expense		3,756			2,840
	Income (loss) from continuing operations attributable to Key		790			915
	Income (loss) from discontinued operations, net of taxes ^(a)		1			1
	Net income (loss) attributable to Key		791			916

	Income (loss) from continuing operations attributable to Key common shareholders		$	753		$	892
	Income (loss) from discontinued operations, net of taxes ^(a)		1			1
	Net income (loss) attributable to Key common shareholders		754			893

Per common share
	Income (loss) from continuing operations attributable to Key common shareholders		$	.81		$	1.06
	Income (loss) from discontinued operations, net of taxes ^(a)		—			—
	Net income (loss) attributable to Key common shareholders ^(b)		.81			1.06

	Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		.80			1.05
	Income (loss) from discontinued operations, net of taxes — assuming dilution ^(a)		—			—
	Net income (loss) attributable to Key common shareholders — assuming dilution ^(b)		.80			1.05

	Cash dividends paid		.330			.290

Performance ratios
	From continuing operations:
	Return on average total assets		.70		%	.99		%
	Return on average common equity		6.26			8.63
	Return on average tangible common equity ^(c)		7.39			9.64
	Net interest margin (TE)		2.92			2.88
	Cash efficiency ratio ^(c)		73.7			65.9

	From consolidated operations:
	Return on average total assets		.69		%	.97		%
	Return on average common equity		6.27			8.64
	Return on average tangible common equity ^(c)		7.40			9.65
	Net interest margin (TE)		2.91			2.85

Asset quality — from continuing operations
	Net loan charge-offs		206			142
	Net loan charge-offs to average total loans		.29		%	.24		%

Other data
	Average full-time equivalent employees		15,700			13,483

Taxable-equivalent adjustment			34			28

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. In February 2013, Key decided to sell its investment subsidiary, Victory Capital Management, and its broker-dealer affiliate, Victory Capital Advisors, to a private equity fund. As a result of these decisions, Key has accounted for these businesses as discontinued operations.

Earnings per share may not foot due to rounding.

The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity,” “Common Equity Tier 1,” 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.

Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits (excluding deposits in foreign office).

12/31/2016 ratio is estimated.

Nonperforming loan balances exclude, $865 million , $ 959 million , and $11 million of purchased credit impaired loans at December 31, 2016 , September 30, 2016 , and December 31, 2015 , respectively.

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

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 15

GAAP to Non-GAAP Reconciliations

(dollars in millions)

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

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.

Common Equity Tier 1 is not formally defined by GAAP and is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess Key’s capital adequacy using tangible common equity and Common Equity Tier 1, management believes it is useful to enable investors to assess Key’s capital adequacy on these same bases. The table also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

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. The table below shows the computation of merger-related charges, noninterest expense excluding merger-related charges, earnings per common share excluding merger-related charges, return on average tangible common equity excluding merger-related charges, return on average assets from continuing operations excluding merger-related charges, and pre-provision net revenue excluding merger-related charges. Management believes that eliminating the effects of the merger-related charges 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
				12/31/2016			9/30/2016			12/31/2015
Tangible common equity to tangible assets at period end
	Key shareholders’ equity (GAAP)			$	15,240		$	14,996		$	10,746
	Less:	Intangible assets ^(a)		2,788			2,855			1,080
		Preferred Stock ^(b)		1,640			1,150			281
		Tangible common equity (non-GAAP)		$	10,812		$	10,991		$	9,385

	Total assets (GAAP)			$	136,453		$	135,805		$	95,131
	Less:	Intangible assets ^(a)		2,788			2,855			1,080
		Tangible assets (non-GAAP)		$	133,665		$	132,950		$	94,051

	Tangible common equity to tangible assets ratio (non-GAAP)			8.09		%	8.27		%	9.98		%

Common Equity Tier 1 at period end
	Key shareholders’ equity (GAAP)			$	15,240		$	14,996		$	10,746
	Less:	Preferred Stock ^(b)		1,640			1,150			281
		Common Equity Tier 1 capital before adjustments and deductions		13,600			13,846			10,465
	Less:	Goodwill, net of deferred taxes		2,416			2,450			1,034
		Intangible assets, net of deferred taxes		159			216			26
		Deferred tax assets		6			6			1
		Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes		(185		)	101			(58		)
		Accumulated gains (losses) on cash flow hedges, net of deferred taxes		(53		)	39			(20		)
		Amounts in accumulated other comprehensive income (loss) attributed to
			pension and postretirement benefit costs, net of deferred taxes	(339		)	(359		)	(365		)
		Total Common Equity Tier 1 capital ^(c)		$	11,596		$	11,393		$	9,847

	Net risk-weighted assets (regulatory) ^(c)			$	120,887		$	119,120		$	89,980

	Common Equity Tier 1 ratio (non-GAAP) ^(c)			9.59		%	9.56		%	10.94		%

Pre-provision net revenue
	Net interest income (GAAP)			$	938		$	780		$	602
	Plus:	Taxable-equivalent adjustment		10			8			8
		Noninterest income		618			549			485
	Less:	Noninterest expense		1,220			1,082			736
		Pre-provision net revenue from continuing operations (non-GAAP)		$	346		$	255		$	359

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January 19, 2017

Page 16



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			12/31/2016			9/30/2016			12/31/2015
Average tangible common equity
	Average Key shareholders’ equity (GAAP)		$	14,901		$	13,552		$	10,731
	Less:	Intangible assets (average) ^(d)	2,874			2,255			1,082
		Preferred Stock (average)	1,274			648			290
		Average tangible common equity (non-GAAP)	$	10,753		$	10,649		$	9,359

Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	213		$	165		$	224
	Average tangible common equity (non-GAAP)		10,753			10,649			9,359

	Return on average tangible common equity from continuing operations (non-GAAP)		7.88		%	6.16		%	9.50		%

Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	209		$	166		$	220
	Average tangible common equity (non-GAAP)		10,753			10,649			9,359

	Return on average tangible common equity consolidated (non-GAAP)		7.73		%	6.20		%	9.33		%

Return on average tangible common equity from continuing operations excluding merger-related charges
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	213		$	165		$	224
	Merger-related charges, after tax		124			132			4
	Net income (loss) from continuing operations attributable to Key common shareholders excluding
		merger-related charges (non-GAAP)	$	337		$	297		$	228

	Average tangible common equity (non-GAAP)		$	10,753		$	10,649		$	9,359

	Return on average tangible common equity from continuing operations excluding merger-related
		charges (non-GAAP)	12.47		%	11.10		%	9.67		%

Return on average tangible common equity consolidated excluding merger-related charges
	Net income (loss) attributable to Key common shareholders (GAAP)		$	209		$	166		$	220
	Merger-related charges, after tax		124			132			4
	Net income (loss) attributable to Key common shareholders excluding merger-related charges (non-GAAP)		$	333		$	298		$	224

	Average tangible common equity (non-GAAP)		$	10,753		$	10,649		$	9,359

	Return on average tangible common equity consolidated excluding merger-related charges (non-GAAP)		12.32		%	11.13		%	9.50		%

Noninterest expense excluding merger-related charges
	Noninterest expense (GAAP)		$	1,220		$	1,082		$	736
	Less:	Merger-related charges	207			189			6
		Noninterest expense excluding merger-related charges (non-GAAP)	$	1,013		$	893		$	730

Earnings per common share (EPS) excluding merger-related charges
	EPS from continuing operations attributable to Key common shareholders — assuming dilution		$	.20		$	.16		$	.27
	Add:	EPS impact of merger-related charges	.11			.14			—
		EPS from continuing operations attributable to Key common shareholders
		excluding merger-related charges (non-GAAP)	$	.31		$	.30		$	.27

Cash efficiency ratio
	Noninterest expense (GAAP)		$	1,220		$	1,082		$	736
	Less:	Intangible asset amortization	27			13			9
		Adjusted noninterest expense (non-GAAP)	1,193			1,069			727
	Less:	Merger-related charges	207			189			6
		Adjusted noninterest expense excluding merger-related charges (non-GAAP)	$	986		$	880		$	721

	Net interest income (GAAP)		$	938		$	780		$	602
	Plus:	Taxable-equivalent adjustment	10			8			8
		Noninterest income	618			549			485
		Total taxable-equivalent revenue (non-GAAP)	1,566			1,337			1,095
	Add:	Merger-related charges	(9		)	18			—
		Adjusted noninterest income excluding merger-related charges (non-GAAP)	$	1,557		$	1,355		$	1,095

	Cash efficiency ratio (non-GAAP)		76.2		%	80.0		%	66.4		%

	Cash efficiency ratio excluding merger-related charges (non-GAAP)		63.3		%	64.9		%	65.8		%

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January 19, 2017

Page 17



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Three months ended
			12/31/2016			9/30/2016			12/31/2015
Return on average total assets from continuing operations excluding merger-related charges
	Income from continuing operations attributable to Key (GAAP)		$	233		$	171		$	230
	Add:	Merger-related charges, after tax	124			132			4
		Income from continuing operations attributable to Key excluding merger-related
		charges, after tax (non-GAAP)	$	357		$	303		$	234

	Average total assets from continuing operations (GAAP)		$	134,428		$	123,469		$	94,117

	Return on average total assets from continuing operations excluding merger-related
		charges (non-GAAP)	1.06		%	.98		%	.99		%

			Three months ended
			12/31/2016
Common Equity Tier 1 under the Regulatory Capital Rules (“RCR”) (estimates)
	Common Equity Tier 1 under current RCR		$	11,596
	Adjustments from current RCR to the fully phased-in RCR:
		Deferred tax assets and other intangible assets ^(e)	(110		)
		Common Equity Tier 1 anticipated under the fully phased-in RCR ^(f)	$	11,486

	Net risk-weighted assets under current RCR		$	120,887
	Adjustments from current RCR to the fully phased-in RCR:
		Mortgage servicing assets ^(g)	576
		Volcker funds	(185		)
		All other assets	(2		)
		Total risk-weighted assets anticipated under the fully phased-in RCR ^(f)	$	121,276

	Common Equity Tier 1 ratio under the fully phased-in RCR ^(f)		9.47		%

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 18



GAAP to Non-GAAP Reconciliations (continued)
(dollars in millions)
			Twelve months ended
			12/31/2016			12/31/2015
Pre-provision net revenue excluding merger-related charges
	Net interest income (GAAP)		$	2,919		$	2,348
	Plus:	Taxable-equivalent adjustment	34			28
		Noninterest income (GAAP)	2,071			1,880
	Less:	Noninterest expense (GAAP)	3,756			2,840
	Pre-provision net revenue from continuing operations (non-GAAP)		$	1,268		$	1,416
	Less:	Merger-related charges	474			6
	Pre-provision net revenue from continuing operations excluding merger-related charges (non-GAAP)		$	1,742		$	1,422

Average tangible common equity
	Average Key shareholders’ equity (GAAP)		$	12,647		$	10,626
	Less:	Intangible assets (average) ^(h)	1,825			1,085
		Preferred Stock (average)	627			290
		Average tangible common equity (non-GAAP)	$	10,195		$	9,251

Return on average tangible common equity from continuing operations
	Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	753		$	892
	Average tangible common equity (non-GAAP)		10,195			9,251

	Return on average tangible common equity from continuing operations (non-GAAP)		7.39		%	9.64		%

Return on average tangible common equity consolidated
	Net income (loss) attributable to Key common shareholders (GAAP)		$	754		$	893
	Average tangible common equity (non-GAAP)		10,195			9,251

	Return on average tangible common equity consolidated (non-GAAP)		7.40		%	9.65		%

Cash efficiency ratio
	Noninterest expense (GAAP)		$	3,756		$	2,840
	Less:	Intangible asset amortization (GAAP)	55			36
		Adjusted noninterest expense (non-GAAP)	3,701			2,804
	Less:	Merger-related charges	465			6
		Adjusted noninterest expense excluding merger-related charges (non-GAAP)	$	3,236		$	2,798

	Net interest income (GAAP)		$	2,919		$	2,348
	Plus:	Taxable-equivalent adjustment	34			28
		Noninterest income (GAAP)	2,071			1,880
		Total taxable-equivalent revenue (non-GAAP)	5,024			4,256
	Plus:	Merger-related charges	9			—
		Adjusted noninterest income excluding merger-related charges (non-GAAP)	$	5,033		$	4,256

	Cash efficiency ratio (non-GAAP)		73.7		%	65.9		%

	Cash efficiency ratio excluding merger-related charges (non-GAAP)		64.3		%	65.9		%

Return on average total assets from continuing operations excluding merger-related charges
	Income from continuing operations attributable to Key (GAAP)		$	790		$	915
	Plus:	Merger-related charges, after tax	299			4
		Income from continuing operations attributable to Key excluding merger-related
		charges, after tax (non-GAAP)	$	1,089		$	919

	Average total assets from continuing operations (GAAP)		$	112,537		$	94,117

	Return on average total assets from continuing operations excluding merger-related
		charges (non-GAAP)	.97		%	.98		%

For the three months ended December 31, 2016 , September 30, 2016 , and December 31, 2015 , intangible assets exclude $42 million , $51 million, and $45 million, respectively, of period-end purchased credit card receivables.

Net of capital surplus.

12/31/16 amount is estimated.

For the three months ended December 31, 2016 , September 30, 2016 , and December 31, 2015 , average intangible assets exclude $46 million, $47 million, and $47 million, respectively, of average purchased credit card receivables.

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.

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.”

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

For the twelve months ended December 31, 2016 , and December 31, 2015 , average intangible assets exclude $43 million and $55 million, respectively, of average purchased credit card receivables.

GAAP = U.S. generally accepted accounting principles

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 19



Consolidated Balance Sheets
(dollars in millions)

			12/31/2016			9/30/2016			12/31/2015
Assets
	Loans		$	86,038		$	85,528		$	59,876
	Loans held for sale		1,104			1,137			639
	Securities available for sale		20,212			20,540			14,218
	Held-to-maturity securities		10,232			8,995			4,897
	Trading account assets		867			926			788
	Short-term investments		2,775			3,216			2,707
	Other investments		738			747			655
		Total earning assets	121,966			121,089			83,780
	Allowance for loan and lease losses		(858		)	(865		)	(796		)
	Cash and due from banks		677			749			607
	Premises and equipment		978			1,023			779
	Operating lease assets		540			430			340
	Goodwill		2,446			2,480			1,060
	Other intangible assets		384			426			65
	Corporate-owned life insurance		4,068			4,035			3,541
	Derivative assets		803			1,304			619
	Accrued income and other assets		3,864			3,480			3,290
	Discontinued assets		1,585			1,654			1,846
		Total assets	$	136,453		$	135,805		$	95,131

Liabilities
	Deposits in domestic offices:
		NOW and money market deposit accounts	$	54,590		$	56,432		$	37,089
		Savings deposits	6,491			5,335			2,341
		Certificates of deposit ($100,000 or more)	5,483			4,601			2,392
		Other time deposits	4,698			5,793			3,127
		Total interest-bearing deposits	71,262			72,161			44,949
		Noninterest-bearing deposits	32,825			32,024			26,097
	Deposits in foreign office — interest-bearing		—			—			—
		Total deposits	104,087			104,185			71,046
	Federal funds purchased and securities sold under repurchase agreements		1,502			602			372
	Bank notes and other short-term borrowings		808			809			533
	Derivative liabilities		636			850			632
	Accrued expense and other liabilities		1,796			1,739			1,605
	Long-term debt		12,384			12,622			10,184
		Total liabilities	121,213			120,807			84,372

Equity
	Preferred stock		1,665			1,165			290
	Common shares		1,257			1,257			1,017
	Capital surplus		6,385			6,359			3,922
	Retained earnings		9,378			9,260			8,922
	Treasury stock, at cost		(2,904		)	(2,863		)	(3,000		)
	Accumulated other comprehensive income (loss)		(541		)	(182		)	(405		)
		Key shareholders’ equity	15,240			14,996			10,746
	Noncontrolling interests		—			2			13
		Total equity	15,240			14,998			10,759
Total liabilities and equity			$	136,453		$	135,805		$	95,131

Common shares outstanding (000)			1,079,314			1,082,055			835,751

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 20



Consolidated Statements of Income
(dollars in millions, except per share amounts)
			Three months ended								Twelve months ended
			12/31/2016			9/30/2016		12/31/2015			12/31/2016			12/31/2015
Interest income
	Loans		$	898		$	746	$	552		$	2,773		$	2,149
	Loans held for sale		11			10		8			34			37
	Securities available for sale		92			88		76			329			293
	Held-to-maturity securities		44			30		24			122			96
	Trading account assets		6			4		6			23			21
	Short-term investments		5			7		3			22			8
	Other investments		6			5		4			16			18
		Total interest income	1,062			890		673			3,319			2,622

Interest expense
	Deposits		57			49		26			171			105
	Federal funds purchased and securities sold under repurchase agreements		1			—		—			1			—
	Bank notes and other short-term borrowings		3			2		3			10			9
	Long-term debt		63			59		42			218			160
		Total interest expense	124			110		71			400			274

Net interest income			938			780		602			2,919			2,348
Provision for credit losses			66			59		45			266			166
Net interest income after provision for credit losses			872			721		557			2,653			2,182

Noninterest income
	Trust and investment services income		123			122		105			464			433
	Investment banking and debt placement fees		157			156		127			482			445
	Service charges on deposit accounts		84			85		64			302			256
	Operating lease income and other leasing gains		21			6		15			62			73
	Corporate services income		61			51		55			215			198
	Cards and payments income		69			66		47			233			183
	Corporate-owned life insurance income		40			29		36			125			127
	Consumer mortgage income		6			6		2			17			12
	Mortgage servicing fees		20			15		15			57			48
	Net gains (losses) from principal investing		4			5		—			20			51
	Other income ^{(a), (b)}		33			8		19			94			54
		Total noninterest income	618			549		485			2,071			1,880

Noninterest expense
	Personnel		648			594		429			2,073			1,652
	Net occupancy		112			73		64			305			255
	Computer processing		97			70		43			255			164
	Business services and professional fees		78			76		44			235			159
	Equipment		30			26		22			98			88
	Operating lease expense		17			15		13			59			47
	Marketing		35			32		17			101			57
	FDIC assessment		23			21		8			61			32
	Intangible asset amortization		27			13		9			55			36
	OREO expense, net		3			3		1			9			6
	Other expense		150			159		86			505			344
		Total noninterest expense	1,220			1,082		736			3,756			2,840
Income (loss) from continuing operations before income taxes			270			188		306			968			1,222
	Income taxes		38			16		73			179			303
Income (loss) from continuing operations			232			172		233			789			919
	Income (loss) from discontinued operations, net of taxes		(4		)	1		(4		)	1			1
Net income (loss)			228			173		229			790			920
	Less: Net income (loss) attributable to noncontrolling interests		(1		)	1		3			(1		)	4
Net income (loss) attributable to Key			$	229		$	172	$	226		$	791		$	916

Income (loss) from continuing operations attributable to Key common shareholders			$	213		$	165	$	224		$	753		$	892
Net income (loss) attributable to Key common shareholders			209			166		220			754			893

Per common share
Income (loss) from continuing operations attributable to Key common shareholders			$	.20		$	.17	$	.27		$	.81		$	1.06
Income (loss) from discontinued operations, net of taxes			—			—		(.01		)	—			—
Net income (loss) attributable to Key common shareholders ^(c)			.20			.17		.27			.81			1.06

Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders			$	.20		$	.16	$	.27		$	.80		$	1.05
Income (loss) from discontinued operations, net of taxes			—			—		(.01		)	—			—
Net income (loss) attributable to Key common shareholders ^(c)			.19			.17		.26			.80			1.05

Cash dividends declared per common share			$	.085		$	.085	$	.075		$	.33		$	.29

Weighted-average common shares outstanding (000)			1,067,771			982,080		828,206			927,816			836,846
	Effect of common share options and other stock awards		15,946			12,580		7,733			10,720			7,643
Weighted-average common shares and potential common shares outstanding (000) ^(d)			1,083,717			994,660		835,939			938,536			844,489

(a)	For the three months ended December 31, 2016, net securities gains totaled $6 million. For the three months ended September 30, 2016, net securities losses totaled $6 million. For the three months ended December 31, 2015, net securities gains totaled less than $1 million. For the three months ended December 31, 2016, September 30, 2016, and December 31,2015, Key did not have any impairment losses related to securities.
(b)	For the twelve months ended December 31, 2016 and December 31, 2015, net securities gains (losses) totaled less than $1 million. For the twelve months ended December 31, 2016, and December 31,2015, Key did not have any impairment losses related to securities.
(c)	Earnings per share may not foot due to rounding.
(d)	Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 21



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

			Fourth Quarter 2016							Third Quarter 2016							Fourth Quarter 2015
			Average							Average							Average
			Balance			Interest ^(a)		Yield/Rate ^(a)		Balance			Interest ^(a)		Yield/Rate ^(a)		Balance			Interest ^(a)		Yield/Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial, financial and agricultural ^(d)		$	39,495		$	365	3.68	%	$	37,318		$	317	3.38	%	$	30,884		$	253	3.25	%
	Real estate — commercial mortgage		14,771			168		4.50		12,879			126		3.91		8,019			75		3.70
	Real estate — construction		2,222			37		6.72		1,723			21		4.67		1,067			10		3.65
	Commercial lease financing		4,624			50		4.34		4,508			38		3.33		3,910			36		3.68
		Total commercial loans	61,112			620		4.04		56,428			502		3.54		43,880			374		3.38
	Real estate — residential mortgage		5,554			57		4.17		4,453			45		3.96		2,252			24		4.18
	Home equity loans		12,812			129		3.99		11,968			122		4.07		10,418			105		3.97
	Consumer direct loans		1,785			31		6.84		1,666			30		7.20		1,605			26		6.50
	Credit cards		1,088			29		10.78		996			27		10.80		780			21		10.66
	Consumer indirect loans		3,009			42		5.50		2,186			28		5.23		641			10		6.45
		Total consumer loans	24,248			288		4.73		21,269			252		4.73		15,696			186		4.69
		Total loans	85,360			908		4.24		77,697			754		3.86		59,576			560		3.72
	Loans held for sale		1,323			11		3.39		1,152			10		3.48		841			8		4.13
	Securities available for sale ^{(b), (e)}		20,145			92		1.82		17,972			88		1.99		14,168			76		2.13
	Held-to-maturity securities ^(b)		9,121			44		1.95		6,250			30		1.86		4,908			24		1.99
	Trading account assets		892			6		2.54		860			4		2.12		822			6		3.31
	Short-term investments		3,717			5		.49		5,911			7		.48		3,483			3		.28
	Other investments ^(e)		741			6		3.23		717			5		2.74		674			4		2.71
		Total earning assets	121,299			1,072		3.52		110,559			898		3.24		84,472			681		3.21
	Allowance for loan and lease losses		(855		)					(847		)					(790		)
	Accrued income and other assets		13,984							13,757							10,435
	Discontinued assets		1,610							1,676							1,947
		Total assets	$	136,038						$	125,145						$	96,064
Liabilities
	NOW and money market deposit accounts		$	55,444		31		.22		$	51,318		25		.20		$	37,640		14		.15
	Savings deposits		6,546			2		.10		4,521			1		.07		2,338			—		.02
	Certificates of deposit ($100,000 or more) ^(f)		5,428			15		1.11		4,204			12		1.15		2,150			7		1.31
	Other time deposits		4,849			9		.77		5,031			11		.85		3,047			5		.72
	Deposits in foreign office		—			—		—		—			—		—		354			—		.24
		Total interest-bearing deposits	72,267			57		.32		65,074			49		.30		45,529			26		.24
	Federal funds purchased and securities sold under repurchase agreements		592			1		.11		578			—		.16		392			—		.02
	Bank notes and other short-term borrowings		934			3		1.11		1,186			2		.91		556			3		1.65
	Long-term debt ^{(f), (g)}		10,914			63		2.38		10,415			59		2.31		8,316			42		2.05
		Total interest-bearing liabilities	84,707			124		.58		77,253			110		.57		54,793			71		.52
	Noninterest-bearing deposits		32,424							29,844							26,292
	Accrued expense and other liabilities		2,394							2,818							2,289
	Discontinued liabilities ^(g)		1,610							1,676							1,947
		Total liabilities	121,135							111,591							85,321
Equity
	Key shareholders’ equity		14,901							13,552							10,731
	Noncontrolling interests		2							2							12
		Total equity	14,903							13,554							10,743
		Total liabilities and equity	$	136,038						$	125,145						$	96,064
Interest rate spread (TE)								2.94	%						2.67	%						2.69	%
Net interest income (TE) and net interest margin (TE)						948		3.12	%				788		2.85	%				610		2.87	%
TE adjustment ^(b)						10							8							8
	Net interest income, GAAP basis					$	938						$	780						$	602

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.

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%.

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

Commercial, financial and agricultural average balances include $ 119 million , $ 107 million , and $ 87 million of assets from commercial credit cards for the three months ended December 31, 2016 , September 30, 2016 , and December 31, 2015 , respectively.

Yield is calculated on the basis of amortized cost.

Rate calculation excludes basis adjustments related to fair value hedges.

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 Fourth Quarter 2016 Profit

January 19, 2017

Page 22



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

			Twelve months ended December 31, 2016							Twelve months ended December 31, 2015
			Average							Average
			Balance			Interest ^(a)		Yield/Rate ^(a)		Balance			Interest ^(a)		Yield/ Rate ^(a)
Assets
	Loans: ^{(b), (c)}
	Commercial, financial and agricultural ^(d)		$	35,276		$	1,215	3.45	%	$	29,658		$	953	3.21	%
	Real estate — commercial mortgage		11,063			451		4.07		8,020			295		3.68
	Real estate — construction		1,460			76		5.22		1,143			43		3.73
	Commercial lease financing		4,261			161		3.78		3,976			143		3.60
		Total commercial loans	52,060			1,903		3.66		42,797			1,434		3.35
	Real estate — residential mortgage		3,632			148		4.09		2,244			95		4.21
	Home equity loans		11,286			456		4.04		10,503			418		3.98
	Consumer direct loans		1,661			113		6.79		1,580			103		6.54
	Credit cards		916			98		10.73		752			81		10.76
	Consumer indirect loans		1,593			89		5.58		718			46		6.43
	Total consumer loans		19,088			904		4.74		15,797			743		4.70
	Total loans		71,148			2,807		3.95		58,594			2,177		3.71
	Loans held for sale		979			34		3.51		959			37		3.85
	Securities available for sale ^{(b), (e)}		16,661			329		1.98		13,720			293		2.14
	Held-to-maturity securities ^(b)		6,275			122		1.94		4,936			96		1.95
	Trading account assets		884			23		2.59		761			21		2.80
	Short-term investments		4,656			22		.47		2,843			8		.27
	Other investments ^(e)		679			16		2.37		706			18		2.63
	Total earning assets		101,282			3,353		3.31		82,519			2,650		3.21
	Allowance for loan and lease losses		(835		)					(791		)
	Accrued income and other assets		12,090							10,298
	Discontinued assets		1,707							2,132
	Total assets		$	114,244						$	94,158
Liabilities
	NOW and money market deposit accounts		$	46,079		87		.19		$	36,258		56		.15
	Savings deposits		3,957			3		.07		2,372			—		.02
	Certificates of deposit ($100,000 or more) ^(f)		3,911			48		1.22		2,041			26		1.28
	Other time deposits		4,088			33		.81		3,115			22		.71
	Deposits in foreign office		—			—		—		489			1		.23
		Total interest-bearing deposits	58,035			171		.30		44,275			105		.24
	Federal funds purchased and securities sold under repurchase agreements		487			1		.10		632			—		.04
	Bank notes and other short-term borrowings		852			10		1.18		572			9		1.52
	Long-term debt ^{(f), (g)}		9,802			218		2.29		7,332			160		2.24
		Total interest-bearing liabilities	69,176			400		.58		52,811			274		.52
	Noninterest-bearing deposits		28,317							26,355
	Accrued expense and other liabilities		2,393							2,222
	Discontinued liabilities ^(g)		1,706							2,132
	Total liabilities		101,592							83,520
Equity
	Key shareholders’ equity		12,647							10,626
	Noncontrolling interests		5							12
	Total equity		12,652							10,638
	Total liabilities and equity		$	114,244						$	94,158
Interest rate spread (TE)								2.73	%						2.69	%
Net interest income (TE) and net interest margin (TE)						2,953		2.92	%				2,376		2.88	%
TE adjustment ^(b)						34							28
	Net interest income, GAAP basis					$	2,919						$	2,348

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.

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%.

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

Commercial, financial and agricultural average balances include $ 99 million and $ 88 million of assets from commercial credit cards for the twelve months ended December 31, 2016 , and December 31, 2015 , respectively.

Yield is calculated on the basis of amortized cost.

Rate calculation excludes basis adjustments related to fair value hedges.

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

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 23



Noninterest Expense
(dollars in millions)

	Three months ended						Twelve months ended
	12/31/2016		9/30/2016		12/31/2015		12/31/2016		12/31/2015
Personnel ^(a)	$	648	$	594	$	429	$	2,073	$	1,652
Net occupancy	112		73		64		305		255
Computer processing	97		70		43		255		164
Business services and professional fees	78		76		44		235		159
Equipment	30		26		22		98		88
Operating lease expense	17		15		13		59		47
Marketing	35		32		17		101		57
FDIC assessment	23		21		8		61		32
Intangible asset amortization	27		13		9		55		36
OREO expense, net	3		3		1		9		6
Other expense	150		159		86		505		344
Total noninterest expense	$	1,220	$	1,082	$	736	$	3,756	$	2,840
Merger-related charges ^(b)	207		189		6		465		6
Total noninterest expense excluding merger-related charges	$	1,013	$	893	$	730	$	3,291	$	2,834
Average full-time equivalent employees ^(c)	18,849		17,079		13,359		15,700		13,483

Additional detail provided in Personnel Expense table below.

Additional detail provide in Merger-Related Charges table below.

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
	12/31/2016		9/30/2016			12/31/2015		12/31/2016			12/31/2015
Salaries and contract labor	$	352	$	329		$	244	$	1,191		$	958
Incentive and stock-based compensation	185		162			115		537			410
Employee benefits	98		73			64		297			266
Severance	13		30			6		48			18
Total personnel expense	$	648	$	594		$	429	$	2,073		$	1,652
Merger-related charges	80		97			—		228			—
Total personnel expense excluding merger-related charges	$	568	$	497		$	429	$	1,845		$	1,652



Merger-Related Charges
(in millions)

	Three months ended							Twelve months ended
	12/31/2016		9/30/2016			12/31/2015		12/31/2016			12/31/2015
Net interest income	—		$	(6	)	—		$	(6	)	—

Operating lease income and other leasing gains	—		(2		)	—		(2		)	—
Other income	$	9	(10		)	—		(1		)	—
Noninterest income	9		(12		)	—		(3		)	—

Personnel ^(a)	80		97			—		228			—
Net occupancy	29		—			—		29			—
Business services and professional fees	22		32			$	5	66			$	5
Computer processing	38		15			—		53			—
Marketing	13		9			—		26			—
Other nonpersonnel expense	25		36			1		63			1
Noninterest expense	207		189			6		465			6
Total merger-related charges	$	198	$	207		$	6	$	474		$	6

Personnel expense includes severance, technology development related to systems conversion, and fully-dedicated personnel for merger and integration efforts.

KeyCorp Reports Fourth Quarter 2016 Profit

January 19, 2017

Page 24



Loan Composition
(dollars in millions)

								Percent change 12/31/16 vs.
		12/31/2016		9/30/2016		12/31/2015		9/30/2016		12/31/2015
Commercial, financial and agricultural ^(a)		$	39,768	$	39,433	$	31,240	.8	%	27.3	%
Commercial real estate:
	Commercial mortgage	15,111		14,979		7,959		.9		89.9
	Construction	2,345		2,189		1,053		7.1		122.7
	Total commercial real estate loans	17,456		17,168		9,012		1.7		93.7
Commercial lease financing ^(b)		4,685		4,783		4,020		(2.0	)	16.5
	Total commercial loans	61,909		61,384		44,272		.9		39.8
Residential — prime loans:
	Real estate — residential mortgage	5,547		5,509		2,242		.7		147.4
	Home equity loans	12,674		12,757		10,335		(.7	)	22.6
Total residential — prime loans		18,221		18,266		12,577		(.2	)	44.9
Consumer direct loans		1,788		1,764		1,600		1.4		11.8
Credit cards		1,111		1,084		806		2.5		37.8
Consumer indirect loans		3,009		3,030		621		(.7	)	384.5
	Total consumer loans	24,129		24,144		15,604		(.1	)	54.6
	Total loans ^{(c), (d)}	$	86,038	$	85,528	$	59,876	.6	%	43.7	%


99.1	Press Release, dated January 19, 2017 , announcing financial results for the three and twelve-month periods ended December 31, 2016 .


99.2	Supplemental Information Package reviewed during the conference call and webcast.


(a)	Loan balances include $116 million, $117 million, and $85 million of commercial credit card balances at December 31, 2016 , September 30, 2016 , and December 31, 2015 , respectively.


(b)	Commercial lease financing includes receivables held as collateral for a secured borrowing of $68 million, $76 million, and $134 million at December 31, 2016 , September 30, 2016 , and December 31, 2015 , respectively. Principal reductions are based on the cash payments received from these related receivables.


(c)	At December 31, 2016 , total loans include purchased loans of $21.0 billion, of which $ 865 million were purchased credit impaired. At September 30, 2016 , total loans include purchased loans of $22.4 billion, of which $ 959 million were purchased credit impaired. At December 31, 2015 , total loans include purchased loans of $114 million, of which $11 million were purchased credit impaired.


(d)	Total loans exclude loans of $1.6 billion at December 31, 2016 , $1.6 billion at September 30, 2016 , and $1.8 billion at December 31, 2015 , related to the discontinued operations of the education lending business.


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


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


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


(a)	Nonperforming loan balances exclude $865 million , $ 959 million , $11 million, $11 million, and $11 million, of purchased credit impaired loans at December 31, 2016 , September 30, 2016 , June 30, 2016, March 31, 2016, and December 31, 2015, respectively.


(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.



Line of Business Results
(dollars in millions)

																Percent change 4Q16 vs.
	4Q16			3Q16			2Q16			1Q16			4Q15			3Q16		4Q15
Key Community Bank
Summary of operations
Total revenue (TE)	$	901		$	779		$	598		$	595		$	588		15.7	%	53.2	%
Provision for credit losses	44			37			25			42			20			18.9		120.0
Noninterest expense	673			577			444			436			456			16.6		47.6
Net income (loss) attributable to Key	115			104			81			74			70			10.6		64.3
Average loans and leases	47,032			41,548			30,936			30,789			30,925			13.2		52.1
Average deposits	79,357			69,397			53,794			52,803			52,219			14.4		52.0
Net loan charge-offs	42			31			17			23			23			35.5		82.6
Net loan charge-offs to average total loans	.36		%	.30		%	.22		%	.30		%	.30		%	N/A		N/A
Nonperforming assets at period end	$	394		$	430		$	300		$	303		$	303		(8.4	)	30.0
Return on average allocated equity	9.70		%	11.52		%	11.99		%	11.09		%	10.39		%	N/A		N/A
Average full-time equivalent employees	11,173			9,796			7,331			7,376			7,390			14.1		51.2

Key Corporate Bank
Summary of operations
Total revenue (TE)	$	630		$	554		$	452		$	426		$	479		13.7	%	31.5	%
Provision for credit losses	21			25			30			43			26			(16.0	)	(19.2	)
Noninterest expense	325			307			259			237			257			5.9		26.5
Net income (loss) attributable to Key	221			159			135			118			142			39.0		55.6
Average loans and leases	36,769			34,561			28,607			27,722			26,981			6.4		36.3
Average loans held for sale	1,223			1,103			591			811			820			10.9		49.1
Average deposits	23,173			22,708			19,129			18,074			19,080			2.0		21.5
Net loan charge-offs	26			12			27			18			12			116.7		116.7
Net loan charge-offs to average total loans	.28		%	.14		%	.38		%	.26		%	.18		%	N/A		N/A
Nonperforming assets at period end	$	241		$	313		$	319		$	372		$	74		(23.0	)	225.7
Return on average allocated equity	30.62		%	25.86		%	26.23		%	23.15		%	29.05		%	N/A		N/A
Average full-time equivalent employees	2,394			2,331			2,138			2,126			2,113			2.7		13.3