-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O+R5uRppbjKX7/eGR6JXRshaltbQNCCyH4eNNRhdekDgJqGltQOsgdLUAqA/XR6P wuiQU+tqT6JKM0u+EaMoTw== 0000950152-00-002999.txt : 20000424 0000950152-00-002999.hdr.sgml : 20000424 ACCESSION NUMBER: 0000950152-00-002999 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000420 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYCORP /NEW/ CENTRAL INDEX KEY: 0000091576 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 346542451 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11302 FILM NUMBER: 606272 BUSINESS ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 BUSINESS PHONE: 2166896300 MAIL ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 FORMER COMPANY: FORMER CONFORMED NAME: SOCIETY CORP DATE OF NAME CHANGE: 19920703 8-K 1 KEYCORP CURRENT REPORT ON FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15d of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 20, 2000 [KEYCORP LOGO] KeyCorp ----------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 0-850 34-6542451 ------------------------------- ---------------------- ------------------------------------ (State or other jurisdiction of Commission File Number (I.R.S. Employer Identification No.) incorporation or organization) 127 Public Square, Cleveland, Ohio 44114-1306 - ---------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-6300 2 ITEM 5. OTHER EVENTS On April 20, 2000, the Registrant issued a press release announcing its earnings results for the three-month period ended March 31, 2000. This press release, dated April 20, 2000, is attached as Exhibit 99 to this report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits -------- 99 The Registrant's April 20, 2000, press release announcing its earnings results for the three-month period ended March 31, 2000. 3 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. KEYCORP -------------------------------------- (Registrant) Date: April 21, 2000 /s/ Lee Irving -------------------------------------- By: Lee Irving Executive Vice President and Chief Accounting Officer EX-99 2 EXHIBIT 99 1 EXHIBIT 99 MEDIA CONTACT: ANALYST CONTACT: Bill Murschel (216) 689-0457 Vern Patterson (216) 689-0520 WEB SITE: www.Key.com FOR IMMEDIATE RELEASE KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS o CORE EPS OF $0.55 o SALE OF CREDIT CARD BUSINESS COMPLETED o STRONG GROWTH IN COMMERCIAL AND HOME EQUITY LENDING o FAVORABLE NONINTEREST INCOME AND EXPENSE TRENDS CLEVELAND, April 20, 2000 -- KeyCorp (NYSE: KEY) today reported first quarter earnings of $367 million, or $0.83 per diluted common share, up from $293 million, or $0.65, for last year's first quarter. This improvement represents a 25 percent increase in net income and a 28 percent increase in earnings per diluted common share. On a core basis, which excludes significant nonrecurring items, Key's first quarter earnings were $0.55 per diluted common share, equal to the per share amount for the first three months of 1999. Primary among the quarter's nonrecurring items is a gain of $332 million ($207 million after tax, or $0.47 per diluted common share) from the previously announced sale of Key's credit card business. This gain was partially offset by an additional provision for loan losses of $121 million ($76 million after tax, or $0.17 per diluted common share) and $10 million ($7 million after tax, or $0.02 per diluted common share), of restructuring and other nonrecurring net charges, most of which relate to the productivity improvement program announced by Key last November. Core net income was $243 million for the first quarter of 2000, compared with $248 million for the comparable quarter a year ago. The decline is due in part to the effects of the October 1999 sale of Key's Long Island district branches, the January 2000 sale of Key's credit card portfolio and the absence of securitization activity in the first quarter of 2000. First quarter 1999 results included $32 million of net loan securitization gains, increasing net income by $20 million. "Our core results reflect the impact of actions we have taken recently to continue our development as an integrated, multiline financial services company," said Robert W. Gillespie, Key's chairman and chief executive officer. "In January, we completed the sale of our profitable, but slow-growth credit card business. We will redeploy a significant portion of the sales proceeds to more attractive opportunities, such as our rapidly growing home equity business. In that regard, we recently announced our intention to de-emphasize 2 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 2 the securitization and sale of certain home equity loans. We are confident that these strategic actions will generate consistent longer-term growth that will more than offset their unfavorable short-term effects on our earnings. "In the first quarter, strong demand for our commercial and home equity loans boosted earning assets and moderated the adverse effects of continued net interest margin compression. Furthermore, Key's core noninterest income, excluding net securitization gains, rose 9 percent from last year's first quarter and currently represents 41 percent of the company's total core revenue. The increase was driven by investment banking, capital markets, trust and asset management activities and service charges on deposit accounts. "Finally, our efforts to improve Key's overall productivity are gaining momentum. Core noninterest expense, excluding significant nonrecurring items recorded in the first quarters of 2000 and 1999, grew less than 2 percent from the year-ago quarter. We are confident that our productivity improvement activities will sustain these favorable results going forward." Key's returns on average equity and average assets for the first quarters of 2000 and 1999 are presented below. Ratios shown on a cash basis exclude the effects of goodwill and other intangibles that do not qualify as Tier 1 capital, as well as the related amortization of those assets. As Reported Cash Basis ------------------- ------------------ 1Q00 1Q99 1Q00 1Q99 ---- ---- ---- ---- Return on average equity 22.7% 19.5% 31.0% 27.9% Return on average assets 1.77% 1.49% 1.92% 1.64% Net interest income for the first quarter of 2000 totaled $671 million, down $14 million from the first quarter of last year. Key anticipated that decreases in net interest income would result from the October 1999 divestiture of its Long Island district branches and the January 2000 sale of the credit card business. The decrease in net interest income from the first quarter of 1999 resulted from a 27 basis point reduction in the net interest margin of which 15 basis points was attributable to these divestitures. The decline in the margin more than offset the impact of a 4 percent increase in average earning assets (reflecting growth in both commercial and consumer lending) to $73.7 billion. Core noninterest income of $476 million for the first quarter of 2000 was $9 million higher than the $467 million reported for the same period last year, despite a $30 million decline in net securitization gains. Factors contributing to the improvement include increases in income from investment banking and capital markets activities (up $23 million), trust and asset management (up $9 million) and service charges on deposit accounts (up $5 million). 3 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 3 Core noninterest expense totaled $718 million for the first quarter of 2000, up less than 2 percent from $707 million for the year-ago quarter. Higher costs related to personnel, computer processing and professional services were largely offset by reductions in expenses associated with equipment, marketing and the amortization of intangibles. At March 31, 2000, the allowance for loan losses was $979 million, or 1.53 percent of loans, representing an increase of $49 million from the 1999 year end. Growth in the allowance resulted from a provision for loan losses that exceeded net charge-offs. The provision for loan losses was $183 million for the first quarter of 2000, up $72 million from that reported for the first quarter of last year. The higher provision in the current quarter reflects enhancements in Key's methodology for assessing credit risk which are designed to provide a more detailed assessment of specific risk factors, particularly in the commercial loan portfolio. On a reported basis, net loan charge-offs totaled $134 million for the first quarter of 2000. Included in the $134 million are $15 million of loans from the sold credit card portfolio and $57 million of consumer loan charge-offs resulting from the one-time, accelerated implementation of new Federal guidelines applicable to all banking companies. Key elected to implement these guidelines in the first quarter, although compliance is not required until December 31, 2000. The remaining net loan charge-offs totaled $62 million and were 0.39 percent of average loans outstanding for the first quarter. On a comparable basis, net charge-offs for the year-ago quarter were $81 million and 0.53 percent of average loans outstanding. Key's nonperforming assets ended the first quarter at $447 million, or 0.70 percent of loans plus other real estate owned and other nonperforming assets, compared with $430 million, or 0.70 percent, at March 31, 1999. Key's capital ratios continue to exceed all "well-capitalized" benchmarks. At March 31, 2000, Key's estimated Tier 1 and total risk-adjusted capital ratios were 7.75 percent and 11.70 percent, respectively, and the estimated leverage ratio was 7.91 percent. The tangible equity to tangible assets ratio was 6.16 percent at March 31, 2000, compared with 6.03 percent last quarter and 5.86 percent a year ago. The improvement from the prior quarter reflects Key's first quarter 2000 retained net income, offset in part by Key's repurchase of 6,365,000 of its common shares under an authorization that allows for the repurchase of up to 20,000,000 shares. There were 13,635,000 shares remaining for repurchase under this authorization as of March 31, 2000. Cleveland-based KeyCorp (NYSE: KEY) is one of the nation's largest multiline financial services companies, with assets of approximately $84 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and 4 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 4 companies throughout the United States and, for certain businesses, internationally. The company's businesses deliver their products and services through facilities located in 46 states; a network of more than 2,500 ATMs; a robust Web site, Key.com(SM); and telephone banking centers (1.800.KEY2YOU) that provide account access and financial products 24 hours a day. - -------------------------------------------------------------------------------- This news release contains forward-looking statements that are subject to numerous assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: sharp and/or rapid changes in interest rates; significant changes in the economy which could materially change anticipated credit quality trends and the ability to generate loans; failure of the capital markets to function consistent with customary levels; significant delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; consummation of significant business combinations or divestitures; significant changes in law imposing new legal obligations or restrictions or unfavorable resolution of litigation; and significant changes in accounting, tax, or regulatory practices or requirements. - -------------------------------------------------------------------------------- NOTE TO EDITORS: SOME OF THE FINANCIAL TABLES THAT FOLLOW INCLUDE QUARTERLY DATA FOR THREE PERIODS -- MARCH 31, 2000, DECEMBER 31, 1999 (THE PREVIOUS QUARTER), AND MARCH 31, 1999. PLEASE BE SURE TO USE THE APPROPRIATE COLUMN OF FIGURES FOR YOUR DESIRED COMPARISONS, SINCE ONE OF THE PRIOR PERIOD COLUMNS ALLOWS FOR CURRENT QUARTER VS. PRIOR YEAR COMPARISONS AND THE OTHER ALLOWS FOR CURRENT QUARTER COMPARISONS TO THE IMMEDIATELY PRECEDING QUARTER. ### 5 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 5 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
THREE MONTHS ENDED ------------------------------------------- 3-31-00 12-31-99 3-31-99 -------- -------- -------- SUMMARY OF OPERATIONS Net interest income (TE) $ 678 $ 713 $ 693 Provision for loan losses 183 83 111 Noninterest income 806 672 615 Noninterest expense 727 885 754 Net income 367 264 293 PER COMMON SHARE Net income $ .83 $ .59 $ .65 Net income - assuming dilution .83 .59 .65 Cash dividends .28 .26 .26 Book value at period end 14.84 14.41 13.63 Market price at period end 19.00 22.13 30.31 AT PERIOD END Full-time equivalent employees 23,474 24,568 25,650 Branches 937 936 969 PERFORMANCE RATIOS Return on average total assets 1.77% 1.27% 1.49% Return on average equity 22.68 16.18 19.48 Efficiency(1) 62.27 59.23 61.16 Overhead(2) 35.75 30.39 33.19 Net interest margin (TE) 3.68 3.88 3.95 CAPITAL RATIOS AT PERIOD END Equity to assets 7.78% 7.66% 7.63% Tangible equity to tangible assets 6.16 6.03 5.86 Tier 1 risk-adjusted capital(3) 7.75 7.68 7.44 Total risk-adjusted capital(3) 11.70 11.66 11.92 Leverage(3) 7.91 7.77 7.21
1 Calculated as noninterest expense (excluding certain nonrecurring charges) divided by taxable-equivalent net interest income plus noninterest income (excluding gains from certain divestitures and certain nonrecurring charges). 2 Calculated as noninterest expense (excluding certain nonrecurring charges) less noninterest income (excluding gains from certain divestitures and certain nonrecurring charges) divided by taxable-equivalent net interest income. 3 3-31-00 ratio is estimated. TE = Taxable Equivalent 6 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 6 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
THREE MONTHS ENDED ---------------------------------------- 3-31-00 12-31-99 3-31-99 --------- --------- ---------- ASSET QUALITY Net loan charge-offs $ 134 $ 83 $ 81 Net loan charge-offs to average loans .84% .52% .53% Allowance for loan losses $ 979 $ 930 $ 930 Allowance for loan losses to period end loans 1.53% 1.45% 1.52% Allowance for loan losses to nonperforming loans 231.44 228.50 235.44 Nonperforming loans at period end $ 423 $ 407 $ 395 Nonperforming assets at period end 447 433 430 Nonperforming loans to period end loans .66% .63% .65% Nonperforming assets to period end loans plus OREO and other nonperforming assets .70 .67 .70
7 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 7 CONSOLIDATED BALANCE SHEETS (dollars in millions)
3-31-00 12-31-99 3-31-99 --------- --------- --------- ASSETS Loans $ 64,064 $ 64,222 $ 61,045 Investment securities 1,053 986 1,005 Securities available for sale 6,269 6,665 6,778 Short-term investments 2,567 1,860 1,630 --------- --------- --------- Total earning assets 73,953 73,733 70,458 Allowance for loan losses (979) (930) (930) Cash and due from banks 2,757 2,816 2,981 Premises and equipment 761 797 863 Goodwill 1,378 1,389 1,435 Other intangible assets 56 60 72 Corporate owned life insurance 2,132 2,110 2,032 Other assets 3,446 3,420 3,081 --------- --------- --------- TOTAL ASSETS $ 83,504 $ 83,395 $ 79,992 ========= ========= ========= LIABILITIES Deposits in domestic offices: Noninterest-bearing $ 8,283 $ 8,607 $ 8,601 Interest-bearing 34,718 33,390 32,555 Deposits in foreign office-interest-bearing 3,035 1,236 167 --------- --------- --------- Total deposits 46,036 43,233 41,323 Federal funds purchased and securities sold under repurchase agreements 2,621 4,177 4,336 Bank notes and other short-term borrowings 8,015 8,439 8,242 Other liabilities 4,312 4,033 3,285 Long-term debt 14,784 15,881 15,457 Capital securities of subsidiary trusts 1,243 1,243 1,244 --------- --------- --------- TOTAL LIABILITIES 77,011 77,006 73,887 SHAREHOLDERS' EQUITY 6,493 6,389 6,105 --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 83,504 $ 83,395 $ 79,992 ========= ========= ========= Common shares outstanding (000) 437,590 443,427 447,822
8 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 8 CONSOLIDATED STATEMENTS OF INCOME (dollars in millions, except per share amounts)
THREE MONTHS ENDED ------------------------------------------ 3-31-00 12-31-99 3-31-99 -------- --------- -------- INTEREST INCOME $ 1,489 $ 1,489 $ 1,381 INTEREST EXPENSE 818 784 696 -------- --------- -------- NET INTEREST INCOME 671 705 685 Provision for loan losses 183 83 111 -------- --------- -------- 488 622 574 NONINTEREST INCOME Trust and asset management income 115 115 106 Investment banking and capital markets income 89 111 66 Service charges on deposit accounts 86 84 81 Brokerage income 45 39 42 Corporate owned life insurance income 25 31 24 Credit card fees 6 16 10 Net loan securitization gains (losses) 2 (18) 32 Net securities gains 1 3 4 Gains from branch divestitures -- 194 -- Gains from other divestitures 332 -- 148 Other income 105 97 102 -------- --------- -------- Total noninterest income 806 672 615 NONINTEREST EXPENSE Personnel 382 378 372 Net occupancy 57 64 59 Computer processing 59 63 54 Equipment 48 50 56 Marketing 22 22 25 Amortization of intangibles 25 25 28 Professional fees 19 20 15 Restructuring charges 7 91 -- Other expense 108 172 145 -------- --------- -------- Total noninterest expense 727 885 754 -------- --------- -------- INCOME BEFORE INCOME TAXES 567 409 435 Income taxes 200 145 142 -------- --------- -------- NET INCOME $ 367 $ 264 $ 293 ======== ========= ======== Net income per common share $ .83 $ .59 $ .65 Net income per common share - assuming dilution .83 .59 .65 Wtd. avg. common shares (000) 441,834 446,402 449,520 Wtd. avg. common shares and potential common shares (000) 443,757 449,678 454,197 Taxable-equivalent adjustment $ 7 $ 8 $ 8
9 KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS APRIL 20, 2000 PAGE 9 CONSOLIDATED AVERAGE BALANCE SHEETS (in millions)
THREE MONTHS ENDED ------------------------------------------- 3-31-00 12-31-99 3-31-99 -------- -------- -------- ASSETS Loans $ 64,024 $ 63,486 $ 61,693 Investment securities 1,016 974 990 Securities available for sale 6,475 6,667 6,004 Short-term investments 2,164 1,954 1,975 -------- -------- -------- Total earning assets 73,679 73,081 70,662 Allowance for loan losses (899) (916) (888) Cash and due from banks 2,557 2,725 2,613 Other assets 7,850 7,684 7,471 -------- -------- -------- TOTAL ASSETS $ 83,187 $ 82,574 $ 79,858 ======== ======== ======== LIABILITIES Deposits in domestic offices: Noninterest-bearing $ 8,160 $ 8,430 $ 8,495 Interest-bearing 33,708 33,205 32,109 Deposits in foreign office-interest-bearing 1,206 906 509 -------- -------- -------- Total deposits 43,074 42,541 41,113 Federal funds purchased and securities sold under repurchase agreements 4,003 4,384 5,077 Bank notes and other short-term borrowings 8,680 8,243 9,208 Other liabilities 4,344 3,836 3,188 Long-term debt 15,334 15,852 14,133 Capital securities of subsidiary trusts 1,243 1,243 1,039 -------- -------- -------- TOTAL LIABILITIES 76,678 76,099 73,758 SHAREHOLDERS' EQUITY 6,509 6,475 6,100 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 83,187 $ 82,574 $ 79,858 ======== ======== ========
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