<PAGE>
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): October 17, 1996
[KEYCORP LOGO APPEARS HERE]
KEYCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 0-850 63-0593897
----------------- --------------- -------------------
(State or other Commission File (I.R.S. Employer
jurisdiction of Number Identification No.)
incorporation or
organization)
127 Public Square, Cleveland, Ohio 44114-1306
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-6300
<PAGE>
Item 5. OTHER EVENTS
------------
On October 17, 1996, the Registrant issued a press release announcing
its earnings results for the three month period and nine month period
ended September 30, 1996. 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 October 17, 1996, press release announcing its
earnings results for the three month period and nine month period
ended September 30, 1996.
<PAGE>
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: October 17, 1996 /s/ Lee Irving
-----------------
By: Lee Irving
Executive Vice
President and Chief
Accounting Officer
<PAGE>
[KEY LOGO APPEARS HERE]
NEWS
KEYCORP
127 Public Square
Cleveland, Ohio, 44114-1306
MEDIA CONTACTS: ANALYSTS CONTACTS:
John Fuller (216) 689-8140 Jay S. Gould (216) 689-4721
Bill Murschel (216) 689-0457 Laurie E. Counsel (216) 689-4911
WEB SITE: http://www.keybank.com
FOR IMMEDIATE RELEASE
KEYCORP REPORTS THIRD QUARTER 1996 RESULTS
------------------------------------------
* EPS OF $0.95, EXCLUDING ONE-TIME SAIF ASSESSMENT, UP FROM $0.90 LAST YEAR
* 5 MILLION COMMON SHARES REPURCHASED DURING THE QUARTER
CLEVELAND, October 17, 1996 -- KeyCorp (NYSE: KEY) today reported earnings
of $218 million, or $0.95 per common share, for the 1996 third quarter excluding
a one-time charge of $17 million ($11 million after-tax, or $0.05 per common
share) to provide for an assessment mandated by legislation passed by Congress
on September 30, 1996 to recapitalize the Savings Association Insurance Fund
(SAIF). Including the SAIF assessment, 1996 third quarter earnings were $207
million, or $0.90 per common share. Earnings in the year-ago quarter were $209
million, or $0.90 per common share, and were $217 million, or $0.92 per common
share, in the 1996 second quarter.
Robert W. Gillespie, KeyCorp chairman and chief executive officer, said,
"Results for the third quarter were in line with our expectations and
represented another quarter of improved earnings. Earnings per common share,
after adjusting for the SAIF assessment, were up 6 percent from the year-ago
quarter and 3 percent from the 1996 second quarter. Revenue was up 8 percent
from a year ago, reflecting a 3 percent increase in net interest income
resulting from the positive impact of strong growth in KeyCorp's targeted loan
portfolios and a 32 basis point improvement in the net interest margin, as well
as increases in fee income. Excluding the impact of the SAIF assessment in the
current quarter, expenses increased 7 percent from last year's third quarter due
primarily to acquisitions and increases in personnel and marketing expenses
associated
<PAGE>
KEYCORP EARNINGS
OCTOBER 17, 1996
PAGE 2
with significant strategic investments made in our major lines of business.
We anticipate that the 1996 fourth quarter's noninterest expense will be
appreciably lower than the comparable expenses for the quarter just ended."
Gillespie continued, "The implementation of our strategic plan is
running ahead of schedule. As a result, we have expanded our focus on
significantly improving the expense efficiency ratio, with a target of
achieving a 55 percent efficiency ratio by around the end of next year, and
further improvement thereafter. In order to reach that target, we have
initiated a comprehensive review of our branch delivery system and overall
cost structure."
K. Brent Somers, KeyCorp senior executive vice president and chief
financial officer, said, "During the quarter, we continued our program of
aggressive balance sheet and capital management. Through the first nine
months of 1996, we reduced assets by $1.0 billion and repurchased 10 million
shares of KeyCorp common stock, including 5 million shares during the third
quarter. We expect that by year-end we will have completed the repurchase of
the 12 million shares authorized for 1996. Third quarter return on average
total assets was 1.28 percent, up from 1.25 percent in the year-ago quarter,
although down from 1.35 percent in the 1996 second quarter. Return on average
total equity for the third quarter was 16.73 percent compared with 17.79
percent in the prior-year quarter and 16.93 percent in the previous quarter."
Net interest income for the 1996 third quarter totaled $683 million, up
$17 million, or 3 percent, from the year-ago quarter. This increase reflected
a 32 basis point improvement in the net interest margin to 4.82 percent, which
was partially offset by a managed reduction of $2.9 billion, or 5 percent, in
average earning assets. The net interest margin increase was attributable to
wider loan spreads, in part as a result of the securitization and sale of
selected assets, and the reinvestment of funds from sold and maturing
securities into higher yielding loans. Compared with the 1996 second quarter,
net interest income was little changed, reflecting a 2 basis point improvement
in the net interest margin, which was largely offset by a managed reduction of
$439 million, or one percent, in average earning assets.
On September 27, 1996, student loans totaling $357 million were sold,
representing a portion of a third quarter $711 million securitization. The
remaining
<PAGE>
KEYCORP EARNINGS
OCTOBER 17, 1996
PAGE 3
$354 million of this securitization was sold on October 15, 1996. This
compares with a $724 million student loan securitization and sale during the
1995 fourth quarter.
Average targeted loans, which exclude single family mortgages that are
being managed down, increased $1.0 billion during the third quarter. This
represented an annualized growth rate of 10 percent from the second quarter,
comparable to the 9 percent and 11 percent annualized growth rates in the 1996
first and second quarters, respectively. Compared with the year-ago quarter,
and excluding the impact of securitizations and sales, average total loans
increased $2.8 billion, or 6 percent.
Noninterest income for the 1996 third quarter totaled $289 million, up
$54 million, or 23 percent, from the year-ago quarter. The primary
contributors to the year-over-year increase were a $15 million increase in
loan securitization income, resulting largely from the third quarter sale of
student loans, and a $34 million increase in other income. This latter
increase reflected a number of items, including $14 million in venture capital
gains and an $11 million gain on the sale of a $101 million out-of-franchise
credit card portfolio. Also contributing to the favorable comparison with the
year-ago quarter were insurance and brokerage income (up 6 percent), trust and
asset management income (up 5 percent), and increases in service charges on
deposit accounts and credit card fees (both up 4 percent). Compared with the
1996 second quarter, noninterest income was up $25 million, reflecting the
venture capital and credit card portfolio gains, as well as higher loan
securitization income, service charges on deposit accounts, and insurance and
brokerage income.
Noninterest expense for the 1996 third quarter totaled $615 million, up
$54 million, or 10 percent, from the year-ago quarter. Excluding the impact
of the one-time SAIF assessment in the current quarter, noninterest expense
was up $37 million, or 7 percent. This increase reflected a $22 million
increase in personnel expense and an $11 million increase in marketing
expense. These increases were primarily due to the impact of acquisitions and
costs associated with the implementation of strategic initiatives, including
developing brand recognition and other marketing activities. Marketing
expenses are expected to be lower in the fourth quarter.
Asset quality in the 1996 third quarter remained strong and relatively
stable in comparison with second quarter levels. Nonperforming assets ended
the third quarter at $396 million, or 0.82 percent of loans plus other real
estate owned and other
<PAGE>
KEYCORP EARNINGS
OCTOBER 17, 1996
PAGE 4
nonperforming assets, compared with $371 million, or 0.77 percent, for the
previous quarter. Net loan charge-offs for the 1996 third quarter totaled $49
million, or 0.41 percent of average loans, up slightly from $46 million, or
0.38 percent, in the 1996 second quarter. The provision for loan losses for
the 1996 third quarter was $49 million and matched the quarter's net loan
charge-offs. The allowance for loan losses as a percent of period-end loans
was 1.80 percent, with the nonperforming loan coverage ratio at 253 percent,
both little changed from September 30, 1995.
At September 30, 1996, KeyCorp's assets totaled $65.4 billion and
shareholders' equity totaled $5.0 billion. The Tier 1 Capital ratio was
estimated at 7.35 percent and the Total Capital ratio was estimated at 12.28
percent.
# # #
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 EARNINGS
OCTOBER 17, 1996
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------
9-30-96 6-30-96 9-30-95
--------- --------- ---------
<S> <C> <C> <C>
Summary of operations
Net interest income (TE) $696 $694 $680
Provision for loan losses 49 47 27
Noninterest income 289 264 235
Noninterest expense 615 579 561
Net income 207 217 209
Per Common Share
Net income $ .90 $ .92 $ .90
Cash dividends .38 .38 .36
Book value at period-end 21.91 21.63 20.74
Market price at period-end 44.00 38.75 34.25
At period-end
Full-time equivalent employees 28,337 28,319 29,560
Full-service banking offices 1,218 1,239 1,301
Performance ratios
Return on average total assets 1.28% 1.35% 1.25%
Return on average common equity 16.73 17.15 18.07
Return on average total equity 16.73 16.93 17.79
Efficiency (1) 60.71 60.50 61.27
Overhead (2) 44.40 45.53 47.89
Net interest margin (TE) 4.82 4.80 4.50
Capital ratios at period-end
Equity to assets 7.61% 7.71% 7.48%
Tangible equity to tangible assets 6.20 6.27 5.98
Tier 1 risk-adjusted capital (3) 7.35 7.60 7.55
Total risk-adjusted capital (3) 12.28 11.72 10.84
Leverage (3) 6.39 6.43 6.19
<FN>
(1) Calculated as noninterest expense (excluding certain nonrecurring
charges) divided by taxable - equivalent net interest income plus
noninterest income (excluding net securities transactions.
(2) Calculated as noninterest expense (excluding certain nonrecurring charges)
less noninterest income (excluding net securities transactions) divided by
taxable - equivalent net interest income.
(3) 9-30-96 ratio is estimated.
TE = Taxable Equivalent
</FN>
</TABLE>
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 EARNINGS
OCTOBER 17, 1996
PAGE 6
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------
9-30-96 6-30-96 9-30-95
--------- --------- ---------
<S> <C> <C> <C>
Asset quality
Net loan charge-offs $49 $46 $27
Net loan charge-offs to average
loans .41% .38% .23%
Allowance for loan losses $870 $870 $879
Allowance for loan losses to
period-end loans 1.80% 1.82% 1.82%
Allowance for loan losses to
nonperforming loans 252.91 266.87 280.53
Nonperforming loans at period-end $344 $326 $313
Nonperforming assets at period-end 396 371 367
Nonperforming loans to period-end
loans .71% .68% .65%
Nonperforming assets to period-end
loans plus OREO and other
nonperforming assets .82 .77 .76
</TABLE>
<TABLE>
<CAPTION>
Nine months ended
--------------------
9-30-96 9-30-95
--------- ---------
<S> <C> <C>
Summary of operations
Net interest income (TE) $2,072 $2,020
Provision for loan losses 140 66
Noninterest income 802 629
Noninterest expense 1,764 1,690
Income before extraordinary item 632 582
Net income 632 618
Per Common Share
Income before extraordinary item $2.70 $2.44
Net income 2.70 2.59
Cash dividends 1.14 1.08
Performance ratios
Return on average total assets 1.30% 1.24%
Return on average common equity 16.76 17.72
Return on average total equity 16.62 17.46
Efficiency (1) 60.81 62.79
Overhead (2) 45.66 50.43
Net interest margin (TE) 4.78 4.46
Asset quality
Net loan charge-offs $138 $65
Net loan charge-offs to average loans .38% .18%
</TABLE>
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 EARNING
OCTOBER 17, 1996
PAGE 7
Consolidated Balance Sheets
(dollars in millions)
<TABLE>
<CAPTION>
9-30-96 6-30-96 9-30-95
Assets --------- --------- ---------
<S> <C> <C> <C>
Loans $48,291 $47,826 $48,410
Mortgage loans held for sale 82 102 659
Investment securities 1,653 1,714 9,660
Securities available for sale 7,113 7,251 1,596
Short-term investments 501 511 522
--------- --------- ---------
Total earnings assets 57,640 57,404 60,847
Allowance for loan losses (870) (870) (879)
Cash and due from banks 3,110 3,061 3,344
Premises and equipment 1,052 1,032 1,023
Goodwill 838 844 907
Other intangible assets 144 154 174
Corporate owned life insurance 1,301 1,192 839
Other assets 2,141 1,947 1,712
--------- --------- ---------
Total assets $65,356 $64,764 $67,967
========= ========= =========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 9,032 $ 8,877 $ 8,611
Interest-bearing 34,608 34,448 37,279
Deposits in foreign offices-
interest-bearing 883 1,092 2,015
--------- --------- ---------
Total deposits 44,523 44,417 47,905
Federal funds purchased and
securities sold under repurchase
agreements 5,592 6,171 5,908
Other short-term borrowings 3,861 3,408 3,633
Other liabilities 1,740 1,598 1,390
Long-term debt 4,664 4,174 4,048
--------- --------- ---------
Total liabilities 60,380 59,768 62,884
Shareholders' equity
Preferred stock -- -- 160
Common equity 4,976 4,996 4,923
--------- --------- ---------
Total shareholders' equity 4,976 4,996 5,083
--------- --------- ---------
Total liabilities and
shareholders' equity $65,356 $64,764 $67,967
========= ========= =========
Common Shares outstanding (000) 227,062 230,979 237,389
</TABLE>
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 EARNINGS
OCTOBER 17, 1996
PAGE 8
Consolidated Statements of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------
9-30-96 6-30-96 9-30-95
--------- --------- ---------
<S> <C> <C> <C>
Interest income $1,238 $1,234 $1,299
Interest expense 555 552 633
--------- --------- ---------
Net interest income 683 682 666
Provision for loan losses 49 47 27
--------- --------- ---------
634 635 639
Noninterest income
Service charges on deposit accounts 74 72 71
Trust and asset management income 61 61 58
Loan securitization income 18 14 3
Credit card fees 24 24 23
Insurance and brokerage income 18 16 17
Mortgage banking income 6 6 9
Net securities gains -- 1 --
Other income 88 70 54
--------- --------- ---------
Total noninterest income 289 264 235
Noninterest expense
Personnel 300 298 278
Net occupancy 55 54 54
Equipment 41 40 37
FDIC insurance assessments 20 3 1
Amortization of intangibles 21 22 19
Professional fees 18 13 19
Marketing 30 17 19
Other expense 130 132 134
--------- --------- ---------
Total noninterest expense 615 579 561
--------- --------- ---------
Income before income taxes 308 320 313
Income taxes 101 103 104
--------- --------- ---------
Net income $ 207 $ 217 $ 209
========= ========= =========
Net income applicable to Common Shares $207 $213 $205
Net income per Common Share .90 .92 .90
Wtd. avg. Common Shares
outstanding (000) 229,668 231,341 228,187
Taxable-equivalent adjustment $13 $12 $14
</TABLE>
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 EARNINGS
OCTOBER 17, 1996
PAGE 9
Consolidated Statements of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Nine months ended
--------------------
9-30-96 9-30-95
--------- ---------
<S> <C> <C>
Interest income $3,708 $3,843
Interest expense 1,674 1,867
--------- ---------
Net interest income 2,034 1,976
Provision for loan losses 140 66
--------- ---------
1,894 1,910
Noninterest income
Service charges on deposit accounts 218 207
Trust and asset management income 180 170
Loan securitization income 45 9
Credit card fees 68 60
Insurance and brokerage income 52 44
Mortgage banking income 20 34
Net securities gains (losses) 1 (42)
Other income 218 147
--------- ---------
Total noninterest income 802 629
Noninterest expense
Personnel 889 829
Net occupancy 163 160
Equipment 119 116
FDIC insurance assessments 25 52
Amortization of intangibles 65 55
Professional fees 47 49
Marketing 68 52
Other expense 388 377
--------- ---------
Total noninterest expense 1,764 1,690
--------- ---------
Income before income taxes and
extraordinary item 932 849
Income taxes 300 267
--------- ---------
Income before extraordinary item 632 582
Extraordinary net gain from the
sales of subsidiaries, net of
income taxes of $25 -- 36
--------- ---------
Net income $ 632 $ 618
========= =========
Net income applicable to Common Shares $624 $606
Per Common Share:
Income before extraordinary item $2.70 $2.44
Net income 2.70 2.59
Wtd. avg. Common Shares outstanding (000) 231,363 234,462
Taxable-equivalent adjustment $38 $44
</TABLE>
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 ARNINGS
OCTOBER 17, 1996
PAGE 10
Consolidated Quarterly Average Balance Sheet
(in millions)
<TABLE>
<CAPTION>
Three months ended
-------------------------------
9-30-96 6-30-96 9-30-95
--------- --------- ---------
<S> <C> <C> <C>
Assets
Loans $48,017 $48,192 $48,196
Mortgage loans held for sale 86 100 168
Investment securities 1,709 1,673 9,807
Securities available for sale 7,152 7,410 1,457
Short-term investments 463 491 666
--------- --------- ---------
Total earning assets 57,427 57,866 60,294
Allowance for loan losses (870) (877) (870)
Cash and due from banks 2,622 2,468 2,765
Other assets 5,301 5,166 4,427
--------- --------- ---------
Total assets $64,480 $64,623 $66,616
========= ========= =========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,467 $ 8,202 $ 8,157
Interest-bearing 34,518 35,569 37,417
Deposits in foreign offices-
interest-bearing 1,189 1,154 1,867
--------- --------- ---------
Total deposits 44,174 44,925 47,441
Federal funds purchased and
securities sold under
repurchase agreements 5,694 5,899 5,672
Other short-term borrowings 3,669 2,922 3,375
Other liabilities 1,661 1,571 1,407
Long-term debt 4,359 4,152 4,046
--------- --------- ---------
Total liabilities 59,557 59,469 61,941
Shareholders' equity
Preferred stock -- 158 160
Common equity 4,923 4,996 4,515
--------- --------- ---------
Total shareholders' equity 4,923 5,154 4,675
--------- --------- ---------
Total liabilities and
shareholders' equity $64,480 $64,623 $66,616
========= ========= =========
</TABLE>
<PAGE>
KEYCORP REPORTS THIRD QUARTER 1996 EARNINGS
OCTOBER 17, 1996
PAGE 11
Consolidated Year-to-date Average Balance Sheets
(in millions)
<TABLE>
<CAPTION>
Nine months ended
--------------------
9-30-96 9-30-95
--------- ---------
<S> <C> <C>
Assets
Loans $48,003 $47,801
Mortgage loans held for sale 179 202
Investment securities 1,689 10,057
Securities available for sale 7,474 1,501
Short-term investments 487 886
--------- --------
Total earning assets 57,832 60,447
Allowance for loan losses (874) (864)
Cash and due from banks 2,584 2,728
Other assets 5,195 4,364
--------- ---------
Total assets $64,737 $66,675
========= =========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,293 $ 8,041
Interest-bearing 35,560 37,262
Deposits in foreign offices-
interest-bearing 1,064 2,564
--------- ---------
Total deposits 44,917 47,867
Federal funds purchased and securities
sold under repurchase agreements 5,761 5,404
Other short-term borrowings 3,182 3,454
Other liabilities 1,594 1,371
Long-term debt 4,205 3,846
--------- ---------
Total liabilities 59,659 61,942
Shareholders' equity
Preferred stock 106 160
Common equity 4,972 4,573
--------- ---------
Total shareholders' equity 5,078 4,733
Total liabilities and --------- ---------
shareholders' equity $64,737 $66,675
========= =========
</TABLE>
