<PAGE> 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 18, 1994
KEYCORP
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 0-850 34-6542451
------------------------------- ----------- -----------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
127 Public Square, Cleveland, Ohio 44114-1306
---------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-3000
<PAGE> 2
Item 5. Other Events
------------
On July 18, 1994, the Registrant issued a press release announcing its
earnings results for the three and six month periods ended June 30,
1994. This press release is attached as Exhibit 99 to this report and
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
-----------------------------------------------------------------
(c) Exhibits
--------
99. July 18, 1994, press release of the Registrant announcing its
earnings results for the three and six month periods ended
June 30, 1994.
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 18, 1994 /s/ Lee Irving
------------------
By: Lee Irving
Executive Vice President,
Treasurer and Chief
Accounting Officer
<PAGE> 3
[KeyCorp NEWS letterhead]
===============================================================================
CONTACT: John Fuller (216) 689 8140 (media)
Jay Gould (216) 689-4721 (analysts)
FOR IMMEDIATE RELEASE
KEYCORP REPORTS RECORD QUARTERLY EARNINGS
-----------------------------------------
CLEVELAND, July 18, 1994 -- KeyCorp (NYSE: KEY) today reported record
earnings of $222 million for the 1994 second quarter, up 13 percent from the
year-ago quarter.
"We could not be more pleased with the results posted in the 1994
second quarter," said Victor J. Riley, Jr., chairman of the board and chief
executive officer. "This was the first complete quarter since the March 1,
1994, merger with Society Corporation and net income was right on plan."
Earnings per common share for the second quarter were $0.89, up 10
percent from the same period last year.
"We remain confident of attaining our cost savings targets," Riley
continued, "and we are also very encouraged to see early signs of success with
the revenue enhancement programs that provided an important strategic basis for
the merger. The completion of our merger integration process allows us to
focus our efforts on revenue generation and the pursuit of expansion
opportunities such as the recently announced acquisitions pending in the states
of Maine, Vermont, and Indiana."
For the first six months of 1994, net income was $430 million, an
increase of 11 percent from the first half of 1993, with earnings per common
share totaling $1.74, up 10 percent. Prior year results have been restated for
the March 1, 1994, merger with Society Corporation, accounted for as a pooling
of interests.
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<PAGE> 4
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 2
"Loan growth was particularly strong," said Robert W. Gillespie,
president and chief operating officer, "reflecting in part the favorable impact
of our 'Small Business Initiative'. This is our first franchise-wide program
since the merger which harnessed the product development, marketing, and
delivery system capabilities of the new corporation. Launched in mid-April,
this 12-week program was targeted to generate $200 million in new high-quality
small business loans. In the second quarter we booked $238 million in new
loans, and applications for another $278 million are yet to be processed. We
now expect new loan volume to more than double our original target for this
program."
Commenting on financial performance, James W. Wert, senior executive
vice president and chief financial officer, said, "The high performance
characteristics that have been KeyCorp's hallmark continued during the 1994
second quarter with a return on average total assets of 1.43 percent and a
return on average common equity of 19.8 percent. Our efficiency ratio, after
excluding net securities gains, improved to 58.4 percent from 60.1 percent in
the 1994 first quarter as we have begun to realize the combined impact of
initial merger-related cost savings and revenue growth. We are also pleased to
see that growth in average earning assets, primarily loans, resulted in an
increase in net interest income from the prior quarter, despite a modest
decline in the net interest margin."
Net interest income in the 1994 second quarter was up $6 million, or 1
percent, from the year-ago quarter. The favorable impact of a $4.9 billion, or
9 percent, increase in the level of average earning assets was partially offset
by a decline in the net interest margin to 4.92 percent from 5.35 percent.
Compared with the 1994 first quarter, net interest income increased $12
million, or 2 percent, reflecting the favorable impact of a $2.0 billion, or 4
percent, increase in average earning assets which more than offset a decline in
the net interest margin to 4.92 percent from 5.03 percent.
At June 30, 1994, loans totaled $43.2 billion, up $1.8 billion, or 17
percent on an annualized basis, from March 31, 1994. Average loans in the 1994
second quarter, compared to the first quarter, were up $1.8 billion. On an
annualized basis, 1994
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<PAGE> 5
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 3
second quarter average loan increases by region compared to the prior quarter
were: Rocky Mountain Region, 56 percent (23 percent excluding acquisitions);
Northeast Region, 16 percent; Northwest Region, 15 percent; and Great Lakes
Region, 13 percent.
Noninterest income in the 1994 second quarter was $227 million. When
noncore items such as special asset management fees and net securities
transactions are excluded from all reporting periods for comparative purposes,
core noninterest income in the current quarter was $220 million, an increase of
$2 million from the prior quarter, but down $24 million, or 10 percent, from
the year-ago quarter. This reflected the September 1993 sale of Ameritrust
Texas which contributed approximately $12 million to last year's second quarter
noninterest income and an $8 million, or 30 percent, decrease in mortgage
banking fee income.
The decline in mortgage banking revenue reflected the dramatic
industry-wide decline in origination activity from the record levels
experienced last year. Trust and investment management income was down
slightly from the 1994 first quarter, reflecting declines in both the stock and
bond markets, but up 7 percent from the year-ago quarter, after excluding the
impact of the 1993 divestiture of Ameritrust Texas. Regarding other major
categories of noninterest income, service charges on deposits increased $6
million from the first quarter level and were up 7 percent from the second
quarter of last year. Credit card fees increased $2 million from the first
quarter and slightly from last year. Insurance and brokerage fees decreased
slightly during the current quarter compared to the 1994 first quarter, and
were down $2 million, or 13 percent, from the year-ago quarter. The all other
income category decreased $4 million from the 1994 first quarter, and was down
$10 million, or 19 percent, from the year-ago quarter.
Special asset management fees increased $5 million from the 1994 first
quarter. As previously disclosed, these fees are associated with loan
collection work done for the FDIC and are expected to decrease over time as the
FDIC assets under contract are collected and, therefore, decline. These fees
will continue to exhibit quarter-to-
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<PAGE> 6
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 4
quarter volatility depending on the timing associated with the loan work-outs.
For this reason, they are considered noncore fee income.
Noninterest expense totaled $539 million in the 1994 second quarter.
Excluding net OREO expense, core noninterest expense was down $21 million, or 4
percent, from the year-ago quarter. Compared to the 1994 first quarter, core
noninterest expense declined $5 million, reflecting an $8 million decline in
personnel expense and decreases in equipment and net occupancy expenses
totaling $3 million. These decreases reflected a number of factors including
the beginning phase of anticipated merger-related cost savings, as well as a
downsizing of our mortgage banking business in light of the industry-wide
decline in originations. The all other expense category in the 1994 second
quarter was up $6 million from the previous quarter.
Credit quality measures continued to improve from their already strong
levels. Nonperforming assets declined $32 million, or 7 percent, from the 1994
first quarter and represented 1.00 percent of loans plus other real estate
owned and other nonperforming assets. Net loan charge-offs totaled $31
million, or 0.30 percent of average loans, relatively unchanged from the 1994
first quarter. Reflecting the improvement in credit quality measures, the
provision for loan losses in the 1994 second quarter was $35 million, down from
$37 million in the prior quarter. As a result of the growth in loans, the
allowance for loan losses as a percent of loans decreased slightly to 1.89
percent from 1.96 percent at March 31, 1994. Both the nonperforming loan and
nonperforming asset coverage ratios increased and remain strong at 264 percent
and 189 percent, respectively.
At June 30, 1994, assets totaled $63.4 billion and equity capital
totaled $4.6 billion. During the quarter the corporation repurchased 1.2
million shares of its common stock under the previously announced share
buy-back program. The June 30, 1994, Tier 1 capital ratio was estimated at
8.72 percent and the Total Capital ratio was estimated at 11.96 percent.
# # #
<PAGE> 7
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 5
<TABLE>
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<CAPTION>
Three months ended
-----------------------------------------
6-30-94 3-31-94 6-30-93
------------ ------------ ------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $695.1 $682.7 $689.7
Provision for loan losses 35.0 36.8 59.5
Noninterest income 227.4 226.6 253.3
Noninterest expense 538.7 542.8 569.8
Net income 221.8 208.6 196.9
PER COMMON SHARE
Net income $ .89 $ .85 $ .81
Cash dividends .32 .32 .28
Book value at period-end 18.17 17.88 16.74
Market price at period-end 31.88 30.00 35.13
AT PERIOD-END
Full-time equivalent employees 29,810 30,054 30,152
Full-service banking offices 1,275 1,276 1,289
PERFORMANCE RATIOS
Return on average total assets 1.43 % 1.41 % 1.38 %
Return on average common equity 19.77 19.20 19.67
Return on average total equity 19.43 18.88 19.22
Efficiency (1) 58.43 60.13 60.54
Overhead (2) 44.87 47.27 46.15
Net interest margin 4.92 5.03 5.35
CAPITAL RATIOS AT PERIOD-END
Equity to assets 7.26 % 7.38 % 7.22 %
Tangible equity to tangible assets 6.42 6.55 6.16
Tier 1 risk-adjusted capital (3) 8.72 8.91 8.42
Total risk-adjusted capital (3) 11.96 12.34 11.98
Leverage (3) 6.77 6.85 6.48
<FN>
(1) Calculated as noninterest expense divided by taxable-equivalent net interest income plus noninterest income (excluding net
securities transactions).
(2) Calculated as noninterest expense less noninterest income (excluding net securities transactions) divided by
taxable-equivalent net interest income.
(3) 6-30-94 ratio is estimated.
TE = Taxable equivalent
</TABLE>
<PAGE> 8
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 6
<TABLE>
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<CAPTION>
Three months ended
-------------------------------------
6-30-94 3-31-94 6-30-93
----------- ----------- -----------
<S> <C> <C> <C>
ASSET QUALITY
Net loan charge-offs $31.2 $31.3 $59.7
Net loan charge-offs to average loans 0.30 % 0.31 % 0.62 %
Allowance for loan losses $816.4 $812.6 $795.7
Allowance for loan losses to
period-end loans 1.89 % 1.96 % 2.07 %
Allowance for loan losses to
nonperforming loans 264.21 256.53 194.18
Nonperforming loans at period-end $309.0 $316.8 $409.8
Nonperforming assets at period-end 431.9 464.0 701.8
Nonperforming loans to period-end loans 0.72 % 0.77 % 1.07 %
Nonperforming assets to period-end loans plus
OREO and other nonperforming assets 1.00 1.12 1.81
</TABLE>
<TABLE>
<CAPTION>
Six months ended
-------------------------
6-30-94 6-30-93
----------- ------------
<S> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $1,377.8 $1,359.5
Provision for loan losses 71.8 115.4
Noninterest income 454.0 475.9
Noninterest expense 1,081.5 1,104.8
Net income 430.4 386.8
PER COMMON SHARE
Net income $1.74 $1.58
Cash dividends 0.64 0.56
PERFORMANCE RATIOS
Return on average total assets 1.42 % 1.38 %
Return on average common equity 19.49 19.75
Return on average total equity 19.16 19.25
Efficiency (1) 59.27 60.30
Overhead (2) 46.05 46.49
Net interest margin 4.97 5.38
ASSET QUALITY
Net loan charge-offs $62.5 $121.3
Net loan charge-offs to average loans 0.30 % 0.64 %
</TABLE>
<PAGE> 9
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 7
<TABLE>
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<CAPTION>
ASSETS 6-30-94 3-31-94 6-30-93
----------- ----------- -----------
<S> <C> <C> <C>
Loans $43,157.6 $41,379.8 $38,375.9
Mortgage loans held for sale 529.6 901.6 1,178.5
Investment securities 9,311.6 9,091.2 9,348.6
Securities available for sale 4,169.7 4,474.8 2,140.1
Short-term investments 178.5 66.1 1,656.8
----------- ----------- -----------
Total earning assets 57,347.0 55,913.5 52,699.9
Allowance for loan losses (816.4) (812.6) (795.7)
Cash and due from banks 3,132.9 2,830.7 2,581.4
Premises and equipment 933.3 910.9 906.5
Other real estate owned 118.0 134.3 278.0
Goodwill 372.0 381.4 402.1
Other intangible assets 194.7 161.6 250.6
Purchased mortgage servicing rights 193.7 197.9 178.8
Other assets 1,881.4 1,758.1 1,442.9
----------- ----------- -----------
TOTAL ASSETS $63,356.6 $61,475.8 $57,944.5
=========== =========== ===========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $8,414.2 $8,213.6 $8,121.5
Interest-bearing 35,787.8 36,182.0 35,658.3
Deposits in foreign office-
interest-bearing 3,594.2 2,485.0 621.0
----------- ----------- -----------
Total deposits 47,796.2 46,880.6 44,400.8
Federal funds purchased and securities
sold under agreements to repurchase 5,509.7 5,674.5 4,932.7
Other short-term borrowings 2,326.4 1,560.2 1,584.0
Other liabilities 1,001.9 1,079.7 886.3
Long-term debt 2,123.6 1,744.5 1,957.2
----------- ----------- -----------
TOTAL LIABILITIES 58,757.8 56,939.5 53,761.0
SHAREHOLDERS' EQUITY
Preferred stock 160.0 160.0 184.0
Common equity 4,438.8 4,376.3 3,999.5
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 4,598.8 4,536.3 4,183.5
TOTAL LIABILITIES AND ----------- ----------- -----------
SHAREHOLDERS' EQUITY $63,356.6 $61,475.8 $57,944.5
=========== =========== ===========
Common Shares outstanding (000) 244,246 244,763 238,939
</TABLE>
<PAGE> 10
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 8
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<CAPTION>
Three months ended
---------------------------------------
6-30-94 3-31-94 6-30-93
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME $1,102.6 $1,045.0 $1,065.0
INTEREST EXPENSE 422.3 376.9 390.8
----------- ----------- -----------
NET INTEREST INCOME 680.3 668.1 674.2
Provision for loan losses 35.0 36.8 59.5
----------- ----------- -----------
645.3 631.3 614.7
NONINTEREST INCOME
Service charges on deposit accounts 68.4 62.3 64.0
Trust income 55.6 57.0 63.9
Mortgage banking income 19.6 19.4 28.0
Credit card fees 18.9 16.7 18.2
Insurance and brokerage 15.4 16.0 17.6
Special asset management fees 6.8 2.2 7.7
Net securities gains .6 6.4 1.7
Other income 42.1 46.6 52.2
----------- ----------- -----------
Total noninterest income 227.4 226.6 253.3
NONINTEREST EXPENSE
Personnel 267.3 275.6 273.8
Net occupancy 53.2 55.5 51.6
Equipment 39.6 39.9 41.1
FDIC insurance assessments 24.8 24.0 24.3
Professional fees 11.5 12.5 14.6
OREO expense, net 2.4 1.3 12.7
Other expense 139.9 134.0 151.7
----------- ----------- -----------
Total noninterest expense 538.7 542.8 569.8
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 334.0 315.1 298.2
Income taxes 112.2 106.5 101.3
----------- ----------- -----------
NET INCOME $221.8 $208.6 $196.9
=========== =========== ===========
Net income applicable to Common Shares $217.8 $204.6 $192.4
Net income per Common Share .89 .85 .81
Wtd. avg. Common Shares outstanding (000) 244,823 241,926 239,532
Taxable-equivalent adjustment $14.8 $14.6 $15.5
</TABLE>
<PAGE> 11
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 9
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<CAPTION>
Six months ended
-------------------------
6-30-94 6-30-93
----------- -----------
<S> <C> <C>
INTEREST INCOME $2,147.6 $2,112.4
INTEREST EXPENSE 799.2 784.1
----------- -----------
NET INTEREST INCOME 1,348.4 1,328.3
Provision for loan losses 71.8 115.4
----------- -----------
1,276.6 1,212.9
NONINTEREST INCOME
Service charges on deposit accounts 130.7 124.7
Trust income 112.6 126.8
Mortgage banking income 39.0 42.0
Credit card fees 35.6 34.5
Insurance and brokerage 31.4 31.7
Special asset management fees 9.0 24.0
Net securities gains 7.0 3.0
Other income 88.7 89.2
----------- -----------
Total noninterest income 454.0 475.9
NONINTEREST EXPENSE
Personnel 542.9 531.1
Net occupancy 108.7 102.5
Equipment 79.5 79.8
FDIC insurance assessments 48.8 50.6
Professional fees 24.0 27.6
OREO expense, net 3.7 21.4
Other expense 273.9 291.8
----------- -----------
Total noninterest expense 1,081.5 1,104.8
----------- -----------
INCOME BEFORE INCOME TAXES 649.1 584.0
Income taxes 218.7 197.2
----------- -----------
NET INCOME $430.4 $386.8
=========== ===========
Net income applicable to Common Shares $422.4 $376.8
Net income per Common Share 1.74 1.58
Wtd. avg. Common Shares outstanding (000) 243,383 238,733
Taxable-equivalent adjustment $29.4 $31.2
</TABLE>
<PAGE> 12
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 10
<TABLE>
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(in millions)
<CAPTION>
Three months ended
----------------------------------------
ASSETS 6-30-94 3-31-94 6-30-93
------------ ------------ ------------
<S> <C> <C> <C>
Loans $42,092.2 $40,242.2 $38,248.8
Mortgage loans held for sale 866.1 1,139.2 972.6
Investment securities 9,202.8 7,743.3 9,313.8
Securities available for sale 4,297.7 5,260.9 2,193.5
Short-term investments 78.1 154.9 931.5
------------ ------------ ------------
Total earning assets 56,536.9 54,540.5 51,660.2
Allowance for loan losses (819.6) (815.8) (805.4)
Other assets 6,441.9 6,248.4 6,344.2
------------ ------------ ------------
TOTAL ASSETS $62,159.2 $59,973.1 $57,199.0
============ ============ ============
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $8,055.1 $7,802.7 $7,730.2
Interest-bearing 35,903.6 35,604.3 35,873.2
Deposits in foreign office-interest-bearing 2,993.7 2,678.0 1,043.7
------------ ------------ ------------
Total deposits 46,952.4 46,085.0 44,647.1
Federal funds purchased and securities
sold under agreements to repurchase 6,240.0 4,993.3 4,355.6
Other short-term borrowings 1,363.0 1,435.2 1,176.8
Other liabilities 1,006.0 1,220.8 978.7
Long-term debt 2,020.0 1,756.9 1,932.7
------------ ------------ ------------
TOTAL LIABILITIES 57,581.4 55,491.2 53,090.8
SHAREHOLDERS' EQUITY
Preferred stock 160.0 160.0 184.0
Common equity 4,417.8 4,321.9 3,924.1
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 4,577.8 4,481.9 4,108.1
TOTAL LIABILITIES AND ------------ ------------ ------------
SHAREHOLDERS' EQUITY $62,159.2 $59,973.1 $57,199.0
============ ============ ============
</TABLE>
<PAGE> 13
KeyCorp Reports Record Quarterly Earnings
July 18, 1994
Page 11
<TABLE>
CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS
(in millions)
<CAPTION>
Six months ended
--------------------------
ASSETS 6-30-94 6-30-93
------------ ------------
<S> <C> <C>
Loans $41,172.3 $37,788.4
Mortgage loans held for sale 1,001.9 863.2
Investment securities 8,477.1 9,238.7
Securities available for sale 4,776.6 2,262.8
Short-term investments 116.3 818.0
------------ ------------
Total earning assets 55,544.2 50,971.1
Allowance for loan losses (817.7) (800.7)
Other assets 6,345.7 6,251.2
------------ ------------
TOTAL ASSETS $61,072.2 $56,421.6
============ ============
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $7,929.6 $7,517.3
Interest-bearing 35,754.8 35,451.0
Deposits in foreign office-interest-bearing 2,836.7 1,010.1
------------ ------------
Total deposits 46,521.1 43,978.4
Federal funds purchased and securities
sold under agreements to repurchase 5,620.1 4,492.8
Other short-term borrowings 1,398.9 1,038.7
Other liabilities 1,112.8 976.7
Long-term debt 1,889.2 1,883.1
------------ ------------
TOTAL LIABILITIES 56,542.1 52,369.7
SHAREHOLDERS' EQUITY
Preferred stock 160.0 203.9
Common equity 4,370.1 3,848.0
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 4,530.1 4,051.9
TOTAL LIABILITIES AND ------------ ------------
SHAREHOLDERS' EQUITY $61,072.2 $56,421.6
============ ============
</TABLE>
