8-K 1 l89393ae8-k.txt KEYCORP 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): July 17, 2001 [KEYCORP LOGO] -------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 0-850 34-6542451 ------------------------------- ------------------------------------ ------------------------------------- (State or other jurisdiction Commission File Number (I.R.S. Employer Identification No.) of incorporation or organization) 127 Public Square, Cleveland, Ohio 44114-1306 ---------------------------------------- ----------------------------------- (Address of principal executive (Zip Code) offices)
Registrant's telephone number, including area code: (216) 689-6300 2 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE On July 17, 2001, the Registrant issued a press release announcing its earnings results for the three- and six-month period ended June 30, 2001. This press release, dated July 17, 2001, is attached as Exhibit 99.1 to this report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits -------- 99.1 The Registrant's July 17, 2001, press release announcing its earnings results for the three- and six-month period ended June 30, 2001. ITEM 9. REGULATION FD DISCLOSURE On July 17, 2001, the Registrant conducted a conference call/webcast to discuss its quarterly earnings and currently anticipated earnings trends. The slide presentation reviewed by the Registrant in the conference call/webcast follows as Annex A to this Item 9. 3 1 Annex A SECOND QUARTER 2001 REVIEW [KEYCORP LOGO] JULY 17, 2001 [KEYCORP LOGO] 4 2 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 FORWARD-LOOKING STATEMENT DISCLOSURE The conference call and discussion, including related questions and answers, and presentation materials, contain forward-looking statements about issues like anticipated third quarter and full-year 2001 earnings, anticipated level of net loan charge-offs and nonperforming assets and anticipated improvement in profitability and competitiveness. Forward-looking statements by their nature are subject to 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: changes in interest rates; continued softening in the economy which could materially impact credit quality trends and the ability to generate loans; failure of the capital markets to function consistent with customary levels; delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; consummation of significant business combinations or divestitures; changes in law imposing new legal obligations or restrictions or unfavorable resolution of litigation; and changes in accounting, tax or regulatory practices or requirements. [KEYCORP LOGO] 5 3 SECOND QUARTER REVIEW OUTLINE - INTRODUCTION B. SOMERS - OVERVIEW H. MEYER - FINANCIAL REVIEW L. IRVING - ASSET QUALITY K. BLAKELY - WRAP UP / Q&A B. SOMERS [KEYCORP LOGO] 6 4 STRATEGIC ANNOUNCEMENTS MAY 17, 2001 - ACCELERATED DOWNSIZING OF AUTO BUSINESS - SHARPENED FOCUS ON RELATIONSHIP BUSINESS - ADDRESSED CREDIT ISSUES 7 5 COMPETITIVENESS INITIATIVE - PEG FTE REDUCTIONS FTE IN THOUSANDS NET REDUCTION: 16% 1998 1999 2000 MAR-01 JUN-01 25.9 24.6 22.1 21.9 21.7 [KEYCORP LOGO] 8 6 FINANCIAL HIGHLIGHTS - 2Q01 - NET INTEREST MARGIN INCREASE 14BP - NET INTEREST INCOME (TE) UP $24 MM - STRONG GROWTH IN HOME EQUITY LOANS - CONTINUED EXPENSE REDUCTION [KEYCORP LOGO] 9 7 LINE OF BUSINESS PERFORMANCE RETAIL BANKING (A DIVISION OF KEY CONSUMER BANKING) (GRAPH) IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 REVENUE $344 $356 $340 $339 $338 NET INCOME $66 $78 $72 $73 $71 KEY CORPORATE FINANCE (GRAPH) IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 REVENUE $442 $438 $482 $445 $473 NET INCOME $116 $115 $142 $111 $130 HOME EQUITY & CONSUMER FINANCE (A DIVISION OF KEY CONSUMER BANKING) (GRAPH) IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 REVENUE $146 $137 $147 $148 $147 NET INCOME $20 $16 $18 $20 $18* *EXCLUDES ONE-TIME CHARGE FOR RETAINED INTERESTS IN SECURITIZED ASSETS KEY CAPITAL PARTNERS* (GRAPH) IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 REVENUE $257 $260 $268 $228 $229 NET INCOME $28 $38 $34 $2 $4 * NONINTEREST INCOME AND EXPENSE ATTRIBUTABLE TO KEY CAPITAL PARTNERS IS ASSIGNED TO RETAIL BANKING, HOME EQUITY AND CONSUMER FINANCE OR KEY CORPORATE FINANCE IF ONE OF THOSE BUSINESSES IS PRINCIPALLY RESPONSIBLE FOR MAINTAINING THE RELATIONSHIP WITH THE CLIENT THAT USED KEY CAPITAL PARTNERS' PRODUCTS AND SERVICES. [KEYCORP LOGO] 10 8 NET INTEREST INCOME & MARGIN (TE) IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 NET INTEREST INCOME $680 $691 $709 $695 $719 NET INTEREST 3.68% 3.68% 3.71% 3.63% 3.77% MARGIN AVG. EARNING $73,858 $74,709 $76,036 $76,872 $76,546 ASSETS [KEYCORP LOGO] 11 9 NET INTEREST MARGIN (TE) 1Q01 VS. 2Q01 Net Interest Margin 1Q01 3.63% Loan Spreads & Fees .05 Deposit Spreads .04 Accounting Adjustment .03 Balance Sheet Management .02 --- Total 14bp Net Interest Margin 2Q01 3.77% [KEYCORP LOGO] 12 10 CORE NONINTEREST INCOME 1Q01 VS. 2Q01 IN MILLIONS Noninterest Income 1Q01 $455 Residual Losses- Leased Vehicles (40) Net Securities Gains (18) Trust & Investment Services (9) Investment Banking & Capital Markets 7 Other components 3 ---- Noninterest Income 2Q01 $398 [KEYCORP LOGO] 13 11 CORE NONINTEREST EXPENSE 1Q01 VS. 2Q01 IN MILLIONS Noninterest Expense 1Q01 $698 Personnel Expense (19) Other 7 --- Noninterest Expense 2Q01 $686 [KEYCORP LOGO] 14 12 NET CHARGE-OFFS BY LOAN TYPE IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 CONTINUING PORTFOLIO Commercial $36.3 $60.6 $43.0 $51.0 $39.9 Consumer 31.5 43.8 64.8 58.2 59.6 ---- ---- ---- ---- ---- 67.8 104.4 107.8 109.2 99.5 RUN-OFF PORTFOLIO 71.3 ---- TOTAL NET C/O $67.8 $104.4 $107.8 $109.2 $170.8 [KEYCORP LOGO] 15 13 PROVISION VS. NET CHARGE-OFFS IN MILLIONS [BAR GRAPH] 2Q00 3Q00 4Q00 1Q01 2Q01 TOTAL LOAN LOSS PROVISION $68 $131 $108 $110 $401 STRATEGIC PROVISION 300 CONTINUING PROVISION 101 NET CHARGE-OFFS - TOTAL 68 104 108 109 171 NET CHARGE-OFFS - NON-CORE 13 NET CHARGE-OFFS - CORE 95 NET CHARGE-OFFS - RUNOFF 71 NET CHARGE-OFFS - CONTINUING 100 [KEYCORP LOGO] 16 14 ASSET QUALITY INDICATORS CONTINUING TOTAL PORTFOLIO PORTFOLIO IN MILLIONS 1Q01 2Q01 2Q01 ---- ---- ---- Nonperforming Loans $ 713 $ 555 $ 797 to EOP Loans 1.06% 0.85% 1.20% Nonperforming Assets $ 740 $ 581 $ 823 to EOP Loans + OREO 1.10% 0.89% 1.23% Net C/O $ 109 $ 100 $ 171 to Average Loans 0.66% 0.61% 1.02% Allowance $1,001 $1,002 $1,231 to Total Loans 1.49% 1.54% 1.85% to Nonperforming Loans 140% 181% 154% [KEYCORP LOGO] 17 15 RUN-OFF PORTFOLIO IN MILLIONS 5/17/01 6/30/01 ------- ------- Loan Commitments $2,648 $2,393 Allowance for Loan Loss 300 229 Nonperforming Loans 257 242 [KEYCORP LOGO] 18 16 NONPERFORMING LOANS: 2Q01 - 2Q01 Increase: $84MM or 11.8% - Largest Addition: $32MM (Healthcare-CP) - Second Largest Addition: $24MM (Leasing-ROP) CP: CONTINUING PORTFOLIO ROP: RUN-OFF PORTFOLIO [KEYCORP LOGO] 19 17 NONPERFORMING LOANS: 2Q01 LARGEST NPL: $ 32MM (HEALTHCARE-CP) 2(ND) LARGEST: $ 24MM (LEASING-ROP) 3(RD) LARGEST: $ 21MM (MEDIA-ROP) 10(TH) LARGEST $ 12MM (STRUCTURED FINANCE-ROP) 20(TH) LARGEST $ 7MM (LARGE CORPORATE-ROP) TOTAL/ TOP 20 NPLS: $271MM (CP: $95MM ROP: $176MM) CP: CONTINUING PORTFOLIO ROP: RUN-OFF PORTFOLIO [KEYCORP LOGO] 20 18 NONPERFORMING LOANS: 2Q01 Composition of Top 20 NPLs: IN MILLIONS CP ROP TP -- --- -- Structured Finance $23 $70 $93 Middle Market 8 43 51 Healthcare 40 - 40 Leasing - 24 24 Media - 21 21 Large Corporate - 18 18 Key Capital Partners 13 - 13 Commercial Real Estate 11 - 11 CP: Continuing Portfolio ROP: Run-off Portfolio TP: Total Portfolio [KEYCORP LOGO] 21 19 THIRD QUARTER 2001 OUTLOOK (CORE) (COMPARED TO 2Q01) REVENUE MID TO UPPER SINGLE DIGIT GROWTH SUPPORTED BY MODEST LOAN GROWTH, A SLIGHTLY LOWER NET INTEREST MARGIN AND GROWTH IN FEE INCOME FROM THIRD QUARTER 2000 LEVEL. EXPENSE SLIGHT INCREASE - DEPENDENT UPON GROWTH IN FEE INCOME BUSINESSES CREDIT QUALITY NONPERFORMING ASSETS ARE EXPECTED TO INCREASE. NET CHARGE-OFFS ARE EXPECTED TO STABILIZE OR DECLINE. LOAN LOSS PROVISION SHOULD APPROXIMATE THAT OF FIRST QUARTER 2001. [KEYCORP LOGO] 22 20 APPENDIX [KEYCORP LOGO] 23 21 NONINTEREST INCOME IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 ---- ---- ---- ---- ---- RECURRING ITEMS 1. Trust & Invest Services Inc. $ 150 $ 148 $ 150 $ 141 $ 132 2. Inv. Banking & Cap. Mkts. Inc. 98 91 94 65 72 3. Service Charges on Deposits 85 85 85 84 90 4. COLI Income 25 28 31 27 27 5. L/C & Loan Fees 24 26 34 29 30 6. Electronic Banking Fees 17 18 18 17 18 7. Other Income 76 64 96 92 29 ---- ---- ---- ---- ---- CORE NONINTEREST INCOME 475 460 508 455 398 NON-CORE ITEMS -- (55) -- -- -- ---- ---- ---- ---- ---- TOTAL NONINTEREST INCOME $ 475 $ 405 $ 508 $ 455 $ 398 [KEYCORP LOGO] 24 22 NONINTEREST EXPENSE IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 ---- ---- ---- ---- ---- RECURRING ITEMS 1. Personnel $ 361 $ 342 $ 360 $ 364 $ 345 2. Net Occupancy & Equipment 98 96 97 95 96 3. Computer Processing 60 59 62 62 63 4. Marketing 31 29 28 27 29 5. Amortization of Intangibles 25 26 25 26 24 6. Professional Fees 21 18 19 18 19 7. Postage & Delivery 17 15 16 17 16 8. Telecommunications 13 12 12 11 12 9. Other Expense 70 75 89 78 82 ---- ---- ---- ---- ---- CORE NONINTEREST EXPENSE 696 672 708 698 686 NON-CORE ITEMS 2 115 (3) -- 172 ---- ---- ---- ---- ---- TOTAL NONINTEREST EXPENSE $ 698 $ 787 $ 705 $ 698 $ 858 [KEYCORP LOGO] 25 23 STATEMENT OF INCOME-REPORTED -------- IN MILLIONS, EXCEPT PER SHARE DATA 2Q00 3Q00 4Q00 1Q01 2Q01 ---- ---- ---- ---- ---- Net Interest Income (TE) $ 680 $ 691 $ 709 $ 695 $ 719 Loan Loss Provision 68 131 108 110 401 Noninterest Income 475 405 508 455 398 Noninterest Expense 698 787 705 698 858 ----- ----- ----- ----- ----- 389 178 404 342 (142) Income Taxes & TE adj. 141 57 138 124 (6) Accounting Change, Net of Tax -- -- -- (1) (24) ----- ----- ----- ----- ----- Net Income $ 248 $ 121 $ 266 $ 217 $ (160) EPS - Assuming Dilution $0.57 $0.28 $0.62 $0.51 $(0.38) Avg. Common Shares O/S Assuming Dilution 436.0 432.0 430.6 429.9 424.7 [KEYCORP LOGO] 26 24 SIGNIFICANT NON-CORE ITEMS IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 ---- ---- ---- ---- ---- Net Interest Income (TE) -- -- -- -- -- Loan Loss Provision -- $ 27 $ 13 -- -- Noninterest Income -- (55) -- -- -- Noninterest Expense $ 2 $ 115 $ (3) -- $ 172 ----- ----- ----- ----- (2) (197) (10) -- (172) Income Taxes and TE adj. (1) (73) (4) -- (8) Acct. Change, Net of Tax -- -- -- -- (24) ----- ----- ----- ----- ----- Net Loss $ (1) $(124) $ (6) -- $(188) 2Q00 Software write-off 3Q00 Investment portfolio reconfiguration, additional loan loss provision, restructuring and other one-time charges 4Q00 Adjustment to loan loss provision (FFIEC), restructuring credit and other one-time charges 2Q01 Goodwill writedown, additional litigation reserves, restructuring and other one-time net charges, accounting change for retained interests [KEYCORP LOGO] 27 25 STATEMENT OF INCOME-CORE ---- IN MILLIONS, EXCEPT PER SHARE DATA 2Q00 3Q00 4Q00 1Q01 2Q01 ----- ----- ----- ----- ----- Net Interest Income (TE) $ 680 $ 691 $ 709 $ 695 $ 719 Loan Loss Provision 68 104 95 110 401 Noninterest Income 475 460 508 455 398 Noninterest Expense 696 672 708 698 686 ----- ----- ----- ----- ----- 391 375 414 342 30 Income Taxes & TE adj 142 130 142 124 2 Accounting Change, Net of Tax -- -- -- (1) -- ----- ----- ----- ----- ----- Net Income $ 249 $ 245 $ 272 $ 217 $ 28 Avg. Common Shares O/S Assuming Dilution 436.0 432.0 430.6 429.9 424.7 EPS - Core $0.57 $0.57 $0.63 $0.51 $0.07 [KEYCORP LOGO] 28 26 ASSET QUALITY INDICATORS CP: CONTINUING PORTFOLIO TP: TOTAL PORTFOLIO
CP TP IN MILLIONS 2Q00 3Q00 4Q00 1Q01 2Q01 2Q01 ---- ---- ---- ---- ---- ---- Nonperforming Loans $ 545 $ 592 $ 650 $ 713 $ 555 $ 797 to EOP Loans 0.83% 0.89% 0.97% 1.06% 0.85% 1.20% Nonperforming Assets $ 577 $ 617 $ 672 $ 740 $ 581 $ 823 to EOP Loans + OREO 0.83% 0.93% 1.00% 1.10% 0.89% 1.23% Net C/O $ 70 $ 105 $ 95(*) $ 109 $ 100 $ 171 to Average Loans 0.43% 0.63% 0.57%(*) 0.66% 0.61% 1.02% Allowance $ 979 $1,001 $1,001 $1,001 $1,002 $1,231 to Total Loans 1.49% 1.51% 1.50% 1.49% 1.54% 1.85% to Nonperforming Loans 180% 169% 154% 140% 181% 154%
(*) EXCLUDES FFIEC AND ONE-TIME ITEMS [KEYCORP LOGO] 29 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: July 17, 2001 /s/ Lee Irving ------------------------------------ By: Lee Irving Executive Vice President and Chief Accounting Officer