-----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, Ao+Nbb4tDvnaNMUt1PyomiI+vuwxKty2OMrbN09A6e4YhugXSjXVflegCDOFR6jn EYHgOzkCk1PwTjdJvko8Hg== 0000950152-02-000264.txt : 20020413 0000950152-02-000264.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950152-02-000264 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020116 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20020116 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: 1934 Act SEC FILE NUMBER: 001-11302 FILM NUMBER: 2511001 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 l92309ae8-k.txt KEYCORP FORM 8-K 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): January 16, 2002 [LOGO] KEYCORP -------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 0-850 34-6542451 - ---------------------------- -------------------- ----------------------- (State or other jurisdiction Commission (I.R.S. Employer of incorporation or File Number Identification No.) 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 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE On January 16, 2002, the Registrant issued a press release announcing its earnings results for the three- and twelve-month period ended December 31, 2001. This press release, dated January 16, 2002, is attached as Exhibit 99.1 to this report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) EXHIBITS 99.1 The Registrant's January 16, 2002, press release announcing its earnings results for the three- and twelve-month period ended December 31, 2001. ITEM 9. REGULATION FD DISCLOSURE On January 16, 2002, 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. 1 Annex A FOURTH QUARTER 2001 REVIEW [LOGO] January 16, 2002 [LOGO] 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 first quarter and full-year 2002 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 weakness 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; disruption in the economy or business operations or activities as a result of terrorist activities or military actions; and changes in accounting, tax or regulatory practices or requirements. [LOGO] 3 FOURTH QUARTER REVIEW - - INTRODUCTION B. SOMERS - - OVERVIEW 2001 H. MEYER - - FINANCIAL REVIEW L. IRVING - - ASSET QUALITY K. BLAKELY - - OUTLOOK / Q&A B. SOMERS [LOGO] 4 OVERVIEW- 2001 - - SHARPENED STRATEGIC FOCUS AND SIMPLIFIED ORGANIZATION - - STRENGTHENED ACCOUNTABILITY - - DELIVERED ON PEG COMMITMENTS - - INCREASED LOAN LOSS RESERVE - - ACCELERATED DOWNSIZING OF AUTO AND OTHER LOW SPREAD BUSINESSES - - EXIT NON-RELATIONSHIP CORPORATE LENDING - - INCREASED DIVIDEND [LOGO] 5 FINANCIAL HIGHLIGHTS - 4Q01 - - EPS MEETS CONSENSUS $(0.41) - - ADDITIONAL LOAN LOSS PROVISION: $590MM - - SPECIAL CHARGES: $60 MILLION - - NET INTEREST MARGIN INCREASED 13 B.P. - - FAVORABLE TRENDS IN FEE INCOME - - CONTINUED FOCUS ON EXPENSES [LOGO] 6 NET INTEREST INCOME & Margin (TE) in millions [GRAPH] 4Q00 1Q01 2Q01 3Q01 4Q01 NET INTEREST $709 $695 $719 $730 $726 INCOME NET INTEREST 3.71% 3.63% 3.77% 3.85% 3.98% MARGIN AVG. EARNING $ 76,036 $ 76,872 $ 76,546 $ 75,687 $ 72,706 ASSETS [LOGO] 7 NET INTEREST MARGIN (TE) 3Q01 vs. 4Q01 Net Interest Margin 3Q01 3.85% Loan Mix & Spreads .08 Deposit Mix & Spreads (.08) Lease Yields .06 Seasonal Factors .04 Balance Sheet Management .03 ------- Total 13bp Net Interest Margin 4Q01 3.98% [LOGO] 8 CORE NONINTEREST INCOME 3Q01 vs. 4Q01 in millions Noninterest Income 3Q01 $454 Higher letter of credit & loan fees 11 Income from demutualization 10 All other-net (10) Principal investing write-downs (37) Reserve for customer derivatives (10) ------- Noninterest Income 4Q01 $418 [LOGO] 9 CORE NONINTEREST EXPENSE 3Q01 vs. 4Q01 in millions Noninterest Expense 3Q01 $683 Demutualization contribution 10 Higher IC tied to revenue 7 All other-net 2 ------- Noninterest Expense 4Q01 $702 [LOGO] 10 PEG COST SAVINGS NONINTEREST EXPENSE: ACTUAL vs. INFLATIONARY GROWTH (in millions) [GRAPH]
1999 2000 2001 2002 Noninterest expense adjusted for inflation $2,776(b) $2,869(c) $2,949(d) $3,010(e) Noninterest expense (a) 2,776 2,789 2,769 2,770T ------ ------ ------ ------- Savings $ -- $ 80 $ 180 $ 240 ====== ====== ====== =======
(a) Total noninterest expense less significant nonrecurring items, adjusted for divested operations (b) CPI base (c) CPI + 3.4% (Bureau of Labor Statistics Jan-Dec 2000) (d) CPI + 2.8% (Bureau of Labor Statistics Jan-Nov 2001) (e) CPI + 2.0% (Estimate of 2% for 2002) T - Target for 2002 [LOGO] 11 NET CHARGE-OFFS BY LOAN TYPE IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 ---- ---- ---- ---- ---- CONTINUING PORTFOLIO Commercial $ 43.0 $ 51.0 $ 39.9 $ 47.8 $ 62.3 Consumer 64.8 58.2 59.6 68.1 70.4 ---- ---- ---- ---- ---- 107.8 109.2 99.5 115.9 132.7 RUN-OFF PORTFOLIO & LOAN SALES 71.3 57.0 87.2 ---- ---- ---- TOTAL NET C/O $ 107.8 $ 109.2 $ 170.8 $ 172.9 $ 219.9 [LOGO] 12 ASSET QUALITY INDICATORS TOTAL TOTAL CONTINUING CONTINUING PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO IN MILLIONS 3Q01 4Q01 3Q01 4Q01 ---- ---- ---- ---- Nonperforming Loans $ 885 $ 910 $ 652 $ 679 to EOP Loans 1.37% 1.44% 1.03% 1.09% Nonperforming Assets $ 913 $ 947 $ 680 $ 716 to EOP Loans + OREO 1.41% 1.49% 1.07% 1.15% Net C/O $ 173 $ 220 $ 116 $ 133 to Average Loans 1.04% 1.37% 0.71% 0.84% Allowance $1,174 $1,677 $1,002 $1,402 to Total Loans 1.82% 2.65% 1.58% 2.25% to Nonperforming Loans 133% 184% 154% 206% [LOGO] 13 RUN-OFF PORTFOLIO & NONREPLENISHING RESERVES IN MILLIONS 5/17/01 6/30/01 9/30/01 12/31/01 ------- ------- ------- -------- COMMITMENTS $2,648 $2,393 $2,019 $1,694 OUTSTANDINGS 1,611 1,423 1,176 1,023 ALLOWANCE FOR LOAN LOSSES 300 229 172 275 NPLs 257 242 233 231 [LOGO] 14 NONPERFORMING LOANS: 4Q01 4Q01 INCREASE IN NPL: $ 25MM OR 3% LARGEST NPL: $ 32MM (HEALTHCARE-CP) 10TH LARGEST: $ 12MM (STRUCTURED FINANCE- ROP) 20TH LARGEST: $ 9MM (STRUCTURED FINANCE-ROP) CP: CONTINUING PORTFOLIO ROP: RUN-OFF PORTFOLIO [LOGO] 15 NONPERFORMING LOANS: 4Q01 Composition of Top 20 NPLs: in millions CP ROP TP -- --- -- Healthcare $120 -- $120 Structured Finance -- $ 75 75 Middle Market 10 21 31 Large Corporate 10 20 30 Leasing 14 -- 14 Key Capital Partners 13 -- 13 Commercial Real Estate -- -- -- CP: Continuing Portfolio $167M ROP: Run-off Portfolio 116M ------ TP: Total Portfolio $283M Top 20 Average Size $14.2M [LOGO] 16 SUMMARY OF SIGNIFICANT ACTIONS - 2001 - - Accelerated downsizing of auto business - Reduced auto leases and indirect loans by $1.2 billion - - Exit non-relationship corporate lending - Runoff portfolio reduced by $588 million - - Sold $4.4 billion of loans - - Reduced dependence on wholesale funding by $4.1 billion - - Added $676 million to loan loss reserve [LOGO] 17 FIRST QUARTER 2002 OUTLOOK (COMPARED WITH 4Q01) REVENUE SLIGHT INCREASE (4Q INCLUDES SPECIAL CHARGES OF $60 MILL.) - FLAT TO SLIGHTLY LOWER LOANS - SEASONAL DECLINE IN NIM - MODEST FEE GROWTH EXPENSE MODEST DECREASE CREDIT QUALITY NPAs ARE EXPECTED TO INCREASE SLIGHT INCREASE IN CORE NET CHARGE-OFFS EARNINGS EPS RANGE: $0.54 TO $0.57 [LOGO] 18 APPENDIX [LOGO] [B 19 LINE OF BUSINESS PERFORMANCE RETAIL BANKING (A DIVISION OF KEY CONSUMER BANKING) IN MILLIONS [GRAPH] 4Q00 1Q01 2Q01 3Q01 4Q01 REVENUE $341 $339 $341 $361 $343 NET INCOME $ 73 $ 74 $ 73 $ 88 $ 80 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. [LOGO] 20 LINE OF BUSINESS PERFORMANCE HOME EQUITY & CONSUMER FINANCE (A DIVISION OF KEY CONSUMER BANKING) [GRAPH] IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 REVENUE $146 $147 $146 $154 $144 NET INCOME $ 17 $ 19 $ 17* $ 19 $ 12 * EXCLUDES ONE-TIME CHARGE FOR RETAINED INTERESTS IN SECURITIZED ASSETS 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. [LOGO] 21 LINE OF BUSINESS PERFORMANCE KEY CORPORATE FINANCE [GRAPH] IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 REVENUE $480 $442 $474 $459 $498 NET INCOME $141 $109 $130 $127 $150 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. [LOGO] 22 LINE OF BUSINESS PERFORMANCE KEY CAPITAL PARTNERS [GRAPH] IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 REVENUE $250 $244 $240 $243 $241 NET INCOME $ 24 $ 13 $ 13 $ 19 $ 20 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. [LOGO] 23 NONINTEREST INCOME IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 ---- ---- ---- ---- ---- RECURRING ITEMS 1. Trust & Invest Services Inc. $150 $141 $132 $140 $137 2. Inv. Banking & Cap. Mkts. Inc. 94 65 72 46 6 3. Service Charges on Deposits 85 84 90 107 106 4. COLI Income 31 27 27 28 32 5. L/C & Loan Fees 34 29 30 27 38 6. Electronic Banking Fees 18 17 18 20 19 7. Other Income 96 92 29 86 80 ---- ---- ---- ---- ---- CORE NONINTEREST INCOME 508 455 398 454 418 NON-CORE ITEMS - - - - - ---- ---- ---- ---- ---- TOTAL NONINTEREST INCOME $508 $455 $398 $454 $418 [LOGO] 24 NONINTEREST EXPENSE IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 ----- ----- ----- ----- ----- RECURRING ITEMS 1. Personnel $ 360 $ 364 $ 345 $ 334 $ 335 2. Net Occupancy & Equipment 97 95 96 97 96 3. Computer Processing 62 62 63 62 65 4. Marketing 28 27 29 31 25 5. Amortization of Intangibles 25 26 24 22 23 6. Professional Fees 19 18 19 26 25 7. Postage & Delivery 16 17 16 16 14 8. Telecommunications 12 11 12 10 11 9. Other Expense 89 78 82 85 108 ----- ----- ----- ----- ----- CORE NONINTEREST EXPENSE 708 698 686 683 702 NON-CORE ITEMS (3) - 172 - - ----- ----- ----- ----- ----- TOTAL NONINTEREST EXPENSE $ 705 $ 698 $ 858 $ 683 $ 702 [LOGO] 25 STATEMENT OF INCOME-REPORTED IN MILLIONS, EXCEPT PER SHARE DATA 4Q00 1Q01 2Q01 3Q01 4Q01 ---- ---- ---- ---- ---- Net Interest Income (TE) $ 709 $ 695 $ 719 $ 730 $ 726 Loan Loss Provision 108 110 401 116 723 Noninterest Income 508 455 398 454 418 Noninterest Expense 705 698 858 683 702 ----- ----- ----- ----- ----- 404 342 (142) 385 (281) Income Taxes & TE adj. 138 124 (6) 136 (107) Accounting Change, Net of Tax - (1) (24) - - ----- ----- ----- ----- ----- Net Income (Loss) $266 $217 $(160) $ 249 $ (174) Avg. Common Shares O/S Assuming Dilution 430.6 429.9 424.7 430.3 423.6 EPS - Assuming Dilution $0.62 $0.51 $(0.38) $0.58 $(0.41) [LOGO] 26 SIGNIFICANT NON-CORE ITEMS IN MILLIONS, EXCEPT PER SHARE DATA 4Q00 1Q01 2Q01 3Q01 4Q01 ---- ---- ---- ---- ---- Net Interest Income (TE) - - - - - Loan Loss Provision $ 13 - - - - Noninterest Income - - - - - Noninterest Expense (3) - $ 172 - - ------ ------ (10) - (172) - - Income Taxes and TE adj. (4) - (8) - - Acct. Change, Net of Tax - - (24) - - ------ ----- ------ ----- ----- Net Loss $ (6) - $(188) - - 4Q00 Adjustment to loan loss provision (FFIEC), restructuring credit and other one-time charges 2Q01 Goodwill write-down, additional litigation reserves, restructuring and other one-time net charges, accounting change for retained interests [LOGO] 27 STATEMENT OF INCOME-CORE IN MILLIONS, EXCEPT PER SHARE DATA 4Q00 1Q01 2Q01 3Q01 4Q01 ---- ---- ---- ---- ---- Net Interest Income (TE) $ 709 $ 695 $ 719 $ 730 $ 726 Loan Loss Provision 95 110 401 116 723 Noninterest Income 508 455 398 454 418 Noninterest Expense 708 698 686 683 702 ----- ----- ----- ----- ------ 414 342 30 385 (281) Income Taxes & TE adj. 142 124 2 136 (107) Accounting Change, Net of Tax - (1) - - - ----- ----- ----- ----- ------ Net Income $ 272 $ 217 $ 28 $ 249 $ (174) Avg. Common Shares O/S Assuming Dilution 430.6 429.9 424.7 430.3 423.6 EPS - Core $0.63 $0.51 $0.07 $0.58 $(0.41) [LOGO] 28 ASSET QUALITY INDICATORS CP: CONTINUING PORTFOLIO TP: TOTAL PORTFOLIO CP TP IN MILLIONS 4Q00 1Q01 2Q01 3Q01 4Q01 4Q01 ---- ---- ---- ---- ---- ---- Nonperforming Loans $ 650 $ 713 $ 797 $ 885 $ 679 $ 910 to EOP Loans 0.97% 1.06% 1.20% 1.37% 1.09% 1.44% Nonperforming Assets $ 672 $ 740 $ 823 $ 913 $ 716 $ 947 to EOP Loans + OREO 1.00% 1.10% 1.23% 1.41% 1.15% 1.49% Net C/O $ 95* $ 109 $ 171 $ 173 $ 133 $ 220 to Average Loans 0.57%* 0.66% 1.02% 1.04% 0.84% 1.37% Allowance $1,001 $1,001 $1,231 $1,174 $1,402 $1,677 to Total Loans 1.50% 1.49% 1.85% 1.82% 2.25% 2.65% to Nonperforming Loans 154% 140% 154% 133% 206% 184% * EXCLUDES FFIEC AND ONE-TIME ITEMS [LOGO] 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: January 16, 2002 /s/ Lee Irving -------------------------------------- By: Lee Irving Executive Vice President and Chief Accounting Officer EX-99.1 3 l92309aex99-1.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 MEDIA CONTACT: WILLIAM FULLER ANALYST CONTACT: VERNON L. PATTERSON 216.689.8140 216.689.0520 KEY MEDIA INVESTOR RELATIONS NEWSROOM: www.key.com/newsroom INFORMATION: www.key.com/ir
FOR IMMEDIATE RELEASE KEYCORP REPORTS FOURTH QUARTER AND 2001 RESULTS ----------------------------------------------- CLEVELAND, January 16, 2002 - KeyCorp (NYSE: KEY) today announced a fourth quarter net loss of $174 million, or $0.41 per common share. Results include core charges of approximately $410 million (after tax), or $0.96 per share, taken to increase the company's allowance for loan losses and strengthen its balance sheet. In the third quarter, Key reported net income of $249 million, or $0.58 per share. Key's 2001 net income was $132 million, or $0.31 per diluted common share. On a core basis, net income for 2001 was $320 million, or $0.74 per share. Core results exclude certain charges taken during the second quarter, which were associated primarily with the implementation of strategic plans announced in May. The largest of these charges was a $150 million noncash write-down of goodwill. "Fourth quarter results reflect Key's commitment to maintaining a strong loan loss reserve and restoring a conservative credit culture," said Chairman and Chief Executive Officer Henry L. Meyer III. "The previously announced actions that we took this quarter, coupled with our decision earlier in the year to focus on relationship-based banking, position Key well to take full advantage of the economic rebound when it occurs. Recognizing this potential and our strong capital position, the Board of Directors in December approved an increase in Key's quarterly dividend from $0.295 to $0.30 per common share. "Relative to last quarter, results were affected favorably by trends in fee income and the net interest margin. Despite the weak economy, noninterest income rose $24 million, prior to core charges pertaining to investment write-downs and customer derivatives. The increase came primarily from market-sensitive businesses, such as investment banking and brokerage. At the same time, a substantially improved net interest margin helped moderate a $24 million reduction in net interest income--the latter the result of our decision in May to scale back or exit certain types of lending, and slowing loan demand in a recessionary economy. In addition, we continued to manage our expenses effectively." KEYCORP REPORTS FOURTH QUARTER RESULTS JANUARY 16, 2002 PAGE 2 SUMMARY OF CONSOLIDATED RESULTS Net interest income for the fourth quarter of 2001 totaled $700 million, representing a $24 million decrease from the record amount earned in the previous quarter. A rise in Key's net interest margin to 3.98%, the highest level since the fourth quarter of 1998, was more than offset by a decrease in average earning assets. The decrease in earning assets was due primarily to Key's decision last May to exit the automobile leasing business, de-emphasize indirect prime automobile lending and discontinue certain nonrelationship commercial lending. Key's sale in September of $1.4 billion of residential mortgage loans with low net interest spreads also contributed to the decrease. Excluding $60 million of core charges for principal investing write-downs and customer derivative losses, Key's noninterest income was $478 million for the fourth quarter of 2001, up from $454 million for the prior quarter. Higher income from investment banking and capital markets activities (up $20 million) and letter of credit and nonyield-related loan fees (up $11 million) drove the quarter-to-quarter improvement. These positive results were offset partially by an $18 million decrease in net gains from loan sales and securitizations; third quarter results benefited from Key's education loan securitization. Also, traditional fee income in the fourth quarter was supplemented by $10 million of additional revenue, representing the value of shares received as a result of the demutualization of an insurance company in which Key is a policyholder. Key contributed these shares to its charitable foundation. Excluding the contribution, Key's noninterest expense was $692 million, compared with $683 million for the third quarter. Higher commissions tied to revenue production account for most of the $9 million increase. ASSET QUALITY Key's provision for loan losses was $723 million for the fourth quarter of 2001, compared with $116 million for the third quarter. Included in the fourth quarter amount is a provision of $590 million, of which $400 million was used to increase the allowance for loan losses for Key's continuing loan portfolio. The remaining $190 million was added to the portion of the allowance segregated in the second quarter in connection with Key's decision to eliminate nonrelationship lending in the leveraged financing and nationally syndicated lending businesses. This portion of the allowance is being used to exit these credits and for losses incurred in connection with loan sales. It will not be replenished. The fourth quarter increase in the allowance is a result of continued weakness in the economy and the related adverse effects on Key's specific portfolios. The following table summarizes certain asset quality indicators, segregated between Key's continuing and run-off loan portfolios. ASSET QUALITY INDICATORS
Run-off Loan Portfolio and Continuing Loan Portfolio Nonreplenishing Allowance ------------------------------- --------------------------------- dollars in millions 4Q01 3Q01 4Q01 3Q01 - ------------------------------------------------------------------------------------------------------------------------------- Loans outstanding $62,286 $63,330 $ 1,023 $1,176 Nonperforming loans at period end 679 652 231 233 Net loan charge-offs 133 116 87 57 Net loan charge-offs to average loans .84 % .71 % N/M N/M Allowance for loan losses $ 1,402 $ 1,002 $ 275 $ 172 Allowance for loan losses to period-end loans 2.25 % 1.58 % 26.88 % 14.63 % Allowance for loan losses to nonperforming loans 206.48 153.68 119.05 73.82 - ------------------------------------------------------------------------------------------------------------------------------- N/M = Not Meaningful
Total Loan Portfolio ------------------------------ dollars in millions 4Q01 3Q01 - ---------------------------------------------------------------------------------- Loans outstanding $63,309 $64,506 Nonperforming loans at period end 910 885 Net loan charge-offs 220 173 Net loan charge-offs to average loans 1.37 % 1.04 % Allowance for loan losses $ 1,677 $ 1,174 Allowance for loan losses to period-end loans 2.65 % 1.82 % Allowance for loan losses to nonperforming loans 184.29 132.66 - --------------------------------------------------------------------------------- N/M = Not Meaningful
KEYCORP REPORTS FOURTH QUARTER RESULTS JANUARY 16, 2002 PAGE 3 Net loan charge-offs rose by $47 million from the prior quarter. Charge-offs include $35 million that resulted from the fourth quarter sale of $119 million of Key's home equity loans. Of the loans sold, $83 million were nonperforming. Total nonperforming loans grew by $25 million, reflecting the impact of continued economic weakness. CAPITAL Key's capital ratios continued to exceed all "well-capitalized" benchmarks at December 31, 2001. During the fourth quarter, Key did not repurchase any of its common shares under an authorization that allows for the repurchase of up to 25 million shares. There were 16.8 million shares remaining for repurchase under this authorization as of December 31, 2001. LINE OF BUSINESS RESULTS The following table summarizes the contribution made by each major line of business to Key's net income (loss) for the periods presented. NET INCOME (LOSS) BY LINE OF BUSINESS
PERCENT CHANGE 4Q01 VS. --------------- dollars in millions 4Q01 3Q01 4Q00 3Q01 4Q00 - ----------------------------------------------------------------------------------- Key Consumer Banking: Retail Banking $ 80 $ 88 $ 73 (9.1)% 9.6 % Home Equity and Consumer Finance 12 19 17 (36.8) (29.4) Key Corporate Finance 150 127 141 18.1 6.4 Key Capital Partners(a) 20 19 24 5.3 (16.7) Other Segments (36) 3 23 N/M N/M ----- ----- ----- ----- ----- Total segments 226 256 278 (11.7) (18.7) Reconciling items(b) (400) (7) (12) ----- ----- ----- TOTAL NET INCOME (LOSS)(c) $(174) $ 249 $ 266 ===== ===== ===== - ------------------------------------------------------------------------------------
(a) 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. Key Capital Partners had net income of $31 million in the fourth quarter of 2001, $30 million in the third quarter of 2001 and $36 million in the fourth quarter of 2000 before its income and expense were reassigned. (b) In the fourth quarter of 2001, reconciling items include an additional provision for loan losses and a reserve for customer derivative losses. For the fourth quarter of 2000, reconciling items include an adjustment to the provision for loan losses made in connection with revised Federal consumer loan charge-off guidelines and a net credit recorded in connection with strategic actions to improve Key's operating efficiency and profitability. Reconciling items also include charges related to unallocated nonearning assets of corporate support functions. (c) Key's management accounting system utilizes a methodology for loan loss provisioning by line of business that reflects credit quality expectations within each line of business over a normal business cycle. The "normalized provision for loan losses" assigned to each line as a result of this methodology does not necessarily coincide with net loan charge-offs at any given point in the cycle. N/M = Not Meaningful KEY CONSUMER BANKING RETAIL BANKING (A DIVISION OF KEY CONSUMER BANKING) - --------------------------------------------------- Net income for Retail Banking was $80 million for the fourth quarter of 2001, down from $88 million in the previous quarter. The decline was attributable to lower revenue, offset partially by a reduction in noninterest expense. KEYCORP REPORTS FOURTH QUARTER RESULTS JANUARY 16, 2002 PAGE 4 Noninterest income decreased by $15 million, or 12%, from the third quarter, due largely to a reduction in net gains from loan sales and a higher level of annual private banking fees earned in the third quarter. Net interest income decreased by $3 million, or 1%, due primarily to a less favorable interest rate spread on deposits. At the same time, noninterest expense was down $5 million, or 2%, reflecting lower costs for personnel, professional services and various indirect charges, including those related to occupancy and marketing. HOME EQUITY AND CONSUMER FINANCE (A DIVISION OF KEY CONSUMER BANKING) - --------------------------------------------------------------------- Net income for Home Equity and Consumer Finance was $12 million for the fourth quarter of 2001, down from $19 million in the previous quarter. The decrease resulted from a reduction in noninterest income and an increase in noninterest expense. Net interest income was essentially unchanged from the third quarter. The $11 million reduction in noninterest income reflects a decrease in net gains from loan sales and securitizations; third quarter results benefited from Key's education loan securitization. The $2 million, or 2%, increase in noninterest expense was due to higher costs for personnel and computer processing, offset in part by lower marketing expense. KEY CORPORATE FINANCE Net income for Key Corporate Finance was $150 million for the fourth quarter of 2001, up from $127 million in the previous quarter. Total revenue rose significantly from the prior quarter, reflecting increases in both net interest income and noninterest income. These improvements were offset partially by a higher level of noninterest expense. Net interest income rose by $13 million, or 4%, from the prior quarter due to a more favorable interest rate spread on earning assets. Noninterest income grew by $26 million, or 24%, reflecting significant increases in income from investment banking and capital markets activities, and letter of credit and nonyield-related loan fees. The $3 million, or 1%, increase in noninterest expense reflects a higher level of professional fees. KEY CAPITAL PARTNERS Net income for Key Capital Partners was $20 million for the fourth quarter of 2001, up $1 million from the third quarter. Prior to assigning revenue and expense to other business lines whose clients use products and services offered by Key Capital Partners, net income was $31 million in the fourth quarter of 2001, compared with $30 million last quarter. Total revenue for Key Capital Partners decreased by $2 million as a $2 million increase in net interest income was more than offset by a $4 million decline in noninterest income. The reduction in noninterest income was the result of offsetting developments, including lower net gains from loan sales, a reduction in income from trust and investment services and higher income attributable to annual fees recorded in the fourth quarter. The decrease in income from trust and investment services reflects the continuing effect of a slower economy and related weakness in the securities markets. Noninterest expense decreased by $4 million, or 2%, from the third quarter, due primarily to lower personnel and occupancy costs. KEYCORP REPORTS FOURTH QUARTER RESULTS JANUARY 16, 2002 PAGE 5 OTHER SEGMENTS Other Segments includes the Treasury unit, the Principal Investing unit and the net effect of funds transfer pricing. In the fourth quarter of 2001, this segment generated a net loss of $36 million, compared with net income of $3 million for the previous quarter. The fourth quarter loss was due primarily to previously announced principal investing write-downs of $45 million. Cleveland-based KeyCorp is one of the nation's largest bank-based financial services companies, with assets of approximately $81 billion. Key companies provide investment management, retail and commercial banking, retirement, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. The company's businesses deliver their products and services through KeyCenters and offices; a network of more than 2,300 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, Key.com(R) that provides account access and financial products 24 hours a day. NOTES TO EDITORS: A live Internet broadcast of KeyCorp's conference call to discuss quarterly earnings and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at WWW.KEY.COM/IR at 10:00 a.m. ET, on Wednesday, January 16, 2002. A tape of the call will be available until Wednesday, January 23. For up-to-date company information, media contacts and facts and figures about Key's lines of business visit our Media Newsroom at www.Key.com/newsroom. - -------------------------------------------------------------------------------- This news release contains forward-looking statements that 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 weakness 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; disruption in the economy or business operations or activities as a result of terrorist activities or military actions; and changes in accounting, tax or regulatory practices or requirements. - -------------------------------------------------------------------------------- ### KEYCORP REPORTS FOURTH QUARTER RESULTS JANUARY 16, 2002 PAGE 6 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
THREE MONTHS ENDED ---------------------------------------------------- 12-31-01 9-30-01 12-31-00 ------------- ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $ 726 $ 730 $ 709 Noninterest income 418 454 508 ------------- ------------- ------------- Total revenue (taxable equivalent) 1,144 1,184 1,217 Provision for loan losses 723 116 108 Noninterest expense 702 683 705 Net income (loss) (174) 249 266 Net income (loss) - core (174) 249 272 PER COMMON SHARE Net income (loss) $ (.41) $ .59 $ .63 Net income (loss) - core (.41) .59 .64 Net income (loss) - assuming dilution (.41) .58 .62 Net income (loss) - assuming dilution - core (.41) .58 .63 Cash dividends .295 .295 .28 Book value at period end 14.82 15.53 15.65 Market price at period end 24.34 24.14 28.00 AT PERIOD END Full-time equivalent employees 21,230 21,297 22,142 Branches 911 911 922 PERFORMANCE RATIOS Return on average total assets (.84)% 1.16 % 1.24 % Return on average total assets - core (.84) 1.16 1.27 Return on average equity (10.54) 15.20 16.16 Return on average equity - core (10.54) 15.20 16.53 Net interest margin (taxable equivalent) 3.98 3.85 3.71 CAPITAL RATIOS AT PERIOD END Equity to assets 7.76 % 7.79 % 7.59 % Tangible equity to tangible assets 6.45 6.51 6.12 Tier 1 risk-adjusted capital (a) 7.71 7.81 7.72 Total risk-adjusted capital (a) 11.74 11.77 11.48 Leverage (a) 7.83 7.90 7.71 ASSET QUALITY Net loan charge-offs $220 $173 $108 Net loan charge-offs to average loans 1.37 % 1.04 % .64 % Allowance for loan losses $1,677 $1,174 $1,001 Allowance for loan losses to period-end loans 2.65 % 1.82 % 1.50 % Allowance for loan losses to nonperforming loans 184.29 132.66 154.00 Nonperforming loans at period end $910 $885 $650 Nonperforming assets at period end 947 913 672 Nonperforming loans to period-end loans 1.44 % 1.37 % .97 % Nonperforming assets to period-end loans plus OREO and other nonperforming assets 1.49 1.41 1.00 (a) 12-31-01 ratio is estimated.
KEYCORP REPORTS FOURTH QUARTER 2001 RESULTS JANUARY 16, 2002 PAGE 7 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
TWELVE MONTHS ENDED --------------------------------- 12-31-01 12-31-00 ------------- -------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $ 2,870 $ 2,758 Noninterest income 1,725 2,194 ------------ ------------- Total revenue (taxable equivalent) 4,595 4,952 Provision for loan losses 1,350 490 Noninterest expense 2,941 2,917 Net income 132 1,002 Net income - core 320 1,009 PER COMMON SHARE Net income $ .31 $ 2.32 Net income - core .75 2.33 Net income - assuming dilution .31 2.30 Net income - assuming dilution - core .74 2.32 Cash dividends 1.18 1.12 PERFORMANCE RATIOS Return on average total assets .16 % 1.19 % Return on average total assets - core .38 1.20 Return on average equity 2.01 15.39 Return on average equity - core 4.87 15.49 Net interest margin (taxable equivalent) 3.81 3.69 ASSET QUALITY Net loan charge-offs $673 $414 Net loan charge-offs to average loans 1.02 % .63 %
KEYCORP REPORTS FOURTH QUARTER 2001 RESULTS JANUARY 16, 2002 PAGE 8 LINE OF BUSINESS RESULTS (dollars in millions)
KEY CONSUMER BANKING Retail Banking (a division of Key Consumer Banking) 4Q01 3Q01 4Q00 -------------- ------------- -------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $ 230 $ 233 $ 233 Noninterest income 100 116 91 Revenue sharing 13 12 17 ------------- ------------ ------------- Total revenue 343 361 341 Provision for loan losses(a) 12 12 12 Noninterest expense 191 197 197 Expense sharing 9 8 12 ------------- ------------ ------------- Income before income taxes (taxable equivalent) 131 144 120 Allocated income taxes and taxable equivalent adjustments 51 56 47 ------------- ------------ ------------- Net income $ 80 $ 88 $ 73 ============= ============ ============= Percent of consolidated net income N/M 35 % 27 % Net loan charge-offs(a) $ 13 $ 15 $ 16 AVERAGE BALANCES Loans $ 7,376 $ 7,735 $ 7,771 Total assets 8,681 9,058 9,199 Deposits 30,716 30,892 32,479 OTHER FINANCIAL DATA Efficiency ratio 58.31 % 56.79 % 61.29 %
PERCENT CHANGE 4Q01 VS. ------------------------------ 3Q01 4Q00 ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) (1.3)% (1.3) % Noninterest income (13.8) 9.9 Revenue sharing 8.3 (23.5) ------------ ------------ Total revenue (5.0) .6 Provision for loan losses(a) -- -- Noninterest expense (3.0) (3.0) Expense sharing 12.5 (25.0) ------------ ------------ Income before income taxes (taxable equivalent) (9.0) 9.2 Allocated income taxes and taxable equivalent adjustments (8.9) 8.5 ------------ ------------ Net income (9.1) 9.6 Percent of consolidated net income Net loan charge-offs(a) (13.3) % (18.8) % AVERAGE BALANCES Loans (4.6) % (5.1)% Total assets (4.2) (5.6) Deposits (.6) (5.4) OTHER FINANCIAL DATA Efficiency ratio
Home Equity and Consumer Finance (a division of Key Consumer Banking)
4Q01 3Q01 4Q00 -------------- ------------- -------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $ 151 $ 150 $ 136 Noninterest income (8) 4 9 Revenue sharing 1 -- 1 ------------- ------------ ------------- Total revenue 144 154 146 Provision for loan losses(a) 32 33 33 Noninterest expense 91 89 83 Expense sharing -- -- -- ------------- ------------ ------------- Income before income taxes (taxable equivalent) 21 32 30 Allocated income taxes and taxable equivalent adjustments 9 13 13 ------------- ------------ ------------- Net income $ 12 $ 19 $ 17 ============= ============ ============= Percent of consolidated net income N/M 8 % 6 % Net loan charge-offs(a) $ 91 $ 50 $ 49 AVERAGE BALANCES Loans $ 15,154 $15,586 $ 15,234 Total assets 16,110 16,558 16,330 Deposits 231 213 154
PERCENT CHANGE 4Q01 VS. ------------------------------ 3Q01 4Q00 ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) .7 % 11.0 % Noninterest income N/M N/M Revenue sharing N/M -- ------------ ------------ Total revenue (6.5) (1.4) Provision for loan losses(a) (3.0) (3.0) Noninterest expense 2.2 9.6 Expense sharing -- -- ------------ ------------ Income before income taxes (taxable equivalent) (34.4) (30.0) Allocated income taxes and taxable equivalent adjustments (30.8) (30.8) ------------ ------------ Net income (36.8) (29.4) Percent of consolidated net income Net loan charge-offs(a) 82.0 % 85.7 % AVERAGE BALANCES Loans (2.8)% (.5)% Total assets (2.7) (1.3) Deposits 8.5 50.0
KEYCORP REPORTS FOURTH QUARTER 2001 RESULTS JANUARY 16, 2002 PAGE 9 LINE OF BUSINESS RESULTS (CONTINUED) (dollars in millions)
KEY CORPORATE FINANCE 4Q01 3Q01 4Q00 -------------- ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $ 364 $ 351 $ 352 Noninterest income 105 76 94 Revenue sharing 29 32 34 ------------- ------------ ------------ Total revenue 498 459 480 Provision for loan losses(a) 51 52 52 Noninterest expense 188 184 180 Expense sharing 17 18 21 ------------- ------------ ------------ Income before income taxes (taxable equivalent) 242 205 227 Allocated income taxes and taxable equivalent adjustments 92 78 86 ------------- ------------ ------------ Net income $ 150 $ 127 $ 141 ============= ============ ============ Percent of consolidated net income N/M 51 % 53 % Net loan charge-offs(a) $ 113 $ 99 $ 42 AVERAGE BALANCES Loans $ 34,946 $ 35,545 $ 35,689 Total assets 36,893 37,377 37,496 Deposits 6,929 6,637 6,701
PERCENT CHANGE 4Q01 VS. ----------------------------- 3Q01 4Q00 ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) 3.7 % 3.4 % Noninterest income 38.2 11.7 Revenue sharing (9.4) (14.7) ------------ ------------ Total revenue 8.5 3.8 Provision for loan losses(a) (1.9) (1.9) Noninterest expense 2.2 4.4 Expense sharing (5.6) (19.0) ------------ ------------ Income before income taxes (taxable equivalent) 18.0 6.6 Allocated income taxes and taxable equivalent adjustments 17.9 7.0 ------------ ------------ Net income 18.1 6.4 Percent of consolidated net income Net loan charge-offs(a) 14.1 % 169.0 % AVERAGE BALANCES Loans (1.7)% (2.1)% Total assets (1.3) (1.6) Deposits 4.4 3.4
KEY CAPITAL PARTNERS 4Q01 3Q01 4Q00 -------------- ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $ 55 $ 53 $ 55 Noninterest income 229 234 247 Revenue sharing (43) (44) (52) ------------- ------------ ------------ Total revenue 241 243 250 Provision for loan losses(a) 2 3 3 Noninterest expense 229 233 238 Expense sharing (26) (26) (33) ------------- ------------ ------------ Income before income taxes (taxable equivalent) 36 33 42 Allocated income taxes and taxable equivalent adjustments 16 14 18 ------------- ------------ ------------ Net income $20 $19 $24 ============= ============ ============ Percent of consolidated net income N/M 8 % 9 % Net loan charge-offs(a) $ 1 $ 4 $ 1 AVERAGE BALANCES Loans $ 4,575 $ 5,456 $ 5,586 Total assets 8,479 9,195 8,806 Deposits 3,643 3,466 3,703
PERCENT CHANGE 4Q01 VS. ----------------------------- 3Q01 4Q00 ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) 3.8 % -- % Noninterest income (2.1) (7.3) Revenue sharing (2.3) (17.3) ------------ ------------ Total revenue (.8) (3.6) Provision for loan losses(a) (33.3) (33.3) Noninterest expense (1.7) (3.8) Expense sharing -- (21.2) ------------ ------------ Income before income taxes (taxable equivalent) 9.1 (14.3) Allocated income taxes and taxable equivalent adjustments 14.3 (11.1) ------------ ------------ Net income 5.3 (16.7) Percent of consolidated net income Net loan charge-offs(a) (75.0)% -- % AVERAGE BALANCES Loans (16.1)% (18.1)% Total assets (7.8) (3.7) Deposits 5.1 (1.6)
(a) Key's management accounting system utilizes a methodology for loan loss provisioning by line of business that reflects credit quality expectations within each line of business over a normal business cycle. The "normalized provision for loan losses" assigned to each line as a result of this methodology does not necessarily coincide with net loan charge-offs at any given point in the cycle. N/M = Not Meaningful KeyCorp Reports Fourth Quarter 2001 Results January 16, 2002 Page 10 CONSOLIDATED BALANCE SHEETS (dollars in millions)
12-31-01 9-30-01 12-31-00 ------------- -------------- ------------ ASSETS Loans $63,309 $64,506 $66,905 Investment securities 1,119 1,174 1,198 Securities available for sale 5,346 6,471 7,329 Short-term investments 1,898 1,792 1,884 ------------- -------------- ------------ Total earning assets 71,672 73,943 77,316 Allowance for loan losses (1,677) (1,174) (1,001) Cash and due from banks 2,891 2,803 3,189 Premises and equipment 687 682 717 Goodwill 1,101 1,121 1,324 Other intangible assets 31 34 44 Corporate-owned life insurance 2,313 2,289 2,215 Accrued income and other assets 3,920 4,721 3,466 ------------- -------------- ------------ TOTAL ASSETS $80,938 $84,419 $87,270 ============= ============== ============ LIABILITIES Deposits in domestic offices: Noninterest-bearing $9,667 $8,643 $9,076 Interest-bearing 33,529 33,526 35,519 Deposits in foreign office-interest-bearing 1,599 3,203 4,054 ------------- -------------- ------------ Total deposits 44,795 45,372 48,649 Federal funds purchased and securities sold under repurchase agreements 3,735 4,367 4,936 Bank notes and other short-term borrowings 5,549 6,040 6,957 Accrued expense and other liabilities 4,735 5,622 4,701 Long-term debt 14,554 15,114 14,161 Capital securities of subsidiary trusts 1,288 1,329 1,243 ------------- -------------- ------------ TOTAL LIABILITIES 74,656 77,844 80,647 SHAREHOLDERS' EQUITY 6,282 6,575 6,623 ------------- -------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $80,938 $84,419 $87,270 ============= ============== ============ Common shares outstanding (000) 424,005 423,427 423,254
KeyCorp Reports Fourth Quarter 2001 Results January 16, 2002 Page 11 CONSOLIDATED STATEMENTS OF INCOME (dollars in millions, except per share amounts)
THREE MONTHS ENDED ------------------------------------------------------------- 12-31-01 9-30-01 12-31-00 ---------------- ----------------- ---------------- INTEREST INCOME $1,210 $1,380 $1,652 INTEREST EXPENSE 510 656 950 ---------------- ----------------- ---------------- NET INTEREST INCOME 700 724 702 Provision for loan losses 723 116 108 ---------------- ----------------- ---------------- (23) 608 594 Noninterest income Trust and investment services income 137 140 150 Investment banking and capital markets income 6 46 94 Service charges on deposit accounts 106 107 85 Corporate-owned life insurance income 32 28 31 Letter of credit and loan fees 38 27 34 Net securities gains (losses) (1) 2 19 Gains from divestitures - - - Other income 100 104 95 ---------------- ----------------- ---------------- Total noninterest income 418 454 508 NONINTEREST EXPENSE Personnel 335 334 360 Net occupancy 59 60 55 Computer processing 65 62 62 Equipment 37 37 42 Marketing 25 31 28 Amortization of intangibles 23 22 25 Professional fees 25 26 19 Restructuring charges - - (7) Other expense 133 111 121 ---------------- ----------------- ---------------- Total noninterest expense 702 683 705 ---------------- ----------------- ---------------- INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES (307) 379 397 Income taxes (133) 130 131 ---------------- ----------------- ---------------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES (174) 249 266 Cumulative effect of accounting changes, net of tax - - - ---------------- ----------------- ---------------- NET INCOME (LOSS) $(174) $249 $266 ================ ================= ================ PER COMMON SHARE Income (loss) before cumulative effect of accounting changes $(.41) $.59 $.63 Net income (loss) (.41) .59 .63 PER COMMON SHARE-ASSUMING DILUTION Income (loss) before cumulative effect of accounting changes $(.41) $.58 $.62 Net income (loss) (.41) .58 .62 Weighted average common shares outstanding (000) 423,596 424,802 425,054 Weighted average common shares and potential common shares outstanding (000) 423,596 430,346 430,634 Taxable-equivalent adjustment $26 $6 $7
TWELVE MONTHS ENDED ----------------------------------- 12-31-01 12-31-00 ---------------- ---------------- INTEREST INCOME $5,627 $6,277 INTEREST EXPENSE 2,802 3,547 ---------------- ---------------- NET INTEREST INCOME 2,825 2,730 Provision for loan losses 1,350 490 ---------------- ---------------- 1,475 2,240 Noninterest income Trust and investment services income 550 608 Investment banking and capital markets income 189 372 Service charges on deposit accounts 387 341 Corporate-owned life insurance income 114 109 Letter of credit and loan fees 124 107 Net securities gains (losses) 35 (28) Gains from divestitures - 332 Other income 326 353 ---------------- ---------------- Total noninterest income 1,725 2,194 NONINTEREST EXPENSE Personnel 1,378 1,445 Net occupancy 232 223 Computer processing 252 240 Equipment 152 173 Marketing 112 110 Amortization of intangibles 245 101 Professional fees 88 89 Restructuring charges (4) 102 Other expense 486 434 ---------------- ---------------- Total noninterest expense 2,941 2,917 ---------------- ---------------- INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 259 1,517 Income taxes 102 515 ---------------- ---------------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 157 1,002 Cumulative effect of accounting changes, net of tax (25) - ---------------- ---------------- NET INCOME (LOSS) $ 132 $1,002 ================ ================ PER COMMON SHARE Income (loss) before cumulative effect of accounting changes $.37 $2.32 Net income (loss) .31 2.32 PER COMMON SHARE-ASSUMING DILUTION Income (loss) before cumulative effect of accounting changes $.37 $2.30 Net income (loss) .31 2.30 Weighted average common shares outstanding (000) 424,275 432,617 Weighted average common shares and potential common shares outstanding (000) 429,573 435,573 Taxable-equivalent adjustment $45 $28
KeyCorp Reports Fourth Quarter 2001 Results January 16, 2002 Page 12 Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates (dollars in millions)
Fourth Quarter 2001 Third Quarter 2001 -------------------------------------------------------------------------- Average Balance Interest Yield/Rate Average Balance Interest ---------------------------------------- ---------------------------- Assets Loans:(a,b) Commercial, financial and agricultural $18,462 $271 5.83 % $19,338 $324 Real estate - commercial mortgage 6,737 106 6.23 6,813 123 Real estate - construction 5,971 85 5.65 5,859 101 Commercial lease financing 7,109 128 7.18 6,995 117 ------------- ----------- ------------ ------------- ----------- Total commercial loans 38,279 590 6.12 39,005 665 Real estate - residential 2,384 44 7.46 3,826 71 Home equity 11,046 217 7.82 10,777 228 Consumer - direct 2,361 52 8.66 2,409 56 Consumer - indirect lease financing 2,210 47 8.55 2,557 54 Consumer - indirect other 5,359 128 9.51 5,494 132 ------------- ----------- ------------ ------------- ----------- Total consumer loans 23,360 488 8.32 25,063 541 Loans held for sale 2,113 34 6.48 2,130 38 ------------- ----------- ------------ ------------- ----------- Total loans 63,752 1,112 6.94 66,198 1,244 Taxable investment securities 904 4 1.86 925 8 Tax-exempt investment securities(a) 241 6 8.69 258 5 ------------- ----------- ------------ ------------- ----------- Total investment securities 1,145 10 3.30 1,183 13 Securities available for sale(a,c) 6,120 103 6.78 6,565 114 Short-term investments 1,689 11 2.55 1,741 15 ------------- ----------- ------------ ------------- ----------- Total earning assets 72,706 1,236 6.76 75,687 1,386 Allowance for loan losses (1,159) (1,204) Accrued income and other assets 10,920 10,396 ------------- ------------- Total assets $82,467 $84,879 ============= ============= Liabilities Money market deposit accounts $12,396 37 1.20 $12,522 55 Savings deposits 1,911 4 .79 1,936 5 NOW accounts 653 2 1.26 611 2 Certificates of deposit ($100,000 or more)(d) 4,788 61 5.08 4,800 67 Other time deposits 13,659 169 4.91 13,703 184 Deposits in foreign office 2,418 14 2.21 3,399 30 ------------- ----------- ------------ ------------- ----------- Total interest-bearing deposits 35,825 287 3.18 36,971 343 Federal funds purchased and securities sold under repurchase agreements 4,272 24 2.20 6,078 52 Bank notes and other short-term borrowings(d) 5,563 42 2.99 6,230 61 Long-term debt, including capital securities(d,e) 16,167 157 3.88 15,991 200 ------------- ----------- ------------ ------------- ----------- Total interest-bearing liabilities 61,827 510 3.28 65,270 656 ------------- ----------- ------------ ------------- ----------- Noninterest-bearing deposits 8,750 8,262 Accrued expense and other liabilities 5,341 4,848 ------------- ------------- Total liabilities 75,918 78,380 Shareholders' equity 6,549 6,499 ------------- ------------- Total liabilities and shareholders' equity $82,467 $84,879 ============= ============= Interest rate spread (TE) 3.48 % ============ Net interest income (TE) and net interest margin (TE) $726 3.98 % $730 =========== ============ =========== Capital securities $1,333 $21 $1,305 $21 Taxable-equivalent adjustment(a) 26 6
Third Quarter 2001 Fourth Quarter 2000 ------------------ --------------------------------------------- Yield/Rate Average Balance Interest Yield/Rate -------------- --------------------------------------------- Assets Loans:(a,b) Commercial, financial and agricultural 6.63 % $20,093 $451 8.92 % Real estate - commercial mortgage 7.20 6,855 162 9.42 Real estate - construction 6.87 5,164 129 9.97 Commercial lease financing 6.68 6,965 125 7.20 ------------ ------------- ----------- --------------- Total commercial loans 6.77 39,077 867 8.84 Real estate - residential 7.42 4,232 81 7.68 Home equity 8.38 9,591 228 9.45 Consumer - direct 9.34 2,582 69 10.57 Consumer - indirect lease financing 8.30 3,023 62 8.16 Consumer - indirect other 9.60 5,813 141 9.72 ------------ ------------- ----------- --------------- Total consumer loans 8.58 25,241 581 9.18 Loans held for sale 7.17 2,220 51 9.13 ------------ ------------- ----------- --------------- Total loans 7.47 66,538 1,499 8.98 Taxable investment securities 3.44 898 8 3.73 Tax-exempt investment securities(a) 8.65 344 8 8.73 ------------ ------------- ----------- --------------- Total investment securities 4.57 1,242 16 5.12 Securities available for sale(a,c) 6.99 6,807 121 7.02 Short-term investments 3.57 1,449 23 6.20 ------------ ------------- ----------- --------------- Total earning assets 7.29 76,036 1,659 8.69 Allowance for loan losses (989) Accrued income and other assets 10,380 ------------- Total assets $85,427 ============= Liabilities Money market deposit accounts 1.72 $11,873 103 3.44 Savings deposits 1.01 2,045 7 1.32 NOW accounts 1.41 600 2 1.55 Certificates of deposit ($100,000 or more)(d) 5.53 5,789 94 6.44 Other time deposits 5.33 15,037 232 6.15 Deposits in foreign office 3.57 3,265 54 6.60 ------------ ------------- ----------- --------------- Total interest-bearing deposits 3.68 38,609 492 5.07 Federal funds purchased and securities sold under repurchase agreements 3.37 5,859 93 6.33 Bank notes and other short-term borrowings(d) 3.95 6,446 101 6.22 Long-term debt, including capital securities(d,e) 4.97 15,235 264 6.91 ------------ ------------- ----------- --------------- Total interest-bearing liabilities 3.99 66,149 950 5.72 ------------ ------------- ----------- --------------- Noninterest-bearing deposits 8,363 Accrued expense and other liabilities 4,368 ------------- Total liabilities 78,880 Shareholders' equity 6,547 ------------- Total liabilities and shareholders' equity $85,427 ============= Interest rate spread (TE) 3.30 % 2.97 % ============ =============== Net interest income (TE) and net interest margin (TE) 3.85 % $709 3.71 % ============ =========== =============== Capital securities $1,243 $24 Taxable-equivalent adjustment(a) 7
(a) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory Federal income tax rate of 35%. (b) For purposes of these computations, nonaccrual loans are included in average loan balances. (c) Yield is calculated on the basis of amortized cost. (d) Rate calculation excludes basis adjustments related to fair value hedges. (e) Rate calculation excludes ESOP debt. TE = Taxable Equivalent -----END PRIVACY-ENHANCED MESSAGE-----