10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2017

Commission File Number 001-11302

Exact name of registrant as specified in its charter:

Ohio	34-6542451
State or other jurisdiction of incorporation or organization	I.R.S. Employer Identification Number:

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

(216) 689-3000

Registrant’s telephone number, including area code:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Shares with a par value of $1 each	1,096,107,344 shares
Title of class	Outstanding at May 3, 2017

KEYCORP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

		Page Number
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Income	5
	Consolidated Statements of Comprehensive Income	6
	Consolidated Statements of Changes in Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements (Unaudited)	9
	Note 1.    Basis of Presentation and Accounting Policies	9
	Note 2. Business Combination	14
	Note 3.    Earnings Per Common Share	17
	Note 4.    Loans and Loans Held for Sale	18
	Note 5.    Asset Quality	19
	Note 6.    Fair Value Measurements	30
	Note 7.    Securities	43
	Note 8.    Derivatives and Hedging Activities	47
	Note 9.    Mortgage Servicing Assets	55
	Note 10.  Variable Interest Entities	57
	Note 11.  Income Taxes	59
	Note 12.  Acquisition, Divestiture, and Discontinued Operations	60
	Note 13.  Securities Financing Activities	64
	Note 14.  Employee Benefits	65
	Note 15.  Trust Preferred Securities Issued by Unconsolidated Subsidiaries	66
	Note 16.  Contingent Liabilities and Guarantees	67
	Note 17.  Accumulated Other Comprehensive Income	70
	Note 18.  Shareholders’ Equity	71
	Note 19.  Line of Business Results	72
	Report of Ernst & Young LLP, Independent Registered Public Accounting Firm	76

2

Item 2.	Management’s Discussion & Analysis of Financial Condition & Results of Operations	77
	Introduction	77
	Terminology	77
	Forward-looking statements	78
	Selected financial data	79
	Economic overview	80
	Long-term financial targets	80
	Strategic developments	81
	Demographics	81
	Supervision and regulation	82
	Highlights of Our Performance	85
	Financial performance	85
	Results of Operations	91
	Net interest income	91
	Noninterest income	94
	Noninterest expense	96
	Income taxes	97
	Line of Business Results	97
	Key Community Bank summary of operations	98
	Key Corporate Bank summary of operations	99
	Other Segments	100
	Financial Condition	101
	Loans and loans held for sale	101
	Securities	106
	Other investments	109
	Deposits and other sources of funds	109
	Capital	109
	Risk Management	112
	Overview	112
	Market risk management	113
	Liquidity risk management	118
	Credit risk management	121
	Operational and compliance risk management	127
	Critical Accounting Policies and Estimates	128
	European Sovereign and Non-Sovereign Debt Exposures	129
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	129
Item 4.	Controls and Procedures	129

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	130
Item 1A.	Risk Factors	130
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	130
Item 6.	Exhibits	131
	Signature	132

Throughout the Notes to Consolidated Financial Statements (Unaudited) and Management’s Discussion & Analysis of Financial Condition & Results of Operations, we use certain acronyms and abbreviations as defined in Note 1 (“Basis of Presentation and Accounting Policies”) that begins on page 9.

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

in millions, except per share data	March 31, 2017			December 31, 2016
	(Unaudited)
ASSETS
Cash and due from banks	$	549		$	677
Short-term investments	2,525			2,775
Trading account assets	921			867
Securities available for sale	18,431			20,212
Held-to-maturity securities (fair value: $9,954 and $10,007)	10,186			10,232
Other investments	689			738
Loans, net of unearned income of $783 and $826	86,125			86,038
Less: Allowance for loan and lease losses	(870		)	(858		)
Net loans	85,255			85,180
Loans held for sale (a)	1,384			1,104
Premises and equipment	935			978
Operating lease assets	563			540
Goodwill	2,427			2,446
Other intangible assets	362			384
Corporate-owned life insurance	4,087			4,068
Derivative assets	578			803
Accrued income and other assets	4,064			3,864
Discontinued assets (including $3 and $3 of portfolio loans at fair value, see Note 12)	1,520			1,585
Total assets	$	134,476		$	136,453
LIABILITIES
Deposits in domestic offices:
NOW and money market deposit accounts	$	55,095		$	54,590
Savings deposits	6,306			6,491
Certificates of deposit ($100,000 or more)	5,859			5,483
Other time deposits	4,694			4,698
Total interest-bearing deposits	71,954			71,262
Noninterest-bearing deposits	32,028			32,825
Total deposits	103,982			104,087
Federal funds purchased and securities sold under repurchase agreements	442			1,502
Bank notes and other short-term borrowings	943			808
Derivative liabilities	255			636
Accrued expense and other liabilities	1,552			1,796
Long-term debt	12,324			12,384
Total liabilities	119,498			121,213
EQUITY
Preferred stock	1,025			1,665
Common shares, $1 par value; authorized 1,400,000,000 shares; issued 1,256,702,081, and1,256,702,081 shares	1,257			1,257
Capital surplus	6,287			6,385
Retained earnings	9,584			9,378
Treasury stock, at cost (159,223,419 and 177,388,429 shares)	(2,623		)	(2,904		)
Accumulated other comprehensive income (loss)	(554		)	(541		)
Key shareholders’ equity	14,976			15,240
Noncontrolling interests	2			—
Total equity	14,978			15,240
Total liabilities and equity	$	134,476		$	136,453

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

See Notes to Consolidated Financial Statements (Unaudited).

4

Consolidated Statements of Income

dollars in millions, except per share amounts	Three months ended March 31,
(Unaudited)	2017		2016
INTEREST INCOME
Loans	$	877	$	562
Loans held for sale	13		8
Securities available for sale	95		75
Held-to-maturity securities	51		24
Trading account assets	7		7
Short-term investments	3		4
Other investments	4		3
Total interest income	1,050		683
INTEREST EXPENSE
Deposits	58		31
Federal funds purchased and securities sold under repurchase agreements	1		—
Bank notes and other short-term borrowings	5		2
Long-term debt	68		46
Total interest expense	132		79
NET INTEREST INCOME	918		604
Provision for credit losses	63		89
Net interest income after provision for credit losses	855		515
NONINTEREST INCOME
Trust and investment services income	135		109
Investment banking and debt placement fees	127		71
Service charges on deposit accounts	87		65
Operating lease income and other leasing gains	23		17
Corporate services income	54		50
Cards and payments income	65		46
Corporate-owned life insurance income	30		28
Consumer mortgage income	6		2
Mortgage servicing fees	18		12
Net gains (losses) from principal investing	1		—
Other income (a)	31		31
Total noninterest income	577		431
NONINTEREST EXPENSE
Personnel	556		404
Net occupancy	87		61
Computer processing	60		43
Business services and professional fees	46		41
Equipment	27		21
Operating lease expense	19		13
Marketing	21		12
FDIC assessment	20		9
Intangible asset amortization	22		8
OREO expense, net	2		1
Other expense	153		90
Total noninterest expense	1,013		703
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	419		243
Income taxes	94		56
INCOME (LOSS) FROM CONTINUING OPERATIONS	325		187
Income (loss) from discontinued operations, net of taxes $0 and $0 (see Note 12)	—		1
NET INCOME (LOSS)	325		188
Less: Net income (loss) attributable to noncontrolling interests	1		—
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	$	324	$	188
Income (loss) from continuing operations attributable to Key common shareholders	$	296	$	182
Net income (loss) attributable to Key common shareholders	296		183
Per common share:
Income (loss) from continuing operations attributable to Key common shareholders	$	.28	$	.22
Income (loss) from discontinued operations, net of taxes	—		—
Net income (loss) attributable to Key common shareholders (b)	.28		.22
Per common share — assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders	$	.27	$	.22
Income (loss) from discontinued operations, net of taxes	—		—
Net income (loss) attributable to Key common shareholders (b)	.27		.22
Cash dividends declared per common share	$	.085	$	.075
Weighted-average common shares outstanding (000)	1,068,609		827,381
Effect of convertible preferred stock	—		—
Effect of common share options and other stock awards	17,931		7,679
Weighted-average common shares and potential common shares outstanding (000) (c)	1,086,540		835,060

(a) For the three months ended March 31, 2017, net securities gains totaled $1 million. For the three months ended March 31, 2016, net securities gains (losses) totaled less than $1 million. For the three months ended March 31, 2017, and March 31, 2016, we did not have any impairment losses related to securities.

(b) EPS may not foot due to rounding.

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

See Notes to Consolidated Financial Statements (Unaudited).

5

Consolidated Statements of Comprehensive Income

in millions	Three months ended March 31,
(Unaudited)	2017			2016
Net income (loss)	$	325		$	188
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale, net of income taxes of $4 and $76	6			128
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($15) and $34	(24		)	58
Foreign currency translation adjustments, net of income taxes of $1 and $3	1			5
Net pension and postretirement benefit costs, net of income taxes of $2 and $4	4			1
Total other comprehensive income (loss), net of tax	(13		)	192
Comprehensive income (loss)	312			380
Less: Comprehensive income attributable to noncontrolling interests	1			—
Comprehensive income (loss) attributable to Key	$	311		$	380

See Notes to Consolidated Financial Statements (Unaudited).

6

Consolidated Statements of Changes in Equity

	Key Shareholders’ Equity
dollars in millions, except per share amounts (Unaudited)	Preferred Shares Outstanding (000)		Common Shares Outstanding (000)		Preferred Stock			Common Shares		Capital Surplus			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests
BALANCE AT DECEMBER 31, 2015	2,900		835,751		$	290		$	1,017	$	3,922		$	8,922		$	(3,000	)	$	(405	)	$	13
Net income (loss)													188									—
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of $76																			128
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $34																			58
Foreign currency translation adjustments, net of income taxes of $3																			5
Net pension and postretirement benefit costs, net of income taxes of $4																			1
Deferred compensation										(6		)
Cash dividends declared on common shares ($.075 per share)													(63		)
Cash dividends declared on Noncumulative Series A Preferred Stock ($1.9375 per share)													(5		)
Common shares reissued (returned) for stock options and other employee benefit plans			6,539							(98		)				112
Net contribution from (distribution to) noncontrolling interests																						(8		)
BALANCE AT MARCH 31, 2016	2,900		842,290		$	290		$	1,017	$	3,818		$	9,042		$	(2,888	)	$	(213	)	$	5
BALANCE AT DECEMBER 31, 2016	17,421		1,079,314		$	1,665		$	1,257	$	6,385		$	9,378		$	(2,904	)	$	(541	)	$	—
Net income (loss)													324									1
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of $4																			6
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($15)																			(24		)
Foreign currency translation adjustments, net of income taxes of $1																			1
Net pension and postretirement benefit costs, net of income taxes of $2																			4
Deferred compensation										3
Cash dividends declared on common shares ($.085 per share)													(90		)
Cash dividends declared on Noncumulative Series A Preferred Stock ($1.9375 per share)													(6		)
Cash dividends declared on Noncumulative Series C Preferred Stock ($.539063 per share)													(7		)
Cash dividends declared on Noncumulative Series D Preferred Stock ($12.50 per depository share)													(7		)
Cash dividends declared on Noncumulative Series E Preferred Stock ($.395573 per depositary share)													(8		)
Open market common share repurchases			(5,844	)												(107		)
Employee equity compensation program common share repurchases			(2,829	)												(53		)
Series A Preferred Stock exchanged for common shares	(2,900	)	20,568		(290		)			(49		)				338
Redemption of Series C Preferred Stock	(14,000	)			(350		)
Common shares reissued (returned) for stock options and other employee benefit plans			6,270							(52		)				103
Net contribution from (distribution to) noncontrolling interests																						1
BALANCE AT MARCH 31, 2017	521		1,097,479		$	1,025		$	1,257	$	6,287		$	9,584		$	(2,623	)	$	(554	)	$	2

See Notes to Consolidated Financial Statements (Unaudited).

7

Consolidated Statements of Cash Flows

in millions	Three months ended March 31,
(Unaudited)	2017			2016
OPERATING ACTIVITIES
Net income (loss)	$	325		$	188
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for credit losses	63			89
Depreciation and amortization expense, net	100			62
Accretion of acquired loans	43			—
Increase in cash surrender value of corporate-owned life insurance	(28		)	(25		)
Stock-based compensation expense	27			19
FDIC reimbursement (payments), net of FDIC expense	(2		)	1
Deferred income taxes (benefit)	137			50
Proceeds from sales of loans held for sale	2,334			1,110
Originations of loans held for sale, net of repayments	(2,562		)	(1,153		)
Net losses (gains) on sales of loans held for sale	(35		)	(2		)
Net losses (gains) from principal investing	(1		)	—
Net losses (gains) and writedown on OREO	1			1
Net losses (gains) on leased equipment	(2		)	—
Net securities losses (gains)	(1		)	—
Net losses (gains) on sales of fixed assets	12			1
Net decrease (increase) in trading account assets	(54		)	23
Other operating activities, net	(762		)	9
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(405		)	373
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments, excluding acquisitions	250			(2,729		)
Purchases of securities available for sale	(195		)	(610		)
Proceeds from sales of securities available for sale	912			—
Proceeds from prepayments and maturities of securities available for sale	1,061			722
Proceeds from prepayments and maturities of held-to-maturity securities	456			251
Purchases of held-to-maturity securities	(411		)	(358		)
Purchases of other investments	(2		)	(18		)
Proceeds from sales of other investments	51			24
Proceeds from prepayments and maturities of other investments	1			—
Net decrease (increase) in loans, excluding acquisitions, sales and transfers	(255		)	(663		)
Proceeds from sales of portfolio loans	37			40
Proceeds from corporate-owned life insurance	9			9
Purchases of premises, equipment, and software	(2		)	(8		)
Proceeds from sales of premises and equipment	—			—
Proceeds from sales of OREO	11			3
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	1,923			(3,337		)
FINANCING ACTIVITIES
Net increase (decrease) in deposits, excluding acquisitions	(105		)	2,336
Net increase (decrease) in short-term borrowings	(925		)	84
Net proceeds from issuance of long-term debt	—			976
Payments on long-term debt	(10		)	(498		)
Open market common share repurchases	(107		)	—
Employee equity compensation program common share repurchases	(53		)	—
Redemption of Preferred Stock Series C	(350		)	—
Net proceeds from reissuance of common shares	22			1
Cash dividends paid	(118		)	(68		)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(1,646		)	2,831
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS	(128		)	(133		)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD	677			607
CASH AND DUE FROM BANKS AT END OF PERIOD	$	549		$	474
Additional disclosures relative to cash flows:
Interest paid	$	151		$	108
Income taxes paid (refunded)	(11		)	13
Noncash items:
Reduction of secured borrowing and related collateral	$	13		$	21
Loans transferred to portfolio from held for sale	8			—
Loans transferred to held for sale from portfolio	25			—
Loans transferred to OREO	11			4

See Notes to Consolidated Financial Statements (Unaudited).

8

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation and Accounting Policies

As used in these Notes, references to “Key,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. KeyCorp refers solely to the parent holding company, and KeyBank refers to KeyCorp’s subsidiary, KeyBank National Association and its subsidiaries.

The acronyms and abbreviations identified below are used in the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion & Analysis of Financial Condition & Results of Operations. You may find it helpful to refer back to this page as you read this report.

References to our “2016 Form 10-K” refer to our Form 10-K for the year ended December 31, 2016, which was filed with the U.S. Securities and Exchange Commission and is available on its website (www.sec.gov) and on our website

(www.key.com/ir).

AICPA: American Institute of Certified Public Accountants.	KCDC: Key Community Development Corporation.
ALCO: Asset/Liability Management Committee.	KEF: Key Equipment Finance.
ALLL: Allowance for loan and lease losses.	KPP: Key Principal Partners.
A/LM: Asset/liability management.	KREEC: Key Real Estate Equity Capital, Inc.
AOCI: Accumulated other comprehensive income (loss).	LCR: Liquidity coverage ratio.
APBO: Accumulated postretirement benefit obligation.	LIBOR: London Interbank Offered Rate.
Austin: Austin Capital Management, Ltd.	LIHTC: Low-income housing tax credit.
BHCs: Bank holding companies.	LTV: Loan-to-value.
Board: KeyCorp Board of Directors.	Moody’s: Moody’s Investor Services, Inc.
CCAR: Comprehensive Capital Analysis and Review.	MRM: Market Risk Management group.
CMBS: Commercial mortgage-backed securities.	N/A: Not applicable.
CME: Chicago Mercantile Exchange.	NASDAQ: The NASDAQ Stock Market LLC.
CMO: Collateralized mortgage obligation.	NAV: Net asset value.
Common Shares: KeyCorp common shares, $1 par value.	N/M: Not meaningful.
DIF: Deposit Insurance Fund of the FDIC.	NOW: Negotiable Order of Withdrawal.
Dodd-Frank Act: Dodd-Frank Wall Street Reform and	NPR: Notice of proposed rulemaking.
Consumer Protection Act of 2010.	NYSE: New York Stock Exchange.
EBITDA: Earnings before interest, taxes, depreciation, and	OCC: Office of the Comptroller of the Currency.
amortization.	OCI: Other comprehensive income (loss).
EPS: Earnings per share.	OREO: Other real estate owned.
ERISA: Employee Retirement Income Security Act of 1974.	OTTI: Other-than-temporary impairment.
ERM: Enterprise risk management.	PBO: Projected benefit obligation.
EVE: Economic value of equity.	PCI: Purchased credit impaired.
FASB: Financial Accounting Standards Board.	S&P: Standard and Poor’s Ratings Services, a Division
FDIC: Federal Deposit Insurance Corporation.	of The McGraw-Hill Companies, Inc.
Federal Reserve: Board of Governors of the Federal Reserve	SEC: U.S. Securities and Exchange Commission.
System.	Series A Preferred Stock: KeyCorp’s 7.750%
FHLB: Federal Home Loan Bank of Cincinnati.	Noncumulative Perpetual Convertible Preferred Stock,
FHLMC: Federal Home Loan Mortgage Corporation.	Series A.
FICO: Fair Isaac Corporation	SIFIs: Systemically important financial institutions
First Niagara: First Niagara Financial Group, Inc.	including BHCs with total consolidated assets of at least
(NASDAQ: FNFG).	$50 billion and nonbank financial companies designated
FNMA: Federal National Mortgage Association, or Fannie Mae.	by FSOC for supervision by the Federal Reserve.
FSOC: Financial Stability Oversight Council.	TDR: Troubled debt restructuring.
GAAP: U.S. generally accepted accounting principles.	TE: Taxable-equivalent.
GNMA: Government National Mortgage Association, or Ginnie	U.S. Treasury: United States Department of the Treasury.
Mae.	VaR: Value at risk.
ISDA: International Swaps and Derivatives Association.	VEBA: Voluntary Employee Beneficiary Association.
KAHC: Key Affordable Housing Corporation.	VIE: Variable interest entity.
KCC: Key Capital Corporation.

9

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly affect the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements, and financial instruments. See Note 10 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% generally are carried at cost. Investments held by our registered broker-dealer and investment company subsidiaries (principal investing entities and Real Estate Capital line of business) are carried at fair value.

We believe that the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2016 Form 10-K.

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

Accounting Guidance Adopted in 2017

Consolidation. In October 2016, the FASB issued new accounting guidance that amends the previous consolidation guidance issued in February 2015, to require a decision maker that holds an interest in a VIE through an entity under common control to only consider its proportionate indirect interest in the VIE in determining whether the decision maker is the VIE’s primary beneficiary. This new guidance eliminates the requirement that a decision maker treat the common control party’s interest in the VIE as if the decision maker held the interest itself, an approach referred to as “full attribution.” The new guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) on a retrospective basis. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Stock-based compensation. In March 2016, the FASB issued new accounting guidance that simplifies the accounting for several aspects of share-based payment transactions, including the related income tax consequences, the classification of awards as either equity or liabilities, and the presentation on the statement of cash flows. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us). The method of transition was dependent upon the particular amendment within the new guidance. During the three months ended March 31, 2017, we recognized $18 million in excess tax benefits within “income taxes” on our income statement that pertained to share-based payment arrangements. In prior periods, such excess tax benefits were recorded within “capital surplus” on our balance sheet. Under the new guidance, generally, if our share price increases over an award’s vesting period, the resulting tax windfall will decrease “income taxes.” In a like manner, if our share price decreases over an award’s vesting period, the resulting tax shortfall will increase “income taxes.” This change also removed the impact of the excess tax benefits and deficiencies from the calculation of diluted EPS and is required to be applied on a prospective basis. The adoption of this accounting standard did not materially affect our statement of cash flows, nor did it affect retained earnings as of the beginning of the period of adoption. We elected to retain our existing accounting policy of estimating award forfeitures upon the award’s grant date.

Equity method investments.In March 2016, the FASB issued new accounting guidance that simplifies the transition to equity method accounting by eliminating the requirement for an investor to make retroactive adjustments to the investment, results of operations, and retained earnings on a step-by-step basis when an investment becomes qualified for equity method accounting. Instead, when an investment qualifies for the equity method due to an increase in ownership or degree of influence, an equity

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method investor is required to add the cost of acquiring the additional interest to the current basis of the previously held interest, and to adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. This accounting guidance became effective prospectively for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us). Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations. This guidance will only affect our financial condition or results of operations if there is an applicable change in an investment resulting in the investment’s qualifying for equity method accounting.

Derivatives and hedging.In March 2016, the FASB issued new accounting guidance that requires an entity to use a four-step decision model when assessing contingent call (put) options that can accelerate the payment of principal on debt instruments to determine whether they are clearly and closely related to their debt hosts. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) on a modified retrospective basis. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Derivatives and hedging. In March 2016, the FASB issued new accounting guidance that clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, by itself, require dedesignation, but all other hedge accounting criteria must be met. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) and was implemented using a prospective method. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Accounting Guidance Pending Adoption at March 31, 2017

Receivables. In March 2017, the FASB issued new accounting guidance that shortens the amortization period to the earliest call date for certain callable debt securities held at a premium. Securities held at a discount will continue to be amortized to maturity. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2018 (effective January 1, 2019, for us). The guidance should be applied on a modified retrospective basis using a cumulative-effect adjustment. Early adoption is permitted. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Compensation. In March 2017, the FASB issued new accounting guidance that requires service cost to be included in the same line item as certain other compensation costs related to services rendered by employees. We record compensation costs under personnel expense on the income statement. Other elements of net benefit cost should be presented separately. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). The guidance should be applied on a retrospective basis. Early adoption is permitted within the first interim period if the entity issues interim financial statements. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Other income. In February 2017, the FASB issued new accounting guidance that clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. The guidance clarifies that financial assets may be within scope of the derecognition guidance if they are promised to a counterparty in a contract and substantially all the fair value of the assets in the contract are concentrated in nonfinancial assets, which are collectively referred to as in substance nonfinancial assets. The guidance requires entities to derecognize a nonfinancial asset or in substance nonfinancial asset when a counterparty obtains controls of it, and in a partial sale transaction when it does not have a controlling financial interest in the legal entity that holds the asset and when it transfers control of the asset. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). The guidance may be applied on a retrospective or modified retrospective basis. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Goodwill and Other Intangibles.In January 2017, the FASB issued new accounting guidance that simplifies the test for goodwill impairment by eliminating the second step of the current two-step method. Under the new guidance, entities will compare the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the reporting unit’s fair value, the entity is required to recognize an impairment charge for this amount. Current guidance requires an entity to proceed to a second step, whereby the entity would determine the fair value of its assets and liabilities. The new method applies to all reporting units. The option to perform a qualitative assessment is still allowable. This accounting guidance is effective prospectively for interim and annual reporting periods beginning after December 15, 2019 (effective January 1, 2020, for us).

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Early adoption is permitted. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Business combinations.In January 2017, the FASB issued accounting guidance that clarifies the definition of a business and removes the requirement for a market participant to consider whether it could replace missing elements in an integrated set of assets and activities. The guidance states that if substantially all of the fair value of the assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a prospective approach. Early application is allowed for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, as long as the transaction has not been reported in financial statements that have been issued or made available for issuance, and for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occurs before the issuance date or effective date of the amendments, as long as the transaction has not been reported in financial statements that have been issued or made available for issuance. This guidance will not affect our financial condition or results of operations unless we acquire or dispose of a business subsequent to the date of adoption.

Statement of cash flows. In November 2016, the FASB issued accounting guidance requiring restricted cash and restricted cash equivalents to be included with other cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of cash flows. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a retrospective approach. Early adoption is permitted. The adoption of this accounting guidance may affect the presentation in our Consolidated Statements of Cash Flows.

Income taxes. In October 2016, the FASB issued accounting guidance requiring an entity to recognize any deferred taxes from an intra-entity transfer of an asset other than inventory when the transfer occurs. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a modified retrospective approach. Early adoption is permitted but only as of the beginning of an annual reporting period for which financial statements have not yet been issued. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Statement of cash flows. In August 2016, the FASB issued new accounting guidance that clarifies how cash receipts and cash payments in certain specific transactions should be presented and classified in the statement of cash flows. These specific transactions include, but are not limited to, debt prepayment or extinguishment costs, contingent considerations made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions from equity method investees. This guidance also clarifies that in instances of cash flows with multiple aspects that cannot be separately identified, classification should be based on the activity that is likely to be the predominant source of or use of cash flow. This accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a retrospective approach. Early adoption is permitted. The adoption of this accounting guidance may affect the presentation in our Consolidated Statements of Cash Flows.

Financial instruments. In June 2016, the FASB issued new accounting guidance that changes the methodology for recognizing credit losses related to financial instruments. Under current GAAP, a credit loss is not recognized until it is probable that the loss has been incurred. The new accounting guidance eliminates that threshold and expands the information required for an entity to consider when developing an estimate of expected credit losses, including the use of forecast information. Entities will be required to present financial assets measured on an amortized cost basis at the net amount that is expected to be collected. This new guidance will impact the accounting for our loans, debt securities available for sale, and liability for credit losses on unfunded lending-related commitments, as well as purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. This accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2019 (effective January 1, 2020, for us). Early adoption is permitted but only for interim and annual reporting periods beginning after December 15, 2018. This guidance must be implemented using a modified retrospective basis except that a prospective approach must be used for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach also should be used for purchased financial assets with credit deterioration. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations and related disclosures.

Leases. In February 2016, the FASB issued new accounting guidance that requires a lessee to recognize a liability to make lease payments, and a right-of-use asset representing its right to use an underlying asset during the lease term for both finance

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and operating leases. The definition of a lease was modified to exemplify the concept of control over an asset identified in the lease. Lease classification criteria remain substantially similar to criteria in current lease guidance. The guidance defines which payments can be used in determining lease classification. For short-term leases with a term of 12 months or less, lessees can make a policy election not to recognize lease assets and lease liabilities. Lessor accounting is largely unchanged. Leveraged leases that commenced before the effective date of the new guidance are grandfathered. New disclosures are required, and certain practical expedients are allowed upon adoption. This accounting and disclosure guidance will be effective for interim and annual reporting periods beginning after December 15, 2018 (effective January 1, 2019, for us) and should be implemented using the modified retrospective approach. Early adoption is permitted. We are currently in the early stages of implementation and are working to identify our complete lease population, including potential embedded leases. We expect the adoption of this standard to result in additional assets and liabilities, as we will be required to recognize operating leases on our Consolidated Balance Sheet. Other implementation matters to be addressed include, but are not limited to, the determination of effects on our financial and capital ratios and the quantification of the impacts that this accounting guidance may have on our financial condition or results of operations.

Financial instruments.In January 2016, the FASB issued new accounting guidance that requires equity investments, except those accounted for under the equity method of accounting or consolidated, to be measured at fair value with changes recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost less impairment, whereby impairment is based on a qualitative assessment. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost and changes the presentation of financial assets and financial liabilities on the balance sheet or in the footnotes. If an entity has elected the fair value option to measure liabilities, the new accounting guidance requires the portion of the change in the fair value of a liability resulting from credit risk to be presented in OCI. We have not elected to measure any of our liabilities at fair value, and therefore, this aspect of the guidance is not applicable to us. This accounting and disclosure guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). For the guidance that is applicable to us, the accounting will be implemented on a modified retrospective basis though a cumulative-effect adjustment to the balance sheet, except for the guidance related to equity securities without readily determinable fair values, which should be applied on a prospective basis. Except under certain instances, early adoption is not permitted. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Revenue recognition. In May 2014, the FASB issued new accounting guidance that revises the criteria for determining when to recognize revenue from contracts with customers and expands disclosure requirements. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step model to be followed in making this determination. This accounting guidance can be implemented using either a retrospective method or a cumulative-effect approach. In August 2015, the FASB issued an update that defers the effective date of the revenue recognition guidance by one year. This new guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). Early adoption is permitted but only for interim and annual reporting periods beginning after December 15, 2016. We have elected to implement this new accounting guidance using a cumulative-effect approach. We have already identified the revenue line items within scope of the new guidance and are currently in the process of performing an in-depth assessment, though our preliminary analysis suggests that the adoption of this accounting guidance is not expected to have a material effect on our financial condition nor results of operations. We are also evaluating the related disclosures. There are many aspects of this new accounting guidance that are still being interpreted, and the FASB has issued updates to certain aspects of the guidance to address implementation issues. For example, the FASB issued accounting guidance in March 2016 to clarify principal-versus-agent considerations, and additional guidance in April 2016 to clarify the identification of performance obligations and the licensing implementation guidance. In May 2016, the FASB issued narrow-scope improvements related to collectability, sales tax and noncash consideration, and practical expedients for contract modifications and completed contracts. In December 2016, the FASB issued additional technical corrections and improvements. While certain implementation issues relevant to the industry are still pending resolution, including trade date versus settlement date recognition for broker-dealers and the applicability of interchange revenues for card-issuing banks, our preliminary conclusions reached as to the application of the new guidance are not expected to be significantly affected. We will continue to evaluate any impact as additional guidance is issued and as our internal assessment progresses.

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2. Business Combination

First Niagara

On August 1, 2016 (the “Acquisition Date”), we acquired all of the outstanding common shares of First Niagara, the parent company of First Niagara Bank, for total consideration of approximately $4.0 billion and thereby acquired First Niagara Bank’s approximately 390 branch locations across New York, Pennsylvania, Connecticut, and Massachusetts. The merger with First Niagara enabled us to expand in the New England market and into the Pennsylvania market, improve our core deposit base, and add additional scale in our banking operations. The results of First Niagara’s operations are included in our consolidated financial statements from the Acquisition Date.

Under the terms of the merger agreement, each outstanding share of First Niagara common stock was converted into the right

to receive 0.680 KeyCorp Common Shares and $2.30 in cash, for a total per-share value of $10.26, based on the $11.70 closing price of KeyCorp’s stock on July 29, 2016. In the aggregate, First Niagara stockholders received 240 million shares of KeyCorp common stock. Also under the terms of the merger agreement, First Niagara employee stock options and restricted stock awards converted into options to purchase and receive KeyCorp common stock. These options and restricted stock awards had a fair value of $26 million on the Acquisition Date. Our methodology for valuing employee stock options is disclosed in Note 16 (“Stock-Based Compensation”) under the heading “Stock Options” on page 179 of our 2016 Form 10-K. Our methodology for valuing restricted stock awards is disclosed in Note 16 (“Stock-Based Compensation”) under the heading “Long-Term Incentive Compensation Program” on page 180 of our 2016 Form 10-K.

In addition, at the time of the merger, each share of First Niagara preferred stock, Series B, was converted into the right to receive a share of KeyCorp preferred stock, Series C, a newly created series of KeyCorp preferred stock. Additional information on this series of preferred stock is provided in Note 18 (“Shareholders' Equity”) of this report.

On October 7, 2016, First Niagara Bank merged with and into KeyBank, with KeyBank as the surviving entity. Systems and client conversion also occurred during the fourth quarter of 2016 in connection with the bank merger.

The acquisition of First Niagara constituted a business combination and was accounted for under the acquisition method of accounting. Accordingly, the assets acquired, the liabilities assumed, and the consideration paid were recorded at their estimated fair value as of the Acquisition Date. These fair value estimates are considered preliminary and are subject to change for up to one year after the Acquisition Date as additional information becomes available.

The following table provides the purchase price calculation as of the Acquisition Date and the identifiable assets purchased and the liabilities assumed at their estimated fair value. These fair value measurements are based on internal and third-party valuations.

in millions
Consideration paid:
KeyCorp common stock issued			$	2,831
Cash payments to First Niagara stockholders			811
Exchange of First Niagara preferred stock for KeyCorp preferred stock			350
Total consideration paid			$	3,992
Statement of Net Assets Acquired at Fair Value:
ASSETS
Cash and due from banks and short-term investments	$	620
Investment securities	9,012
Other investments	297
Loans	23,645
Premises and equipment	245
Other intangible assets	385
Accrued income and other assets	1,449
Total assets	$	35,653
LIABILITIES
Deposits	$	28,994
Bank notes and other short-term borrowings	2,698
Accrued expense and other liabilities	490
Long-term debt	846
Total liabilities	$	33,028
Net identifiable assets acquired			2,625
Goodwill			$	1,367

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Measurement Period Adjustments

We estimated the fair value of loans acquired from First Niagara by utilizing the discounted cash flow method within the income approach. This methodology aggregates the purchased loans by category and risk rating. Cash flows for each category were determined by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on a market rate for similar loans. There was no carryover of First Niagara’s ALLL associated with the loans we acquired. The valuation of the acquired loans was not final prior to December 31, 2016, due to the relatively short time frame in which we had to complete the acquisition as well as the complexity involved in valuing loans. An estimate was recorded during the third quarter of 2016 based on the results of a valuation exercise conducted as of December 31, 2015, and applied to the August 1, 2016, balance of loans acquired from First Niagara.

During the fourth quarter of 2016, and the first quarter of 2017, we continued to analyze the valuations assigned to the acquired assets and assumed liabilities. Our third-party valuation firm provided revised valuations for loans based on the August 1, 2016 balances, which affected the valuation estimates for loans and unfunded lending-related commitments. Due to the complexity in valuing the loans and the significant amount of data inputs required, the valuation of the loans, including unfunded lending-related commitments, is not yet final. As a result of revising the loan valuation, including unfunded commitments, the purchase accounting accretion and unfunded commitment amortization amounts are also subject to change. We anticipate finalizing the valuation during the second quarter of 2017. In addition, adjustments were made to certain tax balances based on new information resulting in the revised fair values displayed below. Based on the revised valuations and new information, we updated our estimated fair values of these items within our Consolidated Balance Sheet with a corresponding adjustment to goodwill. These changes are reflected in the following table:

in millions
Acquired Asset or Liability	Balance Sheet Line Item	Provisional Estimate		Revised Estimate		Increase (Decrease)
Tax adjustment on previous fair value measurements (a)	Accrued income and other assets	$	175	$	194	$	19

(a) The tax adjustment on previous fair value measurements did not have any impact on the income statement for the three months ended March 31, 2017.

The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

in millions	PCI
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

At the First Niagara Acquisition Date, the contractually-required payments receivable on the purchased performing loans totaled $22.6 billion, with a corresponding estimated fair value of $22.2 billion. The estimated cash flows not expected to be collected at the Acquisition Date were $399 million. These amounts do not include loans held for sale and the loans that were divested as part of the 18 First Niagara Bank branches that were sold on September 9, 2016.

Intangible assets consisted of the core deposit intangible, the commercial purchased credit card relationships, the consumer purchased credit card relationships, and other intangible assets. The core deposit intangible asset of $356 million recognized as part of the First Niagara merger is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. The commercial purchased credit card relationships recognized as part of the First Niagara merger are being amortized over their estimated useful life of approximately six years utilizing an accelerated method. The consumer purchased credit card relationships recognized as part of the First Niagara merger are being amortized over their estimated useful life of approximately nine years utilizing an accelerated method.

Goodwill of $1.4 billion was recorded as a result of the transaction and is not amortized for book purposes. Of this total, $1.1 billion of goodwill was assigned to our Key Community Bank segment and $273 million of goodwill was assigned to our Key Corporate Bank segment. The goodwill recorded is not deductible for tax purposes. The following table shows the changes in the carrying amount of goodwill by reporting unit.

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	Key			Key
	Community			Corporate
in millions	Bank			Bank			Total
BALANCE AT DECEMBER 31, 2015	$	979		$	81		$	1,060
Acquisition of First Niagara	1,109			277			1,386
BALANCE AT DECEMBER 31, 2016	2,088			358			2,446
Tax adjustment on previous fair value measurements	(15		)	(4		)	(19		)
BALANCE AT MARCH 31, 2017	$	2,073		$	354		$	2,427

Certificates of deposit were valued by projecting out the expected cash flows based on the contractual terms of the certificates of deposit. The fair values of savings and transaction deposit accounts acquired from First Niagara were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. These cash flows were discounted based on a market rate for a certificate of deposit with a corresponding maturity.

Direct acquisition costs related to the First Niagara acquisition were expensed as incurred and amounted to less than $1 million for the three months ended March 31, 2017. These direct acquisition costs are part of our total merger-related charges.

The following table presents unaudited pro forma information as if the acquisition of First Niagara had occurred on January 1, 2015. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles, and related income tax effects. Merger-related charges related to the First Niagara merger that we incurred during the three months ended March 31, 2016, are not reflected in the unaudited pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had KeyCorp merged with First Niagara at the beginning of 2015. Cost savings are also not reflected in the unaudited pro forma amounts for the three months ended March 31, 2016.

	Pro forma
in millions	Three months ended March 31, 2016
Net interest income (TE)	$	886
Noninterest income	506
Net income (loss) attributable to common shareholders	245

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3. Earnings Per Common Share

Basic earnings per share is the amount of earnings (adjusted for dividends declared on our preferred stock) available to each common share outstanding during the reporting periods. Diluted earnings per share is the amount of earnings available to each common share outstanding during the reporting periods adjusted to include the effects of potentially dilutive common shares. Potentially dilutive common shares include stock options and other stock-based awards. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in the periods where the effect would be antidilutive. 

On March 20, 2017, all outstanding Series A Preferred Stock was converted into KeyCorp common shares. Prior to this conversion, for diluted earnings per share, net income available to common shareholders could have been affected by the conversion of our convertible Series A Preferred Stock. Where the effect of this conversion would have been dilutive, net income available to common shareholders was adjusted by the amount of preferred dividends associated with our Series A Preferred Stock.

Our basic and diluted earnings per common share are calculated as follows:

	Three months ended March 31,
dollars in millions, except per share amounts	2017		2016
EARNINGS
Income (loss) from continuing operations	$	325	$	187
Less: Net income (loss) attributable to noncontrolling interests	1		—
Income (loss) from continuing operations attributable to Key	324		187
Less: Dividends on Preferred Stock	28		5
Income (loss) from continuing operations attributable to Key common shareholders	296		182
Income (loss) from discontinued operations, net of taxes (a)	—		1
Net income (loss) attributable to Key common shareholders	$	296	$	183
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)	1,068,609		827,381
Effect of convertible preferred stock	—		—
Effect of common share options and other stock awards	17,931		7,679
Weighted-average common shares and potential common shares outstanding (000) (b)	1,086,540		835,060
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders	$	.28	$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—
Net income (loss) attributable to Key common shareholders (c)	.28		.22
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	$	.27	$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—
Net income (loss) attributable to Key common shareholders — assuming dilution (c)	.27		.22

(a) In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of this decision, we have accounted for this business as a discontinued operation. For further discussion regarding the income (loss) from discontinued operations, see Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

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

(c) EPS may not foot due to rounding.

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4. Loans and Loans Held for Sale

in millions	March 31, 2017		December 31, 2016
Commercial and industrial (a)	$	40,112	$	39,768
Commercial real estate:
Commercial mortgage	15,260		15,111
Construction	2,270		2,345
Total commercial real estate loans	17,530		17,456
Commercial lease financing (b)	4,665		4,685
Total commercial loans	62,307		61,909
Residential — prime loans:
Real estate — residential mortgage	5,507		5,547
Home equity loans	12,541		12,674
Total residential — prime loans	18,048		18,221
Consumer direct loans	1,735		1,788
Credit cards	1,037		1,111
Consumer indirect loans	2,998		3,009
Total consumer loans	23,818		24,129
Total loans (c), (d)	$	86,125	$	86,038

(a) Loan balances include $114 million and $116 million of commercial credit card balances at March 31, 2017, and December 31, 2016, respectively.

(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $55 million and $68 million at March 31, 2017, and December 31, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 19 (“Long-Term Debt”) beginning on page 191 of our 2016 Form 10-K.

(c) At March 31, 2017, total loans include purchased loans of $19 billion of which $812 million were PCI loans. At December 31, 2016, total loans include purchased loans of $21 billion, of which $865 million were PCI loans.

(d) Total loans exclude loans of $1.5 billion at March 31, 2017, and $1.6 billion at December 31, 2016, related to the discontinued operations of the education lending business. Additional information pertaining to these loans is provided in Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

Our loans held for sale are summarized as follows:

in millions	March 31, 2017		December 31, 2016
Commercial and industrial	$	171	$	19
Real estate — commercial mortgage	1,150		1,022
Real estate — construction	—		1
Commercial lease financing	1		—
Real estate — residential mortgage (a)	62		62
Total loans held for sale	$	1,384	$	1,104

(a) Real estate — residential mortgage loans held for sale are held at fair value at March 31, 2017, and December 31, 2016. The fair value option was elected for real estate — residential mortgage loans held for sale during the third quarter of 2016 with the First Niagara acquisition. The contractual amount due on these loans totaled $62 million at March 31, 2017, and December 31, 2016. Changes in fair value are recorded in “Consumer mortgage income” on the income statement. Additional information regarding residential mortgage loans held for sale fair value methodology is provided in Note 6 (“Fair Value Measurements”).

Our quarterly summary of changes in loans held for sale is provided below:

in millions	March 31, 2017			December 31, 2016
Balance at beginning of the period	$	1,104		$	1,137
New originations	2,563			2,846
Transfers from (to) held to maturity, net	17			11
Loan sales	(2,299		)	(2,889		)
Loan draws (payments), net	(1		)	(1		)
Balance at end of period (a)	$	1,384		$	1,104

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

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5. Asset Quality

We assess the credit quality of the loan portfolio by monitoring net credit losses, levels of nonperforming assets, delinquencies, and credit quality ratings as defined by management. Nonperforming loans are loans for which we do not accrue interest income, and include commercial and consumer loans and leases, as well as current year TDRs and nonaccruing TDR loans from prior years. Nonperforming assets include nonperforming loans, nonperforming loans held for sale, OREO, and other nonperforming assets. Nonimpaired acquired loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated portfolio. PCI loans cannot be classified as nonperforming loans or TDRs.

Our nonperforming assets and past due loans were as follows:

in millions	March 31, 2017		December 31, 2016
Total nonperforming loans (a)	$	573	$	625
OREO (b)	49		51
Other nonperforming assets	1		—
Total nonperforming assets	$	623	$	676
Nonperforming assets from discontinued operations—education lending (c)	$	4	$	5
TDRs included in nonperforming loans	161		141
TDRs with an allocated specific allowance (d)	84		59
Specifically allocated allowance for restructured loans (e)	30		27
Accruing loans past due 90 days or more	$	79	$	87
Accruing loans past due 30 through 89 days	312		404

(a) Nonperforming loan balances exclude $812 million and $865 million of PCI loans at March 31, 2017, and December 31, 2016, respectively.

(b) Includes carrying value of foreclosed residential real estate of approximately $31 million and $29 million at March 31, 2017 and December 31, 2016, respectively.

(c) Restructured loans of approximately $23 million and $22 million are included in discontinued operations at March 31, 2017, and December 31, 2016, respectively. See Note 12 (“Acquisition, Divestiture, and Discontinued Operations”) for further discussion.

(d) Included in individually impaired loans allocated a specific allowance.

(e) Included in allowance for individually evaluated impaired loans.

We evaluate purchased loans for impairment in accordance with the applicable accounting guidance. Purchased loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are deemed PCI. Several factors are considered when evaluating whether a loan is considered a PCI loan, including the delinquency status of the loan, updated borrower credit status, geographic information, and updated LTV ratios. In accordance with ASC 310-30, excluded from the purchased impaired loans are leases, revolving credit arrangements, and loans held for sale.

We estimated the fair value of loans acquired from First Niagara by utilizing the discounted cash flow method within the income approach. See Note 2 (“Business Combination”) for further discussion of the fair value methodology used. There was no carryover of First Niagara’s ALLL associated with the loans we acquired.

The excess of a PCI loan’s contractually required payments over the amount of its undiscounted cash flows expected to be collected is referred to as the nonaccretable difference. The nonaccretable difference, which is not accreted into income, reflects estimated future credit losses and uncollectible contractual interest expected to be incurred over the life of the PCI loan or pool. The excess of cash flows expected to be collected over the carrying amount of the PCI loans or pools is referred to as the accretable yield. This amount is accreted into interest income over the remaining life of the PCI loans or pools using the level yield method.

Over the life of PCI loans or pools, Key evaluates the remaining contractually required payments receivable and estimates cash flows expected to be collected. Contractually required payments receivable may increase or decrease for a variety of reasons, such as, when the contractual terms of the loan agreement are modified, when interest rates on variable rate loans change, or when principal and/or interest payments are received. Cash flows expected to be collected on PCI loans are estimated by incorporating several primary assumptions similar to the initial estimate of fair value. These primary assumptions include probability of default, loss given default, and the amount of actual prepayments after the Acquisition Date. Increases in expected cash flows of PCI loans or pools subsequent to acquisition are recognized prospectively through adjustment of the yield on the loans or pools over its remaining life, while decreases in expected cash flows are recognized as impairment through a provision for credit losses and an increase in the ALLL.

The difference between the fair value of a nonimpaired acquired loan and contractual amounts due at the Acquisition Date is accreted into income over the estimated life of the loan or pool. Contractually required payments represent the total undiscounted amount of all uncollected principal and interest payments.

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The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

August 1, 2016	PCI
in millions
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

At the First Niagara Acquisition Date, the contractual required payments receivable on the purchased non-impaired loans totaled $22.6 billion, with a corresponding estimated fair value of $22.2 billion. The estimated cash flows not expected to be collected at the Acquisition Date were $399 million. These amounts do not include loans held for sale and the loans that were divested as part of the 18 branches that were sold on September 9, 2016.

In addition to the PCI loans acquired with the First Niagara acquisition in the third quarter of 2016, Key has PCI loans from an earlier acquisition in 2012. At the 2012 acquisition date, the estimated gross contractual amount receivable of all PCI loans totaled $41 million. The estimated cash flows not expected to be collected (the nonaccretable amount) were $11 million, and the accretable amount was approximately $5 million. The following tables present the roll-forward of the accretable yield and the beginning and ending outstanding unpaid principal balance and carrying amount of all PCI loans for the three months ended March 31, 2017, and the twelve months ended December 31, 2016.

	Three months ended March 31,							Twelve months ended December 31,
	2017							2016
in millions	Accretable Yield			Carrying Amount		Outstanding Unpaid Principal Balance		Accretable Yield			Carrying Amount		Outstanding Unpaid Principal Balance
Balance at beginning of period	$	197		$	865	$	1,002	$	5		$	11	$	17
Additions	—							205
Accretion	(19		)					(29		)
Net reclassifications from nonaccretable to accretable	25							35
Payments received, net	(11		)					(19		)
Disposals	—							—
Balance at end of period	$	192		$	812	$	930	$	197		$	865	$	1,002

At March 31, 2017, the approximate carrying amount of our commercial nonperforming loans outstanding represented 75% of their original contractual amount owed, total nonperforming loans outstanding represented 79% of their original contractual amount owed, and nonperforming assets in total were carried at 79% of their original contractual amount owed. At March 31, 2017, our 20 largest nonperforming loans totaled $228 million, representing 40% of total loans on nonperforming status. 

Nonperforming loans and loans held for sale reduced expected interest income by$6 million for the three months ended March 31, 2017, and$5 million for the three months ended March 31, 2016.

20

The following tables set forth a further breakdown of individually impaired loans as of March 31, 2017, and December 31, 2016:

March 31, 2017	Recorded Investment(a)		Unpaid Principal Balance (b)		Specific Allowance
in millions
With no related allowance recorded:
Commercial and industrial	$	152	$	217	—
Commercial real estate:
Commercial mortgage	1		3		—
Total commercial real estate loans	1		3		—
Total commercial loans	153		220		—
Real estate — residential mortgage	20		20		—
Home equity loans	60		60		—
Consumer indirect loans	2		2		—
Total consumer loans	82		82		—
Total loans with no related allowance recorded	235		302		—
With an allowance recorded:
Commercial and industrial	85		90		$	16
Commercial real estate:
Commercial mortgage	15		15		3
Total commercial real estate loans	15		15		3
Total commercial loans	100		105		19
Real estate — residential mortgage	30		30		2
Home equity loans	64		64		17
Consumer direct loans	3		3		—
Credit cards	3		3		—
Consumer indirect loans	33		33		1
Total consumer loans	133		133		20
Total loans with an allowance recorded	233		238		39
Total	$	468	$	540	$	39

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

December 31, 2016	Recorded Investment(a)		Unpaid Principal Balance(b)		Specific Allowance
in millions
With no related allowance recorded:
Commercial and industrial	$	222	$	301	—
Commercial real estate:
Commercial mortgage	2		3		—
Total commercial real estate loans	2		3		—
Total commercial loans	224		304		—
Real estate — residential mortgage	20		20		—
Home equity loans	61		61		—
Consumer indirect loans	1		1		—
Total consumer loans	82		82		—
Total loans with no related allowance recorded	306		386		—
With an allowance recorded:
Commercial and industrial	62		73		$	17
Commercial real estate:
Commercial mortgage	4		4		—
Total commercial real estate loans	4		4		—
Total commercial loans	66		77		17
Real estate — residential mortgage	31		31		2
Home equity loans	64		64		18
Consumer direct loans	2		3		—
Credit cards	3		3		—
Consumer indirect loans	29		29		1
Total consumer loans	129		130		21
Total loans with an allowance recorded	195		207		38
Total	$	501	$	593	$	38

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

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The following table sets forth a further breakdown of the average recorded investment for individually impaired loans reported by Key:

Average Recorded Investment (a)	Three Months Ended March 31,
in millions	2017		2016
Commercial and industrial	$	260	$	215
Commercial real estate:
Commercial mortgage	10		9
Construction	—		6
Total commercial real estate loans	10		15
Total commercial loans	270		230
Real estate — residential mortgage	51		55
Home equity loans	125		129
Consumer direct loans	3		1
Credit cards	2		3
Consumer indirect loans	33		39
Total consumer loans	214		227
Total	$	484	$	457

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

For the three months ended March 31, 2017, and March 31, 2016, interest income recognized on the outstanding balances of accruing impaired loans totaled$3 million and $4 million, respectively.

At March 31, 2017, aggregate restructured loans (accrual and nonaccrual loans) totaled $302 million, compared to $280 million at December 31, 2016. During the first three months of 2017, we added $47 million in restructured loans, which were partially offset by $25 million in payments and charge-offs. During 2016, we added $107 million in restructured loans, which were offset by $107 million in payments and charge-offs.

A further breakdown of TDRs included in nonperforming loans by loan category as of March 31, 2017, follows:

March 31, 2017	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial	20	$	100	$	66
Commercial real estate:
Commercial mortgage	7	5		4
Total commercial real estate loans	7	5		4
Total commercial loans	27	105		70
Real estate — residential mortgage	267	16		16
Home equity loans	1,186	72		64
Consumer direct loans	40	1		1
Credit cards	288	2		1
Consumer indirect loans	522	10		9
Total consumer loans	2,303	101		91
Total nonperforming TDRs	2,330	206		161
Prior-year accruing:(a)
Commercial and industrial	4	29		16
Total commercial loans	4	29		16
Real estate — residential mortgage	526	35		35
Home equity loans	1,240	75		61
Consumer direct loans	32	2		1
Credit cards	440	3		1
Consumer indirect loans	365	55		27
Total consumer loans	2,603	170		125
Total prior-year accruing TDRs	2,607	199		141
Total TDRs	4,937	$	405	$	302

(a) All TDRs that were restructured prior to January 1, 2017, and are fully accruing.

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A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2016, follows:

December 31, 2016	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial	18	$	91	$	50
Commercial real estate:
Commercial mortgage	7	2		1
Total commercial real estate loans	7	2		1
Total commercial loans	25	93		51
Real estate — residential mortgage	264	16		16
Home equity loans	1,199	77		69
Consumer direct loans	32	1		—
Credit cards	336	2		2
Consumer indirect loans	124	4		3
Total consumer loans	1,955	100		90
Total nonperforming TDRs	1,980	193		141
Prior-year accruing: (a)
Commercial and Industrial	5	30		16
Total commercial loans	5	30		16
Real estate — residential mortgage	477	35		35
Home equity loans	1,231	70		57
Consumer direct loans	35	2		2
Credit cards	410	3		1
Consumer indirect loans	377	56		28
Total consumer loans	2,530	166		123
Total prior-year accruing TDRs	2,535	196		139
Total TDRs	4,515	$	389	$	280

(a) All TDRs that were restructured prior to January 1, 2016, and are fully accruing.

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession without commensurate financial, structural, or legal consideration. Acquired loans that were previously modified in a TDR are no longer classified as TDRs at the Acquisition Date. An acquired loan may only be classified as a TDR if a modification meeting the above TDR criteria is performed after the Acquisition Date. PCI loans cannot be classified as TDRs. All commercial and consumer loan TDRs, regardless of size, are individually evaluated for impairment to determine the probable loss content and are assigned a specific loan loss allowance. This designation has the effect of moving the loan from the general reserve methodology (i.e., collectively evaluated) to the specific reserve methodology (i.e., individually evaluated) and may impact the ALLL through a charge-off or increased loan loss provision. These components affect the ultimate allowance level. Additional information regarding TDRs for discontinued operations is provided in Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the three months ended March 31, 2017, there were no commercial loan TDRs and 3 consumer loan TDRs with a combined recorded investment of less than $1 million that experienced payment defaults after modifications resulting in TDR status during 2016. During the three months ended March 31, 2016, there were no commercial loan TDRs and 51 consumer loan TDRs with a combined recorded investment of $3 million that experienced payment defaults from modifications resulting in TDR status during 2015. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the ALLL. Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs are $15 million and $14 million at March 31, 2017 and December 31, 2016, respectively.

Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Our concession types are primarily interest rate reductions, forgiveness of principal, and other modifications. The commercial TDR other concession category includes modification of loan terms, covenants, or conditions. The consumer TDR other concession category primarily includes those borrowers’ debts that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed. At March 31, 2017, and December 31, 2016, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $140 million and $141 million, respectively.

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The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs that occurred during the three months ended March 31, 2017, and March 31, 2016.

	Three Months Ended March 31,
in millions	2017		2016
Commercial loans:
Interest rate reduction	$	7	—
Other	21		$	3
Total	$	28	$	3
Consumer loans:
Interest rate reduction	$	3	$	2
Forgiveness of principal	—		12
Other	12		2
Total	$	15	$	16
Total commercial and consumer TDRs	$	43	$	19
Total loans	86,125		60,438

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2016 Form 10-K.

The following aging analysis of past due and current loans as of March 31, 2017, and December 31, 2016, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio ^(a) 

March 31, 2017	Current		30-59 Days Past Due (b)		60-89 Days Past Due (b)		90 and Greater Days Past Due (b)		Non-performing Loans		Total Past Due and Non-performing Loans		Purchased Credit Impaired		Total Loans (c), (d)
in millions
LOAN TYPE
Commercial and industrial	$	39,621	$	60	$	47	$	24	$	258	$	389	$	102	$	40,112
Commercial real estate:
Commercial mortgage	14,891		25		10		11		32		78		291		15,260
Construction	2,242		—		—		—		2		2		26		2,270
Total commercial real estate loans	17,133		25		10		11		34		80		317		17,530
Commercial lease financing	4,634		12		8		6		5		31		—		4,665
Total commercial loans	$	61,388	$	97	$	65	$	41	$	297	$	500	$	419	$	62,307
Real estate — residential mortgage	$	5,065	$	16	$	7	$	4	$	54	$	81	$	361	$	5,507
Home equity loans	12,225		42		27		14		207		290		26		12,541
Consumer direct loans	1,709		8		4		5		3		20		6		1,735
Credit cards	1,011		7		5		11		3		26		—		1,037
Consumer indirect loans	2,951		27		7		4		9		47		—		2,998
Total consumer loans	$	22,961	$	100	$	50	$	38	$	276	$	464	$	393	$	23,818
Total loans	$	84,349	$	197	$	115	$	79	$	573	$	964	$	812	$	86,125

(a) Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b) Past due loan amounts exclude PCI, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c) Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d) Future accretable yield related to PCI loans is not included in the analysis of the loan portfolio.

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December 31, 2016	Current		30-59 Days Past Due (b)		60-89 Days Past Due (b)		90 and Greater Days Past Due (b)		Non-performing Loans		Total Past Due and Non-performing Loans		Purchased Credit Impaired		Total Loans (c), (d)
in millions
LOAN TYPE
Commercial and industrial	$	39,242	$	58	$	28	$	31	$	297	$	414	112		$	39,768
Commercial real estate:
Commercial mortgage	14,655		93		9		6		26		134		322		15,111
Construction	2,314		—		—		2		3		5		26		2,345
Total commercial real estate loans	16,969		93		9		8		29		139		348		17,456
Commercial lease financing	4,641		28		3		5		8		44		—		4,685
Total commercial loans	$	60,852	$	179	$	40	$	44	$	334	$	597	460		$	61,909
Real estate — residential mortgage	$	5,098	$	17	$	5	$	3	$	56	$	81	$	368	$	5,547
Home equity loans	12,327		49		29		16		223		317		30		12,674
Consumer direct loans	1,705		44		15		11		6		76		7		1,788
Credit cards	1,082		9		6		12		2		29		—		1,111
Consumer indirect loans	2,993		7		4		1		4		16		—		3,009
Total consumer loans	$	23,205	$	126	$	59	$	43	$	291	$	519	$	405	$	24,129
Total loans	$	84,057	$	305	$	99	$	87	$	625	$	1,116	$	865	$	86,038

(a) Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b) Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c) Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d) Future accretable yield related to purchased credit impaired loans is not included in the analysis of the loan portfolio.

The prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the refreshed FICO score assigned for the consumer loan portfolios.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Commercial Credit Exposure — Excluding PCI

Credit Risk Profile by Creditworthiness Category ^{(a), (b)} 

in millions	Commercial and industrial				RE — Commercial				RE — Construction				Commercial lease				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
RATING	2017		2016		2017		2016		2017		2016		2017		2016		2017		2016
Pass	$	38,268	$	37,845	$	14,536	$	14,308	$	2,199	$	2,287	$	4,602	$	4,632	$	59,605	$	59,072
Criticized (Accruing)	1,484		1,514		401		455		43		30		58		45		1,986		2,044
Criticized (Nonaccruing)	258		297		32		26		2		2		5		8		297		333
Total	$	40,010	$	39,656	$	14,969	$	14,789	$	2,244	$	2,319	$	4,665	$	4,685	$	61,888	$	61,449

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) The term criticized refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

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Consumer Credit Exposure — Excluding PCI

Non-PCI Loans by Refreshed FICO Score ^(a) 

in millions	Residential — Prime				Consumer direct loans				Credit cards				Consumer indirect loans				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2017		2016		2017		2016		2017		2016		2017		2016		2017		2016
750 and above	$	9,935	$	9,818	$	472	$	498	$	408	$	453	$	1,263	$	1,266	$	12,078	$	12,035
660 to 749	5,821		5,266		644		661		498		525		1,190		1,195		8,153		7,647
Less than 660	1,665		1,617		199		194		131		132		545		543		2,540		2,486
No Score	240		1,122		414		428		—		1		—		5		654		1,556
Total	$	17,661	$	17,823	$	1,729	$	1,781	$	1,037	$	1,111	$	2,998	$	3,009	$	23,425	$	23,724

(a) Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

Commercial Credit Exposure — PCI

Credit Risk Profile by Creditworthiness Category ^{(a), (b)} 

in millions	Commercial and Industrial				RE — Commercial				RE — Construction				Commercial Lease		Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,	December 31,	March 31,		December 31,
RATING	2017		2016		2017		2016		2017		2016		2017	2016	2017		2016
Pass	$	26	$	12	$	118	$	139	$	20	$	21	—	—	$	164	$	172
Criticized	76		100		173		183		6		5		—	—	255		288
Total	$	102	$	112	$	291	$	322	$	26	$	26	—	—	$	419	$	460

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) The term “criticized” refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

Consumer Credit Exposure — PCI

PCI Loans by Refreshed FICO Score ^(a) 

in millions	Residential — Prime				Consumer direct loans				Credit cards		Consumer indirect loans		Total
	March 31,		December 31,		March 31,		December 31,		March 31,	December 31,	March 31,	December 31,	March 31,		December 31,
	2017		2016		2017		2016		2017	2016	2017	2016	2017		2016
750 and above	$	136	$	133	—		—		—	—	—	—	$	136	$	133
660 to 749	143		127		$	2	$	2	—	—	—	—	145		129
Less than 660	103		133		3		4		—	—	—	—	106		137
No Score	5		5		1		1		—	—	—	—	6		6
Total	$	387	$	398	$	6	$	7	—	—	—	—	$	393	$	405

(a) Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

We determine the appropriate level of the ALLL on at least a quarterly basis. The methodology for this determination is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2016 Form 10-K. We apply expected loss rates to existing loans with similar risk characteristics and exercise judgment to assess the impact of qualitative factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets.

For all commercial and consumer loan TDRs, regardless of size, as well as for impaired commercial loans with an outstanding balance of $2.5 million or greater, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan. We estimate the extent of the individual impairment for commercial loans and TDRs by comparing the recorded investment of the loan with the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. Secured consumer loan TDRs that are discharged through Chapter 7 bankruptcy and not formally re-affirmed are adjusted to reflect the fair value of the underlying collateral, less costs to sell. Non-Chapter 7 consumer loan TDRs are combined in homogenous pools and assigned a specific allocation based on the estimated present value of future cash flows using the loan’s effective interest rate. A specific allowance also may be assigned, even when sources of repayment appear sufficient, if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses.

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Commercial loans are generally charged off in full or charged down to the fair value of the underlying collateral when the borrower’s payment is 180 days past due. Consumer loans are generally charged off when payments are 120 days past due. Home equity and residential mortgage loans are generally charged down to net realizable value when payment is 180 days past due. Credit card loans and similar unsecured products are charged off when payments are 180 days past due.

The ALLL on the acquired non-impaired loan portfolio is estimated using the same methodology as is used for the originated portfolio, however, the estimated ALLL is compared to the remaining accretable yield to determine if any incremental ALLL must be recorded. For PCI loans, Key estimates cash flows expected to be collected quarterly. Decreases in expected cash flows are recognized as impairment through a provision for credit losses and an increase in the ALLL. The ALLL at March 31, 2017, represents our best estimate of the probable credit losses inherent in the loan portfolio at that date.

A summary of the changes in the ALLL for the periods indicated is presented in the table below:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period — continuing operations	$	858		$	796
Charge-offs	(77		)	(60		)
Recoveries	19			14
Net loans and leases charged off	(58		)	(46		)
Provision for loan and lease losses from continuing operations	70			76
Balance at end of period — continuing operations	$	870		$	826

The changes in the ALLL by loan category for the three months ended March 31, 2017, and March 31, 2016, are as follows:

Three months ended March 31, 2017:

in millions	December 31, 2016		Provision				Charge-offs			Recoveries		March 31, 2017
Commercial and Industrial	$	508	$	31			$	(32	)	$	5	$	512
Commercial real estate:
Real estate — commercial mortgage	144		2				—			—		146
Real estate — construction	22		6				—			1		29
Total commercial real estate loans	166		8				—			1		175
Commercial lease financing	42		3				(7		)	2		40
Total commercial loans	716		42				(39		)	8		727
Real estate — residential mortgage	17		(3		)		2			2		18
Home equity loans	54		4				(8		)	3		53
Consumer direct loans	24		9				(10		)	1		24
Credit cards	38		10				(11		)	1		38
Consumer indirect loans	9		8				(11		)	4		10
Total consumer loans	142		28				(38		)	11		143
Total ALLL — continuing operations	858		70			(a)	(77		)	19		870
Discontinued operations	24		3				(6		)	2		23
Total ALLL — including discontinued operations	$	882	$	73			$	(83	)	$	21	$	893

(a)    Excludes a credit for losses on lending-related commitments of $7 million.

Three months ended March 31, 2016:

in millions	December 31, 2015		Provision				Charge-offs			Recoveries		March 31, 2016
Commercial and Industrial	$	450	$	50			$	(26	)	$	3	$	477
Commercial real estate:
Real estate — commercial mortgage	134		—				(1		)	2		135
Real estate — construction	25		(3		)		—			1		$	23
Total commercial real estate loans	159		(3		)		(1		)	3		158
Commercial lease financing	47		(1		)		(3		)	—		43
Total commercial loans	656		46				(30		)	6		678
Real estate — residential mortgage	18		2				(2		)	2		20
Home equity loans	57		14				(10		)	3		64
Consumer direct loans	20		5				(6		)	1		20
Credit cards	32		6				(8		)	1		31
Consumer indirect loans	13		3				(4		)	1		13
Total consumer loans	140		30				(30		)	8		148
Total ALLL — continuing operations	796		76			(a)	(60		)	14		826
Discontinued operations	28		2				(9		)	3		24
Total ALLL — including discontinued operations	$	824	$	78			$	(69	)	$	17	$	850

(a)    Excludes a provision for losses on lending-related commitments of $13 million.

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Our ALLL from continuing operations increased by $12 million, or 1.4%, from December 31, 2016. Our allowance applies expected loss rates to our existing loans with similar risk characteristics as well as any adjustments to reflect our current assessment of qualitative factors, such as changes in economic conditions, underwriting standards, and concentrations of credit. Our commercial ALLL increased by $11 million, or 1.5%, from December 31, 2016, primarily because of loan growth in certain segments of the commercial loan portfolio as well as credit quality migration. Our consumer ALLL increased by $1 million, or .7% from December 31, 2016, reflecting a provision in excess of net loan charge-offs of $1 million.

There was $4 million of provision for loan and lease losses on PCI loans during the three months ended March 31, 2017. There was $11 million of provision for loan and lease losses on these PCI loans during the twelve months ended December 31, 2016.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of March 31, 2017, follows:

	Allowance					Outstanding
March 31, 2017	Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment		Purchased Credit Impaired	Loans			Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment			Purchased Credit Impaired
in millions
Commercial and industrial	$	16	$	495	1	$	40,112		$	237	$	39,773		$	102
Commercial real estate:
Commercial mortgage	3		140		3	15,260			16		14,953			291
Construction	—		29		—	2,270			—		2,244			26
Total commercial real estate loans	3		169		3	17,530			16		17,197			317
Commercial lease financing	—		40		—	4,665			—		4,665			—
Total commercial loans	19		704		4	62,307			253		61,635			419
Real estate — residential mortgage	2		15		1	5,507			51		5,095			361
Home equity loans	17		35		1	12,541			124		12,391			26
Consumer direct loans	—		24		—	1,735			3		1,726			6
Credit cards	—		38		—	1,037			3		1,034			—
Consumer indirect loans	1		9		—	2,998			35		2,963			—
Total consumer loans	20		121		2	23,818			216		23,209			393
Total ALLL — continuing operations	39		825		6	86,125			469		84,844			812
Discontinued operations	2		21		—	1,500		(a)	23		1,477		(a)	—
Total ALLL — including discontinued operations	$	41	$	846	6	$	87,625		$	492	$	86,321		$	812

(a) Amount includes $3 million of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of December 31, 2016, follows:

	Allowance						Outstanding
December 31, 2016	Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment		Purchased Credit Impaired		Loans			Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment			Purchased Credit Impaired
in millions
Commercial and Industrial	$	17	$	486	5		$	39,768		$	284	$	39,372		$	112
Commercial real estate:
Commercial mortgage	—		144		—		15,111			5		14,784			322
Construction	—		22		—		2,345			—		2,319			26
Total commercial real estate loans	—		166		—		17,456			5		17,103			348
Commercial lease financing	—		42		—		4,685			—		4,685			—
Total commercial loans	17		694		5		61,909			289		61,160			460
Real estate — residential mortgage	2		15		—		5,547			51		5,128			368
Home equity loans	17		37		—		12,674			125		12,519			30
Consumer direct loans	—		24		—		1,788			3		1,778			7
Credit cards	—		38		—		1,111			3		1,108			—
Consumer indirect loans	1		8		—		3,009			30		2,979			—
Total consumer loans	20		122		—		24,129			212		23,512			405
Total ALLL — continuing operations	37		816		5		86,038			501		84,672			865
Discontinued operations	2		22		—		1,565		(a)	22		1,543		(a)	—
Total ALLL — including discontinued operations	$	39	$	838	$	5	$	87,603		$	523	$	86,215		$	865

(a) Amount includes $3 million of loans carried at fair value that are excluded from ALLL consideration.

The liability for credit losses inherent in unfunded lending-related commitments, such as letters of credit and unfunded loan commitments, is included in “accrued expense and other liabilities” on the balance sheet. We establish the amount of this reserve by considering both historical trends and current market conditions quarterly, or more often if deemed necessary.

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Changes in the liability for credit losses on unfunded lending-related commitments are summarized as follows:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period	$	55		$	56
Provision (credit) for losses on lending-related commitments	(7		)	13
Balance at end of period	$	48		$	69

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6. Fair Value Measurements

Fair Value Determination

As defined in the applicable accounting guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in our principal market. We have established and documented our process for determining the fair values of our assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, we determine the fair value of our assets and liabilities using valuation models or third-party pricing services. Both of these approaches rely on market-based parameters, when available, such as interest rate yield curves, option volatilities, and credit spreads, or on unobservable inputs. Unobservable inputs may be based on our judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs.

Valuation adjustments, such as those pertaining to counterparty and our own credit quality and liquidity, may be necessary to ensure that assets and liabilities are recorded at fair value. Credit valuation adjustments are made when market pricing does not accurately reflect the counterparty’s or our own credit quality. We make liquidity valuation adjustments to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when we are unable to observe recent market transactions for identical or similar instruments. Liquidity valuation adjustments are based on the following factors:

• the amount of time since the last relevant valuation;

• whether there is an actual trade or relevant external quote available at the measurement date; and

• volatility associated with the primary pricing components.

We ensure that our fair value measurements are accurate and appropriate by relying upon various controls, including:

• an independent review and approval of valuation models and assumptions;

• recurring detailed reviews of profit and loss; and

• a validation of valuation model components against benchmark data and similar products, where possible.

We recognize transfers between levels of the fair value hierarchy at the end of the reporting period. Quarterly, we review any changes to our valuation methodologies to ensure they are appropriate and justified, and refine our valuation methodologies if more market-based data becomes available. The Fair Value Committee, which is governed by ALCO, oversees the valuation process. Various working groups that report to the Fair Value Committee analyze and approve the underlying assumptions and valuation adjustments. Changes in valuation methodologies for Level 1 and Level 2 instruments are presented to the Accounting Policy group for approval. Changes in valuation methodologies for Level 3 instruments are presented to the Fair Value Committee for approval. The working groups are discussed in more detail in the qualitative disclosures within this note. Formal documentation of the fair valuation methodologies is prepared by the lines of business and support areas as appropriate. The documentation details the asset or liability class and related general ledger accounts, valuation techniques, fair value hierarchy level, market participants, accounting methods, valuation methodology, group responsible for valuations, and valuation inputs.

Additional information regarding our accounting policies for determining fair value is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” beginning on page 110 of our 2016 Form 10-K.

Qualitative Disclosures of Valuation Techniques

Loans. Most loans recorded as trading account assets are valued based on market spreads for similar assets since they are actively traded. Therefore, these loans are classified as Level 2 because the fair value recorded is based on observable market data for similar assets.

Securities (trading and available for sale). We own several types of securities, requiring a range of valuation methods:

• Securities are classified as Level 1 when quoted market prices are available in an active market for the identical securities. Level 1 instruments include exchange-traded equity securities.

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• Securities are classified as Level 2 if quoted prices for identical securities are not available, and fair value is determined using pricing models (either by a third-party pricing service or internally) or quoted prices of similar securities. These instruments include municipal bonds, bonds backed by the U.S. government, corporate bonds, agency residential and CMBS, securities issued by the U.S. Treasury, money markets, and certain agency and corporate CMOs. Inputs to the pricing models include standard inputs (i.e. yields, benchmark securities, bids, and offers), actual trade data (i.e., spreads, credit ratings, and interest rates) for comparable assets, spread tables, matrices, high-grade scales, and option-adjusted spreads.

• Securities are classified as Level 3 when there is limited activity in the market for a particular instrument. To determine fair value in such cases, depending on the complexity of the valuations required, we use internal models based on certain assumptions or a third-party valuation service. At March 31, 2017, our Level 3 instruments consist of two convertible preferred securities. Our Corporate Strategy group is responsible for reviewing the valuation model and determining the fair value of these investments on a quarterly basis. The securities are valued using a cash flow analysis of the associated private company issuers. The valuations of the securities are negatively affected by projected net losses of the associated private companies and positively affected by projected net gains.

The fair values of our Level 2 securities available for sale are determined by a third-party pricing service. The valuations provided by the third-party pricing service are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, and reference data obtained from market research publications. Inputs used by the third-party pricing service in valuing CMOs and other mortgage-backed securities also include new issue data, monthly payment information, whole loan collateral performance, and “To Be Announced” prices. In valuations of securities issued by state and political subdivisions, inputs used by the third-party pricing service also include material event notices.

On a monthly basis, we validate the pricing methodologies utilized by our third-party pricing service to ensure that the fair value determination is consistent with the applicable accounting guidance and that our assets are properly classified in the fair value hierarchy. To perform this validation, we:

• review documentation received from our third-party pricing service regarding the inputs used in their valuations and determine a level assessment for each category of securities;

• substantiate actual inputs used for a sample of securities by comparing the actual inputs used by our third-party pricing service to comparable inputs for similar securities; and

• substantiate the fair values determined for a sample of securities by comparing the fair values provided by our third-party pricing service to prices from other independent sources for the same and similar securities. We analyze variances and conduct additional research with our third-party pricing service and take appropriate steps based on our findings.

Private equity and mezzanine investments. Private equity and mezzanine investments consist of investments in debt and equity securities through our Real Estate Capital line of business. They include direct investments made in specific properties, as well as indirect investments made in funds that pool assets of many investors to invest in properties. There is no active market for these investments, so we employ other valuation methods. The portion of our Real Estate Capital line of business involved with private equity and mezzanine investments is accounted for as an investment company in accordance with the applicable accounting guidance, whereby all investments are recorded at fair value.

Direct private equity and mezzanine investments are classified as Level 3 assets since there is a certain amount of subjectivity and use of unobservable inputs surrounding our determination of fair value. Our Fund Management, Asset Management, and Accounting groups are responsible for reviewing the valuation models and determining the fair value of these investments on a quarterly basis. Direct investments in properties are initially valued based upon the transaction price. This amount is then adjusted to fair value based on current market conditions using the discounted cash flow method based on the expected investment exit date. The fair values of the assets are reviewed and adjusted quarterly. There were no significant direct equity and mezzanine investments at March 31, 2017, nor at December 31, 2016.

The fair value of our indirect investments is based on the most recent value of the capital accounts as reported by the general partners of the funds in which we invest. The calculation to determine the investment’s fair value is based on our percentage

ownership in the fund multiplied by the net asset value of the fund, as provided by the fund manager. Under the requirements of the Volcker Rule, we will be required to dispose of some or all of our indirect investments. The Federal Reserve extended the conformance period with respect to covered funds to July 21, 2017, for all banking entities. On January 13, 2017, Key filed for an additional extension for illiquid funds, to retain certain indirect investments until the earlier of the date on which the

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investment is conformed or is expected to mature, or July 21, 2022. The application for an extension was approved on February 14, 2017. As of March 31, 2017, we have not committed to a plan to sell these investments. Therefore, these investments continue to be valued using the net asset value per share methodology. For more information about the Volcker Rule, see the discussion under the heading “Other Regulatory Developments under the Dodd-Frank Act — ‘Volcker Rule’” in the section entitled “Supervision and Regulation” beginning on page 16 of our 2016 Form 10-K.

Investments in real estate private equity funds are included within private equity and mezzanine investments. The main purpose of these funds is to acquire a portfolio of real estate investments that provides attractive, risk-adjusted returns and current income for investors. Certain of these investments do not have readily determinable fair values and represent our ownership interest in an entity that follows measurement principles under investment company accounting. The following table presents the fair value of our indirect investments and related unfunded commitments at March 31, 2017. We did not provide any financial support to investees related to our direct and indirect investments for the three months ended March 31, 2017, and March 31, 2016.

March 31, 2017	Fair Value		Unfunded Commitments
in millions
INVESTMENT TYPE
Indirect investments
Passive funds (a) (measured at NAV)	$	2	$	1
Total	$	2	$	1

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to three years. The purpose of KREEC’s funding is to allow funds to make additional investments and keep a certain market value threshold in the funds. KREEC is obligated to provide financial support, as all investors are required, to the funds based on its ownership percentage, as noted in the Limited Partnership Agreements.

Principal investments. Principal investments consist of investments in equity and debt instruments made by our principal investing entities. They include direct investments (investments made in a particular company) and indirect investments (investments made through funds that include other investors). Our principal investing entities are accounted for as investment companies in accordance with the applicable accounting guidance, whereby each investment is adjusted to fair value with any net realized or unrealized gain/loss recorded in the current period’s earnings. This process is a coordinated and documented effort by the Principal Investing Entities Deal Team (individuals from one of the independent investment managers who oversee these instruments), accounting staff, and the Investment Committee (individual employees and one of the independent investment managers). This process involves an in-depth review of the condition of each investment depending on the type of investment.

Our direct investments include investments in debt and equity instruments of both private and public companies. When quoted prices are available in an active market for the identical direct investment, we use the quoted prices in the valuation process, and the related investments are classified as Level 1 assets. In most cases, quoted market prices are not available for our direct investments, and we must perform valuations using other methods. These direct investment valuations are an in-depth analysis of the condition of each investment and are based on the unique facts and circumstances related to each individual investment. There is a certain amount of subjectivity surrounding the valuation of these investments due to the combination of quantitative and qualitative factors that are used in the valuation models. Therefore, these direct investments are classified as Level 3 assets. The specific inputs used in the valuations of each type of direct investment are described below.

Interest-bearing securities (i.e., loans) are valued on a quarterly basis. Valuation adjustments are determined by the Principal Investing Entities Deal Team and are subject to approval by the Investment Committee. Valuations of debt instruments are based on the Principal Investing Entities Deal Team’s knowledge of the current financial status of the subject company, which is regularly monitored throughout the term of the investment. Significant, unobservable inputs used in the valuations of these investments include the company’s payment history, adequacy of cash flows from operations, and current operating

results, including market multiples and historical and forecast EBITDA. Inputs can also include the seniority of the debt, the nature of any pledged collateral, the extent to which the security interest is perfected, and the net liquidation value of collateral.

Valuations of equity instruments of private companies, which are prepared on a quarterly basis, are based on current market conditions and the current financial status of each company. A valuation analysis is performed to value each investment. The valuation analysis is reviewed by the Principal Investing Entities Deal Team Member, and reviewed and approved by the Chief Administrative Officer of one of the independent investment managers. Significant unobservable inputs used in these valuations include adequacy of the company’s cash flows from operations, any significant change in the company’s performance since the prior valuation, and any significant equity issuances by the company. Equity instruments of public companies are valued using

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quoted prices in an active market for the identical security. If the instrument is restricted, the fair value is determined considering the number of shares traded daily, the number of the company’s total restricted shares, and price volatility.

Our indirect investments include primary and secondary investments in private equity funds engaged mainly in venture- and growth-oriented investing. These investments do not have readily determinable fair values. Indirect investments are valued using a methodology that is consistent with accounting guidance allowing us to estimate fair value based upon net asset value per share (or its equivalent, such as member units or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed). On January 13, 2017, Key filed for an additional extension for illiquid funds, to retain certain indirect investments until the earlier of the date on which the investment is conformed or is expected to mature, or July 21, 2022. The application for an extension was approved on February 14, 2017. As of March 31, 2017, we have not committed to a plan to sell these investments. Therefore, these investments continue to be valued using the net asset value per share methodology.

For indirect investments, management may make adjustments it deems appropriate to the net asset value if it is determined that the net asset value does not properly reflect fair value. In determining the need for an adjustment to net asset value, management performs an analysis of the private equity funds based on the independent fund manager’s valuations as well as management’s own judgment. Management also considers whether the independent fund manager adequately marks down an impaired investment, maintains financial statements in accordance with GAAP, or follows a practice of holding all investments at cost.

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at March 31, 2017, as well as financial support provided for the three months ended March 31, 2017, and March 31, 2016.

					Financial support provided
					Three months ended March 31,
	March 31, 2017				2017			2016
in millions	Fair Value		Unfunded Commitments		Funded Commitments		Funded Other	Funded Commitments		Funded Other
INVESTMENT TYPE
Direct investments (a)	$	21	—		—		—	—		$	13
Indirect investments (b) (measured at NAV)	155		$	37	$	1	—	$	1	—
Total	$	176	$	37	$	1	—	$	1	$	13

(a) Our direct investments consist of equity and debt investments directly in independent business enterprises. Operations of the business enterprises are handled by management of the portfolio company. The purpose of funding these enterprises is to provide financial support for business development and acquisition strategies. We infuse equity capital based on an initial contractual cash contribution and later from additional requests on behalf of the companies’ management.

(b) Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to eight years. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.

Loans Held for Sale. As of August 1, 2016, we account for our residential mortgage loans held for sale at fair value on a recurring basis. The election of the fair value option aligns the accounting for the residential mortgages held for sale with the related forward mortgage loan sale commitments. Additionally, we have elected to account for loans repurchased due to breaches of representations and warranties at fair value.

Residential mortgage loans are valued based on quoted market prices, where available, prices for other traded mortgage loans with similar characteristics, and purchase commitments and bid information received from market participants. The prices are adjusted as necessary to include the embedded servicing value in the loans and to take into consideration the specific characteristics of certain loans that are priced based on the pricing of similar loans. These adjustments represent unobservable inputs to the valuation but are not considered significant given the relative insensitivity of the value to changes in these inputs to the fair value of the loans. Accordingly, the majority of residential mortgage loans held for sale are classified as Level 2. This category also includes repurchased and temporarily unsalable residential mortgage loans that are included in “Loans, net of unearned income” on the balance sheet. These loans are repurchased due to a breach of representations and warranties in the loan sales agreement and typically occur after the loan is in default. The temporarily unsalable loans have an origination defect that makes them currently unable to be sold into the performing loan sales market. Because transaction details regarding sales of this type of loan are often unavailable, unobservable bid information from brokers and investors is heavily relied upon. Accordingly, based on the significance of unobservable inputs, these loans are classified as Level 3.

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Derivatives. Exchange-traded derivatives are valued using quoted prices and, therefore, are classified as Level 1 instruments. However, only a few types of derivatives are exchange-traded. The majority of our derivative positions are valued using internally developed models, based on market convention, that use observable market inputs, such as interest rate curves, yield curves, LIBOR and Overnight Index Swap discount rates and curves, index pricing curves, foreign currency curves, and volatility surfaces (a three-dimensional graph of implied volatility against strike price and maturity), as well as current prices for mortgage securities and investor supplied prices. These derivative contracts, which are classified as Level 2 instruments, include interest rate swaps, certain options, cross-currency swaps, credit default swaps, and forward mortgage loan sale commitments.

We have several customized derivative instruments and risk participations that are classified as Level 3 instruments. These derivative positions are valued using internally developed models, with inputs consisting of available market data, such as bond spreads and asset values, as well as unobservable, internally derived assumptions, such as loss probabilities and internal risk ratings of customers. These derivatives are priced monthly by our MRM group using a credit valuation adjustment methodology. Swap details with the customer and our related participation percentage, if applicable, are obtained from our derivatives accounting system, which is the system of record. Applicable customer rating information is obtained from the particular loan system and represents an unobservable input to this valuation process. Using these various inputs, a valuation of these Level 3 derivatives is performed using a model that was acquired from a third party. In summary, the fair value represents an estimate of the amount that the risk participation counterparty would need to pay/receive as of the measurement date based on the probability of customer default on the swap transaction and the fair value of the underlying customer swap. Therefore, a higher loss probability and a lower credit rating would negatively affect the fair value of the risk participations and a lower loss probability and higher credit rating would positively affect the fair value of the risk participations.

As a result of the First Niagara acquisition, we acquired First Niagara’s residential mortgage business, which included interest rate lock commitments. These instruments are accounted for as a derivative and valued using models containing unobservable significant inputs. For valuation purposes, the loan amount associated with each interest rate lock commitment is adjusted by its modeled pull-through (an unobservable input) defined as the percentage of loans that will close prior to the expiration of the rate lock commitment, as adjusted for approved changes to the terms. Based on the significance of unobservable inputs, these instruments are classified as Level 3.

Market convention implies a credit rating of “AA” equivalent in the pricing of derivative contracts, which assumes that all counterparties have the same creditworthiness. To reflect the actual exposure on our derivative contracts related to both counterparty and our own creditworthiness, we record a fair value adjustment in the form of a credit valuation adjustment. The credit component is determined by individual counterparty based on the probability of default and considers master netting and collateral agreements. The credit valuation adjustment is classified as Level 3. Our MRM group is responsible for the valuation policies and procedures related to this credit valuation adjustment. A weekly reconciliation process is performed to ensure that all applicable derivative positions are covered in the calculation, which includes transmitting customer exposures and reserve reports to trading management, derivative traders and marketers, derivatives middle office, and accounting personnel. On a quarterly basis, MRM prepares the credit valuation adjustment calculation, which includes a detailed reserve comparison with the previous quarter, an analysis for change in reserve, and a reserve forecast to ensure that the credit valuation adjustment recorded at period end is sufficient.

Other assets and liabilities. The value of our short positions is driven by the valuation of the underlying securities. If quoted prices for identical securities are not available, fair value is determined by using pricing models or quoted prices of similar securities, resulting in a Level 2 classification. For interest rate-driven products, such as government bonds, U.S. Treasury bonds and other products backed by the U.S. government, inputs include spreads, credit ratings, and interest rates. For credit-driven products, such as corporate bonds and mortgage-backed securities, inputs include actual trade data for comparable assets and bids and offers.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. The following tables present these assets and liabilities at March 31, 2017, and December 31, 2016.

March 31, 2017	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	586	—		$	586
States and political subdivisions	—		47		—		47
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		248		—		248
Other securities	$	1	35		—		36
Total trading account securities	1		916		—		917
Commercial loans	—		4		—		4
Total trading account assets	1		920		—		921
Securities available for sale:
U.S. Treasury, agencies and corporations	—		185		—		185
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations (a)	—		14,563		—		14,563
Agency residential mortgage-backed securities (a)	—		1,742		—		1,742
Agency commercial mortgage-backed securities	—		1,910		—		1,910
Other securities	3		—		$	17	20
Total securities available for sale	3		18,411		17		18,431
Other investments:
Principal investments:
Direct	—		—		21		21
Indirect (measured at NAV) (b)	—		—		—		155
Total principal investments	—		—		21		176
Equity and mezzanine investments:
Indirect (measured at NAV) (b)	—		—		—		2
Total equity and mezzanine investments	—		—		—		2
Total other investments	—		—		21		178
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		777		5		782
Foreign exchange	91		7		—		98
Commodity	—		150		—		150
Credit	—		2		1		3
Other	—		5		4		9
Derivative assets	91		941		10		1,042
Netting adjustments (c)	—		—		—		(464		)
Total derivative assets	91		941		10		578
Accrued income and other assets	—		—		—		—
Total assets on a recurring basis at fair value	$	95	$	20,334	$	48	$	20,170
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	214	$	729	—		$	943
Derivative liabilities:
Interest rate	—		531		—		531
Foreign exchange	78		8		—		86
Commodity	—		140		—		140
Credit	—		6		—		6
Other	—		16		—		16
Derivative liabilities	78		701		—		779
Netting adjustments (c)	—		—		—		(524		)
Total derivative liabilities	78		701		—		255
Accrued expense and other liabilities	—		—		—		—
Total liabilities on a recurring basis at fair value	$	292	$	1,430	—		$	1,198

(a) “Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.

(b) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

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December 31, 2016	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	655	—		$	655
States and political subdivisions	—		8		—		8
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		113		—		113
Other securities	—		73		—		73
Total trading account securities	—		849		—		849
Commercial loans	—		18		—		18
Total trading account assets	—		867		—		867
Securities available for sale:
U.S. Treasury, agencies and corporations	—		184		—		184
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations (a)	—		16,408		—		16,408
Agency residential mortgage-backed securities (a)	—		1,846		—		1,846
Agency commercial mortgage-backed securities	—		1,743		—		1,743
Other securities	$	3	—		$	17	20
Total securities available for sale	3		20,192		17		20,212
Other investments:
Principal investments:
Direct	—		—		27		27
Indirect (measured at NAV) (b)	—		—		—		158
Total principal investments	—		—		27		185
Equity and mezzanine investments:
Indirect (measured at NAV) (b)	—		—		—		6
Total equity and mezzanine investments	—		—		—		6
Total other investments	—		—		27		191
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		923		7		930
Foreign exchange	114		9		—		123
Commodity	—		176		—		176
Credit	—		—		1		1
Other	—		2		2		4
Derivative assets	114		1,110		10		1,234
Netting adjustments (c)	—		—		—		(431		)
Total derivative assets	114		1,110		10		803
Accrued income and other assets	—		8		—		8
Total assets on a recurring basis at fair value	$	117	$	22,239	$	54	$	22,143
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	192	$	616	—		$	808
Derivative liabilities:
Interest rate	—		737		—		737
Foreign exchange	102		11		—		113
Commodity	—		165		—		165
Credit	—		4		—		4
Other	—		1		—		1
Derivative liabilities	102		918		—		1,020
Netting adjustments (c)	—		—		—		(384		)
Total derivative liabilities	102		918		—		636
Accrued expense and other liabilities	—		14		—		14
Total liabilities on a recurring basis at fair value	$	294	$	1,548	—		$	1,458

(a) “Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.

(b) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

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Changes in Level 3 Fair Value Measurements

The following table shows the components of the change in the fair values of our Level 3 financial instruments for the three months ended March 31, 2017, and March 31, 2016. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases	Sales			Settlements		Transfers Other		Transfers into Level 3 (a)			Transfers out of Level 3 (a)				End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2017
Securities available for sale
Other securities	$	17	—				—	—			—		—		—			—				$	17	—
Other investments
Principal investments
Direct	27		$	(2	)	(b)	—	$	(4	)	—		—		—			—				21		$	(6	)	(b)
Other indirect	—		—				—	—			—		—		—			—				—		—
Derivative instruments (c)
Interest rate	7		—				—	—			—		—		$	1	(e)	$	(3	)	(e)	5		—
Credit	1		(3		)	(d)	—	—			$	3	—		—			—				1		—
Other (g)	2		—				—	—			—		$	2	—			—				4		—

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases	Sales			Settlements		Transfers into Level 3 (a)			Transfers out of Level 3 (a)				End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2016
Securities available for sale
Other securities	$	17	—				—	—			—		—			—				$	17	—
Other investments
Principal investments
Direct	50		$	(3	)	(b)	—	—			—		—			—				47		$	(3	)	(b)
Other indirect	20		(1		)	(b)	—	$	(1	)	—		—			—				18		(1		)	(b)
Derivative instruments (c)
Interest rate	16		4			(d)	—	—			—		$	3	(e)	$	(7	)	(e)	16		—
Credit	1		(2		)	(d)	—	—			$	3	—			—				2		—

(a) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

(b) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized losses on other and private equity and mezzanine investments are reported in “other income” on the income statement.

(c) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(d) Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on the income statement.

(e) Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant. Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less significant.

(f) There were no issuances for the three-month periods ended March 31, 2017, and March 31, 2016.

(g) Amounts represent Level 3 interest rate lock commitments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. There were no liabilities measured at fair value on a nonrecurring basis at March 31, 2017, and December 31, 2016. The following table presents our assets measured at fair value on a nonrecurring basis at March 31, 2017, and December 31, 2016:

	March 31, 2017						December 31, 2016
in millions	Level 1	Level 2	Level 3		Total		Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	—	—	$	11	$	11	—	—	$	11	$	11
Loans held for sale (a)	—	—	1		1		—	—	—		—
Accrued income and other assets	—	—	6		6		—	—	11		11
Total assets on a nonrecurring basis at fair value	—	—	$	18	$	18	—	—	$	22	$	22

(a) During the first three months of 2017, we transferred $17 million of commercial loans and leases at their current fair value from held-to-maturity portfolio to held-for-sale status, compared to $35 million during 2016.

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Impaired loans. We typically adjust the carrying amount of our impaired loans when there is evidence of probable loss and the expected fair value of the loan is less than its contractual amount. The amount of the impairment may be determined based on the estimated present value of future cash flows, the fair value of the underlying collateral, or the loan’s observable market price. Impaired loans with a specifically allocated allowance based on cash flow analysis or the value of the underlying collateral are classified as Level 3 assets. Impaired loans with a specifically allocated allowance based on an observable market price that reflects recent sale transactions for similar loans and collateral are classified as Level 2 assets.

The evaluations for impairment are prepared by the responsible relationship managers in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. The Asset Recovery Group is part of the Risk Management Group and reports to our Chief Credit Officer. These evaluations are performed in conjunction with the quarterly ALLL process.

Loans are evaluated for impairment on a quarterly basis. Loans included in the previous quarter’s review are re-evaluated, and if their values have changed materially, the underlying information (loan balance and in most cases, collateral value) is compared. Material differences are evaluated for reasonableness, and the relationship managers and their senior managers consider these differences and determine if any adjustment is necessary. The inputs are developed and substantiated on a quarterly basis based on current borrower developments, market conditions, and collateral values. The following two internal methods are used to value impaired loans:

• Cash flow analysis considers internally developed inputs, such as discount rates, default rates, costs of foreclosure, and changes in collateral values.

• The fair value of the collateral, which may take the form of real estate or personal property, is based on internal estimates, field observations, and assessments provided by third-party appraisers. We perform or reaffirm appraisals of collateral-dependent impaired loans at least annually. Appraisals may occur more frequently if the most recent appraisal does not accurately reflect the current market, if the debtor is seriously delinquent or chronically past due, or there has been a material deterioration in the performance of the project or condition of the property. Adjustments to outdated appraisals that result in an appraisal value less than the carrying amount of a collateral-dependent impaired loan are reflected in the ALLL.

Impairment valuations are back-tested each quarter, based on a look-back of actual incurred losses on closed deals previously evaluated for impairment. The overall percent variance of actual net loan charge-offs on closed deals compared to the specific allocations on such deals is considered in determining each quarter’s specific allocations.

Commercial loans held for sale. Through a quarterly analysis of our loan portfolios held for sale, which include both performing and nonperforming commercial loans, we determine any adjustments necessary to record the portfolios at the lower of cost or fair value in accordance with GAAP. Our analysis concluded that there was one commercial loan held for sale adjusted to fair value at March 31, 2017. There were no commercial loans held for sale adjusted to fair value at December 31, 2016.

Market inputs, including updated collateral values, and reviews of each borrower’s financial condition influence the inputs used in our internal models and other valuation methodologies. The valuations are prepared by the responsible relationship managers or analysts in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. Actual gains or losses realized on the sale of various commercial loans held for sale provide a back-testing mechanism for determining whether our valuations of these loans held for sale that are adjusted to fair value are appropriate.

Valuations of performing commercial mortgage and construction loans held for sale are conducted using internal models that rely on market data from sales or nonbinding bids on similar assets, including credit spreads, treasury rates, interest rate curves, and risk profiles. These internal models also rely on our own assumptions about the exit market for the loans and details about individual loans within the respective portfolios. Therefore, we classify these loans as Level 3 assets. The inputs related to our assumptions and other internal loan data include changes in real estate values, costs of foreclosure, prepayment rates, default rates, and discount rates.

Valuations of nonperforming commercial mortgage and construction loans held for sale are based on current agreements to sell the loans or approved, discounted payoffs. If a negotiated value is not available, we use third-party appraisals, adjusted for current market conditions. Since valuations are based on unobservable data, these loans are classified as Level 3 assets.

Direct financing leases and operating lease assets held for sale. Our KEF Accounting and Capital Markets groups are responsible for the valuation policies and procedures related to these assets. The Managing Director of the KEF Capital

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Markets group reports to the President of the KEF line of business. A weekly report that lists all equipment finance deals booked in the warehouse portfolio is distributed to both groups. On a quarterly basis, the KEF Accounting group prepares a detailed held-for-sale roll-forward schedule that is reconciled to the general ledger and the above-mentioned weekly report. KEF management uses the held-for-sale roll-forward schedule to determine whether an impairment adjustment is necessary in accordance with lower of cost or fair value guidelines.

Valuations of direct financing leases and operating lease assets held for sale are performed using an internal model that relies on market data, such as swap rates and bond ratings, as well as on our own assumptions about the exit market for the leases and details about the individual leases in the portfolio. The inputs based on our assumptions include changes in the value of leased items and internal credit ratings. These leases have been classified as Level 3 assets. KEF has master sale and assignment agreements with numerous institutional investors. Historically, multiple quotes are obtained, with the most reasonable formal quotes retained. These nonbinding quotes generally lead to a sale to one of the parties who provided the quote. Leases for which we receive a current nonbinding bid, and for which the sale is considered probable, may be classified as Level 2. The validity of these quotes is supported by historical and continued dealings with these institutions that have fulfilled the nonbinding quote in the past. In a distressed market where market data were not available, an estimate of the fair value of the leased asset may be used to value the lease, resulting in a Level 3 classification. In an inactive market, the market value of the assets held for sale is determined as the present value of the future cash flows discounted at the current buy rate. KEF Accounting calculates an estimated fair value buy rate based on the credit premium inherent in the relevant bond index and the appropriate swap rate on the measurement date. The amount of the adjustment is calculated as book value minus the present value of future cash flows discounted at the calculated buy rate.

Goodwill and other intangible assets. On a quarterly basis, we review impairment indicators to determine whether we need to evaluate the carrying amount of goodwill and other intangible assets assigned to Key Community Bank and Key Corporate Bank. We also perform an annual impairment test for goodwill. Accounting guidance permits an entity to first assess qualitative factors to determine whether additional goodwill impairment testing is required. We chose to utilize a qualitative assessment in our annual goodwill impairment testing performed during the fourth quarter of 2016. For additional information on the results of recent goodwill impairment testing, see Note 11 (“Goodwill and Other Intangible Assets”) beginning on page 166 of our 2016 Form 10-K.

The fair value of other intangible assets is calculated using a cash flow approach. While the calculation to test for recoverability uses a number of assumptions that are based on current market conditions, the calculation is based primarily on unobservable assumptions. Accordingly, these assets are classified as Level 3. Our lines of business, with oversight from our Accounting group, are responsible for routinely, at least quarterly, assessing whether impairment indicators are present. All indicators that signal that impairment may exist are appropriately considered in this analysis. An impairment loss is only recognized for a held-and-used, long-lived asset if the sum of its estimated future undiscounted cash flows used to test for recoverability is less than its carrying value.

Our primary assumptions include attrition rates, alternative costs of funds, and rates paid on deposits. For additional information on the results of other intangible assets impairment testing, see Note 11 (“Goodwill and Other Intangible Assets”) beginning on page 166 of our 2016 Form 10-K.

Other assets. OREO and other repossessed properties are valued based on inputs such as appraisals and third-party price opinions, less estimated selling costs. Generally, we classify these assets as Level 3, but OREO and other repossessed properties for which we receive binding purchase agreements are classified as Level 2. Returned lease inventory is valued based on market data for similar assets and is classified as Level 2. Assets that are acquired through, or in lieu of, loan foreclosures are recorded initially as held for sale at fair value less estimated selling costs at the date of foreclosure. After foreclosure, valuations are updated periodically, and current market conditions may require the assets to be marked down further to a new cost basis.

• Commercial Real Estate Valuation Process: When a loan is reclassified from loan status to OREO because we took possession of the collateral, the Asset Recovery Group Loan Officer, in consultation with our OREO group, obtains a broker price opinion or a third-party appraisal, which is used to establish the fair value of the underlying collateral. The determined fair value of the underlying collateral less estimated selling costs becomes the carrying value of the OREO asset. In addition to valuations from independent third-party sources, our OREO group also writes down the carrying balance of OREO assets once a bona fide offer is contractually accepted, where the accepted price is lower than the current balance of the particular OREO asset. The fair value of OREO property is re-evaluated every 90 days, and the OREO asset is adjusted as necessary.

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• Residential Real Estate Valuation Process: The Asset Management team within our Risk Operations group is responsible for valuation policies and procedures of these loans. The current vendor partner provides monthly reporting of all broker price opinion evaluations, appraisals, and the monthly market plans. Market plans are reviewed monthly, and valuations are reviewed and tested monthly to ensure proper pricing has been established and guidelines are being met. Risk Operations Compliance validates and provides periodic testing of the valuation process. The Asset Management team reviews changes in fair value measurements. Third-party broker price opinions are reviewed every 180 days, and the fair value is written down based on changes to the valuation. External factors are documented and monitored as appropriate.

•

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets at March 31, 2017, and December 31, 2016, along with the valuation techniques used, are shown in the following table:

March 31, 2017	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Recurring
Other investments — principal investments — direct:	$	21	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.00 - 6.30 (6.20)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	11		Fair value of underlying collateral	Discount	00.00 - 70.00% (16.00%)

December 31, 2016	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Recurring
Other investments — principal investments — direct:	$	27	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.30 - 7.00 (6.50)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	11		Fair value of underlying collateral	Discount	00.00 - 70.00% (46.00%)

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Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at March 31, 2017, and December 31, 2016, are shown in the following tables:

	March 31, 2017
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments (a)	$	3,074	$	3,074	—		—		—		—				$	3,074
Trading account assets (b)	921		1		$	920	—		—		—				921
Securities available for sale (b)	18,431		3		18,411		$	17	—		—				18,431
Held-to-maturity securities (c)	10,186		—		9,954		—		—		—				9,954
Other investments (b)	689		—		—		527		$	157	—				684
Loans, net of allowance (d)	85,255		—		83,520		—		—		—				83,520
Loans held for sale (b)	1,384		—		62		1,322		—		—				1,384
Derivative assets (b)	578		91		941		10		—		$	(464	)	(f)	578
LIABILITIES
Deposits with no stated maturity (a)	$	93,429	—		$	93,429	—		—		—				$	93,429
Time deposits (e)	10,553		—		10,649		—		—		—				10,649
Short-term borrowings (a)	1,385		$	214	1,171		—		—		—				1,385
Long-term debt (e)	12,324		12,372		289		—		—		—				12,661
Derivative liabilities (b)	255		78		701		—		—		$	(524	)	(f)	255

	December 31, 2016
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments (a)	$	3,452	$	3,452	—		—		—		—				$	3,452
Trading account assets (b)	867		—		$	867	—		—		—				867
Securities available for sale (b)	20,212		3		20,192		$	17	—		—				20,212
Held-to-maturity securities (c)	10,232		—		10,007		—		—		—				10,007
Other investments (b)	738		—		—		569		$	164	—				733
Loans, net of allowance (d)	85,180		—		—		83,285		—		—				83,285
Loans held for sale (b)	1,104		—		62		1,042		—		—				1,104
Derivative assets (b)	803		114		1,110		10		—		$	(431	)	(f)	803
LIABILITIES
Deposits with no stated maturity (a)	$	93,906	—		$	93,906	—		—		—				$	93,906
Time deposits (e)	10,181		—		10,267		—		—		—				10,267
Short-term borrowings (a)	2,310		$	192	2,118		—		—		—				2,310
Long-term debt (e)	12,384		12,386		304		—		—		—				12,690
Derivative liabilities (b)	636		102		918		—		—		$	(384	)	(f)	636

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” in this Note. Investments accounted for under the equity method are not included in this table.

(c) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities, and certain prepayment assumptions. We review the valuations derived from the models to ensure that they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(d) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(e) Fair values of time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

We use valuation methods based on exit market prices in accordance with applicable accounting guidance. We determine fair value based on assumptions pertaining to the factors that a market participant would consider in valuing the asset. A substantial portion of our fair value adjustments are related to liquidity. During 2016 and the first three months of 2017, the fair values of our loan portfolios generally remained stable, primarily due to increasing liquidity in the loan markets. If we were to use

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different assumptions, the fair values shown in the preceding table could change. Also, because the applicable accounting guidance for financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, the fair value amounts shown in the table above do not, by themselves, represent the underlying value of our company as a whole.

Education lending business. The discontinued education lending business consists of loans in portfolio recorded at carrying value with appropriate valuation reserves, and loans in portfolio recorded at fair value. All of these loans were excluded from the table above as follows:

• Loans at carrying value, net of allowance, of $1.5 billion ($1.3 billion at fair value) at March 31, 2017, and December 31, 2016;

• Portfolio loans at fair value of $3 million at March 31, 2017, and December 31, 2016.

These loans and securities are classified as Level 3 because we rely on unobservable inputs when determining fair value since observable market data is not available.

Residential real estate mortgage loans. Residential real estate mortgage loans with carrying amounts of $5.5 billion at March 31, 2017, and December 31, 2016 are included in “Loans, net of allowance” in the previous table.

Short-term financial instruments. For financial instruments with a remaining average life to maturity of less than six months, carrying amounts were used as an approximation of fair values.

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7. Securities

Securities available for sale. These are securities that we intend to hold for an indefinite period of time but that may be sold in response to changes in interest rates, prepayment risk, liquidity needs, or other factors. Securities available for sale are reported at fair value. Unrealized gains and losses (net of income taxes) deemed temporary are recorded in equity as a component of AOCI on the balance sheet. Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “other income” on the income statement. “Other securities” held in the available-for-sale portfolio consist primarily of convertible preferred stock issued by privately held companies.

Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “other income” on the income statement or in AOCI on the balance sheet in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

Held-to-maturity securities. These are debt securities that we have the intent and ability to hold until maturity. Debt securities are carried at cost and adjusted for amortization of premiums and accretion of discounts using the interest method. This method produces a constant rate of return on the adjusted carrying amount.

“Other securities” held in the held-to-maturity portfolio consists primarily of foreign bonds.

Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “other income” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “other income” on the income statement or in AOCI on the balance sheet in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.

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	March 31, 2017
in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations	$	188	—		$	3	$	185
States and political subdivisions	11		—		—		11
Agency residential collateralized mortgage obligations	14,790		$	29	256		14,563
Agency residential mortgage-backed securities	1,751		5		14		1,742
Agency commercial mortgage-backed securities	1,956		—		46		1,910
Other securities	21		—		1		20
Total securities available for sale	$	18,717	$	34	$	320	$	18,431
HELD TO MATURITY SECURITIES
Agency residential collateralized mortgage obligations	$	7,973	$	2	$	188	$	7,787
Agency residential mortgage-backed securities	605		—		5		600
Agency commercial mortgage-backed securities	1,593		3		44		1,552
Other securities	15		—		—		15
Total held-to-maturity securities	$	10,186	$	5	$	237	$	9,954

	December 31, 2016
in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations	$	188	—		$	4	$	184
States and political subdivisions	11		—		—		11
Agency residential collateralized mortgage obligations	16,652		$	31	275		16,408
Agency residential mortgage-backed securities	1,857		6		17		1,846
Agency commercial mortgage-backed securities	1,778		—		35		1,743
Other securities	21		—		1		20
Total securities available for sale	$	20,507	$	37	$	332	$	20,212
HELD TO MATURITY SECURITIES
Agency residential collateralized mortgage obligations	$	8,404	$	1	$	173	$	8,232
Agency residential mortgage-backed securities	629		—		5		624
Agency commercial mortgage-backed securities	1,184		1		49		1,136
Other securities	15		—		—		15
Total held-to-maturity securities	$	10,232	$	2	$	227	$	10,007

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The following table summarizes our securities that were in an unrealized loss position as of March 31, 2017, and December 31, 2016.

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
in millions	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2017
Securities available for sale:
U.S Treasury, agencies, and corporations	$	185	$	3	—		—		$	185	$	3
Agency residential collateralized mortgage obligations	10,573		205		$	1,507	$	51	12,080		256
Agency residential mortgage-backed securities	1,527		14		—		—		1,527		14
Agency commercial mortgage-backed securities	1,910		46		—		—		1,910		46
Other securities (a)	—		—		3		1		3		1
Held-to-maturity:
Agency residential collateralized mortgage obligations	$	6,634	$	169	$	521	$	19	$	7,155	$	188
Agency residential mortgage-backed securities (a)	525		5		—		—		525		5
Agency commercial mortgage-backed securities	1,001		44		—		—		1,001		44
Other securities (b)	4		—		—		—		4		—
Total temporarily impaired securities	$	22,359	$	486	$	2,031	$	71	$	24,390	$	557
December 31, 2016
Securities available for sale:
U.S. Treasury, agencies, and corporations	$	182	$	4	—		—		$	182	$	4
Agency residential collateralized mortgage obligations	12,345		231		$	1,410	$	44	13,755		275
Agency residential mortgage-backed securities	1,452		17		—		—		1,452		17
Agency commercial mortgage-backed securities	1,482		35		—		—		1,482		35
Other securities (a)	2		—		3		1		5		1
Held-to-maturity:
Agency residential collateralized mortgage obligations	7,028		156		518		17		7,546		173
Agency residential mortgage-backed securities	547		5		—		—		547		5
Agency commercial mortgage-backed securities	996		49		—		—		996		49
Other securities (b)	4		—		—		—		4		—
Total temporarily impaired securities	$	24,038	$	497	$	1,931	$	62	$	25,969	$	559

(a) Gross unrealized losses totaled less than $1 million for other securities available for sale at March 31, 2017, and December 31, 2016.

(b) Gross unrealized losses totaled less than $1 million for other securities held to maturity at March 31, 2017, and December 31, 2016.

At March 31, 2017, we had $256 million of gross unrealized losses related to 367 fixed-rate agency residential CMOs that we invested in as part of our overall A/LM strategy. These securities had a weighted-average maturity of 4.19 years at March 31, 2017. We also had $14 million of gross unrealized losses related to 234 agency residential mortgage-backed securities positions, which had a weighted-average maturity of 3.85 years at March 31, 2017. Because these securities have a fixed interest rate, their fair value is sensitive to movements in market interest rates. These unrealized losses are considered temporary since we expect to collect all contractually due amounts from these securities. Accordingly, these investments were reduced to their fair value through OCI, not through earnings.

We regularly assess our securities portfolio for OTTI. The assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery.

The debt securities identified as OTTI are written down to their current fair value. For those debt securities that we intend to sell, or more likely than not will be required to sell prior to the expected recovery of the amortized cost, the entire impairment (i.e., the difference between amortized cost and the fair value) is recognized in earnings. For those debt securities that we do not intend to sell, or more likely than not will not be required to sell prior to expected recovery, the credit portion of OTTI is recognized in earnings, while the remaining OTTI is recognized in equity as a component of AOCI on the balance sheet. As shown in the following table, we did not have any impairment losses recognized in earnings for the three months ended March 31, 2017.

Three months ended March 31, 2017
in millions
Balance at December 31, 2016	$	4
Impairment recognized in earnings	—
Balance at March 31, 2017	$	4

For the three months ended March 31, 2017, net realized securities gains totaled $1 million.

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At March 31, 2017, securities available for sale and held-to-maturity securities totaling $8.9 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

The following table shows our securities by remaining maturity. CMOs and other mortgage-backed securities (both of which are included in the securities available-for-sale portfolio) as well as the CMOs in the held-to-maturity portfolio are presented based on their expected average lives. The remaining securities, in both the available-for-sale and held-to-maturity portfolios, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

	Securities Available for Sale				Held to Maturity Securities
March 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value
in millions
Due in one year or less	$	177	$	179	$	55	$	56
Due after one through five years	16,595		16,354		6,935		6,798
Due after five through ten years	1,737		1,693		2,936		2,862
Due after ten years	208		205		260		238
Total	$	18,717	$	18,431	$	10,186	$	9,954

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8. Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require a small or no net investment, and allow for the net settlement of positions. A derivative’s notional amount serves as the basis for the payment provision of the contract and takes the form of units, such as shares or dollars. A derivative’s underlying variable is a specified interest rate, security price, commodity price, foreign exchange rate, index, or other variable. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the fair value of the derivative contract.

The primary derivatives that we use are interest rate swaps, caps, floors, and futures; foreign exchange contracts; commodity derivatives; and credit derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in our loan portfolio, hedge against changes in foreign currency exchange rates, and meet client financing and hedging needs. As further discussed in this note:

• interest rate risk is the risk that the EVE or net interest income will be adversely affected by fluctuations in interest rates;

• credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms; and

• foreign exchange risk is the risk that an exchange rate will adversely affect the fair value of a financial instrument.

Derivative assets and liabilities are recorded at fair value on the balance sheet, after taking into account the effects of bilateral collateral and master netting agreements. These agreements allow us to settle all derivative contracts held with a single counterparty on a net basis and to offset net derivative positions with related cash collateral, where applicable. As a result, we may have derivative contracts with negative fair values included in derivative assets on the balance sheet and contracts with positive fair values included in derivative liabilities.

At March 31, 2017, after taking into account the effects of bilateral collateral and master netting agreements, we had $27 million of derivative assets and a positive $8 million of derivative liabilities that relate to contracts entered into for hedging purposes. Our hedging derivative liabilities are in an asset position largely because we have contracts with positive fair values as a result of master netting agreements. As of the same date, after taking into account the effects of bilateral collateral and master netting agreements and a reserve for potential future losses, we had derivative assets of $551 million and derivative liabilities of $263 million that were not designated as hedging instruments.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives” beginning on page 112 of our 2016 Form 10-K.

Derivatives Designated in Hedge Relationships

Net interest income and the EVE change in response to changes in the mix of assets, liabilities, and off-balance sheet instruments and the associated interest rates tied to each instrument. In addition, differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities cause net interest income and the EVE to fluctuate. We utilize derivatives that have been designated as part of a hedge relationship in accordance with the applicable accounting guidance to manage net interest income and EVE to within our stated risk tolerances. The primary derivative instruments used to manage interest rate risk are interest rate swaps, which convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index.

We designate certain “receive fixed/pay variable” interest rate swaps as fair value hedges. These contracts convert certain fixed-rate long-term debt into variable-rate obligations, thereby modifying our exposure to changes in interest rates. As a result, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts.

Similarly, we designate certain “receive fixed/pay variable” interest rate swaps as cash flow hedges. These contracts effectively convert certain floating-rate loans into fixed-rate loans to reduce the potential adverse effect of interest rate decreases on future interest income. Again, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts.

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We also designate certain “pay fixed/receive variable” interest rate swaps as cash flow hedges. These swaps convert certain floating-rate debt into fixed-rate debt. We also use these swaps to manage the interest rate risk associated with anticipated sales of certain commercial real estate loans. The swaps protect against the possible short-term decline in the value of the loans that could result from changes in interest rates between the time they are originated and the time they are sold.

We use foreign currency forward transactions to hedge the foreign currency exposure of our net investment in various foreign equipment finance entities. These entities are denominated in a non-U.S. currency. These swaps are designated as net investment hedges to mitigate the exposure of measuring the net investment at the spot foreign exchange rate.

Derivatives Not Designated in Hedge Relationships

On occasion, we enter into interest rate swap contracts to manage economic risks but do not designate the instruments in hedge relationships. Excluding contracts addressing customer exposures, the amount of derivatives hedging risks on an economic basis at March 31, 2017, was not significant.

Like other financial services institutions, we originate loans and extend credit, both of which activities expose us to credit risk. We actively manage our overall loan portfolio and the associated credit risk in a manner consistent with asset quality objectives and concentration risk tolerances to mitigate portfolio credit risk. Purchasing credit default swaps enables us to transfer to a third party a portion of the credit risk associated with a particular extension of credit, including situations where there is a forecast sale of loans. Beginning in the first quarter of 2014, we began purchasing credit default swaps to reduce the credit risk associated with the debt securities held in our trading portfolio. We may also sell credit derivatives to offset our purchased credit default swap position prior to maturity. Although we use credit default swaps for risk management purposes, they are not treated as hedging instruments.

We also enter into derivative contracts for other purposes, including:

• interest rate swap, cap, and floor contracts generally entered into to accommodate the needs of commercial loan clients;

• energy and base metal swap and option contracts entered into to accommodate the needs of clients;

• foreign exchange forward and option contracts entered into primarily to accommodate the needs of clients; and

• futures contracts and positions with third parties that are intended to offset or mitigate the interest rate or market risk related to client positions discussed above.

These contracts are not designated as part of hedge relationships.

Fair Values, Volume of Activity, and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2017, and December 31, 2016. The change in the notional amounts of these derivatives by type from December 31, 2016, to March 31, 2017, indicates the volume of our derivative transaction activity during the first three months of 2017. The notional amounts are not affected by bilateral collateral and master netting agreements. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Where master netting agreements are not in effect or are not enforceable under bankruptcy laws, we do not adjust those derivative assets and liabilities with counterparties. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:

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	March 31, 2017								December 31, 2016
			Fair Value								Fair Value
in millions	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	24,917	$	98		$	20		$	24,237	$	189		$	94
Foreign exchange	284		3			2			282		6			4
Total	25,201		101			22			24,519		195			98
Derivatives not designated as hedging instruments:
Interest rate	58,963		684			511			55,315		741			643
Foreign exchange	6,897		95			84			6,230		117			109
Commodity	1,569		150			140			1,474		176			165
Credit	418		3			6			360		1			4
Other (a)	2,625		9			16			390		4			1
Total	70,472		941			757			63,769		1,039			922
Netting adjustments (b)	—		(464		)	(524		)	—		(431		)	(384		)
Net derivatives in the balance sheet	95,673		578			255			88,288		803			636
Other collateral (c)	—		(11		)	(71		)	—		(21		)	(97		)
Net derivative amounts	$	95,673	$	567		$	184		$	88,288	$	782		$	539

(a) Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when issued securities, and when-issued security transactions in connection with an “at-the-market” equity offering program.

(b) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(c) Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Fair value hedges. Instruments designated as fair value hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. The effective portion of a change in the fair value of an instrument designated as a fair value hedge is recorded in earnings at the same time as a change in fair value of the hedged item, resulting in no effect on net income. The ineffective portion of a change in the fair value of such a hedging instrument is recorded in “other income” on the income statement with no corresponding offset. During the three-month period ended March 31, 2017, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some immaterial ineffectiveness in our hedging relationships, all of our fair value hedges remained “highly effective” as of March 31, 2017.

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement.

	Three months ended March 31, 2017
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative			Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	(35	)	Long-term debt	Other income	$	35	(a)
Interest rate	Interest expense — Long-term debt	18
Total		$	(17	)			$	35

	Three months ended March 31, 2016
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	115	Long-term debt	Other income	$	(115	)	(a)
Interest rate	Interest expense — Long-term debt	27
Total		$	142			$	(115	)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

Cash flow hedges. Instruments designated as cash flow hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a cash flow hedge is recorded as a component of AOCI on the balance sheet. This amount is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we pay variable-rate interest on debt, receive variable-rate interest on commercial loans, or sell commercial real estate loans). The ineffective portion of cash flow hedging transactions is included in “other income” on the income statement. During the three-month period ended March 31, 2017, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some immaterial ineffectiveness in our hedging relationships, all of our cash flow hedges remained “highly effective” as of March 31, 2017.

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Considering the interest rates, yield curves, and notional amounts as of March 31, 2017, we would expect to reclassify an estimated $8 million of after-tax net gains on derivative instruments designated as cash flow hedges from AOCI to income during the next 12 months. In addition, we expect to reclassify approximately $3 million of net losses related to terminated cash flow hedges from AOCI to income during the next 12 months. As of March 31, 2017, the maximum length of time over which we hedge forecast transactions is 11 years.

Net investment hedges. We enter into foreign currency forward contracts to hedge our exposure to changes in the carrying value of our investments in foreign subsidiaries as a result of changes in the related foreign exchange rates. Instruments designated as net investment hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a net investment hedge is recorded as a component of AOCI on the balance sheet when the terms of the derivative match the notional and currency risk being hedged. The effective portion is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we dispose of or liquidate a foreign subsidiary). At March 31, 2017, AOCI reflected unrecognized, after-tax gains totaling $38 million related to cumulative changes in the fair value of our net investment hedges, which offset the unrecognized, after-tax foreign currency losses on net investment balances. The ineffective portion of net investment hedging transactions is included in “other income” on the income statement, but there was no net investment hedge ineffectiveness as of March 31, 2017. We did not exclude any portion of our hedging instruments from the assessment of hedge effectiveness during the three-month period ended March 31, 2017.

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

	Three months ended March 31, 2017
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	(22	)	Interest income — Loans	$	15		Other income	—
Interest rate	—			Interest expense — Long-term debt	(1		)	Other income	—
Interest rate	—			Investment banking and debt placement fees	—			Other income	—
Net Investment Hedges
Foreign exchange contracts	(3		)	Other Income	—			Other income	—
Total	$	(25	)		$	14			—

	Three months ended March 31, 2016
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	133		Interest income — Loans	$	23		Other income	—
Interest rate	(4		)	Interest expense — Long-term debt	(1		)	Other income	—
Interest rate	(1		)	Investment banking and debt placement fees	—			Other income	—
Net Investment Hedges
Foreign exchange contracts	(14		)	Other Income	—			Other income	—
Total	$	114			$	22			—

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

in millions	December 31, 2016			2017 Hedging Activity			Reclassification of Gains to Net Income			March 31, 2017
AOCI resulting from cash flow and net investment hedges	$	(14	)	$	(15	)	$	(9	)	$	(38	)

Nonhedging instruments. Our derivatives that are not designated as hedging instruments are recorded at fair value in “derivative assets” and “derivative liabilities” on the balance sheet. Adjustments to the fair values of these instruments, as well as any premium paid or received, are included in “corporate services income,” “consumer mortgage income,” and “other income” on the income statement.

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The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement.

	Three months ended March 31, 2017											Three months ended March 31, 2016
in millions	Corporate Services Income		Consumer Mortgage Income (a)			Other Income			Total			Corporate Services Income		Other Income			Total
NET GAINS (LOSSES)
Interest rate	$	6	—			$	(1	)	$	5		$	6	$	(1	)	$	5
Foreign exchange	11		—			—			11			10		—			10
Commodity	2		—			—			2			1		—			1
Credit	1		—			(5		)	(4		)	1		(2		)	(1		)
Other	—		$	(1	)	(1		)	(2		)	—		—			—
Total net gains (losses)	$	20	$	(1	)	$	(7	)	$	12		$	18	$	(3	)	$	15

(a) As a result of the First Niagara acquisition, we began recognizing net gains (losses) on other derivatives related to our residential mortgage banking activities in “consumer mortgage income” in December 2016.

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected positive replacement value of the contracts. We use several means to mitigate and manage exposure to credit risk on derivative contracts. We generally enter into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. Additionally, we monitor counterparty credit risk exposure on each contract to determine appropriate limits on our total credit exposure across all product types. We review our collateral positions on a daily basis and exchange collateral with our counterparties in accordance with standard ISDA documentation, central clearing rules, and other related agreements. We generally hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises, or GNMA. Cash collateral of $25 million was included in derivative assets on the balance sheet at March 31, 2017, compared to $155 million of cash collateral netted against derivative assets at December 31, 2016. The cash collateral netted against derivative liabilities totaled $35 million at March 31, 2017, and $108 million at December 31, 2016.

Beginning in the first quarter of 2017, the relevant agreements that allow us to access the central clearing organizations to clear derivative transactions became qualified master netting agreements resulting in a change in how cash collateral is reflected in our balance sheet and related disclosures as of March 31, 2017. As of March 31, 2017, all cash collateral exchanged with central clearing organizations is netted against the related derivative contracts in our balance sheet and related disclosures. Cash collateral exchanged with central clearing organizations was included in “short-term investments” and “NOW and money market deposit accounts” on the balance sheet in all periods prior to March 31, 2017. At December 31, 2016, we posted $448 million of cash collateral with clearing organizations and held $59 million of cash collateral from clearing organizations.

Additionally, the CME amended its rulebook effective January 3, 2017, to legally characterize variation margin payments made to and received from the CME as settlement of derivatives, not collateral against derivative exposure. As a result, variation margin payments with the CME are presented in the balance sheet and related disclosures as part of the gross fair value of CME-cleared derivative assets and liabilities. At March 31, 2017 we had paid $194 million and received $68 million in variation margin to settle CME-cleared derivatives. In addition, under the CME’s settlement rulebook, CME-cleared derivative assets and liabilities are offset against one another to determine the gross asset or liability exposure of CME-cleared derivatives.

Netting cash collateral exchanged with all central clearing organizations and applying variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction of net derivative assets on our balance sheet of $121 million and a reduction of net derivative liabilities on our balance sheet of $394 million as of March 31, 2017, as compared to December 31, 2016.

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

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in millions	March 31, 2017			December 31, 2016
Interest rate	$	452		$	782
Foreign exchange	41			62
Commodity	50			110
Credit	1			—
Other	9			4
Derivative assets before collateral	553			958
Less: Related collateral	(25		)	155
Total derivative assets	$	578		$	803

We enter into derivative transactions with two primary groups: broker-dealers and banks, and clients. Given that these groups have different economic characteristics, we have different methods for managing counterparty credit exposure and credit risk.

We enter into transactions with broker-dealers and banks for various risk management purposes. These types of transactions are generally high dollar volume. We generally enter into bilateral collateral and master netting agreements with these counterparties. We began clearing certain types of derivative transactions with these counterparties in June 2013, whereby the central clearing organizations become our counterparties subsequent to novation of the original derivative contracts. In addition, we began entering into derivative contracts through swap execution facilities during the first quarter of 2014. The swap clearing and swap trade execution requirements were mandated by the Dodd-Frank Act for the purpose of reducing counterparty credit risk and increasing transparency in the derivative market. At March 31, 2017, we had gross exposure of $464 million to broker-dealers and banks. We had net exposure of $239 million after the application of master netting agreements and cash collateral, where such qualifying agreements exist. We had net exposure of $215 million after considering $24 million of additional collateral held in the form of securities.

We enter into transactions with clients to accommodate their business needs. These types of transactions are generally low dollar volume. We generally enter into master netting agreements with these counterparties. In addition, we mitigate our overall portfolio exposure and market risk by buying and selling U.S. Treasuries and Eurodollar futures and entering into offsetting positions and other derivative contracts, sometimes with entities other than broker-dealers and banks. Due to the smaller size and magnitude of the individual contracts with clients, we generally do not exchange collateral in connection with these derivative transactions. To address the risk of default associated with the uncollateralized contracts, we have established a credit valuation adjustment (included in “derivative assets”) in the amount of $5 million at March 31, 2017, which we estimate to be the potential future losses on amounts due from client counterparties in the event of default. At March 31, 2017, we had gross exposure of $382 million to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements. We had net exposure of $339 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve. 

Credit Derivatives

We are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. We may also sell credit derivatives, mainly single-name credit default swaps, to offset our purchased credit default swap positions prior to maturity.

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of March 31, 2017, and December 31, 2016. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.

	March 31, 2017							December 31, 2016
in millions	Purchased			Sold	Net			Purchased			Sold		Net
Single-name credit default swaps	$	(2	)	—	$	(2	)	$	(2	)	—		$	(2	)
Traded credit default swap indices	(1		)	—	(1		)	(1		)	—		(1		)
Other (a)	—			—	—			—			$	—	—
Total credit derivatives	$	(3	)	—	$	(3	)	$	(3	)	$	—	(3		)

(a) As of both March 31, 2017, and December 31, 2016, the fair value of other credit derivatives sold totaled less than $1 million.

Single-name credit default swaps are bilateral contracts whereby the seller agrees, for a premium, to provide protection against the credit risk of a specific entity (the “reference entity”) in connection with a specific debt obligation. The protected credit risk is related to adverse credit events, such as bankruptcy, failure to make payments, and acceleration or restructuring of obligations, identified in the credit derivative contract. As the seller of a single-name credit derivative, we may settle in

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one of two ways if the underlying reference entity experiences a predefined credit event. We may be required to pay the purchaser the difference between the par value and the market price of the debt obligation (cash settlement) or receive the specified referenced asset in exchange for payment of the par value (physical settlement). If we effect a physical settlement and receive our portion of the related debt obligation, we will join other creditors in the liquidation process, which may enable us to recover a portion of the amount paid under the credit default swap contract. We also may purchase offsetting credit derivatives for the same reference entity from third parties that will permit us to recover the amount we pay should a credit event occur.

A traded credit default swap index represents a position on a basket or portfolio of reference entities. As a seller of protection on a credit default swap index, we would be required to pay the purchaser if one or more of the entities in the index had a credit event. Upon a credit event, the amount payable is based on the percentage of the notional amount allocated to the specific defaulting entity.

The majority of transactions represented by the “other” category shown in the above table are risk participation agreements. In these transactions, the lead participant has a swap agreement with a customer. The lead participant (purchaser of protection) then enters into a risk participation agreement with a counterparty (seller of protection), under which the counterparty receives a fee to accept a portion of the lead participant’s credit risk. If the customer defaults on the swap contract, the counterparty to the risk participation agreement must reimburse the lead participant for the counterparty’s percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, the counterparty has no reimbursement requirements. If the customer defaults on the swap contract and the seller fulfills its payment obligations under the risk participation agreement, the seller is entitled to a pro rata share of the lead participant’s claims against the customer under the terms of the swap agreement.

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2017, and December 31, 2016. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	March 31, 2017					December 31, 2016
dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	8	11.40	12.85	%	$	4	6.49	17.93	%
Total credit derivatives sold	$	8	—	—		$	4	—	—

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At March 31, 2017, KeyBank’s rating was “A3” with Moody’s and “A-” with S&P, and KeyCorp’s rating was “Baa1” with Moody’s and “BBB+” with S&P. As of March 31, 2017, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) held by KeyBank that were in a net liability position totaled $98 million, which comprised of $164 million in derivative assets and $262 million in derivative liabilities. We had $100 million in cash and securities collateral posted to cover those positions as of March 31, 2017. There were no derivative contracts with credit risk contingent features held by KeyCorp at March 31, 2017.

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of March 31, 2017, and December 31, 2016. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of March 31, 2017, and December 31, 2016, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of December 31, 2016. For more information about the credit ratings for KeyBank and

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KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.

	March 31, 2017				December 31, 2016
in millions	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings	A3		A-		A3		A-
One rating downgrade	$	2	$	2	$	2	$	2
Two rating downgrades	2		2		2		2
Three rating downgrades	2		2		4		4

KeyBank’s long-term senior unsecured credit rating was four ratings above noninvestment grade at Moody’s and S&P as of March 31, 2017, and December 31, 2016. If KeyBank’s ratings had been downgraded below investment grade as of March 31, 2017, or December 31, 2016, payments of up to $3 million and $4 million, respectively, would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted. If KeyCorp’s ratings had been downgraded below investment grade as of December 31, 2016, payments of less than $1 million would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted.

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9. Mortgage Servicing Assets

We originate and periodically sell commercial and residential mortgage loans but continue to service those loans for the buyers. We also may purchase the right to service commercial mortgage loans for other lenders. We record a servicing asset if we purchase or retain the right to service loans in exchange for servicing fees that exceed the going market servicing rate and are considered more than adequate compensation for servicing. Commercial and residential mortgage servicing assets are recorded as a component of “accrued income and other assets” on the balance sheet.

Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets.”

Commercial Mortgage Servicing

Changes in the carrying amount of commercial mortgage servicing assets are summarized as follows:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period	$	356		$	321
Servicing retained from loan sales	28			7
Purchases	7			12
Amortization	(22		)	(22		)
Balance at end of period	$	369		$	318
Fair value at end of period	$	480		$	408

The fair value of commercial mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted average of the significant unobservable inputs used to determine the fair value of our commercial mortgage servicing assets at March 31, 2017, and December 31, 2016, along with the valuation techniques, are shown in the following table:

March 31, 2017	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Commercial mortgage servicing assets	Discounted cash flow	Expected defaults	1.00 - 3.00% (1.30%)
		Residual cash flows discount rate	7.00 - 15.00% (8.60%)
		Escrow earn rate	1.20 - 3.20% (2.60%)
		Servicing cost	$150 - $38,500 ($1,342)
		Loan assumption rate	0.00 - 3.00% (1.25%)
		Percentage late	0.00 - 2.00% (.31%)

December 31, 2016	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Commercial mortgage servicing assets	Discounted cash flow	Expected defaults	1.00 - 3.00% (1.40%)
		Residual cash flows discount rate	7.00 - 12.00% (8.00%)
		Escrow earn rate	1.10 - 3.00% (2.40%)
		Servicing cost	$150 - $2,700 ($1,124)
		Loan assumption rate	0.00 - 3.00% (1.13%)
		Percentage late	0.00 - 2.00% (.34%)

If these economic assumptions change or prove incorrect, the fair value of commercial mortgage servicing assets may also change. Expected credit losses, escrow earning rates, and discount rates are critical to the valuation of commercial mortgage servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates, and reflect historical data associated with the commercial mortgage loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. A decrease in the value assigned to the escrow earning rates would cause a decrease in the fair value of our commercial mortgage servicing assets. An increase in the assumed default rates of commercial mortgage loans or an increase in the assigned discount rates would cause a decrease in the fair value of our commercial mortgage servicing assets. Prepayment activity on commercial serviced loans does not significantly affect the valuation of our commercial mortgage servicing assets. Unlike residential mortgages, commercial mortgages experience significantly lower prepayments due to certain contractual restrictions affecting the borrower’s ability to prepay the mortgage.

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We have elected to account for commercial servicing assets using the amortization method. The amortization of commercial servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of commercial servicing assets for each period, as shown in the table at the beginning of this note, is recorded as a reduction to contractual fee income. The contractual fee income from servicing commercial mortgage loans totaled $38 million for the three-month period ended March 31, 2017, and $35 million for the three-month period ended March 31, 2016. This fee income was offset by $22 million of amortization for the three-month period ended March 31, 2017, and $23 million for the three-month period ended March 31, 2016. Both the contractual fee income and the amortization are recorded, net, in “mortgage servicing fees” on the income statement.

Additional information pertaining to the accounting for commercial mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” on page 113 of our 2016 Form 10-K.

Residential Mortgage Servicing

With the First Niagara acquisition, we acquired residential mortgage servicing assets with a fair value of $28 million as of the Acquisition Date.

Changes in the carrying amount of residential mortgage servicing assets are summarized as follows:

	Three months ended March 31, 2017
in millions
Balance at beginning of period	$	28
Servicing retained from loan sales	2
Amortization	(1		)
Balance at end of period	$	29
Fair value at end of period	$	35

The fair value of mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted-average of the significant unobservable inputs used to fair value our mortgage servicing assets at March 31, 2017, along with the valuation techniques, are shown in the following table:

March 31, 2017	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Residential mortgage servicing assets	Discounted cash flow	Prepayment speed	7.68 - 19.68% (9.24%)
		Discount rate	8.50 - 11.00% (8.55%)
		Servicing cost	$76 - $3,335 ($83.03)

If these economic assumptions change or prove incorrect, the fair value of residential mortgage servicing assets may also change. Prepayment speed, discount rates, and servicing cost are critical to the valuation of servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates, and reflect historical data associated with the loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. An increase in the prepayment speed, assigned discount rates, and servicing cost assumptions would also cause a negative impact on the fair value of our residential mortgage servicing assets.

We have elected to account for residential servicing assets using the amortization method. The amortization of residential servicing assets is determined in proportion to, and over the period of, the estimated net residential servicing income. The amortization of servicing assets for March 31, 2017, as shown in the table above, is recorded as a reduction to contractual fee income. The contractual fee income from servicing residential mortgage loans totaled $3 million for the three-month period ended March 31, 2017. This fee income was offset by $1 million of amortization for the three-month period ended March 31, 2017. Both the contractual fee income and the amortization are recorded, net, in “mortgage servicing fees” on the income statement.

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10. Variable Interest Entities

A VIE is a partnership, limited liability company, trust, or other legal entity that meets any one of the following criteria:

• The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

• The entity’s investors lack the power to direct the activities that most significantly affect the entity’s economic performance.

• The entity’s equity at risk holders do not have the obligation to absorb losses or the right to receive residual returns.

• The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

Our significant VIEs are summarized below. We define a “significant interest” in a VIE as a subordinated interest that exposes us to a significant portion, but not the majority, of the VIE’s expected losses or residual returns, even though we do not have the power to direct the activities that most significantly affect the entity’s economic performance. KCC and KPP principal investments are newly assessed VIEs under the amended consolidation guidance. Additional information on the amended consolidation guidance is provided in Note 1 (“Basis of Presentation and Accounting Policies”).

LIHTC investments.Through KCDC, we have made investments directly and indirectly in LIHTC operating partnerships formed by third parties. As a limited partner in these operating partnerships, we are allocated tax credits and deductions associated with the underlying properties. We have determined that we are not the primary beneficiary of these investments because the general partners have the power to direct the activities that most significantly influence the economic performance of their respective partnerships and have the obligation to absorb expected losses and the right to receive residual returns. As we are not the primary beneficiary of these investments, we do not include them in our corporate consolidation.

Our maximum exposure to loss in connection with these partnerships consists of our unamortized investment balance plus any unfunded equity commitments and tax credits claimed but subject to recapture. We had $1.2 billion of investments in LIHTC operating partnerships at both March 31, 2017, and December 31, 2016. These investments are recorded in “accrued income and other assets” on our balance sheet. We do not have any loss reserves recorded related to these investments because we believe the likelihood of any loss to be remote. For all legally binding, unfunded equity commitments, we increase our recognized investment and recognize a liability. As of March 31, 2017, and December 31, 2016, we had liabilities of $439 million and $462 million, respectively, related to investments in qualified affordable housing projects, which are recorded in “accrued expenses and other liabilities” on our balance sheet. We continue to invest in these LIHTC operating partnerships.

The assets and liabilities presented in the table below convey the size of KCDC’s direct and indirect investments at March 31, 2017, and December 31, 2016. As these investments represent unconsolidated VIEs, the assets and liabilities of the investments themselves are not recorded on our balance sheet.

	Unconsolidated VIEs
in millions	Total Assets		Total Liabilities		Maximum Exposure to Loss
March 31, 2017
LIHTC investments	$	4,785	$	1,972	$	1,451
December 31, 2016
LIHTC investments	$	4,814	$	2,003	$	1,465

We amortize our LIHTC investments over the period that we expect to receive the tax benefits. During the first three months of 2017, we recognized $40 million of amortization and $39 million of tax credits associated with these investments within “income taxes” on our income statement. During the first three months of 2016, we recognized $33 million of amortization and $33 million of tax credits associated with these investments within “income taxes” on our income statement.

Principal investments.Through our principal investing entity, KCC, we have made investments in private equity funds engaged in venture- and growth-oriented investing. As a limited partner to these funds, KCC records these investments at fair value and receives distributions from the funds in accordance with the funds’ partnership agreements. We are not the primary beneficiary of these investments as we do not hold the power to direct the activities that most significantly affect the funds’

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economic performance. Such power rests with the funds’ general partners. In addition, we have neither the obligation to absorb the funds’ expected losses nor the right to receive their residual returns. Our voting rights are also disproportionate to our economic interests, and substantially all of the funds’ activities are conducted on behalf of investors with disproportionally few voting rights. Because we are not the primary beneficiary of these investments, we do not consolidate them.

Our maximum exposure to loss associated with indirect principal investments consists of the investments’ fair value plus any unfunded equity commitments. The fair value of our indirect principal investments totaled $155 million and $158 million at March 31, 2017, and December 31, 2016, respectively. These investments are recorded in “other investments” on our balance sheet. Additional information on indirect principal investments is provided in Note 6 (“Fair Value Measurements”). The table below reflects the size of the private equity funds in which KCC was invested as well as our maximum exposure to loss in connection with these investments at March 31, 2017.

	Unconsolidated VIEs
in millions	Total Assets		Total Liabilities		Maximum Exposure to Loss
March 31, 2017
KCC indirect investments	$	19,029	$	135	$	192
December 31, 2016
KCC indirect investments	$	32,755	$	201	$	195

Other unconsolidated VIEs. We are involved with other various entities that we have determined to be VIEs in the normal course of business. We have determined that we are not the primary beneficiary of these partnerships because the general partners have the power to direct the activities that most significantly impact their economic performance. Our assets associated with these unconsolidated VIEs totaled $172 million at March 31, 2017, and $178 million at December 31, 2016, and primarily consisted of our investments in these entities. These assets are recorded in “accrued income and other assets,” “other investments,” and “securities available for sale” on our balance sheet. We had liabilities totaling $4 million associated with these unconsolidated VIEs at both March 31, 2017, and December 31, 2016. These liabilities are recorded in “accrued expenses and other liabilities” on our balance sheet.

Consolidated VIEs.Through our principal investing entity, KPP, we have formed and funded operating entities that provide management and other related services to our investment company funds, which directly invest in portfolio companies. In return for providing services to our direct investment funds, these entities’ receive a minority equity interest in the funds. This minority equity ownership is recorded at fair value on the entities financial statements. Additional information on our direct principal investments is provided in Note 6 (“Fair Value Measurements”). While other equity investors manage the daily operations of these entities, we retain the power, through voting rights, to direct the activities of the entities that most significantly affect their economic performance. In addition, we have the obligation to absorb losses and the right to receive residual returns that could potentially be significant to these entities. As a result, we have determined that we are the primary beneficiary of these funds and have consolidated them since formation. The assets of these KPP entities that can only be used to settle the entities’ obligations totaled $3 million at March 31, 2017, and $1 million at December 31, 2016. These assets are recorded in “cash and due from banks” and “accrued income and other assets” on our balance sheet. The entities had no liabilities at March 31, 2017, nor at December 31, 2016, and other equity investors have no recourse to our general credit.

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11. Income Taxes

Income Tax Provision

In accordance with the applicable accounting guidance, the principal method established for computing the provision for income taxes in interim periods requires us to make our best estimate of the effective tax rate expected to be applicable for the full year. This estimated effective tax rate is then applied to interim consolidated pre-tax operating income to determine the interim provision for income taxes.

The effective tax rate, which is the provision for income taxes as a percentage of income from continuing operations before income taxes, was 22.4% for the first quarter of 2017 and 23.0% for the first quarter of 2016. The effective tax rates are below our combined federal and state statutory tax rate of 37.2% primarily due to income from investments in tax-advantaged assets such as corporate-owned life insurance and credits associated with renewable energy and low-income housing investments. The effective tax rates for the three months ended March 31, 2017, and March 31, 2016, were favorably affected by net discrete income tax benefits of 4.7% and 1%, respectively.

The tax rate for the first quarter of 2017 was also significantly reduced due to merger-related charges of $81 million. Excluding those expenses, the tax rate for the first quarter of 2017 was 24.8%.

Deferred Tax Asset

At March 31, 2017, from continuing operations we had a net deferred tax asset of $468 million, compared to a net deferred tax asset of $607 million at December 31, 2016, included in “accrued income and other assets” on the balance sheet. At March 31, 2017, deferred tax assets were affected by the First Niagara acquisition including certain purchase accounting adjustments and changes in market conditions that affect the mark-to-market deferred tax adjustment on securities.

To determine the amount of deferred tax assets that are more likely than not to be realized, and therefore recorded, we conduct a quarterly assessment of all available evidence. This evidence includes, but is not limited to, taxable income in prior periods, projected future taxable income, and projected future reversals of deferred tax items. These assessments involve a degree of subjectivity and may undergo change. Based on these criteria, we had a valuation allowance of $26 million at March 31, 2017, and $26 million at December 31, 2016. The valuation allowance is associated with certain state net operating loss carryforwards, state credit carryforwards, and federal and state capital loss carryforwards.

Unrecognized Tax Benefits

As permitted under the applicable accounting guidance for income taxes, it is our policy to recognize interest and penalties related to unrecognized tax benefits in “income tax expense.” At March 31, 2017, Key’s unrecognized tax benefits were $50 million.

Pre-1988 Bank Reserves Acquired in a Business Combination

As a result of the First Niagara acquisition, at March 31, 2017, the retained earnings of KeyBank included approximately $92 million of allocated bad debt deductions for which no income taxes have been recorded. Under current federal law, these

reserves are subject to recapture into taxable income if KeyBank, or any successor, fails to maintain its bank status under the

Internal Revenue Code or makes non-dividend distributions or distributions greater than its accumulated earnings and profits.

No deferred tax liability has been established as these events are not expected to occur in the foreseeable future.

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12. Acquisition, Divestiture, and Discontinued Operations

Acquisition

First Niagara Financial Group, Inc. As previously disclosed, on October 30, 2015, KeyCorp entered into a definitive agreement and plan of merger (“Agreement”) to acquire all of the outstanding capital stock of First Niagara, headquartered in Buffalo, New York. On August 1, 2016, First Niagara merged with and into KeyCorp, with KeyCorp as the surviving entity. The total consideration for the transaction was approximately $4.0 billion. Under the terms of the Agreement, at the effective time of the merger, each share of First Niagara common stock was converted into the right to receive (i) 0.680 of a share of KeyCorp common stock and (ii) $2.30 in cash. The exchange ratio of KeyCorp stock for First Niagara stock was fixed per the Agreement and did not adjust based on changes in KeyCorp’s share trading price. First Niagara equity awards outstanding immediately prior to the effective time of the merger were converted into equity awards for KeyCorp common stock as provided in the Agreement. Each share of First Niagara’s Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series B, was converted into a share of a newly created series of preferred stock of KeyCorp having substantially the same terms as First Niagara’s preferred stock. For more information on the acquisition, see Note 2 (“Business Combination”).

On October 7, 2016, First Niagara Bank merged with and into KeyBank, with KeyBank as the surviving entity. Systems and client conversion also occurred during the fourth quarter of 2016 in connection with the bank merger.

Divestiture

On September 9, 2016, KeyCorp sold to Northwest Bank, a wholly-owned subsidiary of Northwest Bancshares, Inc., 18 First Niagara Bank branches in the Buffalo, New York market. The branches were divested in connection with the merger between First Niagara and KeyCorp and pursuant to an agreement with the United States Department of Justice and commitments to the Federal Reserve following a customary antitrust review in connection with the merger. The divestiture included $439 million of loans and $1.6 billion of deposits associated with the 18 branches.

Discontinued operations

Education lending.In September 2009, we decided to exit the government-guaranteed education lending business. As a result, we have accounted for this business as a discontinued operation. As of January 1, 2010, we consolidated our ten outstanding education lending securitization trusts, as we held the residual interests and are the master servicer with the power to direct the activities that most significantly influence the economic performance of the trusts.

On September 30, 2014, we sold the residual interests in all of our outstanding education lending securitization trusts to a third party for $57 million. In selling the residual interests, we no longer have the obligation to absorb losses nor the right to receive benefits related to the securitization trusts. Therefore, in accordance with the applicable accounting guidance, we deconsolidated the securitization trusts and removed trust assets of $1.7 billion and trust liabilities of $1.6 billion from our balance sheet at September 30, 2014. We continue to service the securitized loans in eight of the securitization trusts and receive servicing fees, whereby we are adequately compensated, as well as remaining a counterparty to derivative contracts with three of the securitization trusts. We retained interests in the securitization trusts through our ownership of an insignificant percentage of certificates in two of the securitization trusts and two interest-only strips in one of the securitization trusts. These retained interests were remeasured at fair value on September 30, 2014, and their fair value of $1 million was recorded in “discontinued assets” on our balance sheet. These assets were valued using a similar approach and inputs that have been used to value the education loan securitization trust loans and securities, which are further discussed later in this note.

“Income (loss) from discontinued operations, net of taxes” on the income statement includes (i) the changes in fair value of the portfolio loans at fair value (discussed later in this note), and (ii) the interest income and expense from the loans in portfolio at both amortized cost and fair value. These amounts are shown separately in the following table. Gains and losses attributable to changes in fair value are recorded as a component of “noninterest income” or “noninterest expense.” Interest income and interest expense related to the loans and securities are included as components of “net interest income.”

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The components of “income (loss) from discontinued operations, net of taxes” for the education lending business are as follows:

	Three months ended March 31,
in millions	2017		2016
Net interest income	$	5	$	7
Provision for credit losses	3		2
Net interest income after provision for credit losses	2		5
Noninterest income	2		1
Noninterest expense	4		5
Income (loss) before income taxes	—		1
Income taxes	—		—
Income (loss) from discontinued operations, net of taxes (a)	—		$	1

(a) Includes after-tax charges of $6 million for each of the three-month periods ended March 31, 2017, and March 31, 2016, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The discontinued assets of our education lending business included on the balance sheet are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Held-to-maturity securities	$	1	$	1
Portfolio loans at fair value	3		3
Loans, net of unearned income (a)	1,497		1,562
Less: Allowance for loan and lease losses	23		24
Net loans	1,477		1,541
Accrued income and other assets	27		28
Total assets	$	1,505	$	1,570

(a) At March 31, 2017, and December 31, 2016, unearned income was less than $1 million.

The discontinued education lending business consisted of loans in portfolio recorded at fair value and loans in portfolio recorded at carrying value with appropriate valuation reserves. As of June 30, 2015, we decided to sell the portfolio loans that are recorded at fair value, which were subsequently sold during the fourth quarter of 2015.

At March 31, 2017, education loans included 2,316 TDRs with a recorded investment of approximately $23 million (pre-modification and post-modification). A specifically allocated allowance of $2 million was assigned to these loans as of March 31, 2017. At December 31, 2016, education loans included 2,163 TDRs with a recorded investment of approximately $22 million (pre-modification and post-modification). A specifically allocated allowance of $2 million was assigned to these loans as of December 31, 2016. There have been no significant payment defaults. There are no significant commitments to lend additional funds to these borrowers outstanding. Additional information regarding TDR classification and ALLL methodology is provided in Note 5 (“Asset Quality”).

In June 2015, we transferred $179 million of loans that were previously purchased from three of the outstanding securitization trusts pursuant to the legal terms of those particular trusts to held for sale and accounted for them at fair value. These portfolio loans held for sale were valued based on indicative bids to sell the loans. These loans were considered Level 3 assets since we relied on unobservable inputs when determining their fair value. Portfolio loans accounted for at fair value were $3 million at March 31, 2017.

The following table shows the significant unobservable inputs used to measure the fair value of the portfolio loans accounted for at fair value as of March 31, 2017, and December 31, 2016:

March 31, 2017	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Portfolio loans accounted for at fair value	$	3	Market approach	Indicative bids	84.50-104.00%

December 31, 2016	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Portfolio loans accounted for at fair value	$	3	Market approach	Indicative bids	84.50-104.00%

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The following table shows the principal and fair value amounts for our portfolio loans at carrying value at March 31, 2017, and December 31, 2016. Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2016 Form 10-K.

	March 31, 2017			December 31, 2016
in millions	Principal		Fair Value	Principal		Fair Value
Portfolio loans at carrying value
Accruing loans past due 90 days or more	$	20	N/A	$	22	N/A
Loans placed on nonaccrual status	4		N/A	5		N/A

The following table shows the portfolio loans at fair value and their related contractual amounts as of March 31, 2017, and December 31, 2016.

	March 31, 2017				December 31, 2016
in millions	Contractual Amount		Fair Value		Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	3	$	3	$	3	$	3

The following tables present the assets of the portfolio loans measured at fair value on a recurring basis at March 31, 2017, and December 31, 2016.

March 31, 2017
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	—	—	$	3	$	3
Total assets on a recurring basis at fair value	—	—	$	3	$	3

December 31, 2016
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	—	—	$	3	$	3
Total assets on a recurring basis at fair value	—	—	$	3	$	3

The following table shows the change in the fair values of the Level 3 portfolio loans held for sale, portfolio loans, and consolidated education loan securitization trusts for the three-month periods ended March 31, 2017, and March 31, 2016.

in millions		Portfolio Student Loans
Balance at December 31, 2016		$	3
Settlements		—
Balance at March 31, 2017	(a)	$	3
Balance at December 31, 2015		$	4
Settlements		(1		)
Balance at March 31, 2016	(a)	$	3

(a) There were no purchases, sales, issuances, gains (losses) recognized in earnings, transfers into Level 3, or transfers out of Level 3 for the three-month period ended March 31, 2017. There were no purchases, sales, issuances, gains (losses) recognized in earnings, transfers into Level 3, or transfers out of Level 3 for the three-month period ended March 31, 2016.

Austin Capital Management, Ltd.In April 2009, we decided to discontinue the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. As a result, we have accounted for this business as a discontinued operation. There was no income related to Austin for the three-month periods ended March 31, 2017, and March 31, 2016. The discontinued assets of Austin included on the balance sheet are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Cash and due from banks	$	15	$	15
Total assets	$	15	$	15

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Combined discontinued operations. The combined results of the discontinued operations are as follows:

	Three months ended March 31,
in millions	2017		2016
Net interest income	$	5	$	7
Provision for credit losses	3		2
Net interest income after provision for credit losses	2		5
Noninterest income	2		1
Noninterest expense	4		5
Income (loss) before income taxes	—		1
Income taxes	—		—
Income (loss) from discontinued operations, net of taxes (a)	—		$	1

(a) Includes after-tax charges of $6 million and for each of the three-month periods ended March 31, 2017, and March 31, 2016, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The combined assets of the discontinued operations are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Cash and due from banks	$	15	$	15
Held-to-maturity securities	1		1
Portfolio loans at fair value	3		3
Loans, net of unearned income (a)	1,497		1,562
Less: Allowance for loan and lease losses	23		24
Net loans	1,477		1,541
Accrued income and other assets	27		28
Total assets	$	1,520	$	1,585

(a) At March 31, 2017, and December 31, 2016, unearned income was less than $1 million.

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13. Securities Financing Activities

We enter into repurchase agreements to finance overnight customer sweep deposits. We also enter into repurchase and reverse repurchase agreements to settle other securities obligations. We account for these securities financing agreements as collateralized financing transactions. Repurchase and reverse repurchase agreements are recorded on the balance sheet at the amounts for which the securities will be subsequently sold or repurchased. Securities borrowed transactions are recorded on the balance sheet at the amounts of cash collateral advanced. While our securities financing agreements incorporate a right of set off, the assets and liabilities are reported on a gross basis. Reverse repurchase agreements and securities borrowed transactions are included in “short-term investments” on the balance sheet; repurchase agreements are included in “federal funds purchased and securities sold under repurchase agreements.”

The following table summarizes our securities financing agreements at March 31, 2017, and December 31, 2016:

	March 31, 2017
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	4	$	(3	)	$	(1	)	—
Total	$	4	$	(3	)	$	(1	)	—
Offsetting of financial liabilities:
Repurchase agreements (c)	$	437	$	(3	)	$	(434	)	—
Total	$	437	$	(3	)	$	(434	)	—

	December 31, 2016
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	3	$	(3	)	—			—
Total	$	3	$	(3	)	—			—
Offsetting of financial liabilities:
Repurchase agreements (c)	$	497	$	(3	)	$	(494	)	—
Total	$	497	$	(3	)	$	(494	)	—

(a) Netting adjustments take into account the impact of master netting agreements that allow us to settle with a single counterparty on a net basis.

(b) These adjustments take into account the impact of bilateral collateral agreements that allow us to offset the net positions with the related collateral. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

(c) Repurchase agreements are collateralized by federal agency CMOs and U.S. Treasury securities and contracted on an overnight basis. These securities are reported in “securities available for sale” on our balance sheet.

As of March 31, 2017, the carrying amount of assets pledged as collateral against repurchase agreements totaled $569 million. Assets pledged as collateral are reported in “securities available for sale” and “held-to-maturity securities” on our balance sheet. At March 31, 2017, the liabilities associated with collateral pledged were solely comprised of customer sweep financing activity and had a carrying value of $434 million. The collateral pledged under customer sweep repurchase agreements is posted to a third-party custodian and cannot be sold or repledged by the secured party. The risk related to a decline in the market value of collateral pledged is minimal given the collateral's high credit quality and the overnight duration of the repurchase agreements.

Like other financing transactions, securities financing agreements contain an element of credit risk. To mitigate and manage credit risk exposure, we generally enter into master netting agreements and other collateral arrangements that give us the right, in the event of default, to liquidate collateral held and to offset receivables and payables with the same counterparty.  Additionally, we establish and monitor limits on our counterparty credit risk exposure by product type. For the reverse repurchase agreements, we monitor the value of the underlying securities we received from counterparties and either request additional collateral or return a portion of the collateral based on the value of those securities. We generally hold collateral in the form of highly rated securities issued by the U.S. Treasury and fixed income securities. In addition, we may need to provide collateral to counterparties under our repurchase agreements. With the exception of collateral pledged against customer sweep repurchase agreements, the collateral we pledge and receive can generally be sold or repledged by the secured parties.

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14. Employee Benefits

Pension Plans

Effective December 31, 2009, we amended our cash balance pension plan and other defined benefit plans to freeze all benefit accruals and close the plans to new employees. We will continue to credit participants’ existing account balances for interest until they receive their plan benefits. We changed certain pension plan assumptions after freezing the plans. As part of the acquisition of First Niagara, Key also obtained two frozen defined benefit plans sponsored by First Niagara, both of which provide benefits based upon length of service and compensation levels. Effective September 30, 2016, the two First Niagara plans merged into another defined benefit plan maintained by Key to form the KeyCorp Consolidated Cash Balance Plan. Effective December 31, 2016, our original cash balance pension plan merged into the KeyCorp Consolidated Cash Balance Plan.

The components of net pension cost (benefit) for all funded and unfunded plans are as follows:

	Three months ended March 31,
in millions	2017			2016
Interest cost on PBO	$	12		$	10
Expected return on plan assets	(17		)	(13		)
Amortization of losses	4			4
Net pension cost	$	(1	)	$	1

Other Postretirement Benefit Plans

We sponsor a retiree healthcare plan in which all employees age 55 with 5 years of service (or employees age 50 with 15 years of service who are terminated under conditions that entitle them to a severance benefit) are eligible to participate. Participant contributions are adjusted annually. Key may provide a subsidy toward the cost of coverage for certain employees hired before 2001 with a minimum of 15 years of service at the time of termination. We use a separate VEBA trust to fund the retiree healthcare plan. Effective November 29, 2016, an unfunded retiree welfare plan previously sponsored by First Niagara merged into our current retiree healthcare plan.

The components of net postretirement benefit cost for all funded and unfunded plans are as follows:

	Three months ended March 31,
in millions	2017	2016
Interest cost on APBO	—	$	1
Expected return on plan assets	—	(1		)
Net postretirement benefit cost	—	—

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15. Trust Preferred Securities Issued by Unconsolidated Subsidiaries

We own the outstanding common stock of business trusts formed by us that issued corporation-obligated, mandatorily redeemable, trust preferred securities. The trusts used the proceeds from the issuance of their trust preferred securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the mandatorily redeemable trust preferred securities. The outstanding common stock of these business trusts is recorded in “other investments” on our balance sheet.

We unconditionally guarantee the following payments or distributions on behalf of the trusts:

• required distributions on the trust preferred securities;

• the redemption price when a capital security is redeemed; and

• the amounts due if a trust is liquidated or terminated.

The Regulatory Capital Rules, discussed in “Supervision and regulation” in Item 2 of this report, implement a phase-out of trust preferred securities as Tier 1 capital, consistent with the requirements of the Dodd-Frank Act. For “standardized approach” banking organizations such as Key, the phase-out period began on January 1, 2015, and starting in 2016 requires us to treat our mandatorily redeemable, trust preferred securities as Tier 2 capital.

During the quarter, we redeemed $9 million of trust preferred securities that were acquired in the First Niagara acquisition.

The trust preferred securities, common stock, and related debentures are summarized as follows:

dollars in millions	Trust Preferred Securities, Net of Discount (a)		Common Stock		Principal Amount of Debentures, Net of Discount (b)		Interest Rate of Trust Preferred Securities and Debentures (c)		Maturity of Trust Preferred Securities and Debentures
March 31, 2017
KeyCorp Capital I	$	155	$	6	$	161	1.738	%	2028
KeyCorp Capital II	105		4		109		6.875		2029
KeyCorp Capital III	138		4		142		7.750		2029
HNC Statutory Trust III	18		1		19		2.453		2035
Willow Grove Statutory Trust I	18		1		19		2.441		2036
HNC Statutory Trust IV	16		1		17		2.319		2037
Westbank Capital Trust II	7		—		7		3.342		2034
Westbank Capital Trust III	7		—		7		3.342		2034
Total	$	464	$	17	$	481	4.811	%	—
December 31, 2016	$	475	$	17	$	492	4.845	%	—

(a) The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $58 million at March 31, 2017, and $59 million at December 31, 2016. See Note 8 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b) We have the right to redeem these debentures. If the debentures purchased by KeyCorp Capital I, HNC Statutory Trust III, Willow Grove Statutory Trust I, HNC Statutory Trust IV, Westbank Capital Trust II, or Westbank Capital Trust III are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (i) the principal amount, plus any accrued but unpaid interest, or (ii) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points for KeyCorp Capital II or 25 basis points for KeyCorp Capital III, or 50 basis points in the case of redemption upon either a tax or a capital treatment event for either KeyCorp Capital II or KeyCorp Capital III, plus any accrued but unpaid interest. The principal amount of certain debentures includes basis adjustments related to fair value hedges totaling $58 million at March 31, 2017, and $59 million at December 31, 2016. See Note 8 for an explanation of fair value hedges. The principal amount of debentures, net of discounts, is included in “long-term debt” on the balance sheet.

(c) The interest rates for the trust preferred securities issued by KeyCorp Capital II and KeyCorp Capital III are fixed. The trust preferred securities issued by KeyCorp Capital I have a floating interest rate, equal to three-month LIBOR plus 74 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust III have a floating interest rate, equal to three-month LIBOR plus 140 basis points, that reprices quarterly. The trust preferred securities issued by Willow Grove Statutory Trust I have a floating interest rate, equal to three-month LIBOR plus 131 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust IV have a floating interest rate, equal to three-month LIBOR plus 128 basis points, that reprices quarterly. The trust preferred securities issued by Westbank Capital Trust II and Westbank Capital Trust III each have a floating interest rate, equal to three-month LIBOR plus 219 basis points, that reprices quarterly.  The total interest rates are weighted-average rates.

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16. Contingent Liabilities and Guarantees

Legal Proceedings

See Note 21 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Legal Proceedings” on page 194 of our 2016 Form 10-K for a description of a proceeding styled In re: Checking Account Overdraft Litigation.

Other litigation.From time to time, in the ordinary course of business, we and our subsidiaries are subject to various other litigation, investigations, and administrative proceedings. Private, civil litigations may range from individual actions involving a single plaintiff to putative class action lawsuits with potentially thousands of class members. Investigations may involve both formal and informal proceedings, by both government agencies and self-regulatory bodies. These other matters may involve claims for substantial monetary relief. At times, these matters may present novel claims or legal theories. Due to the complex nature of these various other matters, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information presently known to us, we do not believe there is any other matter to which we are a party, or involving any of our properties that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on our financial condition. We continually monitor and reassess the potential materiality of these other litigation matters. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Guarantees

We are a guarantor in various agreements with third parties. The following table shows the types of guarantees that we had outstanding at March 31, 2017. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Guarantees” beginning on page 115 of our 2016 Form 10-K.

March 31, 2017	Maximum Potential Undiscounted Future Payments		Liability Recorded
in millions
Financial guarantees:
Standby letters of credit	$	11,779	$	70
Recourse agreement with FNMA	2,664		5
Residential mortgage reserve	1,270		5
Return guarantee agreement with LIHTC investors	3		3
Written put options (a)	2,052		43
Total	$	17,768	$	126

(a) The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

We determine the payment/performance risk associated with each type of guarantee described below based on the probability that we could be required to make the maximum potential undiscounted future payments shown in the preceding table. We use a scale of low (0% to 30% probability of payment), moderate (greater than 30% to 70% probability of payment), or high (greater than 70% probability of payment) to assess the payment/performance risk, and have determined that the payment/performance risk associated with each type of guarantee outstanding at March 31, 2017, is low.

Standby letters of credit. KeyBank issues standby letters of credit to address clients’ financing needs. These instruments obligate us to pay a specified third party when a client fails to repay an outstanding loan or debt instrument or fails to perform some contractual nonfinancial obligation. Any amounts drawn under standby letters of credit are treated as loans to the client; they bear interest (generally at variable rates) and pose the same credit risk to us as a loan. At March 31, 2017, our standby letters of credit had a remaining weighted-average life of two years, with remaining actual lives ranging from less than one year to as many as 18 years.

Recourse agreement with FNMA. We participate as a lender in the FNMA Delegated Underwriting and Servicing program. FNMA delegates responsibility for originating, underwriting, and servicing mortgages, and we assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan that we sell to FNMA. We maintain a reserve for such potential losses in an amount that we believe approximates the fair value of our liability. At March 31, 2017, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of 7.5 years, and the unpaid principal balance outstanding of loans sold by us as a participant was $9.1 billion. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal

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to approximately 29% of the principal balance of loans outstanding at March 31, 2017. If we are required to make a payment, we would have an interest in the collateral underlying the related commercial mortgage loan; any loss we incur could be offset by the amount of any recovery from the collateral.

Residential Mortgage Banking. We often originate and sell residential mortgage loans with servicing retained. Our loan sales activity is generally conducted through loan sales in a secondary market sponsored by FNMA and FHLMC. Subsequent to the sale of mortgage loans, we do not typically retain any interest in the underlying loans except through our relationship as the servicer of the loans.

As is customary in the mortgage banking industry, we, or banks we have acquired, have made certain representations and warranties related to the sale of residential mortgage loans (including loans sold with servicing released) and to the performance of our obligations as servicer. The breach of any such representations or warranties could result in losses for us. Our maximum exposure to loss is equal to the outstanding principal balance of the sold loans; however, any loss would be reduced by any payments received on the loans or through the sale of collateral.

At March 31, 2017, the outstanding residential mortgage loans in this program had a weighted-average LTV ratio of 71%, and the unpaid principal balance outstanding of loans sold by us was $4.2 billion. The risk assessment is low for the residential mortgage product. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 30% of the principal balance of loans outstanding at March 31, 2017. Our liability for estimated repurchase obligations on loans sold, which is included in other liabilities on our balance sheet, was $5 million at March 31, 2017.

Return guarantee agreement with LIHTC investors. KAHC, a subsidiary of KeyBank, offered limited partnership interests to qualified investors. Partnerships formed by KAHC invested in low-income residential rental properties that qualify for federal low-income housing tax credits under Section 42 of the Internal Revenue Code. In certain partnerships, investors paid a fee to KAHC for a guaranteed return that is based on the financial performance of the property and the property’s confirmed LIHTC status throughout a 15-year compliance period. Typically, KAHC fulfills these guaranteed returns by distributing tax credits and deductions associated with the specific properties. If KAHC defaults on its obligation to provide the guaranteed return, KeyBank is obligated to make any necessary payments to investors. No recourse or collateral is available to offset our guarantee obligation other than the underlying income streams from the properties and the residual value of the operating partnership interests.

As shown in the previous table, KAHC maintained a reserve in the amount of $3 million at March 31, 2017, which is sufficient to cover estimated future obligations under the guarantees. The maximum exposure to loss reflected in the table represents undiscounted future payments due to investors for the return on and of their investments.

These guarantees have expiration dates that extend through 2018, but KAHC has not formed any new partnerships under this program since October 2003. Additional information regarding these partnerships is included in Note 10 (“Variable Interest Entities”).

Written put options. In the ordinary course of business, we “write” put options for clients that wish to mitigate their exposure to changes in interest rates and commodity prices. At March 31, 2017, our written put options had an average life of three years. These instruments are considered to be guarantees, as we are required to make payments to the counterparty (the client) based on changes in an underlying variable that is related to an asset, a liability, or an equity security that the client holds. We are obligated to pay the client if the applicable benchmark interest rate or commodity price is above or below a specified level (known as the “strike rate”). These written put options are accounted for as derivatives at fair value, as further discussed in Note 8 (“Derivatives and Hedging Activities”). We mitigate our potential future payment obligations by entering into offsetting positions with third parties.

Written put options where the counterparty is a broker-dealer or bank are accounted for as derivatives at fair value but are not considered guarantees since these counterparties typically do not hold the underlying instruments. In addition, we are a purchaser and seller of credit derivatives, which are further discussed in Note 8 (“Derivatives and Hedging Activities”).

Default guarantees. Some lines of business participate in guarantees that obligate us to perform if the debtor (typically a client) fails to satisfy all of its payment obligations to third parties. We generally undertake these guarantees for one of two possible reasons: (i) either the risk profile of the debtor should provide an investment return, or (ii) we are supporting our underlying investment in the debtor. We do not hold collateral for the default guarantees. If we were required to make a payment under a guarantee, we would receive a pro rata share should the third party collect some or all of the amounts due from the debtor. At March 31, 2017, we had less than $1 million of default guarantees.

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Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in the applicable accounting guidance, and from other relationships.

Indemnifications provided in the ordinary course of business. We provide certain indemnifications, primarily through representations and warranties in contracts that we execute in the ordinary course of business in connection with loan and lease sales and other ongoing activities, as well as in connection with purchases and sales of businesses. We maintain reserves, when appropriate, with respect to liability that reasonably could arise as a result of these indemnities.

Intercompany guarantees. KeyCorp, KeyBank, and certain of our affiliates are parties to various guarantees that facilitate the ongoing business activities of other affiliates. These business activities include issuing debt, assuming certain lease and insurance obligations, purchasing or issuing investments and securities, and engaging in certain leasing transactions involving clients.

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17. Accumulated Other Comprehensive Income

Our changes in AOCI for the three months ended March 31, 2017, and March 31, 2016, are as follows:

in millions	Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative financial instruments			Foreign currency translation adjustment			Net pension and postretirement benefit costs			Total
Balance at December 31, 2016	$	(185	)	$	(14	)	$	(3	)	$	(339	)	$	(541	)
Other comprehensive income before reclassification, net of income taxes	6			(15		)	1			1			(7		)
Amounts reclassified from accumulated other comprehensive income, net of income taxes (a)	—			(9		)	—			3			(6		)
Net current-period other comprehensive income, net of income taxes	6			(24		)	1			4			(13		)
Balance at March 31, 2017	$	(179	)	$	(38	)	$	(2	)	$	(335	)	$	(554	)
Balance at December 31, 2015	$	(58	)	$	20		$	(2	)	$	(365	)	$	(405	)
Other comprehensive income before reclassification, net of income taxes	128			72			5			(2		)	203
Amounts reclassified from accumulated other comprehensive income, net of income taxes (a)	—			(14		)	—			3			(11		)
Net current-period other comprehensive income, net of income taxes	128			58			5			1			192
Balance at March 31, 2016	$	70		$	78		$	3		$	(364	)	$	(213	)

(a) See table below for details about these reclassifications.

Our reclassifications out of AOCI for the three months ended March 31, 2017, and March 31, 2016, are as follows:

Three months ended March 31, 2017	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
in millions
Unrealized gains (losses) on derivative financial instruments
Interest rate	$	15		Interest income — Loans
Interest rate	(1		)	Interest expense — Long-term debt
	14			Income (loss) from continuing operations before income taxes
	5			Income taxes
	$	9		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses	$	(4	)	Personnel expense
Amortization of unrecognized prior service credit	—			Personnel expense
	(4		)	Income (loss) from continuing operations before income taxes
	(1		)	Income taxes
	$	(3	)	Income (loss) from continuing operations

Three months ended March 31, 2016	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
in millions
Unrealized gains (losses) on derivative financial instruments
Interest rate	$	23		Interest income — Loans
Interest rate	(1		)	Interest expense — Long-term debt
	22			Income (loss) from continuing operations before income taxes
	8			Income taxes
	$	14		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses	$	(4	)	Personnel expense
	(4		)	Income (loss) from continuing operations before income taxes
	(1		)	Income taxes
	$	(3	)	Income (loss) from continuing operations

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18. Shareholders' Equity

Comprehensive Capital Plan

On June 29, 2016, the Federal Reserve announced that it did not object to our 2016 capital plan submitted as part of the annual CCAR process. Share repurchases of up to $350 million were included in the 2016 capital plan, which is effective through the second quarter of 2017. We completed $160 million of Common Share repurchases, including $107 million of Common Share repurchases in the open market and $53 million of Common Share repurchases related to employee equity compensation programs in the first quarter of 2017 under this authorization.

Consistent with our 2016 capital plan, the Board declared a quarterly dividend of $.085 per Common Share for the first quarter of 2017. Our 2016 capital plan proposed an increase in our quarterly Common Share dividend, up to $.095 per share, which will be considered by the Board for the second quarter of 2017.

Preferred Stock

On March 9, 2017, we announced that all of our 7.75% Noncumulative Perpetual Convertible Series A Preferred Stock would convert into KeyCorp Common Shares. On March 20, 2017, the conversion date, holders of the Series A Preferred Stock received 7.0922 Common Shares for each share of Series A Preferred Stock. Cash was paid in lieu of fractional shares. Prior to the conversion of the Series A Preferred Stock, we made a quarterly dividend payment of $1.9375 per share, or $6 million, on our Series A Preferred Stock during the first quarter of 2017.

We had $290 million of 7.75% Noncumulative Perpetual Convertible Series A Preferred Stock outstanding at December 31, 2016. Our Series A Preferred Stock had a $1 par value and a $100 liquidation preference. There were 7,475,000 shares authorized and 2,900,234 shares outstanding at December 31, 2016.

As previously reported, on January 12, 2017, we provided notice of our intention to redeem all outstanding shares of the Series C Preferred Stock on February 15, 2017. On February 15, 2017, the Series C Preferred Stock was redeemed for cash at a redemption price of $25 per share. The redemption date was also a dividend payment date, and declared dividends of $.539063 per share, or $7 million, were also paid separately on February 15, 2017. The Series C Preferred Stock was initially issued in connection with the First Niagara acquisition to replace First Niagara’s outstanding preferred stock.

Prior to the redemption, we had $350 million of Fixed-to-Floating Rate Perpetual Noncumulative Series C Preferred Stock. Our Series C Preferred Stock had a $1 par value with a $25 liquidation preference. There were 14,000,000 shares authorized and outstanding at December 31, 2016.

We have $525 million of depositary shares, each representing a 1/25^th ownership interest in a share of our Fixed-to-Floating Rate Perpetual Noncumulative Series D Preferred Stock outstanding at March 31, 2017, and December 31, 2016. Our Series D Preferred Stock has a $1 par value with a $25,000 liquidation preference. There are 21,000 shares authorized and outstanding at March 31, 2017, and December 31, 2016. We made payments of $12.50 per depository share on the depositary shares related to our Series D Preferred Stock during the first quarter of 2017, for a total of $7 million.

We have $500 million of depositary shares, each representing a 1/40th ownership interest in a share of our Fixed-to-Floating Rate Perpetual Noncumulative Series E Preferred Stock outstanding at March 31, 2017, and December 31, 2016. Our Series E Preferred Stock has a $1 par value with a $1,000 liquidation preference. There are 500,000 shares authorized and outstanding at March 31, 2017, and December 31, 2016. We made payments of $.395573 per depositary share on the depositary shares related to our Series E Preferred Stock during the first quarter of 2017, for a total of $8 million.

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19. Line of Business Results

The specific lines of business that constitute each of the major business segments (operating segments) are described below.

Key Community Bank

Key Community Bank serves individuals and small to mid-sized businesses primarily through its 15-state branch network.

Individuals are provided with branch-based deposit and investment products, personal finance services, and loans, including residential mortgages, home equity, credit card, and various types of installment loans. Key Community Bank offers personal property and casualty insurance, such as home, auto, renters, watercraft, and umbrella policies. Key Community Bank also purchases retail auto sales contracts via a network of auto dealerships. The auto dealerships finance the sale of automobiles as the initial lender and then assign the contracts to us pursuant to dealer agreements. In addition, financial, estate and retirement planning, asset management services, and Delaware Trust capabilities are offered to assist high net worth clients with their banking, trust, portfolio management, life insurance, charitable giving, and related needs.

Small businesses are provided with deposit, investment and credit products, and business advisory services. Mid-sized businesses are provided with products and services, some of which are delivered by Key Corporate Bank, that include commercial lending, cash management, equipment leasing, investment, insurance including commercial property and casualty as well as captive insurance and employee benefit programs, succession planning, access to capital markets, derivatives, and foreign exchange.

Key Corporate Bank

Key Corporate Bank is a full-service corporate and investment bank focused principally on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate, and technology. Key Corporate Bank delivers a broad suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance. Key Corporate Bank is also a significant servicer of commercial mortgage loans and a significant special servicer of CMBS. Key Corporate Bank delivers many of its product capabilities to clients of Key Community Bank.

Other Segments

Other Segments consists of corporate treasury, our principal investing unit, and various exit portfolios.

Reconciling Items

Total assets included under “Reconciling Items” primarily represent the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling Items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations, including merger-related charges.

The information was derived from the internal financial reporting system that we use to monitor and manage our financial performance. GAAP guides financial accounting, but there is no authoritative guidance for “management accounting,” i.e., the way we apply judgment and experience to make reporting decisions. Consequently, the line of business results we report may not be comparable to line of business results presented by other companies.

The selected financial data are based on internal accounting policies designed to compile results on a consistent basis and in a manner that reflects the underlying economics of the businesses. In accordance with our policies:

• Net interest income is determined by assigning a standard cost for funds used or a standard credit for funds provided based on their assumed maturity, prepayment, and/or repricing characteristics;

• Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent that each line of business actually uses the services;

• The consolidated provision for credit losses is allocated among the lines of business primarily based on their actual net loan charge-offs, adjusted periodically for loan growth and changes in risk profile. The amount of the consolidated

72

provision is based on the methodology that we use to estimate our consolidated ALLL. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2016 Form 10-K;

• Income taxes are allocated based on the statutory federal income tax rate of 35% and a blended state income tax rate (net of the federal income tax benefit) of 2.2%; and

• Capital is assigned to each line of business based on economic equity.

The development and application of the methodologies that we use to allocate items among our lines of business is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocation drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

The table on the following pages shows selected financial data for our major business segments for the three-month periods ended March 31, 2017, and March 31, 2016.

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Three months ended March 31,	Key Community Bank						Key Corporate Bank
dollars in millions	2017			2016			2017			2016
SUMMARY OF OPERATIONS
Net interest income (TE)	$	631		$	399		$	304		$	218
Noninterest income	277			196			275			207
Total revenue (TE) (a)	908			595			579			425
Provision for credit losses	47			42			17			43
Depreciation and amortization expense	28			13			20			13
Other noninterest expense	599			423			283			224
Income (loss) from continuing operations before income taxes (TE)	234			117			259			145
Allocated income taxes and TE adjustments	87			43			78			27
Income (loss) from continuing operations	147			74			181			118
Income (loss) from discontinued operations, net of taxes	—			—			—			—
Net income (loss)	147			74			181			118
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—
Net income (loss) attributable to Key	$	147		$	74		$	181		$	118
AVERAGE BALANCES(b)
Loans and leases	$	47,036		$	30,789		$	37,737		$	27,722
Total assets (a)	50,962			32,856			44,167			33,413
Deposits	79,393			52,803			21,003			18,074
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	43		$	23		$	14		$	18
Return on average allocated equity (b)	12.60		%	11.10		%	24.86		%	22.92		%
Return on average allocated equity	12.60			11.10			24.86			22.92
Average full-time equivalent employees (c)	10,804			7,376			2,384			2,126

(a) Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software, and goodwill held by our major business segments, are located in the United States.

(b) From continuing operations.

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

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Other Segments						Total Segments						Reconciling Items						Key
2017			2016			2017			2016			2017			2016			2017			2016
$	(5	)	$	(9	)	$	930		$	608		$	(1	)	$	4		$	929		$	612
33			30			585			433			(8		)	(2		)	577			431
28			21			1,515			1,041			(9		)	2			1,506			1,043
(1		)	5			63			90			—			(1		)	63			89
1			1			49			27			44			37			93			64
10			9			892			656			28			(17		)	920			639
18			6			511			268			(81		)	(17		)	430			251
(5		)	(8		)	160			62			(55		)	2			105			64
23			14			351			206			(26		)	(19		)	325			187
—			—			—			—			—			1			—			1
23			14			351			206			(26		)	(18		)	325			188
2			(1		)	2			(1		)	(1		)	1			1			—
$	21		$	15		$	349		$	207		$	(25	)	$	(19	)	$	324		$	188
$	1,328		$	1,603		$	86,101		$	60,114		$	32		$	42		$	86,133		$	60,156
36,549			27,729			131,678			93,998			1,063			479			132,741			94,477
2,030			756			102,426			71,633			(348		)	(35		)	102,078			71,598
$	1		$	5		$	58		$	46		—			—			$	58		$	46
53.56		%	33.33		%	18.04		%	16.88		%	(1.38		)%	(1.34		)%	8.65		%	6.87		%
53.56			33.33			18.04			16.88			(1.38		)	(1.27		)	8.65			6.90
3			8			13,191			9,510			5,195			3,893			18,386			13,403

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Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of KeyCorp

We have reviewed the consolidated balance sheet of KeyCorp as of March 31, 2017, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2017 and 2016. These financial statements are the responsibility of KeyCorp’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of KeyCorp as of December 31, 2016, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended (not presented herein) and we expressed an unqualified opinion on those consolidated financial statements in our report dated February 28, 2017. In our opinion, the accompanying consolidated balance sheet of KeyCorp as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Cleveland, Ohio	Ernst & Young LLP
May 5, 2017

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Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations

Introduction

This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for the quarterly periods ended March 31, 2017, and March 31, 2016. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes in this report. The page locations of specific sections and notes that we refer to are presented in the Table of Contents.

References to our “2016 Form 10-K” refer to our Form 10-K for the year ended December 31, 2016, which has been filed with the SEC and is available on its website (www.sec.gov) and on our website (www.key.com/ir).

Terminology

Throughout this discussion, references to “Key,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. “KeyCorp” refers solely to the parent holding company, and “KeyBank” refers to KeyCorp’s subsidiary bank, KeyBank National Association.

Throughout the following discussion, industry-specific terms are used as defined below:

• We use the phrase continuing operations in this document to mean all of our businesses other than the education lending business and Austin. The education lending business and Austin have been accounted for as discontinued operations since 2009.

• Our exit loan portfolios are separate from our discontinued operations. These portfolios, which are in a run-off mode, stem from product lines we decided to cease because they no longer fit with our corporate strategy. These exit loan portfolios are included in Other Segments.

• We engage in capital markets activities primarily through business conducted by our Key Corporate Bank segment. These activities encompass a variety of products and services. Among other things, we trade securities as a dealer, enter into derivative contracts (both to accommodate clients’ financing needs and to mitigate certain risks), and conduct transactions in foreign currencies (both to accommodate clients’ needs and to benefit from fluctuations in exchange rates).

• For regulatory purposes, capital is divided into two classes. Federal regulations currently prescribe that at least one-half of a bank or BHC’s total risk-based capital must qualify as Tier 1 capital. Both total and Tier 1 capital serve as bases for several measures of capital adequacy, which is an important indicator of financial stability and condition. As described under the heading “Regulatory capital requirements – Capital planning and stress testing” in the section entitled “Supervision and Regulation” that begins on page 8 of our 2016 Form 10-K, the regulators are required to conduct a supervisory capital assessment of all BHCs with assets of at least $50 billion, including KeyCorp. As part of this capital adequacy review, banking regulators evaluate a component of Tier 1 capital, known as Common Equity Tier 1, under the Regulatory Capital Rules. The “Capital” section of this report under the heading “Capital adequacy” provides more information on total capital, Tier 1 capital, and the Regulatory Capital Rules, including Common Equity Tier 1, and describes how these measures are calculated.

Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 (“Basis of Presentation and Accounting Policies”).

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Forward-looking statements

From time to time, we have made or will make 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. Our disclosures in this report contain forward-looking statements. We may also make forward-looking statements in other documents filed with or furnished to the SEC. In addition, we may make forward-looking statements orally to analysts, investors, representatives of the media, and others.

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 our actual results to differ from those described in forward-looking statements include, but are not limited to:

• deterioration of commercial real estate market fundamentals;

• defaults by our loan counterparties or clients;

• adverse changes in credit quality trends;

• declining asset prices;

• our concentrated credit exposure in commercial and industrial loans;

• the extensive and increasing regulation of the U.S. financial services industry;

• operational or risk management failures by us or critical third parties;

• changes in accounting policies, standards, and interpretations;

• breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;

• negative outcomes from claims or litigation;

• the occurrence of natural or man-made disasters, conflicts, or terrorist attacks, or other adverse external events;

• evolving capital and liquidity standards under applicable regulatory rules;

• unanticipated changes in our liquidity position, including but not limited to, changes in our access to or the cost of funding, and our ability to secure alternative funding sources;

• downgrades in our credit ratings or those of KeyBank;

• a reversal of the U.S. economic recovery due to financial, political, or other shocks;

• our ability to anticipate interest rate changes and manage interest rate risk;

• deterioration of economic conditions in the geographic regions where we operate;

• the soundness of other financial institutions;

• tax reform and other changes in tax laws;

• our ability to attract and retain talented executives and employees and to manage our reputational risks;

• our ability to timely and effectively implement our strategic initiatives;

• increased competitive pressure due to industry consolidation;

• our ability to adapt our products and services to industry standards and consumer preferences;

• unanticipated adverse effects of strategic partnerships or acquisitions and dispositions of assets or businesses;

• our ability to realize the anticipated benefits of the First Niagara merger; and

• our ability to develop and effectively use the quantitative models we rely upon in our business planning.

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. Before making an investment decision, you should carefully consider all risks and uncertainties disclosed in our SEC filings, including this report on Form 10-Q and our subsequent reports on Forms 8-K, 10-Q, and 10-K, and our registration statements under the Securities Act of 1933, as amended, all of which are or will upon filing be accessible on the SEC’s website at www.sec.gov and on our website at www.key.com/ir.

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Selected financial data          

Our financial performance for each of the last five quarters is summarized in Figure 1.

Figure 1. Selected Financial Data

	2017			2016
dollars in millions, except per share amounts	First			Fourth			Third			Second			First
FOR THE PERIOD
Interest income	$	1,050		$	1,062		$	890		$	684		$	683
Interest expense	132			124			110			87			79
Net interest income	918			938			780			597			604
Provision for credit losses	63			66			59			52			89
Noninterest income	577			618			549			473			431
Noninterest expense	1,013			1,220			1,082			751			703
Income (loss) from continuing operations before income taxes	419			270			188			267			243
Income (loss) from continuing operations attributable to Key	324			233			171			199			187
Income (loss) from discontinued operations, net of taxes (a)	—			(4		)	1			3			1
Net income (loss) attributable to Key	324			229			172			202			188
Income (loss) from continuing operations attributable to Key common shareholders	296			213			165			193			182
Income (loss) from discontinued operations, net of taxes (a)	—			(4		)	1			3			1
Net income (loss) attributable to Key common shareholders	296			209			166			196			183
PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders	$	.28		$	.20		$	.17		$	.23		$	.22
Income (loss) from discontinued operations, net of taxes (a)	—			—			—			—			—
Net income (loss) attributable to Key common shareholders (b)	.28			.20			.17			.23			.22
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	$	.27		$	.20		$	.16		$	.23		$	.22
Income (loss) from discontinued operations, net of taxes — assuming dilution (a)	—			—			—			—			—
Net income (loss) attributable to Key common shareholders — assuming dilution (b)	.27			.19			.17			.23			.22
Cash dividends paid	.085			.085			.085			.085			.075
Book value at period end	12.71			12.58			12.78			13.08			12.79
Tangible book value at period end	10.21			9.99			10.14			11.81			11.52
Market price:
High	19.36			18.62			12.64			13.08			13.37
Low	16.90			12.00			10.38			10.21			9.88
Close	17.78			18.27			12.17			11.05			11.04
Weighted-average common shares outstanding (000)	1,068,609			1,067,771			982,080			831,899			827,381
Weighted-average common shares and potential common shares outstanding (000) (c)	1,086,540			1,083,717			994,660			838,496			835,060
AT PERIOD END
Loans	$	86,125		$	86,038		$	85,528		$	62,098		$	60,438
Earning assets	120,261			121,966			121,089			90,065			87,273
Total assets	134,476			136,453			135,805			101,150			98,402
Deposits	103,982			104,087			104,185			75,325			73,382
Long-term debt	12,324			12,384			12,622			11,388			10,760
Key common shareholders’ equity	13,951			13,575			13,831			11,023			10,776
Key shareholders’ equity	14,976			15,240			14,996			11,313			11,066
PERFORMANCE RATIOS — FROM CONTINUING OPERATIONS
Return on average total assets	.99		%	.69		%	.55		%	.82		%	.80		%
Return on average common equity	8.76			6.22			5.09			7.15			6.86
Return on average tangible common equity (d)	10.98			7.88			6.16			7.94			7.64
Net interest margin (TE)	3.13			3.12			2.85			2.76			2.89
Cash efficiency ratio (d)	65.8			76.2			80.0			69.0			66.6
PERFORMANCE RATIOS — FROM CONSOLIDATED OPERATIONS
Return on average total assets	.98		%	.67		%	.55		%	.82		%	.79		%
Return on average common equity	8.76			6.10			5.12			7.26			6.90
Return on average tangible common equity (d)	10.98			7.73			6.20			8.06			7.68
Net interest margin (TE)	3.11			3.09			2.83			2.74			2.83
Loan-to-deposit (e)	85.6			85.2			84.7			85.3			85.7
CAPITAL RATIOS AT PERIOD END
Key shareholders’ equity to assets	11.14		%	11.17		%	11.04		%	11.18		%	11.25		%
Key common shareholders’ equity to assets	10.37			9.95			10.18			10.90			10.95
Tangible common equity to tangible assets (d)	8.51			8.09			8.27			9.95			9.97
Common Equity Tier 1 (d)	9.91			9.54			9.56			11.10			11.07
Tier 1 risk-based capital	10.74			10.89			10.53			11.41			11.38
Total risk-based capital	12.69			12.85			12.63			13.63			13.12
Leverage	9.81			9.90			10.22			10.59			10.73
TRUST ASSETS
Assets under management	$	37,417		$	36,592		$	36,752		$	34,535		$	34,107
OTHER DATA
Average full-time-equivalent employees	18,386			18,849			17,079			13,419			13,403
Branches	1,216			1,217			1,322			949			961

(a) In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of this decision, we have accounted for this business as a discontinued operation. For further discussion regarding the income (loss) from discontinued operations, see Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

(b) EPS may not foot due to rounding.

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

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(d) See Figure 6 entitled “GAAP to Non-GAAP Reconciliations,” which 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.

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

Economic Overview

The U.S. economy started 2017 on a sour note with annualized GDP growth in the first quarter 2017 coming in at a mere .7%. Much of the deceleration in the first quarter of 2017 can be attributed to a slowdown in personal consumption expenditures in addition to drawbacks in private inventory investment and state and local government spending. However, these were partially offset by increases in exports and fixed investment. GDP growth in 2016 was slower than in 2015, due to a weaker start, with tepid growth of .8% in the first quarter of 2016 and 1.4% in the second quarter of 2016 before accelerating in the third quarter of 2016 to 3.5% and 2.1% in the fourth quarter of 2016. Consumer spending and inventory investment were major contributors. Slower growth in emerging markets, weak investment spending, and sluggish demand for American exports caused by a strong U.S. dollar, all factored in to the muted economic expansion in 2016. The IMF estimates that global GDP is set to expand 2.9% in 2017. The global recovery, however, appears to be uneven as developed countries are leading most of this year’s upswing in global growth, with robust domestic demand buttressing growth in the Euro area and the United States.

Oil prices remain relatively flat compared to the fourth quarter of 2016, after plummeting to multiyear lows in 2014 and 2015. Although inventories remain elevated, recent declines may help clear the way for stronger appreciation in 2017 and help support America’s struggling energy industry. The stock market performed admirably in the first quarter, with the S&P 500 equity index up 5.5% since the end of 2016. A general rally has occurred following the November elections, and based on expectations for growth-friendly economic policies from the new U.S. presidential administration.

533,000 new jobs were added in the U.S. during the first quarter of 2017. This was up from fourth quarter of 2016, which saw gains of 443,000. However bad weather, accelerated hiring at the beginning of the year, and a late Easter all depressed payrolls in March, when employment increased by 98,000 jobs, which was well below consensus. Payrolls in January 2017 and February 2017 were revised down as well. Still, the unemployment rate fell from 4.7% on December 31, 2016, to 4.5% in March 2017, while the participation was unchanged at 63%. Slack appears to be leaving the labor market as reflected in rising wage growth, up 2.7% in March 2017, over last year. Accordingly, consumers prefer to spend rather than save, with personal consumption up 4.8% year over year, while the savings rate fell from 6.0% to 5.6%. Headline inflation was up by 2.4% year over year in March 2017, surpassing the Federal Reserve’s target of 2.0%, although it fell slightly month over month, down .3%. Core inflation was also healthy year over year, at 2.0%.

Thanks to the solid economy and persistently low rates, the housing market generally benefited in the first quarter of 2017. New home sales growth was up 12.9%compared to the first quarter of 2016, while existing home sales were up 5.0%. Prices are also up, with average new home prices up 5.6% from year ago levels, and existing home prices up 5.3%. Housing starts also posted respectable gains in the first quarter of 2017, up 8.2%, from the first quarter of 2016. These gains were supported by multi-family construction, up 12.8%; while single-family construction was up 6.0%.

As expected, the Federal Open Market Committee raised the target range for the fed funds rate by 25 basis points to .75% to 1.00% in March 2017. Policymakers reiterated that the risks to the economic outlook remained fairly balanced. Forward guidance was unchanged, with their statement noting that economic conditions will likely continue in a manner that will warrant gradual rate hikes. Federal Open Market Committee meeting minutes also suggested that a reduction of their balance sheet may be on the agenda later this year. The 10-year U.S. Treasury yield stood at 2.5% at the end of the first quarter of 2017, virtually unchanged from the prior quarter.

Long-term financial targets

Our long-term financial targets are as follows:

• Generate positive operating leverage and a cash efficiency ratio of less than 60%;

• Maintain a moderate risk profile by targeting a net loan charge-offs to average loans ratio in the range of .40% to .60%; and

• Achieve a return on tangible common equity ratio in the range of 13% to 15%.

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Figure 2 shows the evaluation of our long-term financial targets for the three months ended March 31, 2017.

Figure 2. Evaluation of Our Long-Term Targets

	Key Metrics (a)	1Q17		Targets
Positive operating leverage	Cash efficiency ratio (b)	65.8	%	< 60 %
	Cash efficiency ratio excluding merger-related charges (b)	60.4	%
Moderate Risk Profile	Net loan charge-offs to average loans	.27	%	.40 - .60 %
Financial Returns	Return on average tangible common equity (c)	10.98	%	13.00-15.00 %
	Return on average tangible common equity excluding merger related charges (c)	12.87	%

(a) Calculated from continuing operations, unless otherwise noted.

(b) Excludes intangible asset amortization; non-GAAP measure; see Figure 6 entitled “GAAP to Non-GAAP Reconciliations” for reconciliation.

(c) Non-GAAP measure: see Figure 6 entitled “GAAP to Non-GAAP Reconciliations” for reconciliation.

Strategic developments

Our actions and results during the first three months of 2017 supported our corporate strategy described in the “Introduction” section under the “Corporate strategy” heading on page 35 of our 2016 Form 10-K.

• We continue to focus on growing our businesses and remain committed to improving productivity and efficiency. During the first three months of 2017, we generated positive operating leverage compared to the prior year, as revenue relative to the year-ago period benefited from higher net interest income, positive momentum in our fee-based businesses, and the addition of over one million newly acquired consumer and business clients. Investment banking and debt placement fees increased by $56 million, related to improved capital markets conditions and activity from the year-ago period. Trust and investment services income, cards and payments income, and service charges on deposits accounts also contributed to the growth, largely resulting from the First Niagara acquisition.

• Net loan charge-offs increased during the first three months of 2017 compared to the year-ago quarter due to loan growth and credit quality migration in our commercial loan portfolio. Our net loan charge-offs were .27% of average loans for the first three months of 2017, below our targeted range.

• Capital management remains a priority for 2017. As previously reported, share repurchases of up to $350 million were included in the 2016 capital plan, which is effective through the second quarter of 2017. We completed $160 million of Common Share repurchases, including $107 million of Common Share repurchases in the open market and $53 million of Common Share repurchases related to employee equity compensation programs in the first quarter of 2017 under this authorization.

• Consistent with our 2016 capital plan, we made a dividend payment of $.085 per share, for the first quarter of 2017. An additional potential increase in our quarterly Common Share dividend, up to $.095 per share, will be considered by the Board for the second quarter of 2017, consistent with the 2016 capital plan.

Demographics

We have two major business segments: Key Community Bank and Key Corporate Bank.

Key Community Bank serves individuals and small to mid-sized businesses by offering a variety of deposit and investment, lending, credit card, and personalized wealth management products and business advisory services. Key Community Bank offers personal property and casualty insurance, such as home, auto, renters, watercraft, and umbrella policies. Key Community Bank also purchases motor vehicle retail installment sales contracts relating to new or used automobiles and light and medium-duty trucks via a network of dealers who regularly originate these third party installment sales contracts. These products and services are provided primarily through our relationship managers and specialists working in our 15-state branch network, which is organized into ten internally defined geographic regions: Washington, Oregon/Alaska, Rocky Mountains, Indiana/Northwest Ohio/Michigan, Central/Southwest Ohio, East Ohio/Western Pennsylvania, Atlantic, Western New York, Eastern New York and New England. In addition, some of these product capabilities are delivered by Key Corporate Bank to clients of Key Community Bank.

Key Corporate Bank is a full-service corporate and investment bank focused principally on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate, and technology. Key Corporate Bank delivers a broad suite of banking and capital markets products to its clients, including syndicated finance, debt

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and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance. Key Corporate Bank is also a significant servicer of commercial mortgage loans and a significant special servicer of CMBS. Key Corporate Bank delivers many of its product capabilities to clients of Key Community Bank.

Further information regarding the products and services offered by our Key Community Bank and Key Corporate Bank segments is included in this report in Note 19 (“Line of Business Results”).

Supervision and regulation

The following discussion provides a summary of recent regulatory developments and should be read in conjunction with the disclosure included in our 2016 Form 10-K under the heading “Supervision and Regulation” in Item 1. Business and under the heading “II. Compliance Risk” in Item 1A. Risk Factors.

Regulatory capital requirement

In July 2013, the U.S. banking agencies adopted a final rule to implement Basel III with an effective date of January 1, 2015, and a multi-year transition period ending on December 31, 2018 (“Regulatory Capital Rules”). Consistent with the international framework, the Regulatory Capital Rules further restrict the type of instruments that may be recognized in Tier 1 and Tier 2 capital (including the phase out of trust preferred securities from tier 1 capital for BHCs above a certain asset threshold, like KeyCorp), establish a minimum Tier 1 Common Equity Capital ratio requirement of 4.5% and capital buffers to address procyclicality concerns and absorb losses during periods of financial stress, and refine several of the methodologies used for determining risk-weighted assets. The Regulatory Capital Rules provide additional requirements for large banking organizations with over $250 billion in total consolidated assets or $10 billion in foreign exposure, but those additional requirements do not apply to KeyCorp nor to KeyBank. Accordingly, for purposes of the Regulatory Capital Rules, KeyCorp and KeyBank are treated as “standardized approach” banking organizations.

The Basel III capital framework and the U.S. implementation of the Basel III capital framework are discussed in more detail in Item 1. Business of our 2016 Form 10-K under the heading “Supervision and Regulation - Regulatory capital requirements.”

Under the Regulatory Capital Rules, “standardized approach” banking organizations, like KeyCorp, are required to meet the minimum capital and leverage ratios set forth in Figure 3 below. At March 31, 2017, Key had an estimated Common Equity Tier 1 Capital Ratio of 9.83% under the fully phased-in Regulatory Capital Rules. Also at March 31, 2017, based on the fully phased-in Regulatory Capital Rules, Key estimates that its capital and leverage ratios, after adjustment for market risk, would be as set forth in Figure 3.

Figure 3. Pro Forma Ratios vs. Minimum Capital Ratios Calculated Under the Fully Phased-In Regulatory Capital Rules

Ratios (including Capital conservation buffer)	Key March 31, 2017 Pro forma		Minimum January 1, 2017		Phase-in Period	Minimum January 1,  2019
Common Equity Tier 1 (a)	9.83	%	4.5	%	None	4.5	%
Capital conservation buffer (b)			—		1/1/16-1/1/19	2.5
Common Equity Tier 1 + Capital conservation buffer			4.5		1/1/16-1/1/19	7.0
Tier 1 Capital	10.51	%	6.0		None	6.0
Tier 1 Capital + Capital conservation buffer			6.0		1/1/16-1/1/19	8.5
Total Capital	12.49	%	8.0		None	8.0
Total Capital + Capital conservation buffer			8.0		1/1/16-1/1/19	10.5
Leverage (c)	9.66	%	4.0		None	4.0

(a) See Figure 6 entitled “GAAP to Non-GAAP Reconciliations,” which presents the computation for estimated Common Equity Tier 1. The table reconciles the GAAP performance measure to the corresponding non-GAAP measure, which provides a basis for period-to-period comparisons.

(b) Capital conservation buffer must consist of Common Equity Tier 1 capital. As a standardized approach banking organization, KeyCorp is not subject to the countercyclical capital buffer of up to 2.5% imposed upon an advanced approaches banking organization under the Regulatory Capital Rules.

(c) As a standardized approach banking organization, KeyCorp is not subject to the 3% supplemental leverage ratio requirement, which becomes effective January 1, 2018.

Revised prompt corrective action framework

The federal prompt corrective action (“PCA”) framework under the FDIA groups FDIC-insured depository institutions into one of five capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and

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“critically undercapitalized,” for purposes of determining whether a bank should be required to establish a capital restoration plan and become subject to limitations on the bank’s activities, capital actions, and payment of management fees.

In addition to implementing the Basel III capital framework in the U.S., the Regulatory Capital Rules also revised the capital category thresholds under the PCA framework for FDIC-insured depository institutions such as KeyBank. The revised PCA framework table in Figure 4 identifies the capital category thresholds for a “well capitalized” and an “adequately capitalized” institution under the Regulatory Capital Rules.

Figure 4. "Well Capitalized" and "Adequately Capitalized" Capital Category Ratios under Revised PCA Framework

Prompt Corrective Action	Capital Category
Ratio	Well Capitalized (a)		Adequately Capitalized
Common Equity Tier 1 Risk-Based	6.5	%	4.5	%
Tier 1 Risk-Based	8.0		6.0
Total Risk-Based	10.0		8.0
Tier 1 Leverage (b)	5.0		4.0

(a) A “well capitalized” institution also must not be subject to any written agreement, order, or directive to meet and maintain a specific capital level for any capital measure.

(b) As a “standardized approach” banking organization, KeyBank is not subject to the 3% supplemental leverage ratio requirement, which becomes effective January 1, 2018.

We believe that, as of March 31, 2017, KeyBank (consolidated) satisfied the risk-based and leverage capital requirements to be considered “well capitalized” for purposes of the revised PCA framework. However, investors should not regard this determination as a representation of the overall financial condition or prospects of KeyBank because the PCA framework is intended to serve a limited supervisory function. Moreover, it is important to note that the PCA framework does not apply to BHCs, like KeyCorp.

Capital planning and stress testing

On January 30, 2017, the Federal Reserve released a final rule to revise the capital plan and stress test rules as they apply to large, noncomplex BHCs and U.S. intermediaries of foreign banks. Under the final rule, a large noncomplex BHC is one with total consolidated assets of more than $50 billion but less than $250 billion, and nonbank assets of less than $75 billion (“covered BHCs”). This includes KeyCorp.

The final rule provides relief from the compliance requirements associated with the Federal Reserve’s capital plan and stress test rules. Specifically, the final rule relieves covered BHCs from the qualitative assessment portion of the Federal Reserve’s CCAR program and modifies the reporting requirements for these organizations by reducing the reporting requirements applicable to covered BHCs under the FR Y-14A and by raising the materiality thresholds for specific portfolio reporting requirements.

The final rule also limits the amount of capital a covered BHC is authorized to distribute in excess of the amount set forth in its capital plan without Federal Reserve approval (the “de minimis exception”), and establishes a one-quarter blackout period during which a BHC is not permitted to submit a notice to use the de minimis exception or seek prior approval to make a capital distribution in an amount that exceeds the de minimis exception level. If exigent circumstances arise during the blackout period that require a capital distribution, a covered BHC may resubmit its capital plan and request expedited review from the Federal Reserve; however, the Federal Reserve is not required to expedite the review process.

The final rule also requires covered BHCs to measure nonbank assets on a monthly basis and report the monthly average to the Federal Reserve on a quarterly basis beginning March 31, 2017.

The final rule is effective 30 days after publication in the Federal Register, and therefore, the relief provided under the final rule from the qualitative assessment portion of the CCAR program is effective for the 2017 CCAR cycle.

Liquidity requirements

In October 2014, the federal banking agencies published a final rule to implement the Basel III liquidity coverage ratio (“Basel III LCR”) for U.S. banking organizations (the “Liquidity Coverage Rules”) that establishes a minimum LCR for certain internationally active bank and nonbank financial companies (excluding KeyCorp) and a modified version of the LCR (“Modified LCR”) for BHCs and other depository institution holding companies with over $50 billion in consolidated assets that are not internationally active (including KeyCorp). KeyBank will not be subject to the LCR or the Modified LCR under the Liquidity Coverage Rules unless the OCC affirmatively determines that application to KeyBank is appropriate in light of

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KeyBank’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system.

Under the Liquidity Coverage Rules, KeyCorp must calculate a Modified LCR on a monthly basis, and was required to satisfy a minimum Modified LCR requirement of 100% by January 1, 2017. At March 31, 2017, Key’s estimated Modified LCR was above 100%. In the future, KeyCorp may change the composition of our investment portfolio, increase the size of the overall investment portfolio, and modify product offerings to enhance or optimize our liquidity position.

Net stable funding ratio

The federal banking agencies commenced implementation of the Basel III net stable funding ratio (“NSFR”) in the US in April and May 2016, with the release of a proposed rule to implement a NSFR requirement for certain internationally active banking organizations (excluding KeyCorp) and a modified version of the minimum NSFR requirement (“Modified NSFR”) for BHCs and other depository institution holding companies with over $50 billion in consolidated assets that are not internationally active (including KeyCorp), together with quarterly public disclosure requirements. The proposed rule would require banking organizations to satisfy a minimum NSFR requirement of 1.0 on an ongoing basis. However, banking organizations subject to the Modified NSFR (like KeyCorp) would be required to maintain a lower minimum amount of available stable funding, equal to 70% of the required stable funding under the NSFR. The proposed rule would be effective on January 1, 2018. The comment period for the NPR expired on August 5, 2016. If the proposed NSFR requirement is adopted as a final rule, then similar to actions taken in connection with the implementation of the Liquidity Coverage Rules, KeyCorp may adjust its balance sheet or modify product offerings to enhance its liquidity position.

Resolution and recovery planning

BHCs with at least $50 billion in total consolidated assets, like KeyCorp, are required to periodically submit to the Federal Reserve and FDIC a plan discussing how the company could be rapidly and efficiently resolved if the company failed or experienced material financial distress. Insured depository institutions with at least $50 billion in total consolidated assets, like KeyBank, are also required to submit a resolution plan to the FDIC. These plans are due annually by December 31 of each year. For 2015, these resolution plans, the third required from KeyCorp and KeyBank, were submitted on December 1, 2015. KeyCorp and KeyBank were not required to submit resolution plans for 2016 because the FDIC and Federal Reserve deferred such requirement until December 2017. By letter dated March 24, 2017, KeyCorp received guidance from the Federal Reserve and the FDIC regarding the information requirements for certain aspects of KeyCorp’s December 2017 resolution plan submission. That letter is publicly available on the Federal Reserve’s website, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20170324a.htm.

Annually, in January, the Federal Reserve and FDIC make available on their websites the public sections of resolution plans for the companies, including KeyCorp and KeyBank, that submitted plans in the prior December. The public section of the resolution plans of KeyCorp and KeyBank is available at http://www.federalreserve.gov/bankinforeg/resolution-plans.htm and https://www.fdic.gov/regulations/reform/resplans/.

On September 28, 2016, the OCC released final guidelines that establish standards for recovery planning by certain large OCC-regulated institutions, including KeyBank. The guidelines require such institutions to establish a comprehensive framework for evaluating the financial effects of severe stress events, and recovery actions an institution may pursue to remain a viable, going concern during a period of severe financial stress. Under the final guidelines, an institution’s recovery plan must include triggers to alert the institution of severe stress events, escalation procedures, recovery options, and a process for periodic review and approval by senior management and the board of directors. The recovery plan should be tailored to the complexity, scope of operations, and risk profile of the institution.

Because KeyBank had average total consolidated assets of greater than $100 billion but less than $750 billion as reported on KeyBank’s Consolidated Reports of Condition and Income for the four most recent consecutive quarters prior to January 1, 2017, it must be in compliance with the guidelines not later than January 1, 2018.

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Deposit insurance and assessments

As required under the Dodd-Frank Act, in March 2015, the FDIC approved a final rule to impose a surcharge on the quarterly deposit insurance assessments of insured depository institutions having total consolidated assets of at least $10 billion (like KeyBank). The surcharge is 4.5 cents per $100 of the institution’s assessment base (after making certain adjustments). The final rule became effective on July 1, 2016. As of July 1, 2016, KeyBank must pay a surcharge to assist in bringing the reserve ratio to the statutory minimum of 1.35%. Surcharges will continue through the quarter that the DIF reserve ratio reaches or exceeds 1.35%, but not later than December 31, 2018. If the reserve ratio does not reach 1.35% by December 31, 2018 (provided it is at least 1.15%), the FDIC will impose a shortfall assessment on March 31, 2019, on insured depository institutions with total consolidated assets of $10 billion or more (like KeyBank).

In December 2016, the FDIC issued a final rule that imposes recordkeeping requirements on insured depository institutions with two million or more deposit accounts (including KeyBank) in order to facilitate rapid payment of insured deposits to customers if the institutions were to fail. The rule requires those insured depository institutions to: (i) maintain complete and accurate data on each depositor’s ownership interest by right and capacity for all of the institution’s deposit accounts; and (ii) develop the capability to calculate the insured and uninsured amounts for each deposit owner within 24 hours of failure. The FDIC will conduct periodic testing of compliance with these requirements, and institutions subject to the rule must submit to the FDIC a certification of compliance, signed by the KeyBank CEO, and deposit insurance coverage summary report on or before the mandatory compliance date and annually thereafter. The final rule became effective on April 1, 2017, with a mandatory compliance date of April 1, 2020.

Single counterparty credit limits

In March 2016, the Federal Reserve issued an NPR proposing to establish single counterparty credit limits for BHCs with total consolidated assets of $50 billion or more. This proposal would implement a provision in the Dodd-Frank Act and replaces proposals on this subject issued by the Federal Reserve in 2011 and 2012. Under the proposal, a covered BHC (including KeyCorp) would not be allowed to have an aggregate net credit exposure to any unaffiliated counterparty that exceeds 25% of the consolidated capital stock and surplus of the covered BHC. Globally, systemically important banks and certain other large BHCs (excluding KeyCorp) would be subject to stricter limits under the proposal. A covered BHC such as KeyCorp would be required to comply with the proposed limits and quarterly reporting to show such compliance starting two years after the effective date of a final rule. The comment period for the NPR expired on June 3, 2016.

ERISA fiduciary standard

In April 2016, the Department of Labor published final rules and amendments to certain prohibited transaction exemptions regarding which service providers would be regarded as fiduciaries under ERISA for making investment advice recommendations to: (i) certain retirement plan fiduciaries, participants, or beneficiaries; and (ii) owners or beneficiaries of individual retirement accounts and health savings accounts, among other retirement plans. The purpose of the rules is to place fiduciary obligations, rather than the lesser legal obligations that currently apply, on these service providers. Accordingly, the rules subject any financial institution making recommendations for either the purchase or sale of investments in or rollover of the respective retirement plan to certain fiduciary obligations under ERISA such as an impartial conduct standard and not selling certain investment products whose compensation may raise a conflict of interest for the advisor without entering into a contract providing certain disclosures and legal remedies to the customer. Under the Department of Labor’s original rules, the impartial standard requirement for financial institutions and their advisors was to become effective April 10, 2017. However, in response to a Presidential Order, the Department of Labor has extended the effective date to June 9, 2017. The contract provisions must be in place by January 1, 2018. The Department of Labor will continue to review whether to modify, further delay, or rescind these rules in whole or in part.

Highlights of Our Performance

Financial performance

For the first quarter of 2017, we announced net income from continuing operations attributable to Key common shareholders of $296 million, or $.27 per common share. Our first quarter of 2017 results compare to net income from continuing operations attributable to Key common shareholders of $182 million, or $.22 per common share, for the first quarter of 2016. During the first quarter of 2017, we incurred merger-related charges totaling $81 million, or $.05 per common share, compared to $24 million, or $.02 per common share, in the first quarter of 2016.

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Our taxable-equivalent net interest income was $929 million for the first quarter of 2017, and the net interest margin was 3.13%, compared to taxable-equivalent net interest income of $612 million and a net interest margin of 2.89% for the first quarter of 2016, reflecting the benefit from the First Niagara acquisition, including purchase accounting accretion, as well as higher earning asset yields and balances. For the full year of 2017, we expect net interest income to be in the range of $3.7 billion to $3.8 billion, with our outlook including one additional interest rate increase in the middle of 2017.

Key’s noninterest income was $577 million for the first quarter of 2017, compared to $431 million for the year-ago quarter. The most notable increase was in investment banking and debt placement fees, which increased $56 million, related to improved capital markets conditions and activity from the year-ago period. Trust and investment services income, cards and payments income, and service charges on deposit accounts also contributed to the growth, largely resulting from to the First Niagara acquisition. For the full year of 2017, we expect noninterest income to be in the range of $2.3 billion to $2.4 billion.

Our noninterest expense was $1 billion for the first quarter of 2017, which included $81 million of merger-related charges. The merger-related charges were primarily composed of $51 million in nonpersonnel expense largely recognized in marketing, net occupancy, business services and professional fees, and other expenses reflecting a $20 million philanthropic contribution. The remaining $30 million was personnel expense, related to ongoing integration activities. During the first quarter of 2016, we incurred $24 million of merger-related charges.

Excluding merger-related charges, noninterest expense was $253 million higher than the first quarter of last year. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was primarily driven by the acquisition of First Niagara. Higher incentive and stock-based compensation related to stronger capital markets performance also contributed to the year-over-year increase. For the full year of 2017, we expect noninterest expense excluding merger-related charges to be in the range of $3.65 billion to $3.75 billion.

Average loans were $86.1 billion for the first quarter of 2017, an increase of $26 billion compared to the first quarter of 2016, primarily reflecting the impact of the First Niagara acquisition and growth in commercial and industrial loans. We anticipate mid-single digit (4%-6%) loan growth from the fourth quarter of 2016, which translates to $87 billion to $88 billion for fiscal year 2017 average balances and for average loan growth to exceed average deposit growth.

Average deposits totaled $102.1 billion for the first quarter of 2017, an increase of $30.5 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and core deposit growth in Key’s retail banking franchise. Our consolidated loan-to-deposit ratio was 85.6% at March 31, 2017, compared to 85.7% at March 31, 2016. We anticipate average deposits to be in the range of $104 billion to $105 billion for the fiscal year 2017.

Our provision for credit losses was $63 million for the first quarter of 2017, compared to $89 million for the first quarter of 2016. Our allowance for loan and lease losses was $870 million, or 1.01% of total period-end loans, at March 31, 2017, compared to 1.37% at March 31, 2016. For the remainder of 2017, we expect the provision for credit losses to slightly exceed net loan charge-offs to provide for loan growth.

Net loan charge-offs for the first quarter of 2017 totaled $58 million, or .27% of average total loans, compared to $46 million, or .31%, for the first quarter of 2016. For the remainder of 2017, we expect net loan charge-offs to average loans to remain below our targeted range of 40 to 60 basis points.

At March 31, 2017, our nonperforming loans totaled $573 million, which represented .67% of period-end portfolio loans, compared to 1.12% at March 31, 2016. Nonperforming assets at March 31, 2017, totaled $623 million and represented .72% of period-end portfolio loans and OREO and other nonperforming assets, compared to $692 million, or 1.14% of period-end portfolio loans, at March 31, 2016.

Our capital ratios remain strong. Our tangible common equity and Tier 1 risk-based capital ratios at March 31, 2017, are 8.51% and 10.74%, respectively, compared to 9.97% and 11.38%, respectively, at March 31, 2016. In addition, our Common Equity Tier 1 ratio is 9.91% at March 31, 2017, compared to 11.07% at March 31, 2016. 

We continue to return capital to our shareholders by repurchasing Common Shares and through our quarterly common share dividend. In the first quarter of 2017, we completed $160 million of Common Share repurchases, including $107 million of common share repurchases in the open market and $53 million of Common Share repurchases related to employee equity compensation programs and paid a cash dividend of $.085 per Common Share, under our 2016 capital plan authorization.

Figure 5 shows our continuing and discontinued operating results for the current, past, and year-ago quarters. Our financial performance for each of the past five quarters is summarized in Figure 1.

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Figure 5. Results of Operations

	Three months ended
in millions, except per share amounts	3/31/2017		12/31/2016			3/31/2016
Summary of operations
Income (loss) from continuing operations attributable to Key	$	324	$	233		$	187
Income (loss) from discontinued operations, net of taxes (a)	—		(4		)	1
Net income (loss) attributable to Key	$	324	$	229		$	188
Income (loss) from continuing operations attributable to Key	$	324	$	233		$	187
Less: Dividends on Preferred Stock	28		20			5
Income (loss) from continuing operations attributable to Key common shareholders	296		213			182
Income (loss) from discontinued operations, net of taxes (a)	—		(4		)	1
Net income (loss) attributable to Key common shareholders	$	296	$	209		$	183
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders	$	.27	$	.20		$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—			—
Net income (loss) attributable to Key common shareholders (b)	$	.27	$	.19		$	.22

(a) In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of this decision, we have accounted for these businesses as discontinued operations. For further discussion regarding the income (loss) from discontinued operations, see Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

(b) EPS may not foot due to rounding.

Figure 6 presents certain non-GAAP financial measures related to “tangible common equity,” “return on tangible common equity,” “Common Equity Tier 1,” “pre provision net revenue,” “cash efficiency ratio,” certain financial measures excluding merger-related charges, and “Common Equity Tier 1 under the Regulatory Capital Rules (estimates).”

The tangible common equity ratio and the return on tangible common equity ratio have been a focus for some investors, and management believes that 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 BHC capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. The Federal Reserve focuses its assessment of capital adequacy on a component of Tier 1 capital known as Common Equity Tier 1. Because the Federal Reserve has long indicated that voting common shareholders’ equity (essentially Tier 1 risk-based capital less preferred stock and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Common Equity Tier 1 is consistent with existing capital adequacy categories. The Regulatory Capital Rules, described in more detail under the section “Supervision and Regulation” in Item 2 of this report, also make Common Equity Tier 1 a priority. The Regulatory Capital Rules change the regulatory capital standards that apply to BHCs by, among other changes, phasing out the treatment of trust preferred securities and cumulative preferred securities as Tier 1 eligible capital. Starting in 2016, our trust preferred securities are only included in Tier 2 capital. Since analysts and banking regulators may assess our capital adequacy using tangible common equity and Common Equity Tier 1, we believe it is useful to enable investors to assess our capital adequacy on these same bases. Figure 6 reconciles the GAAP performance measures to the corresponding non-GAAP measures.

Figure 6 also shows the computation for and reconciliation of pre provision net revenue, which is not formally defined by GAAP. We believe that eliminating the effects of the provision for credit losses makes it easier to analyze our results by presenting them on a more comparable basis.

As disclosed in Note 2 (“Business Combination”) and Note 12 (“Acquisition, Divestiture, and Discontinued Operations”), KeyCorp 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, we’ve recognized merger-related charges. Figure 6 shows the computation of pre provision net revenue excluding merger-related charges, noninterest expense excluding merger-related charges, EPS excluding merger-related charges, and return on average assets from continuing operations excluding merger-related charges. We believe that eliminating the effects of the merger-related charges makes it easier to analyze our results by presenting them on a more comparable basis with our prior results.

The cash efficiency ratio is a ratio of two non-GAAP performance measures. Accordingly, there is no directly comparable GAAP performance measure. The cash efficiency ratio excludes the impact of our intangible asset amortization from the calculation. We also disclose the cash efficiency ratio excluding merger-related charges. We believe these ratios provide greater consistency and comparability between our results and those of our peer banks. Additionally, these ratios are used by analysts and investors as they develop earnings forecasts and peer bank analysis.

87

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, nor as a substitute for analyses of results as reported under GAAP.

88

Figure 6. GAAP to Non-GAAP Reconciliations

		Three months ended
dollars in millions		3/31/2017			12/31/2016			9/30/2016			6/30/2016			3/31/2016
Tangible common equity to tangible assets at period end
Key shareholders’ equity (GAAP)		$	14,976		$	15,240		$	14,996		$	11,313		$	11,066
Less:	Intangible assets (a)	2,751			2,788			2,855			1,074			1,077
	Preferred Stock (b)	1,009			1,640			1,150			281			281
	Tangible common equity (non-GAAP)	$	11,216		$	10,812		$	10,991		$	9,958		$	9,708
	Total assets (GAAP)	$	134,476		$	136,453		$	135,805		$	101,150		$	98,402
Less:	Intangible assets (a)	2,751			2,788			2,855			1,074			1,077
	Tangible assets (non-GAAP)	$	131,725		$	133,665		$	132,950		$	100,076		$	97,325
	Tangible common equity to tangible assets ratio (non-GAAP)	8.51		%	8.09		%	8.27		%	9.95		%	9.97		%
Common Equity Tier 1 at period end
Key shareholders’ equity (GAAP)		$	14,976		$	15,240		$	14,996		$	11,313		$	11,066
Less:	Preferred Stock (b)	1,009			1,640			1,150			281			281
	Common Equity Tier 1 capital before adjustments and deductions	13,967			13,600			13,846			11,032			10,785
Less:	Goodwill, net of deferred taxes	2,379			2,405			2,450			1,031			1,033
	Intangible assets, net of deferred taxes	194			155			216			30			35
	Deferred tax assets	11			4			6			1			1
	Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes	(179		)	(185		)	101			129			70
	Accumulated gains (losses) on cash flow hedges, net of deferred taxes	(76		)	(52		)	39			77			46
	Amounts in AOCI attributed to pension and postretirement benefit costs, net of deferred taxes	(335		)	(339		)	(359		)	(362		)	(365		)
	Total Common Equity Tier 1 capital	$	11,973		$	11,612		$	11,393		$	10,126		$	9,965
	Net risk-weighted assets (regulatory)	$	120,852		$	121,671		$	119,120		$	91,195		$	90,014
	Common Equity Tier 1 ratio (non-GAAP)	9.91		%	9.54		%	9.56		%	11.10		%	11.07		%
Average tangible common equity
Average Key shareholders’ equity (GAAP)		$	15,184		$	14,901		$	13,552		$	11,147		$	10,953
Less:	Intangible assets (average) (c)	2,772			2,874			2,255			1,076			1,079
	Preferred Stock (average)	1,480			1,274			648			290			290
	Average tangible common equity (non-GAAP)	$	10,932		$	10,753		$	10,649		$	9,781		$	9,584
Return on average tangible common equity from continuing operations
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP)		$	296		$	213		$	165		$	193		$	182
Plus:	Merger-related charges, after tax	51			124			132			28			15
	Net income (loss) from continuing operations attributable to Key common shareholders after merger-related charges (non-GAAP)	$	347		$	337		$	297		$	221		$	197
Average tangible common equity (non-GAAP)		10,932			10,753			10,649			9,781			9,584
Return on average tangible common equity from continuing operations (non-GAAP)		10.98		%	7.88		%	6.16		%	7.94		%	7.64		%
Return on average tangible common equity from continuing operations excluding merger-related charges (non-GAAP)		12.87			12.47		%	11.22		%	9.09		%	8.27		%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)		$	296		$	209		$	166		$	196		$	183
Average tangible common equity (non-GAAP)		10,932			10,753			10,649			9,781			9,584
Return on average tangible common equity consolidated (non-GAAP)		10.98		%	7.73		%	6.20		%	8.06		%	7.68		%
Pre provision net revenue
Net interest income (GAAP)		$	918		$	938		$	780		$	597		$	604
Plus:	Taxable-equivalent adjustment	11			10			8			8			8
	Noninterest income (GAAP)	577			618			549			473			431
Less:	Noninterest expense (GAAP)	1,013			1,220			1,082			751			703
	Pre provision net revenue from continuing operations (non-GAAP)	$	493		$	346		$	255		$	327		$	340
Plus:	Merger-related charges	81			198			207			45			24
	Pre provision net revenue from continuing operations excluding merger-related charges (non-GAAP)	574			544			462			372			364
Noninterest expense excluding merger-related charges
Noninterest expense (GAAP)		$	1,013		$	1,220		$	1,082		$	751		$	703
Less:	Merger-related charges	81			207			189			45			24
	Noninterest expense excluding merger-related charges (non-GAAP)	$	932		$	1,013		$	893		$	706		$	679
Cash efficiency ratio
Noninterest expense (GAAP)		$	1,013		$	1,220		$	1,082		$	751		$	703
Less:	Intangible asset amortization	22			27			13			7			8
Adjusted noninterest expense (non-GAAP)		$	991		$	1,193		$	1,069		$	744		$	695
Less:	Merger-related charges	81			207			189			45			24
Adjusted noninterest expense excluding merger-related charges (non-GAAP)		$	910		$	986		$	880		$	699		$	671
Net interest income (GAAP)		$	918		$	938		$	780		$	597		$	604
Plus:	Taxable-equivalent adjustment	11			10			8			8			8
	Noninterest income (GAAP)	577			618			549			473			431
Total taxable-equivalent revenue (non-GAAP)		$	1,506		$	1,566		$	1,337		$	1,078		$	1,043
Plus:	Merger-related charges	—			(9		)	18			—			—
	Adjusted noninterest income excluding merger-related charges (non-GAAP)	$	1,506		$	1,557		$	1,355		$	1,078		$	1,043
Cash efficiency ratio (non-GAAP)		65.8		%	76.2		%	80.0		%	69.0		%	66.6		%
Cash efficiency ratio excluding merger-related charges (non-GAAP)		60.4		%	63.3		%	64.9		%	64.8		%	64.3		%
Return on average total assets from continuing operations excluding merger-related charges
Income from continuing operations attributable to Key (GAAP)		$	324		$	233		$	171		$	199		$	187
Plus:	Merger-related charges, after tax	51			124			132			28			15
	Income from continuing operations attributable to Key excluding merger-related charges, after tax (non-GAAP)	$	375		$	357		$	303		$	227		$	202
Average total assets from continuing operations (GAAP)		$	132,741		$	134,428		$	123,469		$	97,413		$	94,477
Return on average total assets from continuing operations excluding merger-related charges (non-GAAP)		1.15		%	1.06		%	.98		%	.94		%	.86		%

89

dollars in millions	Three months ended 3/31/2017
Common Equity Tier 1 under the Regulatory Capital Rules (estimates)
Common Equity Tier 1 under current Regulatory Capital Rules	$	11,973
Adjustments from current Regulatory Capital Rules to the fully phased-in Regulatory Capital Rules:
Deferred tax assets and other intangible assets (d)	(51		)
Common Equity Tier 1 anticipated under the fully phased-in Regulatory Capital Rules (e)	$	11,922
Net risk-weighted assets under current Regulatory Capital Rules	$	120,852
Adjustments from current Regulatory Capital Rules to the fully phased-in Regulatory Capital Rules:
Mortgage servicing assets (f)	597
Volcker Funds	(172		)
All other assets	61
Total risk-weighted assets anticipated under the fully phased-in Regulatory Capital Rules (e)	$	121,338
Common Equity Tier 1 ratio under the fully phased-in Regulatory Capital Rules (e)	9.83		%

(a) For the three months ended March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, intangible assets exclude $38 million, $42 million, $51 million, $36 million, and $40 million, respectively, of period-end purchased credit card relationships.

(b) Net of capital surplus.

(c) For the three months ended March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, average intangible assets exclude $40 million, $46 million, $47 million, $38 million, and $42 million, respectively, of average purchased credit card relationships.

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

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

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

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Results of Operations

Net interest income

One of our principal sources of revenue is net interest income. Net interest income is the difference between interest income received on earning assets (such as loans and securities) and loan-related fee income, and interest expense paid on deposits and borrowings. There are several factors that affect net interest income, including:

• the volume, pricing, mix, and maturity of earning assets and interest-bearing liabilities;

• the volume and value of net free funds, such as noninterest-bearing deposits and equity capital;

• the use of derivative instruments to manage interest rate risk;

• interest rate fluctuations and competitive conditions within the marketplace; and

• asset quality.

To make it easier to compare both the results across several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in this discussion on a “taxable-equivalent basis” (i.e., as if all income were taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $154, an amount that, if taxed at the statutory federal income tax rate of 35%, would yield $100.

Figure 7 shows the various components of our balance sheet that affect interest income and expense, and their respective yields or rates over the past five quarters. This figure also presents a reconciliation of TE net interest income to net interest income reported in accordance with GAAP for each of those quarters. The net interest margin, which is an indicator of the profitability of the earning assets portfolio less cost of funding, is calculated by dividing annualized TE net interest income by average earning assets.

First quarter 2017 net interest income included $53 million of purchase accounting accretion related to the acquisition of First Niagara. This compares to $92 million of purchase accounting accretion in the fourth quarter of 2016, which included $34 million related to the refinement of third quarter 2016 purchase accounting estimates.

TE net interest income was $929 million for the first quarter of 2017, and the net interest margin was 3.13%, compared to TE net interest income of $612 million and a net interest margin of 2.89% for the first quarter of 2016, reflecting the benefit from the First Niagara acquisition, including $53 million of purchase accounting accretion, as well as higher earning asset yields and balances.

Compared to the fourth quarter of 2016, TE net interest income decreased by $19 million, and the net interest margin increased by one basis point. The decline in net interest income reflects a decline in purchase accounting accretion and two fewer days in the quarter, partly offset by higher earning asset yields. The net interest margin benefited from higher earning asset yields and lower levels of liquidity, offset by a decline in purchase accounting accretion. Excluding purchase accounting accretion, TE net interest income increased $20 million from the fourth quarter of 2016 and $264 million from the first quarter of 2016.

Average loans were $86.1 billion for the first quarter of 2017, an increase of $26 billion compared to the first quarter of 2016, primarily reflecting the impact of the First Niagara acquisition and growth in commercial and industrial loans. The acquisition resulted in an estimated adjustment to the fair value of the acquired loan portfolio of $548 million. We anticipate finalizing the valuation of the acquired loans during the second quarter of 2017.

Compared to the fourth quarter of 2016, average loans increased by $773 million, driven by a $507 million increase in commercial and industrial loans, and a $416 million increase in commercial mortgage loans. The growth reflects overall business activity and lower payoffs in Key’s Commercial Real Estate line of business. Consumer loans decreased $292 million, mostly related to continued decline in the home equity loan portfolio, largely the result of paydowns on home equity lines of credit.

Average deposits totaled $102.1 billion for the first quarter of 2017, an increase of $30.5 billion compared to the year-ago quarter, primarily reflecting the acquisition of First Niagara and core deposit growth in Key’s retail banking franchise. Compared to the fourth quarter of 2016, average deposits decreased by $2.6 billion, largely driven by a decline in escrow deposits and both seasonal and short-term commercial deposit outflows. On a period-end basis, total deposits decreased $105 million compared to the fourth quarter of 2016 as the decline in escrow deposits was partially offset by core deposit growth in Key’s retail banking franchise.

91

Figure 7. Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates from Continuing Operations

	First Quarter 2017							Fourth Quarter 2016
dollars in millions	Average Balance			Interest (a)		Yield/ Rate (a)		Average Balance			Interest (a)		Yield/ Rate (a)
ASSETS
Loans (b), (c)
Commercial and industrial (d)	$	40,002		$	373	3.77	%	$	39,495		$	365	3.68	%
Real estate — commercial mortgage	15,187			164		4.39		14,771			168		4.50
Real estate — construction	2,353			26		4.54		2,222			37		6.72
Commercial lease financing	4,635			44		3.76		4,624			50		4.34
Total commercial loans	62,177			607		3.95		61,112			620		4.04
Real estate — residential mortgage	5,520			54		3.94		5,554			57		4.17
Home equity loans	12,611			131		4.22		12,812			129		3.99
Consumer direct loans	1,762			30		6.97		1,785			31		6.84
Credit cards	1,067			29		11.06		1,088			29		10.78
Consumer indirect loans	2,996			37		4.91		3,009			42		5.50
Total consumer loans	23,956			281		4.75		24,248			288		4.73
Total loans	86,133			888		4.17		85,360			908		4.24
Loans held for sale	1,188			13		4.28		1,323			11		3.39
Securities available for sale (b), (e)	19,181			95		1.95		20,145			92		1.82
Held-to-maturity securities (b)	9,988			51		2.04		9,121			44		1.95
Trading account assets	968			7		2.75		892			6		2.54
Short-term investments	1,610			3		.79		3,717			5		.49
Other investments (e)	709			4		2.26		741			6		3.23
Total earning assets	119,777			1,061		3.57		121,299			1,072		3.52
Allowance for loan and lease losses	(855		)					(855		)
Accrued income and other assets	13,819							13,984
Discontinued assets	1,540							1,610
Total assets	$	134,281						$	136,038
LIABILITIES
NOW and money market deposit accounts	$	54,295		32		.24		$	55,444		31		.22
Savings deposits	6,351			1		.10		6,546			2		.10
Certificates of deposit ($100,000 or more)(f)	5,627			16		1.16		5,428			15		1.11
Other time deposits	4,706			9		.76		4,849			9		.77
Total interest-bearing deposits	70,979			58		.33		72,267			57		.32
Federal funds purchased and securities sold under repurchase agreements	795			1		.32		592			1		.11
Bank notes and other short-term borrowings	1,802			5		1.06		934			3		1.11
Long-term debt (f), (g)	10,833			68		2.54		10,914			63		2.38
Total interest-bearing liabilities	84,409			132		.63		84,707			124		.58
Noninterest-bearing deposits	31,099							32,424
Accrued expense and other liabilities	2,048							2,394
Discontinued liabilities (g)	1,540							1,610
Total liabilities	119,096							121,135
EQUITY
Key shareholders’ equity	15,184							14,901
Noncontrolling interests	1							2
Total equity	15,185							14,903
Total liabilities and equity	$	134,281						$	136,038
Interest rate spread (TE)						2.94	%						2.94	%
Net interest income (TE) and net interest margin (TE)				929		3.13	%				948		3.12	%
TE adjustment (b)				11							10
Net interest income, GAAP basis				$	918						$	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 TE 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 $114 million, $119 million, $107 million, $87 million, and $85 million of assets from commercial credit cards for the three months ended March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively.

92

Figure 7. Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates from Continuing Operations

Third Quarter 2016							Second Quarter 2016							First Quarter 2016
Average Balance			Interest (a)		Yield/ Rate (a)		Average Balance			Interest (a)		Yield/ Rate (a)		Average Balance			Interest (a)		Yield/ Rate (a)
$	37,318		$	317	3.38	%	$	32,630		$	270	3.32	%	$	31,590		$	263	3.35	%
12,879			126		3.91		8,404			80		3.85		8,138			77		3.78
1,723			21		4.67		869			8		3.78		1,016			10		4.11
4,508			38		3.33		3,949			37		3.77		3,957			36		3.65
56,428			502		3.54		45,852			395		3.47		44,701			386		3.47
4,453			45		3.96		2,253			22		4.11		2,236			24		4.18
11,968			122		4.07		10,098			102		4.04		10,240			103		4.06
1,666			30		7.20		1,599			26		6.53		1,593			26		6.53
996			27		10.80		792			21		10.58		784			21		10.72
2,186			28		5.23		554			9		6.56		602			10		6.44
21,269			252		4.73		15,296			180		4.74		15,455			184		4.76
77,697			754		3.86		61,148			575		3.78		60,156			570		3.80
1,152			10		3.48		611			5		3.18		826			8		4.02
17,972			88		1.99		14,268			74		2.08		14,207			75		2.12
6,250			30		1.86		4,883			24		1.98		4,817			24		2.01
860			4		2.12		967			6		2.28		817			7		3.50
5,911			7		.48		5,559			6		.45		3,432			4		.46
717			5		2.74		610			2		1.54		647			3		1.73
110,559			898		3.24		88,046			692		3.16		84,902			691		3.27
(847		)					(833		)					(803		)
13,757							10,200							10,378
1,676							1,738							1,804
$	125,145						$	99,151						$	96,281
$	51,318		25		.20		$	39,687		16		.17		$	37,708		15		.16
4,521			1		.07		2,375			—		.02		2,349			—		.02
4,204			12		1.15		3,233			11		1.39		2,761			10		1.37
5,031			11		.85		3,252			7		.85		3,200			6		.79
65,074			49		.30		48,547			34		.29		46,018			31		.27
578			—		.16		337			—		.01		437			—		.07
1,186			2		.91		694			3		1.39		591			2		1.63
10,415			59		2.31		9,294			50		2.25		8,566			46		2.19
77,253			110		.57		58,872			87		.60		55,612			79		.57
29,844							25,357							25,580
2,818							2,032							2,322
1,676							1,738							1,804
111,591							87,999							85,318
13,552							11,147							10,953
2							5							10
13,554							11,152							10,963
$	125,145						$	99,151						$	96,281
					2.67	%						2.56	%						2.70	%
			788		2.85	%				605		2.76	%				612		2.89	%
			8							8							8
			$	780						$	597						$	604

(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 our matched funds transfer pricing methodology to discontinued operations.

93

Figure 8 shows how the changes in yields or rates and average balances from the prior year period affected net interest income. The section entitled “Financial Condition” contains additional discussion about changes in earning assets and funding sources.

Figure 8. Components of Net Interest Income Changes from Continuing Operations

	From three months ended March 31, 2016
	to three months ended March 31, 2017
in millions	Average Volume			Yield/ Rate			Net Change (a)
INTEREST INCOME
Loans	$	264		$	54		$	318
Loans held for sale	4			1			5
Securities available for sale	25			(5		)	20
Held-to-maturity securities	26			1			27
Trading account assets	1			(1		)	—
Short-term investments	(3		)	2			(1		)
Other investments	—			1			1
Total interest income (TE)	317			53			370
INTEREST EXPENSE
NOW and money market deposit accounts	8			9			17
Savings deposits	—			1			1
Certificates of deposit ($100,000 or more)	9			(3		)	6
Other time deposits	3			—			3
Total interest-bearing deposits	20			7			27
Federal funds purchased and securities sold under repurchase agreements	—			1			1
Bank notes and other short-term borrowings	3			—			3
Long-term debt	13			9			22
Total interest expense	36			17			53
Net interest income (TE)	$	281		$	36		$	317

(a) The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

Noninterest income

As shown in Figure 9, noninterest income was $577 million for the first quarter of 2017, compared to $431 million for the year-ago quarter. The most notable increase was in investment banking and debt placement fees, which increased $56 million, related to improved capital markets conditions and activity from the year-ago period. Trust and investment services income, cards and payments income, and service charges on deposit accounts also contributed to the growth, largely resulting from the First Niagara acquisition.

Compared to the fourth quarter of 2016, noninterest income decreased by $41 million. The decrease was primarily attributable to lower investment banking and debt placement fees, as well as a decline in corporate-owned life insurance income, which is seasonally lower in the first quarter. Corporate services income also decreased $7 million related to lower loan and derivative trading income. An increase of $12 million in trust and investment services income related to higher insurance revenue and fixed income trading volume slightly offset these declines.

Figure 9. Noninterest Income

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount		Percent
Trust and investment services income	$	135	$	109	$	26	23.9	%
Investment banking and debt placement fees	127		71		56		78.9
Service charges on deposit accounts	87		65		22		33.8
Operating lease income and other leasing gains	23		17		6		35.3
Corporate services income	54		50		4		8.0
Cards and payments income	65		46		19		41.3
Corporate-owned life insurance income	30		28		2		7.1
Consumer mortgage income	6		2		4		200.0
Mortgage servicing fees	18		12		6		50.0
Net gains (losses) from principal investing	1		—		1		N/M
Other income	31		31		—		—
Total noninterest income	$	577	$	431	$	146	33.9	%

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The following discussion explains the composition of certain elements of our noninterest income and the factors that caused those elements to change.

Trust and investment services income 

Trust and investment services income is one of our largest sources of noninterest income and consists of brokerage commissions, trust and asset management commissions, and insurance income. The assets under management that primarily generate these revenues are shown in Figure 10. For the three months ended March 31, 2017, trust and investment services income increased $26 million, or 23.9%, compared to the same period one year ago, primarily due to the acquisition of First Niagara. Compared to the fourth quarter of 2016, trust and investment services income increased $12 million, or 9.8%, related to higher insurance revenue and fixed income trading volume.

A significant portion of our trust and investment services income depends on the value and mix of assets under management. At March 31, 2017, our bank, trust, and registered investment advisory subsidiaries had assets under management of $37.4 billion, compared to $34.1 billion at March 31, 2016. The increase in assets under management, as shown in Figure 10, was primarily attributable to the acquisition of First Niagara and growth in equity investments.

Figure 10. Assets Under Management

	2017		2016
in millions	First		Fourth		Third		Second		First
Assets under management by investment type:
Equity	$	22,522	$	21,722	$	21,568	$	20,458	$	20,210
Securities lending	1,095		1,148		991		968		1,147
Fixed income	10,497		10,386		11,016		10,053		9,789
Money market	3,303		3,336		3,177		3,056		2,961
Total assets under management	$	37,417	$	36,592	$	36,752	$	34,535	$	34,107

Investment banking and debt placement fees

Investment banking and debt placement fees consist of syndication fees, debt and equity financing fees, financial adviser fees, gains on sales of commercial mortgages, and agency origination fees. Investment banking and debt placement fees increased $56 million, or 78.9%, for the first quarter of 2017, related to improved capital markets conditions and activity from the year-ago period. Compared to the fourth quarter of 2016, investment banking and debt placement fees decreased $30 million, or 19.1%, primarily due to lower gains on sales of commercial mortgages and mergers and acquisition advisory fees. The first quarter of 2017 was the strongest first quarter for investment banking and debt placement fees in our history.

Service charges on deposit accounts

Service charges on deposit accounts increased $22 million, or 33.8%, for the three months ended March 31, 2017, compared to the same period one year ago. The increase from the three months ended March 31, 2016, was primarily due to the acquisition of First Niagara. Compared to the fourth quarter of 2016, service charges on deposit accounts increased $3 million, or 3.6%, primarily due to an increase in account analysis and other fees.

Corporate services income

Corporate services income increased $4 million, or 8.0%, from the year-ago quarter. This increase was primarily due to the acquisition of First Niagara. Compared to the fourth quarter of 2016, corporate services income decreased $7 million, or 11.5%, driven by lower loan and derivative trading income.

Cards and payments income

Cards and payments income, which consists of debit card, consumer and commercial credit card, and merchant services income, increased $19 million, or 41.3%, from the year-ago quarter. This increase was primarily due to the acquisition of First Niagara and to higher purchase and prepaid card fees in Key Corporate Bank. Compared to the fourth quarter of 2016, cards and payments income decreased $4 million, or 5.8%, due to seasonal consumer behavior.

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Other income

Other income, which consists primarily of gains on sales of loans held for sale, other service charges, and certain dealer trading income, was flat from the year-ago quarter. Compared to the fourth quarter of 2016, other income decreased $2 million, or 6.1%, primarily attributable to changes in various miscellaneous income categories.

Noninterest expense

As shown in Figure 11, noninterest expense was $1 billion for the first quarter of 2017, which included $81 million of merger-related charges. The merger-related charges were primarily made up of $51 million of nonpersonnel expense, largely recognized in marketing, net occupancy, business services and professional fees, and other expense reflecting a $20 million philanthropic contribution. The remaining $30 million was personnel expense, related to ongoing integration activities. $24 million of merger-related charges were incurred in the first quarter of 2016.

Excluding merger-related charges, noninterest expense was $253 million higher than the first quarter of last year. The increase from the prior year, reflected in both personnel and nonpersonnel expense, was primarily driven by the acquisition of First Niagara. Higher incentive and stock-based compensation related to stronger capital markets performance also contributed to the year-over-year increase.

Compared to the fourth quarter of 2016, noninterest expense, excluding merger-related charges, decreased by $81 million. The decrease primarily reflects cost savings related to the First Niagara acquisition, reflected in both personnel and nonpersonnel expense. Lower incentive and stock-based compensation and the absence of a pension settlement charge also contributed to the decline. These decreases were partially offset by seasonally higher employee benefits expenses.

Figure 11. Noninterest Expense

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount		Percent
Personnel (a)	$	556	$	404	$	152	37.6	%
Net occupancy	87		61		26		42.6
Computer processing	60		43		17		39.5
Business services and professional fees	46		41		5		12.2
Equipment	27		21		6		28.6
Operating lease expense	19		13		6		46.2
Marketing	21		12		9		75.0
FDIC assessment	20		9		11		122.2
Intangible asset amortization	22		8		14		175.0
OREO expense, net	2		1		1		100.0
Other expense	153		90		63		70.0
Total noninterest expense	$	1,013	$	703	$	310	44.1	%
Merger-related charges (b)	81		24		57		237.5
Total noninterest expense excluding merger-related charges (c)	$	932	$	679	$	253	37.3	%
Average full-time equivalent employees (d)	18,386		13,403		4,983		37.2	%

(a) Additional detail provided in Figure 13 entitled “Personnel Expense.”

(b) Additional detail provided in Figure 12 entitled “Merger-Related Charges.”

(c) Non-GAAP measure.

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

Figure 12. Merger-Related Charges

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount			Percent
Personnel	$	30	$	16	$	14		87.5	%
Net occupancy	5		—		5			N/M
Business services and professional fees	5		7		(2		)	(28.6	)
Computer processing	5		—		5			N/M
Marketing	6		1		5			500.0
Other nonpersonnel expense	30		—		30			N/M
Noninterest expense	81		24		57			237.5
Total merger-related charges	$	81	$	24	$	57		237.5	%

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Personnel

As shown in Figure 13, personnel expense, the largest category of our noninterest expense, increased by $152 million, or 37.6%, for the first quarter of 2017 compared to the year-ago quarter. This increase was primarily driven by the acquisition of First Niagara. Higher incentive and stock-based compensation related to stronger capital markets performance also contributed to the year-over-year increase. Compared to the fourth quarter of 2016, personnel expense decreased $92 million, or 14.2%, driven by lower incentive and stock-based compensation and by the absence of a pension settlement charge. These decreases were partially offset by seasonally higher employee benefits expenses.

Figure 13. Personnel Expense

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount		Percent
Salaries and contract labor	$	324	$	244	$	80	32.8	%
Incentive and stock-based compensation	127		89		38		42.7
Employee benefits	96		68		28		41.2
Severance	9		3		6		200.0
Total personnel expense	$	556	$	404	$	152	37.6	%
Merger-related charges	30		16		14		87.5
Total personnel expense excluding merger-related charges	$	526	$	388	$	138	35.6	%

Net occupancy

Net occupancy expense increased $26 million, or 42.6%, for the first quarter of 2017, compared to the same period one year ago. This increase was primarily due to the acquisition of First Niagara. Compared to the fourth quarter of 2016, net occupancy expense decreased $25 million, or 22.3%, primarily attributable to lower property reserve expenses.

Other expense

Other expense comprises various miscellaneous expense items. The $63 million, or 70.0%, increase in the current quarter compared to the same period one year ago reflects the impact of the First Niagara acquisition and other miscellaneous expenses. Compared to the fourth quarter of 2016, other expense increased $3 million, or 2.0%, reflecting a $20 million philanthropic contribution, partially offset by decreases in other miscellaneous expenses.

Income taxes

We recorded tax expense from continuing operations of $94 million for the first quarter of 2017 and $56 million for the first quarter of 2016. 

Our federal tax expense (benefit) differs from the amount that would be calculated using the federal statutory tax rate, primarily because we generate income from investments in tax-advantaged assets, such as corporate-owned life insurance and credits associated with renewable energy and low-income housing investments, and make periodic adjustments to our tax reserves. Tax expense for the three months ended March 31, 2017, and March 31, 2016, was favorably affected by net discrete income tax benefits of $19 million and $2 million, respectively. The tax expense for the first quarter of 2017 was also significantly reduced due to merger-related charges of $81 million. Excluding those expenses, the tax expense for the first quarter of 2017 was $124 million.

Additional information pertaining to how our tax expense (benefit) and the resulting effective tax rates were derived is included in Note 13 (“Income Taxes”) beginning on page 170 of our 2016 Form 10-K.

Line of Business Results

This section summarizes the financial performance and related strategic developments of our two major business segments (operating segments): Key Community Bank and Key Corporate Bank. Note 19 (“Line of Business Results”) describes the products and services offered by each of these business segments, provides more detailed financial information pertaining to the segments, and explains “Other Segments” and “Reconciling Items.”

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Figure 14 summarizes the contribution made by each major business segment to our “taxable-equivalent revenue from continuing operations” and “income (loss) from continuing operations attributable to Key” for the three-month periods ended March 31, 2017, and March 31, 2016.

Figure 14. Major Business Segments — Taxable-Equivalent Revenue from Continuing Operations and Income (Loss) from Continuing Operations Attributable to Key

	Three months ended March 31,						Change
dollars in millions	2017			2016			Amount			Percent
REVENUE FROM CONTINUING OPERATIONS (TE)
Key Community Bank	$	908		$	595		$	313		52.6	%
Key Corporate Bank	579			425			154			36.2
Other Segments	28			21			7			33.3
Total Segments	1,515			1,041			474			45.5
Reconciling Items (a)	(9		)	2			(11		)	N/M
Total	$	1,506		$	1,043		$	463		44.4	%
INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO KEY
Key Community Bank	$	147		$	74		$	73		98.6	%
Key Corporate Bank	181			118			63			53.4
Other Segments	21			15			6			40.0
Total Segments	349			207			142			68.6
Reconciling Items (a)	(25		)	(20		)	(5		)	N/M
Total	$	324		$	187		$	137		73.3	%

(a)    Reconciling items consist 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.

Key Community Bank summary of operations

• Positive operating leverage from prior year

• Net income increased $73 million, or 98.6%, from prior year

• Average commercial and industrial loans increased $5.1 billion, or 39.3%, from the prior year

• Average deposits increased $26.6 billion, or 50.4%, from the prior year

As shown in Figure 15, Key Community Bank recorded net income attributable to Key of $147 million for the first quarter of 2017, compared to $74 million for the year-ago quarter, benefiting from momentum in Key's core businesses, as well as the impact of the First Niagara acquisition.

TE net interest income increased by $232 million, or 58.1%, from the first quarter of 2016. The increase was primarily attributable to the acquisition of First Niagara, as well as benefit from the Federal Reserve rate increase. Average loans and leases increased $16.2 billion, or 52.8%, largely driven by a $5.1 billion, or 39.3%, increase in commercial and industrial loans. Additionally, average deposits increased $26.6 billion, or 50.4%, from one year ago.

Noninterest income increased $81 million, or 41.3%, from the year-ago quarter, driven by the acquisition of First Niagara, as well as strength in derivatives and higher assets under management balances, primarily attributable to the acquisition of First Niagara and growth in equity investments.

The provision for credit losses increased by $5 million, or 11.9%, and net loan charge-offs increased $20 million, from the first quarter of 2016, primarily related to the acquisition of First Niagara.

Noninterest expense increased by $191 million, or 43.8%, from the year-ago quarter, largely driven by the acquisition of First Niagara, as well as an increase in core business activity and investments. Personnel expense increased $75 million, while non-personnel expense increased by $116 million, including higher intangible amortization expense and higher FDIC assessment expense.

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Figure 15. Key Community Bank

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount		Percent
SUMMARY OF OPERATIONS
Net interest income (TE)	$	631	$	399	$	232	58.1	%
Noninterest income	277		196		81		41.3
Total revenue (TE)	908		595		313		52.6
Provision for credit losses	47		42		5		11.9
Noninterest expense	627		436		191		43.8
Income (loss) before income taxes (TE)	234		117		117		100.0
Allocated income taxes (benefit) and TE adjustments	87		43		44		102.3
Net income (loss) attributable to Key	$	147	$	74	$	73	98.6	%
AVERAGE BALANCES
Loans and leases	$	47,036	$	30,789	$	16,247	52.8	%
Total assets	50,962		32,856		18,106		55.1
Deposits	79,393		52,803		26,590		50.4
Assets under management at period end	$	37,417	$	34,107	$	3,310	9.7	%

ADDITIONAL KEY COMMUNITY BANK DATA

	Three months ended March 31,						Change
dollars in millions	2017			2016			Amount		Percent
NONINTEREST INCOME
Trust and investment services income	$	98		$	73		$	25	34.2	%
Services charges on deposit accounts	75			54			21		38.9
Cards and payments income	55			43			12		27.9
Other noninterest income	49			26			23		88.5
Total noninterest income	$	277		$	196		$	81	41.3	%
AVERAGE DEPOSITS OUTSTANDING
NOW and money market deposit accounts	$	45,027		$	29,432		$	15,595	53.0	%
Savings deposits	5,268			2,340			2,928		125.1
Certificates of deposits ($100,000 or more)	3,878			2,120			1,758		82.9
Other time deposits	4,692			3,197			1,495		46.8
Noninterest-bearing deposits	20,528			15,714			4,814		30.6
Total deposits	$	79,393		$	52,803		$	26,590	50.4	%
HOME EQUITY LOANS
Average balance	$	12,456		$	10,037
Combined weighted-average loan-to-value ratio (at date of origination)	70		%	71		%
Percent first lien positions	60			61
OTHER DATA
Branches	1,216			961
Automated teller machines	1,594			1,249

Key Corporate Bank summary of operations

• Average loan and lease balances up $10 billion, or 36.1%, from the prior year

• Revenue up $154 million, or 36.2%, from the prior year

• Noninterest income up $68 million, or 32.9%, from the prior year

As shown in Figure 16, Key Corporate Bank recorded net income attributable to Key of $181 million for the first quarter of 2017, compared to $118 million for the same period one year ago.

Taxable-equivalent net interest income increased by $86 million, or 39.4%, compared to the first quarter of 2016. Average loan and lease balances increased $10 billion, or 36.1%, from the year-ago quarter, primarily driven by the First Niagara acquisition as well as growth in commercial and industrial loans. Average deposit balances increased $2.9 billion, or 16.2%, from the year-ago quarter, mostly driven by the First Niagara acquisition.

Noninterest income was up $68 million, or 32.9%, from the prior year. This growth was mostly due to $54 million of higher investment banking and debt placement fees related to improved capital markets conditions and activity from the year-ago period, as well as an increase of $8 million in operating lease income and other leasing gains related to higher originations.

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Additional increases of $7 million in cards and payments income and $4 million in mortgage servicing fees were partially offset by a $7 million decrease in other noninterest income.

The provision for credit losses decreased $26 million, or 60.5%, compared to the first quarter of 2016 due to $4 million of lower net loan charge-offs and improvement in the oil and gas portfolio.

Noninterest expense increased by $66 million, or 27.8%, from the first quarter of 2016. 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.

Figure 16. Key Corporate Bank

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount			Percent
SUMMARY OF OPERATIONS
Net interest income (TE)	$	304	$	218	$	86		39.4	%
Noninterest income	275		207		68			32.9
Total revenue (TE)	579		425		154			36.2
Provision for credit losses	17		43		(26		)	(60.5	)
Noninterest expense	303		237		66			27.8
Income (loss) before income taxes (TE)	259		145		114			78.6
Allocated income taxes and TE adjustments	78		27		51			188.9
Net income (loss) attributable to Key	$	181	$	118	$	63		53.4	%
AVERAGE BALANCES
Loans and leases	$	37,737	$	27,722	$	10,015		36.1	%
Loans held for sale	1,097		811		286			35.3
Total assets	44,167		33,413		10,754			32.2
Deposits	21,003		18,074		2,929			16.2

ADDITIONAL KEY CORPORATE BANK DATA

	Three months ended March 31,				Change
dollars in millions	2017		2016		Amount			Percent
NONINTEREST INCOME
Trust and investment services income	$	37	$	36	$	1		2.8	%
Investment banking and debt placement fees	124		70		54			77.1
Operating lease income and other leasing gains	21		13		8			61.5
Corporate services income	38		38		—			—
Service charges on deposit accounts	12		11		1			9.1
Cards and payments income	10		3		7			233.3
Payments and services income	60		52		8			15.4
Mortgage servicing fees	16		12		4			33.3
Other noninterest income	17		24		(7		)	(29.2	)
Total noninterest income	$	275	$	207	$	68		32.9	%

Other Segments

Other Segments consist of corporate treasury, our principal investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $21 million for the first quarter of 2017, compared to $15 million for the same period last year, driven by increases in corporate-owned life insurance income, net gains on principal investing, and other income.

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Financial Condition

Loans and loans held for sale

At March 31, 2017, total loans outstanding from continuing operations were $86.1 billion, compared to $86 billion at December 31, 2016. Loans related to the discontinued operations of the education lending business and excluded from total loans were $1.5 billion at March 31, 2017, and $1.6 billion at December 31, 2016. For more information on balance sheet carrying value, see Note 1 (“Summary of Significant Accounting Policies”) under the headings “Loans” and “Loans Held for Sale” on page 107 of our 2016 Form 10-K.

Commercial loan portfolio

Commercial loans outstanding were $62.3 billion at March 31, 2017, an increase of $398 million, or .6%, compared to December 31, 2016, primarily driven by an increase in commercial and industrial loans and real estate — commercial mortgage loans. Figure 17 provides our commercial loan portfolios by industry classification at March 31, 2017, and December 31, 2016

Figure 17. Commercial Loans by Industry

March 31, 2017	Commercial and industrial		Commercial real estate		Commercial lease financing		Total commercial loans		Percent of total
dollars in millions
Industry classification:
Agricultural	$	620	$	185	$	55	$	860	1.4	%
Automotive	2,275		477		93		2,845		4.6
Business products	1,590		159		51		1,800		2.9
Business services	2,681		162		306		3,149		5.1
Commercial real estate	5,117		11,266		11		16,394		26.3
Construction materials and contractors	1,664		357		106		2,127		3.4
Consumer discretionary	3,759		552		351		4,662		7.5
Consumer services	2,866		1,001		220		4,087		6.5
Equipment	1,624		153		115		1,892		3.0
Financial	3,700		99		259		4,058		6.6
Healthcare	3,096		2,530		457		6,083		9.8
Materials manufacturing and mining	1,965		139		142		2,246		3.6
Media	489		23		54		566		.9
Oil and gas	817		21		50		888		1.4
Public exposure	2,241		72		1,067		3,380		5.4
Technology	439		6		17		462		.7
Transportation	1,410		310		936		2,656		4.3
Utilities	3,312		7		375		3,694		5.9
Other	447		11		—		458		.7
Total	$	40,112	$	17,530	$	4,665	$	62,307	100.0	%
December 31, 2016	Commercial and industrial		Commercial real estate		Commercial lease financing		Total commercial loans		Percent of total
dollars in millions
Industry classification:
Agricultural	$	844	$	194	$	151	$	1,189	1.9	%
Automotive	2,139		491		74		2,704		4.4
Business products	1,243		152		31		1,426		2.3
Business services	2,648		179		303		3,130		5.1
Commercial real estate	4,759		11,235		2		15,996		25.8
Construction materials and contractors	1,282		307		79		1,668		2.7
Consumer discretionary	3,367		539		314		4,220		6.8
Consumer services	2,281		749		66		3,096		5.0
Equipment	1,582		107		87		1,776		2.9
Financial	3,864		95		296		4,255		6.9
Healthcare	3,487		2,577		526		6,590		10.6
Materials manufacturing and mining	2,743		276		212		3,231		5.2
Media	478		18		70		566		.9
Oil and gas	1,094		27		62		1,183		1.9
Public exposure	2,621		311		1,204		4,136		6.7
Technology	485		6		34		525		.8
Transportation	940		148		923		2,011		3.3
Utilities	3,441		26		251		3,718		6.0
Other	470		19		—		489		.8
Total	$	39,768	$	17,456	$	4,685	$	61,909	100.0	%

Commercial and industrial. Our commercial and industrial loans represented 47% of our total loan portfolio at March 31, 2017, and 46% at December 31, 2016, and are the largest component of our total loans. These loans are originated by both Key Corporate Bank and Key Community Bank and consist of fixed and variable rate loans to our large, middle market, and small business clients.

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Commercial and industrial loans increased$344 million, or .9%, from December 31, 2016, with Key Corporate Bank increasing $1 million, Key Community Bank up $369 million, and Other Segments decreasing $26 million.

We have experienced growth in new, high credit quality loan commitments and utilization with clients in our middle market segment and Institutional and Capital Markets business. Our largest commercial loan industry classifications, commercial real estate, increased by 7.5%, when compared to December 31, 2016. We experienced growth in our transportation, construction materials and contractors, and business products commercial loan classifications, increasing 50%, 29.8%, and 27.9%, respectively, from December 31, 2016. Partially offsetting these increases, the utilities and financial commercial loan classifications, which represented approximately 8% and 9%, respectively, of the commercial and industrial loan portfolio at March 31, 2017, decreased 3.7% and 4.2%, respectively, from December 31, 2016.

Commercial real estate loans. Our commercial real estate lending business is conducted through two primary sources: our 15-state banking franchise, and KeyBank Real Estate Capital, a national line of business that cultivates relationships with owners of commercial real estate located both within and beyond the branch system. This line of business deals primarily with nonowner-occupied properties (generally properties for which at least 50% of the debt service is provided by rental income from nonaffiliated third parties) and accounted for approximately 69% of our average year-to-date commercial real estate loans for the three months ended March 31, 2017, and March 31, 2016. KeyBank Real Estate Capital generally focuses on larger owners and operators of commercial real estate.

Commercial real estate loans totaled $17.5 billion at March 31, 2017, and December 31, 2016, and represented 20% of our total loan portfolio at March 31, 2017, and December 31, 2016, respectively. The $74 million increase from December 31, 2016, was due to an increase in real estate—commercial mortgage loans. These loans, which include both owner- and nonowner-occupied properties, represented 28% of our commercial loan portfolio at both March 31, 2017, and December 31, 2016. We continue to decrease the risk of the portfolio by changing our focus from developers to owners of completed and stabilized commercial real estate.

Figure 18 includes commercial mortgage and construction loans in both Key Community Bank and Key Corporate Bank. As shown in Figure 18, this loan portfolio is diversified by both property type and geographic location of the underlying collateral.

As presented in Figure 18, at March 31, 2017, our commercial real estate portfolio included commercial mortgage loans of $15.3 billion and construction loans of $2.3 billion, representing 18% and 3%, respectively, of our total loans. At March 31, 2017, nonowner-occupied loans represented 16% of our total loans and owner-occupied loans represented 4% of our total loans. The average size of commercial mortgage loans originated during the first quarter of 2017 was $4.3 million, and our largest commercial mortgage loan at March 31, 2017, had a balance of $125 million. At March 31, 2017, our average construction loan commitment was $9.1 million, our largest construction loan commitment was $65 million, and our largest construction loan amount outstanding was $47.4 million.

Also shown in Figure 18, 79% of our commercial real estate loans at March 31, 2017, were for nonowner-occupied properties compared to 78% at December 31, 2016. Approximately 16% of these loans were construction loans at March 31, 2017, and 17% were construction loans at December 31, 2016. Typically, these properties are not fully leased at the origination of the loan. The borrower relies upon additional leasing through the life of the loan to provide the cash flow necessary to support debt service payments. A significant decline in economic growth, and in turn in rental rates and occupancy, would adversely affect our portfolio of construction loans.

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Figure 18. Commercial Real Estate Loans

	Geographic Region (a)														Total		Percent of Total		Construction		Commercial Mortgage
dollars in millions	West		Southwest		Central		Midwest		Southeast		Northeast		National
March 31, 2017
Nonowner-occupied:
Retail properties	$	203	$	122	$	73	$	377	$	258	$	778	$	247	$	2,058	11.7	%	$	202	$	1,856
Multifamily properties	338		179		791		576		996		2,339		137		5,356		30.6		1,280		4,076
Health facilities	258		—		173		165		351		1,148		189		2,284		13.0		164		2,120
Office buildings	168		7		188		158		259		1,108		35		1,923		11.0		184		1,739
Warehouses	71		29		83		95		104		394		40		816		4.7		89		727
Manufacturing facilities	5		2		—		27		12		68		37		151		.9		16		135
Hotels/Motels	14		—		16		5		24		172		23		254		1.4		31		223
Residential properties	1		—		20		2		2		201		—		226		1.3		84		142
Land and development	9		—		1		4		7		128		—		149		.8		75		74
Other	43		12		2		53		51		359		85		605		3.4		68		537
Total nonowner-occupied	1,110		351		1,347		1,462		2,064		6,695		793		13,822		78.8		2,193		11,629
Owner-occupied	991		7		266		618		207		1,619		—		3,708		21.2		77		3,631
Total	$	2,101	$	358	$	1,613	$	2,080	$	2,271	$	8,314	$	793	17,530		100.0	%	$	2,270	$	15,260
December 31, 2016
Total	$	2,032	$	291	$	1,508	$	2,281	$	2,304	$	8,340	$	700	$	17,456			$	2,345	$	15,111
March 31, 2017
Nonowner-occupied:
Nonperforming loans	1		—		2		5		12		9		—		29		N/M		2		27
Accruing loans past due 90 days or more	—		—		—		2		—		3		—		5		N/M		—		5
Accruing loans past due 30 through 89 days	—		—		1		2		10		21		—		34		N/M		5		29

(a)Regions are defined as follows

West –	Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington, and Wyoming
Southwest –	Arizona, Nevada, and New Mexico
Central –	Arkansas, Colorado, Oklahoma, Texas, and Utah
Midwest –	Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin
Southeast –	Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington D.C., and West Virginia
Northeast –	Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont
National –	Accounts in three or more regions

Nonperforming loans related to nonowner-occupied properties increased by $7 million from December 31, 2016, to $29 million at March 31, 2017. Our nonowner-occupied commercial real estate portfolio has increased by 1.2%, or approximately $161 million, since December 31, 2016. The growth reflects overall business activity and lower payoffs in our Commercial Real Estate line of business.

Commercial lease financing. We conduct commercial lease financing arrangements through our KEF line of business. Commercial lease financing receivables represented 7% of commercial loans at March 31, 2017, and 8% of commercial loans at December 31, 2016.

Commercial loan modification and restructuring

We modify and extend certain commercial loans in the normal course of business for our clients. Loan modifications vary and are handled on a case-by-case basis with strategies responsive to the specific circumstances of each loan and borrower. In many cases, borrowers have other resources and can reinforce the credit with additional capital, collateral, guarantees, or other income sources.

Modifications are negotiated to achieve mutually agreeable terms that maximize loan credit quality while at the same time meeting our clients’ financing needs. Modifications made to loans of creditworthy borrowers not experiencing financial difficulties and under circumstances where ultimate collection of all principal and interest is not in doubt are not classified as TDRs. In accordance with applicable accounting guidance, a loan is classified as a TDR only when the borrower is experiencing financial difficulties and a creditor concession has been granted.

Our concession types are primarily interest rate reductions, forgiveness of principal, and other modifications. Loan extensions are sometimes coupled with these primary concession types. Because economic conditions have improved modestly and we have restructured loans to provide the optimal opportunity for successful repayment by the borrower, certain of our restructured loans have returned to accrual status and consistently performed under the restructured loan terms over the past year.

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If loan terms are extended at less than normal market rates for similar lending arrangements, our Asset Recovery Group is consulted to help determine if any concession granted would result in designation as a TDR. Transfer to our Asset Recovery Group is considered for any commercial loan determined to be a TDR. During the first three months of 2017, we had $28 million of new restructured commercial loans compared to $3 million of new restructured commercial loans during the first three months of 2016.

For more information on concession types for our commercial accruing and nonaccruing TDRs, see Note 5 (“Asset Quality”).

Figure 19. Commercial TDRs by Accrual Status

in millions	March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016		March 31, 2016
Commercial TDRs by Accrual Status
Nonaccruing	$	70	$	51	$	67	$	33	$	50
Accruing	16		16		18		20		2
Total Commercial TDRs	$	86	$	67	$	85	$	53	$	52

We often use an A-B note structure for our TDRs, breaking the existing loan into two tranches. First, we create an A note. Since the objective of this TDR note structure is to achieve a fully performing and well-rated A note, we focus on sizing that note to a level that is supported by cash flow available to service debt at current market terms and consistent with our customary underwriting standards. This note structure typically will include a debt coverage ratio of 1.2 or better of cash flow to monthly payments of market interest, and principal amortization of generally not more than 25 years. These metrics are adjusted from time to time based upon changes in long-term markets and “take-out underwriting standards” of our various lines of business. Appropriately sized A notes are more likely to return to accrual status, allowing us to resume recognizing interest income. As the borrower’s payment performance improves, these restructured notes typically also allow for an upgraded internal quality risk rating classification.

The B note typically is a structurally subordinate note that may or may not require any debt service until the primary payment source stabilizes and generates excess cash flow. This excess cash flow customarily is captured for application to either the A note or B note dependent upon the terms of the restructure. We evaluate the B note when we consider returning the A note to accrual status. In many cases, the B note is charged off at the same time the A note is returned to accrual status in accordance with our interpretation of accounting and regulatory guidance applicable to TDRs. Alternatively, both A and B notes may be simultaneously returned to accrual if credit metrics are supportive.

Restructured nonaccrual loans may be returned to accrual status based on a current, well-documented evaluation of the credit, which would include analysis of the borrower’s financial condition, prospects for repayment under the modified terms, and alternate sources of repayment such as the value of loan collateral. We consider the borrower’s ability to perform under the modified terms for a reasonable period (generally a minimum of six months) before returning the loan to accrual status. Sustained historical repayment performance prior to the restructuring also may be taken into account. The primary consideration for returning a restructured loan to accrual status is the reasonable assurance that the full contractual principal balance of the loan and the ongoing contractually required interest payments will be fully repaid. Although our policy is a guideline, considerable judgment is required to review each borrower’s circumstances.

All loans processed as TDRs, including A notes and any non-charged-off B notes, are reported as TDRs during the calendar year in which the restructure took place. At March 31, 2017, we had $86 million of A note commercial TDRs. We did not have any B note commercial TDRs at March 31, 2017.

Additional information regarding TDRs is provided in Note 5 (“Asset Quality”).

Extensions. Project loans typically are refinanced into the permanent commercial loan market at maturity, but they are often modified and extended. Extension terms take into account the specific circumstances of the client relationship, the status of the project, and near-term prospects for the client, the repayment source, and the collateral. In all cases, pricing and loan structure are reviewed and, where necessary, modified to ensure that the loan has been priced to achieve a market rate of return and loan terms that are appropriate for the risk. Typical enhancements include one or more of the following: principal pay down, increased amortization, additional collateral, increased guarantees, and a cash flow sweep. Some maturing loans have automatic extension options built in; in those cases, pricing and loan terms cannot be altered.

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Loan pricing is determined based on the strength of the borrowing entity, the strength of the guarantor, if any, and the structure and residual risk of the transaction. Therefore, pricing for an extended loan may remain the same because the loan is already priced at or above current market.

We do not consider loan extensions in the normal course of business (under existing loan terms or at market rates) as TDRs, particularly when ultimate collection of all principal and interest is not in doubt and no concession has been made. In the case of loan extensions where either collection of all principal and interest is uncertain or a concession has been made, we would analyze such credit under the applicable accounting guidance to determine whether it qualifies as a TDR. Extensions that qualify as TDRs are measured for impairment under the applicable accounting guidance.

Guarantors. We conduct a detailed guarantor analysis (i) for all new extensions of credit, (ii) at the time of any material modification/extension, and (iii) as part of our ongoing portfolio and loan monitoring procedures, typically annually. This analysis requires the guarantor entity to submit all appropriate financial statements, including balance sheets, income statements, tax returns, and real estate schedules. While the specific steps of each guarantor analysis may vary, the high-level objectives include determining the overall financial conditions of the guarantor entities, including size, quality, and nature of asset base; net worth (adjusted to reflect our opinion of market value); leverage; standing liquidity; recurring cash flow; contingent and direct debt obligations; and near-term debt maturities.

Borrower and guarantor financial statements are required at least annually within 90-120 days of the calendar/fiscal year end. Income statements and rent rolls for project collateral are required quarterly. We may require certain information, such as liquidity, certifications, status of asset sales or debt resolutions, and real estate schedules, to be provided more frequently.

We routinely seek performance from guarantors of impaired debt if the guarantor is solvent. We may not seek to enforce the guaranty if we are precluded by bankruptcy or we determine that the cost to pursue a guarantor exceeds the value to be returned given the guarantor’s verified financial condition. We often are successful in obtaining either monetary payment or the cooperation of our solvent guarantors to help mitigate loss, cost, and the expense of collections.

Consumer loan portfolio

Consumer loans outstanding decreased by $311 million, or 1.3%, from December 31, 2016, mostly related to continued decline in the home equity loan portfolio, largely the result of paydowns on home equity lines of credit.

The home equity portfolio is the largest segment of our consumer loan portfolio. Approximately 99% of this portfolio at March 31, 2017, was originated from our Key Community Bank within our 15-state footprint. The remainder of the portfolio, which has been in an exit mode since the fourth quarter of 2007, was originated from the Consumer Finance line of business and is now included in Other Segments. 

As shown in Figure 15, we held the first lien position for approximately 60% of the Key Community Bank home equity portfolio at March 31, 2017, and 61% at March 31, 2016. At March 31, 2017, 40% of the Key Community Bank home equity portfolio was secured by second lien mortgages. For consumer loans with real estate collateral, we track borrower performance monthly. Regardless of the lien position, credit metrics are refreshed quarterly, including recent FICO scores as well as original and updated loan-to-value ratios. This information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2016 Form 10-K.

Loans held for sale

As shown in Note 4 (“Loans and Loans Held for Sale”), our loans held for sale increased to $1.4 billion at March 31, 2017, from $1.1 billion at December 31, 2016. At March 31, 2017, loans held for sale included $171 million of commercial and industrial loans, which increased$152 million from December 31, 2016; $1.2 billion of commercial mortgage loans, which increased$128 million from December 31, 2016; $62 million of residential mortgage loans, which were unchanged from December 31, 2016; and $1 million of commercial lease financing, which increased$1 million from December 31, 2016.

Loan sales

As shown in Figure 20, during the first three months of 2017, we sold $2 billion of commercial real estate loans, $194 million of residential real estate loans, $83 million of commercial lease financing loans, and $49 million of commercial loans. Most of these sales came from the held-for-sale portfolio; however, $37 million of these loan sales related to the held-to-maturity portfolio.

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Loan sales classified as held for sale generated net gains of $35 million in the first three months of 2017 and are included in “investment banking and debt placement fees” and “other income” on the income statement.

Among the factors that we consider in determining which loans to sell are:

• our business strategy for particular lending areas;

• whether particular lending businesses meet established performance standards or fit with our relationship banking strategy;

• our A/LM needs;

• the cost of alternative funding sources;

• the level of credit risk;

• capital requirements; and

• market conditions and pricing.

Figure 20 summarizes our loan sales for the first three months of 2017 and all of 2016.

Figure 20. Loans Sold (Including Loans Held for Sale)

in millions	Commercial		Commercial Real Estate		Commercial Lease Financing		Residential Real Estate		Total
2017
First quarter	$	49	$	2,011	$	83	$	194	$	2,337
Total	$	49	$	2,011	$	83	$	194	$	2,337
2016
Fourth quarter	$	83	$	2,521	$	93	$	232	$	2,929
Third quarter	105		1,791		52		260		$	2,208
Second quarter	83		1,518		121		111		$	1,833
First quarter	46		925		88		89		$	1,148
Total	$	317	$	6,755	$	354	$	692	$	8,118

Figure 21 shows loans that are either administered or serviced by us, but not recorded on the balance sheet; this includes loans that were sold.

Figure 21. Loans Administered or Serviced

in millions	March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016		March 31, 2016
Commercial real estate loans	$	218,387	$	218,135	$	213,998	$	213,879	$	214,756
Residential mortgage	4,272		4,198		—		—		—
Education loans	1,067		1,122		1,172		1,226		1,280
Commercial lease financing	916		899		930		930		891
Commercial loans	427		418		1,461		355		347
Total	$	225,069	$	224,772	$	217,561	$	216,390	$	217,274

In the event of default by a borrower, we are subject to recourse with respect to approximately $2.7 billion of the $225.1 billion of loans administered or serviced at March 31, 2017. Additional information about this recourse arrangement is included in Note 16 (“Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with FNMA.”

We derive income from several sources when retaining the right to administer or service loans that are sold. We earn noninterest income (recorded as “mortgage servicing fees”) from fees for servicing or administering loans. This fee income is reduced by the amortization of related servicing assets. In addition, we earn interest income from investing funds generated by escrow deposits collected in connection with the servicing of commercial real estate loans.

Securities

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Our securities portfolio totaled $28.6 billion at March 31, 2017, compared to $30.4 billion at December 31, 2016. Available-for-sale securities were $18.4 billion at March 31, 2017, compared to $20.2 billion at December 31, 2016. Held-to-maturity securities were $10.2 billion at March 31, 2017, and December 31, 2016.

As shown in Figure 22, all of our mortgage-backed securities, which include both securities available for sale and held-to-maturity securities, are issued by government-sponsored enterprises or GNMA and traded in liquid secondary markets. These securities are recorded on the balance sheet at fair value for the available-for-sale portfolio and at cost for the held-to-maturity portfolio. For more information about these securities, see Note 6 (“Fair Value Measurements”) under the heading “Qualitative Disclosures of Valuation Techniques,” and Note 7 (“Securities”).

Figure 22. Mortgage-Backed Securities by Issuer

in millions	March 31, 2017		December 31, 2016
FHLMC	$	5,575	$	6,415
FNMA	8,966		9,879
GNMA	13,845		13,920
Total (a)	$	28,386	$	30,214

(a) Includes securities held in the available-for-sale and held-to-maturity portfolios.

Securities available for sale

The majority of our securities available for sale portfolio consists of federal agency CMOs and mortgage-backed securities. CMOs are debt securities secured by a pool of mortgages or mortgage-backed securities. These mortgage securities generate interest income, serve as collateral to support certain pledging agreements, and provide liquidity value under regulatory requirements. At March 31, 2017, we had $18.2 billion invested in CMOs and other mortgage-backed securities in the available-for-sale portfolio, compared to $20 billion at December 31, 2016.

We periodically evaluate our securities available for sale portfolio in light of established A/LM objectives, changing market conditions that could affect the profitability of the portfolio, the regulatory environment, and the level of interest rate risk to which we are exposed. These evaluations may cause us to take steps to adjust our overall balance sheet positioning.

In addition, the size and composition of our securities available for sale portfolio could vary with our needs for liquidity and the extent to which we are required (or elect) to hold these assets as collateral to secure public funds and trust deposits. Although we generally use debt securities for this purpose, other assets, such as securities purchased under resale agreements or letters of credit, are used occasionally when they provide a lower cost of collateral or more favorable risk profiles.

Our investing activities continue to complement other balance sheet developments and provide for our ongoing liquidity management needs. Our actions to not reinvest the monthly security cash flows at various times provide the liquidity necessary to address our funding requirements. These funding requirements include ongoing loan growth and occasional debt maturities. At other times, we may make additional investments that go beyond the replacement of maturities or mortgage security cash flows as our liquidity position and/or interest rate risk management strategies may require. Lastly, our focus on investing in high quality liquid assets, including GNMA-related securities, is related to liquidity management strategies to satisfy regulatory requirements.

Figure 23 shows the composition, yields, and remaining maturities of our securities available for sale. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 7 (“Securities”).

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Figure 23. Securities Available for Sale

dollars in millions	U.S. Treasury, Agencies, and Corporations			States and Political Subdivisions			Agency Residential Collateralized Mortgage Obligations (a)			Agency Residential Mortgage-backed Securities (a)			Agency Commercial Mortgage-backed Securities			Other Securities (b)			Total				Weighted-Average Yield (c)
March 31, 2017
Remaining maturity:
One year or less	$	27		$	1		$	130		$	18		$	—		$	3		$	179			2.72	%
After one through five years	45			10			13,063			1,598			1,628			10			16,354				2.04
After five through ten years	112			—			1,370			114			90			7			1,693				2.04
After ten years	1			—			—			12			192			—			205				2.66
Fair value	$	185		$	11		$	14,563		$	1,742		$	1,910		$	20		$	18,431			—
Amortized cost	188			11			14,790			1,751			1,956			21			18,717				2.05	%
Weighted-average yield (c)	1.65		%	6.23		%	2.03		%	2.07		%	2.24		%	—		(d)	2.05		%	(d)	—
Weighted-average maturity	4.5 years			2.3 years			4.0 years			3.7 years			4.7 years			3.2 years			4.0 years				—
December 31, 2016
Fair value	$	184		$	11		$	16,408		$	1,846		$	1,743		$	20		$	20,212			—
Amortized cost	188			11			16,652			1,857			1,778			21			20,507				2.00	%

(a) Maturity is based upon expected average lives rather than contractual terms.

(b) Includes primarily marketable equity securities.

(c) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate of 35%.

(d) Excludes $20 million of securities at March 31, 2017, that have no stated yield.

Held-to-maturity securities

Federal agency CMOs and mortgage-backed securities constitute essentially all of our held-to-maturity securities. The remaining balance comprises primarily foreign bonds. Figure 24 shows the composition, yields, and remaining maturities of these securities.

Figure 24. Held-to-Maturity Securities

dollars in millions	Agency Residential Collateralized Mortgage Obligations			Agency Residential Mortgage-backed Securities			Agency Commercial Mortgage-backed Securities			Other Securities			Total			Weighted-Average Yield (a)
March 31, 2017
Remaining maturity:
One year or less	$	55		$	—		$	—		$	—		$	55		2.37	%
After one through five years	6,035			128			757			15			6,935			2.00
After five through ten years	1,883			477			576			—			2,936			2.27
After ten years	—			—			260			—			260			2.22
Amortized cost	$	7,973		$	605		$	1,593		$	15		$	10,186		2.08	%
Fair value	7,787			600			1,552			15			9,954			—
Weighted-average yield	1.92		%	2.65		%	2.68		%	2.85		%	2.08		%	—
Weighted-average maturity	4.1 years			6.1 years			7.1 years			2.3 years			4.7 years			—
December 31, 2016
Amortized cost	$	8,404		$	629		$	1,184		$	15		$	10,232		2.05	%
Fair value	8,232			624			1,136			15			10,007			—

(a) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a TE basis using the statutory federal income tax rate of 35%.

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Other investments

Principal investments — investments in equity and debt instruments made by our principal investing unit — represented 25% of other investments at both March 31, 2017, and December 31, 2016. They include direct investments (investments made in a particular company) as well as indirect investments (investments made through funds that include other investors). Principal investments are predominantly made in privately held companies and are carried at fair value. The fair value of the direct investments was $21 million at March 31, 2017, and $27 million at December 31, 2016, while the fair value of the indirect investments was $155 million at March 31, 2017, and $158 million at December 31, 2016. Under the requirements of the Volcker Rule, we will be required to dispose of some or all of our indirect principal investments. The Federal Reserve extended the conformance period to July 21, 2017, for all banking entities with respect to covered funds. On January 13, 2017, Key filed for an additional extension for illiquid funds, to retain certain indirect investments until the earlier of the date on which the investment is conformed or is expected to mature, or July 21, 2022. The application for an extension was approved on February 14, 2017. As of March 31, 2017, we have not committed to a plan to sell these investments. Therefore, these investments continue to be valued using the net asset value per share methodology.For more information about the Volcker Rule, see the discussion in Item 1 under the heading “Other Regulatory Developments under the Dodd-Frank Act — ‘Volcker Rule’” in the section entitled “Supervision and Regulation” beginning on page 16 of our 2016 Form 10-K.

In addition to principal investments, “other investments” include real estate-related investments that are carried at fair value, as well as other types of investments that generally are carried at cost. The real estate-related investments were valued at $2 million at March 31, 2017, and $6 million at December 31, 2016. Additional information pertaining to the equity investment is included in the “Assets and Liabilities Measured at Fair Value on a Recurring Basis” section of Note 6 (“Fair Value Measurements”).

Most of our other investments are not traded on an active market. We determine the fair value at which these investments should be recorded based on the nature of the specific investment and all available relevant information. This review may encompass such factors as the issuer’s past financial performance and future potential, the values of public companies in comparable businesses, the risks associated with the particular business or investment type, current market conditions, the nature and duration of resale restrictions, the issuer’s payment history, our knowledge of the industry, third-party data, and other relevant factors. During the first three months of 2017, net gains from our principal investing activities (including results attributable to noncontrolling interests) totaled $1 million, which includes $3 million of net unrealized losses. These net gains are recorded as “net gains (losses) from principal investing” on the income statement. Additional information regarding these investments is provided in Note 6 (“Fair Value Measurements”).

Deposits and other sources of funds

Domestic deposits are our primary source of funding. The composition of our average deposits is shown in Figure 7 in the section entitled “Net interest income.” During the first quarter of 2017, average domestic deposits were $102.1 billion, compared to $71.6 billion during the first quarter of 2016. The increase reflected the acquisition of First Niagara and core deposit growth in Key’s retail banking franchise. Compared to the fourth quarter of 2016, average deposits decreased by $2.6 billion, largely driven by a decline in escrow deposits and both seasonal and short-term commercial deposit outflows. On a period-end basis, total deposits decreased $105 million compared to the fourth quarter of 2016 as the decline in escrow deposits was partially offset by core deposit growth in Key’s retail banking franchise. As of March 31, 2017, period-end deposits represented 85.6% of the funds we used to support loans and other earning assets, compared to 85.2% at December 31, 2016.

Wholesale funds, consisting of short-term borrowings, averaged $2.6 billion during the first quarter of 2017, compared to $1 billion during the first quarter of 2016. The change from the first quarter of 2016 was caused by increases of $358 million in federal funds purchased and securities sold under repurchase agreements, and $1.2 billion in bank notes and other short-term borrowings.

Capital

At March 31, 2017, our shareholders’ equity was $15 billion, down$264 million from December 31, 2016. The following sections discuss certain factors that contributed to this change. For other factors that contributed to the change, see the Consolidated Statements of Changes in Equity and Note 18 (“Shareholders' Equity”).

CCAR and capital actions

As part of its ongoing supervisory process, the Federal Reserve requires BHCs like KeyCorp to submit an annual comprehensive capital plan and to update that plan to reflect material changes in the BHC’s risk profile, business strategies, or

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corporate structure, including but not limited to changes in planned capital actions. In April 2016, we submitted to the Federal Reserve and provided to the OCC our 2016 capital plan under the annual CCAR process. On June 29, 2016, the Federal Reserve announced that it did not object to our 2016 capital plan. Share repurchases of up to $350 million were included in the 2016 capital plan, which is effective through the second quarter of 2017. We completed $160 million of Common Share repurchases, including $107 million of Common Share repurchases in the open market and $53 million of Common Share repurchases related to employee equity compensation programs in the first quarter of 2017 under this authorization.

Dividends

As previously reported, our 2015 capital plan proposed an increase in our quarterly Common Share dividend from $.075 to $.085 per share, which was approved by our Board in May 2016. An additional potential increase in our quarterly Common Share dividend, up to $.095 per share, will be considered by the Board for the second quarter of 2017, consistent with the 2016 capital plan. Other changes to future dividends may be evaluated by the Board based upon our earnings, financial condition, and other factors, including regulatory review. Further information regarding the capital planning process and CCAR is included under the heading “Capital planning and stress testing” in the “Supervision and Regulation” section beginning on page 12 of our 2016 Form 10-K.

Consistent with the 2016 capital plan, we made a dividend payment of $.085 per share, or $90 million, on our Common Shares during the first quarter of 2017.

During the first quarter of 2017, we made the following dividend payments on our preferred stock:

• $1.9375 per share, or $6 million, on our Series A Preferred Stock;

• $.539063 per share, or $7 million, on our Series C Preferred Stock;

• $12.50 per depositary share, or $7 million, on the depositary shares related to our Series D Preferred Stock; and

• $.395573 per depositary share, or $8 million, on the depositary shares related to our Series E Preferred Stock.

Preferred shares

On February 15, 2017, our Series C Preferred Stock was redeemed for cash at a redemption price of $25 per share. The Series C Preferred Stock was initially issued in connection with the First Niagara acquisition to replace First Niagara’s outstanding preferred stock.

On March 9, 2017, we provided notice of our intention to convert the Series A Preferred Stock into Common Shares on March 20, 2017. On March 20, 2017, each outstanding share of Series A Preferred Stock was converted into 7.0922 Common Shares. Cash was paid in lieu of fractional shares.

Common shares outstanding

Our Common Shares are traded on the NYSE under the symbol KEY with 43,129 holders of record at March 31, 2017. Our book value per Common Share was $12.71 based on 1.097 billion shares outstanding at March 31, 2017, compared to $12.58 per Common Share based on 1.079 billion shares outstanding at December 31, 2016. At March 31, 2017, our tangible book value per Common Share was $10.21, compared to $9.99 per Common Share at December 31, 2016.

Figure 25 shows activities that caused the change in outstanding common shares over the past five quarters.

Figure 25. Changes in Common Shares Outstanding

	2017		2016
in thousands	First		Fourth		Third		Second	First
Shares outstanding at beginning of period	1,079,314		1,082,055		842,703		842,290	835,751
Open market repurchases and return of shares under employee compensation plans	(8,673	)	(4,380	)	(5,240	)	—	—
Shares issued under employee compensation plans (net of cancellations)	6,270		1,642		4,857		413	6,539
Series A Preferred Stock exchanged for common shares	20,568		—		—		—	—
Common shares issued to acquire First Niagara	—		(3	)	239,735		—	—
Shares outstanding at end of period	1,097,479		1,079,314		1,082,055		842,703	842,290

As shown above, Common Shares outstanding increased by 18 million shares during the first quarter of 2017. This increase was primarily due to the conversion of the Series A Preferred Stock into Common Shares during the first quarter of 2017 which added approximately 21 million Common Shares outstanding as disclosed above.

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At March 31, 2017, we had 159.2 million treasury shares, compared to 177.4 million treasury shares at December 31, 2016. Going forward we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes.

Information on repurchases of Common Shares by KeyCorp is included in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this report.

Capital adequacy

Capital adequacy is an important indicator of financial stability and performance. All of KeyCorp’s capital ratios remained in excess of regulatory requirements at March 31, 2017. Our capital and liquidity levels are intended to position us to weather an adverse credit cycle while continuing to serve our clients’ needs, as well as to meet the Regulatory Capital Rules described in the “Supervision and regulation” section of Item 2 of this report. Our shareholders’ equity to assets ratio was 11.14% at March 31, 2017, compared to 11.17% at December 31, 2016. Our tangible common equity to tangible assets ratio was 8.51% at March 31, 2017, compared to 8.09% at December 31, 2016.

The capital modifications mandated by the Regulatory Capital Rules, which became effective on January 1, 2015, for KeyCorp, require higher and better-quality capital and introduced a new capital measure, “Common Equity Tier 1.” The Rules phased out

the treatment of certain capital securities and cumulative preferred securities as eligible Tier 1 capital. The phase-out period, which began January 1, 2015, for “standardized approach” banking organizations such as KeyCorp, resulted in our trust preferred securities issued by the KeyCorp capital trusts and acquired from First Niagara, being treated only as Tier 2 capital starting in 2016. The new minimum capital and leverage ratios under the Regulatory Capital Rules, together with the estimated ratios of KeyCorp at March 31, 2017, calculated on a fully phased-in basis, are set forth under the heading “New minimum capital and leverage ratio requirements” in the “Supervision and regulation” section in Item 2 of this report.

As of January 1, 2016, KeyCorp (and its banking subsidiaries) were each required to maintain, on a consolidated basis, a minimum Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. At March 31, 2017, our Tier 1 risk-based capital ratio, total risk-based capital ratio, and Tier 1 leverage ratio were 10.74%, 12.69%, and 9.81%, respectively, compared to 10.89%, 12.85%, and 9.90%, respectively, at December 31, 2016. Information regarding the regulatory capital ratios of KeyCorp’s banking subsidiaries is presented annually, in Note 23 (“Shareholders’ Equity”) beginning on page 198 of our 2016 Form 10-K.

Common Equity Tier 1 is not formally defined by GAAP and is considered to be a non-GAAP financial measure. Figure 6 in the “Highlights of Our Performance” section reconciles Key shareholders’ equity, the GAAP performance measure, to Common Equity Tier 1, the corresponding non-GAAP measure. Beginning with the implementation of the Regulatory Capital Rules, deferred tax assets that arise from net operating loss and tax credit carryforwards are deductible from Common Equity Tier 1 on a phase-in basis. As of March 31, 2017, this balance was $11 million. As of January 1, 2016, KeyCorp (and its banking subsidiaries) were each required to maintain, on a consolidated basis, a minimum Common Equity Tier 1 capital ratio of 4.5%. Our Common Equity Tier 1 capital ratio was 9.91% and 9.54% at March 31, 2017, and December 31, 2016, respectively.

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Figure 26. Capital Components and Risk-Weighted Assets

	dollars in millions	March 31, 2017			December 31, 2016
COMMON EQUITY TIER 1
Key shareholders’ equity (GAAP)		$	14,976		$	15,240
Less:	Preferred Stock (a)	1,009			1,640
	Common Equity Tier 1 capital before adjustments and deductions	13,967			13,600
Less:	Goodwill, net of deferred taxes	2,379			2,405
	Intangible assets, net of deferred taxes	194			155
	Deferred tax assets	11			4
	Net unrealized gains (losses) on available-for-sale securities, net of deferred taxes	(179		)	(185		)
	Accumulated gains (losses) on cash flow hedges, net of deferred taxes	(76		)	(52		)
	Amounts in AOCI attributed to pension and postretirement benefit costs, net of deferred taxes	(335		)	(339		)
	Total Common Equity Tier 1 capital	$	11,973		$	11,612
TIER 1 CAPITAL
Common Equity Tier 1		$	11,973		$	11,612
Additional Tier 1 capital instruments and related surplus		1,009			1,640
Non-qualifying capital instruments subject to phase-out		—			—
Less:	Deductions	3			3
	Total Tier 1 capital	12,979			13,249
TIER 2 CAPITAL
Tier 2 capital instruments and related surplus		1,409			1,450
Allowance for losses on loans and liability for losses on lending-related commitments (b)		943			939
Net unrealized gains on available-for-sale preferred stock classified as an equity security		—			—
Less:	Deductions	—			—
	Total Tier 2 capital	2,352			2,389
	Total risk-based capital	$	15,331		$	15,638
RISK-WEIGHTED ASSETS
Risk-weighted assets on balance sheet		$	94,554		$	94,959
Risk-weighted off-balance sheet exposure		25,416			25,848
Market risk-equivalent assets		882			864
Gross risk-weighted assets		120,852			121,671
Less:	Excess allowance for loan and lease losses	—			—
	Net risk-weighted assets	$	120,852		$	121,671
AVERAGE QUARTERLY TOTAL ASSETS		$	132,260		$	133,795
CAPITAL RATIOS
Tier 1 risk-based capital		10.74		%	10.89		%
Total risk-based capital		12.69			12.85
Leverage (c)		9.81			9.90
Common Equity Tier 1 (d)		9.91			9.54

(a) Net of capital surplus.

(b) The ALLL included in Tier 2 capital is limited by regulation to 1.25% of the institution’s standardized total risk-weighted assets (excluding its standardized market risk-weighted assets). The ALLL includes $23 million and $24 million of allowance classified as “discontinued assets” on the balance sheet at March 31, 2017, and December 31, 2016, respectively.

(c) This ratio is Tier 1 capital divided by average quarterly total assets as defined by the Federal Reserve less: (i) goodwill, (ii) the disallowed intangible and deferred tax assets, and (iii) other deductions from assets for leverage capital purposes.

(d) Non-GAAP measure: see Figure 6 for reconciliation.

Risk Management

Overview

Like all financial services companies, we engage in business activities and assume the related risks. The most significant risks we face are credit, compliance, operational, liquidity, market, reputation, strategic, and model risks. Our risk management activities are focused on ensuring that we properly identify, measure, and manage such risks across the entire enterprise to maintain safety and soundness, and to maximize profitability.

The Board serves in an oversight capacity, ensuring that Key’s risks are managed in a manner that is not only effective and balanced, but also adds value for the shareholders. The Board understands Key’s risk philosophy, approves the risk appetite, inquires about risk practices, reviews the portfolio of risks, compares the actual risks to the risk appetite, and is apprised of significant risks, both actual and emerging, and determines whether management is responding appropriately. The Board challenges management and ensures accountability.

The Board’s Audit Committee assists the Board in oversight of financial statement integrity, regulatory and legal requirements, independent auditors’ qualifications and independence, and the performance of the internal audit function and independent auditors. The Audit Committee meets with management and approves significant policies relating to the risk areas overseen by

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the Audit Committee. The Audit Committee has responsibility over all risk review functions, including internal audit, as well as financial reporting, legal matters, and fraud risk. The Audit Committee also receives reports on enterprise risk. In addition to regularly scheduled bi-monthly meetings, the Audit Committee convenes to discuss the content of our financial disclosures and quarterly earnings releases.

The Board’s Risk Committee assists the Board in oversight of strategies, policies, procedures, and practices relating to the assessment and management of enterprise-wide risk, including credit, market, liquidity, model, operational, compliance, reputation, and strategic risks. The Risk Committee also assists the Board in overseeing risks related to capital adequacy, capital planning, and capital actions. The Risk Committee reviews and provides oversight of management’s activities related to the enterprise-wide risk management framework, which includes review of the ERM Policy, including the Risk Appetite Statement, and management and ERM reports. The Risk Committee also approves any material changes to the charter of the ERM Committee and significant policies relating to risk management.

The Audit and Risk Committees meet jointly, as appropriate, to discuss matters that relate to each committee’s responsibilities. Committee chairpersons routinely meet with management during interim months to plan agendas for upcoming meetings and to discuss emerging trends and events that have transpired since the preceding meeting. All members of the Board receive formal reports designed to keep them abreast of significant developments during the interim months.

Our ERM Committee, chaired by the Chief Executive Officer and comprising other senior level executives, is responsible for managing risk and ensuring that the corporate risk profile is managed in a manner consistent with our risk appetite. The ERM Program encompasses our risk philosophy, policy, framework, and governance structure for the management of risks across the entire company. The ERM Committee reports to the Board’s Risk Committee. Annually, the Board reviews and approves the ERM Policy, as well as the risk appetite, including corporate risk tolerances for major risk categories. We use a risk-adjusted capital framework to manage risks. This framework is approved and managed by the ERM Committee.

Tier 2 Risk Governance Committees support the ERM Committee by identifying early warning events and trends, escalating emerging risks, and discussing forward-looking assessments. Risk Governance Committees include attendees from each of the Three Lines of Defense. The First Line of Defense is the line of business primarily responsible to accept, own, proactively identify, monitor, and manage risk. The Second Line of Defense comprises Risk Management representatives who provide independent, centralized oversight over all risk categories by aggregating, analyzing, and reporting risk information. Risk Review, our internal audit function, provides the Third Line of Defense in its role to provide independent assessment and testing of the effectiveness of, appropriateness of, and adherence to KeyCorp’s risk management policies, practices, and controls. The Chief Risk Officer ensures that relevant risk information is properly integrated into strategic and business decisions, ensures appropriate ownership of risks, provides input into performance and compensation decisions, assesses aggregate enterprise risk, monitors capabilities to manage critical risks, and executes appropriate Board and stakeholder reporting.

Federal banking regulators continue to emphasize with financial institutions the importance of relating capital management strategy to the level of risk at each institution. We believe our internal risk management processes help us achieve and maintain capital levels that are commensurate with our business activities and risks, and conform to regulatory expectations.

Market risk management

Market risk is the risk that movements in market risk factors, including interest rates, foreign exchange rates, equity prices, commodity prices, credit spreads, and volatilities will reduce Key’s income and the value of its portfolios. These factors influence prospective yields, values, or prices associated with the instrument. For example, the value of a fixed-rate bond will decline when market interest rates increase, while the cash flows associated with a variable rate loan will increase when interest rates increase. The holder of a financial instrument is exposed to market risk when either the cash flows or the value of the instrument is tied to such external factors.

We are exposed to market risk both in our trading and nontrading activities, which include asset and liability management activities. Our trading positions are carried at fair value with changes recorded in the income statement. These positions are subject to various market-based risk factors that affect the fair value of the financial instruments in the trading category. Our traditional banking loan and deposit products, as well as long-term debt and certain short-term borrowings are nontrading positions. These positions are generally carried at the principal amount outstanding for assets and the amount owed for liabilities. The nontrading positions are subject to changes in economic value due to varying market conditions, primarily changes in interest rates.

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Trading market risk

Key incurs market risk as a result of trading, investing, and client facilitation activities, principally within our investment banking and capital markets businesses. Key has exposures to a wide range of interest rates, equity prices, foreign exchange rates, credit spreads, and commodity prices, as well as the associated implied volatilities and spreads. Our primary market risk exposures are a result of trading activities in the derivative and fixed income markets, and of maintaining positions in these instruments. We maintain modest trading inventories to facilitate customer flow, make markets in securities, and hedge certain risks. The majority of our positions are traded in active markets.

Management of trading market risks. Market risk management is an integral part of Key’s risk culture. The Risk Committee of our Board provides oversight of trading market risks. The ERM Committee and the Market Risk Committee regularly review and discuss market risk reports prepared by our MRM that contain our market risk exposures and results of monitoring activities. Market risk policies and procedures have been defined and approved by the Market Risk Committee, a Tier 2 Risk Governance Committee, and take into account our tolerance for risk and consideration for the business environment.

The MRM is an independent risk management function that partners with the lines of business to identify, measure, and monitor market risks throughout our company. The MRM is responsible for ensuring transparency of significant market risks, monitoring compliance with established limits, and escalating limit exceptions to appropriate senior management. The various business units and trading desks are responsible for ensuring that market risk exposures are well-managed and prudent. Market risk is monitored through various measures, such as VaR, and through routine stress testing, sensitivity, and scenario analyses. The MRM conducts stress tests for each covered position using historical worst case and standard shock scenarios. VaR, stressed VaR, and other analyses are prepared daily and distributed to appropriate management.

Covered positions. We monitor the market risk of our covered positions, which includes all of our trading positions as well as all foreign exchange and commodity positions, regardless of whether the position is in a trading account. All positions in the trading account are recorded at fair value, and changes in fair value are reflected in our consolidated statements of income. Information regarding our fair value policies, procedures, and methodologies is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” on page 110 of our 2016 Form 10-K and Note 6 (“Fair Value Measurements”) in this report. Instruments that are used to hedge nontrading activities, such as bank-issued debt and loan portfolios, equity positions that are not actively traded, and securities financing activities, do not meet the definition of a covered position. The MRM is responsible for identifying our portfolios as either covered or noncovered. The Covered Position Working Group develops the final list of covered positions, and a summary is provided to the Market Risk Committee.

Our significant portfolios of covered positions are detailed below. We analyze market risk by portfolios of covered positions, and do not separately measure and monitor our portfolios by risk type. The descriptions below incorporate the respective risk types associated with each of these portfolios.

• Fixed income includes those instruments associated with our capital markets business and the trading of securities as a dealer. These instruments may include positions in municipal bonds, bonds backed by the U.S. government, agency and corporate bonds, certain mortgage-backed securities, securities issued by the U.S. Treasury, money markets, and certain CMOs. The activities and instruments within the fixed income portfolio create exposures to interest rate and credit spread risks.

• Interest rate derivatives include interest rate swaps, caps, and floors, which are transacted primarily to accommodate the needs of commercial loan clients. In addition, we enter into interest rate derivatives to offset or mitigate the interest rate risk related to the client positions. The activities within this portfolio create exposures to interest rate risk.

• Credit derivatives generally include credit default swap indices, which are used to manage the credit risk exposure associated with anticipated sales of certain commercial real estate loans. The transactions within the credit derivatives portfolio result in exposure to counterparty credit risk and market risk.

VaR and stressed VaR. VaR is the estimate of the maximum amount of loss on an instrument or portfolio due to adverse market conditions during a given time interval within a stated confidence level. Stressed VaR is used to assess extreme conditions on market risk within our trading portfolios. MRM calculates VaR and stressed VaR on a daily basis, and the results are distributed to appropriate management. VaR and stressed VaR results are also provided to our regulators and utilized in regulatory capital calculations.

We use a historical VaR model to measure the potential adverse effect of changes in interest rates, foreign exchange rates, equity prices, and credit spreads on the fair value of our covered positions. Historical scenarios are customized for specific covered positions, and numerous risk factors are incorporated in the calculation. Additional consideration is given to the risk

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factors to estimate the exposures that contain optionality features, such as options and cancelable provisions. VaR is calculated using daily observations over a one-year time horizon, and approximates a 95% confidence level. Statistically, this means that we would expect to incur losses greater than VaR, on average, five out of 100 trading days, or three to four times each quarter. We also calculate VaR and stressed VaR at a 99% confidence level.

The VaR model is an effective tool in estimating ranges of possible gains and losses on our covered positions. However, there are limitations inherent in the VaR model since it uses historical results over a given time interval to estimate future performance. Historical results may not be indicative of future results, and changes in the market or composition of our portfolios could have a significant impact on the accuracy of the VaR model. We regularly review and enhance the modeling techniques, inputs and assumptions used. Our market risk policy includes the independent validation of our VaR model by Key’s Risk Management Group on an annual basis. The Model Risk Management Committee oversees the Model Validation Program, and results of validations are discussed with the ERM Committee.

Actual losses for the total covered positions did not exceed aggregate daily VaR on any day during the quarters ended March 31, 2017, and March 31, 2016. The MRM backtests our VaR model on a daily basis to evaluate its predictive power. The test compares VaR model results at the 99% confidence level to daily held profit and loss. Results of backtesting are provided to the Market Risk Committee. Backtesting exceptions occur when trading losses exceed VaR. We do not engage in correlation trading, or utilize the internal model approach for measuring default and credit migration risk. Our net VaR approach incorporates diversification, but our VaR calculation does not include the impact of counterparty risk and our own credit spreads on derivatives.

The aggregate VaR at the 99% confidence level for all covered positions was $2 million at March 31, 2017, and $1 million at March 31, 2016. The increase in aggregate VaR was primarily due to the increased exposure in our fixed income and CMBS portfolios. Figure 27 summarizes our VaR at the 99% confidence level for significant portfolios of covered positions for the three months ended March 31, 2017, and March 31, 2016. During these periods, none of our significant portfolios daily trading VaR numbers exceeded their VaR limits or stress VaR limits.

Figure 27. VaR for Significant Portfolios of Covered Positions

	2017								2016
	Three months ended March 31,								Three months ended March 31,
in millions	High		Low		Mean		March 31,		High		Low		Mean		March 31,
Trading account assets:
Fixed income	$	1.4	$	.7	$	1.1	$	1.2	$	.9	$	.4	$	.6	$	.7
Derivatives:
Interest rate	$	.2	.1		$	.1	$	.1	$	.1	—		$	.1	$	.1
Credit	.6		$	.1	.2		.6		.5		$	—	.3		.1

Stressed VaR is calculated using our general VaR results at the 99% confidence level and applying certain assumptions. The aggregate stressed VaR for all covered positions was $4.5 million at March 31, 2017, and $2.4 million at March 31, 2016. Figure 28 summarizes our stressed VaR for significant portfolios of covered positions for the three months ended March 31, 2017, and March 31, 2016, as used for market risk capital charge calculation purposes.

Figure 28. Stressed VaR for Significant Portfolios of Covered Positions

	2017								2016
	Three months ended March 31,								Three months ended March 31,
in millions	High		Low		Mean		March 31,		High		Low		Mean		March 31,
Trading account assets:
Fixed income	$	3.8	$	1.9	$	2.6	$	2.6	$	1.8	$	.8	$	1.4	$	1.4
Derivatives:
Interest rate	$	.3	$	.1	$	.2	$	.2	$	.2	$	.1	$	.1	$	.2
Credit	1.2		.1		.4		1.1		2.6		.1		1.4		.2

Internal capital adequacy assessment. Market risk is a component of our internal capital adequacy assessment. Our risk-weighted assets include a market risk-equivalent asset position, which consists of a VaR component, stressed VaR component, a de minimis exposure amount, and a specific risk add-on, which are added together to arrive at total market risk equivalent assets. Specific risk is the price risk of individual financial instruments, which is not accounted for by changes in broad market risk factors and is measured through a standardized approach. Specific risk calculations are run quarterly by the MRM, and approved by the Chief Market Risk Officer.

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Nontrading market risk

Most of our nontrading market risk is derived from interest rate fluctuations and its impacts on our traditional loan and deposit products, as well as investments, hedging relationships, long-term debt, and certain short-term borrowings. Interest rate risk, which is inherent in the banking industry, is measured by the potential for fluctuations in net interest income and the EVE. Such fluctuations may result from changes in interest rates and differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. We manage the exposure to changes in net interest income and the EVE in accordance with our risk appetite and within Board-approved policy limits.

Interest rate risk positions are influenced by a number of factors including the balance sheet positioning that arises out of customer preferences for loan and deposit products, economic conditions, the competitive environment within our markets, changes in market interest rates that affect client activity, and our hedging, investing, funding, and capital positions. The primary components of interest rate risk exposure consist of reprice risk, basis risk, yield curve risk, and option risk.

• Reprice risk is the exposure to changes in the level of interest rates and occurs when the volume of interest-bearing liabilities and the volume of interest-earning assets they fund (e.g., deposits used to fund loans) do not mature or reprice at the same time.

• Basis risk is the exposure to asymmetrical changes in interest rate indices and occurs when floating-rate assets and floating-rate liabilities reprice at the same time, but in response to different market factors or indices.

• Yield curve risk is the exposure to nonparallel changes in the slope of the yield curve (where the yield curve depicts the relationship between the yield on a particular type of security and its term to maturity) and occurs when interest-bearing liabilities and the interest-earning assets that they fund do not price or reprice to the same term point on the yield curve.

• Option risk is the exposure to a customer or counterparty’s ability to take advantage of the interest rate environment and terminate or reprice one of our assets, liabilities, or off-balance sheet instruments prior to contractual maturity without a penalty. Option risk occurs when exposures to customer and counterparty early withdrawals or prepayments are not mitigated with an offsetting position or appropriate compensation.

The management of nontrading market risk is centralized within Corporate Treasury. The Risk Committee of our Board provides oversight of nontrading market risk. The ERM Committee and the ALCO review reports on the components of interest rate risk described above as well as sensitivity analyses of these exposures. These committees have various responsibilities related to managing nontrading market risk, including recommending, approving, and monitoring strategies that maintain risk positions within approved tolerance ranges. The A/LM policy provides the framework for the oversight and management of interest rate risk and is administered by the ALCO. Internal and external emerging issues are monitored on a daily basis. The MRM, as the second line of defense, provides additional oversight.

Net interest income simulation analysis. The primary tool we use to measure our interest rate risk is simulation analysis. For purposes of this analysis, we estimate our net interest income based on the current and projected composition of our on- and off-balance sheet positions, accounting for recent and anticipated trends in customer activity. The analysis also incorporates assumptions for the current and projected interest rate environments, and balance sheet growth projections based on a most likely macroeconomic view. While simulation modeling assumes that residual risk exposures are managed within the risk appetite and Board approved policy limits, the results also reflect management’s desired interest rate risk positioning. Achieving the current modeled position typically requires purchases of investment securities to replace security cash flows and the execution of new interest rate swaps to replace maturing interest rate swaps. The simulation model estimates the amount of net interest income at risk by simulating the change in net interest income that would occur if interest rates were to gradually increase or decrease over the next 12 months. Our standard rate scenarios encompass a gradual, parallel increase or decrease of 200 basis points, but due to the low interest rate environment, we have modified the standard decrease scenario to a gradual, parallel decrease of 100 basis points over six months with no change over the following six months. After calculating the amount of net interest income at risk to interest rate changes, we compare that amount with the base case of an unchanged interest rate environment.

Figure 29 presents the results of the simulation analysis at March 31, 2017, and March 31, 2016. At March 31, 2017, our simulated impact to changes in interest rates was modestly asset-sensitive. Tolerance levels for risk management require the development of remediation plans to maintain residual risk within tolerance if simulation modeling demonstrates that a gradual, parallel 200 basis point increase or 100 basis point decrease in interest rates over the next 12 months would adversely affect net interest income over the same period by more than 5.5%. In March 2017, the Federal Reserve increased the range for the

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Federal Funds Target Rate, which led to an increase in the magnitude of the declining rate scenario to 100 basis points. As a result of the change, our modeled exposure to declining rates increased. The modeled exposure depends on the relationships of interest rates on our interest earning assets and interest bearing liabilities. As shown in Figure 29, we are operating within these levels as of March 31, 2017.

Figure 29. Simulated Change in Net Interest Income

March 31, 2017
Basis point change assumption (short-term rates)	-100		+200
Tolerance level	-5.50	%	-5.50	%
Interest rate risk assessment	-4.03	%	1.05	%
March 31, 2016
Basis point change assumption (short-term rates)	-50		+200
Tolerance level	-4.00	%	-4.00	%
Interest rate risk assessment	-3.19	%	2.23	%

Simulation analysis produces a sophisticated estimate of interest rate exposure based on judgments related to assumptions input into the model. We tailor certain assumptions to the specific interest rate environment and yield curve shape being modeled, and validate those assumptions on a regular basis. However, actual results may differ from those derived in simulation analysis due to unanticipated changes to the balance sheet composition, customer behavior, product pricing, market interest rates, changes in management’s desired interest rate risk positioning, investment, funding and hedging activities, and repercussions from unanticipated or unknown events.

We also perform regular stress tests and sensitivity analyses on the model inputs that could materially change the resulting risk assessments. Assessments are performed using different shapes of the yield curve, including steepening or flattening of the yield curve, changes in credit spreads, immediate changes in market interest rates, and changes in the relationship of money market interest rates. Assessments are also performed on changes to the following assumptions: loan and deposit balances, the pricing of deposits without contractual maturities, changes in lending spreads, prepayments on loans and securities, investment, funding and hedging activities, and liquidity and capital management strategies.

The results of additional assessments indicate that net interest income could increase or decrease from the base simulation results presented in Figure 29. Net interest income is highly dependent on the timing, magnitude, frequency, and path of interest rate increases and the associated assumptions for deposit repricing relationships, lending spreads, and the balance behavior of transaction accounts. The modeling is sensitive to the volume of fixed-rate assets and liabilities incorporated. The modeling currently assumes approximately $23.5 billion of investment security purchases and swap executions over the next three years. For every immediate reduction in fixed-rate assets of $1 billion, the modeled benefit to rising rates would increase by approximately 30 basis points. The low level of interest rates increases the uncertainty of assumptions for deposit balance behavior and deposit repricing relationships to market interest rates. Our historical deposit repricing betas in the last rising rate cycle ranged between 50% and 60% for interest-bearing deposits, and we continue to make similar assumptions in our modeling, with the modeled betas varying by customer segment and product type. Recent deposit repricing has been lower than our modeled assumptions. In the modeling, if the deposit beta for the first 25 basis point increase in the Federal Funds Target Rate was zero, then returned to the standard modeled betas for the next 175 basis points of rate increases, our modeled asset sensitive benefit would increase by approximately 200 basis points. The sensitivity testing of assumptions supports our confidence that actual results are likely to be within 100 basis points of modeled results.

Our current interest rate risk position could fluctuate to higher or lower levels of risk depending on the competitive environment and client behavior that may affect the actual volume, mix, maturity, and repricing characteristics of loan and deposit flows. Treasury discretionary activities related to funding, investing, and hedging may also change as a result of changes in customer business flows, or changes in management’s desired interest rate risk positioning. As changes occur to both the configuration of the balance sheet and the outlook for the economy, management proactively evaluates hedging opportunities that may change our interest rate risk profile.

We also conduct simulations that measure the effect of changes in market interest rates in the second and third years of a three-year horizon. These simulations are conducted in a manner similar to those based on a 12-month horizon. To capture longer-term exposures, we calculate exposures to changes of the EVE as discussed in the following section.

Economic value of equity modeling. EVE complements net interest income simulation analysis as it estimates risk exposure beyond 12-, 24-, and 36-month horizons. EVE modeling measures the extent to which the economic values of assets, liabilities and off-balance sheet instruments may change in response to fluctuations in interest rates. EVE is calculated by subjecting the balance sheet to an immediate 200 basis point increase or decrease in interest rates, measuring the resulting change in the

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values of assets, liabilities, and off-balance sheet instruments, and comparing those amounts with the base case of the current interest rate environment. Because the calculation of EVE under an immediate 200 basis point decrease in interest rates in the current low rate environment results in certain interest rates declining to zero and a less than 200 basis point decrease in certain yield curve term points, we have modified the standard declining rate scenario to an immediate 100 basis point decrease. This analysis is highly dependent upon assumptions applied to assets and liabilities with non-contractual maturities. Those assumptions are based on historical behaviors, as well as our expectations. We develop remediation plans that would maintain residual risk within tolerance if this analysis indicates that our EVE will decrease by more than 15% in response to an immediate increase or decrease in interest rates. We are operating within these guidelines as of March 31, 2017.

Management of interest rate exposure. We use the results of our various interest rate risk analyses to formulate A/LM strategies to achieve the desired risk profile while managing to our objectives for capital adequacy and liquidity risk exposures. Specifically, we manage interest rate risk positions by purchasing securities, issuing term debt with floating or fixed interest rates, and using derivatives — predominantly in the form of interest rate swaps, which modify the interest rate characteristics of certain assets and liabilities.

Figure 30 shows all swap positions that we hold for A/LM purposes. These positions are used to convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index. For example, fixed-rate debt is converted to a floating rate through a “receive fixed/pay variable” interest rate swap. The volume, maturity and mix of portfolio swaps change frequently as we adjust our broader A/LM objectives and the balance sheet positions to be hedged. For more information about how we use interest rate swaps to manage our risk profile, see Note 8 (“Derivatives and Hedging Activities”).

Figure 30. Portfolio Swaps by Interest Rate Risk Management Strategy

	March 31, 2017
							Weighted-Average					March 31, 2016
dollars in millions	Notional Amount		Fair Value				Maturity (Years)	Receive Rate		Pay Rate		Notional Amount		Fair Value
Receive fixed/pay variable — conventional A/LM (a)	$	16,150	$	(84	)		1.9	1.1	%	.8	%	$	13,530	$	115
Receive fixed/pay variable — conventional debt	8,616		59				3.0	1.6		.9		7,491		303
Pay fixed/receive variable — conventional debt	50		(6		)		11.3	1.0		3.6		50		(10		)
Total portfolio swaps	$	24,816	$	(31	)	(b), (c)	2.3	1.3	%	.9	%	$	21,071	$	408		(b)

(a) Portfolio swaps designated as A/LM are used to manage interest rate risk tied to both assets and liabilities.

(b) Excludes accrued interest of $109 million and $45 million at March 31, 2017, and March 31, 2016, respectively.

(c) Excludes variation margin payments for CME-cleared trades of $58 million at March 31, 2017.

Liquidity risk management

Liquidity risk, which is inherent in the banking industry, is measured by our ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund new business opportunities at a reasonable cost, in a timely manner, and without adverse consequences. Liquidity management involves maintaining sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets and liabilities under both normal and adverse conditions.

Governance structure

We manage liquidity for all of our affiliates on an integrated basis. This approach considers the unique funding sources available to each entity, as well as each entity’s capacity to manage through adverse conditions. The approach also recognizes that adverse market conditions or other events that could negatively affect the availability or cost of liquidity will affect the access of all affiliates to sufficient wholesale funding.

The management of consolidated liquidity risk is centralized within Corporate Treasury. Oversight and governance is provided by the Board, the ERM Committee, the ALCO, and the Chief Risk Officer. The Asset Liability Management Policy provides the framework for the oversight and management of liquidity risk and is administered by the ALCO. The MRM, as the Second Line of Defense, provides additional oversight. Our current liquidity risk management practices are in compliance with the Federal Reserve’s Enhanced Prudential Standards and the OCC’s Heightened Standards for Large Insured National Banks.

These committees regularly review liquidity and funding summaries, liquidity trends, peer comparisons, variance analyses, liquidity projections, hypothetical funding erosion stress tests, and goal tracking reports. The reviews generate a discussion of positions, trends, and directives on liquidity risk and shape a number of our decisions. When liquidity pressure is elevated,

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positions are monitored more closely and reporting is more intensive. To ensure that emerging issues are identified, we also communicate with individuals inside and outside of the company on a daily basis.

Factors affecting liquidity

Our liquidity could be adversely affected by both direct and indirect events. An example of a direct event would be a downgrade in our public credit ratings by a rating agency. Examples of indirect events (events unrelated to us) that could impair our access to liquidity would be an act of terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund or hedge fund. Similarly, market speculation, or rumors about us or the banking industry in general, may adversely affect the cost and availability of normal funding sources.

Our credit ratings at March 31, 2017, are shown in Figure 31. We believe these credit ratings, under normal conditions in the capital markets, would enable KeyCorp or KeyBank to issue fixed income securities to investors.

Figure 31. Credit Ratings

March 31, 2017	Short-Term Borrowings	Long-Term Deposits	Senior Long-Term Debt	Subordinated Long-Term Debt	Capital Securities	Preferred Stock
KEYCORP (THE PARENT COMPANY)
Standard & Poor’s	A-2	N/A	BBB+	BBB	BB+	BB+
Moody’s	P-2	N/A	Baa1	Baa1	Baa2	Baa3
Fitch Ratings, Inc.	F1	N/A	A-	BBB+	BB+	BB
DBRS, Inc.	R-2(high)	N/A	BBB(high)	BBB	BBB	BB(high)
KEYBANK
Standard & Poor’s	A-2	N/A	A-	BBB+	N/A	N/A
Moody’s	P-1	Aa3	A3	Baa1	N/A	N/A
Fitch Ratings, Inc.	F1	A	A-	BBB+	N/A	N/A
DBRS, Inc.	R-1(low)	A(low)	A(low)	BBB(high)	N/A	N/A

Managing liquidity risk

Most of our liquidity risk is derived from our lending activities, which inherently place funds into illiquid assets. Liquidity risk is also derived from our deposit gathering activities and the ability of our customers to withdraw funds that do not have a stated maturity or to withdraw funds before their contractual maturity. The assessments of liquidity risk are measured under the assumption of normal operating conditions as well as under a stressed environment. We manage these exposures in accordance with our risk appetite, and within Board-approved policy limits.

We regularly monitor our liquidity position and funding sources and measure our capacity to obtain funds in a variety of hypothetical scenarios in an effort to maintain an appropriate mix of available and affordable funding. In the normal course of business, we perform a monthly hypothetical funding erosion stress test for both KeyCorp and KeyBank. In a “heightened monitoring mode,” we may conduct the hypothetical funding erosion stress tests more frequently, and use assumptions to reflect the changed market environment. Our testing incorporates estimates for loan and deposit lives based on our historical studies. Erosion stress tests analyze potential liquidity scenarios under various funding constraints and time periods. Ultimately, they determine the periodic effects that major direct and indirect events would have on our access to funding markets and our ability to fund our normal operations. To compensate for the effect of these assumed liquidity pressures, we consider alternative sources of liquidity and maturities over different time periods to project how funding needs would be managed.

We maintain a Contingency Funding Plan that outlines the process for addressing a liquidity crisis. The plan provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities for managing liquidity through a problem period. As part of the plan, we maintain on-balance sheet liquid reserves referred to as our liquid asset portfolio, which consists of high quality liquid assets. During a problem period, that reserve could be used as a source of funding to provide time to develop and execute a longer-term strategy. The liquid asset portfolio at March 31, 2017, totaled $22.2 billion, consisting of $19.6 billion of unpledged securities, $383 million of securities available for secured funding at the FHLB, and $2.2 billion of net balances of federal funds sold and balances in our Federal Reserve account. The liquid asset portfolio can fluctuate due to excess liquidity, heightened risk, or prefunding of expected outflows, such as debt maturities. Additionally, as of March 31, 2017, our unused borrowing capacity secured by loan collateral was $23.5 billion at the Federal Reserve Bank of Cleveland and $6.2 billion at the FHLB. During the first quarter of 2017, Key’s outstanding FHLB of Cincinnati advances were reduced by $1 million due to repayments.

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Final U.S. liquidity coverage ratio

Under the Liquidity Coverage Rules, we are required to calculate the Modified LCR for Key. For the first quarter of 2017, our Modified LCR was above 100%. In the future, we may change the composition of our investment portfolio, increase the size of the overall investment portfolio, and modify product offerings to enhance or optimize our liquidity position.

Additional information about the LCR is included in the “Supervision and regulation” section under the heading “Liquidity requirements” in Item 2 of this report.

Long-term liquidity strategy

Our long-term liquidity strategy is to be predominantly funded by core deposits. However, we may use wholesale funds to sustain an adequate liquid asset portfolio, meet daily cash demands, and allow management flexibility to execute business initiatives. Key’s client-based relationship strategy provides for a strong core deposit base that, in conjunction with intermediate and long-term wholesale funds managed to a diversified maturity structure and investor base, supports our liquidity risk management strategy. We use the loan-to-deposit ratio as a metric to monitor these strategies. Our target loan-to-deposit ratio is 90-100% (at March 31, 2017, our loan-to-deposit ratio was 86%) which we calculate as total loans, loans held for sale, and nonsecuritized discontinued loans, divided by domestic deposits.

Sources of liquidity

Our primary sources of liquidity include customer deposits, wholesale funding, and liquid assets. If the cash flows needed to support operating and investing activities are not satisfied by deposit balances, we rely on wholesale funding or on-balance sheet liquid reserves. Conversely, excess cash generated by operating, investing, and deposit-gathering activities may be used to repay outstanding debt or invest in liquid assets.

Liquidity programs

We have several liquidity programs, which are described in Note 19 (“Long-Term Debt”) beginning on page 191 of our 2016 Form 10-K, that are designed to enable KeyCorp and KeyBank to raise funds in the public and private debt markets. The proceeds from most of these programs can be used for general corporate purposes, including acquisitions. These liquidity programs are reviewed from time to time by the Board and are renewed and replaced as necessary. There are no restrictive financial covenants in any of these programs.

Liquidity for KeyCorp 

The primary source of liquidity for KeyCorp is from subsidiary dividends, primarily from KeyBank. KeyCorp has sufficient liquidity when it can service its debt, support customary corporate operations and activities (including acquisitions), support occasional guarantees of subsidiaries’ obligations in transactions with third parties at a reasonable cost, in a timely manner, and without adverse consequences, and pay dividends to shareholders.

We use a parent cash coverage months metric as the primary measure to assess parent company liquidity. The parent cash coverage months metric measures the months into the future where projected obligations can be met with the current amount of liquidity. KeyCorp generally issues term debt to supplement dividends from KeyBank to manage our liquidity position at or above our targeted levels. The parent company generally maintains cash in an amount sufficient to meet projected debt maturities over at least the next 24 months. At March 31, 2017, KeyCorp held $2.3 billion in cash, which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing debt obligations for the periods prescribed by our risk tolerance.

Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank and other non-bank subsidiaries, supplemented with term debt. Federal banking law limits the amount of capital distributions that a bank can make to its holding company without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several factors, including net profits (as defined by statute) for the two previous calendar years and for the current year, up to the date of dividend declaration. During the first quarter of 2017, KeyBank paid $125 million in dividends to KeyCorp. As of March 31, 2017, KeyBank had regulatory capacity to pay $435 million in dividends to KeyCorp without prior regulatory approval.

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Our liquidity position and recent activity

Over the past quarter, our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, has decreased as a result of a decrease in unpledged securities. The liquid asset portfolio continues to exceed the amount that we estimate would be necessary to manage through an adverse liquidity event by providing sufficient time to develop and execute a longer-term solution.

From time to time, KeyCorp or KeyBank may seek to retire, repurchase, or exchange outstanding debt, capital securities, preferred shares, or Common Shares through cash purchase, privately negotiated transactions or other means. Additional information on repurchases of Common Shares by KeyCorp is included in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this report and in Part II, Item 5. “Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” on page 28 of our 2016 Form 10-K. Such transactions depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, regulatory requirements, and other factors. The amounts involved may be material, individually or collectively.

We generate cash flows from operations and from investing and financing activities. We have approximately $171 million of cash, cash equivalents, and short-term investments in international tax jurisdictions as of March 31, 2017. As we consider alternative long-term strategic and liquidity plans, opportunities to repatriate these amounts would result in approximately $3 million in taxes to be paid. We have included the appropriate amount as a deferred tax liability at March 31, 2017.

The Consolidated Statements of Cash Flows summarize our sources and uses of cash by type of activity for the three-month periods ended March 31, 2017, and March 31, 2016.

Credit risk management

Credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Like other financial services institutions, we make loans, extend credit, purchase securities, and enter into financial derivative contracts, all of which have related credit risk.

Credit policy, approval, and evaluation

We manage credit risk exposure through a multifaceted program. The Credit Risk Committee and the Commercial Credit Policy Committee approve retail and commercial credit policies. Significant policies are reviewed periodically with our Executive Risk Management Committee and the Risk Committee of our Board of Directors on a prescribed schedule. These policies are communicated throughout the organization to foster a consistent approach to granting credit.

Our credit risk management team and individuals within our lines of business to whom credit risk management has delegated authority are responsible for credit approval. Individuals with assigned credit authority are authorized to grant exceptions to credit policies. It is not unusual to make exceptions to established policies when mitigating circumstances dictate, however, a corporate tolerance has been established to keep exceptions at an acceptable level based upon portfolio and economic considerations.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned to commercial loans at the time of origination, verified by the credit risk management team and periodically reevaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected loss rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk within the context of the general economic outlook. Types of exposure, transaction structure and collateral, including credit risk mitigants, affect the expected loss assessment.

Our credit risk management team uses risk models to evaluate consumer loans. These models, known as scorecards, forecast the probability of serious delinquency and default for an applicant. The scorecards are embedded in the application processing system, which allows for real-time scoring and automated decisions for many of our products. We periodically validate the loan grading and scoring processes.

We maintain an active concentration management program to monitor concentration risk in our credit portfolios. For aggregate credit relationships, we employ a sliding scale of exposure, known as hold limits, which is dictated by the type of loan and

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strength of the borrower. Our legal lending limit is approximately $2.1 billion. However, internal hold limits generally restrict the largest exposures to less than 20% of that amount. As of March 31, 2017, we had seven client relationships with loan commitments net of credit default swaps of more than $200 million. The average amount outstanding on these seven individual net obligor commitments was $72 million at March 31, 2017. In general, our philosophy is to maintain a diverse portfolio with regard to credit exposures.

We actively manage the overall loan portfolio in a manner consistent with asset quality objectives and concentration risk tolerances to mitigate excess portfolio credit risk. We utilize credit default swaps on a limited basis to transfer a portion of the credit risk associated with a particular extension of credit to a third party. At March 31, 2017, we used credit default swaps with a notional amount of $191 million to manage the credit risk associated with specific commercial lending obligations. We may also sell credit derivatives — primarily single name credit default swaps — to offset our purchased credit default swap position prior to maturity. At March 31, 2017, we did not have any sold credit default swaps outstanding.

Credit default swaps are recorded on the balance sheet at fair value. Related gains or losses, as well as the premium paid or received for credit protection, are included in the “corporate services income” and “other income” components of noninterest income.

Allowance for loan and lease losses

At March 31, 2017, the ALLL was $870 million, or 1.01% of period-end loans, compared to $858 million, or 1.00%, at December 31, 2016. The allowance includes $39 million that was specifically allocated for impaired loans of $469 million at March 31, 2017, compared to $37 million that was specifically allocated for impaired loans of $501 million at December 31, 2016. For more information about impaired loans, see Note 5 (“Asset Quality”). At March 31, 2017, the ALLL was 151.8% of nonperforming loans, compared to 137.3% at December 31, 2016.

Selected asset quality statistics for each of the past five quarters are presented in Figure 32. The factors that drive these statistics are discussed in the remainder of this section.

Figure 32. Selected Asset Quality Statistics from Continuing Operations

	2017			2016
dollars in millions	First			Fourth			Third			Second			First
Net loan charge-offs	$	58		$	72		$	44		$	43		$	46
Net loan charge-offs to average total loans	.27		%	.34		%	.23		%	.28		%	.31		%
Allowance for loan and lease losses	$	870		$	858		$	865		$	854		$	826
Allowance for credit losses (a)	918			913			918			904			895
Allowance for loan and lease losses to period-end loans	1.01		%	1.00		%	1.01		%	1.38		%	1.37		%
Allowance for credit losses to period-end loans	1.07			1.06			1.07			1.46			1.48
Allowance for loan and lease losses to nonperforming loans (b)	151.8			137.3			119.6			138.0			122.2
Allowance for credit losses to nonperforming loans (b)	160.2			146.1			127.0			146.0			132.4
Nonperforming loans at period end (b)	$	573		$	625		$	723		$	619		$	676
Nonperforming assets at period end (b)	623			676			760			637			692
Nonperforming loans to period-end portfolio loans (b)	.67		%	.73		%	.85		%	1.00		%	1.12		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (b)	.72			.79			.89			1.03			1.14

(a) Includes the ALLL plus the liability for credit losses on lending-related unfunded commitments.

(b) Nonperforming loan balances exclude $812 million, $865 million, $959 million, $11 million, and $11 million of PCI loans at March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively.

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology used is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2016 Form 10-K. Briefly, our allowance applies expected loss rates to existing loans with similar risk characteristics. We exercise judgment to assess any adjustment to the expected loss rates for the impact of factors such as changes in economic conditions, lending policies including underwriting standards, and the level of credit risk associated with specific industries and markets.

For all commercial and consumer loan TDRs, regardless of size, as well as impaired commercial loans with an outstanding balance of $2.5 million or greater, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan. We estimate the extent of the individual impairment for commercial loans and TDRs by comparing the recorded investment of the loan with the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. Secured consumer loan TDRs that are discharged through Chapter 7 bankruptcy and not formally re-affirmed are adjusted to reflect the fair value of the underlying collateral, less costs to sell.

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Other consumer loan TDRs are combined in homogenous pools and assigned a specific allocation based on the estimated present value of future cash flows using the effective interest rate. A specific allowance also may be assigned — even when sources of repayment appear sufficient — if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. The ALLL at March 31, 2017, represents our best estimate of the probable credit losses inherent in the loan portfolio at that date.

As shown in Figure 33, our ALLL from continuing operations increased by $12 million, or 1.4%, from December 31, 2016. Our allowance applies expected loss rates to our existing loans with similar risk characteristics as well as any adjustments to reflect our current assessment of qualitative factors, such as changes in economic conditions, underwriting standards, and concentrations of credit. Our commercial ALLL increased by $11 million, or 1.5%, from December 31, 2016, primarily because of loan growth in certain segments of the commercial loan portfolio as well as credit quality migration. Our consumer ALLL increased from December 31, 2016. Our consumer ALLL increased by $1 million, or .7%, from December 31, 2016, reflecting a provision in excess of net loan charge-offs of $1 million.

Our liability for credit losses on lending-related commitments decreased by $7 million from December 31, 2016, to $48 million at March 31, 2017. When combined with our ALLL, our total allowance for credit losses represented 1.07% of period-end loans at March 31, 2017, compared to 1.06% at December 31, 2016.

Figure 33. Allocation of the Allowance for Loan Lease Losses

	March 31, 2017						December 31, 2016
dollars in millions	Amount		Percent of Allowance to Total Allowance		Percent of Loan Type to Total Loans		Amount		Percent of Allowance to Total Allowance		Percent of Loan Type to Total Loans
Commercial and industrial	$	512	58.9	%	46.6	%	$	508	59.2	%	46.2	%
Commercial real estate:
Commercial mortgage	146		16.8		17.7		144		16.8		17.6
Construction	29		3.3		2.6		22		2.6		2.7
Total commercial real estate loans	175		20.1		20.3		166		19.4		20.3
Commercial lease financing	40		4.6		5.4		42		4.9		5.4
Total commercial loans	727		83.6		72.3		716		83.5		71.9
Real estate — residential mortgage	18		2.1		6.4		17		2.0		6.5
Home equity loans	53		6.1		14.6		54		6.3		14.7
Consumer direct loans	24		2.7		2.0		24		2.8		2.1
Credit cards	38		4.4		1.2		38		4.4		1.3
Consumer indirect loans	10		1.1		3.5		9		1.0		3.5
Total consumer loans	143		16.4		27.7		142		16.5		28.1
Total loans (a)	$	870	100.0	%	100.0	%	$	858	100.0	%	100.0	%

(a) Excludes allocations of the ALLL related to the discontinued operations of the education lending business in the amount of $23 million, and $24 million at March 31, 2017, and December 31, 2016, respectively.

Our provision for credit losses was $63 million for the first quarter of 2017, compared to $89 million for the first quarter of 2016. Compared to the first three months of 2016, oil and gas prices have stabilized, leading to improved credit quality metrics. We continue to reduce our exposure in our higher-risk businesses, including the residential properties portion of our construction loan portfolio, marine/RV financing, and other selected leasing portfolios through the sale of certain loans, payments from borrowers, or net loan charge-offs.

Net loan charge-offs 

Net loan charge-offs for the first quarter of 2017 totaled $58 million, or .27% of average loans, compared to net loan charge-offs of $46 million, or .31%, for the same period last year. Figure 34 shows the trend in our net loan charge-offs by loan type, while the composition of loan charge-offs and recoveries by type of loan is presented in Figure 35.

Over the past 12 months, net loan charge-offs increased $12 million. This increase is attributable to growth in our loan portfolio and lower levels of recoveries coupled with high levels of charge-offs over the same period.

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Figure 34. Net Loan Charge-offs from Continuing Operations ^(a)

	2017			2016
dollars in millions	First			Fourth			Third			Second			First
Commercial and industrial	$	27		$	37		$	15		$	32		$	23
Real estate — Commercial mortgage	—			2			(1		)	(4		)	(1		)
Real estate — Construction	(1		)	—			8			—			(1		)
Commercial lease financing	5			—			5			1			3
Total commercial loans	31			39			27			29			24
Real estate — Residential mortgage	(4		)	2			—			1			—
Home equity loans	5			4			2			3			7
Consumer direct loans	9			8			5			4			5
Credit cards	10			9			8			7			7
Consumer indirect loans	7			10			2			(1		)	3
Total consumer loans	27			33			17			14			22
Total net loan charge-offs	$	58		$	72		$	44		$	43		$	46
Net loan charge-offs to average loans	.27		%	.34		%	.23		%	.28		%	.31		%
Net loan charge-offs from discontinued operations — education lending business	$	4		$	4		$	3		$	4		$	6

(a) Credit amounts indicate that recoveries exceeded charge-offs.

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Figure 35. Summary of Loan and Lease Loss Experience from Continuing Operations

	Three months ended March 31,
dollars in millions	2017			2016
Average loans outstanding	$	86,133		$	60,156
Allowance for loan and lease losses at beginning of period	$	858		$	796
Loans charged off:
Commercial and industrial	32			26
Real estate — commercial mortgage	—			1
Real estate — construction	—			—
Total commercial real estate loans (a)	—			1
Commercial lease financing	7			3
Total commercial loans (b)	39			30
Real estate — residential mortgage	(2		)	2
Home equity loans	8			10
Consumer direct loans	10			6
Credit cards	11			8
Consumer indirect loans	11			4
Total consumer loans	38			30
Total loans charged off	77			60
Recoveries:
Commercial and industrial	5			3
Real estate — commercial mortgage	—			2
Real estate — construction	1			1
Total commercial real estate loans (a)	1			3
Commercial lease financing	2			—
Total commercial loans (b)	8			6
Real estate — residential mortgage	2			2
Home equity loans	3			3
Consumer direct loans	1			1
Credit cards	1			1
Consumer indirect loans	4			1
Total consumer loans	11			8
Total recoveries	19			14
Net loan charge-offs	(58		)	(46		)
Provision (credit) for loan and lease losses	70			76
Allowance for loan and lease losses at end of period	$	870		$	826
Liability for credit losses on lending-related commitments at beginning of period	$	55		$	56
Provision (credit) for losses on lending-related commitments	(7		)	13
Liability for credit losses on lending-related commitments at end of period (c)	$	48		$	69
Total allowance for credit losses at end of period	$	918		$	895
Net loan charge-offs to average total loans	.27		%	.31		%
Allowance for loan and lease losses to period-end loans	1.01			1.37
Allowance for credit losses to period-end loans	1.07			1.48
Allowance for loan and lease losses to nonperforming loans	151.8			122.2
Allowance for credit losses to nonperforming loans	160.2			132.4
Discontinued operations — education lending business:
Loans charged off	$	6		$	9
Recoveries	2			3
Net loan charge-offs	$	(4	)	$	(6	)

(a) See Figure 18 entitled “Commercial Real Estate Loans” and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.

(b) See Figure 17 entitled “Commercial Loans by Industry” and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio.

(c) Included in “accrued expense and other liabilities” on the balance sheet.

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Nonperforming assets

Figure 36 shows the composition of our nonperforming assets. These assets totaled $623 million at March 31, 2017, and represented .72% of period-end portfolio loans, OREO, and other nonperforming assets, compared to $676 million, or .79%, at December 31, 2016. See Note 1 (“Summary of Significant Accounting Policies”) under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” beginning on page 108 of our 2016 Form 10-K for a summary of our nonaccrual and charge-off policies.

Figure 36. Summary of Nonperforming Assets and Past Due Loans from Continuing Operations

dollars in millions	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Commercial and industrial	$	258		$	297		$	335		$	321		$	380
Real estate — commercial mortgage	32			26			32			14			16
Real estate — construction	2			3			17			25			12
Total commercial real estate loans (a)	34			29			49			39			28
Commercial lease financing	5			8			13			10			11
Total commercial loans (b)	297			334			397			370			419
Real estate — residential mortgage	54			56			72			54			59
Home equity loans	207			223			225			189			191
Consumer direct loans	3			6			2			1			1
Credit cards	3			2			3			2			2
Consumer indirect loans	9			4			24			3			4
Total consumer loans	276			291			326			249			257
Total nonperforming loans (c)	573			625			723			619			676
OREO	49			51			35			15			14
Other nonperforming assets	1			—			2			3			2
Total nonperforming assets (c)	$	623		$	676		$	760		$	637		$	692
Accruing loans past due 90 days or more	$	79		$	87		$	49		$	70		$	70
Accruing loans past due 30 through 89 days	312			404			317			203			237
Restructured loans — accruing and nonaccruing (d)	302			280			304			277			283
Restructured loans included in nonperforming loans (d)	161			141			149			133			151
Nonperforming assets from discontinued operations — education lending business	4			5			5			5			6
Nonperforming loans to period-end portfolio loans (c)	.67		%	.73		%	.85		%	1.00		%	1.12		%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets (c)	.72			.79			.89			1.03			1.14

(a) See Figure 18 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate loan portfolio.

(b) See Figure 17 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial loan portfolio.

(c) Nonperforming loan balances exclude $812 million, $865 million, $959 million, $11 million, and $11 million of PCI loans at March 31, 2017, December 31, 2016, September, 30 2016, June 30, 2016, and March 31, 2016, respectively.

(d) Restructured loans (i.e., TDRs) 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.

As shown in Figure 36, nonperforming assets at March 31, 2017, decreased $53 million from December 31, 2016. This decrease was reflected in both our commercial and consumer loan portfolios. 

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Figure 37 shows the types of activity that caused the change in our nonperforming loan balance during each of the last five quarters.

Figure 37. Summary of Changes in Nonperforming Loans from Continuing Operations

	2017			2016
in millions	First			Fourth			Third			Second			First
Balance at beginning of period	$	625		$	723		$	619		$	676		$	387
Loans placed on nonaccrual status	218			170			78			124			406
Nonperforming loans acquired from First Niagara	—			(31		)	150			—			—
Charge-offs	(77		)	(81		)	(53		)	(64		)	(60		)
Loans sold	(8		)	(9		)	—			—			(11		)
Payments	(59		)	(30		)	(32		)	(75		)	(8		)
Transfers to OREO	(11		)	(21		)	(5		)	(6		)	(4		)
Transfers to other nonperforming assets	—			—			—			—			—
Loans returned to accrual status	(115		)	(96		)	(34		)	(36		)	(34		)
Balance at end of period (a)	$	573		$	625		$	723		$	619		$	676

(a) Nonperforming loan balances exclude $812 million, $865 million, $959 million, $11 million, and $11 million of PCI loans at March 31, 2017, December 31, 2016, September, 30 2016, June 30, 2016, and March 31, 2016, respectively.

Figure 38 shows the factors that contributed to the change in our OREO during each of the last five quarters.

Figure 38. Summary of Changes in Other Real Estate Owned, Net of Allowance, from Continuing Operations

	2017			2016
in millions	First			Fourth			Third			Second			First
Balance at beginning of period	$	51		$	35		$	15		$	14		$	14
Properties acquired — First Niagara	—			—			19			—			—
Properties acquired — nonperforming loans	11			21			5			6			4
Valuation adjustments	(2		)	(2		)	(2		)	(2		)	(1		)
Properties sold	(11		)	(3		)	(2		)	(3		)	(3		)
Balance at end of period	$	49		$	51		$	35		$	15		$	14

Operational and compliance risk management

Like all businesses, we are subject to operational risk, which is the risk of loss resulting from human error or malfeasance, inadequate or failed internal processes and systems, and external events. These events include, among other things, threats to our cybersecurity, as we are reliant upon information systems and the Internet to conduct our business activities.

Operational risk also encompasses compliance risk, which is the risk of loss from violations of, or noncompliance with, laws, rules and regulations, prescribed practices, and ethical standards. Under the Dodd-Frank Act, large financial companies like Key are subject to heightened prudential standards and regulation. This heightened level of regulation has increased our operational risk. Resulting operational risk losses and/or additional regulatory compliance costs could take the form of explicit charges, increased operational costs, harm to our reputation, or foregone opportunities.

We seek to mitigate operational risk through identification and measurement of risk, alignment of business strategies with risk appetite and tolerance, and a system of internal controls and reporting. We continuously strive to strengthen our system of internal controls to improve the oversight of our operational risk and to ensure compliance with laws, rules, and regulations. For example, an operational event database tracks the amounts and sources of operational risk and losses. This tracking mechanism helps to identify weaknesses and to highlight the need to take corrective action. We also rely upon software programs designed to assist in assessing operational risk and monitoring our control processes. This technology has enhanced the reporting of the effectiveness of our controls to senior management and the Board.

The Operational Risk Management Program provides the framework for the structure, governance, roles, and responsibilities, as well as the content, to manage operational risk for Key. The Compliance Risk Committee serves the same function in managing compliance risk for Key. Primary responsibility for managing and monitoring internal control mechanisms lies with the managers of our various lines of business. The Operational Risk Committee and Compliance Risk Committee are senior management committees that oversee our level of operational and compliance risk and direct and support our operational and compliance infrastructure and related activities. These committees and the Operational Risk Management and Compliance functions are an integral part of our ERM Program. Our Risk Review function regularly assesses the overall effectiveness of our Operational Risk Management and Compliance Programs and our system of internal controls. Risk Review reports the

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results of reviews on internal controls and systems to senior management and the Risk and Audit Committees and independently supports the Risk Committee’s oversight of these controls.

Cybersecurity

We maintain comprehensive Cyber Incident Response Plans, and we devote significant time and resources to maintaining and regularly updating our technology systems and processes to protect the security of our computer systems, software, networks, and other technology assets against attempts by third parties to obtain unauthorized access to confidential information, destroy data, disrupt or degrade service, sabotage systems, or cause other damage. We and many other U.S. financial institutions have experienced distributed denial-of-service attacks from technologically sophisticated third parties. These attacks are intended to disrupt or disable consumer online banking services and prevent banking transactions. We also periodically experience other attempts to breach the security of our systems and data. These cyberattacks have not, to date, resulted in any material disruption of our operations or material harm to our customers, and have not had a material adverse effect on our results of operations.

Cyberattack risks may also occur with our third-party technology service providers, and may interfere with their ability to fulfill their contractual obligations to us, with attendant potential for financial loss or liability that could adversely affect our financial condition or results of operations. Recent high-profile cyberattacks have targeted retailers and other businesses for the purpose of acquiring the confidential information (including personal, financial, and credit card information) of customers, some of whom are customers of ours. We may incur expenses related to the investigation of such attacks or related to the protection of our customers from identity theft as a result of such attacks. Risks and exposures related to cyberattacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking, and other technology-based products and services by us and our clients.

Critical Accounting Policies and Estimates

Our business is dynamic and complex. Consequently, we must exercise judgment in choosing and applying accounting policies and methodologies. These choices are critical – not only are they necessary to comply with GAAP, they also reflect our view of the appropriate way to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Significant Accounting Policies”) beginning on page 106 of our 2016 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance.

In our opinion, some accounting policies are more likely than others to have a critical effect on our financial results and to expose those results to potentially greater volatility. These policies apply to areas of relatively greater business importance, or require us to exercise judgment and to make assumptions and estimates that affect amounts reported in the financial statements. Because these assumptions and estimates are based on current circumstances, they may prove to be inaccurate, or we may find it necessary to change them.

We rely heavily on the use of judgment, assumptions, and estimates to make a number of core decisions, including accounting for the ALLL; contingent liabilities, guarantees and income taxes; derivatives and related hedging activities; and assets and liabilities that involve valuation methodologies. In addition, we may employ outside valuation experts to assist us in determining fair values of certain assets and liabilities. A brief discussion of each of these areas appears on pages 92 through 95 of our 2016 Form 10-K.

At March 31, 2017, $20.2 billion, or 15%, of our total assets were measured at fair value on a recurring basis. Approximately 99% of these assets, before netting adjustments, were classified as Level 1 or Level 2 within the fair value hierarchy. At March 31, 2017, $1.2 billion, or 1%, of our total liabilities were measured at fair value on a recurring basis. All of these liabilities were classified as Level 1 or Level 2.

At March 31, 2017, $18 million, or less than 1% of our total assets were measured at fair value on a nonrecurring basis. All of these assets were classified as Level 3. At March 31, 2017, there were no liabilities measured at fair value on a nonrecurring basis.

During the first three months of 2017, we did not significantly alter the manner in which we applied our critical accounting policies or developed related assumptions and estimates.

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European Sovereign and Nonsovereign Debt Exposures

Our total European sovereign and Nonsovereign debt exposure is presented in Figure 39.

Figure 39. European Sovereign and Nonsovereign Debt Exposures

March 31, 2017	Short-and Long- Term Commercial Total (a)		Foreign Exchange and Derivatives with Collateral (b)			Net Exposure
in millions
France:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		$	(1	)	$	(1	)
Nonsovereign non-financial institutions	$	9	—			9
Total	9		(1		)	8
Germany:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		—			—
Nonsovereign non-financial institutions	179		—			179
Total	179		—			179
Italy:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		—			—
Nonsovereign non-financial institutions	16		—			16
Total	16		—			16
Netherlands:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		—			—
Nonsovereign non-financial institutions	6		—			6
Total	6		—			6
Spain:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		—			—
Nonsovereign non-financial institutions	8		—			8
Total	8		—			8
Switzerland:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		(2		)	(2		)
Nonsovereign non-financial institutions	59		—			59
Total	59		(2		)	57
United Kingdom:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		189			189
Nonsovereign non-financial institutions	65		—			65
Total	65		189			254
Other Europe: (c)
Sovereigns	—		—			—
Nonsovereign financial institutions	—		—			—
Nonsovereign non-financial institutions	62		—			62
Total	62		—			62
Total Europe:
Sovereigns	—		—			—
Nonsovereign financial institutions	—		186			186
Nonsovereign non-financial institutions	404		—			404
Total	$	404	$	186		$	590

(a) Represents our outstanding leases.

(b) Represents contracts to hedge our balance sheet asset and liability needs, and to accommodate our clients’ trading and/or hedging needs. Our derivative mark-to-market exposures are calculated and reported on a daily basis. These exposures are largely covered by cash or highly marketable securities collateral with daily collateral calls.

(c) Other Europe consists of the following countries: Austria, Belarus, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Finland, Greece, Hungary, Iceland, Ireland, Lithuania, Luxembourg, Malta, Norway, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Sweden, and Ukraine. 100% of our current exposure in Other Europe is in Belgium, Finland, and Sweden.

Our credit risk exposure is largely concentrated in developed countries with emerging market exposure essentially limited to commercial facilities; these exposures are actively monitored by management. We do not have at-risk exposures in the rest of the world.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

The information presented in the “Market risk management” section of the Management’s Discussion & Analysis of Financial Condition & Results of Operations is incorporated herein by reference.

Item 4. Controls and Procedures

As of the end of the period covered by this report, KeyCorp carried out an evaluation, under the supervision and with the participation of KeyCorp’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of KeyCorp’s disclosure controls and procedures (as defined in Rule 13a-15(e) under

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the Securities Exchange Act of 1934 (the “Exchange Act”), to ensure that information required to be disclosed by KeyCorp in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to KeyCorp’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Based upon that evaluation, KeyCorp’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective, in all material respects, as of the end of the period covered by this report.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information presented in the Legal Proceedings section of Note 16 (“Contingent Liabilities and Guarantees”) of the Notes to Consolidated Financial Statements (Unaudited) is incorporated herein by reference.

On at least a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we have not accrued legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Item 1A. Risk Factors

For a discussion of certain risk factors affecting us, see the section titled “Supervision and Regulation” in Part I, Item 1. Business, on pages 8-18 of our 2016 Form 10-K; Part I, Item 1A. Risk Factors, on pages 18-27 of our 2016 Form 10-K; the section titled “Supervision and regulation” in this Form 10-Q; and our disclosure regarding forward-looking statements in this Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

From time to time, KeyCorp or its principal subsidiary, KeyBank, may seek to retire, repurchase, or exchange outstanding debt of KeyCorp or KeyBank, and capital securities or preferred stock of KeyCorp, through cash purchase, privately negotiated transactions, or otherwise. Such transactions, if any, depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, and other factors. The amounts involved may be material.

In April 2016, we submitted to the Federal Reserve and provided to the OCC our 2016 capital plan under the annual CCAR process. On June 29, 2016, the Federal Reserve announced that it did not object to our 2016 capital plan. Share repurchases of up to $350 million were included in the 2016 capital plan, which is effective through the second quarter of 2017. We completed $160 million of Common Share repurchases, including $107 million of Common Share repurchases in the open market and $53 million of Common Share repurchases related to employee equity compensation programs in the first quarter of 2017 under this authorization. The following table summarizes our repurchases of our common shares for the three months ended March 31, 2017.

Calendar month	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased as part of publicly announced plans or programs (b)
January	2,093,363	$	18.10	1,963,820	16,381,019
February	6,534,315	18.53		3,880,430	9,232,758
March	45,469	20.37		—	9,694,757
Total	8,673,147	$	18.43	5,844,250

(a) Includes common shares deemed surrendered by employees in connection with our stock compensation and benefit plans to satisfy tax obligations.

(b) Calculated using the remaining general repurchase amount divided by the closing price of KeyCorp common shares as follows: on January 31, 2017, at $17.97; on February 28, 2017, at $18.77; and on March 31, 2017, at $17.78.

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Item 6. Exhibits

12	Computation of Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
15	Acknowledgment of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101	The following materials from KeyCorp’s Form 10-Q Report for the quarterly period ended March 31, 2017, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income; (iii) the Consolidated Statements of Changes in Equity; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements.

*  Furnished herewith.

Information Available on Website

KeyCorp makes available free of charge on its website, www.key.com, its 2016 Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as soon as reasonably practicable after KeyCorp electronically files such material with, or furnishes it to, the SEC. We also make available a summary of filings made with the SEC of statements of beneficial ownership of our equity securities filed by our directors and officers under Section 16 of the Exchange Act. The “Regulatory Disclosures and Filings” tab of the investor relations section of our website includes public disclosures concerning our annual and mid-year stress-testing activities under the Dodd-Frank Act. Information contained on or accessible through our website or any other website referenced in this report is not part of this report.

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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, thereunto duly authorized, on the date indicated.

	KEYCORP
	(Registrant)
Date: May 5, 2017	/s/ Douglas M. Schosser
	By:  Douglas M. Schosser
	Chief Accounting Officer (Principal Accounting Officer)

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EX-12

EXHIBIT 12

KEYCORP

COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO

COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

(dollars in millions)

(unaudited)

	Three months ended March 31,				Year ended December 31,
	2017		2016		2016		2015		2014			2013		2012
Computation of Earnings
Net income (loss) attributable to Key	$	324	$	188	$	791	$	916	$	900		$	910	$	858
Add: Provision for income taxes	94		56		179		303		326			271		231
Less: Income (loss) from discontinued operations, net of taxes	—		1		1		1		(39		)	40		23
Income (loss) before income taxes and cumulative effect of accounting change	418		243		969		1,218		1,265			1,141		1,066
Fixed charges, excluding interest on deposits	79		52		246		185		160			154		200
Total earnings for computation, excluding interest on deposits	497		295		1,215		1,403		1,425			1,295		1,266
Interest on deposits	58		31		171		105		117			158		257
Total earnings for computation, including interest on deposits	$	555	$	326	$	1,386	$	1,508	$	1,542		$	1,453	$	1,523
Computation of Fixed Charges
Net rental expense	$	34	$	26	$	110	$	104	$	104		$	111	$	109
Portion of net rental expense deemed representative of interest	$	5	$	4	$	17	$	16	$	16		$	17	$	16
Interest on short-term borrowed funds	6		2		11		9		11			10		11
Interest on long-term debt	68		46		218		160		133			127		173
Total fixed charges, excluding interest on deposits	79		52		246		185		160			154		200
Interest on deposits	58		31		171		105		117			158		257
Total fixed charges, including interest on deposits	$	137	$	83	$	417	$	290	$	277		$	312	$	457
Combined Fixed Charges and Preferred Stock Dividends
Preferred stock dividend requirement on a pre-tax basis	$	28	$	5	$	37	$	23	$	22		$	23	$	22
Total fixed charges, excluding interest on deposits	79		52		246		185		160			154		200
Combined fixed charges and preferred stock dividends, excluding interest on deposits	107		57		283		208		182			177		222
Interest on deposits	58		31		171		105		117			158		257
Combined fixed charges and preferred stock dividends, including interest on deposits	$	165	$	88	$	454	$	313	$	299		$	335	$	479
Ratio of Earnings to Fixed Charges
Excluding deposit interest	6.29		5.67		4.94		7.58		8.91			8.41		6.33
Including deposit interest	4.05		3.93		3.32		5.20		5.57			4.66		3.33
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Excluding deposit interest	4.64		5.18		4.29		6.75		7.83			7.32		5.70
Including deposit interest	3.36		3.70		3.05		4.82		5.16			4.34		3.18

EX-15

Exhibit 15

ACKNOWLEDGMENT OF ERNST & YOUNG LLP,

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

May 5, 2017

The Board of Directors and Shareholders of KeyCorp

We are aware of the incorporation by reference in the following Registration Statements (including all amendments thereto) of KeyCorp:

Form S-3 No. 333-55959        

Form S-3 No. 333-59175        

Form S-3 No. 333-64601        

Form S-3 No. 333-76619        

Form S-3 No. 333-151608        

Form S-3 No. 333-174865        

Form S-3 No. 333-196641        

Form S-4 No. 333-146456        

Form S-8 No. 333-49609        

Form S-8 No. 333-70669        

Form S-8 No. 333-70703        

Form S-8 No. 333-70775        

Form S-8 No. 333-72189        

Form S-8 No. 333-92881        

Form S-8 No. 333-45320        

Form S-8 No. 333-45322        

Form S-8 No. 333-99493        

Form S-8 No. 333-107074        

Form S-8 No. 333-107075        

Form S-8 No. 333-107076        

Form S-8 No. 333-109273        

Form S-8 No. 333-112225        

Form S-8 No. 333-116120        

Form S-8 No. 333-167093        

Form S-8 No. 333-188703

Form S-8 No. 333-208272

of our review report dated May 5, 2017 relating to the unaudited consolidated interim financial statements of KeyCorp that are included in its Form 10-Q for the quarter ended March 31, 2017.

Ernst & Young

Cleveland, Ohio

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Beth E. Mooney, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KeyCorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2017
	Beth E. Mooney
	Chairman, Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Donald R. Kimble, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KeyCorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2017
	Donald R. Kimble
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2017
	Beth E. Mooney
	Chairman, Chief Executive Officer and President

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2017
	Donald R. Kimble
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 03, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	KEYCORP /NEW/
Trading Symbol	KEY
Entity Central Index Key	0000091576
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		1,096,107,344

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 549	$ 677
Short-term investments	2,525	2,775
Trading account assets	921	867
Securities available for sale	18,431	20,212
Held-to-maturity securities (fair value: $9,954 and $10,007)	10,186	10,232
Other investments	689	738
Loans, net of unearned income	86,125	86,038
Less: Allowance for loan and lease losses	(870)	(858)
Net loans	85,255	85,180
Loans held for sale	1,384	1,104
Premises and equipment	935	978
Operating lease assets	563	540
Goodwill	2,427	2,446
Other intangible assets	362	384
Corporate-owned life insurance	4,087	4,068
Derivative assets	578	803
Accrued income and other assets	4,064	3,864
Discontinued assets (including $3 and $3 of portfolio loans at fair value, see Note 12)	1,520	1,585
Total assets	134,476	136,453
Deposits in domestic offices:
NOW and money market deposit accounts	55,095	54,590
Savings deposits	6,306	6,491
Certificates of deposit ($100,000 or more)	5,859	5,483
Other time deposits	4,694	4,698
Total interest-bearing deposits	71,954	71,262
Noninterest-bearing deposits	32,028	32,825
Total deposits	103,982	104,087
Federal funds purchased and securities sold under repurchase agreements	442	1,502
Bank notes and other short-term borrowings	943	808
Derivative liabilities	255	636
Accrued expense and other liabilities	1,552	1,796
Long-term debt	12,324	12,384
Total liabilities	119,498	121,213
EQUITY
Preferred stock	1,025	1,665
Common shares, $1 par value; authorized 1,400,000,000 shares; issued 1,256,702,081, and 1,256,702,081 shares	1,257	1,257
Capital surplus	6,287	6,385
Retained earnings	9,584	9,378
Treasury stock, at cost (159,223,419 and 177,388,429 shares)	(2,623)	(2,904)
Accumulated other comprehensive income (loss)	(554)	(541)
Key shareholders’ equity	14,976	15,240
Noncontrolling interests	2	0
Total equity	14,978	15,240
Total liabilities and equity	$ 134,476	$ 136,453

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Loans held for sale	$ 1,384	$ 1,104
Held-to-maturity securities, fair value	9,954	10,007
Unearned income on loans	783	826
Loan securitization trust VIEs	3	3
Aggregate amount of certificates of deposit, denominations	$ 100,000	$ 100,000
Common shares, par value (in usd per share)	$ 1	$ 1
Common shares, shares authorized (in shares)	1,400,000,000	1,400,000,000
Common shares, shares issued (in shares)	1,256,702,081	1,256,702,081
Treasury stock, shares (in shares)	159,223,419	177,388,429
Residential Mortgage [Member]
Loans held for sale	$ 62	$ 62

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Millions		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
INTEREST INCOME
Loans		$ 877	$ 562
Loans held for sale		13	8
Securities available for sale		95	75
Held-to-maturity securities		51	24
Trading account assets		7	7
Short-term investments		3	4
Other investments		4	3
Total interest income		1,050	683
INTEREST EXPENSE
Deposits		58	31
Federal funds purchased and securities sold under repurchase agreements		1	0
Bank notes and other short-term borrowings		5	2
Long-term debt		68	46
Total interest expense		132	79
NET INTEREST INCOME		918	604
Provision for credit losses		63	89
Net interest income after provision for credit losses		855	515
NONINTEREST INCOME
Trust and investment services income		135	109
Investment banking and debt placement fees		127	71
Service charges on deposit accounts		87	65
Operating lease income and other leasing gains		23	17
Corporate services income		54	50
Cards and payments income		65	46
Corporate-owned life insurance income		30	28
Consumer mortgage income		6	2
Mortgage servicing fees		18	12
Net gains (losses) from principal investing		1	0
Other income	[1]	31	31
Total noninterest income		577	431
NONINTEREST EXPENSE
Personnel		556	404
Net occupancy		87	61
Computer processing		60	43
Business services and professional fees		46	41
Equipment		27	21
Operating lease expense		19	13
Marketing		21	12
FDIC assessment		20	9
Intangible asset amortization		22	8
OREO expense, net		2	1
Other expense		153	90
Total noninterest expense		1,013	703
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		419	243
Income taxes		94	56
INCOME (LOSS) FROM CONTINUING OPERATIONS		325	187
Income (loss) from discontinued operations, net of taxes $0 and $0 (see Note 12)		0	1
NET INCOME (LOSS)		325	188
Less: Net income (loss) attributable to noncontrolling interests		1	0
NET INCOME (LOSS) ATTRIBUTABLE TO KEY		324	188
Income (loss) from continuing operations attributable to Key common shareholders		296	182
Net income (loss) attributable to Key common shareholders		$ 296	$ 183
Per common share:
Income (loss) from continuing operations attributable to Key common shareholders (in usd per share)		$ 0.28	$ 0.22
Income (loss) from discontinued operations, net of taxes (in usd per share)		0.00	0.00
Net income (loss) attributable to Key common shareholders (in usd per share)	[2]	0.28	0.22
Per common share — assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders (in usd per share)		0.27	0.22
Income (loss) from discontinued operations, net of taxes (in usd per share)		0.00	0.00
Net income (loss) attributable to Key common shareholders (in usd per share)	[2]	0.27	0.22
Cash dividends declared per common share (in usd per share)		$ 0.085	$ 0.075
Weighted-average common shares outstanding (in shares)		1,068,609	827,381
Effect of convertible preferred stock (in shares)		0	0
Effect of common share options and other stock awards (in shares)		17,931	7,679
Weighted-average common shares and potential common shares outstanding (in shares)	[3]	1,086,540	835,060

[1] For the three months ended March 31, 2017, net securities gains totaled $1 million. For the three months ended March 31, 2016, net securities gains (losses) totaled less than $1 million. For the three months ended March 31, 2017, and March 31, 2016, we did not have any impairment losses related to securities.

[2] EPS may not foot due to rounding.

[3] Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.

XML

Consolidated Statements of Income (Parenthetical) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Net tax effect on income (loss) from discontinued operations	$ 0	$ 0
Net securities gains (losses) (less than for 2015)	1,000,000	1,000,000
Impaired losses related to securities	$ 0	$ 0

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 325	$ 188
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale, net of income taxes of $4 and $76	6	128
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($15) and $34	(24)	58
Foreign currency translation adjustments, net of income taxes of $1 and $3	1	5
Net pension and postretirement benefit costs, net of income taxes of $2 and $4	4	1
Total other comprehensive income (loss), net of tax	(13)	192
Comprehensive income (loss)	312	380
Less: Comprehensive income attributable to noncontrolling interests	1	0
Comprehensive income (loss) attributable to Key	$ 311	$ 380

XML

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
Income taxes effect on net unrealized (losses) gains on securities available for sale	$ 4	$ 76
Income taxes effect on net unrealized gains (losses) on derivative financial instruments	(15)	34
Income taxes effect on foreign currency translation adjustments	1	3
Income taxes effect on net pension and postretirement benefit costs	$ 2	$ 4

XML

Consolidated Statements of Changes in Equity - USD ($) $ in Millions	Total	Series C Preferred Stock [Member]	Series D Preferred Stock [Member]	Series E Preferred Stock [Member]	Preferred Stock [Member]	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Retained Earnings [Member] Series A Preferred Stock [Member]	Retained Earnings [Member] Series C Preferred Stock [Member]	Retained Earnings [Member] Series D Preferred Stock [Member]	Retained Earnings [Member] Series E Preferred Stock [Member]	Treasury Stock, at Cost [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Noncontrolling Interests [Member]
Beginning Balance, Preferred Shares at Dec. 31, 2015					2,900,000
Beginning Balance, Common Shares at Dec. 31, 2015						835,751,000
Beginning Balance at Dec. 31, 2015					$ 290	$ 1,017	$ 3,922	$ 8,922					$ (3,000)	$ (405)	$ 13
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ 188							188
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes	128													128
Net unrealized gains (losses) on derivative financial instruments, net of income taxes	58													58
Foreign currency translation adjustments, net of income taxes	5													5
Net pension and postretirement benefit costs, net of income taxes	1													1
Deferred compensation							(6)
Cash dividends declared on common shares								(63)
Cash dividends declared on Noncumulative Series A Preferred Stock									$ (5)
Redemption of Series C Preferred Stock	$ 0
Common shares reissued (returned) for stock options and other employee benefit plans, shares						6,539,000
Common shares reissued (returned) for stock options and other employee benefit plans							(98)						112
Net contribution from (distribution to) noncontrolling interests															(8)
Ending Balance, Preferred Shares at Mar. 31, 2016					2,900,000
Ending Balance, Common Shares at Mar. 31, 2016						842,290,000
Ending Balance at Mar. 31, 2016					$ 290	$ 1,017	3,818	9,042					(2,888)	(213)	5
Beginning Balance, Preferred Shares at Dec. 31, 2015					2,900,000
Beginning Balance, Common Shares at Dec. 31, 2015						835,751,000
Beginning Balance at Dec. 31, 2015					$ 290	$ 1,017	3,922	8,922					(3,000)	(405)	13
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)								324
Ending Balance, Preferred Shares at Dec. 31, 2016	2,900,234	14,000,000	21,000	500,000	17,421,000
Ending Balance, Common Shares at Dec. 31, 2016						1,079,314,000
Ending Balance at Dec. 31, 2016	$ 15,240				$ 1,665	$ 1,257	6,385	9,378					(2,904)	(541)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	325														1
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes	6													6
Net unrealized gains (losses) on derivative financial instruments, net of income taxes	(24)													(24)
Foreign currency translation adjustments, net of income taxes	1													1
Net pension and postretirement benefit costs, net of income taxes	4													4
Deferred compensation							3
Cash dividends declared on common shares								(90)
Cash dividends declared on Noncumulative Series A Preferred Stock									$ (6)	$ (7)	$ (7)	$ (8)
Open market common share repurchases, shares						(5,844,000)
Common shares repurchased													(107)
Employee equity compensation program common share repurchase, shares						(2,829,000)
Employee equity compensation program common share repurchases													(53)
Series A Preferred Stock exchanged for common shares, shares					2,900,000	20,568,000
Series A Preferred Stock exchanged for common shares					$ (290)		(49)						338
Redemption of Series C Preferred Stock, shares					(14,000,000)
Redemption of Series C Preferred Stock	350				$ (350)
Common shares reissued (returned) for stock options and other employee benefit plans, shares						6,270,000
Common shares reissued (returned) for stock options and other employee benefit plans							(52)						103
Net contribution from (distribution to) noncontrolling interests															1
Ending Balance, Preferred Shares at Mar. 31, 2017		14,000,000	21,000	500,000	521,000
Ending Balance, Common Shares at Mar. 31, 2017						1,097,479,000
Ending Balance at Mar. 31, 2017	$ 14,978				$ 1,025	$ 1,257	$ 6,287	$ 9,584					$ (2,623)	$ (554)	$ 2

XML

Consolidated Statements of Changes in Equity (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income taxes effect on net unrealized (losses) gains on securities available for sale	$ 4	$ 76
Income taxes effect on net unrealized gains (losses) on derivative financial instruments	(15)	34
Income taxes effect on foreign currency translation adjustments	1	3
Income taxes effect on net pension and postretirement benefit costs	$ 2	$ 4
Cash dividends declared on common shares (in usd per share)	$ 0.085	$ 0.075
Series A Preferred Stock [Member]
Cash dividends declared on Preferred Stock (in usd per share)	1.9375	$ 1.9375
Series C Preferred Stock [Member]
Cash dividends declared on Preferred Stock (in usd per share)	0.539063
Series D Preferred Stock [Member]
Cash dividends declared on Preferred Stock (in usd per share)	12.50
Series E Preferred Stock [Member]
Cash dividends declared on Preferred Stock (in usd per share)	$ 0.395573

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
OPERATING ACTIVITIES
Net income (loss)	$ 325	$ 188
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for credit losses	63	89
Depreciation and amortization expense, net	100	62
Accretion of acquired loans	43	0
Increase in cash surrender value of corporate-owned life insurance	(28)	(25)
Stock-based compensation expense	27	19
FDIC reimbursement (payments), net of FDIC expense	(2)	1
Deferred income taxes (benefit)	137	50
Proceeds from sales of loans held for sale	2,334	1,110
Originations of loans held for sale, net of repayments	(2,562)	(1,153)
Net losses (gains) on sales of loans held for sale	(35)	(2)
Net losses (gains) from principal investing	(1)	0
Net losses (gains) and writedown on OREO	1	1
Net losses (gains) on leased equipment	(2)	0
Net securities losses (gains)	(1)	(1)
Net losses (gains) on sales of fixed assets	12	1
Net decrease (increase) in trading account assets	(54)	23
Other operating activities, net	(762)	9
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(405)	373
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments, excluding acquisitions	250	(2,729)
Purchases of securities available for sale	(195)	(610)
Proceeds from sales of securities available for sale	912	0
Proceeds from prepayments and maturities of securities available for sale	1,061	722
Proceeds from prepayments and maturities of held-to-maturity securities	456	251
Purchases of held-to-maturity securities	(411)	(358)
Purchases of other investments	(2)	(18)
Proceeds from sales of other investments	51	24
Proceeds from prepayments and maturities of other investments	1	0
Net decrease (increase) in loans, excluding acquisitions, sales and transfers	(255)	(663)
Proceeds from sales of portfolio loans	37	40
Proceeds from corporate-owned life insurance	9	9
Purchases of premises, equipment, and software	(2)	(8)
Proceeds from sales of premises and equipment	0	0
Proceeds from sales of OREO	11	3
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	1,923	(3,337)
FINANCING ACTIVITIES
Net increase (decrease) in deposits, excluding acquisitions	(105)	2,336
Net increase (decrease) in short-term borrowings	(925)	84
Net proceeds from issuance of long-term debt	0	976
Payments on long-term debt	(10)	(498)
Open market common share repurchases	(107)	0
Employee equity compensation program common share repurchases	(53)	0
Redemption of Preferred Stock Series C	(350)	0
Net proceeds from reissuance of common shares	22	1
Cash dividends paid	(118)	(68)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(1,646)	2,831
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS	(128)	(133)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD	677	607
CASH AND DUE FROM BANKS AT END OF PERIOD	549	474
Additional disclosures relative to cash flows:
Interest paid	151	108
Income taxes paid (refunded)	(11)	13
Noncash items:
Reduction of secured borrowing and related collateral	13	21
Loans transferred to portfolio from held for sale	8	0
Loans transferred to held for sale from portfolio	25	0
Loans transferred to OREO	$ 11	$ 4

XML

Basis of Presentation and Accounting Policies

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Accounting Policies

1. Basis of Presentation and Accounting Policies

As used in these Notes, references to “Key,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. KeyCorp refers solely to the parent holding company, and KeyBank refers to KeyCorp’s subsidiary, KeyBank National Association and its subsidiaries.

The acronyms and abbreviations identified below are used in the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion & Analysis of Financial Condition & Results of Operations. You may find it helpful to refer back to this page as you read this report.

References to our “2016 Form 10-K” refer to our Form 10-K for the year ended December 31, 2016, which was filed with the U.S. Securities and Exchange Commission and is available on its website (www.sec.gov) and on our website

(www.key.com/ir).

AICPA: American Institute of Certified Public Accountants.	KCDC: Key Community Development Corporation.
ALCO: Asset/Liability Management Committee.	KEF: Key Equipment Finance.
ALLL: Allowance for loan and lease losses.	KPP: Key Principal Partners.
A/LM: Asset/liability management.	KREEC: Key Real Estate Equity Capital, Inc.
AOCI: Accumulated other comprehensive income (loss).	LCR: Liquidity coverage ratio.
APBO: Accumulated postretirement benefit obligation.	LIBOR: London Interbank Offered Rate.
Austin: Austin Capital Management, Ltd.	LIHTC: Low-income housing tax credit.
BHCs: Bank holding companies.	LTV: Loan-to-value.
Board: KeyCorp Board of Directors.	Moody’s: Moody’s Investor Services, Inc.
CCAR: Comprehensive Capital Analysis and Review.	MRM: Market Risk Management group.
CMBS: Commercial mortgage-backed securities.	N/A: Not applicable.
CME: Chicago Mercantile Exchange.	NASDAQ: The NASDAQ Stock Market LLC.
CMO: Collateralized mortgage obligation.	NAV: Net asset value.
Common Shares: KeyCorp common shares, $1 par value.	N/M: Not meaningful.
DIF: Deposit Insurance Fund of the FDIC.	NOW: Negotiable Order of Withdrawal.
Dodd-Frank Act: Dodd-Frank Wall Street Reform and	NPR: Notice of proposed rulemaking.
Consumer Protection Act of 2010.	NYSE: New York Stock Exchange.
EBITDA: Earnings before interest, taxes, depreciation, and	OCC: Office of the Comptroller of the Currency.
amortization.	OCI: Other comprehensive income (loss).
EPS: Earnings per share.	OREO: Other real estate owned.
ERISA: Employee Retirement Income Security Act of 1974.	OTTI: Other-than-temporary impairment.
ERM: Enterprise risk management.	PBO: Projected benefit obligation.
EVE: Economic value of equity.	PCI: Purchased credit impaired.
FASB: Financial Accounting Standards Board.	S&P: Standard and Poor’s Ratings Services, a Division
FDIC: Federal Deposit Insurance Corporation.	of The McGraw-Hill Companies, Inc.
Federal Reserve: Board of Governors of the Federal Reserve	SEC: U.S. Securities and Exchange Commission.
System.	Series A Preferred Stock: KeyCorp’s 7.750%
FHLB: Federal Home Loan Bank of Cincinnati.	Noncumulative Perpetual Convertible Preferred Stock,
FHLMC: Federal Home Loan Mortgage Corporation.	Series A.
FICO: Fair Isaac Corporation	SIFIs: Systemically important financial institutions
First Niagara: First Niagara Financial Group, Inc.	including BHCs with total consolidated assets of at least
(NASDAQ: FNFG).	$50 billion and nonbank financial companies designated
FNMA: Federal National Mortgage Association, or Fannie Mae.	by FSOC for supervision by the Federal Reserve.
FSOC: Financial Stability Oversight Council.	TDR: Troubled debt restructuring.
GAAP: U.S. generally accepted accounting principles.	TE: Taxable-equivalent.
GNMA: Government National Mortgage Association, or Ginnie	U.S. Treasury: United States Department of the Treasury.
Mae.	VaR: Value at risk.
ISDA: International Swaps and Derivatives Association.	VEBA: Voluntary Employee Beneficiary Association.
KAHC: Key Affordable Housing Corporation.	VIE: Variable interest entity.
KCC: Key Capital Corporation.

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly affect the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements, and financial instruments. See Note 10 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% generally are carried at cost. Investments held by our registered broker-dealer and investment company subsidiaries (principal investing entities and Real Estate Capital line of business) are carried at fair value.

We believe that the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2016 Form 10-K.

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

Accounting Guidance Adopted in 2017

Consolidation. In October 2016, the FASB issued new accounting guidance that amends the previous consolidation guidance issued in February 2015, to require a decision maker that holds an interest in a VIE through an entity under common control to only consider its proportionate indirect interest in the VIE in determining whether the decision maker is the VIE’s primary beneficiary. This new guidance eliminates the requirement that a decision maker treat the common control party’s interest in the VIE as if the decision maker held the interest itself, an approach referred to as “full attribution.” The new guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) on a retrospective basis. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Stock-based compensation. In March 2016, the FASB issued new accounting guidance that simplifies the accounting for several aspects of share-based payment transactions, including the related income tax consequences, the classification of awards as either equity or liabilities, and the presentation on the statement of cash flows. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us). The method of transition was dependent upon the particular amendment within the new guidance. During the three months ended March 31, 2017, we recognized $18 million in excess tax benefits within “income taxes” on our income statement that pertained to share-based payment arrangements. In prior periods, such excess tax benefits were recorded within “capital surplus” on our balance sheet. Under the new guidance, generally, if our share price increases over an award’s vesting period, the resulting tax windfall will decrease “income taxes.” In a like manner, if our share price decreases over an award’s vesting period, the resulting tax shortfall will increase “income taxes.” This change also removed the impact of the excess tax benefits and deficiencies from the calculation of diluted EPS and is required to be applied on a prospective basis. The adoption of this accounting standard did not materially affect our statement of cash flows, nor did it affect retained earnings as of the beginning of the period of adoption. We elected to retain our existing accounting policy of estimating award forfeitures upon the award’s grant date.

Equity method investments.In March 2016, the FASB issued new accounting guidance that simplifies the transition to equity method accounting by eliminating the requirement for an investor to make retroactive adjustments to the investment, results of operations, and retained earnings on a step-by-step basis when an investment becomes qualified for equity method accounting. Instead, when an investment qualifies for the equity method due to an increase in ownership or degree of influence, an equity method investor is required to add the cost of acquiring the additional interest to the current basis of the previously held interest, and to adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. This accounting guidance became effective prospectively for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us). Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations. This guidance will only affect our financial condition or results of operations if there is an applicable change in an investment resulting in the investment’s qualifying for equity method accounting.

Derivatives and hedging.In March 2016, the FASB issued new accounting guidance that requires an entity to use a four-step decision model when assessing contingent call (put) options that can accelerate the payment of principal on debt instruments to determine whether they are clearly and closely related to their debt hosts. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) on a modified retrospective basis. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Derivatives and hedging. In March 2016, the FASB issued new accounting guidance that clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, by itself, require dedesignation, but all other hedge accounting criteria must be met. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) and was implemented using a prospective method. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Accounting Guidance Pending Adoption at March 31, 2017

Receivables. In March 2017, the FASB issued new accounting guidance that shortens the amortization period to the earliest call date for certain callable debt securities held at a premium. Securities held at a discount will continue to be amortized to maturity. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2018 (effective January 1, 2019, for us). The guidance should be applied on a modified retrospective basis using a cumulative-effect adjustment. Early adoption is permitted. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Compensation. In March 2017, the FASB issued new accounting guidance that requires service cost to be included in the same line item as certain other compensation costs related to services rendered by employees. We record compensation costs under personnel expense on the income statement. Other elements of net benefit cost should be presented separately. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). The guidance should be applied on a retrospective basis. Early adoption is permitted within the first interim period if the entity issues interim financial statements. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Other income. In February 2017, the FASB issued new accounting guidance that clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. The guidance clarifies that financial assets may be within scope of the derecognition guidance if they are promised to a counterparty in a contract and substantially all the fair value of the assets in the contract are concentrated in nonfinancial assets, which are collectively referred to as in substance nonfinancial assets. The guidance requires entities to derecognize a nonfinancial asset or in substance nonfinancial asset when a counterparty obtains controls of it, and in a partial sale transaction when it does not have a controlling financial interest in the legal entity that holds the asset and when it transfers control of the asset. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). The guidance may be applied on a retrospective or modified retrospective basis. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Goodwill and Other Intangibles.In January 2017, the FASB issued new accounting guidance that simplifies the test for goodwill impairment by eliminating the second step of the current two-step method. Under the new guidance, entities will compare the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the reporting unit’s fair value, the entity is required to recognize an impairment charge for this amount. Current guidance requires an entity to proceed to a second step, whereby the entity would determine the fair value of its assets and liabilities. The new method applies to all reporting units. The option to perform a qualitative assessment is still allowable. This accounting guidance is effective prospectively for interim and annual reporting periods beginning after December 15, 2019 (effective January 1, 2020, for us). Early adoption is permitted. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Business combinations.In January 2017, the FASB issued accounting guidance that clarifies the definition of a business and removes the requirement for a market participant to consider whether it could replace missing elements in an integrated set of assets and activities. The guidance states that if substantially all of the fair value of the assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a prospective approach. Early application is allowed for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, as long as the transaction has not been reported in financial statements that have been issued or made available for issuance, and for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occurs before the issuance date or effective date of the amendments, as long as the transaction has not been reported in financial statements that have been issued or made available for issuance. This guidance will not affect our financial condition or results of operations unless we acquire or dispose of a business subsequent to the date of adoption.

Statement of cash flows. In November 2016, the FASB issued accounting guidance requiring restricted cash and restricted cash equivalents to be included with other cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of cash flows. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a retrospective approach. Early adoption is permitted. The adoption of this accounting guidance may affect the presentation in our Consolidated Statements of Cash Flows.

Income taxes. In October 2016, the FASB issued accounting guidance requiring an entity to recognize any deferred taxes from an intra-entity transfer of an asset other than inventory when the transfer occurs. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a modified retrospective approach. Early adoption is permitted but only as of the beginning of an annual reporting period for which financial statements have not yet been issued. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Statement of cash flows. In August 2016, the FASB issued new accounting guidance that clarifies how cash receipts and cash payments in certain specific transactions should be presented and classified in the statement of cash flows. These specific transactions include, but are not limited to, debt prepayment or extinguishment costs, contingent considerations made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions from equity method investees. This guidance also clarifies that in instances of cash flows with multiple aspects that cannot be separately identified, classification should be based on the activity that is likely to be the predominant source of or use of cash flow. This accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a retrospective approach. Early adoption is permitted. The adoption of this accounting guidance may affect the presentation in our Consolidated Statements of Cash Flows.

Financial instruments. In June 2016, the FASB issued new accounting guidance that changes the methodology for recognizing credit losses related to financial instruments. Under current GAAP, a credit loss is not recognized until it is probable that the loss has been incurred. The new accounting guidance eliminates that threshold and expands the information required for an entity to consider when developing an estimate of expected credit losses, including the use of forecast information. Entities will be required to present financial assets measured on an amortized cost basis at the net amount that is expected to be collected. This new guidance will impact the accounting for our loans, debt securities available for sale, and liability for credit losses on unfunded lending-related commitments, as well as purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. This accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2019 (effective January 1, 2020, for us). Early adoption is permitted but only for interim and annual reporting periods beginning after December 15, 2018. This guidance must be implemented using a modified retrospective basis except that a prospective approach must be used for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach also should be used for purchased financial assets with credit deterioration. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations and related disclosures.

Leases. In February 2016, the FASB issued new accounting guidance that requires a lessee to recognize a liability to make lease payments, and a right-of-use asset representing its right to use an underlying asset during the lease term for both finance and operating leases. The definition of a lease was modified to exemplify the concept of control over an asset identified in the lease. Lease classification criteria remain substantially similar to criteria in current lease guidance. The guidance defines which payments can be used in determining lease classification. For short-term leases with a term of 12 months or less, lessees can make a policy election not to recognize lease assets and lease liabilities. Lessor accounting is largely unchanged. Leveraged leases that commenced before the effective date of the new guidance are grandfathered. New disclosures are required, and certain practical expedients are allowed upon adoption. This accounting and disclosure guidance will be effective for interim and annual reporting periods beginning after December 15, 2018 (effective January 1, 2019, for us) and should be implemented using the modified retrospective approach. Early adoption is permitted. We are currently in the early stages of implementation and are working to identify our complete lease population, including potential embedded leases. We expect the adoption of this standard to result in additional assets and liabilities, as we will be required to recognize operating leases on our Consolidated Balance Sheet. Other implementation matters to be addressed include, but are not limited to, the determination of effects on our financial and capital ratios and the quantification of the impacts that this accounting guidance may have on our financial condition or results of operations.

Financial instruments.In January 2016, the FASB issued new accounting guidance that requires equity investments, except those accounted for under the equity method of accounting or consolidated, to be measured at fair value with changes recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost less impairment, whereby impairment is based on a qualitative assessment. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost and changes the presentation of financial assets and financial liabilities on the balance sheet or in the footnotes. If an entity has elected the fair value option to measure liabilities, the new accounting guidance requires the portion of the change in the fair value of a liability resulting from credit risk to be presented in OCI. We have not elected to measure any of our liabilities at fair value, and therefore, this aspect of the guidance is not applicable to us. This accounting and disclosure guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). For the guidance that is applicable to us, the accounting will be implemented on a modified retrospective basis though a cumulative-effect adjustment to the balance sheet, except for the guidance related to equity securities without readily determinable fair values, which should be applied on a prospective basis. Except under certain instances, early adoption is not permitted. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Revenue recognition. In May 2014, the FASB issued new accounting guidance that revises the criteria for determining when to recognize revenue from contracts with customers and expands disclosure requirements. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step model to be followed in making this determination. This accounting guidance can be implemented using either a retrospective method or a cumulative-effect approach. In August 2015, the FASB issued an update that defers the effective date of the revenue recognition guidance by one year. This new guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). Early adoption is permitted but only for interim and annual reporting periods beginning after December 15, 2016. We have elected to implement this new accounting guidance using a cumulative-effect approach. We have already identified the revenue line items within scope of the new guidance and are currently in the process of performing an in-depth assessment, though our preliminary analysis suggests that the adoption of this accounting guidance is not expected to have a material effect on our financial condition nor results of operations. We are also evaluating the related disclosures. There are many aspects of this new accounting guidance that are still being interpreted, and the FASB has issued updates to certain aspects of the guidance to address implementation issues. For example, the FASB issued accounting guidance in March 2016 to clarify principal-versus-agent considerations, and additional guidance in April 2016 to clarify the identification of performance obligations and the licensing implementation guidance. In May 2016, the FASB issued narrow-scope improvements related to collectability, sales tax and noncash consideration, and practical expedients for contract modifications and completed contracts. In December 2016, the FASB issued additional technical corrections and improvements. While certain implementation issues relevant to the industry are still pending resolution, including trade date versus settlement date recognition for broker-dealers and the applicability of interchange revenues for card-issuing banks, our preliminary conclusions reached as to the application of the new guidance are not expected to be significantly affected. We will continue to evaluate any impact as additional guidance is issued and as our internal assessment progresses.

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Business Combination

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Business Combination

2. Business Combination

First Niagara

On August 1, 2016 (the “Acquisition Date”), we acquired all of the outstanding common shares of First Niagara, the parent company of First Niagara Bank, for total consideration of approximately $4.0 billion and thereby acquired First Niagara Bank’s approximately 390 branch locations across New York, Pennsylvania, Connecticut, and Massachusetts. The merger with First Niagara enabled us to expand in the New England market and into the Pennsylvania market, improve our core deposit base, and add additional scale in our banking operations. The results of First Niagara’s operations are included in our consolidated financial statements from the Acquisition Date.

Under the terms of the merger agreement, each outstanding share of First Niagara common stock was converted into the right

to receive 0.680 KeyCorp Common Shares and $2.30 in cash, for a total per-share value of $10.26, based on the $11.70 closing price of KeyCorp’s stock on July 29, 2016. In the aggregate, First Niagara stockholders received 240 million shares of KeyCorp common stock. Also under the terms of the merger agreement, First Niagara employee stock options and restricted stock awards converted into options to purchase and receive KeyCorp common stock. These options and restricted stock awards had a fair value of $26 million on the Acquisition Date. Our methodology for valuing employee stock options is disclosed in Note 16 (“Stock-Based Compensation”) under the heading “Stock Options” on page 179 of our 2016 Form 10-K. Our methodology for valuing restricted stock awards is disclosed in Note 16 (“Stock-Based Compensation”) under the heading “Long-Term Incentive Compensation Program” on page 180 of our 2016 Form 10-K.

In addition, at the time of the merger, each share of First Niagara preferred stock, Series B, was converted into the right to receive a share of KeyCorp preferred stock, Series C, a newly created series of KeyCorp preferred stock. Additional information on this series of preferred stock is provided in Note 18 (“Shareholders' Equity”) of this report.

On October 7, 2016, First Niagara Bank merged with and into KeyBank, with KeyBank as the surviving entity. Systems and client conversion also occurred during the fourth quarter of 2016 in connection with the bank merger.

The acquisition of First Niagara constituted a business combination and was accounted for under the acquisition method of accounting. Accordingly, the assets acquired, the liabilities assumed, and the consideration paid were recorded at their estimated fair value as of the Acquisition Date. These fair value estimates are considered preliminary and are subject to change for up to one year after the Acquisition Date as additional information becomes available.

The following table provides the purchase price calculation as of the Acquisition Date and the identifiable assets purchased and the liabilities assumed at their estimated fair value. These fair value measurements are based on internal and third-party valuations.

in millions
Consideration paid:
KeyCorp common stock issued			$	2,831
Cash payments to First Niagara stockholders			811
Exchange of First Niagara preferred stock for KeyCorp preferred stock			350
Total consideration paid			$	3,992
Statement of Net Assets Acquired at Fair Value:
ASSETS
Cash and due from banks and short-term investments	$	620
Investment securities	9,012
Other investments	297
Loans	23,645
Premises and equipment	245
Other intangible assets	385
Accrued income and other assets	1,449
Total assets	$	35,653
LIABILITIES
Deposits	$	28,994
Bank notes and other short-term borrowings	2,698
Accrued expense and other liabilities	490
Long-term debt	846
Total liabilities	$	33,028
Net identifiable assets acquired			2,625
Goodwill			$	1,367

Measurement Period Adjustments

We estimated the fair value of loans acquired from First Niagara by utilizing the discounted cash flow method within the income approach. This methodology aggregates the purchased loans by category and risk rating. Cash flows for each category were determined by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on a market rate for similar loans. There was no carryover of First Niagara’s ALLL associated with the loans we acquired. The valuation of the acquired loans was not final prior to December 31, 2016, due to the relatively short time frame in which we had to complete the acquisition as well as the complexity involved in valuing loans. An estimate was recorded during the third quarter of 2016 based on the results of a valuation exercise conducted as of December 31, 2015, and applied to the August 1, 2016, balance of loans acquired from First Niagara.

During the fourth quarter of 2016, and the first quarter of 2017, we continued to analyze the valuations assigned to the acquired assets and assumed liabilities. Our third-party valuation firm provided revised valuations for loans based on the August 1, 2016 balances, which affected the valuation estimates for loans and unfunded lending-related commitments. Due to the complexity in valuing the loans and the significant amount of data inputs required, the valuation of the loans, including unfunded lending-related commitments, is not yet final. As a result of revising the loan valuation, including unfunded commitments, the purchase accounting accretion and unfunded commitment amortization amounts are also subject to change. We anticipate finalizing the valuation during the second quarter of 2017. In addition, adjustments were made to certain tax balances based on new information resulting in the revised fair values displayed below. Based on the revised valuations and new information, we updated our estimated fair values of these items within our Consolidated Balance Sheet with a corresponding adjustment to goodwill. These changes are reflected in the following table:

in millions
Acquired Asset or Liability	Balance Sheet Line Item	Provisional Estimate		Revised Estimate		Increase (Decrease)
Tax adjustment on previous fair value measurements (a)	Accrued income and other assets	$	175	$	194	$	19

(a) The tax adjustment on previous fair value measurements did not have any impact on the income statement for the three months ended March 31, 2017.

The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

in millions	PCI
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

At the First Niagara Acquisition Date, the contractually-required payments receivable on the purchased performing loans totaled $22.6 billion, with a corresponding estimated fair value of $22.2 billion. The estimated cash flows not expected to be collected at the Acquisition Date were $399 million. These amounts do not include loans held for sale and the loans that were divested as part of the 18 First Niagara Bank branches that were sold on September 9, 2016.

Intangible assets consisted of the core deposit intangible, the commercial purchased credit card relationships, the consumer purchased credit card relationships, and other intangible assets. The core deposit intangible asset of $356 million recognized as part of the First Niagara merger is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. The commercial purchased credit card relationships recognized as part of the First Niagara merger are being amortized over their estimated useful life of approximately six years utilizing an accelerated method. The consumer purchased credit card relationships recognized as part of the First Niagara merger are being amortized over their estimated useful life of approximately nine years utilizing an accelerated method.

Goodwill of $1.4 billion was recorded as a result of the transaction and is not amortized for book purposes. Of this total, $1.1 billion of goodwill was assigned to our Key Community Bank segment and $273 million of goodwill was assigned to our Key Corporate Bank segment. The goodwill recorded is not deductible for tax purposes. The following table shows the changes in the carrying amount of goodwill by reporting unit.

	Key			Key
	Community			Corporate
in millions	Bank			Bank			Total
BALANCE AT DECEMBER 31, 2015	$	979		$	81		$	1,060
Acquisition of First Niagara	1,109			277			1,386
BALANCE AT DECEMBER 31, 2016	2,088			358			2,446
Tax adjustment on previous fair value measurements	(15		)	(4		)	(19		)
BALANCE AT MARCH 31, 2017	$	2,073		$	354		$	2,427

Certificates of deposit were valued by projecting out the expected cash flows based on the contractual terms of the certificates of deposit. The fair values of savings and transaction deposit accounts acquired from First Niagara were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. These cash flows were discounted based on a market rate for a certificate of deposit with a corresponding maturity.

Direct acquisition costs related to the First Niagara acquisition were expensed as incurred and amounted to less than $1 million for the three months ended March 31, 2017. These direct acquisition costs are part of our total merger-related charges.

The following table presents unaudited pro forma information as if the acquisition of First Niagara had occurred on January 1, 2015. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles, and related income tax effects. Merger-related charges related to the First Niagara merger that we incurred during the three months ended March 31, 2016, are not reflected in the unaudited pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had KeyCorp merged with First Niagara at the beginning of 2015. Cost savings are also not reflected in the unaudited pro forma amounts for the three months ended March 31, 2016.

	Pro forma
in millions	Three months ended March 31, 2016
Net interest income (TE)	$	886
Noninterest income	506
Net income (loss) attributable to common shareholders	245

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Common Share

3. Earnings Per Common Share

Basic earnings per share is the amount of earnings (adjusted for dividends declared on our preferred stock) available to each common share outstanding during the reporting periods. Diluted earnings per share is the amount of earnings available to each common share outstanding during the reporting periods adjusted to include the effects of potentially dilutive common shares. Potentially dilutive common shares include stock options and other stock-based awards. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in the periods where the effect would be antidilutive. 

On March 20, 2017, all outstanding Series A Preferred Stock was converted into KeyCorp common shares. Prior to this conversion, for diluted earnings per share, net income available to common shareholders could have been affected by the conversion of our convertible Series A Preferred Stock. Where the effect of this conversion would have been dilutive, net income available to common shareholders was adjusted by the amount of preferred dividends associated with our Series A Preferred Stock.

Our basic and diluted earnings per common share are calculated as follows:

	Three months ended March 31,
dollars in millions, except per share amounts	2017		2016
EARNINGS
Income (loss) from continuing operations	$	325	$	187
Less: Net income (loss) attributable to noncontrolling interests	1		—
Income (loss) from continuing operations attributable to Key	324		187
Less: Dividends on Preferred Stock	28		5
Income (loss) from continuing operations attributable to Key common shareholders	296		182
Income (loss) from discontinued operations, net of taxes (a)	—		1
Net income (loss) attributable to Key common shareholders	$	296	$	183
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)	1,068,609		827,381
Effect of convertible preferred stock	—		—
Effect of common share options and other stock awards	17,931		7,679
Weighted-average common shares and potential common shares outstanding (000) (b)	1,086,540		835,060
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders	$	.28	$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—
Net income (loss) attributable to Key common shareholders (c)	.28		.22
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	$	.27	$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—
Net income (loss) attributable to Key common shareholders — assuming dilution (c)	.27		.22

(a) In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of this decision, we have accounted for this business as a discontinued operation. For further discussion regarding the income (loss) from discontinued operations, see Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

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

(c) EPS may not foot due to rounding.

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Loans and Loans Held for Sale

3 Months Ended

Mar. 31, 2017

Loans Receivables [Abstract]

Loans and Loans Held for Sale

4. Loans and Loans Held for Sale

in millions	March 31, 2017		December 31, 2016
Commercial and industrial (a)	$	40,112	$	39,768
Commercial real estate:
Commercial mortgage	15,260		15,111
Construction	2,270		2,345
Total commercial real estate loans	17,530		17,456
Commercial lease financing (b)	4,665		4,685
Total commercial loans	62,307		61,909
Residential — prime loans:
Real estate — residential mortgage	5,507		5,547
Home equity loans	12,541		12,674
Total residential — prime loans	18,048		18,221
Consumer direct loans	1,735		1,788
Credit cards	1,037		1,111
Consumer indirect loans	2,998		3,009
Total consumer loans	23,818		24,129
Total loans (c), (d)	$	86,125	$	86,038

(a) Loan balances include $114 million and $116 million of commercial credit card balances at March 31, 2017, and December 31, 2016, respectively.

(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $55 million and $68 million at March 31, 2017, and December 31, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 19 (“Long-Term Debt”) beginning on page 191 of our 2016 Form 10-K.

(c) At March 31, 2017, total loans include purchased loans of $19 billion of which $812 million were PCI loans. At December 31, 2016, total loans include purchased loans of $21 billion, of which $865 million were PCI loans.

(d) Total loans exclude loans of $1.5 billion at March 31, 2017, and $1.6 billion at December 31, 2016, related to the discontinued operations of the education lending business. Additional information pertaining to these loans is provided in Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

Our loans held for sale are summarized as follows:

in millions	March 31, 2017		December 31, 2016
Commercial and industrial	$	171	$	19
Real estate — commercial mortgage	1,150		1,022
Real estate — construction	—		1
Commercial lease financing	1		—
Real estate — residential mortgage (a)	62		62
Total loans held for sale	$	1,384	$	1,104

(a) Real estate — residential mortgage loans held for sale are held at fair value at March 31, 2017, and December 31, 2016. The fair value option was elected for real estate — residential mortgage loans held for sale during the third quarter of 2016 with the First Niagara acquisition. The contractual amount due on these loans totaled $62 million at March 31, 2017, and December 31, 2016. Changes in fair value are recorded in “Consumer mortgage income” on the income statement. Additional information regarding residential mortgage loans held for sale fair value methodology is provided in Note 6 (“Fair Value Measurements”).

Our quarterly summary of changes in loans held for sale is provided below:

in millions	March 31, 2017			December 31, 2016
Balance at beginning of the period	$	1,104		$	1,137
New originations	2,563			2,846
Transfers from (to) held to maturity, net	17			11
Loan sales	(2,299		)	(2,889		)
Loan draws (payments), net	(1		)	(1		)
Balance at end of period (a)	$	1,384		$	1,104

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

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Asset Quality

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Asset Quality

5. Asset Quality

We assess the credit quality of the loan portfolio by monitoring net credit losses, levels of nonperforming assets, delinquencies, and credit quality ratings as defined by management. Nonperforming loans are loans for which we do not accrue interest income, and include commercial and consumer loans and leases, as well as current year TDRs and nonaccruing TDR loans from prior years. Nonperforming assets include nonperforming loans, nonperforming loans held for sale, OREO, and other nonperforming assets. Nonimpaired acquired loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated portfolio. PCI loans cannot be classified as nonperforming loans or TDRs.

Our nonperforming assets and past due loans were as follows:

in millions	March 31, 2017		December 31, 2016
Total nonperforming loans (a)	$	573	$	625
OREO (b)	49		51
Other nonperforming assets	1		—
Total nonperforming assets	$	623	$	676
Nonperforming assets from discontinued operations—education lending (c)	$	4	$	5
TDRs included in nonperforming loans	161		141
TDRs with an allocated specific allowance (d)	84		59
Specifically allocated allowance for restructured loans (e)	30		27
Accruing loans past due 90 days or more	$	79	$	87
Accruing loans past due 30 through 89 days	312		404

(a) Nonperforming loan balances exclude $812 million and $865 million of PCI loans at March 31, 2017, and December 31, 2016, respectively.

(b) Includes carrying value of foreclosed residential real estate of approximately $31 million and $29 million at March 31, 2017 and December 31, 2016, respectively.

(c) Restructured loans of approximately $23 million and $22 million are included in discontinued operations at March 31, 2017, and December 31, 2016, respectively. See Note 12 (“Acquisition, Divestiture, and Discontinued Operations”) for further discussion.

(d) Included in individually impaired loans allocated a specific allowance.

(e) Included in allowance for individually evaluated impaired loans.

We evaluate purchased loans for impairment in accordance with the applicable accounting guidance. Purchased loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are deemed PCI. Several factors are considered when evaluating whether a loan is considered a PCI loan, including the delinquency status of the loan, updated borrower credit status, geographic information, and updated LTV ratios. In accordance with ASC 310-30, excluded from the purchased impaired loans are leases, revolving credit arrangements, and loans held for sale.

We estimated the fair value of loans acquired from First Niagara by utilizing the discounted cash flow method within the income approach. See Note 2 (“Business Combination”) for further discussion of the fair value methodology used. There was no carryover of First Niagara’s ALLL associated with the loans we acquired.

The excess of a PCI loan’s contractually required payments over the amount of its undiscounted cash flows expected to be collected is referred to as the nonaccretable difference. The nonaccretable difference, which is not accreted into income, reflects estimated future credit losses and uncollectible contractual interest expected to be incurred over the life of the PCI loan or pool. The excess of cash flows expected to be collected over the carrying amount of the PCI loans or pools is referred to as the accretable yield. This amount is accreted into interest income over the remaining life of the PCI loans or pools using the level yield method.

Over the life of PCI loans or pools, Key evaluates the remaining contractually required payments receivable and estimates cash flows expected to be collected. Contractually required payments receivable may increase or decrease for a variety of reasons, such as, when the contractual terms of the loan agreement are modified, when interest rates on variable rate loans change, or when principal and/or interest payments are received. Cash flows expected to be collected on PCI loans are estimated by incorporating several primary assumptions similar to the initial estimate of fair value. These primary assumptions include probability of default, loss given default, and the amount of actual prepayments after the Acquisition Date. Increases in expected cash flows of PCI loans or pools subsequent to acquisition are recognized prospectively through adjustment of the yield on the loans or pools over its remaining life, while decreases in expected cash flows are recognized as impairment through a provision for credit losses and an increase in the ALLL.

The difference between the fair value of a nonimpaired acquired loan and contractual amounts due at the Acquisition Date is accreted into income over the estimated life of the loan or pool. Contractually required payments represent the total undiscounted amount of all uncollected principal and interest payments.

The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

August 1, 2016	PCI
in millions
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

At the First Niagara Acquisition Date, the contractual required payments receivable on the purchased non-impaired loans totaled $22.6 billion, with a corresponding estimated fair value of $22.2 billion. The estimated cash flows not expected to be collected at the Acquisition Date were $399 million. These amounts do not include loans held for sale and the loans that were divested as part of the 18 branches that were sold on September 9, 2016.

In addition to the PCI loans acquired with the First Niagara acquisition in the third quarter of 2016, Key has PCI loans from an earlier acquisition in 2012. At the 2012 acquisition date, the estimated gross contractual amount receivable of all PCI loans totaled $41 million. The estimated cash flows not expected to be collected (the nonaccretable amount) were $11 million, and the accretable amount was approximately $5 million. The following tables present the roll-forward of the accretable yield and the beginning and ending outstanding unpaid principal balance and carrying amount of all PCI loans for the three months ended March 31, 2017, and the twelve months ended December 31, 2016.

	Three months ended March 31,							Twelve months ended December 31,
	2017							2016
in millions	Accretable Yield			Carrying Amount		Outstanding Unpaid Principal Balance		Accretable Yield			Carrying Amount		Outstanding Unpaid Principal Balance
Balance at beginning of period	$	197		$	865	$	1,002	$	5		$	11	$	17
Additions	—							205
Accretion	(19		)					(29		)
Net reclassifications from nonaccretable to accretable	25							35
Payments received, net	(11		)					(19		)
Disposals	—							—
Balance at end of period	$	192		$	812	$	930	$	197		$	865	$	1,002

At March 31, 2017, the approximate carrying amount of our commercial nonperforming loans outstanding represented 75% of their original contractual amount owed, total nonperforming loans outstanding represented 79% of their original contractual amount owed, and nonperforming assets in total were carried at 79% of their original contractual amount owed. At March 31, 2017, our 20 largest nonperforming loans totaled $228 million, representing 40% of total loans on nonperforming status. 

Nonperforming loans and loans held for sale reduced expected interest income by$6 million for the three months ended March 31, 2017, and$5 million for the three months ended March 31, 2016.

The following tables set forth a further breakdown of individually impaired loans as of March 31, 2017, and December 31, 2016:

March 31, 2017	Recorded Investment(a)		Unpaid Principal Balance (b)		Specific Allowance
in millions
With no related allowance recorded:
Commercial and industrial	$	152	$	217	—
Commercial real estate:
Commercial mortgage	1		3		—
Total commercial real estate loans	1		3		—
Total commercial loans	153		220		—
Real estate — residential mortgage	20		20		—
Home equity loans	60		60		—
Consumer indirect loans	2		2		—
Total consumer loans	82		82		—
Total loans with no related allowance recorded	235		302		—
With an allowance recorded:
Commercial and industrial	85		90		$	16
Commercial real estate:
Commercial mortgage	15		15		3
Total commercial real estate loans	15		15		3
Total commercial loans	100		105		19
Real estate — residential mortgage	30		30		2
Home equity loans	64		64		17
Consumer direct loans	3		3		—
Credit cards	3		3		—
Consumer indirect loans	33		33		1
Total consumer loans	133		133		20
Total loans with an allowance recorded	233		238		39
Total	$	468	$	540	$	39

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

December 31, 2016	Recorded Investment(a)		Unpaid Principal Balance(b)		Specific Allowance
in millions
With no related allowance recorded:
Commercial and industrial	$	222	$	301	—
Commercial real estate:
Commercial mortgage	2		3		—
Total commercial real estate loans	2		3		—
Total commercial loans	224		304		—
Real estate — residential mortgage	20		20		—
Home equity loans	61		61		—
Consumer indirect loans	1		1		—
Total consumer loans	82		82		—
Total loans with no related allowance recorded	306		386		—
With an allowance recorded:
Commercial and industrial	62		73		$	17
Commercial real estate:
Commercial mortgage	4		4		—
Total commercial real estate loans	4		4		—
Total commercial loans	66		77		17
Real estate — residential mortgage	31		31		2
Home equity loans	64		64		18
Consumer direct loans	2		3		—
Credit cards	3		3		—
Consumer indirect loans	29		29		1
Total consumer loans	129		130		21
Total loans with an allowance recorded	195		207		38
Total	$	501	$	593	$	38

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

The following table sets forth a further breakdown of the average recorded investment for individually impaired loans reported by Key:

Average Recorded Investment (a)	Three Months Ended March 31,
in millions	2017		2016
Commercial and industrial	$	260	$	215
Commercial real estate:
Commercial mortgage	10		9
Construction	—		6
Total commercial real estate loans	10		15
Total commercial loans	270		230
Real estate — residential mortgage	51		55
Home equity loans	125		129
Consumer direct loans	3		1
Credit cards	2		3
Consumer indirect loans	33		39
Total consumer loans	214		227
Total	$	484	$	457

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

For the three months ended March 31, 2017, and March 31, 2016, interest income recognized on the outstanding balances of accruing impaired loans totaled$3 million and $4 million, respectively.

At March 31, 2017, aggregate restructured loans (accrual and nonaccrual loans) totaled $302 million, compared to $280 million at December 31, 2016. During the first three months of 2017, we added $47 million in restructured loans, which were partially offset by $25 million in payments and charge-offs. During 2016, we added $107 million in restructured loans, which were offset by $107 million in payments and charge-offs.

A further breakdown of TDRs included in nonperforming loans by loan category as of March 31, 2017, follows:

March 31, 2017	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial	20	$	100	$	66
Commercial real estate:
Commercial mortgage	7	5		4
Total commercial real estate loans	7	5		4
Total commercial loans	27	105		70
Real estate — residential mortgage	267	16		16
Home equity loans	1,186	72		64
Consumer direct loans	40	1		1
Credit cards	288	2		1
Consumer indirect loans	522	10		9
Total consumer loans	2,303	101		91
Total nonperforming TDRs	2,330	206		161
Prior-year accruing:(a)
Commercial and industrial	4	29		16
Total commercial loans	4	29		16
Real estate — residential mortgage	526	35		35
Home equity loans	1,240	75		61
Consumer direct loans	32	2		1
Credit cards	440	3		1
Consumer indirect loans	365	55		27
Total consumer loans	2,603	170		125
Total prior-year accruing TDRs	2,607	199		141
Total TDRs	4,937	$	405	$	302

(a) All TDRs that were restructured prior to January 1, 2017, and are fully accruing.

A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2016, follows:

December 31, 2016	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial	18	$	91	$	50
Commercial real estate:
Commercial mortgage	7	2		1
Total commercial real estate loans	7	2		1
Total commercial loans	25	93		51
Real estate — residential mortgage	264	16		16
Home equity loans	1,199	77		69
Consumer direct loans	32	1		—
Credit cards	336	2		2
Consumer indirect loans	124	4		3
Total consumer loans	1,955	100		90
Total nonperforming TDRs	1,980	193		141
Prior-year accruing: (a)
Commercial and Industrial	5	30		16
Total commercial loans	5	30		16
Real estate — residential mortgage	477	35		35
Home equity loans	1,231	70		57
Consumer direct loans	35	2		2
Credit cards	410	3		1
Consumer indirect loans	377	56		28
Total consumer loans	2,530	166		123
Total prior-year accruing TDRs	2,535	196		139
Total TDRs	4,515	$	389	$	280

(a) All TDRs that were restructured prior to January 1, 2016, and are fully accruing.

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession without commensurate financial, structural, or legal consideration. Acquired loans that were previously modified in a TDR are no longer classified as TDRs at the Acquisition Date. An acquired loan may only be classified as a TDR if a modification meeting the above TDR criteria is performed after the Acquisition Date. PCI loans cannot be classified as TDRs. All commercial and consumer loan TDRs, regardless of size, are individually evaluated for impairment to determine the probable loss content and are assigned a specific loan loss allowance. This designation has the effect of moving the loan from the general reserve methodology (i.e., collectively evaluated) to the specific reserve methodology (i.e., individually evaluated) and may impact the ALLL through a charge-off or increased loan loss provision. These components affect the ultimate allowance level. Additional information regarding TDRs for discontinued operations is provided in Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the three months ended March 31, 2017, there were no commercial loan TDRs and 3 consumer loan TDRs with a combined recorded investment of less than $1 million that experienced payment defaults after modifications resulting in TDR status during 2016. During the three months ended March 31, 2016, there were no commercial loan TDRs and 51 consumer loan TDRs with a combined recorded investment of $3 million that experienced payment defaults from modifications resulting in TDR status during 2015. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the ALLL. Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs are $15 million and $14 million at March 31, 2017 and December 31, 2016, respectively.

Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Our concession types are primarily interest rate reductions, forgiveness of principal, and other modifications. The commercial TDR other concession category includes modification of loan terms, covenants, or conditions. The consumer TDR other concession category primarily includes those borrowers’ debts that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed. At March 31, 2017, and December 31, 2016, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $140 million and $141 million, respectively.

The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs that occurred during the three months ended March 31, 2017, and March 31, 2016.

	Three Months Ended March 31,
in millions	2017		2016
Commercial loans:
Interest rate reduction	$	7	—
Other	21		$	3
Total	$	28	$	3
Consumer loans:
Interest rate reduction	$	3	$	2
Forgiveness of principal	—		12
Other	12		2
Total	$	15	$	16
Total commercial and consumer TDRs	$	43	$	19
Total loans	86,125		60,438

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2016 Form 10-K.

The following aging analysis of past due and current loans as of March 31, 2017, and December 31, 2016, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio ^(a) 

March 31, 2017	Current		30-59 Days Past Due (b)		60-89 Days Past Due (b)		90 and Greater Days Past Due (b)		Non-performing Loans		Total Past Due and Non-performing Loans		Purchased Credit Impaired		Total Loans (c), (d)
in millions
LOAN TYPE
Commercial and industrial	$	39,621	$	60	$	47	$	24	$	258	$	389	$	102	$	40,112
Commercial real estate:
Commercial mortgage	14,891		25		10		11		32		78		291		15,260
Construction	2,242		—		—		—		2		2		26		2,270
Total commercial real estate loans	17,133		25		10		11		34		80		317		17,530
Commercial lease financing	4,634		12		8		6		5		31		—		4,665
Total commercial loans	$	61,388	$	97	$	65	$	41	$	297	$	500	$	419	$	62,307
Real estate — residential mortgage	$	5,065	$	16	$	7	$	4	$	54	$	81	$	361	$	5,507
Home equity loans	12,225		42		27		14		207		290		26		12,541
Consumer direct loans	1,709		8		4		5		3		20		6		1,735
Credit cards	1,011		7		5		11		3		26		—		1,037
Consumer indirect loans	2,951		27		7		4		9		47		—		2,998
Total consumer loans	$	22,961	$	100	$	50	$	38	$	276	$	464	$	393	$	23,818
Total loans	$	84,349	$	197	$	115	$	79	$	573	$	964	$	812	$	86,125

(a) Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b) Past due loan amounts exclude PCI, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c) Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d) Future accretable yield related to PCI loans is not included in the analysis of the loan portfolio.

December 31, 2016	Current		30-59 Days Past Due (b)		60-89 Days Past Due (b)		90 and Greater Days Past Due (b)		Non-performing Loans		Total Past Due and Non-performing Loans		Purchased Credit Impaired		Total Loans (c), (d)
in millions
LOAN TYPE
Commercial and industrial	$	39,242	$	58	$	28	$	31	$	297	$	414	112		$	39,768
Commercial real estate:
Commercial mortgage	14,655		93		9		6		26		134		322		15,111
Construction	2,314		—		—		2		3		5		26		2,345
Total commercial real estate loans	16,969		93		9		8		29		139		348		17,456
Commercial lease financing	4,641		28		3		5		8		44		—		4,685
Total commercial loans	$	60,852	$	179	$	40	$	44	$	334	$	597	460		$	61,909
Real estate — residential mortgage	$	5,098	$	17	$	5	$	3	$	56	$	81	$	368	$	5,547
Home equity loans	12,327		49		29		16		223		317		30		12,674
Consumer direct loans	1,705		44		15		11		6		76		7		1,788
Credit cards	1,082		9		6		12		2		29		—		1,111
Consumer indirect loans	2,993		7		4		1		4		16		—		3,009
Total consumer loans	$	23,205	$	126	$	59	$	43	$	291	$	519	$	405	$	24,129
Total loans	$	84,057	$	305	$	99	$	87	$	625	$	1,116	$	865	$	86,038

(a) Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b) Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c) Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d) Future accretable yield related to purchased credit impaired loans is not included in the analysis of the loan portfolio.

The prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the refreshed FICO score assigned for the consumer loan portfolios.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Commercial Credit Exposure — Excluding PCI

Credit Risk Profile by Creditworthiness Category ^{(a), (b)} 

in millions	Commercial and industrial				RE — Commercial				RE — Construction				Commercial lease				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
RATING	2017		2016		2017		2016		2017		2016		2017		2016		2017		2016
Pass	$	38,268	$	37,845	$	14,536	$	14,308	$	2,199	$	2,287	$	4,602	$	4,632	$	59,605	$	59,072
Criticized (Accruing)	1,484		1,514		401		455		43		30		58		45		1,986		2,044
Criticized (Nonaccruing)	258		297		32		26		2		2		5		8		297		333
Total	$	40,010	$	39,656	$	14,969	$	14,789	$	2,244	$	2,319	$	4,665	$	4,685	$	61,888	$	61,449

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) The term criticized refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

Consumer Credit Exposure — Excluding PCI

Non-PCI Loans by Refreshed FICO Score ^(a) 

in millions	Residential — Prime				Consumer direct loans				Credit cards				Consumer indirect loans				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2017		2016		2017		2016		2017		2016		2017		2016		2017		2016
750 and above	$	9,935	$	9,818	$	472	$	498	$	408	$	453	$	1,263	$	1,266	$	12,078	$	12,035
660 to 749	5,821		5,266		644		661		498		525		1,190		1,195		8,153		7,647
Less than 660	1,665		1,617		199		194		131		132		545		543		2,540		2,486
No Score	240		1,122		414		428		—		1		—		5		654		1,556
Total	$	17,661	$	17,823	$	1,729	$	1,781	$	1,037	$	1,111	$	2,998	$	3,009	$	23,425	$	23,724

(a) Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

Commercial Credit Exposure — PCI

Credit Risk Profile by Creditworthiness Category ^{(a), (b)} 

in millions	Commercial and Industrial				RE — Commercial				RE — Construction				Commercial Lease		Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,	December 31,	March 31,		December 31,
RATING	2017		2016		2017		2016		2017		2016		2017	2016	2017		2016
Pass	$	26	$	12	$	118	$	139	$	20	$	21	—	—	$	164	$	172
Criticized	76		100		173		183		6		5		—	—	255		288
Total	$	102	$	112	$	291	$	322	$	26	$	26	—	—	$	419	$	460

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) The term “criticized” refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

Consumer Credit Exposure — PCI

PCI Loans by Refreshed FICO Score ^(a) 

in millions	Residential — Prime				Consumer direct loans				Credit cards		Consumer indirect loans		Total
	March 31,		December 31,		March 31,		December 31,		March 31,	December 31,	March 31,	December 31,	March 31,		December 31,
	2017		2016		2017		2016		2017	2016	2017	2016	2017		2016
750 and above	$	136	$	133	—		—		—	—	—	—	$	136	$	133
660 to 749	143		127		$	2	$	2	—	—	—	—	145		129
Less than 660	103		133		3		4		—	—	—	—	106		137
No Score	5		5		1		1		—	—	—	—	6		6
Total	$	387	$	398	$	6	$	7	—	—	—	—	$	393	$	405

(a) Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

We determine the appropriate level of the ALLL on at least a quarterly basis. The methodology for this determination is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2016 Form 10-K. We apply expected loss rates to existing loans with similar risk characteristics and exercise judgment to assess the impact of qualitative factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets.

For all commercial and consumer loan TDRs, regardless of size, as well as for impaired commercial loans with an outstanding balance of $2.5 million or greater, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan. We estimate the extent of the individual impairment for commercial loans and TDRs by comparing the recorded investment of the loan with the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. Secured consumer loan TDRs that are discharged through Chapter 7 bankruptcy and not formally re-affirmed are adjusted to reflect the fair value of the underlying collateral, less costs to sell. Non-Chapter 7 consumer loan TDRs are combined in homogenous pools and assigned a specific allocation based on the estimated present value of future cash flows using the loan’s effective interest rate. A specific allowance also may be assigned, even when sources of repayment appear sufficient, if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses.

Commercial loans are generally charged off in full or charged down to the fair value of the underlying collateral when the borrower’s payment is 180 days past due. Consumer loans are generally charged off when payments are 120 days past due. Home equity and residential mortgage loans are generally charged down to net realizable value when payment is 180 days past due. Credit card loans and similar unsecured products are charged off when payments are 180 days past due.

The ALLL on the acquired non-impaired loan portfolio is estimated using the same methodology as is used for the originated portfolio, however, the estimated ALLL is compared to the remaining accretable yield to determine if any incremental ALLL must be recorded. For PCI loans, Key estimates cash flows expected to be collected quarterly. Decreases in expected cash flows are recognized as impairment through a provision for credit losses and an increase in the ALLL. The ALLL at March 31, 2017, represents our best estimate of the probable credit losses inherent in the loan portfolio at that date.

A summary of the changes in the ALLL for the periods indicated is presented in the table below:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period — continuing operations	$	858		$	796
Charge-offs	(77		)	(60		)
Recoveries	19			14
Net loans and leases charged off	(58		)	(46		)
Provision for loan and lease losses from continuing operations	70			76
Balance at end of period — continuing operations	$	870		$	826

The changes in the ALLL by loan category for the three months ended March 31, 2017, and March 31, 2016, are as follows:

Three months ended March 31, 2017:

in millions	December 31, 2016		Provision				Charge-offs			Recoveries		March 31, 2017
Commercial and Industrial	$	508	$	31			$	(32	)	$	5	$	512
Commercial real estate:
Real estate — commercial mortgage	144		2				—			—		146
Real estate — construction	22		6				—			1		29
Total commercial real estate loans	166		8				—			1		175
Commercial lease financing	42		3				(7		)	2		40
Total commercial loans	716		42				(39		)	8		727
Real estate — residential mortgage	17		(3		)		2			2		18
Home equity loans	54		4				(8		)	3		53
Consumer direct loans	24		9				(10		)	1		24
Credit cards	38		10				(11		)	1		38
Consumer indirect loans	9		8				(11		)	4		10
Total consumer loans	142		28				(38		)	11		143
Total ALLL — continuing operations	858		70			(a)	(77		)	19		870
Discontinued operations	24		3				(6		)	2		23
Total ALLL — including discontinued operations	$	882	$	73			$	(83	)	$	21	$	893

(a)    Excludes a credit for losses on lending-related commitments of $7 million.

Three months ended March 31, 2016:

in millions	December 31, 2015		Provision				Charge-offs			Recoveries		March 31, 2016
Commercial and Industrial	$	450	$	50			$	(26	)	$	3	$	477
Commercial real estate:
Real estate — commercial mortgage	134		—				(1		)	2		135
Real estate — construction	25		(3		)		—			1		$	23
Total commercial real estate loans	159		(3		)		(1		)	3		158
Commercial lease financing	47		(1		)		(3		)	—		43
Total commercial loans	656		46				(30		)	6		678
Real estate — residential mortgage	18		2				(2		)	2		20
Home equity loans	57		14				(10		)	3		64
Consumer direct loans	20		5				(6		)	1		20
Credit cards	32		6				(8		)	1		31
Consumer indirect loans	13		3				(4		)	1		13
Total consumer loans	140		30				(30		)	8		148
Total ALLL — continuing operations	796		76			(a)	(60		)	14		826
Discontinued operations	28		2				(9		)	3		24
Total ALLL — including discontinued operations	$	824	$	78			$	(69	)	$	17	$	850

(a)    Excludes a provision for losses on lending-related commitments of $13 million.

Our ALLL from continuing operations increased by $12 million, or 1.4%, from December 31, 2016. Our allowance applies expected loss rates to our existing loans with similar risk characteristics as well as any adjustments to reflect our current assessment of qualitative factors, such as changes in economic conditions, underwriting standards, and concentrations of credit. Our commercial ALLL increased by $11 million, or 1.5%, from December 31, 2016, primarily because of loan growth in certain segments of the commercial loan portfolio as well as credit quality migration. Our consumer ALLL increased by $1 million, or .7% from December 31, 2016, reflecting a provision in excess of net loan charge-offs of $1 million.

There was $4 million of provision for loan and lease losses on PCI loans during the three months ended March 31, 2017. There was $11 million of provision for loan and lease losses on these PCI loans during the twelve months ended December 31, 2016.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of March 31, 2017, follows:

	Allowance					Outstanding
March 31, 2017	Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment		Purchased Credit Impaired	Loans			Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment			Purchased Credit Impaired
in millions
Commercial and industrial	$	16	$	495	1	$	40,112		$	237	$	39,773		$	102
Commercial real estate:
Commercial mortgage	3		140		3	15,260			16		14,953			291
Construction	—		29		—	2,270			—		2,244			26
Total commercial real estate loans	3		169		3	17,530			16		17,197			317
Commercial lease financing	—		40		—	4,665			—		4,665			—
Total commercial loans	19		704		4	62,307			253		61,635			419
Real estate — residential mortgage	2		15		1	5,507			51		5,095			361
Home equity loans	17		35		1	12,541			124		12,391			26
Consumer direct loans	—		24		—	1,735			3		1,726			6
Credit cards	—		38		—	1,037			3		1,034			—
Consumer indirect loans	1		9		—	2,998			35		2,963			—
Total consumer loans	20		121		2	23,818			216		23,209			393
Total ALLL — continuing operations	39		825		6	86,125			469		84,844			812
Discontinued operations	2		21		—	1,500		(a)	23		1,477		(a)	—
Total ALLL — including discontinued operations	$	41	$	846	6	$	87,625		$	492	$	86,321		$	812

(a) Amount includes $3 million of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of December 31, 2016, follows:

	Allowance						Outstanding
December 31, 2016	Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment		Purchased Credit Impaired		Loans			Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment			Purchased Credit Impaired
in millions
Commercial and Industrial	$	17	$	486	5		$	39,768		$	284	$	39,372		$	112
Commercial real estate:
Commercial mortgage	—		144		—		15,111			5		14,784			322
Construction	—		22		—		2,345			—		2,319			26
Total commercial real estate loans	—		166		—		17,456			5		17,103			348
Commercial lease financing	—		42		—		4,685			—		4,685			—
Total commercial loans	17		694		5		61,909			289		61,160			460
Real estate — residential mortgage	2		15		—		5,547			51		5,128			368
Home equity loans	17		37		—		12,674			125		12,519			30
Consumer direct loans	—		24		—		1,788			3		1,778			7
Credit cards	—		38		—		1,111			3		1,108			—
Consumer indirect loans	1		8		—		3,009			30		2,979			—
Total consumer loans	20		122		—		24,129			212		23,512			405
Total ALLL — continuing operations	37		816		5		86,038			501		84,672			865
Discontinued operations	2		22		—		1,565		(a)	22		1,543		(a)	—
Total ALLL — including discontinued operations	$	39	$	838	$	5	$	87,603		$	523	$	86,215		$	865

(a) Amount includes $3 million of loans carried at fair value that are excluded from ALLL consideration.

The liability for credit losses inherent in unfunded lending-related commitments, such as letters of credit and unfunded loan commitments, is included in “accrued expense and other liabilities” on the balance sheet. We establish the amount of this reserve by considering both historical trends and current market conditions quarterly, or more often if deemed necessary.

Changes in the liability for credit losses on unfunded lending-related commitments are summarized as follows:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period	$	55		$	56
Provision (credit) for losses on lending-related commitments	(7		)	13
Balance at end of period	$	48		$	69

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

6. Fair Value Measurements

Fair Value Determination

As defined in the applicable accounting guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in our principal market. We have established and documented our process for determining the fair values of our assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, we determine the fair value of our assets and liabilities using valuation models or third-party pricing services. Both of these approaches rely on market-based parameters, when available, such as interest rate yield curves, option volatilities, and credit spreads, or on unobservable inputs. Unobservable inputs may be based on our judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs.

Valuation adjustments, such as those pertaining to counterparty and our own credit quality and liquidity, may be necessary to ensure that assets and liabilities are recorded at fair value. Credit valuation adjustments are made when market pricing does not accurately reflect the counterparty’s or our own credit quality. We make liquidity valuation adjustments to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when we are unable to observe recent market transactions for identical or similar instruments. Liquidity valuation adjustments are based on the following factors:

• the amount of time since the last relevant valuation;

• whether there is an actual trade or relevant external quote available at the measurement date; and

• volatility associated with the primary pricing components.

We ensure that our fair value measurements are accurate and appropriate by relying upon various controls, including:

• an independent review and approval of valuation models and assumptions;

• recurring detailed reviews of profit and loss; and

• a validation of valuation model components against benchmark data and similar products, where possible.

We recognize transfers between levels of the fair value hierarchy at the end of the reporting period. Quarterly, we review any changes to our valuation methodologies to ensure they are appropriate and justified, and refine our valuation methodologies if more market-based data becomes available. The Fair Value Committee, which is governed by ALCO, oversees the valuation process. Various working groups that report to the Fair Value Committee analyze and approve the underlying assumptions and valuation adjustments. Changes in valuation methodologies for Level 1 and Level 2 instruments are presented to the Accounting Policy group for approval. Changes in valuation methodologies for Level 3 instruments are presented to the Fair Value Committee for approval. The working groups are discussed in more detail in the qualitative disclosures within this note. Formal documentation of the fair valuation methodologies is prepared by the lines of business and support areas as appropriate. The documentation details the asset or liability class and related general ledger accounts, valuation techniques, fair value hierarchy level, market participants, accounting methods, valuation methodology, group responsible for valuations, and valuation inputs.

Additional information regarding our accounting policies for determining fair value is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” beginning on page 110 of our 2016 Form 10-K.

Qualitative Disclosures of Valuation Techniques

Loans. Most loans recorded as trading account assets are valued based on market spreads for similar assets since they are actively traded. Therefore, these loans are classified as Level 2 because the fair value recorded is based on observable market data for similar assets.

Securities (trading and available for sale). We own several types of securities, requiring a range of valuation methods:

• Securities are classified as Level 1 when quoted market prices are available in an active market for the identical securities. Level 1 instruments include exchange-traded equity securities.

• Securities are classified as Level 2 if quoted prices for identical securities are not available, and fair value is determined using pricing models (either by a third-party pricing service or internally) or quoted prices of similar securities. These instruments include municipal bonds, bonds backed by the U.S. government, corporate bonds, agency residential and CMBS, securities issued by the U.S. Treasury, money markets, and certain agency and corporate CMOs. Inputs to the pricing models include standard inputs (i.e. yields, benchmark securities, bids, and offers), actual trade data (i.e., spreads, credit ratings, and interest rates) for comparable assets, spread tables, matrices, high-grade scales, and option-adjusted spreads.

• Securities are classified as Level 3 when there is limited activity in the market for a particular instrument. To determine fair value in such cases, depending on the complexity of the valuations required, we use internal models based on certain assumptions or a third-party valuation service. At March 31, 2017, our Level 3 instruments consist of two convertible preferred securities. Our Corporate Strategy group is responsible for reviewing the valuation model and determining the fair value of these investments on a quarterly basis. The securities are valued using a cash flow analysis of the associated private company issuers. The valuations of the securities are negatively affected by projected net losses of the associated private companies and positively affected by projected net gains.

The fair values of our Level 2 securities available for sale are determined by a third-party pricing service. The valuations provided by the third-party pricing service are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, and reference data obtained from market research publications. Inputs used by the third-party pricing service in valuing CMOs and other mortgage-backed securities also include new issue data, monthly payment information, whole loan collateral performance, and “To Be Announced” prices. In valuations of securities issued by state and political subdivisions, inputs used by the third-party pricing service also include material event notices.

On a monthly basis, we validate the pricing methodologies utilized by our third-party pricing service to ensure that the fair value determination is consistent with the applicable accounting guidance and that our assets are properly classified in the fair value hierarchy. To perform this validation, we:

• review documentation received from our third-party pricing service regarding the inputs used in their valuations and determine a level assessment for each category of securities;

• substantiate actual inputs used for a sample of securities by comparing the actual inputs used by our third-party pricing service to comparable inputs for similar securities; and

• substantiate the fair values determined for a sample of securities by comparing the fair values provided by our third-party pricing service to prices from other independent sources for the same and similar securities. We analyze variances and conduct additional research with our third-party pricing service and take appropriate steps based on our findings.

Private equity and mezzanine investments. Private equity and mezzanine investments consist of investments in debt and equity securities through our Real Estate Capital line of business. They include direct investments made in specific properties, as well as indirect investments made in funds that pool assets of many investors to invest in properties. There is no active market for these investments, so we employ other valuation methods. The portion of our Real Estate Capital line of business involved with private equity and mezzanine investments is accounted for as an investment company in accordance with the applicable accounting guidance, whereby all investments are recorded at fair value.

Direct private equity and mezzanine investments are classified as Level 3 assets since there is a certain amount of subjectivity and use of unobservable inputs surrounding our determination of fair value. Our Fund Management, Asset Management, and Accounting groups are responsible for reviewing the valuation models and determining the fair value of these investments on a quarterly basis. Direct investments in properties are initially valued based upon the transaction price. This amount is then adjusted to fair value based on current market conditions using the discounted cash flow method based on the expected investment exit date. The fair values of the assets are reviewed and adjusted quarterly. There were no significant direct equity and mezzanine investments at March 31, 2017, nor at December 31, 2016.

The fair value of our indirect investments is based on the most recent value of the capital accounts as reported by the general partners of the funds in which we invest. The calculation to determine the investment’s fair value is based on our percentage

ownership in the fund multiplied by the net asset value of the fund, as provided by the fund manager. Under the requirements of the Volcker Rule, we will be required to dispose of some or all of our indirect investments. The Federal Reserve extended the conformance period with respect to covered funds to July 21, 2017, for all banking entities. On January 13, 2017, Key filed for an additional extension for illiquid funds, to retain certain indirect investments until the earlier of the date on which the investment is conformed or is expected to mature, or July 21, 2022. The application for an extension was approved on February 14, 2017. As of March 31, 2017, we have not committed to a plan to sell these investments. Therefore, these investments continue to be valued using the net asset value per share methodology. For more information about the Volcker Rule, see the discussion under the heading “Other Regulatory Developments under the Dodd-Frank Act — ‘Volcker Rule’” in the section entitled “Supervision and Regulation” beginning on page 16 of our 2016 Form 10-K.

Investments in real estate private equity funds are included within private equity and mezzanine investments. The main purpose of these funds is to acquire a portfolio of real estate investments that provides attractive, risk-adjusted returns and current income for investors. Certain of these investments do not have readily determinable fair values and represent our ownership interest in an entity that follows measurement principles under investment company accounting. The following table presents the fair value of our indirect investments and related unfunded commitments at March 31, 2017. We did not provide any financial support to investees related to our direct and indirect investments for the three months ended March 31, 2017, and March 31, 2016.

March 31, 2017	Fair Value		Unfunded Commitments
in millions
INVESTMENT TYPE
Indirect investments
Passive funds (a) (measured at NAV)	$	2	$	1
Total	$	2	$	1

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to three years. The purpose of KREEC’s funding is to allow funds to make additional investments and keep a certain market value threshold in the funds. KREEC is obligated to provide financial support, as all investors are required, to the funds based on its ownership percentage, as noted in the Limited Partnership Agreements.

Principal investments. Principal investments consist of investments in equity and debt instruments made by our principal investing entities. They include direct investments (investments made in a particular company) and indirect investments (investments made through funds that include other investors). Our principal investing entities are accounted for as investment companies in accordance with the applicable accounting guidance, whereby each investment is adjusted to fair value with any net realized or unrealized gain/loss recorded in the current period’s earnings. This process is a coordinated and documented effort by the Principal Investing Entities Deal Team (individuals from one of the independent investment managers who oversee these instruments), accounting staff, and the Investment Committee (individual employees and one of the independent investment managers). This process involves an in-depth review of the condition of each investment depending on the type of investment.

Our direct investments include investments in debt and equity instruments of both private and public companies. When quoted prices are available in an active market for the identical direct investment, we use the quoted prices in the valuation process, and the related investments are classified as Level 1 assets. In most cases, quoted market prices are not available for our direct investments, and we must perform valuations using other methods. These direct investment valuations are an in-depth analysis of the condition of each investment and are based on the unique facts and circumstances related to each individual investment. There is a certain amount of subjectivity surrounding the valuation of these investments due to the combination of quantitative and qualitative factors that are used in the valuation models. Therefore, these direct investments are classified as Level 3 assets. The specific inputs used in the valuations of each type of direct investment are described below.

Interest-bearing securities (i.e., loans) are valued on a quarterly basis. Valuation adjustments are determined by the Principal Investing Entities Deal Team and are subject to approval by the Investment Committee. Valuations of debt instruments are based on the Principal Investing Entities Deal Team’s knowledge of the current financial status of the subject company, which is regularly monitored throughout the term of the investment. Significant, unobservable inputs used in the valuations of these investments include the company’s payment history, adequacy of cash flows from operations, and current operating

results, including market multiples and historical and forecast EBITDA. Inputs can also include the seniority of the debt, the nature of any pledged collateral, the extent to which the security interest is perfected, and the net liquidation value of collateral.

Valuations of equity instruments of private companies, which are prepared on a quarterly basis, are based on current market conditions and the current financial status of each company. A valuation analysis is performed to value each investment. The valuation analysis is reviewed by the Principal Investing Entities Deal Team Member, and reviewed and approved by the Chief Administrative Officer of one of the independent investment managers. Significant unobservable inputs used in these valuations include adequacy of the company’s cash flows from operations, any significant change in the company’s performance since the prior valuation, and any significant equity issuances by the company. Equity instruments of public companies are valued using quoted prices in an active market for the identical security. If the instrument is restricted, the fair value is determined considering the number of shares traded daily, the number of the company’s total restricted shares, and price volatility.

Our indirect investments include primary and secondary investments in private equity funds engaged mainly in venture- and growth-oriented investing. These investments do not have readily determinable fair values. Indirect investments are valued using a methodology that is consistent with accounting guidance allowing us to estimate fair value based upon net asset value per share (or its equivalent, such as member units or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed). On January 13, 2017, Key filed for an additional extension for illiquid funds, to retain certain indirect investments until the earlier of the date on which the investment is conformed or is expected to mature, or July 21, 2022. The application for an extension was approved on February 14, 2017. As of March 31, 2017, we have not committed to a plan to sell these investments. Therefore, these investments continue to be valued using the net asset value per share methodology.

For indirect investments, management may make adjustments it deems appropriate to the net asset value if it is determined that the net asset value does not properly reflect fair value. In determining the need for an adjustment to net asset value, management performs an analysis of the private equity funds based on the independent fund manager’s valuations as well as management’s own judgment. Management also considers whether the independent fund manager adequately marks down an impaired investment, maintains financial statements in accordance with GAAP, or follows a practice of holding all investments at cost.

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at March 31, 2017, as well as financial support provided for the three months ended March 31, 2017, and March 31, 2016.

					Financial support provided
					Three months ended March 31,
	March 31, 2017				2017			2016
in millions	Fair Value		Unfunded Commitments		Funded Commitments		Funded Other	Funded Commitments		Funded Other
INVESTMENT TYPE
Direct investments (a)	$	21	—		—		—	—		$	13
Indirect investments (b) (measured at NAV)	155		$	37	$	1	—	$	1	—
Total	$	176	$	37	$	1	—	$	1	$	13

(a) Our direct investments consist of equity and debt investments directly in independent business enterprises. Operations of the business enterprises are handled by management of the portfolio company. The purpose of funding these enterprises is to provide financial support for business development and acquisition strategies. We infuse equity capital based on an initial contractual cash contribution and later from additional requests on behalf of the companies’ management.

(b) Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to eight years. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.

Loans Held for Sale. As of August 1, 2016, we account for our residential mortgage loans held for sale at fair value on a recurring basis. The election of the fair value option aligns the accounting for the residential mortgages held for sale with the related forward mortgage loan sale commitments. Additionally, we have elected to account for loans repurchased due to breaches of representations and warranties at fair value.

Residential mortgage loans are valued based on quoted market prices, where available, prices for other traded mortgage loans with similar characteristics, and purchase commitments and bid information received from market participants. The prices are adjusted as necessary to include the embedded servicing value in the loans and to take into consideration the specific characteristics of certain loans that are priced based on the pricing of similar loans. These adjustments represent unobservable inputs to the valuation but are not considered significant given the relative insensitivity of the value to changes in these inputs to the fair value of the loans. Accordingly, the majority of residential mortgage loans held for sale are classified as Level 2. This category also includes repurchased and temporarily unsalable residential mortgage loans that are included in “Loans, net of unearned income” on the balance sheet. These loans are repurchased due to a breach of representations and warranties in the loan sales agreement and typically occur after the loan is in default. The temporarily unsalable loans have an origination defect that makes them currently unable to be sold into the performing loan sales market. Because transaction details regarding sales of this type of loan are often unavailable, unobservable bid information from brokers and investors is heavily relied upon. Accordingly, based on the significance of unobservable inputs, these loans are classified as Level 3.

Derivatives. Exchange-traded derivatives are valued using quoted prices and, therefore, are classified as Level 1 instruments. However, only a few types of derivatives are exchange-traded. The majority of our derivative positions are valued using internally developed models, based on market convention, that use observable market inputs, such as interest rate curves, yield curves, LIBOR and Overnight Index Swap discount rates and curves, index pricing curves, foreign currency curves, and volatility surfaces (a three-dimensional graph of implied volatility against strike price and maturity), as well as current prices for mortgage securities and investor supplied prices. These derivative contracts, which are classified as Level 2 instruments, include interest rate swaps, certain options, cross-currency swaps, credit default swaps, and forward mortgage loan sale commitments.

We have several customized derivative instruments and risk participations that are classified as Level 3 instruments. These derivative positions are valued using internally developed models, with inputs consisting of available market data, such as bond spreads and asset values, as well as unobservable, internally derived assumptions, such as loss probabilities and internal risk ratings of customers. These derivatives are priced monthly by our MRM group using a credit valuation adjustment methodology. Swap details with the customer and our related participation percentage, if applicable, are obtained from our derivatives accounting system, which is the system of record. Applicable customer rating information is obtained from the particular loan system and represents an unobservable input to this valuation process. Using these various inputs, a valuation of these Level 3 derivatives is performed using a model that was acquired from a third party. In summary, the fair value represents an estimate of the amount that the risk participation counterparty would need to pay/receive as of the measurement date based on the probability of customer default on the swap transaction and the fair value of the underlying customer swap. Therefore, a higher loss probability and a lower credit rating would negatively affect the fair value of the risk participations and a lower loss probability and higher credit rating would positively affect the fair value of the risk participations.

As a result of the First Niagara acquisition, we acquired First Niagara’s residential mortgage business, which included interest rate lock commitments. These instruments are accounted for as a derivative and valued using models containing unobservable significant inputs. For valuation purposes, the loan amount associated with each interest rate lock commitment is adjusted by its modeled pull-through (an unobservable input) defined as the percentage of loans that will close prior to the expiration of the rate lock commitment, as adjusted for approved changes to the terms. Based on the significance of unobservable inputs, these instruments are classified as Level 3.

Market convention implies a credit rating of “AA” equivalent in the pricing of derivative contracts, which assumes that all counterparties have the same creditworthiness. To reflect the actual exposure on our derivative contracts related to both counterparty and our own creditworthiness, we record a fair value adjustment in the form of a credit valuation adjustment. The credit component is determined by individual counterparty based on the probability of default and considers master netting and collateral agreements. The credit valuation adjustment is classified as Level 3. Our MRM group is responsible for the valuation policies and procedures related to this credit valuation adjustment. A weekly reconciliation process is performed to ensure that all applicable derivative positions are covered in the calculation, which includes transmitting customer exposures and reserve reports to trading management, derivative traders and marketers, derivatives middle office, and accounting personnel. On a quarterly basis, MRM prepares the credit valuation adjustment calculation, which includes a detailed reserve comparison with the previous quarter, an analysis for change in reserve, and a reserve forecast to ensure that the credit valuation adjustment recorded at period end is sufficient.

Other assets and liabilities. The value of our short positions is driven by the valuation of the underlying securities. If quoted prices for identical securities are not available, fair value is determined by using pricing models or quoted prices of similar securities, resulting in a Level 2 classification. For interest rate-driven products, such as government bonds, U.S. Treasury bonds and other products backed by the U.S. government, inputs include spreads, credit ratings, and interest rates. For credit-driven products, such as corporate bonds and mortgage-backed securities, inputs include actual trade data for comparable assets and bids and offers.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. The following tables present these assets and liabilities at March 31, 2017, and December 31, 2016.

March 31, 2017	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	586	—		$	586
States and political subdivisions	—		47		—		47
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		248		—		248
Other securities	$	1	35		—		36
Total trading account securities	1		916		—		917
Commercial loans	—		4		—		4
Total trading account assets	1		920		—		921
Securities available for sale:
U.S. Treasury, agencies and corporations	—		185		—		185
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations (a)	—		14,563		—		14,563
Agency residential mortgage-backed securities (a)	—		1,742		—		1,742
Agency commercial mortgage-backed securities	—		1,910		—		1,910
Other securities	3		—		$	17	20
Total securities available for sale	3		18,411		17		18,431
Other investments:
Principal investments:
Direct	—		—		21		21
Indirect (measured at NAV) (b)	—		—		—		155
Total principal investments	—		—		21		176
Equity and mezzanine investments:
Indirect (measured at NAV) (b)	—		—		—		2
Total equity and mezzanine investments	—		—		—		2
Total other investments	—		—		21		178
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		777		5		782
Foreign exchange	91		7		—		98
Commodity	—		150		—		150
Credit	—		2		1		3
Other	—		5		4		9
Derivative assets	91		941		10		1,042
Netting adjustments (c)	—		—		—		(464		)
Total derivative assets	91		941		10		578
Accrued income and other assets	—		—		—		—
Total assets on a recurring basis at fair value	$	95	$	20,334	$	48	$	20,170
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	214	$	729	—		$	943
Derivative liabilities:
Interest rate	—		531		—		531
Foreign exchange	78		8		—		86
Commodity	—		140		—		140
Credit	—		6		—		6
Other	—		16		—		16
Derivative liabilities	78		701		—		779
Netting adjustments (c)	—		—		—		(524		)
Total derivative liabilities	78		701		—		255
Accrued expense and other liabilities	—		—		—		—
Total liabilities on a recurring basis at fair value	$	292	$	1,430	—		$	1,198

(a) “Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.

(b) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2016	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	655	—		$	655
States and political subdivisions	—		8		—		8
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		113		—		113
Other securities	—		73		—		73
Total trading account securities	—		849		—		849
Commercial loans	—		18		—		18
Total trading account assets	—		867		—		867
Securities available for sale:
U.S. Treasury, agencies and corporations	—		184		—		184
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations (a)	—		16,408		—		16,408
Agency residential mortgage-backed securities (a)	—		1,846		—		1,846
Agency commercial mortgage-backed securities	—		1,743		—		1,743
Other securities	$	3	—		$	17	20
Total securities available for sale	3		20,192		17		20,212
Other investments:
Principal investments:
Direct	—		—		27		27
Indirect (measured at NAV) (b)	—		—		—		158
Total principal investments	—		—		27		185
Equity and mezzanine investments:
Indirect (measured at NAV) (b)	—		—		—		6
Total equity and mezzanine investments	—		—		—		6
Total other investments	—		—		27		191
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		923		7		930
Foreign exchange	114		9		—		123
Commodity	—		176		—		176
Credit	—		—		1		1
Other	—		2		2		4
Derivative assets	114		1,110		10		1,234
Netting adjustments (c)	—		—		—		(431		)
Total derivative assets	114		1,110		10		803
Accrued income and other assets	—		8		—		8
Total assets on a recurring basis at fair value	$	117	$	22,239	$	54	$	22,143
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	192	$	616	—		$	808
Derivative liabilities:
Interest rate	—		737		—		737
Foreign exchange	102		11		—		113
Commodity	—		165		—		165
Credit	—		4		—		4
Other	—		1		—		1
Derivative liabilities	102		918		—		1,020
Netting adjustments (c)	—		—		—		(384		)
Total derivative liabilities	102		918		—		636
Accrued expense and other liabilities	—		14		—		14
Total liabilities on a recurring basis at fair value	$	294	$	1,548	—		$	1,458

(a) “Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.

(b) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

Changes in Level 3 Fair Value Measurements

The following table shows the components of the change in the fair values of our Level 3 financial instruments for the three months ended March 31, 2017, and March 31, 2016. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases	Sales			Settlements		Transfers Other		Transfers into Level 3 (a)			Transfers out of Level 3 (a)				End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2017
Securities available for sale
Other securities	$	17	—				—	—			—		—		—			—				$	17	—
Other investments
Principal investments
Direct	27		$	(2	)	(b)	—	$	(4	)	—		—		—			—				21		$	(6	)	(b)
Other indirect	—		—				—	—			—		—		—			—				—		—
Derivative instruments (c)
Interest rate	7		—				—	—			—		—		$	1	(e)	$	(3	)	(e)	5		—
Credit	1		(3		)	(d)	—	—			$	3	—		—			—				1		—
Other (g)	2		—				—	—			—		$	2	—			—				4		—

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases	Sales			Settlements		Transfers into Level 3 (a)			Transfers out of Level 3 (a)				End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2016
Securities available for sale
Other securities	$	17	—				—	—			—		—			—				$	17	—
Other investments
Principal investments
Direct	50		$	(3	)	(b)	—	—			—		—			—				47		$	(3	)	(b)
Other indirect	20		(1		)	(b)	—	$	(1	)	—		—			—				18		(1		)	(b)
Derivative instruments (c)
Interest rate	16		4			(d)	—	—			—		$	3	(e)	$	(7	)	(e)	16		—
Credit	1		(2		)	(d)	—	—			$	3	—			—				2		—

(a) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

(b) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized losses on other and private equity and mezzanine investments are reported in “other income” on the income statement.

(c) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(d) Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on the income statement.

(e) Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant. Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less significant.

(f) There were no issuances for the three-month periods ended March 31, 2017, and March 31, 2016.

(g) Amounts represent Level 3 interest rate lock commitments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. There were no liabilities measured at fair value on a nonrecurring basis at March 31, 2017, and December 31, 2016. The following table presents our assets measured at fair value on a nonrecurring basis at March 31, 2017, and December 31, 2016:

	March 31, 2017						December 31, 2016
in millions	Level 1	Level 2	Level 3		Total		Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	—	—	$	11	$	11	—	—	$	11	$	11
Loans held for sale (a)	—	—	1		1		—	—	—		—
Accrued income and other assets	—	—	6		6		—	—	11		11
Total assets on a nonrecurring basis at fair value	—	—	$	18	$	18	—	—	$	22	$	22

(a) During the first three months of 2017, we transferred $17 million of commercial loans and leases at their current fair value from held-to-maturity portfolio to held-for-sale status, compared to $35 million during 2016.

Impaired loans. We typically adjust the carrying amount of our impaired loans when there is evidence of probable loss and the expected fair value of the loan is less than its contractual amount. The amount of the impairment may be determined based on the estimated present value of future cash flows, the fair value of the underlying collateral, or the loan’s observable market price. Impaired loans with a specifically allocated allowance based on cash flow analysis or the value of the underlying collateral are classified as Level 3 assets. Impaired loans with a specifically allocated allowance based on an observable market price that reflects recent sale transactions for similar loans and collateral are classified as Level 2 assets.

The evaluations for impairment are prepared by the responsible relationship managers in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. The Asset Recovery Group is part of the Risk Management Group and reports to our Chief Credit Officer. These evaluations are performed in conjunction with the quarterly ALLL process.

Loans are evaluated for impairment on a quarterly basis. Loans included in the previous quarter’s review are re-evaluated, and if their values have changed materially, the underlying information (loan balance and in most cases, collateral value) is compared. Material differences are evaluated for reasonableness, and the relationship managers and their senior managers consider these differences and determine if any adjustment is necessary. The inputs are developed and substantiated on a quarterly basis based on current borrower developments, market conditions, and collateral values. The following two internal methods are used to value impaired loans:

• Cash flow analysis considers internally developed inputs, such as discount rates, default rates, costs of foreclosure, and changes in collateral values.

• The fair value of the collateral, which may take the form of real estate or personal property, is based on internal estimates, field observations, and assessments provided by third-party appraisers. We perform or reaffirm appraisals of collateral-dependent impaired loans at least annually. Appraisals may occur more frequently if the most recent appraisal does not accurately reflect the current market, if the debtor is seriously delinquent or chronically past due, or there has been a material deterioration in the performance of the project or condition of the property. Adjustments to outdated appraisals that result in an appraisal value less than the carrying amount of a collateral-dependent impaired loan are reflected in the ALLL.

Impairment valuations are back-tested each quarter, based on a look-back of actual incurred losses on closed deals previously evaluated for impairment. The overall percent variance of actual net loan charge-offs on closed deals compared to the specific allocations on such deals is considered in determining each quarter’s specific allocations.

Commercial loans held for sale. Through a quarterly analysis of our loan portfolios held for sale, which include both performing and nonperforming commercial loans, we determine any adjustments necessary to record the portfolios at the lower of cost or fair value in accordance with GAAP. Our analysis concluded that there was one commercial loan held for sale adjusted to fair value at March 31, 2017. There were no commercial loans held for sale adjusted to fair value at December 31, 2016.

Market inputs, including updated collateral values, and reviews of each borrower’s financial condition influence the inputs used in our internal models and other valuation methodologies. The valuations are prepared by the responsible relationship managers or analysts in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. Actual gains or losses realized on the sale of various commercial loans held for sale provide a back-testing mechanism for determining whether our valuations of these loans held for sale that are adjusted to fair value are appropriate.

Valuations of performing commercial mortgage and construction loans held for sale are conducted using internal models that rely on market data from sales or nonbinding bids on similar assets, including credit spreads, treasury rates, interest rate curves, and risk profiles. These internal models also rely on our own assumptions about the exit market for the loans and details about individual loans within the respective portfolios. Therefore, we classify these loans as Level 3 assets. The inputs related to our assumptions and other internal loan data include changes in real estate values, costs of foreclosure, prepayment rates, default rates, and discount rates.

Valuations of nonperforming commercial mortgage and construction loans held for sale are based on current agreements to sell the loans or approved, discounted payoffs. If a negotiated value is not available, we use third-party appraisals, adjusted for current market conditions. Since valuations are based on unobservable data, these loans are classified as Level 3 assets.

Direct financing leases and operating lease assets held for sale. Our KEF Accounting and Capital Markets groups are responsible for the valuation policies and procedures related to these assets. The Managing Director of the KEF Capital Markets group reports to the President of the KEF line of business. A weekly report that lists all equipment finance deals booked in the warehouse portfolio is distributed to both groups. On a quarterly basis, the KEF Accounting group prepares a detailed held-for-sale roll-forward schedule that is reconciled to the general ledger and the above-mentioned weekly report. KEF management uses the held-for-sale roll-forward schedule to determine whether an impairment adjustment is necessary in accordance with lower of cost or fair value guidelines.

Valuations of direct financing leases and operating lease assets held for sale are performed using an internal model that relies on market data, such as swap rates and bond ratings, as well as on our own assumptions about the exit market for the leases and details about the individual leases in the portfolio. The inputs based on our assumptions include changes in the value of leased items and internal credit ratings. These leases have been classified as Level 3 assets. KEF has master sale and assignment agreements with numerous institutional investors. Historically, multiple quotes are obtained, with the most reasonable formal quotes retained. These nonbinding quotes generally lead to a sale to one of the parties who provided the quote. Leases for which we receive a current nonbinding bid, and for which the sale is considered probable, may be classified as Level 2. The validity of these quotes is supported by historical and continued dealings with these institutions that have fulfilled the nonbinding quote in the past. In a distressed market where market data were not available, an estimate of the fair value of the leased asset may be used to value the lease, resulting in a Level 3 classification. In an inactive market, the market value of the assets held for sale is determined as the present value of the future cash flows discounted at the current buy rate. KEF Accounting calculates an estimated fair value buy rate based on the credit premium inherent in the relevant bond index and the appropriate swap rate on the measurement date. The amount of the adjustment is calculated as book value minus the present value of future cash flows discounted at the calculated buy rate.

Goodwill and other intangible assets. On a quarterly basis, we review impairment indicators to determine whether we need to evaluate the carrying amount of goodwill and other intangible assets assigned to Key Community Bank and Key Corporate Bank. We also perform an annual impairment test for goodwill. Accounting guidance permits an entity to first assess qualitative factors to determine whether additional goodwill impairment testing is required. We chose to utilize a qualitative assessment in our annual goodwill impairment testing performed during the fourth quarter of 2016. For additional information on the results of recent goodwill impairment testing, see Note 11 (“Goodwill and Other Intangible Assets”) beginning on page 166 of our 2016 Form 10-K.

The fair value of other intangible assets is calculated using a cash flow approach. While the calculation to test for recoverability uses a number of assumptions that are based on current market conditions, the calculation is based primarily on unobservable assumptions. Accordingly, these assets are classified as Level 3. Our lines of business, with oversight from our Accounting group, are responsible for routinely, at least quarterly, assessing whether impairment indicators are present. All indicators that signal that impairment may exist are appropriately considered in this analysis. An impairment loss is only recognized for a held-and-used, long-lived asset if the sum of its estimated future undiscounted cash flows used to test for recoverability is less than its carrying value.

Our primary assumptions include attrition rates, alternative costs of funds, and rates paid on deposits. For additional information on the results of other intangible assets impairment testing, see Note 11 (“Goodwill and Other Intangible Assets”) beginning on page 166 of our 2016 Form 10-K.

Other assets. OREO and other repossessed properties are valued based on inputs such as appraisals and third-party price opinions, less estimated selling costs. Generally, we classify these assets as Level 3, but OREO and other repossessed properties for which we receive binding purchase agreements are classified as Level 2. Returned lease inventory is valued based on market data for similar assets and is classified as Level 2. Assets that are acquired through, or in lieu of, loan foreclosures are recorded initially as held for sale at fair value less estimated selling costs at the date of foreclosure. After foreclosure, valuations are updated periodically, and current market conditions may require the assets to be marked down further to a new cost basis.

• Commercial Real Estate Valuation Process: When a loan is reclassified from loan status to OREO because we took possession of the collateral, the Asset Recovery Group Loan Officer, in consultation with our OREO group, obtains a broker price opinion or a third-party appraisal, which is used to establish the fair value of the underlying collateral. The determined fair value of the underlying collateral less estimated selling costs becomes the carrying value of the OREO asset. In addition to valuations from independent third-party sources, our OREO group also writes down the carrying balance of OREO assets once a bona fide offer is contractually accepted, where the accepted price is lower than the current balance of the particular OREO asset. The fair value of OREO property is re-evaluated every 90 days, and the OREO asset is adjusted as necessary.

• Residential Real Estate Valuation Process: The Asset Management team within our Risk Operations group is responsible for valuation policies and procedures of these loans. The current vendor partner provides monthly reporting of all broker price opinion evaluations, appraisals, and the monthly market plans. Market plans are reviewed monthly, and valuations are reviewed and tested monthly to ensure proper pricing has been established and guidelines are being met. Risk Operations Compliance validates and provides periodic testing of the valuation process. The Asset Management team reviews changes in fair value measurements. Third-party broker price opinions are reviewed every 180 days, and the fair value is written down based on changes to the valuation. External factors are documented and monitored as appropriate.

•

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets at March 31, 2017, and December 31, 2016, along with the valuation techniques used, are shown in the following table:

March 31, 2017	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Recurring
Other investments — principal investments — direct:	$	21	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.00 - 6.30 (6.20)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	11		Fair value of underlying collateral	Discount	00.00 - 70.00% (16.00%)

December 31, 2016	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Recurring
Other investments — principal investments — direct:	$	27	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.30 - 7.00 (6.50)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	11		Fair value of underlying collateral	Discount	00.00 - 70.00% (46.00%)

Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at March 31, 2017, and December 31, 2016, are shown in the following tables:

	March 31, 2017
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments (a)	$	3,074	$	3,074	—		—		—		—				$	3,074
Trading account assets (b)	921		1		$	920	—		—		—				921
Securities available for sale (b)	18,431		3		18,411		$	17	—		—				18,431
Held-to-maturity securities (c)	10,186		—		9,954		—		—		—				9,954
Other investments (b)	689		—		—		527		$	157	—				684
Loans, net of allowance (d)	85,255		—		83,520		—		—		—				83,520
Loans held for sale (b)	1,384		—		62		1,322		—		—				1,384
Derivative assets (b)	578		91		941		10		—		$	(464	)	(f)	578
LIABILITIES
Deposits with no stated maturity (a)	$	93,429	—		$	93,429	—		—		—				$	93,429
Time deposits (e)	10,553		—		10,649		—		—		—				10,649
Short-term borrowings (a)	1,385		$	214	1,171		—		—		—				1,385
Long-term debt (e)	12,324		12,372		289		—		—		—				12,661
Derivative liabilities (b)	255		78		701		—		—		$	(524	)	(f)	255

	December 31, 2016
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments (a)	$	3,452	$	3,452	—		—		—		—				$	3,452
Trading account assets (b)	867		—		$	867	—		—		—				867
Securities available for sale (b)	20,212		3		20,192		$	17	—		—				20,212
Held-to-maturity securities (c)	10,232		—		10,007		—		—		—				10,007
Other investments (b)	738		—		—		569		$	164	—				733
Loans, net of allowance (d)	85,180		—		—		83,285		—		—				83,285
Loans held for sale (b)	1,104		—		62		1,042		—		—				1,104
Derivative assets (b)	803		114		1,110		10		—		$	(431	)	(f)	803
LIABILITIES
Deposits with no stated maturity (a)	$	93,906	—		$	93,906	—		—		—				$	93,906
Time deposits (e)	10,181		—		10,267		—		—		—				10,267
Short-term borrowings (a)	2,310		$	192	2,118		—		—		—				2,310
Long-term debt (e)	12,384		12,386		304		—		—		—				12,690
Derivative liabilities (b)	636		102		918		—		—		$	(384	)	(f)	636

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” in this Note. Investments accounted for under the equity method are not included in this table.

(c) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities, and certain prepayment assumptions. We review the valuations derived from the models to ensure that they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(d) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(e) Fair values of time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

We use valuation methods based on exit market prices in accordance with applicable accounting guidance. We determine fair value based on assumptions pertaining to the factors that a market participant would consider in valuing the asset. A substantial portion of our fair value adjustments are related to liquidity. During 2016 and the first three months of 2017, the fair values of our loan portfolios generally remained stable, primarily due to increasing liquidity in the loan markets. If we were to use different assumptions, the fair values shown in the preceding table could change. Also, because the applicable accounting guidance for financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, the fair value amounts shown in the table above do not, by themselves, represent the underlying value of our company as a whole.

Education lending business. The discontinued education lending business consists of loans in portfolio recorded at carrying value with appropriate valuation reserves, and loans in portfolio recorded at fair value. All of these loans were excluded from the table above as follows:

• Loans at carrying value, net of allowance, of $1.5 billion ($1.3 billion at fair value) at March 31, 2017, and December 31, 2016;

• Portfolio loans at fair value of $3 million at March 31, 2017, and December 31, 2016.

These loans and securities are classified as Level 3 because we rely on unobservable inputs when determining fair value since observable market data is not available.

Residential real estate mortgage loans. Residential real estate mortgage loans with carrying amounts of $5.5 billion at March 31, 2017, and December 31, 2016 are included in “Loans, net of allowance” in the previous table.

Short-term financial instruments. For financial instruments with a remaining average life to maturity of less than six months, carrying amounts were used as an approximation of fair values.

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Securities

3 Months Ended

Mar. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Securities

7. Securities

Securities available for sale. These are securities that we intend to hold for an indefinite period of time but that may be sold in response to changes in interest rates, prepayment risk, liquidity needs, or other factors. Securities available for sale are reported at fair value. Unrealized gains and losses (net of income taxes) deemed temporary are recorded in equity as a component of AOCI on the balance sheet. Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “other income” on the income statement. “Other securities” held in the available-for-sale portfolio consist primarily of convertible preferred stock issued by privately held companies.

Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “other income” on the income statement or in AOCI on the balance sheet in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

Held-to-maturity securities. These are debt securities that we have the intent and ability to hold until maturity. Debt securities are carried at cost and adjusted for amortization of premiums and accretion of discounts using the interest method. This method produces a constant rate of return on the adjusted carrying amount.

“Other securities” held in the held-to-maturity portfolio consists primarily of foreign bonds.

Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “other income” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “other income” on the income statement or in AOCI on the balance sheet in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.

	March 31, 2017
in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations	$	188	—		$	3	$	185
States and political subdivisions	11		—		—		11
Agency residential collateralized mortgage obligations	14,790		$	29	256		14,563
Agency residential mortgage-backed securities	1,751		5		14		1,742
Agency commercial mortgage-backed securities	1,956		—		46		1,910
Other securities	21		—		1		20
Total securities available for sale	$	18,717	$	34	$	320	$	18,431
HELD TO MATURITY SECURITIES
Agency residential collateralized mortgage obligations	$	7,973	$	2	$	188	$	7,787
Agency residential mortgage-backed securities	605		—		5		600
Agency commercial mortgage-backed securities	1,593		3		44		1,552
Other securities	15		—		—		15
Total held-to-maturity securities	$	10,186	$	5	$	237	$	9,954

	December 31, 2016
in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations	$	188	—		$	4	$	184
States and political subdivisions	11		—		—		11
Agency residential collateralized mortgage obligations	16,652		$	31	275		16,408
Agency residential mortgage-backed securities	1,857		6		17		1,846
Agency commercial mortgage-backed securities	1,778		—		35		1,743
Other securities	21		—		1		20
Total securities available for sale	$	20,507	$	37	$	332	$	20,212
HELD TO MATURITY SECURITIES
Agency residential collateralized mortgage obligations	$	8,404	$	1	$	173	$	8,232
Agency residential mortgage-backed securities	629		—		5		624
Agency commercial mortgage-backed securities	1,184		1		49		1,136
Other securities	15		—		—		15
Total held-to-maturity securities	$	10,232	$	2	$	227	$	10,007

The following table summarizes our securities that were in an unrealized loss position as of March 31, 2017, and December 31, 2016.

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
in millions	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2017
Securities available for sale:
U.S Treasury, agencies, and corporations	$	185	$	3	—		—		$	185	$	3
Agency residential collateralized mortgage obligations	10,573		205		$	1,507	$	51	12,080		256
Agency residential mortgage-backed securities	1,527		14		—		—		1,527		14
Agency commercial mortgage-backed securities	1,910		46		—		—		1,910		46
Other securities (a)	—		—		3		1		3		1
Held-to-maturity:
Agency residential collateralized mortgage obligations	$	6,634	$	169	$	521	$	19	$	7,155	$	188
Agency residential mortgage-backed securities (a)	525		5		—		—		525		5
Agency commercial mortgage-backed securities	1,001		44		—		—		1,001		44
Other securities (b)	4		—		—		—		4		—
Total temporarily impaired securities	$	22,359	$	486	$	2,031	$	71	$	24,390	$	557
December 31, 2016
Securities available for sale:
U.S. Treasury, agencies, and corporations	$	182	$	4	—		—		$	182	$	4
Agency residential collateralized mortgage obligations	12,345		231		$	1,410	$	44	13,755		275
Agency residential mortgage-backed securities	1,452		17		—		—		1,452		17
Agency commercial mortgage-backed securities	1,482		35		—		—		1,482		35
Other securities (a)	2		—		3		1		5		1
Held-to-maturity:
Agency residential collateralized mortgage obligations	7,028		156		518		17		7,546		173
Agency residential mortgage-backed securities	547		5		—		—		547		5
Agency commercial mortgage-backed securities	996		49		—		—		996		49
Other securities (b)	4		—		—		—		4		—
Total temporarily impaired securities	$	24,038	$	497	$	1,931	$	62	$	25,969	$	559

(a) Gross unrealized losses totaled less than $1 million for other securities available for sale at March 31, 2017, and December 31, 2016.

(b) Gross unrealized losses totaled less than $1 million for other securities held to maturity at March 31, 2017, and December 31, 2016.

At March 31, 2017, we had $256 million of gross unrealized losses related to 367 fixed-rate agency residential CMOs that we invested in as part of our overall A/LM strategy. These securities had a weighted-average maturity of 4.19 years at March 31, 2017. We also had $14 million of gross unrealized losses related to 234 agency residential mortgage-backed securities positions, which had a weighted-average maturity of 3.85 years at March 31, 2017. Because these securities have a fixed interest rate, their fair value is sensitive to movements in market interest rates. These unrealized losses are considered temporary since we expect to collect all contractually due amounts from these securities. Accordingly, these investments were reduced to their fair value through OCI, not through earnings.

We regularly assess our securities portfolio for OTTI. The assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery.

The debt securities identified as OTTI are written down to their current fair value. For those debt securities that we intend to sell, or more likely than not will be required to sell prior to the expected recovery of the amortized cost, the entire impairment (i.e., the difference between amortized cost and the fair value) is recognized in earnings. For those debt securities that we do not intend to sell, or more likely than not will not be required to sell prior to expected recovery, the credit portion of OTTI is recognized in earnings, while the remaining OTTI is recognized in equity as a component of AOCI on the balance sheet. As shown in the following table, we did not have any impairment losses recognized in earnings for the three months ended March 31, 2017.

Three months ended March 31, 2017
in millions
Balance at December 31, 2016	$	4
Impairment recognized in earnings	—
Balance at March 31, 2017	$	4

For the three months ended March 31, 2017, net realized securities gains totaled $1 million.

At March 31, 2017, securities available for sale and held-to-maturity securities totaling $8.9 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

The following table shows our securities by remaining maturity. CMOs and other mortgage-backed securities (both of which are included in the securities available-for-sale portfolio) as well as the CMOs in the held-to-maturity portfolio are presented based on their expected average lives. The remaining securities, in both the available-for-sale and held-to-maturity portfolios, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

	Securities Available for Sale				Held to Maturity Securities
March 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value
in millions
Due in one year or less	$	177	$	179	$	55	$	56
Due after one through five years	16,595		16,354		6,935		6,798
Due after five through ten years	1,737		1,693		2,936		2,862
Due after ten years	208		205		260		238
Total	$	18,717	$	18,431	$	10,186	$	9,954

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Derivatives and Hedging Activities

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

8. Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require a small or no net investment, and allow for the net settlement of positions. A derivative’s notional amount serves as the basis for the payment provision of the contract and takes the form of units, such as shares or dollars. A derivative’s underlying variable is a specified interest rate, security price, commodity price, foreign exchange rate, index, or other variable. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the fair value of the derivative contract.

The primary derivatives that we use are interest rate swaps, caps, floors, and futures; foreign exchange contracts; commodity derivatives; and credit derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in our loan portfolio, hedge against changes in foreign currency exchange rates, and meet client financing and hedging needs. As further discussed in this note:

• interest rate risk is the risk that the EVE or net interest income will be adversely affected by fluctuations in interest rates;

• credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms; and

• foreign exchange risk is the risk that an exchange rate will adversely affect the fair value of a financial instrument.

Derivative assets and liabilities are recorded at fair value on the balance sheet, after taking into account the effects of bilateral collateral and master netting agreements. These agreements allow us to settle all derivative contracts held with a single counterparty on a net basis and to offset net derivative positions with related cash collateral, where applicable. As a result, we may have derivative contracts with negative fair values included in derivative assets on the balance sheet and contracts with positive fair values included in derivative liabilities.

At March 31, 2017, after taking into account the effects of bilateral collateral and master netting agreements, we had $27 million of derivative assets and a positive $8 million of derivative liabilities that relate to contracts entered into for hedging purposes. Our hedging derivative liabilities are in an asset position largely because we have contracts with positive fair values as a result of master netting agreements. As of the same date, after taking into account the effects of bilateral collateral and master netting agreements and a reserve for potential future losses, we had derivative assets of $551 million and derivative liabilities of $263 million that were not designated as hedging instruments.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives” beginning on page 112 of our 2016 Form 10-K.

Derivatives Designated in Hedge Relationships

Net interest income and the EVE change in response to changes in the mix of assets, liabilities, and off-balance sheet instruments and the associated interest rates tied to each instrument. In addition, differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities cause net interest income and the EVE to fluctuate. We utilize derivatives that have been designated as part of a hedge relationship in accordance with the applicable accounting guidance to manage net interest income and EVE to within our stated risk tolerances. The primary derivative instruments used to manage interest rate risk are interest rate swaps, which convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index.

We designate certain “receive fixed/pay variable” interest rate swaps as fair value hedges. These contracts convert certain fixed-rate long-term debt into variable-rate obligations, thereby modifying our exposure to changes in interest rates. As a result, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts.

Similarly, we designate certain “receive fixed/pay variable” interest rate swaps as cash flow hedges. These contracts effectively convert certain floating-rate loans into fixed-rate loans to reduce the potential adverse effect of interest rate decreases on future interest income. Again, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts.

We also designate certain “pay fixed/receive variable” interest rate swaps as cash flow hedges. These swaps convert certain floating-rate debt into fixed-rate debt. We also use these swaps to manage the interest rate risk associated with anticipated sales of certain commercial real estate loans. The swaps protect against the possible short-term decline in the value of the loans that could result from changes in interest rates between the time they are originated and the time they are sold.

We use foreign currency forward transactions to hedge the foreign currency exposure of our net investment in various foreign equipment finance entities. These entities are denominated in a non-U.S. currency. These swaps are designated as net investment hedges to mitigate the exposure of measuring the net investment at the spot foreign exchange rate.

Derivatives Not Designated in Hedge Relationships

On occasion, we enter into interest rate swap contracts to manage economic risks but do not designate the instruments in hedge relationships. Excluding contracts addressing customer exposures, the amount of derivatives hedging risks on an economic basis at March 31, 2017, was not significant.

Like other financial services institutions, we originate loans and extend credit, both of which activities expose us to credit risk. We actively manage our overall loan portfolio and the associated credit risk in a manner consistent with asset quality objectives and concentration risk tolerances to mitigate portfolio credit risk. Purchasing credit default swaps enables us to transfer to a third party a portion of the credit risk associated with a particular extension of credit, including situations where there is a forecast sale of loans. Beginning in the first quarter of 2014, we began purchasing credit default swaps to reduce the credit risk associated with the debt securities held in our trading portfolio. We may also sell credit derivatives to offset our purchased credit default swap position prior to maturity. Although we use credit default swaps for risk management purposes, they are not treated as hedging instruments.

We also enter into derivative contracts for other purposes, including:

• interest rate swap, cap, and floor contracts generally entered into to accommodate the needs of commercial loan clients;

• energy and base metal swap and option contracts entered into to accommodate the needs of clients;

• foreign exchange forward and option contracts entered into primarily to accommodate the needs of clients; and

• futures contracts and positions with third parties that are intended to offset or mitigate the interest rate or market risk related to client positions discussed above.

These contracts are not designated as part of hedge relationships.

Fair Values, Volume of Activity, and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2017, and December 31, 2016. The change in the notional amounts of these derivatives by type from December 31, 2016, to March 31, 2017, indicates the volume of our derivative transaction activity during the first three months of 2017. The notional amounts are not affected by bilateral collateral and master netting agreements. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Where master netting agreements are not in effect or are not enforceable under bankruptcy laws, we do not adjust those derivative assets and liabilities with counterparties. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:

	March 31, 2017								December 31, 2016
			Fair Value								Fair Value
in millions	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	24,917	$	98		$	20		$	24,237	$	189		$	94
Foreign exchange	284		3			2			282		6			4
Total	25,201		101			22			24,519		195			98
Derivatives not designated as hedging instruments:
Interest rate	58,963		684			511			55,315		741			643
Foreign exchange	6,897		95			84			6,230		117			109
Commodity	1,569		150			140			1,474		176			165
Credit	418		3			6			360		1			4
Other (a)	2,625		9			16			390		4			1
Total	70,472		941			757			63,769		1,039			922
Netting adjustments (b)	—		(464		)	(524		)	—		(431		)	(384		)
Net derivatives in the balance sheet	95,673		578			255			88,288		803			636
Other collateral (c)	—		(11		)	(71		)	—		(21		)	(97		)
Net derivative amounts	$	95,673	$	567		$	184		$	88,288	$	782		$	539

(a) Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when issued securities, and when-issued security transactions in connection with an “at-the-market” equity offering program.

(b) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(c) Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Fair value hedges. Instruments designated as fair value hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. The effective portion of a change in the fair value of an instrument designated as a fair value hedge is recorded in earnings at the same time as a change in fair value of the hedged item, resulting in no effect on net income. The ineffective portion of a change in the fair value of such a hedging instrument is recorded in “other income” on the income statement with no corresponding offset. During the three-month period ended March 31, 2017, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some immaterial ineffectiveness in our hedging relationships, all of our fair value hedges remained “highly effective” as of March 31, 2017.

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement.

	Three months ended March 31, 2017
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative			Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	(35	)	Long-term debt	Other income	$	35	(a)
Interest rate	Interest expense — Long-term debt	18
Total		$	(17	)			$	35

	Three months ended March 31, 2016
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	115	Long-term debt	Other income	$	(115	)	(a)
Interest rate	Interest expense — Long-term debt	27
Total		$	142			$	(115	)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

Cash flow hedges. Instruments designated as cash flow hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a cash flow hedge is recorded as a component of AOCI on the balance sheet. This amount is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we pay variable-rate interest on debt, receive variable-rate interest on commercial loans, or sell commercial real estate loans). The ineffective portion of cash flow hedging transactions is included in “other income” on the income statement. During the three-month period ended March 31, 2017, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some immaterial ineffectiveness in our hedging relationships, all of our cash flow hedges remained “highly effective” as of March 31, 2017.

Considering the interest rates, yield curves, and notional amounts as of March 31, 2017, we would expect to reclassify an estimated $8 million of after-tax net gains on derivative instruments designated as cash flow hedges from AOCI to income during the next 12 months. In addition, we expect to reclassify approximately $3 million of net losses related to terminated cash flow hedges from AOCI to income during the next 12 months. As of March 31, 2017, the maximum length of time over which we hedge forecast transactions is 11 years.

Net investment hedges. We enter into foreign currency forward contracts to hedge our exposure to changes in the carrying value of our investments in foreign subsidiaries as a result of changes in the related foreign exchange rates. Instruments designated as net investment hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a net investment hedge is recorded as a component of AOCI on the balance sheet when the terms of the derivative match the notional and currency risk being hedged. The effective portion is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we dispose of or liquidate a foreign subsidiary). At March 31, 2017, AOCI reflected unrecognized, after-tax gains totaling $38 million related to cumulative changes in the fair value of our net investment hedges, which offset the unrecognized, after-tax foreign currency losses on net investment balances. The ineffective portion of net investment hedging transactions is included in “other income” on the income statement, but there was no net investment hedge ineffectiveness as of March 31, 2017. We did not exclude any portion of our hedging instruments from the assessment of hedge effectiveness during the three-month period ended March 31, 2017.

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

	Three months ended March 31, 2017
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	(22	)	Interest income — Loans	$	15		Other income	—
Interest rate	—			Interest expense — Long-term debt	(1		)	Other income	—
Interest rate	—			Investment banking and debt placement fees	—			Other income	—
Net Investment Hedges
Foreign exchange contracts	(3		)	Other Income	—			Other income	—
Total	$	(25	)		$	14			—

	Three months ended March 31, 2016
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	133		Interest income — Loans	$	23		Other income	—
Interest rate	(4		)	Interest expense — Long-term debt	(1		)	Other income	—
Interest rate	(1		)	Investment banking and debt placement fees	—			Other income	—
Net Investment Hedges
Foreign exchange contracts	(14		)	Other Income	—			Other income	—
Total	$	114			$	22			—

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

in millions	December 31, 2016			2017 Hedging Activity			Reclassification of Gains to Net Income			March 31, 2017
AOCI resulting from cash flow and net investment hedges	$	(14	)	$	(15	)	$	(9	)	$	(38	)

Nonhedging instruments. Our derivatives that are not designated as hedging instruments are recorded at fair value in “derivative assets” and “derivative liabilities” on the balance sheet. Adjustments to the fair values of these instruments, as well as any premium paid or received, are included in “corporate services income,” “consumer mortgage income,” and “other income” on the income statement.

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement.

	Three months ended March 31, 2017											Three months ended March 31, 2016
in millions	Corporate Services Income		Consumer Mortgage Income (a)			Other Income			Total			Corporate Services Income		Other Income			Total
NET GAINS (LOSSES)
Interest rate	$	6	—			$	(1	)	$	5		$	6	$	(1	)	$	5
Foreign exchange	11		—			—			11			10		—			10
Commodity	2		—			—			2			1		—			1
Credit	1		—			(5		)	(4		)	1		(2		)	(1		)
Other	—		$	(1	)	(1		)	(2		)	—		—			—
Total net gains (losses)	$	20	$	(1	)	$	(7	)	$	12		$	18	$	(3	)	$	15

(a) As a result of the First Niagara acquisition, we began recognizing net gains (losses) on other derivatives related to our residential mortgage banking activities in “consumer mortgage income” in December 2016.

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected positive replacement value of the contracts. We use several means to mitigate and manage exposure to credit risk on derivative contracts. We generally enter into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. Additionally, we monitor counterparty credit risk exposure on each contract to determine appropriate limits on our total credit exposure across all product types. We review our collateral positions on a daily basis and exchange collateral with our counterparties in accordance with standard ISDA documentation, central clearing rules, and other related agreements. We generally hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises, or GNMA. Cash collateral of $25 million was included in derivative assets on the balance sheet at March 31, 2017, compared to $155 million of cash collateral netted against derivative assets at December 31, 2016. The cash collateral netted against derivative liabilities totaled $35 million at March 31, 2017, and $108 million at December 31, 2016.

Beginning in the first quarter of 2017, the relevant agreements that allow us to access the central clearing organizations to clear derivative transactions became qualified master netting agreements resulting in a change in how cash collateral is reflected in our balance sheet and related disclosures as of March 31, 2017. As of March 31, 2017, all cash collateral exchanged with central clearing organizations is netted against the related derivative contracts in our balance sheet and related disclosures. Cash collateral exchanged with central clearing organizations was included in “short-term investments” and “NOW and money market deposit accounts” on the balance sheet in all periods prior to March 31, 2017. At December 31, 2016, we posted $448 million of cash collateral with clearing organizations and held $59 million of cash collateral from clearing organizations.

Additionally, the CME amended its rulebook effective January 3, 2017, to legally characterize variation margin payments made to and received from the CME as settlement of derivatives, not collateral against derivative exposure. As a result, variation margin payments with the CME are presented in the balance sheet and related disclosures as part of the gross fair value of CME-cleared derivative assets and liabilities. At March 31, 2017 we had paid $194 million and received $68 million in variation margin to settle CME-cleared derivatives. In addition, under the CME’s settlement rulebook, CME-cleared derivative assets and liabilities are offset against one another to determine the gross asset or liability exposure of CME-cleared derivatives.

Netting cash collateral exchanged with all central clearing organizations and applying variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction of net derivative assets on our balance sheet of $121 million and a reduction of net derivative liabilities on our balance sheet of $394 million as of March 31, 2017, as compared to December 31, 2016.

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

in millions	March 31, 2017			December 31, 2016
Interest rate	$	452		$	782
Foreign exchange	41			62
Commodity	50			110
Credit	1			—
Other	9			4
Derivative assets before collateral	553			958
Less: Related collateral	(25		)	155
Total derivative assets	$	578		$	803

We enter into derivative transactions with two primary groups: broker-dealers and banks, and clients. Given that these groups have different economic characteristics, we have different methods for managing counterparty credit exposure and credit risk.

We enter into transactions with broker-dealers and banks for various risk management purposes. These types of transactions are generally high dollar volume. We generally enter into bilateral collateral and master netting agreements with these counterparties. We began clearing certain types of derivative transactions with these counterparties in June 2013, whereby the central clearing organizations become our counterparties subsequent to novation of the original derivative contracts. In addition, we began entering into derivative contracts through swap execution facilities during the first quarter of 2014. The swap clearing and swap trade execution requirements were mandated by the Dodd-Frank Act for the purpose of reducing counterparty credit risk and increasing transparency in the derivative market. At March 31, 2017, we had gross exposure of $464 million to broker-dealers and banks. We had net exposure of $239 million after the application of master netting agreements and cash collateral, where such qualifying agreements exist. We had net exposure of $215 million after considering $24 million of additional collateral held in the form of securities.

We enter into transactions with clients to accommodate their business needs. These types of transactions are generally low dollar volume. We generally enter into master netting agreements with these counterparties. In addition, we mitigate our overall portfolio exposure and market risk by buying and selling U.S. Treasuries and Eurodollar futures and entering into offsetting positions and other derivative contracts, sometimes with entities other than broker-dealers and banks. Due to the smaller size and magnitude of the individual contracts with clients, we generally do not exchange collateral in connection with these derivative transactions. To address the risk of default associated with the uncollateralized contracts, we have established a credit valuation adjustment (included in “derivative assets”) in the amount of $5 million at March 31, 2017, which we estimate to be the potential future losses on amounts due from client counterparties in the event of default. At March 31, 2017, we had gross exposure of $382 million to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements. We had net exposure of $339 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve. 

Credit Derivatives

We are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. We may also sell credit derivatives, mainly single-name credit default swaps, to offset our purchased credit default swap positions prior to maturity.

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of March 31, 2017, and December 31, 2016. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.

	March 31, 2017							December 31, 2016
in millions	Purchased			Sold	Net			Purchased			Sold		Net
Single-name credit default swaps	$	(2	)	—	$	(2	)	$	(2	)	—		$	(2	)
Traded credit default swap indices	(1		)	—	(1		)	(1		)	—		(1		)
Other (a)	—			—	—			—			$	—	—
Total credit derivatives	$	(3	)	—	$	(3	)	$	(3	)	$	—	(3		)

(a) As of both March 31, 2017, and December 31, 2016, the fair value of other credit derivatives sold totaled less than $1 million.

Single-name credit default swaps are bilateral contracts whereby the seller agrees, for a premium, to provide protection against the credit risk of a specific entity (the “reference entity”) in connection with a specific debt obligation. The protected credit risk is related to adverse credit events, such as bankruptcy, failure to make payments, and acceleration or restructuring of obligations, identified in the credit derivative contract. As the seller of a single-name credit derivative, we may settle in

one of two ways if the underlying reference entity experiences a predefined credit event. We may be required to pay the purchaser the difference between the par value and the market price of the debt obligation (cash settlement) or receive the specified referenced asset in exchange for payment of the par value (physical settlement). If we effect a physical settlement and receive our portion of the related debt obligation, we will join other creditors in the liquidation process, which may enable us to recover a portion of the amount paid under the credit default swap contract. We also may purchase offsetting credit derivatives for the same reference entity from third parties that will permit us to recover the amount we pay should a credit event occur.

A traded credit default swap index represents a position on a basket or portfolio of reference entities. As a seller of protection on a credit default swap index, we would be required to pay the purchaser if one or more of the entities in the index had a credit event. Upon a credit event, the amount payable is based on the percentage of the notional amount allocated to the specific defaulting entity.

The majority of transactions represented by the “other” category shown in the above table are risk participation agreements. In these transactions, the lead participant has a swap agreement with a customer. The lead participant (purchaser of protection) then enters into a risk participation agreement with a counterparty (seller of protection), under which the counterparty receives a fee to accept a portion of the lead participant’s credit risk. If the customer defaults on the swap contract, the counterparty to the risk participation agreement must reimburse the lead participant for the counterparty’s percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, the counterparty has no reimbursement requirements. If the customer defaults on the swap contract and the seller fulfills its payment obligations under the risk participation agreement, the seller is entitled to a pro rata share of the lead participant’s claims against the customer under the terms of the swap agreement.

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2017, and December 31, 2016. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	March 31, 2017					December 31, 2016
dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	8	11.40	12.85	%	$	4	6.49	17.93	%
Total credit derivatives sold	$	8	—	—		$	4	—	—

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At March 31, 2017, KeyBank’s rating was “A3” with Moody’s and “A-” with S&P, and KeyCorp’s rating was “Baa1” with Moody’s and “BBB+” with S&P. As of March 31, 2017, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) held by KeyBank that were in a net liability position totaled $98 million, which comprised of $164 million in derivative assets and $262 million in derivative liabilities. We had $100 million in cash and securities collateral posted to cover those positions as of March 31, 2017. There were no derivative contracts with credit risk contingent features held by KeyCorp at March 31, 2017.

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of March 31, 2017, and December 31, 2016. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of March 31, 2017, and December 31, 2016, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of December 31, 2016. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.

	March 31, 2017				December 31, 2016
in millions	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings	A3		A-		A3		A-
One rating downgrade	$	2	$	2	$	2	$	2
Two rating downgrades	2		2		2		2
Three rating downgrades	2		2		4		4

KeyBank’s long-term senior unsecured credit rating was four ratings above noninvestment grade at Moody’s and S&P as of March 31, 2017, and December 31, 2016. If KeyBank’s ratings had been downgraded below investment grade as of March 31, 2017, or December 31, 2016, payments of up to $3 million and $4 million, respectively, would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted. If KeyCorp’s ratings had been downgraded below investment grade as of December 31, 2016, payments of less than $1 million would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted.

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Mortgage Servicing Assets

3 Months Ended

Mar. 31, 2017

Servicing Asset [Abstract]

Mortgage Servicing Assets

9. Mortgage Servicing Assets

We originate and periodically sell commercial and residential mortgage loans but continue to service those loans for the buyers. We also may purchase the right to service commercial mortgage loans for other lenders. We record a servicing asset if we purchase or retain the right to service loans in exchange for servicing fees that exceed the going market servicing rate and are considered more than adequate compensation for servicing. Commercial and residential mortgage servicing assets are recorded as a component of “accrued income and other assets” on the balance sheet.

Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets.”

Commercial Mortgage Servicing

Changes in the carrying amount of commercial mortgage servicing assets are summarized as follows:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period	$	356		$	321
Servicing retained from loan sales	28			7
Purchases	7			12
Amortization	(22		)	(22		)
Balance at end of period	$	369		$	318
Fair value at end of period	$	480		$	408

The fair value of commercial mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted average of the significant unobservable inputs used to determine the fair value of our commercial mortgage servicing assets at March 31, 2017, and December 31, 2016, along with the valuation techniques, are shown in the following table:

March 31, 2017	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Commercial mortgage servicing assets	Discounted cash flow	Expected defaults	1.00 - 3.00% (1.30%)
		Residual cash flows discount rate	7.00 - 15.00% (8.60%)
		Escrow earn rate	1.20 - 3.20% (2.60%)
		Servicing cost	$150 - $38,500 ($1,342)
		Loan assumption rate	0.00 - 3.00% (1.25%)
		Percentage late	0.00 - 2.00% (.31%)

December 31, 2016	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Commercial mortgage servicing assets	Discounted cash flow	Expected defaults	1.00 - 3.00% (1.40%)
		Residual cash flows discount rate	7.00 - 12.00% (8.00%)
		Escrow earn rate	1.10 - 3.00% (2.40%)
		Servicing cost	$150 - $2,700 ($1,124)
		Loan assumption rate	0.00 - 3.00% (1.13%)
		Percentage late	0.00 - 2.00% (.34%)

If these economic assumptions change or prove incorrect, the fair value of commercial mortgage servicing assets may also change. Expected credit losses, escrow earning rates, and discount rates are critical to the valuation of commercial mortgage servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates, and reflect historical data associated with the commercial mortgage loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. A decrease in the value assigned to the escrow earning rates would cause a decrease in the fair value of our commercial mortgage servicing assets. An increase in the assumed default rates of commercial mortgage loans or an increase in the assigned discount rates would cause a decrease in the fair value of our commercial mortgage servicing assets. Prepayment activity on commercial serviced loans does not significantly affect the valuation of our commercial mortgage servicing assets. Unlike residential mortgages, commercial mortgages experience significantly lower prepayments due to certain contractual restrictions affecting the borrower’s ability to prepay the mortgage.

We have elected to account for commercial servicing assets using the amortization method. The amortization of commercial servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of commercial servicing assets for each period, as shown in the table at the beginning of this note, is recorded as a reduction to contractual fee income. The contractual fee income from servicing commercial mortgage loans totaled $38 million for the three-month period ended March 31, 2017, and $35 million for the three-month period ended March 31, 2016. This fee income was offset by $22 million of amortization for the three-month period ended March 31, 2017, and $23 million for the three-month period ended March 31, 2016. Both the contractual fee income and the amortization are recorded, net, in “mortgage servicing fees” on the income statement.

Additional information pertaining to the accounting for commercial mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” on page 113 of our 2016 Form 10-K.

Residential Mortgage Servicing

With the First Niagara acquisition, we acquired residential mortgage servicing assets with a fair value of $28 million as of the Acquisition Date.

Changes in the carrying amount of residential mortgage servicing assets are summarized as follows:

	Three months ended March 31, 2017
in millions
Balance at beginning of period	$	28
Servicing retained from loan sales	2
Amortization	(1		)
Balance at end of period	$	29
Fair value at end of period	$	35

The fair value of mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted-average of the significant unobservable inputs used to fair value our mortgage servicing assets at March 31, 2017, along with the valuation techniques, are shown in the following table:

March 31, 2017	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Residential mortgage servicing assets	Discounted cash flow	Prepayment speed	7.68 - 19.68% (9.24%)
		Discount rate	8.50 - 11.00% (8.55%)
		Servicing cost	$76 - $3,335 ($83.03)

If these economic assumptions change or prove incorrect, the fair value of residential mortgage servicing assets may also change. Prepayment speed, discount rates, and servicing cost are critical to the valuation of servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates, and reflect historical data associated with the loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. An increase in the prepayment speed, assigned discount rates, and servicing cost assumptions would also cause a negative impact on the fair value of our residential mortgage servicing assets.

We have elected to account for residential servicing assets using the amortization method. The amortization of residential servicing assets is determined in proportion to, and over the period of, the estimated net residential servicing income. The amortization of servicing assets for March 31, 2017, as shown in the table above, is recorded as a reduction to contractual fee income. The contractual fee income from servicing residential mortgage loans totaled $3 million for the three-month period ended March 31, 2017. This fee income was offset by $1 million of amortization for the three-month period ended March 31, 2017. Both the contractual fee income and the amortization are recorded, net, in “mortgage servicing fees” on the income statement.

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Variable Interest Entities

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

10. Variable Interest Entities

A VIE is a partnership, limited liability company, trust, or other legal entity that meets any one of the following criteria:

• The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

• The entity’s investors lack the power to direct the activities that most significantly affect the entity’s economic performance.

• The entity’s equity at risk holders do not have the obligation to absorb losses or the right to receive residual returns.

• The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

Our significant VIEs are summarized below. We define a “significant interest” in a VIE as a subordinated interest that exposes us to a significant portion, but not the majority, of the VIE’s expected losses or residual returns, even though we do not have the power to direct the activities that most significantly affect the entity’s economic performance. KCC and KPP principal investments are newly assessed VIEs under the amended consolidation guidance. Additional information on the amended consolidation guidance is provided in Note 1 (“Basis of Presentation and Accounting Policies”).

LIHTC investments.Through KCDC, we have made investments directly and indirectly in LIHTC operating partnerships formed by third parties. As a limited partner in these operating partnerships, we are allocated tax credits and deductions associated with the underlying properties. We have determined that we are not the primary beneficiary of these investments because the general partners have the power to direct the activities that most significantly influence the economic performance of their respective partnerships and have the obligation to absorb expected losses and the right to receive residual returns. As we are not the primary beneficiary of these investments, we do not include them in our corporate consolidation.

Our maximum exposure to loss in connection with these partnerships consists of our unamortized investment balance plus any unfunded equity commitments and tax credits claimed but subject to recapture. We had $1.2 billion of investments in LIHTC operating partnerships at both March 31, 2017, and December 31, 2016. These investments are recorded in “accrued income and other assets” on our balance sheet. We do not have any loss reserves recorded related to these investments because we believe the likelihood of any loss to be remote. For all legally binding, unfunded equity commitments, we increase our recognized investment and recognize a liability. As of March 31, 2017, and December 31, 2016, we had liabilities of $439 million and $462 million, respectively, related to investments in qualified affordable housing projects, which are recorded in “accrued expenses and other liabilities” on our balance sheet. We continue to invest in these LIHTC operating partnerships.

The assets and liabilities presented in the table below convey the size of KCDC’s direct and indirect investments at March 31, 2017, and December 31, 2016. As these investments represent unconsolidated VIEs, the assets and liabilities of the investments themselves are not recorded on our balance sheet.

	Unconsolidated VIEs
in millions	Total Assets		Total Liabilities		Maximum Exposure to Loss
March 31, 2017
LIHTC investments	$	4,785	$	1,972	$	1,451
December 31, 2016
LIHTC investments	$	4,814	$	2,003	$	1,465

We amortize our LIHTC investments over the period that we expect to receive the tax benefits. During the first three months of 2017, we recognized $40 million of amortization and $39 million of tax credits associated with these investments within “income taxes” on our income statement. During the first three months of 2016, we recognized $33 million of amortization and $33 million of tax credits associated with these investments within “income taxes” on our income statement.

Principal investments.Through our principal investing entity, KCC, we have made investments in private equity funds engaged in venture- and growth-oriented investing. As a limited partner to these funds, KCC records these investments at fair value and receives distributions from the funds in accordance with the funds’ partnership agreements. We are not the primary beneficiary of these investments as we do not hold the power to direct the activities that most significantly affect the funds’ economic performance. Such power rests with the funds’ general partners. In addition, we have neither the obligation to absorb the funds’ expected losses nor the right to receive their residual returns. Our voting rights are also disproportionate to our economic interests, and substantially all of the funds’ activities are conducted on behalf of investors with disproportionally few voting rights. Because we are not the primary beneficiary of these investments, we do not consolidate them.

Our maximum exposure to loss associated with indirect principal investments consists of the investments’ fair value plus any unfunded equity commitments. The fair value of our indirect principal investments totaled $155 million and $158 million at March 31, 2017, and December 31, 2016, respectively. These investments are recorded in “other investments” on our balance sheet. Additional information on indirect principal investments is provided in Note 6 (“Fair Value Measurements”). The table below reflects the size of the private equity funds in which KCC was invested as well as our maximum exposure to loss in connection with these investments at March 31, 2017.

	Unconsolidated VIEs
in millions	Total Assets		Total Liabilities		Maximum Exposure to Loss
March 31, 2017
KCC indirect investments	$	19,029	$	135	$	192
December 31, 2016
KCC indirect investments	$	32,755	$	201	$	195

Other unconsolidated VIEs. We are involved with other various entities that we have determined to be VIEs in the normal course of business. We have determined that we are not the primary beneficiary of these partnerships because the general partners have the power to direct the activities that most significantly impact their economic performance. Our assets associated with these unconsolidated VIEs totaled $172 million at March 31, 2017, and $178 million at December 31, 2016, and primarily consisted of our investments in these entities. These assets are recorded in “accrued income and other assets,” “other investments,” and “securities available for sale” on our balance sheet. We had liabilities totaling $4 million associated with these unconsolidated VIEs at both March 31, 2017, and December 31, 2016. These liabilities are recorded in “accrued expenses and other liabilities” on our balance sheet.

Consolidated VIEs.Through our principal investing entity, KPP, we have formed and funded operating entities that provide management and other related services to our investment company funds, which directly invest in portfolio companies. In return for providing services to our direct investment funds, these entities’ receive a minority equity interest in the funds. This minority equity ownership is recorded at fair value on the entities financial statements. Additional information on our direct principal investments is provided in Note 6 (“Fair Value Measurements”). While other equity investors manage the daily operations of these entities, we retain the power, through voting rights, to direct the activities of the entities that most significantly affect their economic performance. In addition, we have the obligation to absorb losses and the right to receive residual returns that could potentially be significant to these entities. As a result, we have determined that we are the primary beneficiary of these funds and have consolidated them since formation. The assets of these KPP entities that can only be used to settle the entities’ obligations totaled $3 million at March 31, 2017, and $1 million at December 31, 2016. These assets are recorded in “cash and due from banks” and “accrued income and other assets” on our balance sheet. The entities had no liabilities at March 31, 2017, nor at December 31, 2016, and other equity investors have no recourse to our general credit.

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Income Taxes

3 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Income Tax Provision

In accordance with the applicable accounting guidance, the principal method established for computing the provision for income taxes in interim periods requires us to make our best estimate of the effective tax rate expected to be applicable for the full year. This estimated effective tax rate is then applied to interim consolidated pre-tax operating income to determine the interim provision for income taxes.

The effective tax rate, which is the provision for income taxes as a percentage of income from continuing operations before income taxes, was 22.4% for the first quarter of 2017 and 23.0% for the first quarter of 2016. The effective tax rates are below our combined federal and state statutory tax rate of 37.2% primarily due to income from investments in tax-advantaged assets such as corporate-owned life insurance and credits associated with renewable energy and low-income housing investments. The effective tax rates for the three months ended March 31, 2017, and March 31, 2016, were favorably affected by net discrete income tax benefits of 4.7% and 1%, respectively.

The tax rate for the first quarter of 2017 was also significantly reduced due to merger-related charges of $81 million. Excluding those expenses, the tax rate for the first quarter of 2017 was 24.8%.

Deferred Tax Asset

At March 31, 2017, from continuing operations we had a net deferred tax asset of $468 million, compared to a net deferred tax asset of $607 million at December 31, 2016, included in “accrued income and other assets” on the balance sheet. At March 31, 2017, deferred tax assets were affected by the First Niagara acquisition including certain purchase accounting adjustments and changes in market conditions that affect the mark-to-market deferred tax adjustment on securities.

To determine the amount of deferred tax assets that are more likely than not to be realized, and therefore recorded, we conduct a quarterly assessment of all available evidence. This evidence includes, but is not limited to, taxable income in prior periods, projected future taxable income, and projected future reversals of deferred tax items. These assessments involve a degree of subjectivity and may undergo change. Based on these criteria, we had a valuation allowance of $26 million at March 31, 2017, and $26 million at December 31, 2016. The valuation allowance is associated with certain state net operating loss carryforwards, state credit carryforwards, and federal and state capital loss carryforwards.

Unrecognized Tax Benefits

As permitted under the applicable accounting guidance for income taxes, it is our policy to recognize interest and penalties related to unrecognized tax benefits in “income tax expense.” At March 31, 2017, Key’s unrecognized tax benefits were $50 million.

Pre-1988 Bank Reserves Acquired in a Business Combination

As a result of the First Niagara acquisition, at March 31, 2017, the retained earnings of KeyBank included approximately $92 million of allocated bad debt deductions for which no income taxes have been recorded. Under current federal law, these

reserves are subject to recapture into taxable income if KeyBank, or any successor, fails to maintain its bank status under the

Internal Revenue Code or makes non-dividend distributions or distributions greater than its accumulated earnings and profits.

No deferred tax liability has been established as these events are not expected to occur in the foreseeable future.

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Acquisition, Divestiture, and Discontinued Operations

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Acquisition, Divestiture, and Discontinued Operations

12. Acquisition, Divestiture, and Discontinued Operations

Acquisition

First Niagara Financial Group, Inc. As previously disclosed, on October 30, 2015, KeyCorp entered into a definitive agreement and plan of merger (“Agreement”) to acquire all of the outstanding capital stock of First Niagara, headquartered in Buffalo, New York. On August 1, 2016, First Niagara merged with and into KeyCorp, with KeyCorp as the surviving entity. The total consideration for the transaction was approximately $4.0 billion. Under the terms of the Agreement, at the effective time of the merger, each share of First Niagara common stock was converted into the right to receive (i) 0.680 of a share of KeyCorp common stock and (ii) $2.30 in cash. The exchange ratio of KeyCorp stock for First Niagara stock was fixed per the Agreement and did not adjust based on changes in KeyCorp’s share trading price. First Niagara equity awards outstanding immediately prior to the effective time of the merger were converted into equity awards for KeyCorp common stock as provided in the Agreement. Each share of First Niagara’s Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series B, was converted into a share of a newly created series of preferred stock of KeyCorp having substantially the same terms as First Niagara’s preferred stock. For more information on the acquisition, see Note 2 (“Business Combination”).

On October 7, 2016, First Niagara Bank merged with and into KeyBank, with KeyBank as the surviving entity. Systems and client conversion also occurred during the fourth quarter of 2016 in connection with the bank merger.

Divestiture

On September 9, 2016, KeyCorp sold to Northwest Bank, a wholly-owned subsidiary of Northwest Bancshares, Inc., 18 First Niagara Bank branches in the Buffalo, New York market. The branches were divested in connection with the merger between First Niagara and KeyCorp and pursuant to an agreement with the United States Department of Justice and commitments to the Federal Reserve following a customary antitrust review in connection with the merger. The divestiture included $439 million of loans and $1.6 billion of deposits associated with the 18 branches.

Discontinued operations

Education lending.In September 2009, we decided to exit the government-guaranteed education lending business. As a result, we have accounted for this business as a discontinued operation. As of January 1, 2010, we consolidated our ten outstanding education lending securitization trusts, as we held the residual interests and are the master servicer with the power to direct the activities that most significantly influence the economic performance of the trusts.

On September 30, 2014, we sold the residual interests in all of our outstanding education lending securitization trusts to a third party for $57 million. In selling the residual interests, we no longer have the obligation to absorb losses nor the right to receive benefits related to the securitization trusts. Therefore, in accordance with the applicable accounting guidance, we deconsolidated the securitization trusts and removed trust assets of $1.7 billion and trust liabilities of $1.6 billion from our balance sheet at September 30, 2014. We continue to service the securitized loans in eight of the securitization trusts and receive servicing fees, whereby we are adequately compensated, as well as remaining a counterparty to derivative contracts with three of the securitization trusts. We retained interests in the securitization trusts through our ownership of an insignificant percentage of certificates in two of the securitization trusts and two interest-only strips in one of the securitization trusts. These retained interests were remeasured at fair value on September 30, 2014, and their fair value of $1 million was recorded in “discontinued assets” on our balance sheet. These assets were valued using a similar approach and inputs that have been used to value the education loan securitization trust loans and securities, which are further discussed later in this note.

“Income (loss) from discontinued operations, net of taxes” on the income statement includes (i) the changes in fair value of the portfolio loans at fair value (discussed later in this note), and (ii) the interest income and expense from the loans in portfolio at both amortized cost and fair value. These amounts are shown separately in the following table. Gains and losses attributable to changes in fair value are recorded as a component of “noninterest income” or “noninterest expense.” Interest income and interest expense related to the loans and securities are included as components of “net interest income.”

The components of “income (loss) from discontinued operations, net of taxes” for the education lending business are as follows:

	Three months ended March 31,
in millions	2017		2016
Net interest income	$	5	$	7
Provision for credit losses	3		2
Net interest income after provision for credit losses	2		5
Noninterest income	2		1
Noninterest expense	4		5
Income (loss) before income taxes	—		1
Income taxes	—		—
Income (loss) from discontinued operations, net of taxes (a)	—		$	1

(a) Includes after-tax charges of $6 million for each of the three-month periods ended March 31, 2017, and March 31, 2016, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The discontinued assets of our education lending business included on the balance sheet are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Held-to-maturity securities	$	1	$	1
Portfolio loans at fair value	3		3
Loans, net of unearned income (a)	1,497		1,562
Less: Allowance for loan and lease losses	23		24
Net loans	1,477		1,541
Accrued income and other assets	27		28
Total assets	$	1,505	$	1,570

(a) At March 31, 2017, and December 31, 2016, unearned income was less than $1 million.

The discontinued education lending business consisted of loans in portfolio recorded at fair value and loans in portfolio recorded at carrying value with appropriate valuation reserves. As of June 30, 2015, we decided to sell the portfolio loans that are recorded at fair value, which were subsequently sold during the fourth quarter of 2015.

At March 31, 2017, education loans included 2,316 TDRs with a recorded investment of approximately $23 million (pre-modification and post-modification). A specifically allocated allowance of $2 million was assigned to these loans as of March 31, 2017. At December 31, 2016, education loans included 2,163 TDRs with a recorded investment of approximately $22 million (pre-modification and post-modification). A specifically allocated allowance of $2 million was assigned to these loans as of December 31, 2016. There have been no significant payment defaults. There are no significant commitments to lend additional funds to these borrowers outstanding. Additional information regarding TDR classification and ALLL methodology is provided in Note 5 (“Asset Quality”).

In June 2015, we transferred $179 million of loans that were previously purchased from three of the outstanding securitization trusts pursuant to the legal terms of those particular trusts to held for sale and accounted for them at fair value. These portfolio loans held for sale were valued based on indicative bids to sell the loans. These loans were considered Level 3 assets since we relied on unobservable inputs when determining their fair value. Portfolio loans accounted for at fair value were $3 million at March 31, 2017.

The following table shows the significant unobservable inputs used to measure the fair value of the portfolio loans accounted for at fair value as of March 31, 2017, and December 31, 2016:

March 31, 2017	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Portfolio loans accounted for at fair value	$	3	Market approach	Indicative bids	84.50-104.00%

December 31, 2016	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Portfolio loans accounted for at fair value	$	3	Market approach	Indicative bids	84.50-104.00%

The following table shows the principal and fair value amounts for our portfolio loans at carrying value at March 31, 2017, and December 31, 2016. Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2016 Form 10-K.

	March 31, 2017			December 31, 2016
in millions	Principal		Fair Value	Principal		Fair Value
Portfolio loans at carrying value
Accruing loans past due 90 days or more	$	20	N/A	$	22	N/A
Loans placed on nonaccrual status	4		N/A	5		N/A

The following table shows the portfolio loans at fair value and their related contractual amounts as of March 31, 2017, and December 31, 2016.

	March 31, 2017				December 31, 2016
in millions	Contractual Amount		Fair Value		Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	3	$	3	$	3	$	3

The following tables present the assets of the portfolio loans measured at fair value on a recurring basis at March 31, 2017, and December 31, 2016.

March 31, 2017
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	—	—	$	3	$	3
Total assets on a recurring basis at fair value	—	—	$	3	$	3

December 31, 2016
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	—	—	$	3	$	3
Total assets on a recurring basis at fair value	—	—	$	3	$	3

The following table shows the change in the fair values of the Level 3 portfolio loans held for sale, portfolio loans, and consolidated education loan securitization trusts for the three-month periods ended March 31, 2017, and March 31, 2016.

in millions		Portfolio Student Loans
Balance at December 31, 2016		$	3
Settlements		—
Balance at March 31, 2017	(a)	$	3
Balance at December 31, 2015		$	4
Settlements		(1		)
Balance at March 31, 2016	(a)	$	3

(a) There were no purchases, sales, issuances, gains (losses) recognized in earnings, transfers into Level 3, or transfers out of Level 3 for the three-month period ended March 31, 2017. There were no purchases, sales, issuances, gains (losses) recognized in earnings, transfers into Level 3, or transfers out of Level 3 for the three-month period ended March 31, 2016.

Austin Capital Management, Ltd.In April 2009, we decided to discontinue the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. As a result, we have accounted for this business as a discontinued operation. There was no income related to Austin for the three-month periods ended March 31, 2017, and March 31, 2016. The discontinued assets of Austin included on the balance sheet are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Cash and due from banks	$	15	$	15
Total assets	$	15	$	15

Combined discontinued operations. The combined results of the discontinued operations are as follows:

	Three months ended March 31,
in millions	2017		2016
Net interest income	$	5	$	7
Provision for credit losses	3		2
Net interest income after provision for credit losses	2		5
Noninterest income	2		1
Noninterest expense	4		5
Income (loss) before income taxes	—		1
Income taxes	—		—
Income (loss) from discontinued operations, net of taxes (a)	—		$	1

(a) Includes after-tax charges of $6 million and for each of the three-month periods ended March 31, 2017, and March 31, 2016, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The combined assets of the discontinued operations are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Cash and due from banks	$	15	$	15
Held-to-maturity securities	1		1
Portfolio loans at fair value	3		3
Loans, net of unearned income (a)	1,497		1,562
Less: Allowance for loan and lease losses	23		24
Net loans	1,477		1,541
Accrued income and other assets	27		28
Total assets	$	1,520	$	1,585

(a) At March 31, 2017, and December 31, 2016, unearned income was less than $1 million.

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Securities Financing Activities

3 Months Ended

Mar. 31, 2017

Banking and Thrift [Abstract]

Securities Financing Activities

13. Securities Financing Activities

We enter into repurchase agreements to finance overnight customer sweep deposits. We also enter into repurchase and reverse repurchase agreements to settle other securities obligations. We account for these securities financing agreements as collateralized financing transactions. Repurchase and reverse repurchase agreements are recorded on the balance sheet at the amounts for which the securities will be subsequently sold or repurchased. Securities borrowed transactions are recorded on the balance sheet at the amounts of cash collateral advanced. While our securities financing agreements incorporate a right of set off, the assets and liabilities are reported on a gross basis. Reverse repurchase agreements and securities borrowed transactions are included in “short-term investments” on the balance sheet; repurchase agreements are included in “federal funds purchased and securities sold under repurchase agreements.”

The following table summarizes our securities financing agreements at March 31, 2017, and December 31, 2016:

	March 31, 2017
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	4	$	(3	)	$	(1	)	—
Total	$	4	$	(3	)	$	(1	)	—
Offsetting of financial liabilities:
Repurchase agreements (c)	$	437	$	(3	)	$	(434	)	—
Total	$	437	$	(3	)	$	(434	)	—

	December 31, 2016
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	3	$	(3	)	—			—
Total	$	3	$	(3	)	—			—
Offsetting of financial liabilities:
Repurchase agreements (c)	$	497	$	(3	)	$	(494	)	—
Total	$	497	$	(3	)	$	(494	)	—

(a) Netting adjustments take into account the impact of master netting agreements that allow us to settle with a single counterparty on a net basis.

(b) These adjustments take into account the impact of bilateral collateral agreements that allow us to offset the net positions with the related collateral. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

(c) Repurchase agreements are collateralized by federal agency CMOs and U.S. Treasury securities and contracted on an overnight basis. These securities are reported in “securities available for sale” on our balance sheet.

As of March 31, 2017, the carrying amount of assets pledged as collateral against repurchase agreements totaled $569 million. Assets pledged as collateral are reported in “securities available for sale” and “held-to-maturity securities” on our balance sheet. At March 31, 2017, the liabilities associated with collateral pledged were solely comprised of customer sweep financing activity and had a carrying value of $434 million. The collateral pledged under customer sweep repurchase agreements is posted to a third-party custodian and cannot be sold or repledged by the secured party. The risk related to a decline in the market value of collateral pledged is minimal given the collateral's high credit quality and the overnight duration of the repurchase agreements.

Like other financing transactions, securities financing agreements contain an element of credit risk. To mitigate and manage credit risk exposure, we generally enter into master netting agreements and other collateral arrangements that give us the right, in the event of default, to liquidate collateral held and to offset receivables and payables with the same counterparty.  Additionally, we establish and monitor limits on our counterparty credit risk exposure by product type. For the reverse repurchase agreements, we monitor the value of the underlying securities we received from counterparties and either request additional collateral or return a portion of the collateral based on the value of those securities. We generally hold collateral in the form of highly rated securities issued by the U.S. Treasury and fixed income securities. In addition, we may need to provide collateral to counterparties under our repurchase agreements. With the exception of collateral pledged against customer sweep repurchase agreements, the collateral we pledge and receive can generally be sold or repledged by the secured parties.

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Employee Benefits

3 Months Ended

Mar. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Employee Benefits

14. Employee Benefits

Pension Plans

Effective December 31, 2009, we amended our cash balance pension plan and other defined benefit plans to freeze all benefit accruals and close the plans to new employees. We will continue to credit participants’ existing account balances for interest until they receive their plan benefits. We changed certain pension plan assumptions after freezing the plans. As part of the acquisition of First Niagara, Key also obtained two frozen defined benefit plans sponsored by First Niagara, both of which provide benefits based upon length of service and compensation levels. Effective September 30, 2016, the two First Niagara plans merged into another defined benefit plan maintained by Key to form the KeyCorp Consolidated Cash Balance Plan. Effective December 31, 2016, our original cash balance pension plan merged into the KeyCorp Consolidated Cash Balance Plan.

The components of net pension cost (benefit) for all funded and unfunded plans are as follows:

	Three months ended March 31,
in millions	2017			2016
Interest cost on PBO	$	12		$	10
Expected return on plan assets	(17		)	(13		)
Amortization of losses	4			4
Net pension cost	$	(1	)	$	1

Other Postretirement Benefit Plans

We sponsor a retiree healthcare plan in which all employees age 55 with 5 years of service (or employees age 50 with 15 years of service who are terminated under conditions that entitle them to a severance benefit) are eligible to participate. Participant contributions are adjusted annually. Key may provide a subsidy toward the cost of coverage for certain employees hired before 2001 with a minimum of 15 years of service at the time of termination. We use a separate VEBA trust to fund the retiree healthcare plan. Effective November 29, 2016, an unfunded retiree welfare plan previously sponsored by First Niagara merged into our current retiree healthcare plan.

The components of net postretirement benefit cost for all funded and unfunded plans are as follows:

	Three months ended March 31,
in millions	2017	2016
Interest cost on APBO	—	$	1
Expected return on plan assets	—	(1		)
Net postretirement benefit cost	—	—

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Trust Preferred Securities Issued by Unconsolidated Subsidiaries

3 Months Ended

Mar. 31, 2017

Banking and Thrift [Abstract]

Trust Preferred Securities Issued by Unconsolidated Subsidiaries

15. Trust Preferred Securities Issued by Unconsolidated Subsidiaries

We own the outstanding common stock of business trusts formed by us that issued corporation-obligated, mandatorily redeemable, trust preferred securities. The trusts used the proceeds from the issuance of their trust preferred securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the mandatorily redeemable trust preferred securities. The outstanding common stock of these business trusts is recorded in “other investments” on our balance sheet.

We unconditionally guarantee the following payments or distributions on behalf of the trusts:

• required distributions on the trust preferred securities;

• the redemption price when a capital security is redeemed; and

• the amounts due if a trust is liquidated or terminated.

The Regulatory Capital Rules, discussed in “Supervision and regulation” in Item 2 of this report, implement a phase-out of trust preferred securities as Tier 1 capital, consistent with the requirements of the Dodd-Frank Act. For “standardized approach” banking organizations such as Key, the phase-out period began on January 1, 2015, and starting in 2016 requires us to treat our mandatorily redeemable, trust preferred securities as Tier 2 capital.

During the quarter, we redeemed $9 million of trust preferred securities that were acquired in the First Niagara acquisition.

The trust preferred securities, common stock, and related debentures are summarized as follows:

dollars in millions	Trust Preferred Securities, Net of Discount (a)		Common Stock		Principal Amount of Debentures, Net of Discount (b)		Interest Rate of Trust Preferred Securities and Debentures (c)		Maturity of Trust Preferred Securities and Debentures
March 31, 2017
KeyCorp Capital I	$	155	$	6	$	161	1.738	%	2028
KeyCorp Capital II	105		4		109		6.875		2029
KeyCorp Capital III	138		4		142		7.750		2029
HNC Statutory Trust III	18		1		19		2.453		2035
Willow Grove Statutory Trust I	18		1		19		2.441		2036
HNC Statutory Trust IV	16		1		17		2.319		2037
Westbank Capital Trust II	7		—		7		3.342		2034
Westbank Capital Trust III	7		—		7		3.342		2034
Total	$	464	$	17	$	481	4.811	%	—
December 31, 2016	$	475	$	17	$	492	4.845	%	—

(a) The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $58 million at March 31, 2017, and $59 million at December 31, 2016. See Note 8 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b) We have the right to redeem these debentures. If the debentures purchased by KeyCorp Capital I, HNC Statutory Trust III, Willow Grove Statutory Trust I, HNC Statutory Trust IV, Westbank Capital Trust II, or Westbank Capital Trust III are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (i) the principal amount, plus any accrued but unpaid interest, or (ii) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points for KeyCorp Capital II or 25 basis points for KeyCorp Capital III, or 50 basis points in the case of redemption upon either a tax or a capital treatment event for either KeyCorp Capital II or KeyCorp Capital III, plus any accrued but unpaid interest. The principal amount of certain debentures includes basis adjustments related to fair value hedges totaling $58 million at March 31, 2017, and $59 million at December 31, 2016. See Note 8 for an explanation of fair value hedges. The principal amount of debentures, net of discounts, is included in “long-term debt” on the balance sheet.

(c) The interest rates for the trust preferred securities issued by KeyCorp Capital II and KeyCorp Capital III are fixed. The trust preferred securities issued by KeyCorp Capital I have a floating interest rate, equal to three-month LIBOR plus 74 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust III have a floating interest rate, equal to three-month LIBOR plus 140 basis points, that reprices quarterly. The trust preferred securities issued by Willow Grove Statutory Trust I have a floating interest rate, equal to three-month LIBOR plus 131 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust IV have a floating interest rate, equal to three-month LIBOR plus 128 basis points, that reprices quarterly. The trust preferred securities issued by Westbank Capital Trust II and Westbank Capital Trust III each have a floating interest rate, equal to three-month LIBOR plus 219 basis points, that reprices quarterly.  The total interest rates are weighted-average rates.

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Contingent Liabilities and Guarantees

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities and Guarantees

16. Contingent Liabilities and Guarantees

Legal Proceedings

See Note 21 (“Commitments, Contingent Liabilities, and Guarantees”) under the heading “Legal Proceedings” on page 194 of our 2016 Form 10-K for a description of a proceeding styled In re: Checking Account Overdraft Litigation.

Other litigation.From time to time, in the ordinary course of business, we and our subsidiaries are subject to various other litigation, investigations, and administrative proceedings. Private, civil litigations may range from individual actions involving a single plaintiff to putative class action lawsuits with potentially thousands of class members. Investigations may involve both formal and informal proceedings, by both government agencies and self-regulatory bodies. These other matters may involve claims for substantial monetary relief. At times, these matters may present novel claims or legal theories. Due to the complex nature of these various other matters, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information presently known to us, we do not believe there is any other matter to which we are a party, or involving any of our properties that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on our financial condition. We continually monitor and reassess the potential materiality of these other litigation matters. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Guarantees

We are a guarantor in various agreements with third parties. The following table shows the types of guarantees that we had outstanding at March 31, 2017. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Guarantees” beginning on page 115 of our 2016 Form 10-K.

March 31, 2017	Maximum Potential Undiscounted Future Payments		Liability Recorded
in millions
Financial guarantees:
Standby letters of credit	$	11,779	$	70
Recourse agreement with FNMA	2,664		5
Residential mortgage reserve	1,270		5
Return guarantee agreement with LIHTC investors	3		3
Written put options (a)	2,052		43
Total	$	17,768	$	126

(a) The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

We determine the payment/performance risk associated with each type of guarantee described below based on the probability that we could be required to make the maximum potential undiscounted future payments shown in the preceding table. We use a scale of low (0% to 30% probability of payment), moderate (greater than 30% to 70% probability of payment), or high (greater than 70% probability of payment) to assess the payment/performance risk, and have determined that the payment/performance risk associated with each type of guarantee outstanding at March 31, 2017, is low.

Standby letters of credit. KeyBank issues standby letters of credit to address clients’ financing needs. These instruments obligate us to pay a specified third party when a client fails to repay an outstanding loan or debt instrument or fails to perform some contractual nonfinancial obligation. Any amounts drawn under standby letters of credit are treated as loans to the client; they bear interest (generally at variable rates) and pose the same credit risk to us as a loan. At March 31, 2017, our standby letters of credit had a remaining weighted-average life of two years, with remaining actual lives ranging from less than one year to as many as 18 years.

Recourse agreement with FNMA. We participate as a lender in the FNMA Delegated Underwriting and Servicing program. FNMA delegates responsibility for originating, underwriting, and servicing mortgages, and we assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan that we sell to FNMA. We maintain a reserve for such potential losses in an amount that we believe approximates the fair value of our liability. At March 31, 2017, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of 7.5 years, and the unpaid principal balance outstanding of loans sold by us as a participant was $9.1 billion. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 29% of the principal balance of loans outstanding at March 31, 2017. If we are required to make a payment, we would have an interest in the collateral underlying the related commercial mortgage loan; any loss we incur could be offset by the amount of any recovery from the collateral.

Residential Mortgage Banking. We often originate and sell residential mortgage loans with servicing retained. Our loan sales activity is generally conducted through loan sales in a secondary market sponsored by FNMA and FHLMC. Subsequent to the sale of mortgage loans, we do not typically retain any interest in the underlying loans except through our relationship as the servicer of the loans.

As is customary in the mortgage banking industry, we, or banks we have acquired, have made certain representations and warranties related to the sale of residential mortgage loans (including loans sold with servicing released) and to the performance of our obligations as servicer. The breach of any such representations or warranties could result in losses for us. Our maximum exposure to loss is equal to the outstanding principal balance of the sold loans; however, any loss would be reduced by any payments received on the loans or through the sale of collateral.

At March 31, 2017, the outstanding residential mortgage loans in this program had a weighted-average LTV ratio of 71%, and the unpaid principal balance outstanding of loans sold by us was $4.2 billion. The risk assessment is low for the residential mortgage product. The maximum potential amount of undiscounted future payments that we could be required to make under this program, as shown in the preceding table, is equal to approximately 30% of the principal balance of loans outstanding at March 31, 2017. Our liability for estimated repurchase obligations on loans sold, which is included in other liabilities on our balance sheet, was $5 million at March 31, 2017.

Return guarantee agreement with LIHTC investors. KAHC, a subsidiary of KeyBank, offered limited partnership interests to qualified investors. Partnerships formed by KAHC invested in low-income residential rental properties that qualify for federal low-income housing tax credits under Section 42 of the Internal Revenue Code. In certain partnerships, investors paid a fee to KAHC for a guaranteed return that is based on the financial performance of the property and the property’s confirmed LIHTC status throughout a 15-year compliance period. Typically, KAHC fulfills these guaranteed returns by distributing tax credits and deductions associated with the specific properties. If KAHC defaults on its obligation to provide the guaranteed return, KeyBank is obligated to make any necessary payments to investors. No recourse or collateral is available to offset our guarantee obligation other than the underlying income streams from the properties and the residual value of the operating partnership interests.

As shown in the previous table, KAHC maintained a reserve in the amount of $3 million at March 31, 2017, which is sufficient to cover estimated future obligations under the guarantees. The maximum exposure to loss reflected in the table represents undiscounted future payments due to investors for the return on and of their investments.

These guarantees have expiration dates that extend through 2018, but KAHC has not formed any new partnerships under this program since October 2003. Additional information regarding these partnerships is included in Note 10 (“Variable Interest Entities”).

Written put options. In the ordinary course of business, we “write” put options for clients that wish to mitigate their exposure to changes in interest rates and commodity prices. At March 31, 2017, our written put options had an average life of three years. These instruments are considered to be guarantees, as we are required to make payments to the counterparty (the client) based on changes in an underlying variable that is related to an asset, a liability, or an equity security that the client holds. We are obligated to pay the client if the applicable benchmark interest rate or commodity price is above or below a specified level (known as the “strike rate”). These written put options are accounted for as derivatives at fair value, as further discussed in Note 8 (“Derivatives and Hedging Activities”). We mitigate our potential future payment obligations by entering into offsetting positions with third parties.

Written put options where the counterparty is a broker-dealer or bank are accounted for as derivatives at fair value but are not considered guarantees since these counterparties typically do not hold the underlying instruments. In addition, we are a purchaser and seller of credit derivatives, which are further discussed in Note 8 (“Derivatives and Hedging Activities”).

Default guarantees. Some lines of business participate in guarantees that obligate us to perform if the debtor (typically a client) fails to satisfy all of its payment obligations to third parties. We generally undertake these guarantees for one of two possible reasons: (i) either the risk profile of the debtor should provide an investment return, or (ii) we are supporting our underlying investment in the debtor. We do not hold collateral for the default guarantees. If we were required to make a payment under a guarantee, we would receive a pro rata share should the third party collect some or all of the amounts due from the debtor. At March 31, 2017, we had less than $1 million of default guarantees.

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in the applicable accounting guidance, and from other relationships.

Indemnifications provided in the ordinary course of business. We provide certain indemnifications, primarily through representations and warranties in contracts that we execute in the ordinary course of business in connection with loan and lease sales and other ongoing activities, as well as in connection with purchases and sales of businesses. We maintain reserves, when appropriate, with respect to liability that reasonably could arise as a result of these indemnities.

Intercompany guarantees. KeyCorp, KeyBank, and certain of our affiliates are parties to various guarantees that facilitate the ongoing business activities of other affiliates. These business activities include issuing debt, assuming certain lease and insurance obligations, purchasing or issuing investments and securities, and engaging in certain leasing transactions involving clients.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Accumulated Other Comprehensive Income

17. Accumulated Other Comprehensive Income

Our changes in AOCI for the three months ended March 31, 2017, and March 31, 2016, are as follows:

in millions	Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative financial instruments			Foreign currency translation adjustment			Net pension and postretirement benefit costs			Total
Balance at December 31, 2016	$	(185	)	$	(14	)	$	(3	)	$	(339	)	$	(541	)
Other comprehensive income before reclassification, net of income taxes	6			(15		)	1			1			(7		)
Amounts reclassified from accumulated other comprehensive income, net of income taxes (a)	—			(9		)	—			3			(6		)
Net current-period other comprehensive income, net of income taxes	6			(24		)	1			4			(13		)
Balance at March 31, 2017	$	(179	)	$	(38	)	$	(2	)	$	(335	)	$	(554	)
Balance at December 31, 2015	$	(58	)	$	20		$	(2	)	$	(365	)	$	(405	)
Other comprehensive income before reclassification, net of income taxes	128			72			5			(2		)	203
Amounts reclassified from accumulated other comprehensive income, net of income taxes (a)	—			(14		)	—			3			(11		)
Net current-period other comprehensive income, net of income taxes	128			58			5			1			192
Balance at March 31, 2016	$	70		$	78		$	3		$	(364	)	$	(213	)

(a) See table below for details about these reclassifications.

Our reclassifications out of AOCI for the three months ended March 31, 2017, and March 31, 2016, are as follows:

Three months ended March 31, 2017	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
in millions
Unrealized gains (losses) on derivative financial instruments
Interest rate	$	15		Interest income — Loans
Interest rate	(1		)	Interest expense — Long-term debt
	14			Income (loss) from continuing operations before income taxes
	5			Income taxes
	$	9		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses	$	(4	)	Personnel expense
Amortization of unrecognized prior service credit	—			Personnel expense
	(4		)	Income (loss) from continuing operations before income taxes
	(1		)	Income taxes
	$	(3	)	Income (loss) from continuing operations

Three months ended March 31, 2016	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
in millions
Unrealized gains (losses) on derivative financial instruments
Interest rate	$	23		Interest income — Loans
Interest rate	(1		)	Interest expense — Long-term debt
	22			Income (loss) from continuing operations before income taxes
	8			Income taxes
	$	14		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses	$	(4	)	Personnel expense
	(4		)	Income (loss) from continuing operations before income taxes
	(1		)	Income taxes
	$	(3	)	Income (loss) from continuing operations

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Shareholders' Equity

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Shareholder' Equity

18. Shareholders' Equity

Comprehensive Capital Plan

On June 29, 2016, the Federal Reserve announced that it did not object to our 2016 capital plan submitted as part of the annual CCAR process. Share repurchases of up to $350 million were included in the 2016 capital plan, which is effective through the second quarter of 2017. We completed $160 million of Common Share repurchases, including $107 million of Common Share repurchases in the open market and $53 million of Common Share repurchases related to employee equity compensation programs in the first quarter of 2017 under this authorization.

Consistent with our 2016 capital plan, the Board declared a quarterly dividend of $.085 per Common Share for the first quarter of 2017. Our 2016 capital plan proposed an increase in our quarterly Common Share dividend, up to $.095 per share, which will be considered by the Board for the second quarter of 2017.

Preferred Stock

On March 9, 2017, we announced that all of our 7.75% Noncumulative Perpetual Convertible Series A Preferred Stock would convert into KeyCorp Common Shares. On March 20, 2017, the conversion date, holders of the Series A Preferred Stock received 7.0922 Common Shares for each share of Series A Preferred Stock. Cash was paid in lieu of fractional shares. Prior to the conversion of the Series A Preferred Stock, we made a quarterly dividend payment of $1.9375 per share, or $6 million, on our Series A Preferred Stock during the first quarter of 2017.

We had $290 million of 7.75% Noncumulative Perpetual Convertible Series A Preferred Stock outstanding at December 31, 2016. Our Series A Preferred Stock had a $1 par value and a $100 liquidation preference. There were 7,475,000 shares authorized and 2,900,234 shares outstanding at December 31, 2016.

As previously reported, on January 12, 2017, we provided notice of our intention to redeem all outstanding shares of the Series C Preferred Stock on February 15, 2017. On February 15, 2017, the Series C Preferred Stock was redeemed for cash at a redemption price of $25 per share. The redemption date was also a dividend payment date, and declared dividends of $.539063 per share, or $7 million, were also paid separately on February 15, 2017. The Series C Preferred Stock was initially issued in connection with the First Niagara acquisition to replace First Niagara’s outstanding preferred stock.

Prior to the redemption, we had $350 million of Fixed-to-Floating Rate Perpetual Noncumulative Series C Preferred Stock. Our Series C Preferred Stock had a $1 par value with a $25 liquidation preference. There were 14,000,000 shares authorized and outstanding at December 31, 2016.

We have $525 million of depositary shares, each representing a 1/25^th ownership interest in a share of our Fixed-to-Floating Rate Perpetual Noncumulative Series D Preferred Stock outstanding at March 31, 2017, and December 31, 2016. Our Series D Preferred Stock has a $1 par value with a $25,000 liquidation preference. There are 21,000 shares authorized and outstanding at March 31, 2017, and December 31, 2016. We made payments of $12.50 per depository share on the depositary shares related to our Series D Preferred Stock during the first quarter of 2017, for a total of $7 million.

We have $500 million of depositary shares, each representing a 1/40th ownership interest in a share of our Fixed-to-Floating Rate Perpetual Noncumulative Series E Preferred Stock outstanding at March 31, 2017, and December 31, 2016. Our Series E Preferred Stock has a $1 par value with a $1,000 liquidation preference. There are 500,000 shares authorized and outstanding at March 31, 2017, and December 31, 2016. We made payments of $.395573 per depositary share on the depositary shares related to our Series E Preferred Stock during the first quarter of 2017, for a total of $8 million.

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Line of Business Results

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Line of Business Results

19. Line of Business Results

The specific lines of business that constitute each of the major business segments (operating segments) are described below.

Key Community Bank

Key Community Bank serves individuals and small to mid-sized businesses primarily through its 15-state branch network.

Individuals are provided with branch-based deposit and investment products, personal finance services, and loans, including residential mortgages, home equity, credit card, and various types of installment loans. Key Community Bank offers personal property and casualty insurance, such as home, auto, renters, watercraft, and umbrella policies. Key Community Bank also purchases retail auto sales contracts via a network of auto dealerships. The auto dealerships finance the sale of automobiles as the initial lender and then assign the contracts to us pursuant to dealer agreements. In addition, financial, estate and retirement planning, asset management services, and Delaware Trust capabilities are offered to assist high net worth clients with their banking, trust, portfolio management, life insurance, charitable giving, and related needs.

Small businesses are provided with deposit, investment and credit products, and business advisory services. Mid-sized businesses are provided with products and services, some of which are delivered by Key Corporate Bank, that include commercial lending, cash management, equipment leasing, investment, insurance including commercial property and casualty as well as captive insurance and employee benefit programs, succession planning, access to capital markets, derivatives, and foreign exchange.

Key Corporate Bank

Key Corporate Bank is a full-service corporate and investment bank focused principally on serving the needs of middle market clients in seven industry sectors: consumer, energy, healthcare, industrial, public sector, real estate, and technology. Key Corporate Bank delivers a broad suite of banking and capital markets products to its clients, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance. Key Corporate Bank is also a significant servicer of commercial mortgage loans and a significant special servicer of CMBS. Key Corporate Bank delivers many of its product capabilities to clients of Key Community Bank.

Other Segments

Other Segments consists of corporate treasury, our principal investing unit, and various exit portfolios.

Reconciling Items

Total assets included under “Reconciling Items” primarily represent the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling Items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations, including merger-related charges.

The information was derived from the internal financial reporting system that we use to monitor and manage our financial performance. GAAP guides financial accounting, but there is no authoritative guidance for “management accounting,” i.e., the way we apply judgment and experience to make reporting decisions. Consequently, the line of business results we report may not be comparable to line of business results presented by other companies.

The selected financial data are based on internal accounting policies designed to compile results on a consistent basis and in a manner that reflects the underlying economics of the businesses. In accordance with our policies:

• Net interest income is determined by assigning a standard cost for funds used or a standard credit for funds provided based on their assumed maturity, prepayment, and/or repricing characteristics;

• Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent that each line of business actually uses the services;

• The consolidated provision for credit losses is allocated among the lines of business primarily based on their actual net loan charge-offs, adjusted periodically for loan growth and changes in risk profile. The amount of the consolidated provision is based on the methodology that we use to estimate our consolidated ALLL. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 109 of our 2016 Form 10-K;

• Income taxes are allocated based on the statutory federal income tax rate of 35% and a blended state income tax rate (net of the federal income tax benefit) of 2.2%; and

• Capital is assigned to each line of business based on economic equity.

The development and application of the methodologies that we use to allocate items among our lines of business is a dynamic process. Accordingly, financial results may be revised periodically to reflect enhanced alignment of expense base allocation drivers, changes in the risk profile of a particular business, or changes in our organizational structure.

The table on the following pages shows selected financial data for our major business segments for the three-month periods ended March 31, 2017, and March 31, 2016.

Three months ended March 31,	Key Community Bank						Key Corporate Bank
dollars in millions	2017			2016			2017			2016
SUMMARY OF OPERATIONS
Net interest income (TE)	$	631		$	399		$	304		$	218
Noninterest income	277			196			275			207
Total revenue (TE) (a)	908			595			579			425
Provision for credit losses	47			42			17			43
Depreciation and amortization expense	28			13			20			13
Other noninterest expense	599			423			283			224
Income (loss) from continuing operations before income taxes (TE)	234			117			259			145
Allocated income taxes and TE adjustments	87			43			78			27
Income (loss) from continuing operations	147			74			181			118
Income (loss) from discontinued operations, net of taxes	—			—			—			—
Net income (loss)	147			74			181			118
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—
Net income (loss) attributable to Key	$	147		$	74		$	181		$	118
AVERAGE BALANCES(b)
Loans and leases	$	47,036		$	30,789		$	37,737		$	27,722
Total assets (a)	50,962			32,856			44,167			33,413
Deposits	79,393			52,803			21,003			18,074
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	43		$	23		$	14		$	18
Return on average allocated equity (b)	12.60		%	11.10		%	24.86		%	22.92		%
Return on average allocated equity	12.60			11.10			24.86			22.92
Average full-time equivalent employees (c)	10,804			7,376			2,384			2,126

(a) Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software, and goodwill held by our major business segments, are located in the United States.

(b) From continuing operations.

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

Other Segments						Total Segments						Reconciling Items						Key
2017			2016			2017			2016			2017			2016			2017			2016
$	(5	)	$	(9	)	$	930		$	608		$	(1	)	$	4		$	929		$	612
33			30			585			433			(8		)	(2		)	577			431
28			21			1,515			1,041			(9		)	2			1,506			1,043
(1		)	5			63			90			—			(1		)	63			89
1			1			49			27			44			37			93			64
10			9			892			656			28			(17		)	920			639
18			6			511			268			(81		)	(17		)	430			251
(5		)	(8		)	160			62			(55		)	2			105			64
23			14			351			206			(26		)	(19		)	325			187
—			—			—			—			—			1			—			1
23			14			351			206			(26		)	(18		)	325			188
2			(1		)	2			(1		)	(1		)	1			1			—
$	21		$	15		$	349		$	207		$	(25	)	$	(19	)	$	324		$	188
$	1,328		$	1,603		$	86,101		$	60,114		$	32		$	42		$	86,133		$	60,156
36,549			27,729			131,678			93,998			1,063			479			132,741			94,477
2,030			756			102,426			71,633			(348		)	(35		)	102,078			71,598
$	1		$	5		$	58		$	46		—			—			$	58		$	46
53.56		%	33.33		%	18.04		%	16.88		%	(1.38		)%	(1.34		)%	8.65		%	6.87		%
53.56			33.33			18.04			16.88			(1.38		)	(1.27		)	8.65			6.90
3			8			13,191			9,510			5,195			3,893			18,386			13,403

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Basis of Presentation and Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidation

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly affect the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements, and financial instruments. See Note 10 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% generally are carried at cost. Investments held by our registered broker-dealer and investment company subsidiaries (principal investing entities and Real Estate Capital line of business) are carried at fair value.

We believe that the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2016 Form 10-K.

Subsequent Events

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

Accounting Guidance Adopted and Pending Adoption

Accounting Guidance Adopted in 2017

Consolidation. In October 2016, the FASB issued new accounting guidance that amends the previous consolidation guidance issued in February 2015, to require a decision maker that holds an interest in a VIE through an entity under common control to only consider its proportionate indirect interest in the VIE in determining whether the decision maker is the VIE’s primary beneficiary. This new guidance eliminates the requirement that a decision maker treat the common control party’s interest in the VIE as if the decision maker held the interest itself, an approach referred to as “full attribution.” The new guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) on a retrospective basis. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Stock-based compensation. In March 2016, the FASB issued new accounting guidance that simplifies the accounting for several aspects of share-based payment transactions, including the related income tax consequences, the classification of awards as either equity or liabilities, and the presentation on the statement of cash flows. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us). The method of transition was dependent upon the particular amendment within the new guidance. During the three months ended March 31, 2017, we recognized $18 million in excess tax benefits within “income taxes” on our income statement that pertained to share-based payment arrangements. In prior periods, such excess tax benefits were recorded within “capital surplus” on our balance sheet. Under the new guidance, generally, if our share price increases over an award’s vesting period, the resulting tax windfall will decrease “income taxes.” In a like manner, if our share price decreases over an award’s vesting period, the resulting tax shortfall will increase “income taxes.” This change also removed the impact of the excess tax benefits and deficiencies from the calculation of diluted EPS and is required to be applied on a prospective basis. The adoption of this accounting standard did not materially affect our statement of cash flows, nor did it affect retained earnings as of the beginning of the period of adoption. We elected to retain our existing accounting policy of estimating award forfeitures upon the award’s grant date.

Equity method investments.In March 2016, the FASB issued new accounting guidance that simplifies the transition to equity method accounting by eliminating the requirement for an investor to make retroactive adjustments to the investment, results of operations, and retained earnings on a step-by-step basis when an investment becomes qualified for equity method accounting. Instead, when an investment qualifies for the equity method due to an increase in ownership or degree of influence, an equity method investor is required to add the cost of acquiring the additional interest to the current basis of the previously held interest, and to adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. This accounting guidance became effective prospectively for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us). Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations. This guidance will only affect our financial condition or results of operations if there is an applicable change in an investment resulting in the investment’s qualifying for equity method accounting.

Derivatives and hedging.In March 2016, the FASB issued new accounting guidance that requires an entity to use a four-step decision model when assessing contingent call (put) options that can accelerate the payment of principal on debt instruments to determine whether they are clearly and closely related to their debt hosts. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) on a modified retrospective basis. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Derivatives and hedging. In March 2016, the FASB issued new accounting guidance that clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, by itself, require dedesignation, but all other hedge accounting criteria must be met. This accounting guidance was effective for interim and annual reporting periods beginning after December 15, 2016 (effective January 1, 2017, for us) and was implemented using a prospective method. Early adoption was permitted. The adoption of this accounting guidance did not affect our financial condition or results of operations.

Accounting Guidance Pending Adoption at March 31, 2017

Receivables. In March 2017, the FASB issued new accounting guidance that shortens the amortization period to the earliest call date for certain callable debt securities held at a premium. Securities held at a discount will continue to be amortized to maturity. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2018 (effective January 1, 2019, for us). The guidance should be applied on a modified retrospective basis using a cumulative-effect adjustment. Early adoption is permitted. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Compensation. In March 2017, the FASB issued new accounting guidance that requires service cost to be included in the same line item as certain other compensation costs related to services rendered by employees. We record compensation costs under personnel expense on the income statement. Other elements of net benefit cost should be presented separately. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). The guidance should be applied on a retrospective basis. Early adoption is permitted within the first interim period if the entity issues interim financial statements. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Other income. In February 2017, the FASB issued new accounting guidance that clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. The guidance clarifies that financial assets may be within scope of the derecognition guidance if they are promised to a counterparty in a contract and substantially all the fair value of the assets in the contract are concentrated in nonfinancial assets, which are collectively referred to as in substance nonfinancial assets. The guidance requires entities to derecognize a nonfinancial asset or in substance nonfinancial asset when a counterparty obtains controls of it, and in a partial sale transaction when it does not have a controlling financial interest in the legal entity that holds the asset and when it transfers control of the asset. This accounting guidance is effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). The guidance may be applied on a retrospective or modified retrospective basis. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Goodwill and Other Intangibles.In January 2017, the FASB issued new accounting guidance that simplifies the test for goodwill impairment by eliminating the second step of the current two-step method. Under the new guidance, entities will compare the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the reporting unit’s fair value, the entity is required to recognize an impairment charge for this amount. Current guidance requires an entity to proceed to a second step, whereby the entity would determine the fair value of its assets and liabilities. The new method applies to all reporting units. The option to perform a qualitative assessment is still allowable. This accounting guidance is effective prospectively for interim and annual reporting periods beginning after December 15, 2019 (effective January 1, 2020, for us). Early adoption is permitted. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Business combinations.In January 2017, the FASB issued accounting guidance that clarifies the definition of a business and removes the requirement for a market participant to consider whether it could replace missing elements in an integrated set of assets and activities. The guidance states that if substantially all of the fair value of the assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a prospective approach. Early application is allowed for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, as long as the transaction has not been reported in financial statements that have been issued or made available for issuance, and for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occurs before the issuance date or effective date of the amendments, as long as the transaction has not been reported in financial statements that have been issued or made available for issuance. This guidance will not affect our financial condition or results of operations unless we acquire or dispose of a business subsequent to the date of adoption.

Statement of cash flows. In November 2016, the FASB issued accounting guidance requiring restricted cash and restricted cash equivalents to be included with other cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of cash flows. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a retrospective approach. Early adoption is permitted. The adoption of this accounting guidance may affect the presentation in our Consolidated Statements of Cash Flows.

Income taxes. In October 2016, the FASB issued accounting guidance requiring an entity to recognize any deferred taxes from an intra-entity transfer of an asset other than inventory when the transfer occurs. This accounting guidance will be effective for annual and interim reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a modified retrospective approach. Early adoption is permitted but only as of the beginning of an annual reporting period for which financial statements have not yet been issued. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Statement of cash flows. In August 2016, the FASB issued new accounting guidance that clarifies how cash receipts and cash payments in certain specific transactions should be presented and classified in the statement of cash flows. These specific transactions include, but are not limited to, debt prepayment or extinguishment costs, contingent considerations made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions from equity method investees. This guidance also clarifies that in instances of cash flows with multiple aspects that cannot be separately identified, classification should be based on the activity that is likely to be the predominant source of or use of cash flow. This accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us) and should be implemented using a retrospective approach. Early adoption is permitted. The adoption of this accounting guidance may affect the presentation in our Consolidated Statements of Cash Flows.

Financial instruments. In June 2016, the FASB issued new accounting guidance that changes the methodology for recognizing credit losses related to financial instruments. Under current GAAP, a credit loss is not recognized until it is probable that the loss has been incurred. The new accounting guidance eliminates that threshold and expands the information required for an entity to consider when developing an estimate of expected credit losses, including the use of forecast information. Entities will be required to present financial assets measured on an amortized cost basis at the net amount that is expected to be collected. This new guidance will impact the accounting for our loans, debt securities available for sale, and liability for credit losses on unfunded lending-related commitments, as well as purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. This accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2019 (effective January 1, 2020, for us). Early adoption is permitted but only for interim and annual reporting periods beginning after December 15, 2018. This guidance must be implemented using a modified retrospective basis except that a prospective approach must be used for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach also should be used for purchased financial assets with credit deterioration. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations and related disclosures.

Leases. In February 2016, the FASB issued new accounting guidance that requires a lessee to recognize a liability to make lease payments, and a right-of-use asset representing its right to use an underlying asset during the lease term for both finance and operating leases. The definition of a lease was modified to exemplify the concept of control over an asset identified in the lease. Lease classification criteria remain substantially similar to criteria in current lease guidance. The guidance defines which payments can be used in determining lease classification. For short-term leases with a term of 12 months or less, lessees can make a policy election not to recognize lease assets and lease liabilities. Lessor accounting is largely unchanged. Leveraged leases that commenced before the effective date of the new guidance are grandfathered. New disclosures are required, and certain practical expedients are allowed upon adoption. This accounting and disclosure guidance will be effective for interim and annual reporting periods beginning after December 15, 2018 (effective January 1, 2019, for us) and should be implemented using the modified retrospective approach. Early adoption is permitted. We are currently in the early stages of implementation and are working to identify our complete lease population, including potential embedded leases. We expect the adoption of this standard to result in additional assets and liabilities, as we will be required to recognize operating leases on our Consolidated Balance Sheet. Other implementation matters to be addressed include, but are not limited to, the determination of effects on our financial and capital ratios and the quantification of the impacts that this accounting guidance may have on our financial condition or results of operations.

Financial instruments.In January 2016, the FASB issued new accounting guidance that requires equity investments, except those accounted for under the equity method of accounting or consolidated, to be measured at fair value with changes recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost less impairment, whereby impairment is based on a qualitative assessment. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost and changes the presentation of financial assets and financial liabilities on the balance sheet or in the footnotes. If an entity has elected the fair value option to measure liabilities, the new accounting guidance requires the portion of the change in the fair value of a liability resulting from credit risk to be presented in OCI. We have not elected to measure any of our liabilities at fair value, and therefore, this aspect of the guidance is not applicable to us. This accounting and disclosure guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). For the guidance that is applicable to us, the accounting will be implemented on a modified retrospective basis though a cumulative-effect adjustment to the balance sheet, except for the guidance related to equity securities without readily determinable fair values, which should be applied on a prospective basis. Except under certain instances, early adoption is not permitted. We are currently evaluating the impact that this accounting guidance may have on our financial condition or results of operations.

Revenue recognition. In May 2014, the FASB issued new accounting guidance that revises the criteria for determining when to recognize revenue from contracts with customers and expands disclosure requirements. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step model to be followed in making this determination. This accounting guidance can be implemented using either a retrospective method or a cumulative-effect approach. In August 2015, the FASB issued an update that defers the effective date of the revenue recognition guidance by one year. This new guidance will be effective for interim and annual reporting periods beginning after December 15, 2017 (effective January 1, 2018, for us). Early adoption is permitted but only for interim and annual reporting periods beginning after December 15, 2016. We have elected to implement this new accounting guidance using a cumulative-effect approach. We have already identified the revenue line items within scope of the new guidance and are currently in the process of performing an in-depth assessment, though our preliminary analysis suggests that the adoption of this accounting guidance is not expected to have a material effect on our financial condition nor results of operations. We are also evaluating the related disclosures. There are many aspects of this new accounting guidance that are still being interpreted, and the FASB has issued updates to certain aspects of the guidance to address implementation issues. For example, the FASB issued accounting guidance in March 2016 to clarify principal-versus-agent considerations, and additional guidance in April 2016 to clarify the identification of performance obligations and the licensing implementation guidance. In May 2016, the FASB issued narrow-scope improvements related to collectability, sales tax and noncash consideration, and practical expedients for contract modifications and completed contracts. In December 2016, the FASB issued additional technical corrections and improvements. While certain implementation issues relevant to the industry are still pending resolution, including trade date versus settlement date recognition for broker-dealers and the applicability of interchange revenues for card-issuing banks, our preliminary conclusions reached as to the application of the new guidance are not expected to be significantly affected. We will continue to evaluate any impact as additional guidance is issued and as our internal assessment progresses.

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Business Combination (Tables)

3 Months Ended

Mar. 31, 2017

Business Acquisition [Line Items]

Information About Acquired Loan Portfolio as of Acquisition Date

The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

August 1, 2016	PCI
in millions
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

Schedule of Changes in Goodwill by Reporting Unit

The following table shows the changes in the carrying amount of goodwill by reporting unit.

	Key			Key
	Community			Corporate
in millions	Bank			Bank			Total
BALANCE AT DECEMBER 31, 2015	$	979		$	81		$	1,060
Acquisition of First Niagara	1,109			277			1,386
BALANCE AT DECEMBER 31, 2016	2,088			358			2,446
Tax adjustment on previous fair value measurements	(15		)	(4		)	(19		)
BALANCE AT MARCH 31, 2017	$	2,073		$	354		$	2,427

First Niagara Bank, N.A. [Member]

Business Acquisition [Line Items]

Schedule of Purchase Price Calculation and Identifiable Assets Purchased and Liabilities Assumed

The following table provides the purchase price calculation as of the Acquisition Date and the identifiable assets purchased and the liabilities assumed at their estimated fair value. These fair value measurements are based on internal and third-party valuations.

in millions
Consideration paid:
KeyCorp common stock issued			$	2,831
Cash payments to First Niagara stockholders			811
Exchange of First Niagara preferred stock for KeyCorp preferred stock			350
Total consideration paid			$	3,992
Statement of Net Assets Acquired at Fair Value:
ASSETS
Cash and due from banks and short-term investments	$	620
Investment securities	9,012
Other investments	297
Loans	23,645
Premises and equipment	245
Other intangible assets	385
Accrued income and other assets	1,449
Total assets	$	35,653
LIABILITIES
Deposits	$	28,994
Bank notes and other short-term borrowings	2,698
Accrued expense and other liabilities	490
Long-term debt	846
Total liabilities	$	33,028
Net identifiable assets acquired			2,625
Goodwill			$	1,367

Based on the revised valuations and new information, we updated our estimated fair values of these items within our Consolidated Balance Sheet with a corresponding adjustment to goodwill. These changes are reflected in the following table:

in millions
Acquired Asset or Liability	Balance Sheet Line Item	Provisional Estimate		Revised Estimate		Increase (Decrease)
Tax adjustment on previous fair value measurements (a)	Accrued income and other assets	$	175	$	194	$	19

(a) The tax adjustment on previous fair value measurements did not have any impact on the income statement for the three months ended March 31, 2017.

Information About Acquired Loan Portfolio as of Acquisition Date

The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

in millions	PCI
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

Schedule of Operations Included in Consolidated Statement of Income and Unaudited Pro Forma Information

The following table presents unaudited pro forma information as if the acquisition of First Niagara had occurred on January 1, 2015. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles, and related income tax effects. Merger-related charges related to the First Niagara merger that we incurred during the three months ended March 31, 2016, are not reflected in the unaudited pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had KeyCorp merged with First Niagara at the beginning of 2015. Cost savings are also not reflected in the unaudited pro forma amounts for the three months ended March 31, 2016.

	Pro forma
in millions	Three months ended March 31, 2016
Net interest income (TE)	$	886
Noninterest income	506
Net income (loss) attributable to common shareholders	245

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Basic and Diluted Earnings Per Common Share

Our basic and diluted earnings per common share are calculated as follows:

	Three months ended March 31,
dollars in millions, except per share amounts	2017		2016
EARNINGS
Income (loss) from continuing operations	$	325	$	187
Less: Net income (loss) attributable to noncontrolling interests	1		—
Income (loss) from continuing operations attributable to Key	324		187
Less: Dividends on Preferred Stock	28		5
Income (loss) from continuing operations attributable to Key common shareholders	296		182
Income (loss) from discontinued operations, net of taxes (a)	—		1
Net income (loss) attributable to Key common shareholders	$	296	$	183
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)	1,068,609		827,381
Effect of convertible preferred stock	—		—
Effect of common share options and other stock awards	17,931		7,679
Weighted-average common shares and potential common shares outstanding (000) (b)	1,086,540		835,060
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders	$	.28	$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—
Net income (loss) attributable to Key common shareholders (c)	.28		.22
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	$	.27	$	.22
Income (loss) from discontinued operations, net of taxes (a)	—		—
Net income (loss) attributable to Key common shareholders — assuming dilution (c)	.27		.22

(a) In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of this decision, we have accounted for this business as a discontinued operation. For further discussion regarding the income (loss) from discontinued operations, see Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

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

(c) EPS may not foot due to rounding.

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Loans and Loans Held for Sale (Tables)

3 Months Ended

Mar. 31, 2017

Loans Receivables [Abstract]

Loans by Category

in millions	March 31, 2017		December 31, 2016
Commercial and industrial (a)	$	40,112	$	39,768
Commercial real estate:
Commercial mortgage	15,260		15,111
Construction	2,270		2,345
Total commercial real estate loans	17,530		17,456
Commercial lease financing (b)	4,665		4,685
Total commercial loans	62,307		61,909
Residential — prime loans:
Real estate — residential mortgage	5,507		5,547
Home equity loans	12,541		12,674
Total residential — prime loans	18,048		18,221
Consumer direct loans	1,735		1,788
Credit cards	1,037		1,111
Consumer indirect loans	2,998		3,009
Total consumer loans	23,818		24,129
Total loans (c), (d)	$	86,125	$	86,038

(a) Loan balances include $114 million and $116 million of commercial credit card balances at March 31, 2017, and December 31, 2016, respectively.

(b) Commercial lease financing includes receivables held as collateral for a secured borrowing of $55 million and $68 million at March 31, 2017, and December 31, 2016, respectively. Principal reductions are based on the cash payments received from these related receivables. Additional information pertaining to this secured borrowing is included in Note 19 (“Long-Term Debt”) beginning on page 191 of our 2016 Form 10-K.

(c) At March 31, 2017, total loans include purchased loans of $19 billion of which $812 million were PCI loans. At December 31, 2016, total loans include purchased loans of $21 billion, of which $865 million were PCI loans.

(d) Total loans exclude loans of $1.5 billion at March 31, 2017, and $1.6 billion at December 31, 2016, related to the discontinued operations of the education lending business. Additional information pertaining to these loans is provided in Note 12 (“Acquisition, Divestiture, and Discontinued Operations”).

Loans Held for Sale

Our loans held for sale are summarized as follows:

in millions	March 31, 2017		December 31, 2016
Commercial and industrial	$	171	$	19
Real estate — commercial mortgage	1,150		1,022
Real estate — construction	—		1
Commercial lease financing	1		—
Real estate — residential mortgage (a)	62		62
Total loans held for sale	$	1,384	$	1,104

(a) Real estate — residential mortgage loans held for sale are held at fair value at March 31, 2017, and December 31, 2016. The fair value option was elected for real estate — residential mortgage loans held for sale during the third quarter of 2016 with the First Niagara acquisition. The contractual amount due on these loans totaled $62 million at March 31, 2017, and December 31, 2016. Changes in fair value are recorded in “Consumer mortgage income” on the income statement. Additional information regarding residential mortgage loans held for sale fair value methodology is provided in Note 6 (“Fair Value Measurements”).

Summary of Changes in Loans Held for Sale

Our quarterly summary of changes in loans held for sale is provided below:

in millions	March 31, 2017			December 31, 2016
Balance at beginning of the period	$	1,104		$	1,137
New originations	2,563			2,846
Transfers from (to) held to maturity, net	17			11
Loan sales	(2,299		)	(2,889		)
Loan draws (payments), net	(1		)	(1		)
Balance at end of period (a)	$	1,384		$	1,104

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

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Asset Quality (Tables)

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Nonperforming Assets and Past Due Loans

Our nonperforming assets and past due loans were as follows:

in millions	March 31, 2017		December 31, 2016
Total nonperforming loans (a)	$	573	$	625
OREO (b)	49		51
Other nonperforming assets	1		—
Total nonperforming assets	$	623	$	676
Nonperforming assets from discontinued operations—education lending (c)	$	4	$	5
TDRs included in nonperforming loans	161		141
TDRs with an allocated specific allowance (d)	84		59
Specifically allocated allowance for restructured loans (e)	30		27
Accruing loans past due 90 days or more	$	79	$	87
Accruing loans past due 30 through 89 days	312		404

(a) Nonperforming loan balances exclude $812 million and $865 million of PCI loans at March 31, 2017, and December 31, 2016, respectively.

(b) Includes carrying value of foreclosed residential real estate of approximately $31 million and $29 million at March 31, 2017 and December 31, 2016, respectively.

(c) Restructured loans of approximately $23 million and $22 million are included in discontinued operations at March 31, 2017, and December 31, 2016, respectively. See Note 12 (“Acquisition, Divestiture, and Discontinued Operations”) for further discussion.

(d) Included in individually impaired loans allocated a specific allowance.

(e) Included in allowance for individually evaluated impaired loans.

PCI and Non-Impaired Loans Receivable

The following table presents the PCI loans receivable balance at the First Niagara Acquisition Date:

August 1, 2016	PCI
in millions
Contractual required payments receivable	$	1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$	984

Schedule of Changes in Outstanding Unpaid Principal Balance, Carrying Amount, and Accretable Yield for PCI Loans

The following tables present the roll-forward of the accretable yield and the beginning and ending outstanding unpaid principal balance and carrying amount of all PCI loans for the three months ended March 31, 2017, and the twelve months ended December 31, 2016.

	Three months ended March 31,							Twelve months ended December 31,
	2017							2016
in millions	Accretable Yield			Carrying Amount		Outstanding Unpaid Principal Balance		Accretable Yield			Carrying Amount		Outstanding Unpaid Principal Balance
Balance at beginning of period	$	197		$	865	$	1,002	$	5		$	11	$	17
Additions	—							205
Accretion	(19		)					(29		)
Net reclassifications from nonaccretable to accretable	25							35
Payments received, net	(11		)					(19		)
Disposals	—							—
Balance at end of period	$	192		$	812	$	930	$	197		$	865	$	1,002

Breakdown of Individually Impaired Loans

The following tables set forth a further breakdown of individually impaired loans as of March 31, 2017, and December 31, 2016:

March 31, 2017	Recorded Investment(a)		Unpaid Principal Balance (b)		Specific Allowance
in millions
With no related allowance recorded:
Commercial and industrial	$	152	$	217	—
Commercial real estate:
Commercial mortgage	1		3		—
Total commercial real estate loans	1		3		—
Total commercial loans	153		220		—
Real estate — residential mortgage	20		20		—
Home equity loans	60		60		—
Consumer indirect loans	2		2		—
Total consumer loans	82		82		—
Total loans with no related allowance recorded	235		302		—
With an allowance recorded:
Commercial and industrial	85		90		$	16
Commercial real estate:
Commercial mortgage	15		15		3
Total commercial real estate loans	15		15		3
Total commercial loans	100		105		19
Real estate — residential mortgage	30		30		2
Home equity loans	64		64		17
Consumer direct loans	3		3		—
Credit cards	3		3		—
Consumer indirect loans	33		33		1
Total consumer loans	133		133		20
Total loans with an allowance recorded	233		238		39
Total	$	468	$	540	$	39

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

December 31, 2016	Recorded Investment(a)		Unpaid Principal Balance(b)		Specific Allowance
in millions
With no related allowance recorded:
Commercial and industrial	$	222	$	301	—
Commercial real estate:
Commercial mortgage	2		3		—
Total commercial real estate loans	2		3		—
Total commercial loans	224		304		—
Real estate — residential mortgage	20		20		—
Home equity loans	61		61		—
Consumer indirect loans	1		1		—
Total consumer loans	82		82		—
Total loans with no related allowance recorded	306		386		—
With an allowance recorded:
Commercial and industrial	62		73		$	17
Commercial real estate:
Commercial mortgage	4		4		—
Total commercial real estate loans	4		4		—
Total commercial loans	66		77		17
Real estate — residential mortgage	31		31		2
Home equity loans	64		64		18
Consumer direct loans	2		3		—
Credit cards	3		3		—
Consumer indirect loans	29		29		1
Total consumer loans	129		130		21
Total loans with an allowance recorded	195		207		38
Total	$	501	$	593	$	38

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

The following table sets forth a further breakdown of the average recorded investment for individually impaired loans reported by Key:

Average Recorded Investment (a)	Three Months Ended March 31,
in millions	2017		2016
Commercial and industrial	$	260	$	215
Commercial real estate:
Commercial mortgage	10		9
Construction	—		6
Total commercial real estate loans	10		15
Total commercial loans	270		230
Real estate — residential mortgage	51		55
Home equity loans	125		129
Consumer direct loans	3		1
Credit cards	2		3
Consumer indirect loans	33		39
Total consumer loans	214		227
Total	$	484	$	457

(a) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

Breakdown of Nonperforming TDRs by Loans Category

A further breakdown of TDRs included in nonperforming loans by loan category as of March 31, 2017, follows:

March 31, 2017	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial	20	$	100	$	66
Commercial real estate:
Commercial mortgage	7	5		4
Total commercial real estate loans	7	5		4
Total commercial loans	27	105		70
Real estate — residential mortgage	267	16		16
Home equity loans	1,186	72		64
Consumer direct loans	40	1		1
Credit cards	288	2		1
Consumer indirect loans	522	10		9
Total consumer loans	2,303	101		91
Total nonperforming TDRs	2,330	206		161
Prior-year accruing:(a)
Commercial and industrial	4	29		16
Total commercial loans	4	29		16
Real estate — residential mortgage	526	35		35
Home equity loans	1,240	75		61
Consumer direct loans	32	2		1
Credit cards	440	3		1
Consumer indirect loans	365	55		27
Total consumer loans	2,603	170		125
Total prior-year accruing TDRs	2,607	199		141
Total TDRs	4,937	$	405	$	302

(a) All TDRs that were restructured prior to January 1, 2017, and are fully accruing.

A further breakdown of TDRs included in nonperforming loans by loan category as of December 31, 2016, follows:

December 31, 2016	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial	18	$	91	$	50
Commercial real estate:
Commercial mortgage	7	2		1
Total commercial real estate loans	7	2		1
Total commercial loans	25	93		51
Real estate — residential mortgage	264	16		16
Home equity loans	1,199	77		69
Consumer direct loans	32	1		—
Credit cards	336	2		2
Consumer indirect loans	124	4		3
Total consumer loans	1,955	100		90
Total nonperforming TDRs	1,980	193		141
Prior-year accruing: (a)
Commercial and Industrial	5	30		16
Total commercial loans	5	30		16
Real estate — residential mortgage	477	35		35
Home equity loans	1,231	70		57
Consumer direct loans	35	2		2
Credit cards	410	3		1
Consumer indirect loans	377	56		28
Total consumer loans	2,530	166		123
Total prior-year accruing TDRs	2,535	196		139
Total TDRs	4,515	$	389	$	280

(a) All TDRs that were restructured prior to January 1, 2016, and are fully accruing.

Post-Modification Outstanding Recorded Investment by Concession Type for Our Commercial Accruing and Nonaccruing TDRs

The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs that occurred during the three months ended March 31, 2017, and March 31, 2016.

	Three Months Ended March 31,
in millions	2017		2016
Commercial loans:
Interest rate reduction	$	7	—
Other	21		$	3
Total	$	28	$	3
Consumer loans:
Interest rate reduction	$	3	$	2
Forgiveness of principal	—		12
Other	12		2
Total	$	15	$	16
Total commercial and consumer TDRs	$	43	$	19
Total loans	86,125		60,438

Past Due Loans Including Current Loans

The following aging analysis of past due and current loans as of March 31, 2017, and December 31, 2016, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio ^(a) 

March 31, 2017	Current		30-59 Days Past Due (b)		60-89 Days Past Due (b)		90 and Greater Days Past Due (b)		Non-performing Loans		Total Past Due and Non-performing Loans		Purchased Credit Impaired		Total Loans (c), (d)
in millions
LOAN TYPE
Commercial and industrial	$	39,621	$	60	$	47	$	24	$	258	$	389	$	102	$	40,112
Commercial real estate:
Commercial mortgage	14,891		25		10		11		32		78		291		15,260
Construction	2,242		—		—		—		2		2		26		2,270
Total commercial real estate loans	17,133		25		10		11		34		80		317		17,530
Commercial lease financing	4,634		12		8		6		5		31		—		4,665
Total commercial loans	$	61,388	$	97	$	65	$	41	$	297	$	500	$	419	$	62,307
Real estate — residential mortgage	$	5,065	$	16	$	7	$	4	$	54	$	81	$	361	$	5,507
Home equity loans	12,225		42		27		14		207		290		26		12,541
Consumer direct loans	1,709		8		4		5		3		20		6		1,735
Credit cards	1,011		7		5		11		3		26		—		1,037
Consumer indirect loans	2,951		27		7		4		9		47		—		2,998
Total consumer loans	$	22,961	$	100	$	50	$	38	$	276	$	464	$	393	$	23,818
Total loans	$	84,349	$	197	$	115	$	79	$	573	$	964	$	812	$	86,125

(a) Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b) Past due loan amounts exclude PCI, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c) Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d) Future accretable yield related to PCI loans is not included in the analysis of the loan portfolio.

December 31, 2016	Current		30-59 Days Past Due (b)		60-89 Days Past Due (b)		90 and Greater Days Past Due (b)		Non-performing Loans		Total Past Due and Non-performing Loans		Purchased Credit Impaired		Total Loans (c), (d)
in millions
LOAN TYPE
Commercial and industrial	$	39,242	$	58	$	28	$	31	$	297	$	414	112		$	39,768
Commercial real estate:
Commercial mortgage	14,655		93		9		6		26		134		322		15,111
Construction	2,314		—		—		2		3		5		26		2,345
Total commercial real estate loans	16,969		93		9		8		29		139		348		17,456
Commercial lease financing	4,641		28		3		5		8		44		—		4,685
Total commercial loans	$	60,852	$	179	$	40	$	44	$	334	$	597	460		$	61,909
Real estate — residential mortgage	$	5,098	$	17	$	5	$	3	$	56	$	81	$	368	$	5,547
Home equity loans	12,327		49		29		16		223		317		30		12,674
Consumer direct loans	1,705		44		15		11		6		76		7		1,788
Credit cards	1,082		9		6		12		2		29		—		1,111
Consumer indirect loans	2,993		7		4		1		4		16		—		3,009
Total consumer loans	$	23,205	$	126	$	59	$	43	$	291	$	519	$	405	$	24,129
Total loans	$	84,057	$	305	$	99	$	87	$	625	$	1,116	$	865	$	86,038

(a) Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.

(b) Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

(c) Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.

(d) Future accretable yield related to purchased credit impaired loans is not included in the analysis of the loan portfolio.

Financing Receivable Credit Quality Indicators

Commercial Credit Exposure — Excluding PCI

Credit Risk Profile by Creditworthiness Category ^{(a), (b)} 

in millions	Commercial and industrial				RE — Commercial				RE — Construction				Commercial lease				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
RATING	2017		2016		2017		2016		2017		2016		2017		2016		2017		2016
Pass	$	38,268	$	37,845	$	14,536	$	14,308	$	2,199	$	2,287	$	4,602	$	4,632	$	59,605	$	59,072
Criticized (Accruing)	1,484		1,514		401		455		43		30		58		45		1,986		2,044
Criticized (Nonaccruing)	258		297		32		26		2		2		5		8		297		333
Total	$	40,010	$	39,656	$	14,969	$	14,789	$	2,244	$	2,319	$	4,665	$	4,685	$	61,888	$	61,449

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) The term criticized refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

Consumer Credit Exposure — Excluding PCI

Non-PCI Loans by Refreshed FICO Score ^(a) 

in millions	Residential — Prime				Consumer direct loans				Credit cards				Consumer indirect loans				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2017		2016		2017		2016		2017		2016		2017		2016		2017		2016
750 and above	$	9,935	$	9,818	$	472	$	498	$	408	$	453	$	1,263	$	1,266	$	12,078	$	12,035
660 to 749	5,821		5,266		644		661		498		525		1,190		1,195		8,153		7,647
Less than 660	1,665		1,617		199		194		131		132		545		543		2,540		2,486
No Score	240		1,122		414		428		—		1		—		5		654		1,556
Total	$	17,661	$	17,823	$	1,729	$	1,781	$	1,037	$	1,111	$	2,998	$	3,009	$	23,425	$	23,724

(a) Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

Commercial Credit Exposure — PCI

Credit Risk Profile by Creditworthiness Category ^{(a), (b)} 

in millions	Commercial and Industrial				RE — Commercial				RE — Construction				Commercial Lease		Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,	December 31,	March 31,		December 31,
RATING	2017		2016		2017		2016		2017		2016		2017	2016	2017		2016
Pass	$	26	$	12	$	118	$	139	$	20	$	21	—	—	$	164	$	172
Criticized	76		100		173		183		6		5		—	—	255		288
Total	$	102	$	112	$	291	$	322	$	26	$	26	—	—	$	419	$	460

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) The term “criticized” refers to those loans that are internally classified by Key as special mention or worse, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not classified as criticized.

Consumer Credit Exposure — PCI

PCI Loans by Refreshed FICO Score ^(a) 

in millions	Residential — Prime				Consumer direct loans				Credit cards		Consumer indirect loans		Total
	March 31,		December 31,		March 31,		December 31,		March 31,	December 31,	March 31,	December 31,	March 31,		December 31,
	2017		2016		2017		2016		2017	2016	2017	2016	2017		2016
750 and above	$	136	$	133	—		—		—	—	—	—	$	136	$	133
660 to 749	143		127		$	2	$	2	—	—	—	—	145		129
Less than 660	103		133		3		4		—	—	—	—	106		137
No Score	5		5		1		1		—	—	—	—	6		6
Total	$	387	$	398	$	6	$	7	—	—	—	—	$	393	$	405

(a) Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

Summary of Allowance for Loan and Lease Losses

A summary of the changes in the ALLL for the periods indicated is presented in the table below:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period — continuing operations	$	858		$	796
Charge-offs	(77		)	(60		)
Recoveries	19			14
Net loans and leases charged off	(58		)	(46		)
Provision for loan and lease losses from continuing operations	70			76
Balance at end of period — continuing operations	$	870		$	826

Changes in Allowance for Loan and Lease Losses by Loan Category

The changes in the ALLL by loan category for the three months ended March 31, 2017, and March 31, 2016, are as follows:

Three months ended March 31, 2017:

in millions	December 31, 2016		Provision				Charge-offs			Recoveries		March 31, 2017
Commercial and Industrial	$	508	$	31			$	(32	)	$	5	$	512
Commercial real estate:
Real estate — commercial mortgage	144		2				—			—		146
Real estate — construction	22		6				—			1		29
Total commercial real estate loans	166		8				—			1		175
Commercial lease financing	42		3				(7		)	2		40
Total commercial loans	716		42				(39		)	8		727
Real estate — residential mortgage	17		(3		)		2			2		18
Home equity loans	54		4				(8		)	3		53
Consumer direct loans	24		9				(10		)	1		24
Credit cards	38		10				(11		)	1		38
Consumer indirect loans	9		8				(11		)	4		10
Total consumer loans	142		28				(38		)	11		143
Total ALLL — continuing operations	858		70			(a)	(77		)	19		870
Discontinued operations	24		3				(6		)	2		23
Total ALLL — including discontinued operations	$	882	$	73			$	(83	)	$	21	$	893

(a)    Excludes a credit for losses on lending-related commitments of $7 million.

Three months ended March 31, 2016:

in millions	December 31, 2015		Provision				Charge-offs			Recoveries		March 31, 2016
Commercial and Industrial	$	450	$	50			$	(26	)	$	3	$	477
Commercial real estate:
Real estate — commercial mortgage	134		—				(1		)	2		135
Real estate — construction	25		(3		)		—			1		$	23
Total commercial real estate loans	159		(3		)		(1		)	3		158
Commercial lease financing	47		(1		)		(3		)	—		43
Total commercial loans	656		46				(30		)	6		678
Real estate — residential mortgage	18		2				(2		)	2		20
Home equity loans	57		14				(10		)	3		64
Consumer direct loans	20		5				(6		)	1		20
Credit cards	32		6				(8		)	1		31
Consumer indirect loans	13		3				(4		)	1		13
Total consumer loans	140		30				(30		)	8		148
Total ALLL — continuing operations	796		76			(a)	(60		)	14		826
Discontinued operations	28		2				(9		)	3		24
Total ALLL — including discontinued operations	$	824	$	78			$	(69	)	$	17	$	850

(a)    Excludes a provision for losses on lending-related commitments of $13 million.

Allowance for Loan and Lease Losses and Corresponding Loan Balances

A breakdown of the individual and collective ALLL and the corresponding loan balances as of March 31, 2017, follows:

	Allowance					Outstanding
March 31, 2017	Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment		Purchased Credit Impaired	Loans			Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment			Purchased Credit Impaired
in millions
Commercial and industrial	$	16	$	495	1	$	40,112		$	237	$	39,773		$	102
Commercial real estate:
Commercial mortgage	3		140		3	15,260			16		14,953			291
Construction	—		29		—	2,270			—		2,244			26
Total commercial real estate loans	3		169		3	17,530			16		17,197			317
Commercial lease financing	—		40		—	4,665			—		4,665			—
Total commercial loans	19		704		4	62,307			253		61,635			419
Real estate — residential mortgage	2		15		1	5,507			51		5,095			361
Home equity loans	17		35		1	12,541			124		12,391			26
Consumer direct loans	—		24		—	1,735			3		1,726			6
Credit cards	—		38		—	1,037			3		1,034			—
Consumer indirect loans	1		9		—	2,998			35		2,963			—
Total consumer loans	20		121		2	23,818			216		23,209			393
Total ALLL — continuing operations	39		825		6	86,125			469		84,844			812
Discontinued operations	2		21		—	1,500		(a)	23		1,477		(a)	—
Total ALLL — including discontinued operations	$	41	$	846	6	$	87,625		$	492	$	86,321		$	812

(a) Amount includes $3 million of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of December 31, 2016, follows:

	Allowance						Outstanding
December 31, 2016	Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment		Purchased Credit Impaired		Loans			Individually Evaluated  for Impairment		Collectively Evaluated  for Impairment			Purchased Credit Impaired
in millions
Commercial and Industrial	$	17	$	486	5		$	39,768		$	284	$	39,372		$	112
Commercial real estate:
Commercial mortgage	—		144		—		15,111			5		14,784			322
Construction	—		22		—		2,345			—		2,319			26
Total commercial real estate loans	—		166		—		17,456			5		17,103			348
Commercial lease financing	—		42		—		4,685			—		4,685			—
Total commercial loans	17		694		5		61,909			289		61,160			460
Real estate — residential mortgage	2		15		—		5,547			51		5,128			368
Home equity loans	17		37		—		12,674			125		12,519			30
Consumer direct loans	—		24		—		1,788			3		1,778			7
Credit cards	—		38		—		1,111			3		1,108			—
Consumer indirect loans	1		8		—		3,009			30		2,979			—
Total consumer loans	20		122		—		24,129			212		23,512			405
Total ALLL — continuing operations	37		816		5		86,038			501		84,672			865
Discontinued operations	2		22		—		1,565		(a)	22		1,543		(a)	—
Total ALLL — including discontinued operations	$	39	$	838	$	5	$	87,603		$	523	$	86,215		$	865

(a) Amount includes $3 million of loans carried at fair value that are excluded from ALLL consideration.

Changes in Liability for Credit Losses on Lending Related Commitments

Changes in the liability for credit losses on unfunded lending-related commitments are summarized as follows:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period	$	55		$	56
Provision (credit) for losses on lending-related commitments	(7		)	13
Balance at end of period	$	48		$	69

XML

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value of Assets and Liabilities Measured on Recurring Basis

The following tables present these assets and liabilities at March 31, 2017, and December 31, 2016.

March 31, 2017	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	586	—		$	586
States and political subdivisions	—		47		—		47
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		248		—		248
Other securities	$	1	35		—		36
Total trading account securities	1		916		—		917
Commercial loans	—		4		—		4
Total trading account assets	1		920		—		921
Securities available for sale:
U.S. Treasury, agencies and corporations	—		185		—		185
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations (a)	—		14,563		—		14,563
Agency residential mortgage-backed securities (a)	—		1,742		—		1,742
Agency commercial mortgage-backed securities	—		1,910		—		1,910
Other securities	3		—		$	17	20
Total securities available for sale	3		18,411		17		18,431
Other investments:
Principal investments:
Direct	—		—		21		21
Indirect (measured at NAV) (b)	—		—		—		155
Total principal investments	—		—		21		176
Equity and mezzanine investments:
Indirect (measured at NAV) (b)	—		—		—		2
Total equity and mezzanine investments	—		—		—		2
Total other investments	—		—		21		178
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		777		5		782
Foreign exchange	91		7		—		98
Commodity	—		150		—		150
Credit	—		2		1		3
Other	—		5		4		9
Derivative assets	91		941		10		1,042
Netting adjustments (c)	—		—		—		(464		)
Total derivative assets	91		941		10		578
Accrued income and other assets	—		—		—		—
Total assets on a recurring basis at fair value	$	95	$	20,334	$	48	$	20,170
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	214	$	729	—		$	943
Derivative liabilities:
Interest rate	—		531		—		531
Foreign exchange	78		8		—		86
Commodity	—		140		—		140
Credit	—		6		—		6
Other	—		16		—		16
Derivative liabilities	78		701		—		779
Netting adjustments (c)	—		—		—		(524		)
Total derivative liabilities	78		701		—		255
Accrued expense and other liabilities	—		—		—		—
Total liabilities on a recurring basis at fair value	$	292	$	1,430	—		$	1,198

(a) “Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.

(b) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2016	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	655	—		$	655
States and political subdivisions	—		8		—		8
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		113		—		113
Other securities	—		73		—		73
Total trading account securities	—		849		—		849
Commercial loans	—		18		—		18
Total trading account assets	—		867		—		867
Securities available for sale:
U.S. Treasury, agencies and corporations	—		184		—		184
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations (a)	—		16,408		—		16,408
Agency residential mortgage-backed securities (a)	—		1,846		—		1,846
Agency commercial mortgage-backed securities	—		1,743		—		1,743
Other securities	$	3	—		$	17	20
Total securities available for sale	3		20,192		17		20,212
Other investments:
Principal investments:
Direct	—		—		27		27
Indirect (measured at NAV) (b)	—		—		—		158
Total principal investments	—		—		27		185
Equity and mezzanine investments:
Indirect (measured at NAV) (b)	—		—		—		6
Total equity and mezzanine investments	—		—		—		6
Total other investments	—		—		27		191
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		923		7		930
Foreign exchange	114		9		—		123
Commodity	—		176		—		176
Credit	—		—		1		1
Other	—		2		2		4
Derivative assets	114		1,110		10		1,234
Netting adjustments (c)	—		—		—		(431		)
Total derivative assets	114		1,110		10		803
Accrued income and other assets	—		8		—		8
Total assets on a recurring basis at fair value	$	117	$	22,239	$	54	$	22,143
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	192	$	616	—		$	808
Derivative liabilities:
Interest rate	—		737		—		737
Foreign exchange	102		11		—		113
Commodity	—		165		—		165
Credit	—		4		—		4
Other	—		1		—		1
Derivative liabilities	102		918		—		1,020
Netting adjustments (c)	—		—		—		(384		)
Total derivative liabilities	102		918		—		636
Accrued expense and other liabilities	—		14		—		14
Total liabilities on a recurring basis at fair value	$	294	$	1,548	—		$	1,458

(a) “Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.

(b) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

Change in Fair Values of Level 3 Financial Instruments

The following table shows the components of the change in the fair values of our Level 3 financial instruments for the three months ended March 31, 2017, and March 31, 2016. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases	Sales			Settlements		Transfers Other		Transfers into Level 3 (a)			Transfers out of Level 3 (a)				End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2017
Securities available for sale
Other securities	$	17	—				—	—			—		—		—			—				$	17	—
Other investments
Principal investments
Direct	27		$	(2	)	(b)	—	$	(4	)	—		—		—			—				21		$	(6	)	(b)
Other indirect	—		—				—	—			—		—		—			—				—		—
Derivative instruments (c)
Interest rate	7		—				—	—			—		—		$	1	(e)	$	(3	)	(e)	5		—
Credit	1		(3		)	(d)	—	—			$	3	—		—			—				1		—
Other (g)	2		—				—	—			—		$	2	—			—				4		—

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases	Sales			Settlements		Transfers into Level 3 (a)			Transfers out of Level 3 (a)				End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
Three months ended March 31, 2016
Securities available for sale
Other securities	$	17	—				—	—			—		—			—				$	17	—
Other investments
Principal investments
Direct	50		$	(3	)	(b)	—	—			—		—			—				47		$	(3	)	(b)
Other indirect	20		(1		)	(b)	—	$	(1	)	—		—			—				18		(1		)	(b)
Derivative instruments (c)
Interest rate	16		4			(d)	—	—			—		$	3	(e)	$	(7	)	(e)	16		—
Credit	1		(2		)	(d)	—	—			$	3	—			—				2		—

(a) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

(b) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized losses on other and private equity and mezzanine investments are reported in “other income” on the income statement.

(c) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(d) Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on the income statement.

(e) Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant. Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less significant.

(f) There were no issuances for the three-month periods ended March 31, 2017, and March 31, 2016.

(g) Amounts represent Level 3 interest rate lock commitments.

Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

The following table presents our assets measured at fair value on a nonrecurring basis at March 31, 2017, and December 31, 2016:

	March 31, 2017						December 31, 2016
in millions	Level 1	Level 2	Level 3		Total		Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	—	—	$	11	$	11	—	—	$	11	$	11
Loans held for sale (a)	—	—	1		1		—	—	—		—
Accrued income and other assets	—	—	6		6		—	—	11		11
Total assets on a nonrecurring basis at fair value	—	—	$	18	$	18	—	—	$	22	$	22

(a) During the first three months of 2017, we transferred $17 million of commercial loans and leases at their current fair value from held-to-maturity portfolio to held-for-sale status, compared to $35 million during 2016.

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets at March 31, 2017, and December 31, 2016, along with the valuation techniques used, are shown in the following table:

March 31, 2017	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Recurring
Other investments — principal investments — direct:	$	21	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.00 - 6.30 (6.20)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	11		Fair value of underlying collateral	Discount	00.00 - 70.00% (16.00%)

December 31, 2016	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Recurring
Other investments — principal investments — direct:	$	27	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.30 - 7.00 (6.50)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	11		Fair value of underlying collateral	Discount	00.00 - 70.00% (46.00%)

Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at March 31, 2017, and December 31, 2016, are shown in the following tables:

	March 31, 2017
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments (a)	$	3,074	$	3,074	—		—		—		—				$	3,074
Trading account assets (b)	921		1		$	920	—		—		—				921
Securities available for sale (b)	18,431		3		18,411		$	17	—		—				18,431
Held-to-maturity securities (c)	10,186		—		9,954		—		—		—				9,954
Other investments (b)	689		—		—		527		$	157	—				684
Loans, net of allowance (d)	85,255		—		83,520		—		—		—				83,520
Loans held for sale (b)	1,384		—		62		1,322		—		—				1,384
Derivative assets (b)	578		91		941		10		—		$	(464	)	(f)	578
LIABILITIES
Deposits with no stated maturity (a)	$	93,429	—		$	93,429	—		—		—				$	93,429
Time deposits (e)	10,553		—		10,649		—		—		—				10,649
Short-term borrowings (a)	1,385		$	214	1,171		—		—		—				1,385
Long-term debt (e)	12,324		12,372		289		—		—		—				12,661
Derivative liabilities (b)	255		78		701		—		—		$	(524	)	(f)	255

	December 31, 2016
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments (a)	$	3,452	$	3,452	—		—		—		—				$	3,452
Trading account assets (b)	867		—		$	867	—		—		—				867
Securities available for sale (b)	20,212		3		20,192		$	17	—		—				20,212
Held-to-maturity securities (c)	10,232		—		10,007		—		—		—				10,007
Other investments (b)	738		—		—		569		$	164	—				733
Loans, net of allowance (d)	85,180		—		—		83,285		—		—				83,285
Loans held for sale (b)	1,104		—		62		1,042		—		—				1,104
Derivative assets (b)	803		114		1,110		10		—		$	(431	)	(f)	803
LIABILITIES
Deposits with no stated maturity (a)	$	93,906	—		$	93,906	—		—		—				$	93,906
Time deposits (e)	10,181		—		10,267		—		—		—				10,267
Short-term borrowings (a)	2,310		$	192	2,118		—		—		—				2,310
Long-term debt (e)	12,384		12,386		304		—		—		—				12,690
Derivative liabilities (b)	636		102		918		—		—		$	(384	)	(f)	636

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” in this Note. Investments accounted for under the equity method are not included in this table.

(c) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities, and certain prepayment assumptions. We review the valuations derived from the models to ensure that they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(d) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(e) Fair values of time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

Principal Investments [Member]

Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided

The following table presents the fair value of our indirect investments and related unfunded commitments at March 31, 2017. We did not provide any financial support to investees related to our direct and indirect investments for the three months ended March 31, 2017, and March 31, 2016.

March 31, 2017	Fair Value		Unfunded Commitments
in millions
INVESTMENT TYPE
Indirect investments
Passive funds (a) (measured at NAV)	$	2	$	1
Total	$	2	$	1

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to three years. The purpose of KREEC’s funding is to allow funds to make additional investments and keep a certain market value threshold in the funds. KREEC is obligated to provide financial support, as all investors are required, to the funds based on its ownership percentage, as noted in the Limited Partnership Agreements.

Private Equity and Mezzanine Investments [Member]

Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at March 31, 2017, as well as financial support provided for the three months ended March 31, 2017, and March 31, 2016.

					Financial support provided
					Three months ended March 31,
	March 31, 2017				2017			2016
in millions	Fair Value		Unfunded Commitments		Funded Commitments		Funded Other	Funded Commitments		Funded Other
INVESTMENT TYPE
Direct investments (a)	$	21	—		—		—	—		$	13
Indirect investments (b) (measured at NAV)	155		$	37	$	1	—	$	1	—
Total	$	176	$	37	$	1	—	$	1	$	13

(a) Our direct investments consist of equity and debt investments directly in independent business enterprises. Operations of the business enterprises are handled by management of the portfolio company. The purpose of funding these enterprises is to provide financial support for business development and acquisition strategies. We infuse equity capital based on an initial contractual cash contribution and later from additional requests on behalf of the companies’ management.

(b) Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to eight years. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.

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Securities (Tables)

3 Months Ended

Mar. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Details of Securities

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.

	March 31, 2017
in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations	$	188	—		$	3	$	185
States and political subdivisions	11		—		—		11
Agency residential collateralized mortgage obligations	14,790		$	29	256		14,563
Agency residential mortgage-backed securities	1,751		5		14		1,742
Agency commercial mortgage-backed securities	1,956		—		46		1,910
Other securities	21		—		1		20
Total securities available for sale	$	18,717	$	34	$	320	$	18,431
HELD TO MATURITY SECURITIES
Agency residential collateralized mortgage obligations	$	7,973	$	2	$	188	$	7,787
Agency residential mortgage-backed securities	605		—		5		600
Agency commercial mortgage-backed securities	1,593		3		44		1,552
Other securities	15		—		—		15
Total held-to-maturity securities	$	10,186	$	5	$	237	$	9,954

	December 31, 2016
in millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies, and corporations	$	188	—		$	4	$	184
States and political subdivisions	11		—		—		11
Agency residential collateralized mortgage obligations	16,652		$	31	275		16,408
Agency residential mortgage-backed securities	1,857		6		17		1,846
Agency commercial mortgage-backed securities	1,778		—		35		1,743
Other securities	21		—		1		20
Total securities available for sale	$	20,507	$	37	$	332	$	20,212
HELD TO MATURITY SECURITIES
Agency residential collateralized mortgage obligations	$	8,404	$	1	$	173	$	8,232
Agency residential mortgage-backed securities	629		—		5		624
Agency commercial mortgage-backed securities	1,184		1		49		1,136
Other securities	15		—		—		15
Total held-to-maturity securities	$	10,232	$	2	$	227	$	10,007

Available for Sale Securities (Unrealized Loss Position)

The following table summarizes our securities that were in an unrealized loss position as of March 31, 2017, and December 31, 2016.

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
in millions	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2017
Securities available for sale:
U.S Treasury, agencies, and corporations	$	185	$	3	—		—		$	185	$	3
Agency residential collateralized mortgage obligations	10,573		205		$	1,507	$	51	12,080		256
Agency residential mortgage-backed securities	1,527		14		—		—		1,527		14
Agency commercial mortgage-backed securities	1,910		46		—		—		1,910		46
Other securities (a)	—		—		3		1		3		1
Held-to-maturity:
Agency residential collateralized mortgage obligations	$	6,634	$	169	$	521	$	19	$	7,155	$	188
Agency residential mortgage-backed securities (a)	525		5		—		—		525		5
Agency commercial mortgage-backed securities	1,001		44		—		—		1,001		44
Other securities (b)	4		—		—		—		4		—
Total temporarily impaired securities	$	22,359	$	486	$	2,031	$	71	$	24,390	$	557
December 31, 2016
Securities available for sale:
U.S. Treasury, agencies, and corporations	$	182	$	4	—		—		$	182	$	4
Agency residential collateralized mortgage obligations	12,345		231		$	1,410	$	44	13,755		275
Agency residential mortgage-backed securities	1,452		17		—		—		1,452		17
Agency commercial mortgage-backed securities	1,482		35		—		—		1,482		35
Other securities (a)	2		—		3		1		5		1
Held-to-maturity:
Agency residential collateralized mortgage obligations	7,028		156		518		17		7,546		173
Agency residential mortgage-backed securities	547		5		—		—		547		5
Agency commercial mortgage-backed securities	996		49		—		—		996		49
Other securities (b)	4		—		—		—		4		—
Total temporarily impaired securities	$	24,038	$	497	$	1,931	$	62	$	25,969	$	559

(a) Gross unrealized losses totaled less than $1 million for other securities available for sale at March 31, 2017, and December 31, 2016.

(b) Gross unrealized losses totaled less than $1 million for other securities held to maturity at March 31, 2017, and December 31, 2016

Cumulative Credit Portion of Impairments on Debt Securities

As shown in the following table, we did not have any impairment losses recognized in earnings for the three months ended March 31, 2017.

Three months ended March 31, 2017
in millions
Balance at December 31, 2016	$	4
Impairment recognized in earnings	—
Balance at March 31, 2017	$	4

Securities by Maturity

The following table shows our securities by remaining maturity. CMOs and other mortgage-backed securities (both of which are included in the securities available-for-sale portfolio) as well as the CMOs in the held-to-maturity portfolio are presented based on their expected average lives. The remaining securities, in both the available-for-sale and held-to-maturity portfolios, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

	Securities Available for Sale				Held to Maturity Securities
March 31, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value
in millions
Due in one year or less	$	177	$	179	$	55	$	56
Due after one through five years	16,595		16,354		6,935		6,798
Due after five through ten years	1,737		1,693		2,936		2,862
Due after ten years	208		205		260		238
Total	$	18,717	$	18,431	$	10,186	$	9,954

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Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Values, Volume of Activity and Gain (Loss) Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2017, and December 31, 2016. The change in the notional amounts of these derivatives by type from December 31, 2016, to March 31, 2017, indicates the volume of our derivative transaction activity during the first three months of 2017. The notional amounts are not affected by bilateral collateral and master netting agreements. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Where master netting agreements are not in effect or are not enforceable under bankruptcy laws, we do not adjust those derivative assets and liabilities with counterparties. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:

	March 31, 2017								December 31, 2016
			Fair Value								Fair Value
in millions	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	24,917	$	98		$	20		$	24,237	$	189		$	94
Foreign exchange	284		3			2			282		6			4
Total	25,201		101			22			24,519		195			98
Derivatives not designated as hedging instruments:
Interest rate	58,963		684			511			55,315		741			643
Foreign exchange	6,897		95			84			6,230		117			109
Commodity	1,569		150			140			1,474		176			165
Credit	418		3			6			360		1			4
Other (a)	2,625		9			16			390		4			1
Total	70,472		941			757			63,769		1,039			922
Netting adjustments (b)	—		(464		)	(524		)	—		(431		)	(384		)
Net derivatives in the balance sheet	95,673		578			255			88,288		803			636
Other collateral (c)	—		(11		)	(71		)	—		(21		)	(97		)
Net derivative amounts	$	95,673	$	567		$	184		$	88,288	$	782		$	539

(a) Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when issued securities, and when-issued security transactions in connection with an “at-the-market” equity offering program.

(b) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(c) Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Pre-Tax Net Gains (Losses) on Fair Value Hedges

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement.

	Three months ended March 31, 2017
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative			Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	(35	)	Long-term debt	Other income	$	35	(a)
Interest rate	Interest expense — Long-term debt	18
Total		$	(17	)			$	35

	Three months ended March 31, 2016
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	115	Long-term debt	Other income	$	(115	)	(a)
Interest rate	Interest expense — Long-term debt	27
Total		$	142			$	(115	)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

	Three months ended March 31, 2017
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	(22	)	Interest income — Loans	$	15		Other income	—
Interest rate	—			Interest expense — Long-term debt	(1		)	Other income	—
Interest rate	—			Investment banking and debt placement fees	—			Other income	—
Net Investment Hedges
Foreign exchange contracts	(3		)	Other Income	—			Other income	—
Total	$	(25	)		$	14			—

	Three months ended March 31, 2016
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	133		Interest income — Loans	$	23		Other income	—
Interest rate	(4		)	Interest expense — Long-term debt	(1		)	Other income	—
Interest rate	(1		)	Investment banking and debt placement fees	—			Other income	—
Net Investment Hedges
Foreign exchange contracts	(14		)	Other Income	—			Other income	—
Total	$	114			$	22			—

After-Tax Change in AOCI Resulting from Cash Flow Hedges

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

in millions	December 31, 2016			2017 Hedging Activity			Reclassification of Gains to Net Income			March 31, 2017
AOCI resulting from cash flow and net investment hedges	$	(14	)	$	(15	)	$	(9	)	$	(38	)

Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging Instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2017, and March 31, 2016, and where they are recorded on the income statement.

	Three months ended March 31, 2017											Three months ended March 31, 2016
in millions	Corporate Services Income		Consumer Mortgage Income (a)			Other Income			Total			Corporate Services Income		Other Income			Total
NET GAINS (LOSSES)
Interest rate	$	6	—			$	(1	)	$	5		$	6	$	(1	)	$	5
Foreign exchange	11		—			—			11			10		—			10
Commodity	2		—			—			2			1		—			1
Credit	1		—			(5		)	(4		)	1		(2		)	(1		)
Other	—		$	(1	)	(1		)	(2		)	—		—			—
Total net gains (losses)	$	20	$	(1	)	$	(7	)	$	12		$	18	$	(3	)	$	15

(a) As a result of the First Niagara acquisition, we began recognizing net gains (losses) on other derivatives related to our residential mortgage banking activities in “consumer mortgage income” in December 2016.

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

in millions	March 31, 2017			December 31, 2016
Interest rate	$	452		$	782
Foreign exchange	41			62
Commodity	50			110
Credit	1			—
Other	9			4
Derivative assets before collateral	553			958
Less: Related collateral	(25		)	155
Total derivative assets	$	578		$	803

Fair Value of Credit Derivatives Purchased and Sold

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of March 31, 2017, and December 31, 2016. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.

	March 31, 2017							December 31, 2016
in millions	Purchased			Sold	Net			Purchased			Sold		Net
Single-name credit default swaps	$	(2	)	—	$	(2	)	$	(2	)	—		$	(2	)
Traded credit default swap indices	(1		)	—	(1		)	(1		)	—		(1		)
Other (a)	—			—	—			—			$	—	—
Total credit derivatives	$	(3	)	—	$	(3	)	$	(3	)	$	—	(3		)

(a) As of both March 31, 2017, and December 31, 2016, the fair value of other credit derivatives sold totaled less than $1 million.

Credit Derivatives Sold and Held

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2017, and December 31, 2016. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	March 31, 2017					December 31, 2016
dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	8	11.40	12.85	%	$	4	6.49	17.93	%
Total credit derivatives sold	$	8	—	—		$	4	—	—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of March 31, 2017, and December 31, 2016. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of March 31, 2017, and December 31, 2016, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of December 31, 2016. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.

	March 31, 2017				December 31, 2016
in millions	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings	A3		A-		A3		A-
One rating downgrade	$	2	$	2	$	2	$	2
Two rating downgrades	2		2		2		2
Three rating downgrades	2		2		4		4

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Mortgage Servicing Assets (Tables)

3 Months Ended

Mar. 31, 2017

Commercial Mortgage Backed Securities [Member]

Servicing Assets at Fair Value [Line Items]

Changes in Carrying Amount of Mortgage Servicing Assets

Changes in the carrying amount of commercial mortgage servicing assets are summarized as follows:

	Three months ended March 31,
in millions	2017			2016
Balance at beginning of period	$	356		$	321
Servicing retained from loan sales	28			7
Purchases	7			12
Amortization	(22		)	(22		)
Balance at end of period	$	369		$	318
Fair value at end of period	$	480		$	408

Schedule of Range and Weighted-Average of Significant Unobservable Inputs

The range and weighted average of the significant unobservable inputs used to determine the fair value of our commercial mortgage servicing assets at March 31, 2017, and December 31, 2016, along with the valuation techniques, are shown in the following table:

March 31, 2017	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Commercial mortgage servicing assets	Discounted cash flow	Expected defaults	1.00 - 3.00% (1.30%)
		Residual cash flows discount rate	7.00 - 15.00% (8.60%)
		Escrow earn rate	1.20 - 3.20% (2.60%)
		Servicing cost	$150 - $38,500 ($1,342)
		Loan assumption rate	0.00 - 3.00% (1.25%)
		Percentage late	0.00 - 2.00% (.31%)

December 31, 2016	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Commercial mortgage servicing assets	Discounted cash flow	Expected defaults	1.00 - 3.00% (1.40%)
		Residual cash flows discount rate	7.00 - 12.00% (8.00%)
		Escrow earn rate	1.10 - 3.00% (2.40%)
		Servicing cost	$150 - $2,700 ($1,124)
		Loan assumption rate	0.00 - 3.00% (1.13%)
		Percentage late	0.00 - 2.00% (.34%)

Residential Mortgage Backed Securities [Member]

Servicing Assets at Fair Value [Line Items]

Changes in Carrying Amount of Mortgage Servicing Assets

Changes in the carrying amount of residential mortgage servicing assets are summarized as follows:

	Three months ended March 31, 2017
in millions
Balance at beginning of period	$	28
Servicing retained from loan sales	2
Amortization	(1		)
Balance at end of period	$	29
Fair value at end of period	$	35

Schedule of Range and Weighted-Average of Significant Unobservable Inputs

The range and weighted-average of the significant unobservable inputs used to fair value our mortgage servicing assets at March 31, 2017, along with the valuation techniques, are shown in the following table:

March 31, 2017	Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
dollars in millions
Residential mortgage servicing assets	Discounted cash flow	Prepayment speed	7.68 - 19.68% (9.24%)
		Discount rate	8.50 - 11.00% (8.55%)
		Servicing cost	$76 - $3,335 ($83.03)

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Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities Information

The table below reflects the size of the private equity funds in which KCC was invested as well as our maximum exposure to loss in connection with these investments at March 31, 2017.

	Unconsolidated VIEs
in millions	Total Assets		Total Liabilities		Maximum Exposure to Loss
March 31, 2017
KCC indirect investments	$	19,029	$	135	$	192
December 31, 2016
KCC indirect investments	$	32,755	$	201	$	195

The assets and liabilities presented in the table below convey the size of KCDC’s direct and indirect investments at March 31, 2017, and December 31, 2016. As these investments represent unconsolidated VIEs, the assets and liabilities of the investments themselves are not recorded on our balance sheet.

	Unconsolidated VIEs
in millions	Total Assets		Total Liabilities		Maximum Exposure to Loss
March 31, 2017
LIHTC investments	$	4,785	$	1,972	$	1,451
December 31, 2016
LIHTC investments	$	4,814	$	2,003	$	1,465

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Acquisition, Divestiture, and Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Components of Income (Loss) from Discontinued Operations, Net of Taxes for Education Lending Business

The components of “income (loss) from discontinued operations, net of taxes” for the education lending business are as follows:

	Three months ended March 31,
in millions	2017		2016
Net interest income	$	5	$	7
Provision for credit losses	3		2
Net interest income after provision for credit losses	2		5
Noninterest income	2		1
Noninterest expense	4		5
Income (loss) before income taxes	—		1
Income taxes	—		—
Income (loss) from discontinued operations, net of taxes (a)	—		$	1

(a) Includes after-tax charges of $6 million for each of the three-month periods ended March 31, 2017, and March 31, 2016, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

Components of Assets of Education Lending Business

The discontinued assets of our education lending business included on the balance sheet are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Held-to-maturity securities	$	1	$	1
Portfolio loans at fair value	3		3
Loans, net of unearned income (a)	1,497		1,562
Less: Allowance for loan and lease losses	23		24
Net loans	1,477		1,541
Accrued income and other assets	27		28
Total assets	$	1,505	$	1,570

(a) At March 31, 2017, and December 31, 2016, unearned income was less than $1 million.

Quantitative Information about Level 3 Fair Value Measurements

The following table shows the significant unobservable inputs used to measure the fair value of the portfolio loans accounted for at fair value as of March 31, 2017, and December 31, 2016:

March 31, 2017	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Portfolio loans accounted for at fair value	$	3	Market approach	Indicative bids	84.50-104.00%

December 31, 2016	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions
Portfolio loans accounted for at fair value	$	3	Market approach	Indicative bids	84.50-104.00%

Principal and Fair Value Amounts for Portfolio Loans at Carrying Value, and Portfolio Loans at Fair Value

The following table shows the principal and fair value amounts for our portfolio loans at carrying value at March 31, 2017, and December 31, 2016. Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 108 of our 2016 Form 10-K.

	March 31, 2017			December 31, 2016
in millions	Principal		Fair Value	Principal		Fair Value
Portfolio loans at carrying value
Accruing loans past due 90 days or more	$	20	N/A	$	22	N/A
Loans placed on nonaccrual status	4		N/A	5		N/A

Portfolio Loans at Fair Value and Related Contractual Amounts

The following table shows the portfolio loans at fair value and their related contractual amounts as of March 31, 2017, and December 31, 2016.

	March 31, 2017				December 31, 2016
in millions	Contractual Amount		Fair Value		Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	3	$	3	$	3	$	3

Consolidated Assets at Fair Value on Recurring Basis

The following tables present the assets of the portfolio loans measured at fair value on a recurring basis at March 31, 2017, and December 31, 2016.

March 31, 2017
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	—	—	$	3	$	3
Total assets on a recurring basis at fair value	—	—	$	3	$	3

December 31, 2016
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	—	—	$	3	$	3
Total assets on a recurring basis at fair value	—	—	$	3	$	3

Change in Fair Values of Level 3 Portfolio Loans Held for Sale, Portfolio Loans, and Consolidated Education Loan Securitization Trusts

The following table shows the change in the fair values of the Level 3 portfolio loans held for sale, portfolio loans, and consolidated education loan securitization trusts for the three-month periods ended March 31, 2017, and March 31, 2016.

in millions		Portfolio Student Loans
Balance at December 31, 2016		$	3
Settlements		—
Balance at March 31, 2017	(a)	$	3
Balance at December 31, 2015		$	4
Settlements		(1		)
Balance at March 31, 2016	(a)	$	3

(a) There were no purchases, sales, issuances, gains (losses) recognized in earnings, transfers into Level 3, or transfers out of Level 3 for the three-month period ended March 31, 2017. There were no purchases, sales, issuances, gains (losses) recognized in earnings, transfers into Level 3, or transfers out of Level 3 for the three-month period ended March 31, 2016.

Components of Assets from Discontinued Operations

The discontinued assets of Austin included on the balance sheet are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Cash and due from banks	$	15	$	15
Total assets	$	15	$	15

Combined Results of Discontinued Operations

The combined results of the discontinued operations are as follows:

	Three months ended March 31,
in millions	2017		2016
Net interest income	$	5	$	7
Provision for credit losses	3		2
Net interest income after provision for credit losses	2		5
Noninterest income	2		1
Noninterest expense	4		5
Income (loss) before income taxes	—		1
Income taxes	—		—
Income (loss) from discontinued operations, net of taxes (a)	—		$	1

(a) Includes after-tax charges of $6 million and for each of the three-month periods ended March 31, 2017, and March 31, 2016, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

Combined Assets of Discontinued Operations

The combined assets of the discontinued operations are as follows. There were no discontinued liabilities for the periods presented below.

in millions	March 31, 2017		December 31, 2016
Cash and due from banks	$	15	$	15
Held-to-maturity securities	1		1
Portfolio loans at fair value	3		3
Loans, net of unearned income (a)	1,497		1,562
Less: Allowance for loan and lease losses	23		24
Net loans	1,477		1,541
Accrued income and other assets	27		28
Total assets	$	1,520	$	1,585

(a) At March 31, 2017, and December 31, 2016, unearned income was less than $1 million.

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Securities Financing Activities (Tables)

3 Months Ended

Mar. 31, 2017

Banking and Thrift [Abstract]

Summarized Securities Financing Agreements

The following table summarizes our securities financing agreements at March 31, 2017, and December 31, 2016:

	March 31, 2017
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	4	$	(3	)	$	(1	)	—
Total	$	4	$	(3	)	$	(1	)	—
Offsetting of financial liabilities:
Repurchase agreements (c)	$	437	$	(3	)	$	(434	)	—
Total	$	437	$	(3	)	$	(434	)	—

	December 31, 2016
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments (a)			Collateral (b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	3	$	(3	)	—			—
Total	$	3	$	(3	)	—			—
Offsetting of financial liabilities:
Repurchase agreements (c)	$	497	$	(3	)	$	(494	)	—
Total	$	497	$	(3	)	$	(494	)	—

(a) Netting adjustments take into account the impact of master netting agreements that allow us to settle with a single counterparty on a net basis.

(b) These adjustments take into account the impact of bilateral collateral agreements that allow us to offset the net positions with the related collateral. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

(c) Repurchase agreements are collateralized by federal agency CMOs and U.S. Treasury securities and contracted on an overnight basis. These securities are reported in “securities available for sale” on our balance sheet.

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Employee Benefits (Tables)

3 Months Ended

Mar. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Net Pension Cost (Benefit) for All Funded and Unfunded Plans

The components of net pension cost (benefit) for all funded and unfunded plans are as follows:

	Three months ended March 31,
in millions	2017			2016
Interest cost on PBO	$	12		$	10
Expected return on plan assets	(17		)	(13		)
Amortization of losses	4			4
Net pension cost	$	(1	)	$	1

Net Postretirement Benefit Cost for All Funded and Unfunded Plans

The components of net postretirement benefit cost for all funded and unfunded plans are as follows:

	Three months ended March 31,
in millions	2017	2016
Interest cost on APBO	—	$	1
Expected return on plan assets	—	(1		)
Net postretirement benefit cost	—	—

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Trust Preferred Securities Issued by Unconsolidated Subsidiaries (Tables)

3 Months Ended

Mar. 31, 2017

Banking and Thrift [Abstract]

Summary of Trust Preferred Securities, Common Stock and Related Debentures

The trust preferred securities, common stock, and related debentures are summarized as follows:

dollars in millions	Trust Preferred Securities, Net of Discount (a)		Common Stock		Principal Amount of Debentures, Net of Discount (b)		Interest Rate of Trust Preferred Securities and Debentures (c)		Maturity of Trust Preferred Securities and Debentures
March 31, 2017
KeyCorp Capital I	$	155	$	6	$	161	1.738	%	2028
KeyCorp Capital II	105		4		109		6.875		2029
KeyCorp Capital III	138		4		142		7.750		2029
HNC Statutory Trust III	18		1		19		2.453		2035
Willow Grove Statutory Trust I	18		1		19		2.441		2036
HNC Statutory Trust IV	16		1		17		2.319		2037
Westbank Capital Trust II	7		—		7		3.342		2034
Westbank Capital Trust III	7		—		7		3.342		2034
Total	$	464	$	17	$	481	4.811	%	—
December 31, 2016	$	475	$	17	$	492	4.845	%	—

(a) The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $58 million at March 31, 2017, and $59 million at December 31, 2016. See Note 8 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b) We have the right to redeem these debentures. If the debentures purchased by KeyCorp Capital I, HNC Statutory Trust III, Willow Grove Statutory Trust I, HNC Statutory Trust IV, Westbank Capital Trust II, or Westbank Capital Trust III are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (i) the principal amount, plus any accrued but unpaid interest, or (ii) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points for KeyCorp Capital II or 25 basis points for KeyCorp Capital III, or 50 basis points in the case of redemption upon either a tax or a capital treatment event for either KeyCorp Capital II or KeyCorp Capital III, plus any accrued but unpaid interest. The principal amount of certain debentures includes basis adjustments related to fair value hedges totaling $58 million at March 31, 2017, and $59 million at December 31, 2016. See Note 8 for an explanation of fair value hedges. The principal amount of debentures, net of discounts, is included in “long-term debt” on the balance sheet.

(c) The interest rates for the trust preferred securities issued by KeyCorp Capital II and KeyCorp Capital III are fixed. The trust preferred securities issued by KeyCorp Capital I have a floating interest rate, equal to three-month LIBOR plus 74 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust III have a floating interest rate, equal to three-month LIBOR plus 140 basis points, that reprices quarterly. The trust preferred securities issued by Willow Grove Statutory Trust I have a floating interest rate, equal to three-month LIBOR plus 131 basis points, that reprices quarterly. The trust preferred securities issued by HNC Statutory Trust IV have a floating interest rate, equal to three-month LIBOR plus 128 basis points, that reprices quarterly. The trust preferred securities issued by Westbank Capital Trust II and Westbank Capital Trust III each have a floating interest rate, equal to three-month LIBOR plus 219 basis points, that reprices quarterly.  The total interest rates are weighted-average rates.

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Contingent Liabilities and Guarantees (Tables)

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Guarantees

The following table shows the types of guarantees that we had outstanding at March 31, 2017. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Guarantees” beginning on page 115 of our 2016 Form 10-K.

March 31, 2017	Maximum Potential Undiscounted Future Payments		Liability Recorded
in millions
Financial guarantees:
Standby letters of credit	$	11,779	$	70
Recourse agreement with FNMA	2,664		5
Residential mortgage reserve	1,270		5
Return guarantee agreement with LIHTC investors	3		3
Written put options (a)	2,052		43
Total	$	17,768	$	126

(a) The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

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Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Changes in AOCI

Our changes in AOCI for the three months ended March 31, 2017, and March 31, 2016, are as follows:

in millions	Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative financial instruments			Foreign currency translation adjustment			Net pension and postretirement benefit costs			Total
Balance at December 31, 2016	$	(185	)	$	(14	)	$	(3	)	$	(339	)	$	(541	)
Other comprehensive income before reclassification, net of income taxes	6			(15		)	1			1			(7		)
Amounts reclassified from accumulated other comprehensive income, net of income taxes (a)	—			(9		)	—			3			(6		)
Net current-period other comprehensive income, net of income taxes	6			(24		)	1			4			(13		)
Balance at March 31, 2017	$	(179	)	$	(38	)	$	(2	)	$	(335	)	$	(554	)
Balance at December 31, 2015	$	(58	)	$	20		$	(2	)	$	(365	)	$	(405	)
Other comprehensive income before reclassification, net of income taxes	128			72			5			(2		)	203
Amounts reclassified from accumulated other comprehensive income, net of income taxes (a)	—			(14		)	—			3			(11		)
Net current-period other comprehensive income, net of income taxes	128			58			5			1			192
Balance at March 31, 2016	$	70		$	78		$	3		$	(364	)	$	(213	)

(a) See table below for details about these reclassifications.

Reclassifications Out of AOCI

Our reclassifications out of AOCI for the three months ended March 31, 2017, and March 31, 2016, are as follows:

Three months ended March 31, 2017	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
in millions
Unrealized gains (losses) on derivative financial instruments
Interest rate	$	15		Interest income — Loans
Interest rate	(1		)	Interest expense — Long-term debt
	14			Income (loss) from continuing operations before income taxes
	5			Income taxes
	$	9		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses	$	(4	)	Personnel expense
Amortization of unrecognized prior service credit	—			Personnel expense
	(4		)	Income (loss) from continuing operations before income taxes
	(1		)	Income taxes
	$	(3	)	Income (loss) from continuing operations

Three months ended March 31, 2016	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
in millions
Unrealized gains (losses) on derivative financial instruments
Interest rate	$	23		Interest income — Loans
Interest rate	(1		)	Interest expense — Long-term debt
	22			Income (loss) from continuing operations before income taxes
	8			Income taxes
	$	14		Income (loss) from continuing operations
Net pension and postretirement benefit costs
Amortization of losses	$	(4	)	Personnel expense
	(4		)	Income (loss) from continuing operations before income taxes
	(1		)	Income taxes
	$	(3	)	Income (loss) from continuing operations

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Line of Business Results (Tables)

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Financial Information of Business Groups

The table on the following pages shows selected financial data for our major business segments for the three-month periods ended March 31, 2017, and March 31, 2016.

Three months ended March 31,	Key Community Bank						Key Corporate Bank
dollars in millions	2017			2016			2017			2016
SUMMARY OF OPERATIONS
Net interest income (TE)	$	631		$	399		$	304		$	218
Noninterest income	277			196			275			207
Total revenue (TE) (a)	908			595			579			425
Provision for credit losses	47			42			17			43
Depreciation and amortization expense	28			13			20			13
Other noninterest expense	599			423			283			224
Income (loss) from continuing operations before income taxes (TE)	234			117			259			145
Allocated income taxes and TE adjustments	87			43			78			27
Income (loss) from continuing operations	147			74			181			118
Income (loss) from discontinued operations, net of taxes	—			—			—			—
Net income (loss)	147			74			181			118
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—
Net income (loss) attributable to Key	$	147		$	74		$	181		$	118
AVERAGE BALANCES(b)
Loans and leases	$	47,036		$	30,789		$	37,737		$	27,722
Total assets (a)	50,962			32,856			44,167			33,413
Deposits	79,393			52,803			21,003			18,074
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	43		$	23		$	14		$	18
Return on average allocated equity (b)	12.60		%	11.10		%	24.86		%	22.92		%
Return on average allocated equity	12.60			11.10			24.86			22.92
Average full-time equivalent employees (c)	10,804			7,376			2,384			2,126

(a) Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software, and goodwill held by our major business segments, are located in the United States.

(b) From continuing operations.

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

Other Segments						Total Segments						Reconciling Items						Key
2017			2016			2017			2016			2017			2016			2017			2016
$	(5	)	$	(9	)	$	930		$	608		$	(1	)	$	4		$	929		$	612
33			30			585			433			(8		)	(2		)	577			431
28			21			1,515			1,041			(9		)	2			1,506			1,043
(1		)	5			63			90			—			(1		)	63			89
1			1			49			27			44			37			93			64
10			9			892			656			28			(17		)	920			639
18			6			511			268			(81		)	(17		)	430			251
(5		)	(8		)	160			62			(55		)	2			105			64
23			14			351			206			(26		)	(19		)	325			187
—			—			—			—			—			1			—			1
23			14			351			206			(26		)	(18		)	325			188
2			(1		)	2			(1		)	(1		)	1			1			—
$	21		$	15		$	349		$	207		$	(25	)	$	(19	)	$	324		$	188
$	1,328		$	1,603		$	86,101		$	60,114		$	32		$	42		$	86,133		$	60,156
36,549			27,729			131,678			93,998			1,063			479			132,741			94,477
2,030			756			102,426			71,633			(348		)	(35		)	102,078			71,598
$	1		$	5		$	58		$	46		—			—			$	58		$	46
53.56		%	33.33		%	18.04		%	16.88		%	(1.38		)%	(1.34		)%	8.65		%	6.87		%
53.56			33.33			18.04			16.88			(1.38		)	(1.27		)	8.65			6.90
3			8			13,191			9,510			5,195			3,893			18,386			13,403

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Basis of Presentation and Accounting Policies - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Excess tax benefits recognized pertaining to share-based payment arrangements	$ 18

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Business Combination - Narrative (Details)		3 Months Ended	12 Months Ended
	Aug. 01, 2016 USD ($) Branch $ / shares shares	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Sep. 09, 2016 Branch	Jul. 29, 2016 $ / shares
Business Acquisition [Line Items]
Number of branches acquired | Branch	390
Number of branches sold | Branch				18
Goodwill acquired			$ 1,386,000,000
Merger and acquisition integration costs		$ 81,000,000
First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Total consideration paid	$ 3,992,000,000
Maximum period for change in fair value estimate		1 year
Intangible assets acquired	385,000,000
Goodwill acquired	1,367,000,000
Merger and acquisition integration costs		$ 1,000,000
Key Community Bank [Member]
Business Acquisition [Line Items]
Goodwill acquired			1,109,000,000
Key Community Bank [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Goodwill acquired	1,100,000,000
Key Corporate Bank [Member]
Business Acquisition [Line Items]
Goodwill acquired			$ 277,000,000
Key Corporate Bank [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Goodwill acquired	$ 273,000,000
Core Deposits [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Intangible assets acquired		$ 356,000,000
Weighted average useful life		10 years
Commercial Credit Card [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Weighted average useful life		6 years
Consumer Credit Card [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Weighted average useful life		9 years
Common Stock [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Shares available for issuance upon conversion of acquiree stock | shares	0.680
Cash paid upon conversion of acquiree stock	$ 2.30
Shares received by acquiree, per share | $ / shares	$ 10.26
Closing price of acquiree stock, per share | $ / shares					$ 11.70
Number of shares received by acquiree | shares	240,000,000
Fair value of acquiree options to purchase common stock	$ 26,000,000
PCI [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Contractually required payments receivable	22,600,000,000
Fair value of acquired receivables	22,200,000,000
Estimated cash flows not expected to be collected	$ 399,000,000

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Business Combination - Schedule of Purchase Price Calculation and Identifiable Assets Purchased and Liabilities Assumed (Details) - USD ($) $ in Millions		8 Months Ended	12 Months Ended
	Aug. 01, 2016	Mar. 31, 2017	Dec. 31, 2016
LIABILITIES
Goodwill			$ 1,386
First Niagara Bank, N.A. [Member]
Consideration paid:
KeyCorp common stock issued	$ 2,831
Cash payments to First Niagara stockholders	811
Exchange of First Niagara preferred stock for KeyCorp preferred stock	350
Total consideration paid	3,992
ASSETS
Cash and due from banks and short-term investments	620
Investment securities	9,012
Other investments	297
Loans	23,645
Premises and equipment	245
Other intangible assets	385
Accrued income and other assets	1,449
Total assets	35,653
LIABILITIES
Deposits	28,994
Bank notes and other short-term borrowings	2,698
Accrued expense and other liabilities	490
Long-term debt	846
Total liabilities	33,028
Net identifiable assets acquired	2,625
Goodwill	1,367
Tax adjustment on previous fair value measurements	194
Increase (decrease) in tax adjustment on previous fair value measurements		$ 19
Scenario, Previously Reported [Member] | First Niagara Bank, N.A. [Member]
LIABILITIES
Tax adjustment on previous fair value measurements	$ 175

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Business Combination - Information About Acquired Loan Portfolio as of Acquisition Date (Details) - USD ($) $ in Millions	Aug. 01, 2016	Dec. 31, 2012
Business Acquisition [Line Items]
Accretable yield		$ 5
PCI [Member] | First Niagara Bank, N.A. [Member]
Business Acquisition [Line Items]
Contractual required payments receivable	$ 1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$ 984

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Business Combination - Schedule of Changes in Goodwill by Reporting Unit (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 2,446	$ 1,060
Acquisition of First Niagara		1,386
Tax adjustment on previous fair value measurements	(19)
Goodwill, ending balance	2,427	2,446
Key Community Bank [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance	2,088	979
Acquisition of First Niagara		1,109
Tax adjustment on previous fair value measurements	(15)
Goodwill, ending balance	2,073	2,088
Key Corporate Bank [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance	358	81
Acquisition of First Niagara		277
Tax adjustment on previous fair value measurements	(4)
Goodwill, ending balance	$ 354	$ 358

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Business Combination - Schedule of Operations Included in Consolidated Statement of Income and Unaudited Pro Forma Information (Details) - First Niagara Bank, N.A. [Member] $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($)
Business Acquisition, Pro Forma Information [Abstract]
Net interest income (TE), Pro forma	$ 886
Noninterest income, Pro forma	506
Net income (loss) attributable to common shareholders, Pro forma	$ 245

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Earnings Per Common Share - Basic and Diluted Earnings Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
EARNINGS
Income (loss) from continuing operations		$ 325	$ 187
Less: Net income (loss) attributable to noncontrolling interests		1	0
Income (loss) from continuing operations attributable to Key		324	187
Less: Dividends on Preferred Stock		28	5
Income (loss) from continuing operations attributable to Key common shareholders		296	182
Income (loss) from discontinued operations, net of taxes		0	1
Net income (loss) attributable to Key common shareholders		$ 296	$ 183
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (in shares)		1,068,609	827,381
Effect of convertible preferred stock (in shares)		0	0
Effect of common share options and other stock awards (in shares)		17,931	7,679
Weighted-average common shares and potential common shares outstanding (in shares)	[1]	1,086,540	835,060
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders (in usd per share)		$ 0.28	$ 0.22
Income (loss) from discontinued operations, net of taxes (in usd per share)		0.00	0.00
Net income (loss) attributable to Key common shareholders (in usd per share)	[2]	0.28	0.22
Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution (in usd per share)		0.27	0.22
Income (loss) from discontinued operations, net of taxes (in usd per share)		0.00	0.00
Net income (loss) attributable to Key common shareholders (in usd per share)	[2]	$ 0.27	$ 0.22

[1] Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.

[2] EPS may not foot due to rounding.

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Loans and Loans Held for Sale - Loans by Category (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Residential — prime loans:
Total loans	$ 86,125	$ 86,038	$ 60,438
Commercial lease financing includes receivables held as collateral for secured borrowing	55	68
Purchased loans	19,000	21,000
Loans	85,255	85,180
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and industrial	40,112	39,768
Commercial real estate:
Commercial mortgage	15,260	15,111
Construction	2,270	2,345
Total commercial real estate loans	17,530	17,456
Commercial lease financing	4,665	4,685
Total commercial/consumer loans	62,307	61,909
Consumer Portfolio Segment [Member]
Commercial real estate:
Total commercial/consumer loans	23,818	24,129
Residential — prime loans:
Real estate — residential mortgage	5,507	5,547
Home equity loans	12,541	12,674
Total residential — prime loans	18,048	18,221
Consumer direct loans	1,735	1,788
Credit cards	1,037	1,111
Consumer indirect loans	2,998	3,009
Total loans		24,129
Commercial Credit Card [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and industrial	114	116
PCI Loans [Member]
Residential — prime loans:
Purchased loans	812	865
Discontinued Operations [Member]
Residential — prime loans:
Total loans	1,497	1,562
Education Lending [Member] | Discontinued Operations [Member]
Residential — prime loans:
Total loans	1,497	1,562
Loans	$ 1,500	$ 1,600

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Loans and Loans Held for Sale - Loans Held for Sale (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and industrial	$ 171	$ 19
Real estate — construction	0	1
Commercial lease financing	1	0
Total loans held for sale	1,384	1,104	$ 1,137
Commercial Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate	1,150	1,022
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate	62	62
Total loans held for sale	62	62
First Niagara Bank, N.A. [Member] | Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required payments receivable	$ 62	$ 62

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Loans and Loans Held for Sale - Summary of Changes in Loans Held for Sale (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Loans Receivable Held-for-sale, Net, Reconciliation to Cash Flow [Roll Forward]
Balance at beginning of the period	$ 1,104	$ 1,137
New originations	2,563	2,846
Transfers from (to) held to maturity, net	17	11
Loan sales	(2,299)	(2,889)
Loan draws (payments), net	(1)	(1)
Balance at end of period	1,384	1,104
Loans held for sale	1,104	1,137
Residential Mortgage [Member]
Loans Receivable Held-for-sale, Net, Reconciliation to Cash Flow [Roll Forward]
Balance at beginning of the period	62
Balance at end of period	62	62
Loans held for sale	$ 62	$ 62

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Asset Quality - Nonperforming Assets and Past Due Loans (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonperforming loans	$ 573		$ 625
OREO	49		51
Other nonperforming assets	1		0
Total nonperforming assets	623		676
Nonperforming assets from discontinued operations-education lending	4		5
TDRs included in nonperforming loans	161		141
TDRs with an allocated specific allowance	84		59
Specifically allocated allowance for restructured loans	30		27
Accruing loans past due 90 days or more	79		87
Accruing loans past due 30 through 89 days	312		404
Purchased credit impaired loans	812		865
Financial receivable, modifications, subsequent default, recorded investment	1	$ 3
Restructured loans	23		22
Foreclosed Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Carrying value of foreclosed residential real estate	$ 31		$ 29

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Asset Quality - PCI and Non-Impaired Loans Receivable (Details) - USD ($) $ in Millions	Aug. 01, 2016	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accretable yield		$ 5
First Niagara Bank, N.A. [Member] | PCI [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractual required payments receivable	$ 1,378
Nonaccretable difference	189
Expected cash flows	1,189
Accretable yield	205
Fair value	$ 984

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Asset Quality - Additional Information (Detail)	3 Months Ended			12 Months Ended
	Mar. 31, 2017 USD ($) SecurityLoan	Sep. 30, 2016 USD ($)	Mar. 31, 2016 USD ($) SecurityLoan	Dec. 31, 2016 USD ($)	Dec. 31, 2012 USD ($)	Sep. 09, 2016 Branch	Aug. 01, 2016 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of branches sold | Branch						18
Estimated gross contractual amount receivable of PCI loans					$ 41,000,000
Estimated cash flows nonaccretable amount					11,000,000
Accretable yield					$ 5,000,000
Percentage of carrying amount of our commercial nonperforming loans outstanding	75.00%
Percentage of nonperforming loans outstanding face value	79.00%
Percentage of loans held for sale and other nonperforming assets	79.00%
Number of largest nonperforming loans | SecurityLoan	20
Aggregate carrying amount of largest nonperforming loans	$ 228,000,000
Percentage of total loans on nonperforming status	40.00%
Net reduction to interest income	$ 6,000,000		$ 5,000,000
Total restructured loans	302,000,000			$ 280,000,000
Addition in restructured loans	47,000,000			107,000,000
Restructured loans partially in payments and charge-offs	25,000,000			107,000,000
Financial receivable, modifications, subsequent default, recorded investment	1,000,000		3,000,000
Commitments outstanding to lend additional funds to borrowers	15,000,000			14,000,000
Loans, net of unearned income	86,125,000,000		60,438,000,000	86,038,000,000
Minimum outstanding impaired commercial loans	$ 2,500,000
Number of days to designate commercial loans will be charged off in full or charged down to the fair value of the underlying collateral payment due period	180 days
Number of days to designate the charge-off policy for consumer loans taking effect, payment due period	120 days
Number of days to designate home equity and residential mortgage loans to get charged down to net realizable value payment due period	180 days
Number of days to designate the charge-off policy for credit card loans taking effect, payment due period	180 days
Provision (credit) for loan and lease losses	$ 73,000,000		$ 78,000,000
Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans | SecurityLoan	0		0
Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans | SecurityLoan	3		51
Real Estate - Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financial receivable, modifications, subsequent default, recorded investment	$ 140,000,000			141,000,000
Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest income recognized on outstanding balances	3,000,000		$ 4,000,000
Commercial Portfolio Segment [Member] | Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	62,307,000,000			61,909,000,000
Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income				24,129,000,000
Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	23,818,000,000
Consumer Portfolio Segment [Member] | Real Estate - Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, net of unearned income	5,507,000,000			5,547,000,000
Continuing Operations [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase (decrease) in allowance for loan losses	$ 12,000,000
Percentage of Increase (decrease) in allowance for loan losses	1.40%
Provision (credit) for loan and lease losses	$ 70,000,000		76,000,000
Continuing Operations [Member] | Purchase Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Provision (credit) for loan and lease losses	4,000,000			$ 11,000,000
Continuing Operations [Member] | Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase (decrease) in allowance for loan losses	$ 11,000,000
Percentage of Increase (decrease) in allowance for loan losses	1.50%
Provision (credit) for loan and lease losses	$ 42,000,000		46,000,000
Continuing Operations [Member] | Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase (decrease) in allowance for loan losses	$ 1,000,000
Percentage of Increase (decrease) in allowance for loan losses	0.70%
Provision (credit) for loan and lease losses	$ 1,000,000
Continuing Operations [Member] | Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Provision (credit) for loan and lease losses	28,000,000		30,000,000
Continuing Operations [Member] | Consumer Portfolio Segment [Member] | Real Estate - Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Provision (credit) for loan and lease losses	$ (3,000,000)		$ 2,000,000
Purchase Credit Impaired Loans [Member] | First Niagara Bank, N.A. [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required payments receivable							$ 22,600,000,000
Fair value of acquired receivables							22,200,000,000
Estimated cash flows not expected to be collected							399,000,000
Accretable yield							$ 205,000,000

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Asset Quality - Changes in Outstanding Unpaid Principal Balance, Carrying Amount, and Accretable Yield for PCI Loans (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Carrying Amount
Outstanding Unpaid Principal Balance	$ 812	$ 865
PCI Loans [Member]
Accretable Yield
Balance at beginning of period	197	5
Additions	0	205
Accretion	(19)	(29)
Net reclassifications from nonaccretable to accretable	25	35
Payments received, net	(11)	(19)
Disposals	0	0
Balance at end of period	192	197
Carrying Amount
Balance at beginning of period	865	11
Balance at end of period	812	865
Outstanding Unpaid Principal Balance	$ 930	$ 1,002	$ 17

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Asset Quality - Breakdown of Individually Impaired Loans (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	$ 235		$ 306
With related allowance recorded, Recorded Investment	233		195
Recorded Investment	468		501
With no related allowance recorded, Unpaid Principal Balance	302		386
With related allowance recorded, Unpaid Principal Balance	238		207
Unpaid Principal Balance	540		593
Specific Allowance	39		38
Average Recorded Investment	484	$ 457
Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	153		224
With related allowance recorded, Recorded Investment	100		66
With no related allowance recorded, Unpaid Principal Balance	220		304
With related allowance recorded, Unpaid Principal Balance	105		77
Specific Allowance	19		17
Average Recorded Investment	270	230
Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	82		82
With related allowance recorded, Recorded Investment	133		129
With no related allowance recorded, Unpaid Principal Balance	82		82
With related allowance recorded, Unpaid Principal Balance	133		130
Specific Allowance	20		21
Average Recorded Investment	214	227
Commercial and Industrial [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	152		222
With related allowance recorded, Recorded Investment	85		62
With no related allowance recorded, Unpaid Principal Balance	217		301
With related allowance recorded, Unpaid Principal Balance	90		73
Specific Allowance	16		17
Average Recorded Investment	260	215
Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	1		2
With related allowance recorded, Recorded Investment	15		4
With no related allowance recorded, Unpaid Principal Balance	3		3
With related allowance recorded, Unpaid Principal Balance	15		4
Specific Allowance	3		0
Average Recorded Investment	10	9
Commercial Real Estate: Construction [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	0	6
Commercial Real Estate Loans [Member] | Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	1		2
With related allowance recorded, Recorded Investment	15		4
With no related allowance recorded, Unpaid Principal Balance	3		3
With related allowance recorded, Unpaid Principal Balance	15		4
Specific Allowance	3		0
Average Recorded Investment	10	15
Real Estate - Residential Mortgage [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	20		20
With related allowance recorded, Recorded Investment	30		31
With no related allowance recorded, Unpaid Principal Balance	20		20
With related allowance recorded, Unpaid Principal Balance	30		31
Specific Allowance	2		2
Average Recorded Investment	51	55
Home Equity Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	60		61
With related allowance recorded, Recorded Investment	64		64
With no related allowance recorded, Unpaid Principal Balance	60		61
With related allowance recorded, Unpaid Principal Balance	64		64
Specific Allowance	17		18
Average Recorded Investment	125	129
Consumer Indirect Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	2		1
With related allowance recorded, Recorded Investment	33		29
With no related allowance recorded, Unpaid Principal Balance	2		1
With related allowance recorded, Unpaid Principal Balance	33		29
Specific Allowance	1		1
Average Recorded Investment	33	39
Consumer Direct Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	3		2
With related allowance recorded, Unpaid Principal Balance	3		3
Specific Allowance	0		0
Average Recorded Investment	3	1
Credit Cards [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	3		3
With related allowance recorded, Unpaid Principal Balance	3		3
Specific Allowance	0		$ 0
Average Recorded Investment	$ 2	$ 3

XML

Asset Quality - Breakdown of Nonperforming TDRs by Loans Category (Detail) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017 USD ($) SecurityLoan	Dec. 31, 2016 USD ($) SecurityLoan
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	4,937
Pre-modification Outstanding Recorded Investment	$ 405
Post-modification Outstanding Recorded Investment	$ 302
Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		1,980
Pre-modification Outstanding Recorded Investment		$ 193
Post-modification Outstanding Recorded Investment		$ 141
Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		25
Pre-modification Outstanding Recorded Investment		$ 93
Post-modification Outstanding Recorded Investment		$ 51
Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		1,955
Pre-modification Outstanding Recorded Investment		$ 100
Post-modification Outstanding Recorded Investment		$ 90
Nonperforming [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	2,330
Pre-modification Outstanding Recorded Investment	$ 206
Post-modification Outstanding Recorded Investment	$ 161
Prior-Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	2,607
Pre-modification Outstanding Recorded Investment	$ 199
Post-modification Outstanding Recorded Investment	$ 141
Prior-Year Accruing [Member] | Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		35
Pre-modification Outstanding Recorded Investment		$ 2
Post-modification Outstanding Recorded Investment		$ 2
Commercial and Industrial [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		18
Pre-modification Outstanding Recorded Investment		$ 91
Post-modification Outstanding Recorded Investment		$ 50
Commercial and Industrial [Member] | Nonperforming [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	20
Pre-modification Outstanding Recorded Investment	$ 100
Post-modification Outstanding Recorded Investment	$ 66
Commercial and Industrial [Member] | Prior-Year Accruing [Member] | Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	4	5
Pre-modification Outstanding Recorded Investment	$ 29	$ 30
Post-modification Outstanding Recorded Investment	$ 16	$ 16
Commercial Loans [Member] | Nonperforming [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	27
Pre-modification Outstanding Recorded Investment	$ 105
Post-modification Outstanding Recorded Investment	$ 70
Commercial Loans [Member] | Prior-Year Accruing [Member] | Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	4	5
Pre-modification Outstanding Recorded Investment	$ 29	$ 30
Post-modification Outstanding Recorded Investment	$ 16	$ 16
Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		7
Pre-modification Outstanding Recorded Investment		$ 2
Post-modification Outstanding Recorded Investment		$ 1
Commercial Real Estate: Commercial Mortgage [Member] | Nonperforming [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	7
Pre-modification Outstanding Recorded Investment	$ 5
Post-modification Outstanding Recorded Investment	$ 4
Commercial Real Estate: Commercial Mortgage [Member] | Prior-Year Accruing [Member] | Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		477
Pre-modification Outstanding Recorded Investment		$ 35
Post-modification Outstanding Recorded Investment		$ 35
Commercial Real Estate Loans [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		7
Pre-modification Outstanding Recorded Investment		$ 2
Post-modification Outstanding Recorded Investment		$ 1
Commercial Real Estate Loans [Member] | Nonperforming [Member] | Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	7
Pre-modification Outstanding Recorded Investment	$ 5
Post-modification Outstanding Recorded Investment	$ 4
Commercial Real Estate Loans [Member] | Prior-Year Accruing [Member] | Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		1,231
Pre-modification Outstanding Recorded Investment		$ 70
Post-modification Outstanding Recorded Investment		$ 57
Real Estate - Residential Mortgage [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		264
Pre-modification Outstanding Recorded Investment		$ 16
Post-modification Outstanding Recorded Investment		$ 16
Real Estate - Residential Mortgage [Member] | Nonperforming [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	267
Pre-modification Outstanding Recorded Investment	$ 16
Post-modification Outstanding Recorded Investment	$ 16
Real Estate - Residential Mortgage [Member] | Prior-Year Accruing [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	526	410
Pre-modification Outstanding Recorded Investment	$ 35	$ 3
Post-modification Outstanding Recorded Investment	$ 35	$ 1
Home Equity Loans [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	1,186	1,199
Pre-modification Outstanding Recorded Investment	$ 72	$ 77
Post-modification Outstanding Recorded Investment	$ 64	$ 69
Home Equity Loans [Member] | Prior-Year Accruing [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	1,240	377
Pre-modification Outstanding Recorded Investment	$ 75	$ 56
Post-modification Outstanding Recorded Investment	$ 61	$ 28
Consumer Direct Loans [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		32
Pre-modification Outstanding Recorded Investment		$ 1
Post-modification Outstanding Recorded Investment		$ 0
Consumer Direct Loans [Member] | Nonperforming [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	40
Pre-modification Outstanding Recorded Investment	$ 1
Post-modification Outstanding Recorded Investment	$ 1
Consumer Direct Loans [Member] | Prior-Year Accruing [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	32	2,530
Pre-modification Outstanding Recorded Investment	$ 2	$ 166
Post-modification Outstanding Recorded Investment	$ 1	$ 123
Consumer Credit Card [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan		336
Pre-modification Outstanding Recorded Investment		$ 2
Post-modification Outstanding Recorded Investment		$ 2
Consumer Credit Card [Member] | Nonperforming [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	288
Pre-modification Outstanding Recorded Investment	$ 2
Post-modification Outstanding Recorded Investment	$ 1
Consumer Credit Card [Member] | Prior-Year Accruing [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	440	2,535
Pre-modification Outstanding Recorded Investment	$ 3	$ 196
Post-modification Outstanding Recorded Investment	$ 1	$ 139
Consumer Indirect Loans [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	522	124
Pre-modification Outstanding Recorded Investment	$ 10	$ 4
Post-modification Outstanding Recorded Investment	$ 9	$ 3
Consumer Indirect Loans [Member] | Prior-Year Accruing [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	365	4,515
Pre-modification Outstanding Recorded Investment	$ 55	$ 389
Post-modification Outstanding Recorded Investment	$ 27	$ 280
Consumer Portfolio Segment [Member] | Nonperforming [Member] | Consumer Portfolio Segment [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	2,303
Pre-modification Outstanding Recorded Investment	$ 101
Post-modification Outstanding Recorded Investment	$ 91
Consumer Portfolio Segment [Member] | Prior-Year Accruing [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | SecurityLoan	2,603
Pre-modification Outstanding Recorded Investment	$ 170
Post-modification Outstanding Recorded Investment	$ 125

XML

Asset Quality - Post-Modification Outstanding Recorded Investment by Concession Type for Our Commercial Accruing and Nonaccruing TDRs (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Modifications [Line Items]
Total commercial and consumer TDRs	$ 43	$ 19
Total loans	86,125	60,438	$ 86,038
Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Total loans			24,129
Commercial Loans [Member] | Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Interest rate reduction	7	0
Other	21	3
Total	28	3
Total loans	62,307		$ 61,909
Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Interest rate reduction	3	2
Forgiveness of principal	0	12
Other	12	2
Total	15	$ 16
Total loans	$ 23,818

XML

Asset Quality - Past Due Loans Including Current Loans (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 84,349	$ 84,057
Days Past Due	964	1,116
Non-performing Loans	573	625
Purchased Credit Impaired	812	865
Total loans	86,125	86,038	$ 60,438
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans		24,129
Commercial and Industrial [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	39,621	39,242
Days Past Due	389	414
Non-performing Loans	258	297
Purchased Credit Impaired	102	112
Total loans	40,112	39,768
Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	14,891	14,655
Days Past Due	78	134
Non-performing Loans	32	26
Purchased Credit Impaired	291	322
Total loans	15,260	15,111
Commercial Real Estate: Construction [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	2,242	2,314
Days Past Due	2	5
Non-performing Loans	2	3
Purchased Credit Impaired	26	26
Total loans	2,270	2,345
Commercial Real Estate Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	17,133	16,969
Days Past Due	80	139
Non-performing Loans	34	29
Purchased Credit Impaired	317	348
Total loans	17,530	17,456
Commercial Lease Financing [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	4,634	4,641
Days Past Due	31	44
Non-performing Loans	5	8
Purchased Credit Impaired	0	0
Total loans	4,665	4,685
Commercial Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	61,388	60,852
Days Past Due	500	597
Non-performing Loans	297	334
Purchased Credit Impaired	419	460
Total loans	62,307	61,909
Real Estate - Residential Mortgage [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	5,065	5,098
Days Past Due	81	81
Non-performing Loans	54	56
Purchased Credit Impaired	361	368
Total loans	5,507	5,547
Home Equity Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	12,225	12,327
Days Past Due	290	317
Non-performing Loans	207	223
Purchased Credit Impaired	26	30
Total loans	12,541	12,674
Consumer Direct Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,709	1,705
Days Past Due	20	76
Non-performing Loans	3	6
Purchased Credit Impaired	6	7
Total loans	1,735	1,788
Consumer Credit Card Financing Receivable [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	1,011	1,082
Days Past Due	26	29
Non-performing Loans	3	2
Purchased Credit Impaired	0	0
Total loans	1,037	1,111
Consumer Indirect Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	2,951	2,993
Days Past Due	47	16
Non-performing Loans	9	4
Purchased Credit Impaired	0	0
Total loans	2,998	3,009
Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	22,961	23,205
Days Past Due	464	519
Non-performing Loans	276	291
Purchased Credit Impaired	393	405
Total loans	23,818
30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	197	305
30-59 Days Past Due [Member] | Commercial and Industrial [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	60	58
30-59 Days Past Due [Member] | Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	25	93
30-59 Days Past Due [Member] | Commercial Real Estate: Construction [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	0	0
30-59 Days Past Due [Member] | Commercial Real Estate Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	25	93
30-59 Days Past Due [Member] | Commercial Lease Financing [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	12	28
30-59 Days Past Due [Member] | Commercial Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	97	179
30-59 Days Past Due [Member] | Real Estate - Residential Mortgage [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	16	17
30-59 Days Past Due [Member] | Home Equity Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	42	49
30-59 Days Past Due [Member] | Consumer Direct Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	8	44
30-59 Days Past Due [Member] | Consumer Credit Card Financing Receivable [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	7	9
30-59 Days Past Due [Member] | Consumer Indirect Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	27	7
30-59 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	100	126
60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	115	99
60-89 Days Past Due [Member] | Commercial and Industrial [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	47	28
60-89 Days Past Due [Member] | Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	10	9
60-89 Days Past Due [Member] | Commercial Real Estate: Construction [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	0	0
60-89 Days Past Due [Member] | Commercial Real Estate Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	10	9
60-89 Days Past Due [Member] | Commercial Lease Financing [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	8	3
60-89 Days Past Due [Member] | Commercial Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	65	40
60-89 Days Past Due [Member] | Real Estate - Residential Mortgage [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	7	5
60-89 Days Past Due [Member] | Home Equity Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	27	29
60-89 Days Past Due [Member] | Consumer Direct Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	4	15
60-89 Days Past Due [Member] | Consumer Credit Card Financing Receivable [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	5	6
60-89 Days Past Due [Member] | Consumer Indirect Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	7	4
60-89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	50	59
90 and Greater Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	79	87
90 and Greater Days Past Due [Member] | Commercial and Industrial [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	24	31
90 and Greater Days Past Due [Member] | Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	11	6
90 and Greater Days Past Due [Member] | Commercial Real Estate: Construction [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	0	2
90 and Greater Days Past Due [Member] | Commercial Real Estate Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	11	8
90 and Greater Days Past Due [Member] | Commercial Lease Financing [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	6	5
90 and Greater Days Past Due [Member] | Commercial Loans [Member] | Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	41	44
90 and Greater Days Past Due [Member] | Real Estate - Residential Mortgage [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	4	3
90 and Greater Days Past Due [Member] | Home Equity Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	14	16
90 and Greater Days Past Due [Member] | Consumer Direct Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	5	11
90 and Greater Days Past Due [Member] | Consumer Credit Card Financing Receivable [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	11	12
90 and Greater Days Past Due [Member] | Consumer Indirect Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	4	1
90 and Greater Days Past Due [Member] | Consumer Portfolio Segment [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Days Past Due	$ 38	$ 43

XML

Asset Quality - Financing Receivable Credit Quality Indicators (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 86,125	$ 86,038	$ 60,438
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	40,010	39,656
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	38,268	37,845
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial and Industrial [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,484	1,514
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial and Industrial [Member] | Criticized (Nonaccruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	258	297
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	14,969	14,789
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	14,536	14,308
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Commercial [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	401	455
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Commercial [Member] | Criticized (Nonaccruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	32	26
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,244	2,319
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,199	2,287
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Construction [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	43	30
Commercial Portfolio Segment Excluding PCI Loans [Member] | RE Construction [Member] | Criticized (Nonaccruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2	2
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,665	4,685
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Leases [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,602	4,632
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Leases [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	58	45
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Leases [Member] | Criticized (Nonaccruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	5	8
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Portfolio Segment Excluding PCI Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	61,888	61,449
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Portfolio Segment Excluding PCI Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	59,605	59,072
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Portfolio Segment Excluding PCI Loans [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,986	2,044
Commercial Portfolio Segment Excluding PCI Loans [Member] | Commercial Portfolio Segment Excluding PCI Loans [Member] | Criticized (Nonaccruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	297	333
Commercial Portfolio Segment, PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	419	460
Commercial Portfolio Segment, PCI [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	164	172
Commercial Portfolio Segment, PCI [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	255	288
Commercial Portfolio Segment, PCI [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	102	112
Commercial Portfolio Segment, PCI [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	26	12
Commercial Portfolio Segment, PCI [Member] | Commercial and Industrial [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	76	100
Commercial Portfolio Segment, PCI [Member] | RE Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	291	322
Commercial Portfolio Segment, PCI [Member] | RE Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	118	139
Commercial Portfolio Segment, PCI [Member] | RE Commercial [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	173	183
Commercial Portfolio Segment, PCI [Member] | RE Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	26	26
Commercial Portfolio Segment, PCI [Member] | RE Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	20	21
Commercial Portfolio Segment, PCI [Member] | RE Construction [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	6	5
Commercial Portfolio Segment, PCI [Member] | Commercial Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Commercial Portfolio Segment, PCI [Member] | Commercial Leases [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Commercial Portfolio Segment, PCI [Member] | Commercial Leases [Member] | Criticized (Accruing) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 0	$ 0

XML

Asset Quality - Consumer Loans by Refreshed FICO Score (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 86,125	$ 86,038	$ 60,438
Consumer Portfolio Segment Excluding PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	23,425	23,724
Consumer Portfolio Segment Excluding PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	17,661	17,823
Consumer Portfolio Segment Excluding PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,729	1,781
Consumer Portfolio Segment Excluding PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,037	1,111
Consumer Portfolio Segment Excluding PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,998	3,009
Consumer Portfolio Segment, PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	393	405
Consumer Portfolio Segment, PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	387	398
Consumer Portfolio Segment, PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	6	7
Consumer Portfolio Segment, PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Consumer Portfolio Segment, PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment Excluding PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	12,078	12,035
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	9,935	9,818
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	472	498
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	408	453
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,263	1,266
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment, PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	136	133
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment, PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	136	133
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment, PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, 750 and Above [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment Excluding PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	8,153	7,647
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,821	5,266
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	644	661
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	498	525
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,190	1,195
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment, PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	145	129
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment, PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	143	127
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2	2
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment, PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, 660 to 749 [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment Excluding PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,540	2,486
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,665	1,617
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	199	194
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	131	132
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	545	543
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment, PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	106	137
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment, PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	103	133
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	3	4
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment, PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, Less than 660 [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, No Score [Member] | Consumer Portfolio Segment Excluding PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	654	1,556
FICO Score, No Score [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	240	1,122
FICO Score, No Score [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	414	428
FICO Score, No Score [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	1
FICO Score, No Score [Member] | Consumer Portfolio Segment Excluding PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	5
FICO Score, No Score [Member] | Consumer Portfolio Segment, PCI [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	6	6
FICO Score, No Score [Member] | Consumer Portfolio Segment, PCI [Member] | Residential Prime Financing Receivables [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	5	5
FICO Score, No Score [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Direct Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1	1
FICO Score, No Score [Member] | Consumer Portfolio Segment, PCI [Member] | Credit Cards [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
FICO Score, No Score [Member] | Consumer Portfolio Segment, PCI [Member] | Consumer Indirect Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 0	$ 0

XML

Asset Quality - Summary of Allowance for Loan and Lease Losses (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	$ 882	$ 824
Charge-offs	(83)	(69)
Recoveries	21	17
Provision for loan and lease losses from continuing operations	63	89
Ending balance	893	850
Continuing Operations [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	858	796
Charge-offs	(77)	(60)
Recoveries	19	14
Net loans and leases charged off	(58)	(46)
Provision for loan and lease losses from continuing operations	70	76
Ending balance	$ 870	$ 826

XML

Asset Quality - Changes in Allowance for Loan and Lease Losses by Loan Category (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	$ 882	$ 824	$ 824
Provision	73	78
Charge-offs	(83)	(69)
Recoveries	21	17
Ending balance	893	850	882
Provision (credit) for losses on lending-related commitments	(7)	13
Continuing Operations [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	858	796	796
Provision	70	76
Charge-offs	(77)	(60)
Recoveries	19	14
Ending balance	870	826	858
Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	716	656	656
Provision	42	46
Charge-offs	(39)	(30)
Recoveries	8	6
Ending balance	727	678	716
Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Provision	1
Continuing Operations [Member] | Commercial and Industrial [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	508	450	450
Provision	31	50
Charge-offs	(32)	(26)
Recoveries	5	3
Ending balance	512	477	508
Continuing Operations [Member] | Commercial Real Estate: Commercial Mortgage [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	144	134	134
Provision	2	0
Charge-offs	0	(1)
Recoveries	0	2
Ending balance	146	135	144
Continuing Operations [Member] | RE Construction [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	22	25	25
Provision	6	(3)
Charge-offs	0	0
Recoveries	1	1
Ending balance	29	23	22
Continuing Operations [Member] | Commercial Real Estate [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	166	159	159
Provision	8	(3)
Charge-offs	0	(1)
Recoveries	1	3
Ending balance	175	158	166
Continuing Operations [Member] | Commercial Lease Financing [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	42	47	47
Provision	3	(1)
Charge-offs	(7)	(3)
Recoveries	2	0
Ending balance	40	43	42
Continuing Operations [Member] | Real Estate - Residential Mortgage [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	17	18	18
Provision	(3)	2
Charge-offs	2	(2)
Recoveries	2	2
Ending balance	18	20	17
Continuing Operations [Member] | Home Equity Loans [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	54	57	57
Provision	4	14
Charge-offs	(8)	(10)
Recoveries	3	3
Ending balance	53	64	54
Continuing Operations [Member] | Consumer Direct Loans [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	24	20	20
Provision	9	5
Charge-offs	(10)	(6)
Recoveries	1	1
Ending balance	24	20	24
Continuing Operations [Member] | Credit Cards [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	38	32	32
Provision	10	6
Charge-offs	(11)	(8)
Recoveries	1	1
Ending balance	38	31	38
Continuing Operations [Member] | Consumer Indirect Loans [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	9	13	13
Provision	8	3
Charge-offs	(11)	(4)
Recoveries	4	1
Ending balance	10	13	9
Continuing Operations [Member] | Consumer Loans [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	142	140	140
Provision	28	30
Charge-offs	(38)	(30)
Recoveries	11	8
Ending balance	143	148	142
Discontinued Operations [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	24	28	28
Provision	3	2
Charge-offs	(6)	(9)
Recoveries	2	3
Ending balance	$ 23	$ 24	$ 24

XML

Asset Quality - Allowance for Loan and Lease Losses and Corresponding Loan Balances (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Purchase Credit Impairment, Outstanding	$ 812	$ 865
Individually Evaluated for Impairment, Allowance, Total ALLL - Including Discontinued Operations	41	39
Collectively Evaluated for Impairment, Allowance, Total ALLL - Including Discontinued Operations	846	838
Purchased Credit Impaired, Allowance, Total ALLL - Including Discontinued Operations	6	5
Loans, Outstanding, Total ALLL - Including Discontinued Operations	87,625	87,603
Individually Evaluated for Impairment, Outstanding, Total ALLL - Including Discontinued Operations	492	523
Collectively Evaluated for Impairment, Outstanding, Total ALLL - Including Discontinued Operations	86,321	86,215
Purchased Credit Impaired, Outstanding, Total ALLL - Including Discontinued Operations	812	865
Loans at fair value	3
Continuing Operations [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	39	37
Collectively Evaluated for Impairment, Allowance	825	816
Purchase Credit Impairment, Allowance	6	5
Total loans	86,125	86,038
Individually Evaluated for Impairment, Outstanding	469	501
Collectively Evaluated for Impairment, Outstanding	84,844	84,672
Purchase Credit Impairment, Outstanding	812	865
Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Purchase Credit Impairment, Allowance	4	5
Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans		24,129
Discontinued Operations [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance		2
Collectively Evaluated for Impairment, Allowance	21	22
Purchase Credit Impairment, Allowance	0	0
Total loans	1,500	1,565
Individually Evaluated for Impairment, Outstanding	23	22
Collectively Evaluated for Impairment, Outstanding	1,477	1,543
Purchase Credit Impairment, Outstanding	0	0
Loans at fair value	3	3
Commercial and Industrial [Member] | Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	16	17
Collectively Evaluated for Impairment, Allowance	495	486
Purchase Credit Impairment, Allowance	1	5
Total loans	40,112	39,768
Individually Evaluated for Impairment, Outstanding	237	284
Collectively Evaluated for Impairment, Outstanding	39,773	39,372
Purchase Credit Impairment, Outstanding	102	112
Commercial Real Estate: Commercial Mortgage [Member] | Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	3	0
Collectively Evaluated for Impairment, Allowance	140	144
Purchase Credit Impairment, Allowance	3	0
Total loans	15,260	15,111
Individually Evaluated for Impairment, Outstanding	16	5
Collectively Evaluated for Impairment, Outstanding	14,953	14,784
Purchase Credit Impairment, Outstanding	291	322
Commercial Real Estate: Construction [Member] | Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	0	0
Collectively Evaluated for Impairment, Allowance	29	22
Purchase Credit Impairment, Allowance	0	0
Total loans	2,270	2,345
Individually Evaluated for Impairment, Outstanding	0	0
Collectively Evaluated for Impairment, Outstanding	2,244	2,319
Purchase Credit Impairment, Outstanding	26	26
Commercial Real Estate Loans [Member] | Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	3	0
Collectively Evaluated for Impairment, Allowance	169	166
Purchase Credit Impairment, Allowance	3	0
Total loans	17,530	17,456
Individually Evaluated for Impairment, Outstanding	16	5
Collectively Evaluated for Impairment, Outstanding	17,197	17,103
Purchase Credit Impairment, Outstanding	317	348
Commercial Lease Financing [Member] | Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	0	0
Collectively Evaluated for Impairment, Allowance	40	42
Purchase Credit Impairment, Allowance	0	0
Total loans	4,665	4,685
Individually Evaluated for Impairment, Outstanding	0	0
Collectively Evaluated for Impairment, Outstanding	4,665	4,685
Purchase Credit Impairment, Outstanding	0	0
Commercial Loans [Member] | Continuing Operations [Member] | Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	19	17
Collectively Evaluated for Impairment, Allowance	704	694
Total loans	62,307	61,909
Individually Evaluated for Impairment, Outstanding	253	289
Collectively Evaluated for Impairment, Outstanding	61,635	61,160
Purchase Credit Impairment, Outstanding	419	460
Real Estate - Residential Mortgage [Member] | Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	2	2
Collectively Evaluated for Impairment, Allowance	15	15
Purchase Credit Impairment, Allowance	1	0
Total loans	5,507	5,547
Individually Evaluated for Impairment, Outstanding	51	51
Collectively Evaluated for Impairment, Outstanding	5,095	5,128
Purchase Credit Impairment, Outstanding	361	368
Home Equity Loans [Member] | Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	17	17
Collectively Evaluated for Impairment, Allowance	35	37
Purchase Credit Impairment, Allowance	1	0
Total loans	12,541	12,674
Individually Evaluated for Impairment, Outstanding	124	125
Collectively Evaluated for Impairment, Outstanding	12,391	12,519
Purchase Credit Impairment, Outstanding	26	30
Consumer Direct Loans [Member] | Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	0	0
Collectively Evaluated for Impairment, Allowance	24	24
Purchase Credit Impairment, Allowance	0	0
Total loans	1,735	1,788
Individually Evaluated for Impairment, Outstanding	3	3
Collectively Evaluated for Impairment, Outstanding	1,726	1,778
Purchase Credit Impairment, Outstanding	6	7
Consumer Credit Card Financing Receivable [Member] | Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	0	0
Collectively Evaluated for Impairment, Allowance	38	38
Purchase Credit Impairment, Allowance	0	0
Total loans	1,037	1,111
Individually Evaluated for Impairment, Outstanding	3	3
Collectively Evaluated for Impairment, Outstanding	1,034	1,108
Purchase Credit Impairment, Outstanding	0	0
Consumer Indirect Loans [Member] | Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	1	1
Collectively Evaluated for Impairment, Allowance	9	8
Purchase Credit Impairment, Allowance	0	0
Total loans	2,998	3,009
Individually Evaluated for Impairment, Outstanding	35	30
Collectively Evaluated for Impairment, Outstanding	2,963	2,979
Purchase Credit Impairment, Outstanding	0	0
Consumer Loans [Member] | Continuing Operations [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated for Impairment, Allowance	20	20
Collectively Evaluated for Impairment, Allowance	121	122
Purchase Credit Impairment, Allowance	2	0
Total loans	23,818
Individually Evaluated for Impairment, Outstanding	216	212
Collectively Evaluated for Impairment, Outstanding	23,209	23,512
Purchase Credit Impairment, Outstanding	393	405
Education Lending [Member] | Discontinued Operations [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans at fair value	$ 3	$ 3

XML

Asset Quality - Changes in Liability for Credit Losses on Lending Related Commitments (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	$ 55	$ 56
Provision (credit) for losses on lending-related commitments	(7)	13
Balance at end of period	$ 48	$ 69

XML

Fair Value Measurements - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale adjusted to fair value	$ 1	$ 0
Fair value of OREO property re-evaluated period	90 days
Third party broker price opinion periodic review period	180 days
Loans, net of allowance	$ 85,255,000,000	85,180,000,000
Loans at fair value	3,000,000
Discontinued Operations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans at fair value	3,000,000	3,000,000
Discontinued Operations [Member] | Education Lending [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net of allowance	1,500,000,000	1,600,000,000
Loans at fair value	3,000,000	3,000,000
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liabilities measured at fair value on non recurring basis	0	0
Loans held for sale adjusted to fair value	1,384,000,000	1,104,000,000
Loans at fair value	83,520,000,000	83,285,000,000
Fair Value [Member] | Discontinued Operations [Member] | Education Lending [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net of allowance	1,300,000,000	1,300,000,000
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net of allowance	85,255,000,000	85,180,000,000
Carrying Amount [Member] | Discontinued Operations [Member] | Education Lending [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net of allowance	$ 1,500,000,000	1,500,000,000
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Number of convertible preferred securities | security	2
Level 3 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale adjusted to fair value	$ 1,322,000,000	1,042,000,000
Loans at fair value	0	83,285,000,000
Consumer Portfolio Segment [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate — residential mortgage	$ 5,507,000,000	$ 5,547,000,000

XML

Fair Value Measurements - Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Indirect Investments [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Fair Value	$ 2
Unfunded Commitments	1
Indirect Investments [Member] | Passive Funds [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Fair Value	2
Unfunded Commitments	$ 1
Minimum [Member] | Passive Funds [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Liquidation period of funds	1 year
Minimum [Member] | Indirect Investments [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Liquidation period of funds	1 year
Maximum [Member] | Passive Funds [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Liquidation period of funds	3 years
Maximum [Member] | Indirect Investments [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Liquidation period of funds	8 years
Principal Investments [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Fair Value	$ 176
Unfunded Commitments	37
Funded Commitments	1	$ 1
Funded Other	0	13
Principal Investments [Member] | Direct Investments [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Fair Value	21
Unfunded Commitments	0
Funded Commitments	0	0
Funded Other	0	13
Principal Investments [Member] | Indirect Investments [Member]
Fair Value, Estimate Not Practicable, Financial Statement Captions [Line Items]
Fair Value	155
Unfunded Commitments	37
Funded Commitments	1	1
Funded Other	$ 0	$ 0

XML

Fair Value Measurements - Fair Value of Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($)	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	$ 921,000,000	$ 867,000,000
Securities available for sale	18,431,000,000	20,212,000,000
Loans, net of unearned income	86,125,000,000	86,038,000,000	$ 60,438,000,000
Loans held for sale	1	0
Derivative Assets, Netting adjustments	(464,000,000)	(431,000,000)
Total derivative assets	578,000,000	803,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative Liabilities, Netting adjustments	(524,000,000)	(384,000,000)
Total derivative liabilities	255,000,000	636,000,000
Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	14,563,000,000	16,408,000,000
U.S. Treasury, Agencies and Corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	185,000,000	184,000,000
States and Political Subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	11,000,000	11,000,000
Other Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	20,000,000	20,000,000
Agency Residential Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	1,742,000,000	1,846,000,000
Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	1,910,000,000	1,743,000,000
Recurring [Member]
ASSETS MEASURED ON A RECURRING BASIS
Commercial loans	4,000,000	18,000,000
Total trading account assets	921,000,000	867,000,000
Securities available for sale	18,431,000,000	20,212,000,000
Total other investments	178,000,000	191,000,000
Loans, net of unearned income	0	0
Loans held for sale	62,000,000	62,000,000
Derivative assets, gross	1,042,000,000	1,234,000,000
Derivative Assets, Netting adjustments	(464,000,000)	(431,000,000)
Total derivative assets	578,000,000	803,000,000
Accrued income and other assets	0	8,000,000
Total assets at fair value	20,170,000,000	22,143,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	779,000,000	1,020,000,000
Derivative Liabilities, Netting adjustments	(524,000,000)	(384,000,000)
Total derivative liabilities	255,000,000	636,000,000
Accrued expense and other liabilities	0	14,000,000
Total liabilities on a recurring basis at fair value	1,198,000,000	1,458,000,000
Recurring [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	14,563,000,000	16,408,000,000
Recurring [Member] | Trading Account Assets [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	917,000,000	849,000,000
Recurring [Member] | U.S. Treasury, Agencies and Corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	586,000,000	655,000,000
Securities available for sale	185,000,000	184,000,000
Recurring [Member] | States and Political Subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	47,000,000	8,000,000
Securities available for sale	11,000,000	11,000,000
Recurring [Member] | Other Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	36,000,000	73,000,000
Securities available for sale	20,000,000	20,000,000
Recurring [Member] | Agency Residential Mortgage Backed Securities [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		1,846,000,000
Recurring [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	1,910,000,000
Recurring [Member] | Principal Investments Direct [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	21,000,000	27,000,000
Recurring [Member] | Principal Investments Indirect [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	155,000,000	158,000,000
Recurring [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	176,000,000	185,000,000
Recurring [Member] | Equity And Mezzanine Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	2,000,000	6,000,000
Recurring [Member] | Private Equity and Mezzanine Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	2,000,000	6,000,000
Recurring [Member] | Other Mortgage-Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	248,000,000	113,000,000
Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Residential Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	1,742,000,000
Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		1,743,000,000
Recurring [Member] | Short Positions [Member]
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	943,000,000	808,000,000
Recurring [Member] | Interest Rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	782,000,000	930,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	531,000,000	737,000,000
Recurring [Member] | Foreign Exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	98,000,000	123,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	86,000,000	113,000,000
Recurring [Member] | Commodity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	150,000,000	176,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	140,000,000	165,000,000
Recurring [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	3,000,000	1,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	6,000,000	4,000,000
Recurring [Member] | Other [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	9,000,000	4,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	16,000,000	1,000,000
Level 1 [Member] | Recurring [Member]
ASSETS MEASURED ON A RECURRING BASIS
Commercial loans	0	0
Total trading account assets	1,000,000	0
Securities available for sale	3,000,000	3,000,000
Total other investments	0	0
Loans, net of unearned income	0	0
Loans held for sale	0	0
Derivative assets, gross	91,000,000	114,000,000
Derivative Assets, Netting adjustments	0	0
Total derivative assets	91,000,000	114,000,000
Accrued income and other assets	0	0
Total assets at fair value	95,000,000	117,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	78,000,000	102,000,000
Derivative Liabilities, Netting adjustments	0	0
Total derivative liabilities	78,000,000	102,000,000
Accrued expense and other liabilities	0	0
Total liabilities on a recurring basis at fair value	292,000,000	294,000,000
Level 1 [Member] | Recurring [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	0	0
Level 1 [Member] | Recurring [Member] | Trading Account Assets [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	1,000,000	0
Level 1 [Member] | Recurring [Member] | U.S. Treasury, Agencies and Corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	0	0
Level 1 [Member] | Recurring [Member] | States and Political Subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	0	0
Level 1 [Member] | Recurring [Member] | Other Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	1,000,000	0
Securities available for sale	3,000,000	3,000,000
Level 1 [Member] | Recurring [Member] | Agency Residential Mortgage Backed Securities [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		0
Level 1 [Member] | Recurring [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	0
Level 1 [Member] | Recurring [Member] | Principal Investments Direct [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 1 [Member] | Recurring [Member] | Principal Investments Indirect [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 1 [Member] | Recurring [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 1 [Member] | Recurring [Member] | Equity And Mezzanine Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 1 [Member] | Recurring [Member] | Private Equity and Mezzanine Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 1 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Level 1 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Residential Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	0
Level 1 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		0
Level 1 [Member] | Recurring [Member] | Short Positions [Member]
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	214,000,000	192,000,000
Level 1 [Member] | Recurring [Member] | Interest Rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	0	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 1 [Member] | Recurring [Member] | Foreign Exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	91,000,000	114,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	78,000,000	102,000,000
Level 1 [Member] | Recurring [Member] | Commodity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	0	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 1 [Member] | Recurring [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	0	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 1 [Member] | Recurring [Member] | Other [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	0	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 2 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Loans held for sale	62,000,000
Level 2 [Member] | Recurring [Member]
ASSETS MEASURED ON A RECURRING BASIS
Commercial loans	4,000,000	18,000,000
Total trading account assets	920,000,000	867,000,000
Securities available for sale	18,411,000,000	20,192,000,000
Total other investments	0	0
Loans, net of unearned income	0	0
Loans held for sale		62,000,000
Derivative assets, gross	941,000,000	1,110,000,000
Derivative Assets, Netting adjustments	0	0
Total derivative assets	941,000,000	1,110,000,000
Accrued income and other assets	0	8,000,000
Total assets at fair value	20,334,000,000	22,239,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	701,000,000	918,000,000
Derivative Liabilities, Netting adjustments	0	0
Total derivative liabilities	701,000,000	918,000,000
Accrued expense and other liabilities	0	14,000,000
Total liabilities on a recurring basis at fair value	1,430,000,000	1,548,000,000
Level 2 [Member] | Recurring [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	14,563,000,000	16,408,000,000
Level 2 [Member] | Recurring [Member] | Trading Account Assets [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	916,000,000	849,000,000
Level 2 [Member] | Recurring [Member] | U.S. Treasury, Agencies and Corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	586,000,000	655,000,000
Securities available for sale	185,000,000	184,000,000
Level 2 [Member] | Recurring [Member] | States and Political Subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	47,000,000	8,000,000
Securities available for sale	11,000,000	11,000,000
Level 2 [Member] | Recurring [Member] | Other Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	35,000,000	73,000,000
Securities available for sale	0	0
Level 2 [Member] | Recurring [Member] | Agency Residential Mortgage Backed Securities [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		1,846,000,000
Level 2 [Member] | Recurring [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	1,910,000,000
Level 2 [Member] | Recurring [Member] | Principal Investments Direct [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 2 [Member] | Recurring [Member] | Principal Investments Indirect [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 2 [Member] | Recurring [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 2 [Member] | Recurring [Member] | Equity And Mezzanine Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 2 [Member] | Recurring [Member] | Private Equity and Mezzanine Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 2 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	248,000,000	113,000,000
Level 2 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Residential Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	1,742,000,000
Level 2 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		1,743,000,000
Level 2 [Member] | Recurring [Member] | Short Positions [Member]
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	729,000,000	616,000,000
Level 2 [Member] | Recurring [Member] | Interest Rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	777,000,000	923,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	531,000,000	737,000,000
Level 2 [Member] | Recurring [Member] | Foreign Exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	7,000,000	9,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	8,000,000	11,000,000
Level 2 [Member] | Recurring [Member] | Commodity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	150,000,000	176,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	140,000,000	165,000,000
Level 2 [Member] | Recurring [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	2,000,000	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	6,000,000	4,000,000
Level 2 [Member] | Recurring [Member] | Other [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	5,000,000	2,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	16,000,000	1,000,000
Level 3 [Member] | Recurring [Member]
ASSETS MEASURED ON A RECURRING BASIS
Commercial loans	0	0
Total trading account assets	0	0
Securities available for sale	17,000,000	17,000,000
Total other investments	21,000,000	27,000,000
Loans, net of unearned income	0	0
Loans held for sale	0	0
Derivative assets, gross	10,000,000	10,000,000
Derivative Assets, Netting adjustments	0	0
Total derivative assets	10,000,000	10,000,000
Accrued income and other assets	0	0
Total assets at fair value	48,000,000	54,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Derivative Liabilities, Netting adjustments	0	0
Total derivative liabilities	0	0
Accrued expense and other liabilities	0	0
Total liabilities on a recurring basis at fair value	0	0
Level 3 [Member] | Recurring [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	0	0
Level 3 [Member] | Recurring [Member] | Trading Account Assets [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Level 3 [Member] | Recurring [Member] | U.S. Treasury, Agencies and Corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	0	0
Level 3 [Member] | Recurring [Member] | States and Political Subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	0	0
Level 3 [Member] | Recurring [Member] | Other Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Securities available for sale	17,000,000	17,000,000
Level 3 [Member] | Recurring [Member] | Agency Residential Mortgage Backed Securities [Member] | Collateralized Mortgage Obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		0
Level 3 [Member] | Recurring [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	0
Level 3 [Member] | Recurring [Member] | Principal Investments Direct [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	21,000,000	27,000,000
Level 3 [Member] | Recurring [Member] | Principal Investments Indirect [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 3 [Member] | Recurring [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	21,000,000	27,000,000
Level 3 [Member] | Recurring [Member] | Equity And Mezzanine Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 3 [Member] | Recurring [Member] | Private Equity and Mezzanine Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	0	0
Level 3 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	0	0
Level 3 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Residential Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale	0
Level 3 [Member] | Recurring [Member] | Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities available for sale		0
Level 3 [Member] | Recurring [Member] | Short Positions [Member]
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 3 [Member] | Recurring [Member] | Interest Rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	5,000,000	7,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 3 [Member] | Recurring [Member] | Foreign Exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	0	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 3 [Member] | Recurring [Member] | Commodity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	0	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 3 [Member] | Recurring [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	1,000,000	1,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	0	0
Level 3 [Member] | Recurring [Member] | Other [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets, gross	4,000,000	2,000,000
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities, gross	$ 0	$ 0

XML

Fair Value Measurements - Change in Fair Values of Level 3 Financial Instruments (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Issuance of financial instrument	$ 0	$ 0
Securities Available for Sale [Member] | Other Securities [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning Balance	17,000,000	17,000,000	$ 17,000,000
Gains (Losses) Included in Earnings	0	0
Purchases	0	0
Sales	0	0
Settlements	0	0
Transfers Other	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Ending Balance	17,000,000	17,000,000	17,000,000
Unrealized Gains (Losses) Included in Earnings	0		0
Other Investments [Member] | Principal Investments Direct [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning Balance	27,000,000	50,000,000	50,000,000
Gains (Losses) Included in Earnings	(2,000,000)	(3,000,000)
Purchases	0	0
Sales	(4,000,000)	0
Settlements	0	0
Transfers Other	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Ending Balance	21,000,000	47,000,000	27,000,000
Unrealized Gains (Losses) Included in Earnings	(6,000,000)		(3,000,000)
Other Investments [Member] | Other Indirect [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning Balance	0	20,000,000	20,000,000
Gains (Losses) Included in Earnings	0	(1,000,000)
Purchases	0	0
Sales	0	(1,000,000)
Settlements	0	0
Transfers Other	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Ending Balance	0	18,000,000	0
Unrealized Gains (Losses) Included in Earnings	0		(1,000,000)
Interest Rate [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning Balance	7,000,000	16,000,000	16,000,000
Gains (Losses) Included in Earnings	0	4,000,000
Purchases	0	0
Sales	0	0
Settlements	0	0
Transfers Other	0
Transfers into Level 3	1,000,000	3,000,000
Transfers out of Level 3	(3,000,000)	(7,000,000)
Ending Balance	5,000,000	16,000,000	7,000,000
Unrealized Gains (Losses) Included in Earnings	0		0
Credit [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning Balance	1,000,000	1,000,000	1,000,000
Gains (Losses) Included in Earnings	(3,000,000)	(2,000,000)
Purchases	0	0
Sales	0	0
Settlements	3,000,000	3,000,000
Transfers Other	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Ending Balance	1,000,000	$ 2,000,000	1,000,000
Unrealized Gains (Losses) Included in Earnings	0		0
Other [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning Balance	2,000,000
Gains (Losses) Included in Earnings	0
Purchases	0
Sales	0
Settlements	0
Transfers Other	2,000,000
Transfers into Level 3	0
Transfers out of Level 3	0
Ending Balance	4,000,000		$ 2,000,000
Unrealized Gains (Losses) Included in Earnings	$ 0

XML

Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
ASSETS MEASURED ON A NONRECURRING BASIS
Loans held for sale	$ 1		$ 0
Nonrecurring [Member]
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	11,000,000		11,000,000
Loans held for sale	1,000,000		0
Accrued income and other assets	6,000,000		11,000,000
Total assets at fair value	18,000,000		22,000,000
Transfer of commercial and consumer loans from held-to-maturity to held-for-sale, current fair value	17,000,000	$ 35,000,000
Level 1 [Member] | Nonrecurring [Member]
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	0		0
Loans held for sale	0		0
Accrued income and other assets	0		0
Total assets at fair value	0		0
Level 2 [Member]
ASSETS MEASURED ON A NONRECURRING BASIS
Loans held for sale	62,000,000
Level 2 [Member] | Nonrecurring [Member]
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	0		0
Loans held for sale	0		0
Accrued income and other assets	0		0
Total assets at fair value	0		0
Level 3 [Member] | Nonrecurring [Member]
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	11,000,000		11,000,000
Loans held for sale	1,000,000		0
Accrued income and other assets	6,000,000		11,000,000
Total assets at fair value	$ 18,000,000		$ 22,000,000

XML

Fair Value Measurements - Quantitative Information about Level 3 Fair Value Measurements (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Option, Quantitative Disclosures [Line Items]
Other investments	$ 689	$ 738
Nonrecurring [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Impaired loans	11	11
Level 3 [Member] | Nonrecurring [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Impaired loans	11	11
Level 3 [Member] | Other Investments [Member] | Recurring [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Other investments	$ 21	$ 27
Level 3 [Member] | Discount [Member] | Nonrecurring [Member] | Minimum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	0.00%	0.00%
Level 3 [Member] | Discount [Member] | Nonrecurring [Member] | Maximum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	70.00%	70.00%
Level 3 [Member] | Discount [Member] | Nonrecurring [Member] | Weighted Average [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	16.00%	46.00%
Level 3 [Member] | EBITDA Multiple [Member] | Recurring [Member] | Minimum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	6.00%	6.30%
Level 3 [Member] | EBITDA Multiple [Member] | Recurring [Member] | Maximum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	6.30%	7.00%
Level 3 [Member] | EBITDA Multiple [Member] | Recurring [Member] | Weighted Average [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	6.20%	6.50%
Level 3 [Member] | EBITDA Multiple (Where Applicable) [Member] | Recurring [Member] | Weighted Average [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	6.30%	6.30%

XML

Fair Value Measurements - Fair Value Disclosures of Financial Instruments (Detail) - USD ($)	Mar. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Trading account assets	$ 921,000,000	$ 867,000,000
Securities available for sale	18,431,000,000	20,212,000,000
Held-to-maturity securities	10,186,000,000	10,232,000,000
Held-to-maturity securities	9,954,000,000	10,007,000,000
Other investments	689,000,000	738,000,000
Loans, net of allowance	85,255,000,000	85,180,000,000
Loans, net of allowance	3,000,000
Loans held for sale	1,384,000,000	1,104,000,000	$ 1,137,000,000
Loans held for sale	1	0
Derivative assets	578,000,000	803,000,000
LIABILITIES
Long-term debt	12,324,000,000	12,384,000,000
Derivative liabilities	255,000,000	636,000,000
Level 2 [Member]
ASSETS
Loans held for sale	62,000,000
Carrying Amount [Member]
ASSETS
Cash and short-term investments	3,074,000,000	3,452,000,000
Trading account assets	921,000,000	867,000,000
Securities available for sale	18,431,000,000	20,212,000,000
Held-to-maturity securities	10,186,000,000	10,232,000,000
Other investments	689,000,000	738,000,000
Loans, net of allowance	85,255,000,000	85,180,000,000
Loans held for sale	1,384,000,000	1,104,000,000
Derivative assets	578,000,000	803,000,000
LIABILITIES
Deposits with no stated maturity	93,429,000,000	93,906,000,000
Time deposits	10,553,000,000	10,181,000,000
Short-term borrowings	1,385,000,000	2,310,000,000
Long-term debt	12,324,000,000	12,384,000,000
Derivative liabilities	255,000,000	636,000,000
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liabilities measured at fair value on non recurring basis	0	0
ASSETS
Cash and short-term investments	3,074,000,000	3,452,000,000
Trading account assets	921,000,000	867,000,000
Securities available for sale	18,431,000,000	20,212,000,000
Held-to-maturity securities	9,954,000,000	10,007,000,000
Other investments	684,000,000	733,000,000
Loans, net of allowance	83,520,000,000	83,285,000,000
Loans held for sale	1,384,000,000	1,104,000,000
Derivative assets	578,000,000	803,000,000
Derivative assets, Netting Adjustment	(464,000,000)	(431,000,000)
LIABILITIES
Deposits with no stated maturity	93,429,000,000	93,906,000,000
Time deposits	10,649,000,000	10,267,000,000
Short-term borrowings	1,385,000,000	2,310,000,000
Long-term debt	12,661,000,000	12,690,000,000
Derivative liabilities	255,000,000	636,000,000
Derivative liabilities, Netting Adjustment	(524,000,000)	(384,000,000)
Fair Value [Member] | Level 1 [Member]
ASSETS
Cash and short-term investments	3,074,000,000	3,452,000,000
Trading account assets	1,000,000	0
Securities available for sale	3,000,000	3,000,000
Held-to-maturity securities	0	0
Other investments	0	0
Loans, net of allowance	0	0
Loans held for sale	0	0
Derivative assets	91,000,000	114,000,000
LIABILITIES
Deposits with no stated maturity	0	0
Time deposits	0	0
Short-term borrowings	214,000,000	192,000,000
Long-term debt	12,372,000,000	12,386,000,000
Derivative liabilities	78,000,000	102,000,000
Fair Value [Member] | Level 2 [Member]
ASSETS
Cash and short-term investments	0	0
Trading account assets	920,000,000	867,000,000
Securities available for sale	18,411,000,000	20,192,000,000
Held-to-maturity securities		10,007,000,000
Other investments	0	0
Loans, net of allowance	83,520,000,000	0
Loans held for sale	62,000,000	62,000,000
Derivative assets	941,000,000	1,110,000,000
LIABILITIES
Deposits with no stated maturity	93,429,000,000	93,906,000,000
Time deposits	10,649,000,000	10,267,000,000
Short-term borrowings	1,171,000,000	2,118,000,000
Long-term debt	289,000,000	304,000,000
Derivative liabilities	701,000,000	918,000,000
Fair Value [Member] | Level 3 [Member]
ASSETS
Cash and short-term investments	0	0
Trading account assets	0	0
Securities available for sale	17,000,000	17,000,000
Held-to-maturity securities	0	0
Other investments	527,000,000	569,000,000
Loans, net of allowance	0	83,285,000,000
Loans held for sale	1,322,000,000	1,042,000,000
Derivative assets	10,000,000	10,000,000
LIABILITIES
Deposits with no stated maturity	0	0
Time deposits	0	0
Short-term borrowings	0	0
Long-term debt	0	0
Derivative liabilities	0	0
Other Investments [Member] | Fair Value [Member]
ASSETS
Other investments, Measured at NAV	$ 157,000,000	$ 164,000,000

XML

Securities - Details of Securities (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	$ 18,717	$ 20,507
Available for sale, Gross Unrealized Gains	34	37
Available for sale, Gross Unrealized Losses	320	332
Available for sale, Fair Value	18,431	20,212
Held to maturities, Amortized Cost	10,186	10,232
Held to maturities, Gross Unrealized Gains	5	2
Held to maturities, Gross Unrealized Losses	237	227
Held to maturities, Fair Value	9,954	10,007
U.S. Treasury, Agencies and Corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	188	188
Available for sale, Gross Unrealized Gains	0	0
Available for sale, Gross Unrealized Losses	3	4
Available for sale, Fair Value	185	184
States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	11	11
Available for sale, Gross Unrealized Gains	0	0
Available for sale, Gross Unrealized Losses	0	0
Available for sale, Fair Value	11	11
Agency Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	1,751	1,857
Available for sale, Gross Unrealized Gains	5	6
Available for sale, Gross Unrealized Losses	14	17
Available for sale, Fair Value	1,742	1,846
Held to maturities, Amortized Cost	605	629
Held to maturities, Gross Unrealized Gains	0	0
Held to maturities, Gross Unrealized Losses	5	5
Held to maturities, Fair Value	600	624
Agency Commercial Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Held to maturities, Gross Unrealized Losses	44	49
Other Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	21	21
Available for sale, Gross Unrealized Gains	0	0
Available for sale, Gross Unrealized Losses	1	1
Available for sale, Fair Value	20	20
Held to maturities, Amortized Cost	15	15
Held to maturities, Gross Unrealized Gains	0	0
Held to maturities, Gross Unrealized Losses	0	0
Held to maturities, Fair Value	15	15
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	14,790	16,652
Available for sale, Gross Unrealized Gains	29	31
Available for sale, Gross Unrealized Losses	256	275
Available for sale, Fair Value	14,563	16,408
Held to maturities, Amortized Cost	7,973	8,404
Held to maturities, Gross Unrealized Gains	2	1
Held to maturities, Gross Unrealized Losses	188	173
Held to maturities, Fair Value	7,787	8,232
Other Mortgage-Backed Securities [Member] | Agency Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Held to maturities, Gross Unrealized Losses	5	5
Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	1,956	1,778
Available for sale, Gross Unrealized Gains	0	0
Available for sale, Gross Unrealized Losses	46	35
Available for sale, Fair Value	1,910	1,743
Held to maturities, Amortized Cost	1,593	1,184
Held to maturities, Gross Unrealized Gains	3	1
Held to maturities, Gross Unrealized Losses	44	49
Held to maturities, Fair Value	$ 1,552	$ 1,136

XML

Securities - Available for Sale Securities (Unrealized Loss Position) (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity Securities, Gross unrealized losses	$ 237	$ 227
Fair value less than 12 months, total temporarily impaired securities	22,359	24,038
Gross unrealized losses less than 12 months, total temporarily impaired securities	486	497
Fair value 12 months or longer, total temporarily impaired securities	2,031	1,931
Gross unrealized losses 12 months or longer, total temporarily impaired securities	71	62
Fair value, total temporarily impaired securities	24,390	25,969
Gross unrealized losses, total temporarily impaired securities	557	559
U.S. Treasury, Agencies and Corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value, less than 12 months	185	182
Gross unrealized losses, less than 12 months	3	4
Fair value, 12 months or longer	0	0
Gross unrealized losses, 12 months or longer	0	0
Fair Value	185	182
Gross unrealized losses, Total	3	4
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value, less than 12 months	10,573	12,345
Gross unrealized losses, less than 12 months	205	231
Fair value, 12 months or longer	1,507	1,410
Gross unrealized losses, 12 months or longer	51	44
Fair Value	12,080	13,755
Gross unrealized losses, Total	256	275
Held-to-maturity Securities, Fair Value less than 12 months	6,634	7,028
Held-to-maturity Securities, Gross unrealized losses, less than 12 months	169	156
Held-to-maturity Securities, Fair Value 12 months or longer	521	518
Held-to-maturity Securities, Gross unrealized losses, 12 months or longer	19	17
Held-to-maturity Securities, Fair Value	7,155	7,546
Held-to-maturity Securities, Gross unrealized losses	188	173
Agency Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity Securities, Gross unrealized losses	5	5
Agency Commercial Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value, less than 12 months	1,910	1,482
Gross unrealized losses, less than 12 months	46	35
Fair value, 12 months or longer	0	0
Gross unrealized losses, 12 months or longer	0	0
Fair Value	1,910	1,482
Gross unrealized losses, Total	46	35
Held-to-maturity Securities, Fair Value less than 12 months	1,001	996
Held-to-maturity Securities, Gross unrealized losses, less than 12 months	44	49
Held-to-maturity Securities, Fair Value 12 months or longer	0	0
Held-to-maturity Securities, Gross unrealized losses, 12 months or longer	0	0
Held-to-maturity Securities, Fair Value	1,001	996
Held-to-maturity Securities, Gross unrealized losses	44	49
Other Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value, less than 12 months	0	2
Gross unrealized losses, less than 12 months	0	0
Fair value, 12 months or longer	3	3
Gross unrealized losses, 12 months or longer	1	1
Fair Value	3	5
Gross unrealized losses, Total	1	1
Held-to-maturity Securities, Fair Value less than 12 months	4	4
Held-to-maturity Securities, Gross unrealized losses, less than 12 months	0	0
Held-to-maturity Securities, Fair Value 12 months or longer	0	0
Held-to-maturity Securities, Gross unrealized losses, 12 months or longer	0	0
Held-to-maturity Securities, Fair Value	4	4
Held-to-maturity Securities, Gross unrealized losses	0	0
Gross unrealized losses, available for sale securities (less than)	1	1
Gross unrealized losses, held-to-maturity securities (less than)	1	1
Other Mortgage-Backed Securities [Member] | Agency Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value, less than 12 months	1,527	1,452
Gross unrealized losses, less than 12 months	14	17
Fair value, 12 months or longer	0	0
Gross unrealized losses, 12 months or longer	0	0
Fair Value	1,527	1,452
Gross unrealized losses, Total	14	17
Held-to-maturity Securities, Fair Value less than 12 months	525	547
Held-to-maturity Securities, Gross unrealized losses, less than 12 months	5	5
Held-to-maturity Securities, Fair Value 12 months or longer	0	0
Held-to-maturity Securities, Gross unrealized losses, 12 months or longer	0	0
Held-to-maturity Securities, Fair Value	525	547
Held-to-maturity Securities, Gross unrealized losses	5	5
Other Mortgage-Backed Securities [Member] | Agency Commercial Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity Securities, Gross unrealized losses	$ 44	$ 49

XML

Securities - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($) MortgageLoan position	Dec. 31, 2016 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Pledged available for sale and held-to-maturity securities	$ 8,900
Agency residential mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross unrealized loss attributable to mortgage-backed securities (less than)	1
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross unrealized losses	$ 256	$ 275
Number of fixed rate collateralized mortgage obligations | MortgageLoan	367
Weighted-average maturity collateralized mortgage, in years	4 years 2 months 9 days
Residential Mortgage Backed Securities [Member] | Agency residential mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross unrealized losses	$ 14	$ 17
Number of other mortgage-backed securities positions | position	234
Weighted-average maturity mortgage-backed securities, in years	3 years 10 months 6 days

XML

Securities - Cumulative Credit Portion of Impairments on Debt Securities (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($)
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Cumulative Impairments on Debt Securities, Beginning Balance	$ 4
Impairment recognized in earnings	0
Cumulative Impairments on Debt Securities, Ending Balance	$ 4

XML

Securities - Securities by Maturity (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
Amortized Cost of Securities Available for sale, Due in one year or less	$ 177
Amortized Cost of Securities Available for sale, Due after one through five years	16,595
Amortized Cost of Securities Available for sale, Due after five through ten years	1,737
Amortized Cost of Securities Available for sale, Due after ten years	208
Total Amortized Cost of Securities Available for sale	18,717
Fair Value of Securities Available for sale, Due in one year or less	179
Fair Value of Securities Available for sale, Due after one through five years	16,354
Fair Value of Securities Available for sale, Due after five through ten years	1,693
Fair Value of Securities Available for sale, Due after ten years	205
Total Fair Value of Securities Available for sale	18,431	$ 20,212
Amortized Cost of Held-to-Maturity Securities, Due in one year or less	55
Amortized Cost of Held-to-Maturity Securities, Due after one through five years	6,935
Amortized Cost of Held-to-Maturity Securities, Due after five through ten years	2,936
Amortized Cost of Held-to-Maturity Securities, Due after ten years	260
Held to maturities, Amortized Cost	10,186	10,232
Fair Value of Held-to-Maturity Securities, Due in one year or less	56
Fair Value of Held-to-Maturity Securities, Due after one through five years	6,798
Fair Value of Held-to-Maturity Securities, Due after five through ten years	2,862
Fair Value of Held-to-Maturity Securities, Due after ten years	238
Total Fair Value of Held-to-Maturity Securities	$ 9,954	$ 10,007

XML

Derivatives and Hedging Activities - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($) rating	Dec. 31, 2016 USD ($) rating
Credit Derivatives [Line Items]
Derivative assets after effects of bilateral collateral and master netting agreements	$ 27
Derivative liabilities after effects of bilateral collateral and master netting agreements	(8)
Derivative assets not designated as hedging instruments after effects of bilateral collateral and master netting agreements, and a reserve for potential future losses	551
Derivative liabilities not designated as hedging instruments after effects of bilateral collateral and master netting agreements, and a reserve for potential future losses	263
Reclassify of after-tax net losses on derivative instruments from AOCI	$ 8
Length of time hedge in cash flow hedge	12 months
Reclassification of net losses related to terminated cash flow hedges from AOCI to income	$ (3)
Maximum length of time over which forecasted transactions are hedged, years	11 years
Other Comprehensive income unrealized gain on derivatives arising during period net of tax	$ 38
Cash collateral netted against derivative assets	(25)	$ 155
Collateral netted against derivative liabilities	35	108
Cash collateral not netted transferred with clearing organization		448
Cash collateral not netted transferred from clearing organization		59
Cash paid in variation margin to settle CME-cleared derivatives	194
Cash received in variation margin to settle CME-cleared derivatives	68
Increase (decrease) in derivative assets	(121)
Increase (decrease) in derivative liabilities	394
Gross exposure on derivatives, after taking into account the effects of bilateral collateral and master netting agreements	464
Net exposure on derivatives, after taking into account, the effects of bilateral collateral and master netting agreements	239
Over-collateralization on derivatives to broker-dealers and banks, after the application of master netting agreements and collateral	215
Additional collateral held in the form of securities	24
Default reserve associated with uncollateralized contracts	5
Gross exposure on derivatives after taking into account effects of master netting agreements	382
Net exposure on derivatives with clients after application of master netting agreements collateral and related reserve	339
Banking Subsidiary [Member]
Credit Derivatives [Line Items]
Net liability position totaled	98
Derivative assets included in net liability position	164
Derivative liabilities included in net liability position	262
Cash and securities collateral posted	$ 100
Additional collateral amount		$ 1
Banking Subsidiary [Member] | Unsecured Debt [Member]
Credit Derivatives [Line Items]
Number of ratings above noninvestment | rating	4	4
Banking Subsidiary [Member] | Maximum [Member] | Unsecured Debt [Member]
Credit Derivatives [Line Items]
Payments to terminate contracts (less than for the $1 million)	$ 3	$ 4
Key Corp [Member]
Credit Derivatives [Line Items]
Additional collateral amount		$ 1

XML

Derivatives and Hedging Activities - Fair Values, Volume of Activity and Gain (Loss) Information Related to Derivative Instruments (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Derivatives, Fair Value [Line Items]
Notional Amount	$ 95,673	$ 88,288
Derivative Assets, Netting adjustments	(464)	(431)
Derivative Assets, net	567	782
Derivative Liabilities, Netting adjustments	(524)	(384)
Derivative Liabilities, net	184	539
Derivatives Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	25,201	24,519
Derivative Assets	101	195
Derivative Liabilities	22	98
Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	70,472	63,769
Derivative Assets	941	1,039
Derivative Liabilities	757	922
Interest Rate [Member] | Derivatives Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	24,917	24,237
Derivative Assets	98	189
Derivative Liabilities	20	94
Interest Rate [Member] | Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	58,963	55,315
Derivative Assets	684	741
Derivative Liabilities	511	643
Foreign Exchange [Member] | Derivatives Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	284	282
Derivative Assets	3	6
Derivative Liabilities	2	4
Foreign Exchange [Member] | Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	6,897	6,230
Derivative Assets	95	117
Derivative Liabilities	84	109
Commodity [Member] | Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	1,569	1,474
Derivative Assets	150	176
Derivative Liabilities	140	165
Credit [Member] | Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	418	360
Derivative Assets	3	1
Derivative Liabilities	6	4
Other [Member] | Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	2,625	390
Derivative Assets	9	4
Derivative Liabilities	16	1
Net Derivatives [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	95,673	88,288
Derivative Assets, net	578	803
Derivative Liabilities, net	255	636
Counterparty And Cash Collateral Netting [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	0	0
Derivative Assets, net	(11)	(21)
Derivative Liabilities, net	$ (71)	$ (97)

XML

Derivatives and Hedging Activities - Pre-Tax Net Gains (Losses) on Fair Value Hedges (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Derivatives, Fair Value [Line Items]
Net Gains (Losses) on Derivative	$ (17)	$ 142
Net Gains (Losses) on Hedged Item	35	(115)
Other Income [Member] | Interest Rate [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) on Derivative	(35)	115
Net Gains (Losses) on Hedged Item	35	(115)
Interest Expense [Member] | Interest Rate [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) on Derivative	$ 18	$ 27

XML

Derivatives and Hedging Activities - Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Derivatives, Fair Value [Line Items]
Net Gains (Losses) Recognized in OCI (Effective Portion)	$ (25)	$ 114
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	14	22
Net Gains (Losses) Recognized in Income (Ineffective Portion)	0	0
Interest Income [Member] | Interest Rate [Member] | Cash Flow Hedges [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) Recognized in OCI (Effective Portion)	(22)	133
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	15	23
Interest Expense [Member] | Interest Rate [Member] | Cash Flow Hedges [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) Recognized in OCI (Effective Portion)	0	(4)
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	(1)	(1)
Investment Banking and Debt Placement Fees [Member] | Interest Rate [Member] | Cash Flow Hedges [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) Recognized in OCI (Effective Portion)	0	(1)
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	0	0
Other Income [Member] | Interest Rate [Member] | Cash Flow Hedges [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) Recognized in Income (Ineffective Portion)	0	0
Other Income [Member] | Foreign Exchange [Member] | Net Investment Hedges [Member]
Derivatives, Fair Value [Line Items]
Net Gains (Losses) Recognized in OCI (Effective Portion)	(3)	(14)
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	0	0
Net Gains (Losses) Recognized in Income (Ineffective Portion)	$ 0	$ 0

XML

Derivatives and Hedging Activities - After-Tax Change in AOCI Resulting from Cash Flow Hedges (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
December 31, 2016	$ (14)
2017	(15)
Reclassification of Gains to Net Income	(9)
March 31, 2017	$ (38)

XML

Derivatives and Hedging Activities - Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging Instruments (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	$ 12	$ 15
Interest Rate [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	5	5
Foreign Exchange [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	11	10
Commodity [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	2	1
Credit [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(4)	(1)
Other Credit Derivatives [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(2)	0
Corporate Services Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	20	18
Corporate Services Income [Member] | Interest Rate [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	6	6
Corporate Services Income [Member] | Foreign Exchange [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	11	10
Corporate Services Income [Member] | Commodity [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	2	1
Corporate Services Income [Member] | Credit [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	1	1
Corporate Services Income [Member] | Other Credit Derivatives [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0	0
Consumer Mortgage Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(1)
Consumer Mortgage Income [Member] | Interest Rate [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0
Consumer Mortgage Income [Member] | Foreign Exchange [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0
Consumer Mortgage Income [Member] | Commodity [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0
Consumer Mortgage Income [Member] | Credit [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0
Consumer Mortgage Income [Member] | Other Credit Derivatives [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(1)
Other Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(7)	(3)
Other Income [Member] | Interest Rate [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(1)	(1)
Other Income [Member] | Foreign Exchange [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0	0
Other Income [Member] | Commodity [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	0	0
Other Income [Member] | Credit [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	(5)	(2)
Other Income [Member] | Other Credit Derivatives [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses)	$ (1)	$ 0

XML

Derivatives and Hedging Activities - Fair Value of Derivative Assets by Type (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Credit Derivatives [Line Items]
Derivative assets before collateral	$ 553	$ 958
Less: Related collateral	(25)	155
Total derivative assets	578	803
Interest Rate [Member]
Credit Derivatives [Line Items]
Derivative assets before collateral	452	782
Foreign Exchange [Member]
Credit Derivatives [Line Items]
Derivative assets before collateral	41	62
Commodity [Member]
Credit Derivatives [Line Items]
Derivative assets before collateral	50	110
Credit [Member]
Credit Derivatives [Line Items]
Derivative assets before collateral	1	0
Other [Member]
Credit Derivatives [Line Items]
Derivative assets before collateral	$ 9	$ 4

XML

Derivatives and Hedging Activities - Fair Value of Credit Derivatives Purchased and Sold (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Credit Derivatives [Line Items]
Purchased	$ (3)	$ (3)
Sold	0	0
Net	(3)	(3)
Single Name Credit Default Swaps [Member]
Credit Derivatives [Line Items]
Purchased	(2)	(2)
Sold	0	0
Net	(2)	(2)
Traded Credit Default Swap Indices [Member]
Credit Derivatives [Line Items]
Purchased	(1)	(1)
Sold	0	0
Net	(1)	(1)
Other [Member]
Credit Derivatives [Line Items]
Purchased	0	0
Sold	0	0
Net	0	0
Maximum [Member] | Other [Member]
Credit Derivatives [Line Items]
Sold	$ (1)	$ (1)

XML

Derivatives and Hedging Activities - Credit Derivatives Sold and Held (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Credit Derivatives [Line Items]
Notional Amount	$ 8	$ 4
Average Term (Years)	0 years	0 years
Payment / Performance Risk	0.00%	0.00%
Other [Member]
Credit Derivatives [Line Items]
Notional Amount	$ 8	$ 4
Average Term (Years)	11 years 4 months 24 days	6 years 5 months 26 days
Payment / Performance Risk	12.85%	17.93%

XML

Derivatives and Hedging Activities - Credit Risk Contingent Feature (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	$ 24
Standard & Poor's, A- Rating [Member] | One Rating Downgrade [Member]
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	2	$ 2
Standard & Poor's, A- Rating [Member] | Two Rating Downgrade [Member]
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	2	2
Standard & Poor's, A- Rating [Member] | Three Rating Downgrade [Member]
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	2	4
Moody's, A3 Rating [Member] | One Rating Downgrade [Member]
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	2	2
Moody's, A3 Rating [Member] | Two Rating Downgrade [Member]
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	2	2
Moody's, A3 Rating [Member] | Three Rating Downgrade [Member]
Credit Derivatives [Line Items]
Additional collateral aggregate fair value	$ 2	$ 4

XML

Mortgage Servicing Assets - Changes in Carrying Amount of Mortgage Servicing Assets (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Commercial Mortgage Backed Securities [Member]
Servicing Asset at Amortized Cost, Balance [Roll Forward]
Balance at beginning of period	$ 356	$ 321
Servicing retained from loan sales	28	7
Purchases	7	12
Amortization	(22)	(22)
Balance at end of period	369	318
Fair value at end of period	480	$ 408
Residential Mortgage Backed Securities [Member]
Servicing Asset at Amortized Cost, Balance [Roll Forward]
Balance at beginning of period	28
Servicing retained from loan sales	2
Amortization	(1)
Balance at end of period	29
Fair value at end of period	$ 35

XML

Mortgage Servicing Assets - Schedule of Range and Weighted-Average of Significant Unobservable Inputs (Detail) - Discounted Cash Flow [Member] - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Commercial Mortgage Backed Securities [Member] | Minimum [Member]
Servicing Assets at Fair Value [Line Items]
Expected defaults	1.00%	1.00%
Residual cash flows discount rate	7.00%	7.00%
Escrow earn rate	1.20%	1.10%
Servicing cost	$ 150,000,000	$ 150,000,000
Loan assumption rate	0.00%	0.00%
Percentage late	0.00%	0.00%
Commercial Mortgage Backed Securities [Member] | Maximum [Member]
Servicing Assets at Fair Value [Line Items]
Expected defaults	3.00%	3.00%
Residual cash flows discount rate	15.00%	12.00%
Escrow earn rate	3.20%	3.00%
Servicing cost	$ 38,500,000,000	$ 2,700,000,000
Loan assumption rate	3.00%	3.00%
Percentage late	2.00%	2.00%
Commercial Mortgage Backed Securities [Member] | Weighted Average [Member]
Servicing Assets at Fair Value [Line Items]
Expected defaults	1.30%	1.40%
Residual cash flows discount rate	8.60%	8.00%
Escrow earn rate	2.60%	2.40%
Servicing cost	$ 1,342,000,000	$ 1,124,000,000
Loan assumption rate	1.25%	1.13%
Percentage late	0.31%	0.34%
Residential Mortgage Backed Securities [Member] | Minimum [Member]
Servicing Assets at Fair Value [Line Items]
Prepayment speed	7.68%
Expected defaults	8.50%
Servicing cost	$ 76,000,000
Residential Mortgage Backed Securities [Member] | Maximum [Member]
Servicing Assets at Fair Value [Line Items]
Prepayment speed	19.68%
Expected defaults	11.00%
Servicing cost	$ 3,335,000,000
Residential Mortgage Backed Securities [Member] | Weighted Average [Member]
Servicing Assets at Fair Value [Line Items]
Prepayment speed	9.24%
Expected defaults	8.55%
Servicing cost	$ 83,030,000

XML

Mortgage Servicing Assets - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Aug. 01, 2016
Commercial Mortgage Backed Securities [Member]
Servicing Assets at Fair Value [Line Items]
Contractual fee income from servicing commercial mortgage loans	$ 38	$ 35
Amortization of servicing commercial mortgage loans	22	$ 23
Residential Mortgage Backed Securities [Member]
Servicing Assets at Fair Value [Line Items]
Contractual fee income from servicing commercial mortgage loans	3
Amortization of servicing commercial mortgage loans	$ 1
Residential Mortgage Backed Securities [Member] | First Niagara Bank, N.A. [Member]
Servicing Assets at Fair Value [Line Items]
Fair value of mortgage servicing assets			$ 28

XML

Variable Interest Entities - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Variable Interest Entity [Line Items]
Investments in operating partnerships	$ 172,000,000		$ 178,000,000
Liabilities related to investments in qualified affordable housing projects	4,000,000		4,000,000
Recurring [Member]
Variable Interest Entity [Line Items]
Fair value of indirect principal investments	178,000,000		191,000,000
Recurring [Member] | Principal Investments Indirect [Member]
Variable Interest Entity [Line Items]
Fair value of indirect principal investments	155,000,000		158,000,000
Other Investments [Member] | Recurring [Member] | Principal Investments Indirect [Member]
Variable Interest Entity [Line Items]
Fair value of indirect principal investments	155,000,000		158,000,000
LIHTC Investments [Member]
Variable Interest Entity [Line Items]
Investments in operating partnerships	4,785,000,000		4,814,000,000
Liabilities related to investments in qualified affordable housing projects	1,972,000,000		2,003,000,000
Tax credit of investment	39,000,000	$ 33,000,000
LIHTC Investments [Member] | Qualified affordable housing projects investment [Member]
Variable Interest Entity [Line Items]
Liabilities related to investments in qualified affordable housing projects	439,000,000		462,000,000
LIHTC Investments [Member] | Accrued Income And Other Assets [Member]
Variable Interest Entity [Line Items]
Investments in operating partnerships	1,200,000,000		1,200,000,000
LIHTC Investments [Member] | Investments [Member]
Variable Interest Entity [Line Items]
Amortization of investment	40,000,000	$ 33,000,000
Guaranteed Funds [Member] | Investments [Member]
Variable Interest Entity [Line Items]
VIE, assets that can only be used to settle obligations	3,000,000		1,000,000
VIE, liabilities	$ 0		$ 0

XML

Variable Interest Entities - Variable Interest Entities Information (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Variable Interest Entity [Line Items]
Total Assets	$ 172	$ 178
Total Liabilities	4	4
LIHTC Investments [Member]
Variable Interest Entity [Line Items]
Total Assets	4,785	4,814
Total Liabilities	1,972	2,003
Maximum Exposure to Loss	1,451	1,465
KCC Indirect Investments [Member]
Variable Interest Entity [Line Items]
Total Assets	19,029	32,755
Total Liabilities	135	201
Maximum Exposure to Loss	$ 192	$ 195

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Income Tax Contingency [Line Items]
Total income tax expense (benefit), rate	22.40%	23.00%
Combined federal and state statutory tax rate	37.20%
Income tax benefit (as a percent)	4.70%	1.00%
Merger and acquisition integration costs	$ 81
Total income expense (benefit), rate excluding merger and integration expenses	24.80%
Federal deferred tax asset	$ 468		$ 607
Valuation allowance	26		$ 26
Key Corp [Member]
Income Tax Contingency [Line Items]
Unrecognized tax benefits	50
First Niagara Bank, N.A. [Member]
Income Tax Contingency [Line Items]
Merger and acquisition integration costs	1
Allocated bad debt deductions	$ 92

XML

Acquisition, Divestiture, and Discontinued Operations - Additional Information (Detail)				3 Months Ended		12 Months Ended
	Aug. 01, 2016 USD ($)	Oct. 30, 2015 $ / shares shares	Sep. 30, 2014 USD ($)	Mar. 31, 2017 USD ($) SecurityLoan Trust TDR	Mar. 31, 2016 USD ($)	Dec. 31, 2016 USD ($) TDR	Sep. 09, 2016 USD ($) Branch	Jun. 30, 2015 USD ($) Trust	Jan. 01, 2010 Trust
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of branches sold | Branch							18
Trust assets removed				$ 1,520,000,000		$ 1,585,000,000
Number of TDRs | SecurityLoan				4,937
Allowance for loan held as investment				$ 870,000,000		858,000,000
Portfolio loans held for sale at fair value				1		$ 0
Number of outstanding securitizations trusts | Trust								3
Loans at fair value				3,000,000
Income (loss) from discontinued operations, net of taxes				$ 0	$ 1,000,000
First Niagara Financial Group, Inc. [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total consideration	$ 4,000,000,000
Acquiree shares equivalent of acquirer common stock | shares		0.680
Cash payable per acquiree common stock | $ / shares		$ 2.30
Number of branches sold | Branch							18
Loans included in divestiture							$ 439,000,000
Deposits included in divestiture							$ 1,600,000,000
Pacific Crest Securities [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of outstanding securitization trusts | Trust				3
Proceeds from sale of residual interests			$ 57,000,000
Number of continuing securitization trusts | Trust				8
Estimated fair value of the assets and deposits acquired			1,000,000
Education Loans [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of TDRs | TDR				2,316		2,163
Investment recorded				$ 23,000,000		$ 22,000,000
Allowance for loan held as investment						2,000,000
Trust [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Portfolio loans held for sale at fair value								$ 179,000,000
Trust [Member] | Pacific Crest Securities [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Trust assets removed			1,700,000,000
Trust liabilities removed			$ 1,600,000,000
Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loans included in divestiture				1,477,000,000		1,541,000,000
Number of outstanding securitization trusts | Trust									10
Trust assets removed				1,520,000,000		1,585,000,000
Allowance for loan held as investment				2,000,000
Loans at fair value				3,000,000		3,000,000
Income (loss) from discontinued operations, net of taxes				0	1,000,000
Discontinued Operations [Member] | Austin Capital Management [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Trust assets removed				15,000,000		$ 15,000,000
Income (loss) from discontinued operations, net of taxes				$ 0	$ 0

XML

Acquisition, Divestiture, and Discontinued Operations - Components of Income (Loss) from Discontinued Operations, Net of Taxes for Education Lending Business (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income taxes	$ 0	$ 0
Income (loss) from discontinued operations, net of taxes	0	1
Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net interest income	5	7
Provision for credit losses	3	2
Net interest income after provision for credit losses	2	5
Noninterest income	2	1
Noninterest expense	4	5
Income (loss) before income taxes	0	1
Income taxes	0	0
Income (loss) from discontinued operations, net of taxes	0	1
Charges determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations, after tax	6	6
Education Lending [Member] | Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net interest income	5	7
Provision for credit losses	3	2
Net interest income after provision for credit losses	2	5
Noninterest income	2	1
Noninterest expense	4	5
Income (loss) before income taxes	0	1
Income taxes	0	0
Income (loss) from discontinued operations, net of taxes	0	1
Charges determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations, after tax	$ 6	$ 6

XML

Acquisition, Divestiture, and Discontinued Operations - Components of Assets of Education Lending Business (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Portfolio loans at fair value	$ 3
Loans, net of unearned income	86,125	$ 86,038	$ 60,438
Total assets	1,520	1,585
Unearned income on loans (less than)	783	826
Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Portfolio loans at fair value	3	3
Loans, net of unearned income	1,497	1,562
Less: Allowance for loan and lease losses	23	24
Net loans	1,477	1,541
Accrued income and other assets	27	28
Total assets	1,520	1,585
Unearned income on loans (less than)	1	1
Education Lending [Member] | Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Held-to-maturity securities	1	1
Portfolio loans at fair value	3	3
Loans, net of unearned income	1,497	1,562
Less: Allowance for loan and lease losses	23	24
Net loans	1,477	1,541
Accrued income and other assets	27	28
Total assets	1,505	1,570
Unearned income on loans (less than)	$ 1	$ 1

XML

Acquisition, Divestiture, and Discontinued Operations - Quantitative Information about Level 3 Fair Value Measurements (Details) - Level 3 [Member] - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Minimum [Member] | Portfolio Loan Indicative Bids [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	84.50%	84.50%
Maximum [Member] | Portfolio Loan Indicative Bids [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Percentage of significant unobservable inputs	104.00%	104.00%
Portfolio Loans [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Portfolio loans accounted for at fair value	$ 3	$ 3

XML

Acquisition, Divestiture, and Discontinued Operations - Principal and Fair Value Amounts for Portfolio Loans at Carrying Value, and Portfolio Loans at Fair Value (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accruing loans past due 90 days or more	$ 79	$ 87
Portfolio [Member] | Carrying Amount [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accruing loans past due 90 days or more	20	22
Loans placed on nonaccrual status	$ 4	$ 5

XML

Acquisition, Divestiture, and Discontinued Operations - Portfolio Loans at Fair Value and Related Contractual Amounts (Detail) - Discontinued Operations [Member] - Trust [Member] - Education Lending [Member] - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Portfolio contractual amount of loans	$ 3	$ 3
Portfolio fair value of loans	$ 3	$ 3

XML

Acquisition, Divestiture, and Discontinued Operations - Consolidated Assets at Fair Value on Recurring Basis (Detail) - Recurring [Member] - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
ASSETS MEASURED ON A RECURRING BASIS
Total assets at fair value	$ 20,170	$ 22,143
Trust [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	3	3
Total assets at fair value	3	3
Level 1 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total assets at fair value	95	117
Level 1 [Member] | Trust [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	0	0
Total assets at fair value	0	0
Level 2 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total assets at fair value	20,334	22,239
Level 2 [Member] | Trust [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	0	0
Total assets at fair value	0	0
Level 3 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total assets at fair value	48	54
Level 3 [Member] | Trust [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans	3	3
Total assets at fair value	$ 3	$ 3

XML

Acquisition, Divestiture, and Discontinued Operations - Change in Fair Values of Level 3 Portfolio Loans Held for Sale, Portfolio Loans, and Consolidated Education Loan Securitization Trusts (Details) - Discontinued Operations [Member] - Education Lending [Member] - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Purchases, sales, issuances, gains (losses) recognized in earnings	$ 0	$ 0
Portfolio Student Loans [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	3,000,000	4,000,000
Settlements	0	(1,000,000)
Ending Balance	$ 3,000,000	$ 3,000,000

XML

Acquisition, Divestiture, and Discontinued Operations - Components of Assets and Liabilities from Discontinued Operations (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total assets	$ 1,520	$ 1,585
Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total assets	1,520	1,585
Discontinued Operations [Member] | Austin Capital Management [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash and due from banks	15	15
Total assets	$ 15	$ 15

XML

Acquisition, Divestiture, and Discontinued Operations - Combined Results of Discontinued Operations (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income taxes	$ 0	$ 0
Income (loss) from discontinued operations, net of taxes	0	1
Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net interest income	5	7
Provision for credit losses	3	2
Net interest income after provision for credit losses	2	5
Noninterest income	2	1
Noninterest expense	4	5
Income (loss) before income taxes	0	1
Income taxes	0	0
Income (loss) from discontinued operations, net of taxes	0	1
Charges determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations, after tax	$ 6	$ 6

XML

Acquisition, Divestiture, and Discontinued Operations - Combined Assets and Liabilities of Discontinued Operations (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash and due from banks	$ 549	$ 677	$ 474	$ 607
Held-to-maturity securities	10,186	10,232
Portfolio loans at fair value	3
Loans, net of unearned income	86,125	86,038	$ 60,438
Total assets	1,520	1,585
Unearned income on loans (less than)	783	826
Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash and due from banks	15	15
Held-to-maturity securities	1	1
Portfolio loans at fair value	3	3
Loans, net of unearned income	1,497	1,562
Less: Allowance for loan and lease losses	23	24
Net loans	1,477	1,541
Accrued income and other assets	27	28
Total assets	1,520	1,585
Unearned income on loans (less than)	$ 1	$ 1

XML

Securities Financing Activities Summarized Securities Financing Agreements (Detail) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Securities Financing Transaction [Line Items]
Reverse repurchase agreements	$ 0	$ 0
Total	0	0
Repurchase agreements	0	0
Total	0	0
Counterparty And Cash Collateral Netting [Member]
Securities Financing Transaction [Line Items]
Reverse repurchase agreements	(1)	0
Total	(1)	0
Repurchase agreements	(434)	(494)
Total	(434)	(494)
Federal Agency CMOs [Member]
Securities Financing Transaction [Line Items]
Assets pledged as collateral	569
Liabilities pledged as collateral	434
Gross Amounts Presented In Balance Sheets [Member]
Securities Financing Transaction [Line Items]
Reverse repurchase agreements	4	3
Total	4	3
Repurchase agreements	437	497
Total	437	497
Netting Adjustments [Member]
Securities Financing Transaction [Line Items]
Reverse repurchase agreements	(3)	(3)
Total	(3)	(3)
Repurchase agreements	(3)	(3)
Total	$ (3)	$ (3)

XML

Employee Benefits - Additional Information (Detail) - benefit_plan	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2009
Other Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Age of employees under condition one	55 years
Period of service under condition one	5 years
Age of employees under condition two	50 years
Period of service under condition two	15 years
Minimum period of service at the time of termination hired before 2001	15 years
First Niagara Bank, N.A. [Member]
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit plans		2

XML

Employee Benefits - Net Pension Cost (Benefit) for All Funded and Unfunded Plans (Detail) - Pension Plans [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Interest cost on PBO	$ 12	$ 10
Expected return on plan assets	(17)	(13)
Amortization of losses	4	4
Net pension/postretirement benefit cost	$ (1)	$ 1

XML

Employee Benefits - Net Postretirement Benefit Cost for All Funded and Unfunded Plans (Detail) - Other Postretirement Benefit Plans [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Interest cost on APBO	$ 0	$ 1
Expected return on plan assets	0	(1)
Net pension/postretirement benefit cost	$ 0	$ 0

XML

Trust Preferred Securities Issued by Unconsolidated Subsidiaries - Summary of Trust Preferred Securities, Common Stock and Related Debentures (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Stock	$ 1,257	$ 1,257
Debentures adjustments related to financial instrument hedging	58	59
Harleysville Statutory Trust I and Alliance Capital Trust II [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust preferred securities redeemed	9
KeyCorp Capital I [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	155
Common Stock	6
Principal Amount of of Debentures, Net of Discount	$ 161
Interest Rate of Trust Preferred Securities and Debentures	1.738%
KeyCorp Capital II [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 105
Common Stock	4
Principal Amount of of Debentures, Net of Discount	$ 109
Interest Rate of Trust Preferred Securities and Debentures	6.875%
KeyCorp Capital III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 138
Common Stock	4
Principal Amount of of Debentures, Net of Discount	$ 142
Interest Rate of Trust Preferred Securities and Debentures	7.75%
HNC Statutory Trust III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 18
Common Stock	1
Principal Amount of of Debentures, Net of Discount	$ 19
Interest Rate of Trust Preferred Securities and Debentures	2.453%
Willow Grove Statutory Trust I [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 18
Common Stock	1
Principal Amount of of Debentures, Net of Discount	$ 19
Interest Rate of Trust Preferred Securities and Debentures	2.441%
HNC Statutory Trust IV [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 16
Common Stock	1
Principal Amount of of Debentures, Net of Discount	$ 17
Interest Rate of Trust Preferred Securities and Debentures	2.319%
Westbank Capital Trust II [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 7
Common Stock	0
Principal Amount of of Debentures, Net of Discount	$ 7
Interest Rate of Trust Preferred Securities and Debentures	3.342%
Westbank Capital Trust III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 7
Common Stock	0
Principal Amount of of Debentures, Net of Discount	$ 7
Interest Rate of Trust Preferred Securities and Debentures	3.342%
Business Trusts [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Trust Preferred Securities, Net of Discount	$ 464	475
Common Stock	17	17
Principal Amount of of Debentures, Net of Discount	$ 481	$ 492
Interest Rate of Trust Preferred Securities and Debentures	4.811%	4.845%
Treasury Rate [Member] | KeyCorp Capital II [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	0.20%
Treasury Rate [Member] | KeyCorp Capital III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	0.25%
London Interbank Offered Rate (LIBOR) [Member] | KeyCorp Capital I [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	0.74%
London Interbank Offered Rate (LIBOR) [Member] | HNC Statutory Trust III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	1.40%
London Interbank Offered Rate (LIBOR) [Member] | Willow Grove Statutory Trust I [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	1.31%
London Interbank Offered Rate (LIBOR) [Member] | HNC Statutory Trust IV [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	1.28%
London Interbank Offered Rate (LIBOR) [Member] | Westbank Capital Trust II and III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	2.19%
Redemption upon either tax or a capital treatment event [Member] | Treasury Rate [Member] | Keycorp Capital II and III [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Basis spread on variable rate	0.50%

XML

Contingent Liabilities and Guarantees - Guarantees (Detail) $ in Millions	Mar. 31, 2017 USD ($)
Guarantor Obligations [Line Items]
Maximum Potential Undiscounted Future Payments	$ 17,768
Liability Recorded	126
Written Put Options [Member]
Guarantor Obligations [Line Items]
Maximum Potential Undiscounted Future Payments	2,052
Liability Recorded	43
Standby Letters of Credit [Member]
Guarantor Obligations [Line Items]
Maximum Potential Undiscounted Future Payments	11,779
Liability Recorded	70
Recourse Agreement with FNMA [Member]
Guarantor Obligations [Line Items]
Maximum Potential Undiscounted Future Payments	2,664
Liability Recorded	5
Residential Mortgage Reserve [Member]
Guarantor Obligations [Line Items]
Maximum Potential Undiscounted Future Payments	1,270
Liability Recorded	5
Return Guarantee Agreement with LIHTC Investors [Member]
Guarantor Obligations [Line Items]
Maximum Potential Undiscounted Future Payments	3
Liability Recorded	$ 3

XML

Contingent Liabilities and Guarantees - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($)
Commitments Contingencies And Guarantees [Line Items]
Default guarantees, value	$ 126
Written Put Options [Member]
Commitments Contingencies And Guarantees [Line Items]
Default guarantees, value	$ 43
Weighted average life of written put options	3 years
Standby Letters of Credit [Member]
Commitments Contingencies And Guarantees [Line Items]
Remaining weighted-average life of standby letters of credit in years	2 years
Default guarantees, value	$ 70
Recourse Agreement with FNMA [Member]
Commitments Contingencies And Guarantees [Line Items]
Weighted-average remaining term for outstanding commercial mortgage loans in years	7 years 6 months
Unpaid principal balance outstanding of loans sold	$ 9,100
Maximum potential amount of undiscounted future payments possibly required as percentage of principal balance of loans outstanding	29.00%
Default guarantees, value	$ 5
Residential Mortgage Reserve [Member]
Commitments Contingencies And Guarantees [Line Items]
Unpaid principal balance outstanding of loans sold	$ 4,200
Maximum potential amount of undiscounted future payments possibly required as percentage of principal balance of loans outstanding	30.00%
Weighted-average loan to value ratio (as a percent)	71.00%
Liability for estimated repurchase obligations on loans sold	$ 5
Default guarantees, value	$ 5
Return Guarantee Agreement with LIHTC Investors [Member]
Commitments Contingencies And Guarantees [Line Items]
Compliance period of property	15 years
Default guarantees, value	$ 3
Default Guarantees [Member]
Commitments Contingencies And Guarantees [Line Items]
Default guarantees, value	$ 1
Minimum [Member] | Standby Letters of Credit [Member]
Commitments Contingencies And Guarantees [Line Items]
Remaining actual life of standby letters of credit	1 year
Minimum [Member] | Low [Member]
Commitments Contingencies And Guarantees [Line Items]
Guarantee Obligations	0.00%
Minimum [Member] | Moderate [Member]
Commitments Contingencies And Guarantees [Line Items]
Guarantee Obligations	30.00%
Minimum [Member] | High [Member]
Commitments Contingencies And Guarantees [Line Items]
Guarantee Obligations	70.00%
Maximum [Member] | Standby Letters of Credit [Member]
Commitments Contingencies And Guarantees [Line Items]
Remaining actual life of standby letters of credit	18 years
Maximum [Member] | Low [Member]
Commitments Contingencies And Guarantees [Line Items]
Guarantee Obligations	30.00%
Maximum [Member] | Moderate [Member]
Commitments Contingencies And Guarantees [Line Items]
Guarantee Obligations	70.00%

XML

Accumulated Other Comprehensive Income - Changes in AOCI (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance	$ 15,240
Total other comprehensive income (loss), net of tax	(13)	$ 192
Ending Balance	14,978
Unrealized Gains (Losses) on Securities Available for Sale [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance	(185)	(58)
Other comprehensive income before reclassification, net of income taxes	6	128
Amounts reclassified from accumulated other comprehensive income, net of income taxes	0	0
Total other comprehensive income (loss), net of tax	6	128
Ending Balance	(179)	70
Unrealized Gains (Losses) on Derivative Financial Instruments [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance	(14)	20
Other comprehensive income before reclassification, net of income taxes	(15)	72
Amounts reclassified from accumulated other comprehensive income, net of income taxes	(9)	(14)
Total other comprehensive income (loss), net of tax	(24)	58
Ending Balance	(38)	78
Foreign Currency Translation Adjustment [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance	(3)	(2)
Other comprehensive income before reclassification, net of income taxes	1	5
Amounts reclassified from accumulated other comprehensive income, net of income taxes	0	0
Total other comprehensive income (loss), net of tax	1	5
Ending Balance	(2)	3
Net Pension and Postretirement Benefit Costs [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance	(339)	(365)
Other comprehensive income before reclassification, net of income taxes	1	(2)
Amounts reclassified from accumulated other comprehensive income, net of income taxes	3	3
Total other comprehensive income (loss), net of tax	4	1
Ending Balance	(335)	(364)
AOCI Attributable to Parent [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance	(541)	(405)
Other comprehensive income before reclassification, net of income taxes	(7)	203
Amounts reclassified from accumulated other comprehensive income, net of income taxes	(6)	(11)
Total other comprehensive income (loss), net of tax	(13)	192
Ending Balance	$ (554)	$ (213)

XML

Accumulated Other Comprehensive Income - Reclassifications Out of AOCI (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income — Loans	$ 877	$ 562
Interest expense — Long-term debt	(68)	(46)
Income (loss) from continuing operations before income taxes	430	251
Income taxes	94	56
INCOME (LOSS) FROM CONTINUING OPERATIONS	325	187
Personnel expense	556	404
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Derivative Financial Instruments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income (loss) from continuing operations before income taxes	14	22
Income taxes	5	8
INCOME (LOSS) FROM CONTINUING OPERATIONS	9	14
Reclassification out of Accumulated Other Comprehensive Income [Member] | Net Pension and Postretirement Benefit Costs [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income (loss) from continuing operations before income taxes	(4)	(4)
Income taxes	(1)	(1)
INCOME (LOSS) FROM CONTINUING OPERATIONS	(3)	(3)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Net Pension and Postretirement Benefit Costs [Member] | Amortization of Losses [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Personnel expense	(4)	(4)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Net Pension and Postretirement Benefit Costs [Member] | Amortization of Prior Service Credit [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Personnel expense	0
Interest Income [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Derivative Financial Instruments [Member] | Interest Rate [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest income — Loans	15	23
Interest Expense [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Derivative Financial Instruments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense — Long-term debt	$ (1)	$ (1)

XML

Shareholders' Equity - Additional Information (Detail)		3 Months Ended		12 Months Ended
	Feb. 15, 2017 USD ($) $ / shares	Mar. 31, 2017 USD ($) $ / shares shares	Mar. 31, 2016 USD ($) $ / shares	Dec. 31, 2016 USD ($) $ / shares shares	Mar. 20, 2017 shares
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Repurchase of common shares | $		$ 107,000,000	$ 0
Cash dividends declared on common shares (in usd per share)		$ 0.085	$ 0.075
Common stock issued upon conversion (in shares) | shares					7.0922
Dividend payable per share		$ 0.395573
Preferred stock | $		$ 1,025,000,000		$ 1,665,000,000
Preferred stock, shares outstanding (in shares) | shares				2,900,234
Dividend payable | $		$ 118,000,000	$ 68,000,000
Series A Preferred Stock [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Preferred stock, dividend rate				7.75%
Dividend payable per share		$ 1.9375
Preferred stock | $				$ 290,000,000
Preferred stock, par value (in usd per share)				$ 1
Preferred stock, liquidation preference				$ 100
Preferred stock, shares authorized (in shares) | shares				7,475,000
Series C Preferred Stock [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Dividend payable per share	$ 0.539063
Preferred stock | $				$ 350,000,000
Preferred stock, par value (in usd per share)				$ 1
Preferred stock, liquidation preference				$ 25
Preferred stock, shares authorized (in shares) | shares				14,000,000
Preferred stock, shares outstanding (in shares) | shares		14,000,000		14,000,000
Preferred stock, redemption price per share (in usd per share)	$ 25
Dividend payable | $	$ 7,000,000
Depository Shares, Series D [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Shares issued | $		$ 525,000,000		$ 525,000,000
Series D Preferred Stock [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Dividend payable per share		$ 12.50
Preferred stock, par value (in usd per share)		1
Preferred stock, liquidation preference		$ 25,000
Preferred stock, shares authorized (in shares) | shares		21,000		21,000
Preferred stock, shares outstanding (in shares) | shares		21,000		21,000
Dividend payable | $		$ 7,000,000
Depository receipt ratio		0.04		0.04
Depository Shares, Series E [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Shares issued | $		$ 500,000,000		$ 500,000,000
Series E Preferred Stock [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Preferred stock, par value (in usd per share)		$ 1
Preferred stock, liquidation preference		$ 1,000
Preferred stock, shares authorized (in shares) | shares		500,000		500,000
Preferred stock, shares outstanding (in shares) | shares		500,000		500,000
Dividend payable | $		$ 8,000,000
Depository receipt ratio		0.025		0.025
2016 Capital Plan [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Authorized amount of share repurchases | $		$ 350,000,000
Common shares repurchased, value | $		160,000,000
Repurchase of common shares | $		107,000,000
Employee equity compensation program common share repurchases | $		$ 53,000,000
Cash dividends declared on common shares (in usd per share)		$ 0.085
Proposed increase in cash dividends declared on common shares, per share		$ 0.095

XML

Line of Business Results - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017 Branch industry_sector
Segment Reporting [Abstract]
Number of state branch network | Branch	15
Number of business units | industry_sector	7
Federal income tax rate	35.00%
State income tax rate	2.20%

XML

Line of Business Results - Financial Information of Business Groups (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($) employee	Mar. 31, 2016 USD ($) employee
Segment Reporting Information [Line Items]
Net interest income (TE)	$ 929	$ 612
Noninterest income	577	431
Total revenue (TE)	1,506	1,043
Provision for credit losses	63	89
Depreciation and amortization expense	93	64
Other noninterest expense	920	639
Income (loss) from continuing operations before income taxes	430	251
Allocated income taxes and TE adjustments	105	64
INCOME (LOSS) FROM CONTINUING OPERATIONS	325	187
Income (loss) from discontinued operations, net of taxes	0	1
NET INCOME (LOSS)	325	188
Less: Net income (loss) attributable to noncontrolling interests	1	0
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	324	188
AVERAGE BALANCES
Loans and leases	86,133	60,156
Total assets	132,741	94,477
Deposits	102,078	71,598
OTHER FINANCIAL DATA
Net loan charge-offs	$ 58	$ 46
Return on average allocated equity	8.65%	6.87%
Return on average allocated equity	8.65%	6.90%
Average full-time equivalent employees | employee	18,386	13,403
Operating Segments [Member]
Segment Reporting Information [Line Items]
Net interest income (TE)	$ 930	$ 608
Noninterest income	585	433
Total revenue (TE)	1,515	1,041
Provision for credit losses	63	90
Depreciation and amortization expense	49	27
Other noninterest expense	892	656
Income (loss) from continuing operations before income taxes	511	268
Allocated income taxes and TE adjustments	160	62
INCOME (LOSS) FROM CONTINUING OPERATIONS	351	206
Income (loss) from discontinued operations, net of taxes	0	0
NET INCOME (LOSS)	351	206
Less: Net income (loss) attributable to noncontrolling interests	2	(1)
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	349	207
AVERAGE BALANCES
Loans and leases	86,101	60,114
Total assets	131,678	93,998
Deposits	102,426	71,633
OTHER FINANCIAL DATA
Net loan charge-offs	$ 58	$ 46
Return on average allocated equity	18.04%	16.88%
Return on average allocated equity	18.04%	16.88%
Average full-time equivalent employees | employee	13,191	9,510
Operating Segments [Member] | Key Community Bank [Member]
Segment Reporting Information [Line Items]
Net interest income (TE)	$ 631	$ 399
Noninterest income	277	196
Total revenue (TE)	908	595
Provision for credit losses	47	42
Depreciation and amortization expense	28	13
Other noninterest expense	599	423
Income (loss) from continuing operations before income taxes	234	117
Allocated income taxes and TE adjustments	87	43
INCOME (LOSS) FROM CONTINUING OPERATIONS	147	74
Income (loss) from discontinued operations, net of taxes	0	0
NET INCOME (LOSS)	147	74
Less: Net income (loss) attributable to noncontrolling interests	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	147	74
AVERAGE BALANCES
Loans and leases	47,036	30,789
Total assets	50,962	32,856
Deposits	79,393	52,803
OTHER FINANCIAL DATA
Net loan charge-offs	$ 43	$ 23
Return on average allocated equity	12.60%	11.10%
Return on average allocated equity	12.60%	11.10%
Average full-time equivalent employees | employee	10,804	7,376
Operating Segments [Member] | Key Corporate Bank [Member]
Segment Reporting Information [Line Items]
Net interest income (TE)	$ 304	$ 218
Noninterest income	275	207
Total revenue (TE)	579	425
Provision for credit losses	17	43
Depreciation and amortization expense	20	13
Other noninterest expense	283	224
Income (loss) from continuing operations before income taxes	259	145
Allocated income taxes and TE adjustments	78	27
INCOME (LOSS) FROM CONTINUING OPERATIONS	181	118
Income (loss) from discontinued operations, net of taxes	0	0
NET INCOME (LOSS)	181	118
Less: Net income (loss) attributable to noncontrolling interests	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	181	118
AVERAGE BALANCES
Loans and leases	37,737	27,722
Total assets	44,167	33,413
Deposits	21,003	18,074
OTHER FINANCIAL DATA
Net loan charge-offs	$ 14	$ 18
Return on average allocated equity	24.86%	22.92%
Return on average allocated equity	24.86%	22.92%
Average full-time equivalent employees | employee	2,384	2,126
Operating Segments [Member] | Other Segments [Member]
Segment Reporting Information [Line Items]
Net interest income (TE)	$ (5)	$ (9)
Noninterest income	33	30
Total revenue (TE)	28	21
Provision for credit losses	(1)	5
Depreciation and amortization expense	1	1
Other noninterest expense	10	9
Income (loss) from continuing operations before income taxes	18	6
Allocated income taxes and TE adjustments	(5)	(8)
INCOME (LOSS) FROM CONTINUING OPERATIONS	23	14
Income (loss) from discontinued operations, net of taxes	0	0
NET INCOME (LOSS)	23	14
Less: Net income (loss) attributable to noncontrolling interests	2	(1)
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	21	15
AVERAGE BALANCES
Loans and leases	1,328	1,603
Total assets	36,549	27,729
Deposits	2,030	756
OTHER FINANCIAL DATA
Net loan charge-offs	$ 1	$ 5
Return on average allocated equity	53.56%	33.33%
Return on average allocated equity	53.56%	33.33%
Average full-time equivalent employees | employee	3	8
Segment Reconciling Items [Member]
Segment Reporting Information [Line Items]
Net interest income (TE)	$ (1)	$ 4
Noninterest income	(8)	(2)
Total revenue (TE)	(9)	2
Provision for credit losses	0	(1)
Depreciation and amortization expense	44	37
Other noninterest expense	28	(17)
Income (loss) from continuing operations before income taxes	(81)	(17)
Allocated income taxes and TE adjustments	(55)	2
INCOME (LOSS) FROM CONTINUING OPERATIONS	(26)	(19)
Income (loss) from discontinued operations, net of taxes	0	1
NET INCOME (LOSS)	(26)	(18)
Less: Net income (loss) attributable to noncontrolling interests	(1)	1
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	(25)	(19)
AVERAGE BALANCES
Loans and leases	32	42
Total assets	1,063	479
Deposits	(348)	(35)
OTHER FINANCIAL DATA
Net loan charge-offs	$ 0	$ 0
Return on average allocated equity	(1.38%)	(1.34%)
Return on average allocated equity	(1.38%)	(1.27%)
Average full-time equivalent employees | employee	5,195	3,893