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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): April 20, 1995
KEYCORP
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-6300
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Item 5. Other Events
------------
On April 20, 1995, the Registrant issued a press release announcing
its earnings results for the three month period ended March 31, 1995.
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. The Registrant's April 20, 1995 press release announcing its
earnings results for the three month period ended March 31,
1995.
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: April 20, 1995 /s/ Lee Irving
-------------------------
By: Lee Irving
Executive Vice President,
Treasurer and Chief
Accounting Officer
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MEDIA CONTACTS: ANALYST CONTACTS:
Bill Murschel (216) 689-0457 Jay S. Gould (216) 689-4721
Janet Gaydosh (216) 689-3636 Vernon L. Patterson (216) 689-0520
FOR IMMEDIATE RELEASE
KEYCORP REPORTS FIRST QUARTER 1995 EARNINGS
-------------------------------------------
CLEVELAND, April 20, 1995 -- KeyCorp (NYSE: KEY) today reported
earnings of $210 million, or $0.86 per common share, for the 1995 first
quarter. This compares with earnings of $209 million, or $0.85 per common
share, for the year-ago quarter.
Victor J. Riley, Jr., KeyCorp chairman and chief executive officer,
said, "Earnings for the first quarter were consistent with our 1995 profit
plan. These results and the profit plan included the effects of several items
related to previously announced initiatives intended to reduce interest rate
exposure and accelerate long-term revenue and earnings growth. Actions taken
in the first quarter included the continued reconfiguration of the balance
sheet and the strategic repositioning of several businesses."
Riley continued, "Last month we unveiled the company's strategic
planning process known as First Choice 2000. Under the leadership of Bob
Gillespie, president and chief operating officer, we have developed plans to
leverage the capabilities of our franchise by reallocating resources to those
businesses with higher earnings growth potential. During the first quarter,
several First Choice 2000 strategic initiatives were announced, including the
completion of the sale of our residential mortgage loan servicing business and
the agreement to acquire AutoFinance Group, Inc., one of the country's leading
automobile finance companies. In addition, in early April, we completed the
acquisition of Spears, Benzak, Salomon & Farrell, a leading money management
firm based in New York City."
--more--
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KEYCORP EARNINGS
APRIL 20, 1995
PAGE 2
EARNINGS REVIEW AND ANALYSIS
James W. Wert, KeyCorp senior executive vice president and chief
financial officer, said, "In the first quarter, KeyCorp earned a return on
average total assets of 1.28 percent and a return on average common equity of
18.26 percent."
Commenting on significant nonrecurring items in the quarter, Wert
noted, "We recorded the gain on the sale of the residential mortgage loan
servicing business. We also incurred net securities losses related to the
balance sheet reconfiguration and a loss on the sale of an asset management
subsidiary acquired in 1993."
SIGNIFICANT NONRECURRING ITEMS
<TABLE>
<CAPTION>
(in millions, except EPS) AFTER-TAX EPS
--------- ----
<S> <C> <C>
Gain on Sale of Mortgage Loan
Servicing Business $41.6 $0.17
Loss on Sale of Asset
Management Subsidiary ( 5.8) (0.02)
-------- --------
Extraordinary Net Gain $35.8 $0.15
Net Securities Losses Related to
Balance Sheet Reconfiguration ($30.9) ($0.13)
</TABLE>
Net interest income in the 1995 first quarter was significantly
impacted by the combined effects of the December 1994 and January 1995 interest
rate swap transactions, sales of securities and other balance sheet
reconfiguration strategies designed to reduce exposure to future changes in
interest rates. Net interest income in the first quarter totaled $644 million,
compared with $665 million in the fourth quarter, as solid loan growth was more
than offset by a lower net interest margin. Average earning assets increased
$1.4 billion, or 10 percent on an annualized basis during the quarter, with
substantially all of the growth coming from loans. The aggregate
--more--
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KEYCORP EARNINGS
APRIL 20, 1995
PAGE 3
securities portfolio declined by $867 million since year-end 1994, as a result
of securities sales. The net interest margin, which remained relatively stable
throughout the first quarter, was 4.38 percent compared to 4.60 percent in the
fourth quarter. The decline in the net interest margin was the result of the
balance sheet reconfiguration, narrower loan and deposit spreads and increased
reliance on fixed-rate market priced funding.
Average loans in the 1995 first quarter, compared with the 1994 fourth
quarter were up $1.9 billion, or 17 percent on an annualized basis. Annualized
average loan growth in the 1995 first quarter by region was: Northeast (27
percent), Great Lakes (15 percent), Rocky Mountain (26 percent) and Northwest
(10 percent). These growth rates include the impact of three bank acquisitions
completed during the quarter, (Casco Northern Bank, and BANKVERMONT in the
Northeast region and OMNIBANCORP in the Rocky Mountain region). Excluding
acquisitions from both periods, average loans in the 1995 first quarter were up
$716 million, or 6 percent.
Noninterest income in the 1995 first quarter totaled $171 million,
compared with $227 million in the year-ago quarter and $205 million in the 1994
fourth quarter. Included in 1995 first quarter results are pre-tax net
securities losses of $45 million. Excluding the impact of noncore items,
consisting of net securities transactions and special asset management fees,
core noninterest income declined by $5 million, or 2 percent, from the year-ago
level. Compared to the prior quarter, core noninterest income decreased by $11
million, or 5 percent.
Noninterest expense totaled $561 million in the 1995 first quarter, up
$18 million, or 3 percent, from the year-ago level. Compared to the prior
quarter, noninterest expense was relatively unchanged. Adding to the level of
noninterest income and noninterest expense was the impact of seven acquisitions
completed since February 1994.
--more--
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KEYCORP EARNINGS
APRIL 20, 1995
PAGE 4
During the first quarter, one-time tax benefits of approximately $16
million were recognized, reducing the quarter's effective income tax rate
(income taxes as a percentage of income before income taxes and extraordinary
item) to 26 percent. The benefits primarily relate to acquisitions made in
years prior to 1992. Management expects the effective income tax rate to
return to a more normal level in the 1995 second quarter.
Asset quality measures remained strong, despite a modest increase in
nonperforming assets, primarily related to acquisitions completed in the
quarter. Nonperforming assets increased from $340 million at year-end to $363
million, or 0.75 percent of loans plus other real estate owned and other
nonperforming assets at March 31, 1995. Net loan charge-offs in the first
quarter totaled $17.3 million, or 0.15 percent of average loans. The provision
for loan losses for the 1995 first quarter was $18.5 million, more than
covering the quarter's net loan charge-offs. At the end of the first quarter,
nonperforming loan and nonperforming asset coverage ratios were 286 percent and
239 percent, respectively.
At March 31, 1995, KeyCorp's assets totaled $67.7 billion and
shareholder's equity totaled $4.8 billion. The Tier 1 Capital ratio was
estimated at 7.90 percent and the Total Capital ratio was estimated at 10.96
percent. During the first quarter, 6.5 million common shares were acquired
under KeyCorp's on-going repurchase programs.
# # #
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KEYCORP REPORTS FIRST QUARTER 1995 EARNINGS
APRIL 20,1995
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------
3-31-95 12-31-94 3-31-94
-------- -------- --------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $658.8 $680.3 $682.7
Provision for loan losses 18.5 26.2 36.8
Noninterest income 171.0 205.3 226.6
Noninterest expense 560.8 555.6 542.8
Income before extraordinary item 173.9 193.8 208.6
Net income 209.7 193.8 208.6
PER COMMON SHARE
Income before extraordinary item $ .71 $ .79 $ .85
Net income .86 .79 .85
Cash dividends .36 .32 .32
Book value at period-end 19.57 18.88 17.88
Market price at period-end 28.25 25.00 30.00
AT PERIOD-END
Full-time equivalent employees 30,370 29,211 30,054
Full-service banking offices 1,314 1,272 1,276
PERFORMANCE RATIOS
Return on average total assets 1.28 % 1.19 % 1.41 %
Return on average common equity 18.26 16.61 19.20
Return on average total equity 17.99 16.38 18.88
Efficiency (1) 64.12 61.10 60.13
Overhead (2) 52.36 48.01 47.27
Net interest margin 4.38 4.60 5.03
CAPITAL RATIOS AT PERIOD-END
Equity to assets 7.12 % 7.03 % 7.38 %
Tangible equity to tangible assets 6.02 6.19 6.55
Tier 1 risk-adjusted capital (3) 7.90 8.48 8.91
Total risk-adjusted capital (3) 10.96 11.62 12.34
Leverage (3) 6.31 6.63 6.85
<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) 3-31-95 ratio is estimated.
TE = Taxable equivalent
</TABLE>
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KEYCORP REPORTS FIRST QUARTER 1995 EARNINGS
APRIL 20, 1995
PAGE 6
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------
3-31-95 12-31-94 3-31-94
-------- -------- --------
<S> <C> <C> <C>
ASSET QUALITY
Net loan charge-offs $17.3 $20.8 $31.3
Net loan charge-offs to average loans .15 % .19 % .31 %
Allowance for loan losses $867.1 $830.3 $812.6
Allowance for loan losses to
period-end loans 1.81 % 1.80 % 1.96 %
Allowance for loan losses to
nonperforming loans 285.51 324.27 256.53
Nonperforming loans at period-end $303.7 $256.0 $316.8
Nonperforming assets at period-end 362.5 339.8 464.0
Nonperforming loans to period-end loans .63 % .55 % .77 %
Nonperforming assets to period-end loans plus
OREO and other nonperforming assets .75 .73 1.12
</TABLE>
<PAGE> 7
KEYCORP REPORTS FIRST QUARTER 1995 EARNINGS
APRIL 20, 1995
PAGE 7
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<S> <C> <C> <C>
ASSETS 3-31-95 12-31-94 3-31-94
------------ ------------ ------------
Loans $48,020.8 $46,224.7 $41,379.8
Mortgage loans held for sale 164.6 355.2 901.6
investment securities 10,395.5 10,275.6 9,091.2
Securities available for sale 1,534.2 2,521.0 4,474.8
Short-term investments 1,052.0 670.0 66.1
------------ ------------ ------------
Total earning assets 61,167.1 60,046.5 55,913.5
Allowance for loan losses (867.1) (830.3) (812.6)
Cash and due from banks 3,303.2 3,511.4 2,830.7
Premises and equipment 1,016.4 987.2 910.9
Other real estate owned 54.1 79.0 134.3
Goodwill 598.0 418.5 381.4
Other intangible assets 196.7 180.4 161.6
Other assets 2,240.6 2,408.5 1,959.1
------------ ------------ ------------
TOTAL ASSETS $67,709.0 $66,801.2 $61,478.9
============ ============ ============
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,300.3 $ 9,135.7 $ 8,213.6
Interest-bearing 37,792.8 36,003.4 36,182.0
Deposits in foreign offices-interest-bearing 2,719.2 3,425.1 2,485.0
------------ ------------ ------------
Total deposits 48,812.3 48,564.2 46,880.6
Federal funds purchased and securities
sold under repurchase agreements 4,980.8 5,499.1 5,674.5
Other short-term borrowings 3,927.3 3,277.6 1,560.2
Other liabilities 1,443.2 1,197.4 1,088.2
Long-term debt 3,725.2 3,569.8 1,744.5
------------ ------------ ------------
TOTAL LIABILITIES 62,888.8 62,108.1 56,948.0
SHAREHOLDERS' EQUITY
Preferred stock 160.0 160.0 160.0
Common equity 4,660.2 4,533.1 4,370.9
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 4,820.2 4,693.1 4,530.9
TOTAL LIABILITIES AND
------------ ------------ ------------
SHAREHOLDERS' EQUITY $67,709.0 $66,801.2 $61,478.9
============ ============ ============
Common Shares outstanding (000) 238,188 240,362 244,763
</TABLE>
<PAGE> 8
KEYCORP REPORTS FIRST QUARTER 1995 EARNINGS
APRIL 20,1995
PAGE 8
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
3-31-95 12-31-94 3-31-94
---------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME $1,245.4 $1,191.8 $1,045.0
INTEREST EXPENSE 601.6 526.5 376.9
---------- ----------- -----------
NET INTEREST INCOME 643.8 665.3 668.1
Provision for loan losses 18.5 26.2 36.8
---------- ----------- -----------
625.3 639.1 631.3
NONINTEREST INCOME
Service charges on deposit accounts 65.7 64.6 62.3
Trust and asset management income 52.7 53.3 57.0
Mortgage banking income 17.7 21.3 24.8
Credit card fees 16.7 20.1 16.7
Insurance and brokerage income 12.7 12.3 16.0
Special asset management fees 2.7 5.2 2.2
Net securities gains (losses) (44.9) (23.7) 6.4
Other income 47.7 52.2 41.2
---------- ----------- -----------
Total noninterest income 171.0 205.3 226.6
NONINTEREST EXPENSE
Personnel 279.9 267.5 270.5
Net occupancy 54.2 54.3 55.5
Equipment 39.9 39.2 39.9
FDIC insurance assessments 25.5 24.6 24.0
Professional fees 12.6 14.8 12.5
OREO expense, net 2.2 (2.0) 1.3
Other expense 146.5 157.2 139.1
---------- ----------- -----------
Total noninterest expense 560.8 555.6 542.8
---------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 235.5 288.8 315.1
Income taxes 61.6 95.0 106.5
---------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 173.9 193.8 208.6
Extraordinary net gain from sales of
subsidiaries, net of tax benefit of $25.3 35.8 -- --
---------- ----------- -----------
NET INCOME $ 209.7 $ 193.8 $ 208.6
========== =========== ===========
Net income applicable to Common Shares $205.7 $189.8 $204.6
Per Common Share:
Income before extraordinary item .71 .79 .85
Net income .86 .79 .85
Wtd. avg. Common Shares outstanding (000) 239,999 241,385 241,926
Taxable-equivalent adjustment $15.0 $15.0 $14.6
</TABLE>
<PAGE> 9
KEYCORP REPORTS FIRST QUARTER 1995 EARNINGS
APRIL 20, 1995
PAGE 9
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------
ASSETS 3-31-95 12-31-94 3-31-94
----------- ----------- -----------
<S> <C> <C> <C>
Loans $46,888.0 $44,970.1 $40,242.2
Mortgage loans held for sale 243.0 412.3 1,139.2
Investment securities 10,231.2 10,390.1 7,743.3
Securities available for sale 1,623.0 2,844.0 5,260.9
Short-term investments 1,272.2 191.9 154.9
----------- ----------- -----------
Total earning assets 60,257.4 58,808.4 54,540.5
Allowance for loan losses (853.4) (827.1) (815.8)
Other assets 7,054.9 6,632.0 6,248.4
----------- ----------- -----------
TOTAL ASSETS $66,458.9 $64,613.3 $59,973.1
=========== =========== ===========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 7,955.9 $ 8,238.9 $ 7,802.7
Interest-bearing 36,775.8 35,904.1 35,604.3
Deposits in foreign offices-interest-bearing 3,321.2 2,972.2 2,678.0
----------- ----------- -----------
Total deposits 48,052.9 47,115.2 46,085.0
Federal funds purchased and securities
sold under repurchase agreements 5,502.6 5,857.9 4,993.3
Other short-term borrowings 3,298.9 2,850.6 1,435.2
Other liabilities 1,263.8 1,095.2 1,220.8
Long-term debt 3,612.9 3,001.6 1,756.9
----------- ----------- -----------
TOTAL LIABILITIES 61,731.1 59,920.5 55,491.2
SHAREHOLDERS' EQUITY
Preferred stock 160.0 160.0 160.0
Common equity 4,567.8 4,532.8 4,321.9
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 4,727.8 4,692.8 4,481.9
TOTAL LIABILITIES AND
----------- ----------- -----------
SHAREHOLDERS' EQUITY $66,458.9 $64,613.3 $59,973.1
=========== =========== ===========
</TABLE>
