-----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, G+edt5g7Tw6/QVeVPMi9NUZpzpxxUZ6ttnLlW9ijKh4lg4M4GG/M/sTiuRS0Y8nR ZwwV64vqNWA/jYP8VImXgw== 0000950152-98-006028.txt : 19980720 0000950152-98-006028.hdr.sgml : 19980720 ACCESSION NUMBER: 0000950152-98-006028 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980716 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980717 SROS: NYSE 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: 98668191 BUSINESS ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 BUSINESS PHONE: 2166893000 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 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): July 16, 1998 [LOGO] [KEYCORP] - -------------------------------------------------------------------------------- (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 of incorporation or organization) Identification No.) 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 July 16, 1998, the Registrant issued a press release announcing its earnings results for the three-month and six-month periods ended June 30, 1998. This press release, dated July 16, 1998, is attached as Exhibit 99 to this report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits -------- 99 The Registrant's July 16, 1998, press release announcing its earnings results for the three-month and six-month periods ended June 30, 1998. 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: July 17, 1998 /s/ Lee Irving --------------------------------------- By: Lee Irving Executive Vice President and Chief Accounting Officer EX-99 2 EXHIBIT 99 1 EXHIBIT 99 MEDIA CONTACTS: ANALYST CONTACTS: Bill Murschel (216) 689-0457 Lee Irving (216) 689-3564 Mary Lou Ringle (216) 689-0456 Vern Patterson (216) 689-0520 WEB SITE: http://www.Key.com FOR IMMEDIATE RELEASE KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS - - NET INCOME UP 12 PERCENT FROM YEAR-AGO QUARTER - - FEE INCOME, COMMERCIAL LOAN GROWTH AND ASSET QUALITY CONTINUE TO BE STRONG CLEVELAND, July 16, 1998 -- KeyCorp (NYSE: KEY) today reported net income of $249 million for the second quarter of 1998, up 12 percent from $223 million in the second quarter of 1997. On a diluted per common share basis, Key's second quarter 1998 earnings were $0.56, amounting to a 10 percent increase from $0.51 recorded in the year-ago quarter. For the first six months of 1998, earnings were $484 million, or $1.09 per diluted common share, both amounts up 11 percent from $435 million, or $0.98, for the same period last year. Key's return on average equity was 18.5 percent, and return on average total assets was 1.35 percent for the second quarter of 1998, compared with 18.9 percent and 1.32 percent, respectively, for the second quarter of last year. For the first half of 1998, Key's returns on average equity and assets were 18.4 percent and 1.34 percent, respectively, compared with 18.5 percent and 1.31 percent for the first six months of 1997. "Key's second quarter featured strong growth in noninterest income, continued growth in commercial loans and strong asset quality," said Robert W. Gillespie, KeyCorp chairman and chief executive officer. "Growth occurred in nearly all major components of core noninterest income, achieving a 25 percent improvement over the year-ago second quarter. Commercial loans were up 19 percent from the 1997 second quarter, and lower net loan charge-offs permitted a reduction in the matching provision for loan losses. 2 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 2 "From a strategic perspective, we were extremely pleased to announce the agreement under which Key will acquire McDonald & Company Investments, Inc., a full-service investment banking and securities brokerage company. This acquisition creates a powerful business focused on providing capital markets, investment banking and asset management expertise to corporate and private clients. As with Key's earlier acquisitions of leasing and home equity businesses, the McDonald partnership resulted from our efforts to concentrate resources on product lines with potential for high returns and strong growth. We intend to continue our strategic focus on such opportunities, leveraged by Key's distinctive capabilities in technology, marketing and sales." Net interest income totaled $680 million in second quarter 1998, a $16 million increase from the prior quarter, although a decrease of 2 percent from $696 million in the second quarter of last year. Compared with the first quarter of 1998, net interest income improved by 2 percent, reflecting a $1.8 billion increase in average earning assets, while the net interest margin experienced a decline of 4 basis points to 4.19 percent. The 4 basis point decline was the smallest quarterly change in the net interest margin since the fourth quarter of 1996. The decrease in net interest income from the second quarter of 1997 reflected a 50 basis point reduction in the net interest margin, which more than offset a 9 percent increase in average earning assets to $65.8 billion. Noninterest income for the second quarter of 1998 was $380 million, up substantially from the $288 million reported for the year-ago quarter. Excluding branch divestiture gains of $33 million and $10 million recorded in the second quarter of 1998 and 1997, respectively, noninterest income increased by $69 million, or 25 percent, and comprised 34 percent of total revenue for the quarter, compared with 29 percent in the year-ago quarter. The largest increases came from various investment banking and capital markets activities and trust and asset management. Key did not execute a planned securitization of certain home equity loans during the second quarter of 1998, reflecting a decision to retain most of these loans due to their attractive yield and risk profile. Excluding branch sale gains, noninterest income for the first six months of 1998 was up $160 million, or 30 percent, from the same period last year. Noninterest expense totaled $616 million for the second quarter of 1998, up $34 million, or 6 percent, from the year-ago quarter. Personnel expense contributed the largest increase due largely to the impact of acquisitions completed in the third quarter of 1997, merit increases which took effect on April 1, 1998, and higher costs associated with various incentive programs, including those related to investment banking and capital markets activities. Compared with the first quarter of 1998, noninterest expense increased by $16 million. For the first six months of 1998, noninterest 3 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 3 expense rose $59 million, or 5 percent, from the comparable 1997 period, including a $7 million increase in costs incurred to be Year 2000 compliant. The provision for loan losses for the 1998 second quarter was reduced to $72 million from $77 million in the first quarter in response to a similarly lower level of net charge-offs. Net loan charge-offs of $72 million, or 0.51 percent of average loans outstanding for the quarter, were down from $77 million, or 0.58 percent, for the prior quarter. Key's capital ratios continue to exceed all "well-capitalized" benchmarks. In addition, its tangible equity to tangible assets ratio (including capital securities receiving Tier 1 treatment) continued to improve, reaching 6.91 percent as of June 30, 1998, compared with 6.51 percent last quarter and 6.39 percent a year earlier. This improvement was due in part to the second quarter 1998 issuance of an additional $247 million of capital securities receiving Tier 1 treatment. The number of shares acquired during the second quarter of 1998 under Key's share repurchase authorization was not significant. - -------------------------------------------------------------------------------- This news release contains forward-looking statements which 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 economic scenario from the current anticipated scenario which could materially change anticipated credit quality trends and the ability to generate loans; significant delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; consummation of significant business combinations or divestitures; unforeseen business risks related to Year 2000 computer systems issues; and significant changes in accounting, tax, or regulatory practices or requirements. - -------------------------------------------------------------------------------- # # # 4 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 4 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
Three months ended -------------------------------------------------------- 6-30-98 3-31-98 6-30-97 ------------- --------------- ----------- SUMMARY OF OPERATIONS Net interest income (TE) $689 $673 $707 Provision for loan losses 72 77 75 Noninterest income 380 356 288 Noninterest expense 616 600 582 Net income 249 235 223 PER COMMON SHARE Net income $.57 $.53 $.51 Net income - assuming dilution .56 .53 .51 Cash dividends .235 .235 .21 Book value at period end 12.55 12.15 11.02 Market price at period end 35.63 37.81 27.94 AT PERIOD END Full-time equivalent employees 24,711 24,650 25,882 Full-service banking offices 962 1,006 1,130 PERFORMANCE RATIOS Return on average total assets 1.35% 1.32% 1.32% Return on average equity 18.47 18.25 18.85 Efficiency(1) 58.22 57.39 57.66 Overhead(2) 37.30 35.36 41.02 Net interest margin (TE) 4.19 4.23 4.69 CAPITAL RATIOS AT PERIOD END Equity to assets(3) 8.28% 7.98% 7.63% Tangible equity to tangible assets(3) 6.91 6.51 6.39 Tier 1 risk-adjusted capital(4) 6.86 6.81 7.14 Total risk-adjusted capital(4) 11.38 11.38 11.66 Leverage(4) 7.04 6.61 6.65 (1) Calculated as noninterest expense (excluding certain nonrecurring charges and distributions on capital securities) divided by taxable-equivalent net interest income plus noninterest income (excluding net securities transactions and gains from branch divestitures). (2) Calculated as noninterest expense (excluding certain nonrecurring charges and distributions on capital securities) less noninterest income (excluding net securities transactions and gains from branch divestitures) divided by taxable-equivalent net interest income. (3) Excluding capital securities receiving Tier 1 treatment, these ratios at 6-30-98 are 7.29% and 5.91%, respectively; at 3-31-98 are 7.29% and 5.81%, respectively; and at 6-30-97 are 6.91% and 5.67%, respectively. (4) 6-30-98 ratio is estimated. TE = Taxable Equivalent
5 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 5 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
Three months ended ------------------------------------------------------ 6-30-98 3-31-98 6-30-97 --------------- --------------- ------------ ASSET QUALITY Net loan charge-offs $72 $77 $65 Net loan charge-offs to average loans .51% .58% .52% Allowance for loan losses $900 $900 $880 Allowance for loan losses to period end loans 1.56% 1.64% 1.70% Allowance for loan losses to nonperforming loans 240.64 241.29 236.56 Nonperforming loans at period end $374 $373 $372 Nonperforming assets at period end 417 421 433 Nonperforming loans to period end loans .65% .68% .72% Nonperforming assets to period end loans plus OREO and other nonperforming assets .72 .77 .84 Six months ended --------------------------------- SUMMARY OF OPERATIONS 6-30-98 6-30-97 ------------- ------------ Net interest income (TE) $1,362 $1,407 Provision for loan losses 149 142 Noninterest income 736 547 Noninterest expense 1,216 1,157 Net income 484 435 PER COMMON SHARE Net income $1.10 $.99 Net income - assuming dilution 1.09 .98 Cash dividends .47 .42 PERFORMANCE RATIOS Return on average total assets 1.34% 1.31% Return on average equity 18.36 18.46 Efficiency(1) 57.81 58.28 Overhead(2) 36.34 42.36 Net interest margin (TE) 4.21 4.72 ASSET QUALITY Net loan charge-offs $149 $132 Net loan charge-offs to average loans .54% .54%
6 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 6 CONSOLIDATED BALANCE SHEETS (dollars in millions)
ASSETS 6-30-98 3-31-98 6-30-97 --------- --------- ---------- Loans $57,769 $54,900 $51,644 Investment securities 1,038 1,182 1,484 Securities available for sale 6,482 7,115 7,727 Short-term investments 1,652 1,171 653 --------- --------- --------- Total earning assets 66,941 64,368 61,508 Allowance for loan losses (900) (900) (880) Cash and due from banks 3,050 3,287 2,911 Premises and equipment 894 924 1,025 Goodwill 1,028 1,052 795 Other intangible assets 88 99 123 Corporate owned life insurance 1,945 1,921 1,562 Other assets 2,732 2,447 2,628 --------- --------- --------- TOTAL ASSETS $75,778 $73,198 $69,672 ========= ========= ========= LIABILITIES Deposits in domestic offices: Noninterest-bearing $8,967 $9,083 $9,519 Interest-bearing 31,262 32,253 33,655 Deposits in foreign offices-interest-bearing 1,565 325 1,452 --------- --------- --------- Total deposits 41,794 41,661 44,626 Federal funds purchased and securities sold under repurchase agreements 6,828 6,468 6,830 Bank notes and other short-term borrowings 7,855 7,442 5,447 Other liabilities 2,583 2,498 2,023 Long-term debt 10,196 9,041 5,182 --------- --------- --------- TOTAL LIABILITIES 69,256 67,110 64,108 Capital securities of subsidiary trusts 997 750 750 SHAREHOLDERS' EQUITY 5,525 5,338 4,814 TOTAL LIABILITIES, CAPITAL SECURITIES OF SUBSIDIARY TRUSTS AND --------- --------- --------- SHAREHOLDERS' EQUITY $75,778 $73,198 $69,672 ========= ========= ========= Common Shares outstanding (000) 440,352(1) 439,315(1) 218,380 (1) Adjusted to reflect the impact of a two-for-one stock split declared January 15, 1998, effected by means of a 100% stock dividend paid March 6, 1998.
7 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 7 CONSOLIDATED STATEMENTS OF INCOME (dollars in millions, except per share amounts)
Three months ended ----------------------------------------------- 6-30-98 3-31-98 6-30-97 ---------- --------- --------- INTEREST INCOME $1,372 $1,327 $1,295 INTEREST EXPENSE 692 663 599 -------- -------- -------- NET INTEREST INCOME 680 664 696 Provision for loan losses 72 77 75 -------- -------- -------- 608 587 621 NONINTEREST INCOME Service charges on deposit accounts 75 78 74 Trust and asset management income 80 77 64 Investment banking and capital markets income 50 47 21 Credit card fees 17 15 25 Insurance and brokerage income 24 22 21 Corporate owned life insurance income 24 23 21 Loan securitization income 8 10 3 Net securities gains 2 2 -- Gains from sales of branches/subsidiaries 33 29 10 Other income 67 53 49 ---------------------------------------------- Total noninterest income 380 356 288 NONINTEREST EXPENSE Personnel 302 294 283 Net occupancy 56 56 54 Equipment 45 43 44 Amortization of intangibles 22 23 21 Marketing 28 28 22 Professional fees 15 17 13 Other expense 148 139 145 -------- -------- -------- Total noninterest expense 616 600 582 -------- -------- -------- INCOME BEFORE INCOME TAXES 372 343 327 Income taxes 123 108 104 -------- -------- -------- NET INCOME $249 $235 $223 ======== ======== ======== Net income per Common Share $.57 $.53 $.51 Net income per Common Share - assuming dilution .56 .53 .51 Wtd. avg. Common Shares (000) 440,092 438,589 437,946 Wtd. avg. Common Shares and potential Common Shares (000) 446,568 444,836 442,480 Taxable-equivalent adjustment $9 $9 $11
8 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 8 CONSOLIDATED STATEMENTS OF INCOME (dollars in millions, except per share amounts)
Six months ended -------------------------------- 6-30-98 6-30-97 ---------- --------- INTEREST INCOME $2,699 $2,550 INTEREST EXPENSE 1,355 1,165 -------- -------- NET INTEREST INCOME 1,344 1,385 Provision for loan losses 149 142 -------- -------- 1,195 1,243 NONINTEREST INCOME Service charges on deposit accounts 153 145 Trust and asset management income 157 128 Investment banking and capital markets income 97 39 Credit card fees 32 48 Insurance and brokerage income 46 42 Corporate owned life insurance income 47 40 Loan securitization income 18 4 Net securities gains 4 -- Gains from sales of branches/subsidiaries 62 10 Other income 120 91 -------- -------- Total noninterest income 736 547 NONINTEREST EXPENSE Personnel 596 573 Net occupancy 112 110 Equipment 88 87 Amortization of intangibles 45 42 Marketing 56 43 Professional fees 32 24 Other expense 287 278 -------- -------- Total noninterest expense 1,216 1,157 -------- -------- INCOME BEFORE INCOME TAXES 715 633 Income taxes 231 198 -------- -------- NET INCOME $484 $435 ======== ======== Net income per Common Share $1.10 $.99 Net income per Common Share - assuming dilution 1.09 .98 Wtd. avg. Common Shares (000) 439,345 440,628 Wtd. avg. Common Shares and potential Common Shares (000) 445,707 445,504 Taxable-equivalent adjustment $18 $22
9 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 9 CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS (in millions)
Three months ended ------------------------------------------------- ASSETS 6-30-98 3-31-98 6-30-97 --------- --------- --------- Loans $56,441 $53,946 $50,373 Investment securities 1,141 1,196 1,601 Securities available for sale 6,765 7,457 7,822 Short-term investments 1,422 1,350 497 -------- -------- -------- Total earning assets 65,769 63,949 60,293 Allowance for loan losses (888) (889) (866) Cash and due from banks 2,574 2,621 2,556 Other assets 6,611 6,441 5,795 -------- -------- -------- TOTAL ASSETS $74,066 $72,122 $67,778 ======== ======== ======== LIABILITIES Deposits in domestic offices: Noninterest-bearing $8,328 $8,409 $8,432 Interest-bearing 31,928 31,980 34,072 Deposits in foreign offices-interest-bearing 1,095 1,245 2,361 -------- -------- -------- Total deposits 41,351 41,634 44,865 Federal funds purchased and securities sold under repurchase agreements 6,773 7,117 6,461 Bank notes and other short-term borrowings 7,710 6,683 4,350 Other liabilities 2,547 2,390 1,998 Long-term debt 9,511 8,326 4,772 -------- -------- -------- TOTAL LIABILITIES 67,892 66,150 62,446 Capital securities of subsidiary trusts 766 750 588 SHAREHOLDERS' EQUITY 5,408 5,222 4,744 TOTAL LIABILITIES, CAPITAL SECURITIES OF SUBSIDIARY TRUSTS AND -------- -------- -------- SHAREHOLDERS' EQUITY $74,066 $72,122 $67,778 ======== ======== ========
10 KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS JULY 16, 1998 PAGE 10 CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS (in millions)
Six months ended ----------------------------------- ASSETS 6-30-98 6-30-97 ---------- ---------- Loans $55,200 $49,797 Investment securities 1,168 1,609 Securities available for sale 7,109 7,811 Short-term investments 1,387 454 -------- -------- Total earning assets 64,864 59,671 Allowance for loan losses (888) (867) Cash and due from banks 2,597 2,559 Other assets 6,526 5,707 -------- -------- TOTAL ASSETS $73,099 $67,070 ======== ======== LIABILITIES Deposits in domestic offices: Noninterest-bearing $8,368 $8,420 Interest-bearing 31,954 34,158 Deposits in foreign offices-interest-bearing 1,170 1,759 -------- -------- Total deposits 41,492 44,337 Federal funds purchased and securities sold under repurchase agreements 6,944 6,743 Bank notes and other short-term borrowings 7,199 4,132 Other liabilities 2,469 1,933 Long-term debt 8,922 4,630 -------- -------- TOTAL LIABILITIES 67,026 61,775 Capital securities of subsidiary trusts 758 544 SHAREHOLDERS' EQUITY 5,315 4,751 TOTAL LIABILITIES, CAPITAL SECURITIES OF SUBSIDIARY TRUSTS AND -------- -------- SHAREHOLDERS' EQUITY $73,099 $67,070 ======== ========
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