FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________to ______________
Commission File Number 0-11460
KEYSTONE FINANCIAL, INC.
Pennsylvania 23-2289209
(State of Incorporation) (IRS Employer I.D. No.)
ONE KEYSTONE PLAZA
FRONT & MARKET STREETS
P.O. BOX 3660
HARRISBURG, PA 17105-3660
(Address of principal executive offices)
(717) 231-1555
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X or No_______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock ($2 par value): 38,005,429 as of October 31, 1996.
<PAGE>
KEYSTONE FINANCIAL, INC.
INDEX PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Condition - September 30, 1996
and December 31, 1995 3
Consolidated Statements of Income - Three months ended
September 30, 1996 and 1995 and nine months ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Items 1,2,3,4 and 5 have been omitted since they are not
applicable to the registrant.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits 15
(b) Reports on Form 8-K
During the quarter ended September 30, 1996, the registrant
filed a report on Form 8-K dated July 19, 1996 reporting
under Item 5 earnings for the quarter ended June 30, 1996.
On July 25, 1996, the registrant filed a report on Form 8-K
reporting under Item 5 an announcement of a three-for-two
stock split and declaration of the regular quarterly cash
dividend.
Signatures 16
<PAGE>
CONSOLIDATED STATEMENTS OF CONDITION
September 30, December 31,
1996 1995
___________________________________________________________________________
ASSETS (in thousands) (UNAUDITED) (NOTE)
___________________________________________________________________________
Cash and due from banks $164,954 $182,459
Federal funds sold and other 46,772 109,422
Investment securities available
for sale 879,010 837,910
Investment securities held to
maturity(market values
1996-$378,672; 1995-$393,835) 377,999 385,262
Assets held for resale 99,455 57,454
Loans and leases 3,481,937 3,365,716
Allowance for credit losses (44,495) (44,377)
_________________________________________________________________________
Net Loans 3,437,442 3,321,339
Premises and equipment 73,183 70,888
Other assets 107,314 110,051
__________________________________________________________________________
TOTAL ASSETS $5,186,129 $5,074,785
==========================================================================
LIABILITIES
__________________________________________________________________________
Noninterest-bearing deposits $521,449 $532,663
Interest-bearing deposits 3,589,654 3,529,225
__________________________________________________________________________
Total Deposits 4,111,103 4,061,888
Fed Funds purchased and security
repurchase agreements 267,433 260,543
Other short-term borrowings 33,434 19,298
__________________________________________________________________________
Total Short-Term Borrowings 300,867 279,841
FHLB borrowings 169,786 163,771
Long-term debt 2,518 4,048
Other liabilities 99,276 84,543
__________________________________________________________________________
TOTAL LIABILITIES 4,683,550 4,594,091
__________________________________________________________________________
SHAREHOLDERS' EQUITY
__________________________________________________________________________
Preferred stock; $1.00 par value,
authorized 8,000,000 shares;
none issued or outstanding
Common stock: $2.00 par value,
authorized 50,000,000; issued
38,182,896 - 1996 and
25,256,369 - 1995 76,366 50,512
Surplus 72,382 93,177
Retained earnings 360,170 337,557
Deferred KSOP benefit expense (1,375) (1,750)
Treasury stock: 1996 - 18,000 shares
at cost (441) ---
Net unrealized securities gains
(losses) net of tax (4,523) 1,198
__________________________________________________________________________
TOTAL SHAREHOLDERS' EQUITY 502,579 480,694
__________________________________________________________________________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $5,186,129 $5,074,785
==========================================================================
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
___________________________________________________________________
Three Months Ended
September 30,
1996 1995
(unaudited)
___________________________________________________________________
INTEREST INCOME
___________________________________________________________________
Loans and fees on loans $74,802 $72,153
Investments - taxable 16,675 13,464
Investments - tax exempt 1,905 2,056
Federal funds sold & other 1,621 2,965
Assets held for resale 1,596 788
___________________________________________________________________
96,599 91,426
___________________________________________________________________
INTEREST EXPENSE
___________________________________________________________________
Deposits 39,272 37,178
Short-term borrowings 3,078 2,583
FHLB borrowings 2,267 3,003
Long-term debt 83 166
___________________________________________________________________
44,700 42,930
___________________________________________________________________
NET INTEREST INCOME 51,899 48,496
Provision for credit losses 2,312 2,160
___________________________________________________________________
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 49,587 46,336
___________________________________________________________________
NONINTEREST INCOME
___________________________________________________________________
Trust and investment advisory fees 3,751 2,831
Service charges on deposit accounts 3,667 3,269
Mortgage banking income 1,853 1,802
Fee income 3,514 3,329
Reinsurance income 551 460
Other income 2,037 1,421
Net gains-equity securities --- 1
Net gains-debt securities --- 5
___________________________________________________________________
15,373 13,118
NONINTEREST EXPENSE
_________________________________________________________________
Salaries 17,852 15,260
Employee benefits 3,065 2,618
Occupancy expense (net) 3,324 3,209
Furniture and equipment expense 3,536 3,065
Deposit insurance 198 142
Other expense 12,806 12,512
___________________________________________________________________
40,781 36,806
___________________________________________________________________
Income before income taxes 24,179 22,648
Income tax expense 7,154 7,215
___________________________________________________________________
NET INCOME $17,025 $15,433
___________________________________________________________________
PER SHARE DATA *
___________________________________________________________________
Net income $0.45 $0.43
Average number of shares outstanding 38,164,065 35,352,675
Dividends $0.24 $0.23
___________________________________________________________________
* Restated for the three-for-two stock split declared in 1996.
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
_________________________________________________________________
Nine Months Ended
September 30,
1996 1995
(unaudited)
_________________________________________________________________
INTEREST INCOME
_________________________________________________________________
Loans and fees on loans $224,617 $214,325
Investments - taxable 48,541 42,369
Investments - tax exempt 5,604 6,360
Federal funds sold & other 4,488 6,023
Assets held for resale 3,360 1,208
_________________________________________________________________
286,610 270,285
_________________________________________________________________
INTEREST EXPENSE
_________________________________________________________________
Deposits 113,852 107,350
Short-term borrowings 8,430 7,449
FHLB borrowings 7,138 8,157
Long-term debt 265 384
_________________________________________________________________
129,685 123,340
_________________________________________________________________
NET INTEREST INCOME 156,925 146,945
Provision for credit losses 6,336 6,502
_________________________________________________________________
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 150,589 140,443
_________________________________________________________________
NONINTEREST INCOME
_________________________________________________________________
Trust and investment advisory fees 11,158 9,186
Service charges on deposit accounts 10,818 9,719
Mortgage banking income 5,537 4,828
Fee income 10,315 9,059
Reinsurance income 1,675 1,542
Other income 6,078 2,243
Net gains-equity securities 201 104
Net gains-debt securities 352 288
_________________________________________________________________
46,134 36,969
NONINTEREST EXPENSE
_________________________________________________________________
Salaries 51,642 45,251
Employee benefits 9,959 8,378
Occupancy expense (net) 10,141 9,577
Furniture and equipment expense 10,296 9,070
Deposit insurance 584 4,437
Other expense 39,175 35,583
_________________________________________________________________
121,797 112,296
_________________________________________________________________
Income before income taxes 74,926 65,116
Income tax expense 23,311 20,006
_________________________________________________________________
NET INCOME $51,615 $45,110
_________________________________________________________________
PER SHARE DATA *
_________________________________________________________________
Net income $1.36 $1.28
Average number of shares outstanding 38,046,244 35,233,136
Dividends $0.72 $0.68
__________________________________________________________________
* Restated for the three-for-two stock split declared in 1996.
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)
Nine Months Ended
September 30,
1996 1995
(in thousands)
____________________________________________________________________________
OPERATING ACTIVITIES:
Net Income $51,615 $45,110
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for credit losses 6,336 6,502
Provision for depreciation & amortization 9,780 8,972
Deferred income taxes 10,111 7,506
Sale of assets held for resale 326,342 116,682
Origination of assets held for resale (389,207) (113,117)
Decrease in interest receivable 668 1,344
Increase in interest payable 8,175 11,455
Other 153 (18,828)
_____________________________________________________________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,973 65,626
_____________________________________________________________________________
INVESTING ACTIVITIES:
Net decrease in interest-earning deposits 7,450 5,761
Available for sale securities:
Sales 67,214 85,164
Maturities 867,856 430,275
Purchases (986,404) (428,088)
Held to maturity securities:
Maturities 96,445 82,077
Purchases (89,279) (30,878)
Net increase in loans (136,181) (68,737)
Proceeds from sales of loans 36,756 19,272
Purchase of loans --- (19,756)
Purchases of premises and equipment (10,558) (9,680)
Other (716) 56
____________________________________________________________________________
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES (147,417) 65,466
____________________________________________________________________________
FINANCING ACTIVITIES:
Net increase in deposits 49,215 20,307
Net increase (decrease) in short-term borrowings 21,026 (12,296)
Proceeds from FHLB borrowings 254,420 133,352
Repayments of FHLB borrowings (248,405) (107,169)
Net decrease in long-term debt (1,530) (1,563)
Acquisition of treasury stock (441) (3,229)
Cash dividends (28,980) (23,948)
Other 5,434 7,597
____________________________________________________________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES 50,739 13,051
____________________________________________________________________________
INCREASE (DECREASE)IN CASH AND
CASH EQUIVALENTS (72,705) 144,143
Cash and cash equivalents at beginning of
period 258,659 204,942
____________________________________________________________________________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $185,954 $349,085
____________________________________________________________________________
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Notes To Consolidated
Financial Statements
BASIS OF PRESENTATION
- ---------------------
The accompanying unaudited consolidated financial statements for
the interim periods do not include all of the information and
footnotes required by generally accepted accounting principles.
However, in the opinion of management, all adjustments necessary
for a fair presentation have been included, and such adjustments
were of a normal recurring nature.
Operating results for the nine-month period ended September 30,
1996 are not necessarily indicative of the results that may be
expected for 1996.
For further information, refer to the audited consolidated
financial statements, footnotes thereto, and the Financial Review
for the year ended December 31, 1995, as contained in the Annual
Report to Shareholders.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The purpose of this review is to provide additional information
necessary to fully understand the consolidated financial condition
and results of operations of Keystone Financial, Inc. (Keystone).
Throughout this review, net interest income and the yield on
earning assets are stated on a fully taxable-equivalent basis. In
addition, balances represent daily average balances, unless
otherwise indicated.
SUMMARY
Keystone's profit performance for the quarter ended September 30,
1996, exceeded results from the comparable period of 1995. Net
income and earnings per share reached $17,025,000 and $0.45,
respectively, compared to $15,433,000 and $0.43 (restated for the
three-for-two stock split) in the third quarter of 1995. Third
quarter results produced return on average assets of 1.32% and
return on average equity of 13.63%.
Performance for the first nine months of 1996 exhibited similar
improvement as net income rose to $51,615,000 from $45,110,000 in
1995. Earnings per share were $1.36 and $1.28 (restated for the
three-for-two stock split), respectively, for the same periods, a
6.3% increase.
By comparison to 1995, results for 1996 have continued to be
favorably affected by revenue expansion strategies. During the
quarter, Keystone completed its acquisition of Key Investor
Services, and now offers its full range of investments including
fixed annuities, variable annuities, and mutual funds directly
through Keystone's existing distribution channels. This
acquisition, combined with steady performance from Martindale
Andres & Co. (asset management services) and Keystone Financial
Mortgage Company (mortgage banking), boosted noninterest revenues
by 17% on a quarter-to-quarter basis.
Excluding the impact of acquisitions, aggregate noninterest
expenses continued to moderate. Salary expenses grew as a result
of employees added from the 1995 mergers, the acquisition of Key
Investor and start up activities for the Phone Center, all of which
are reflective of Keystone's efforts to expand its distribution
channels. Keystone's ratio of noninterest expenses to revenue
remained below 60%.
While performance results in 1996 exceeded those of the prior year,
third quarter results were slightly below those achieved in the
second quarter of this year. Net income declined from $17,733,000
in the second quarter to $17,025,000, while earnings per share
receded from $0.47 to $0.45. Results between the second and third
quarter were influenced by the impact of rising interest rates on
deposits and by intense pricing competition on loans. Deposit costs,
which are closely tied to movements in the treasury curve, rose from
the second quarter while the prime rate, a significant driver of
loan yields, remained stable. While these factors served to compress
net interest spread in the third quarter, more recent trends reflect
a general decline in treasury rates, which may reduce deposit costs
and restore more favorable spreads.
<PAGE>
Keystone's delinquency trends began to exhibit signs of
stabilization in the third quarter. Through the first six months
of 1996, banks throughout the country had experienced increases in
delinquent consumer loan categories.
AVERAGE STATEMENT OF CONDITION
The average balance sheets for the nine-months ended September 30,
1996 and 1995 were as follows (in thousands):
Change
1996 1995 Volume %
___________________________________________________________________
Cash and due from banks $149,111 $151,107 $(1,996) (1)%
Federal funds sold and
other 112,801 133,251 (20,450) (15)
Investments 1,189,486 1,068,899 120,587 11
Assets held for resale 57,184 21,350 35,834 168
Loans 3,394,826 3,253,551 141,275 4
Allowance for credit losses (44,999) (44,039) (960) (2)
___________________________________________________________________
Net loans 3,349,827 3,209,512 140,315 4
Other assets 166,597 144,338 22,259 15
___________________________________________________________________
TOTAL ASSETS $5,025,006 $4,728,457 $296,549 6%
___________________________________________________________________
Noninterest-bearing deposits $496,730 $469,101 $27,629 6%
Interest-bearing deposits 3,539,617 3,363,682 175,935 5
Short-term borrowings 259,540 202,403 57,137 28
FHLB borrowings 147,163 180,177 (33,014) (18)
Other liabilities 93,654 84,838 8,816 10
___________________________________________________________________
TOTAL LIABILITIES 4,536,704 4,300,201 236,503 5
___________________________________________________________________
SHAREHOLDERS' EQUITY 488,302 428,256 60,046 14
___________________________________________________________________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $5,025,006 $4,728,457 $296,549 6%
___________________________________________________________________
Loan growth during the period was affected by the impact of late
1995 mergers, the securitization and sale of both consumer mortgages
and indirect loans, and the first quarter 1996 sale of the credit card
portfolio. These activities are a result of Keystone's continued pro-
active management of its balance sheet and use of capital. Excluding
these factors, core growth approximated 5% and occurred primarily in
consumer loans and leases. On the funding side, the most notable growth
occurred in the variable rate CD, which provides customers with flexible
liquidity and pricing options.
<PAGE>
NET INTEREST INCOME
The following table summarizes, on a fully taxable equivalent
basis, changes in net interest income and net interest margin for
the nine months ended September 30, 1996 and 1995 (in thousands):
1996 1995 INCREASE/
(DECREASE)
YIELD/ YIELD/ YIELD/
AMOUNT RATE AMOUNT RATE AMOUNT RATE
_______________________________________________________________________________
Interest Income $290,239 8.14% $274,591 8.19% $15,648 (0.05)
Interest Expense 129,685 4.39 123,340 4.40 6,345 (0.01)
_______________________________________________________________________________
Net Interest Income $160,554 $151,251 $ 9,303*
Interest Spread 3.75% 3.79% (0.04)
Impact of Noninterest
Funds 0.74 0.71 0.03
_______________________________________________________________________________
Net Interest Margin 4.49% 4.50% (0.01)
_______________________________________________________________________________
*The change in net interest income consisted primarily of favorable volume
variances.
Keystone's primary source of revenue is net interest income, which
represents the difference between interest income on earning assets
and interest expense on deposits and other borrowed funds.
Competitive pressures on loan pricing reduced earning asset yields
while funding costs remained stable with 1995.
Interest income grew by 6% despite the decrease in overall asset
yields from 8.19% in 1995 to 8.14% for the nine months ended
September 30, 1996. The growth in interest income was attributable
to an overall growth in both loans and earning assets, including
those added in the late 1995 mergers. Loan growth continues to
occur in consumer credit, principally in the area of leases and
home equity loans.
Interest expense grew 5% in 1996 while the cost of funds remained
stable at 4.39% compared to 4.40% for the first three quarters of
1995. Similar to the growth in interest income, the growth in
interest expense was influenced by deposits added in late 1995
mergers.
As a result primarily of the growth in the balance sheet
attributable to both the mergers and core growth, net interest
income grew $9,303,000, or 6%, during the period ended September
30, 1996. Net interest spread, or the difference between earning
asset yield and the cost of funds declined four basis points and
was substantially offset by the positive impact of noninterest
funding sources. Accordingly, net interest margin remained
relatively constant at 4.49% compared to 4.50% in 1995.
<PAGE>
NONINTEREST INCOME
The most dramatic improvement in financial performance occurred in
total noninterest income, which increased $9,165,000 or 25% for the
first three quarters of 1996 compared to the same period in 1995.
The rate of growth is consistent with Keystone's strategic goals of
providing a full-range of financial and investment services as well
as continued efforts on expanding fee income.
Due to a 23% increase in assets under management from September 30,
1995 to the same period in 1996, trust and investment advisory fees
increased from $9,186,000 year-to-date 1995 to $11,158,000 in 1996.
The fourth quarter 1995 acquisition of Martindale Andres & Company
contributed to approximately half of the increase in assets under
management.
Service charges on deposit accounts and fee income, which increased
11% and 14% respectively, benefitted from late 1995 mergers. Fee
income, which includes ATM charges, should continue to grow as the
number of ATM machines operated by Keystone increased 86% in the
third quarter due to the agreement with Sheetz convenience stores.
Mortgage banking income generated by Keystone Financial Mortgage
Corporation increased 14% for the nine months ended September 30,
1996. End of period mortgage loans "serviced for others" increased
9% from $510 million at September 30, 1995 to $555 million at the
end of the third quarter of 1996.
Other income increased $3,835,000 from $2,243,000 year-to-date 1995
to $6,078,000 in 1996. The current year results include a $2
million gain on the sale of the credit card portfolio. In
addition, late in 1995, Keystone began securitizing and selling
indirect loans. The remaining increase in other income is
primarily due to the servicing income stream generated by these
securitizations, of which the balance serviced grew from $60
million at December 31, 1995, to $108 million at September 30,
1996. This income stream should continue to increase as additional
loans are securitized and serviced.
NONINTEREST EXPENSES
Through September 30, 1996, total noninterest expenses reached
$121,797,000 compared to $112,296,000 for the same period in 1995,
an increase of $9,501,000 or 8%. The benefit of reduced FDIC
insurance premiums was offset by increased expenses from the late
1995 mergers and acquisition.
Salary expense increased 14% on a year-to-date basis, as the number
of average full-time equivalent employees (FTE's) increased 6% or
from 2,318 for the first nine months in 1995 to 2,446 for the same
period in 1996. The increase in average FTE's was due to merger
and acquisition activity in late 1995, and the start-up of the
phone banking center and Key Investor Services, both in the second
quarter of 1996. In addition to the increase in FTE's, salary
expense was impacted by annual merit increases and higher
performance-based compensation including a newly adopted long-term
<PAGE>
incentive plan designed to maximize shareholder value, attract and
retain qualified employees and recognize and reward contributions
to the business.
Benefit expenses grew substantially compared to 1995. Keystone had
realized the benefits of favorable claims experience in earlier
periods which had reduced benefit expenses during 1995. Expenses
during 1996 were also affected by the growth in the level of
full-time equivalent employees as well as a general increase in
medical and insurance costs.
Growth in both occupancy and equipment expenses was also related to
the cost of facilities and equipment added in the late 1995 mergers
and to Keystone's continuing investment in office reconfiguration
initiatives and improvements to its delivery channels. Keystone
will continue to make investments in expanding its ability to
provide convenient and cost-effective customer delivery channels
through initiatives such as the Key Call Center and office
reconfiguration.
The reduction in FDIC insurance premiums served to mitigate
increases in overall expenses as premiums declined $3,853,000
during 1996. On September 30, 1996, the Deposit Insurance Funds
Act of 1996 was enacted which provided for resolution of the
capitalization of the Savings Association Insurance Fund (SAIF).
Keystone, which has acquired a limited amount of SAIF-insured
deposits, incurred no material insurance assessment.
Other expenses were affected by increased marketing and merchant
card costs, both of which were associated with revenue expansion
efforts; higher supplies expense due to converting acquired banks
to Keystone's letterhead, and various nonrecurring expense accruals
which occurred in the first quarter of 1996.
ASSET QUALITY
Keystone's allowance for credit losses at $44,495,000 was
comparable to the allowance of $44,377,000 recorded at the end of
1995. The ratio of the allowance to loans declined slightly from
1.32% at December 31, 1995, to 1.28% at September 30, 1996, while
the ratio of annualized net charge offs to loans remained
relatively constant at .24% for the first nine months of 1996
versus .21% for all of 1995.
Keystone did experience an increase in the ratio of total risk
elements to loans from 1.22% at the end of 1995 to 1.29% at
September 30, 1996. This increase, which occurred primarily in the
second quarter of 1996 in the 90-days past due consumer loan
category, was attributable to two major factors. Keystone has been
affected by many of the national trends influencing consumer
delinquency which contributed not only to the increase in 90-days
past due but also to increases in less severe past-due loan
categories. Additionally, Keystone consolidated its collection
function during the first half of 1996 in order to realize both
cost efficiencies and the benefits associated with improved
collection technology. During this period, delinquency trends were
affected by the initial disruption normally associated with
consolidation. During the third quarter, total risk elements
declined slightly. Keystone continuously monitors changes in its
delinquency trends.
<PAGE>
The following table has been provided to compare nonperforming
assets and total risk elements at September 30, 1996 to the
balances at the end of 1995, in both absolute dollars and as a
percentage of loans. This presentation is supplemented by a
comparison of various coverage ratios.
9/30/96 12/31/95
(dollars in thousands)
Nonaccrual loans $16,944 $16,740
Restructurings 582 503
- ------------------------------------------------------------
Nonperforming loans 17,526 17,243
Other real estate 7,316 8,984
- ------------------------------------------------------------
Nonperforming assets 24,842 26,227
Loans past due 90 days or more 20,094 14,995
- ------------------------------------------------------------
Total risk elements $44,936 $41,222
============================================================
Ratio to period-end loans:*
Nonperforming assets .71% .78%
90-days past due .58 .44
- ------------------------------------------------------------
Total risk elements 1.29% 1.22%
============================================================
Coverage Ratios:
Ending allowance to nonper-
forming loans 254% 257%
Ending allowance to risk elements** 118% 138%
Ending allowance to net charge-offs
(annualized) 5.4X 6.5X
____________________________________________________________
* The denominator consists of period-end loans and ORE.
** Excludes ORE.
Based upon the evaluation of loan quality, management
believes that the allowance for credit losses is adequate
to absorb credit risk in the portfolio.
<PAGE>
SHAREHOLDERS' EQUITY
Shareholders' equity at September 30, 1996 was $502,579,000
compared to $480,694,000 recorded at the end of 1995.
Correspondingly, the ratio of equity to assets increased from
9.47% at December 31, 1995 to 9.69% at September 30, 1996.
During the third quarter of 1996, Keystone declared a three-for-two
stock split in the form of a 50% stock dividend, which increased
shares outstanding by approximately 12.7 million. This stock split
was declared in addition to Keystone's quarterly cash dividend.
Keystone's regulatory capital measures, which include the leverage
ratio, "Tier 1" capital, and "Total" capital ratios, continued to
be well in excess of both regulatory minimums and the thresholds
established for "well capitalized" institutions. The following
comparative presentation of these ratios and associated regulatory
standards is provided:
Regulatory Standards
--------------------
"Well- Minimum
9/30/96 12/31/95 Capitalized" Requirement
- -----------------------------------------------------------------
Leverage ratio 9.43% 9.28% 5.00% 4.00%
Tier 1 ratio 13.56% 13.65% 6.00% 4.00%
Total capital ratio 14.80% 14.83% 10.00% 8.00%
<PAGE>
Exhibit Index
- -------------
Exhibit # Description Page #
- --------- ------------------------ ------
27 Financial Data Schedule 17
<PAGE>
SIGNATURES
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.
DATE: November 13, 1996
- -----------------------
Carl L. Campbell,
President and Chief Executive Officer
DATE: November 13, 1996
- -----------------------
Mark L. Pulaski,
Senior Executive Vice President,
Chief Administrative Officer,
and Chief Financial Officer
DATE: November 13, 1996
- -----------------------
Donald F. Holt,
Senior Vice President,
Controller and Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the third
quarter 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 164954
<INT-BEARING-DEPOSITS> 25772
<FED-FUNDS-SOLD> 21000
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0
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