<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): January 16, 1997
[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 January 16, 1997, the Registrant issued a press release announcing
its earnings results for the three month period and twelve month period
ended December 31, 1996. This press release is attached as Exhibit 99
to this report and incorporated herein by reference.
PRIVATE SESURITIES LITIGATION REFORM ACT OF 1995
FORWARD LOOKING STATEMENTS DISCLOSURE
In connection with any forward looking statements made by the
Registrant, the following disclosure is made. Actual results could
differ materially from any such forward looking statements for a variety
of factors including: (1) sharp and/or rapid changes in interest rates,
(2) significant changes in the economic scenario from the current
anticipated scenario which could materially change anticipated credit
quality trends and the ability to generate loans, (3) significant delay
in or inability to execute on strategic initiatives designed to grow
revenues and/or control expenses, including our plans to form a
nationwide bank, to reduce expenses to achieve a 55% efficiency ratio by
around the end of 1997, and to both consolidate and divest branches, and
(4) significant changes in accounting, tax, or regulatory practices or
requirements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
-----------------------------------------------------------------
(c) Exhibits
--------
99. The Registrant's January 16, 1997, press release announcing its
earnings results for the three month period and twelve month period
ended December 31, 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: January 16, 1997 /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: Analyst Contacts:
John Fuller (216) 689-8140 Lee Irving (216) 689-3564
Bill Murschel (216) 689-0457 Laurie Counsel (216) 689-4911
Web Site: http://www.keybank.com
FOR IMMEDIATE RELEASE
KEYCORP REPORTS FOURTH QUARTER EARNINGS, DIVIDEND INCREASE
----------------------------------------------------------
* Record fourth quarter EPS of $0.96, excluding restructuring
charge, up 12%
* Dividend increased 32nd consecutive year, up 10.5%
* 5 million common shares repurchased during the quarter
* Strategic actions position Key as industry leader in nationwide
banking
CLEVELAND, January 16, 1997 -- KeyCorp (NYSE: KEY) today
reported fourth quarter earnings, excluding a previously announced restructuring
charge, of $217 million, up 5 percent from $207 million in the fourth quarter of
1995. Excluding the restructuring charge, earnings per common share reached a
record high of $0.96 for the quarter, up 12 percent from the $0.86 reported for
the same period in 1995. The restructuring charge of $100 million ($66 million
after tax, or $0.29 per common share) was recorded in connection with certain
strategic actions to be taken over the next year to complete Key's
transformation to a nationwide, bank-based financial services company.
Including this charge, 1996 fourth quarter earnings were $151 million, or
$0.67 per common share.
Excluding the restructuring charge and Key's share of a government
mandated assessment to recapitalize the Savings Association Insurance Fund
("SAIF") recorded in the third quarter, earnings for the full year were $860
million, or $3.71 per common share, compared with $825 million, or $3.45 per
common share in 1995. Including both charges, 1996 net income and earnings per
common share were $783 million and $3.37, respectively.
"Our performance for 1996 was solid and right on course," said Robert W.
Gillespie, KeyCorp chairman, president and chief executive officer. "We've
accelerated our plans to transform Key to a nationwide financial services
retailer, setting in motion the strategic actions necessary for broader, more
convenient and modern financial services for American consumers and
businesses."
--more--
<PAGE>
KEYCORP EARNINGS
JANUARY 16, 1997
PAGE 2
The range of financial services offered by Key's nationwide bank,
KeyBank National Association, will reflect Key's long-standing commitment to
its vast array of markets and customers. It will continue to emphasize retail
banking products; its focused private banking services; and commercial
lending and other services tailored to small businesses and middle market
companies. Delivery of these products and services will take place through a
network of KeyCenters organized within 28 U.S. geographic areas defined by their
market contiguity, not constrained by state boundaries. In addition, the
specialized products and service offerings of Key's large corporate and
specialty lending groups will get added attention and emphasis. A separate
entity, KeyBank USA, as it has since its founding in 1995, will continue to
deliver on a nationwide basis consumer finance products such as credit cards,
auto finance and student loans.
Gillespie continued, "Through the formation of a single nationwide bank,
along with the consolidation of offices and workforce reductions, Key intends to
be among the top-performing bank-based financial services companies in terms of
both productivity and earnings growth."
Excluding the restructuring charge, Key's fourth quarter return on
average total assets was 1.33 percent, up from 1.23 percent in the year-ago
quarter and 1.28 percent in the 1996 third quarter. On a comparable basis,
the return on average total equity was 18.01 percent compared with 16.11
percent in the prior-year quarter and 16.73 percent in the previous quarter.
Including the restructuring charge, reported returns on average total assets
and equity in the fourth quarter were 0.92 percent and 12.53 percent,
respectively.
Commenting on financial performance, K. Brent Somers, KeyCorp senior
executive vice president and chief financial officer, said,"The results for
the fourth quarter were in line with our expectations, and I am particularly
pleased that we were able to achieve record operating earnings per common
share. Key's strong performance was bolstered by benefits derived from our
ongoing capital management activities. During the fourth quarter, we
repurchased 5 million shares of KeyCorp common stock, including the first 3
million common shares repurchased under a new 12 million share repurchase
program authorized by the Board of Directors in November. Our flexibility to
continue aggressive management of capital was augmented in the fourth quarter
through the issuance of $500 million of tax-advantaged capital securities which
receive Tier I capital treatment."
Somers added, "As a further indication of their confidence in the
underlying financial strength of the company, the Board of Directors today
declared a 10.5 percent increase in the quarterly common stock dividend to
$.42 per share, making 1997 the 32nd consecutive year in which the dividend has
increased."
--more--
<PAGE>
KEYCORP EARNINGS
JANUARY 16, 1997
PAGE 3
Net interest income for the fourth quarter of 1996 totaled $683 million,
up $23 million, or 3 percent, from the year-ago quarter. This increase
reflected substantial improvement in the net interest margin which rose 27
basis points to 4.80 percent, and more than offset the impact of a managed
reduction of $1.6 billion, or 3 percent, in average earning assets. The
growth in the margin resulted from a number of factors. Two of the primary
factors were the origination of new loans with wider interest rate spreads and
the reduction of lower spread assets. Compared with the 1996 third quarter,
net interest income was unchanged as the net interest margin decline of 2
basis points was offset by an increase of $456 million, or 1 percent, in
average earning assets.
Excluding the impact of sales and securitizations, average total loans
increased $2.7 billion, or 6 percent, from the fourth quarter of 1995, with
the largest growth coming from the consumer portfolio. Average targeted
loans, which exclude single family mortgages that are being managed down,
increased $405 million during the fourth quarter. This resulted in an
annualized targeted loan growth rate of 4 percent relative to the prior
quarter and 9 percent in comparison with the fourth quarter of 1995.
Noninterest income for the 1996 fourth quarter totaled $285 million,
down $19 million, or 6 percent, from the year-ago quarter. Included in
fourth quarter 1995 results was a positive $18 million adjustment for
better-than-expected performance of student loan securitizations completed in
prior periods. Excluding this adjustment, noninterest income was consistent
with the prior year level. Positive contributions from trust and asset
management income (up 8 percent), insurance and brokerage income and service
charges on deposit accounts (both up 6 percent) and other income (up 27
percent) were largely offset by decreases of $22 million in loan
securitization income (net of the adjustment) and $5 million in mortgage
banking income. The reduction in loan securitization income resulted largely
from the timing of Key's student loan sales and securitization activity. In
the latter half of 1996, this activity took place in both the third ($357
million) and fourth ($354 million) quarters, whereas, during the second half
of 1995 all activity occurred in the fourth ($724 million) quarter. The
growth in other income reflected a number of items, including increases in
income from corporate owned life insurance and dealer trading activities.
Compared with the 1996 third quarter, noninterest income decreased $4
million, or 1 percent. Included in third quarter results was an $11 million
gain on the sale of an out-of-franchise credit card portfolio. Excluding
this, noninterest income was up $7 million from the prior quarter.
Noninterest expense for the 1996 fourth quarter totaled $700 million, up
$78 million, or 13 percent, from the year-ago quarter. Excluding the impact
of the restructuring charge in the current quarter and $33 million of
outdated technology write-offs and a sublease loss in the fourth quarter of
1995, noninterest expense showed a slight increase of $11 million, or 2
percent. This reflected a $15 million increase in personnel expense, largely
offset by lower costs associated with deposit insurance, professional fees and
other expenses. After excluding the one-time SAIF assessment recorded in
September, adjusted noninterest expense for the fourth quarter was $2 million
above the 1996 third quarter level.
--more--
<PAGE>
KEYCORP EARNINGS
JANUARY 16, 1997
PAGE 4
Asset quality in the 1996 fourth quarter was relatively unchanged from
1996 third quarter levels. Nonperforming assets ended the fourth quarter at
$400 million, or 0.81 percent of loans plus other real estate owned and other
nonperforming assets, compared with $396 million, or 0.82 percent, for the
previous quarter. As expected, net loan charge-offs continued to approach
more normalized levels, totaling $57 million, or 0.46 percent of average loans,
up from $49 million, or 0.40 percent, in the 1996 third quarter, with the
increases occurring primarily in the credit card and indirect auto
portfolios. As a result of the higher level of net charge-offs, the
provision for loan losses for the 1996 fourth quarter increased to $57
million from $49 million in the third quarter. This increase reflected
management's intention to continue to maintain the provision for loan losses
at a level equal to or above net charge-offs. At the 1996 year end, the
allowance for loan losses as a percentage of period end loans was 1.77
percent, with the nonperforming loan coverage ratio at 249 percent, both
little changed from September 30, 1996.
At December 31, 1996, Key's assets totaled $67.6 billion and
shareholders' equity totaled $4.9 billion. The Tier 1 Capital ratio was
estimated at 7.94 percent and the Total Capital ratio was estimated at 12.94
percent.
# # #
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 5
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
---------------------------------
12-31-96 9-30-96 12-31-95
---------- --------- ----------
<S> <C> <C> <C>
Summary of operations
Net interest income (TE) $695 $696 $673
Provision for loan losses 57 49 34
Noninterest income 285 289 304
Noninterest expense 700 615 622
Net income 151 207 207
Per Common Share
Net income $ .67 $ .90 $ .86
Cash dividends .38 .38 .36
Book value at period end 21.84 21.91 21.36
Market price at period end 50.50 44.00 36.25
At period end
Full-time equivalent employees 27,689 28,337 29,563
Full-service banking offices 1,205 1,218 1,284
Performance ratios
Return on average total assets .92% 1.28% 1.23%
Return on average common equity 12.53 16.73 16.31
Return on average total equity 12.53 16.73 16.11
Efficiency (1) 60.92 60.71 63.67
Overhead (2) 44.89 44.40 47.36
Net interest margin (TE) 4.80 4.82 4.53
Capital ratios at period end
Equity to assets (3) 7.22% 7.61% 7.77%
Tangible equity to tangible assets (3) 5.88 6.20 6.25
Tier 1 risk-adjusted capital (4) 7.94 7.49 7.53
Total risk-adjusted capital (4) 12.94 12.50 10.85
Leverage (4) 6.95 6.38 6.20
<FN>
(1) Calculated as noninterest expense (excluding certain nonrecurring charges
and distributions on capital securities) divided by taxable-equivalent net
interest income plus noninterest income (excluding net securities
transactions).
(2) Calculated as noninterest expense (excluding certain nonrecurring charges
and distributions on capital securities) less noninterest income
(excluding net securities transactions) divided by taxable-equivalent net
interest income.
(3) Including capital securities, these ratios at 12-31-96 are 7.96% and
6.63%, respectively.
(4) 12-31-96 ratio is estimated.
TE = Taxable Equivalent
</FN>
</TABLE>
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 6
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
---------------------------------
12-31-96 9-30-96 12-31-95
---------- --------- ---------
<S> <C> <C> <C>
Asset quality
Net loan charge-offs $57 $49 $34
Net loan charge-offs to average loans .46% .40% .28%
Allowance for loan losses $870 $870 $876
Allowance for loan losses to
period end loans 1.77% 1.80% 1.81%
Allowance for loan losses to
nonperforming loans 249.28 252.91 263.15
Nonperforming loans at period end $349 $344 $333
Nonperforming assets at period end 400 396 379
Nonperforming loans to period end loans .71% .71% .69%
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .81 .82 .78
</TABLE>
<TABLE>
<CAPTION>
Twelve months ended
----------------------
12-31-96 12-31-95
---------- ----------
<S> <C> <C>
Summary of operations
Net interest income (TE) $2,767 $2,693
Provision for loan losses 197 100
Noninterest income 1,087 933
Noninterest expense 2,464 2,312
Income before extraordinary item 783 789
Net income 783 825
Per Common Share
Income before extraordinary item $3.37 $3.30
Net income 3.37 3.45
Cash dividends 1.52 1.44
Performance ratios
Return on average total assets 1.21% 1.24%
Return on average common equity 15.73 17.35
Return on average total equity 15.64 17.10
Efficiency (1) 60.84 63.03
Overhead (2) 45.46 49.66
Net interest margin (TE) 4.78 4.47
Asset quality
Net loan charge-offs $195 $99
Net loan charge-offs to average loans .40% .21%
</TABLE>
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 7
Consolidated Balance Sheets
(dollars in millions)
<TABLE>
<CAPTION>
12-31-96 9-30-96 12-31-95
ASSETS ---------- --------- ----------
<S> <C> <C> <C>
Loans $49,235 $48,373 $48,332
Investment securities 1,601 1,653 1,688
Securities available for sale 7,728 7,113 8,060
Short-term investments 696 501 682
---------- --------- ----------
Total earning assets 59,260 57,640 58,762
Allowance for loan losses (870) (870) (876)
Cash and due from banks 3,444 3,110 3,444
Premises and equipment 1,084 1,052 1,030
Goodwill 824 838 899
Other intangible assets 137 144 171
Corporate owned life insurance 1,515 1,301 1,088
Other assets 2,227 2,141 1,821
---------- --------- ----------
Total assets $67,621 $65,356 $66,339
========== ========= ==========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 9,524 $ 9,032 $ 9,281
Interest-bearing 34,455 34,608 36,764
Deposits in foreign offices-interest-
bearing 1,338 883 1,237
--------- --------- ---------
Total deposits 45,317 44,523 47,282
Federal funds purchased and securities
sold under repurchase agreements 6,925 5,592 5,544
Other short-term borrowings 3,969 3,861 2,880
Other liabilities 1,816 1,740 1,477
Long-term debt 4,213 4,664 4,003
--------- --------- ---------
Total liabilities 62,240 60,380 61,186
Capital securities of subsidiary trusts 500 -- --
Shareholders' equity
Preferred stock -- -- 160
Common equity 4,881 4,976 4,993
---------- --------- ---------
Total shareholders' equity 4,881 4,976 5,153
Total liabilities, capital securities
of subsidiary trusts and ---------- ---------- ---------
shareholders' equity $67,621 $65,356 $66,339
========== ========== =========
Common Shares outstanding (000) 223,454 227,062 233,703
</TABLE>
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 8
Consolidated Statements of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
---------------------------------
12-31-96 9-30-96 12-31-95
---------- --------- ----------
<S> <C> <C> <C>
Interest income $1,243 $1,238 $1,278
Interest expense 560 555 618
---------- --------- ----------
Net interest income 683 683 660
Provision for loan losses 57 49 34
---------- --------- ----------
626 634 626
Noninterest income
Service charges on deposit accounts 75 74 71
Trust and asset management income 67 61 62
Loan securitization income 17 18 57
Credit card fees 25 24 25
Insurance and brokerage income 18 18 17
Mortgage banking income 2 6 7
Net securities gains -- -- 1
Other income 81 88 64
---------- --------- ---------
Total noninterest income 285 289 304
Noninterest expense
Personnel 301 300 286
Net occupancy 56 55 58
Equipment 42 41 40
FDIC insurance assessments -- 20 7
Amortization of intangibles 23 21 22
Professional fees 23 18 24
Marketing 20 30 19
Restructuring charge 100 -- --
Other expense 135 130 166
---------- --------- ---------
Total noninterest expense 700 615 622
---------- --------- ---------
Income before income taxes 211 308 308
Income taxes 60 101 101
---------- --------- ---------
Net income $ 151 $ 207 $ 207
========== ========= =========
Net income applicable to Common Shares $151 $207 $203
Net income per Common Share .67 .90 .86
Wtd. avg. Common Shares outstanding (000) 225,562 229,668 235,753
Taxable-equivalent adjustment $12 $13 $13
</TABLE>
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 9
Consolidated Statements of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Twelve months ended
----------------------
12-31-96 12-31-95
---------- ----------
<S> <C> <C>
Interest income $4,951 $5,121
Interest expense 2,234 2,485
---------- ----------
Net interest income 2,717 2,636
Provision for loan losses 197 100
---------- ----------
2,520 2,536
Noninterest income
Service charges on deposit accounts 293 278
Trust and asset management income 247 232
Loan securitization income 62 66
Credit card fees 93 85
Insurance and brokerage income 70 61
Mortgage banking income 22 41
Net securities gains (losses) 1 (41)
Other income 299 211
---------- ----------
Total noninterest income 1,087 933
Noninterest expense
Personnel 1,190 1,115
Net occupancy 219 218
Equipment 161 156
FDIC insurance assessments 25 59
Amortization of intangibles 88 77
Professional fees 70 73
Marketing 88 71
Restructuring charge 100 --
Other expense 523 543
---------- ----------
Total noninterest expense 2,464 2,312
---------- ----------
Income before income taxes and
extraordinary item 1,143 1,157
Income taxes 360 368
---------- ----------
Income before extraordinary item 783 789
Extraordinary net gain from the
sales of subsidiaries, net of
income taxes of $25 -- 36
---------- ----------
Net income $ 783 $ 825
========== ==========
Net income applicable to Common Shares $775 $809
Per Common Share:
Income before extraordinary item $3.37 $3.30
Net income 3.37 3.45
Wtd. avg. Common Shares outstanding (000) 229,905 234,787
Taxable-equivalent adjustment $50 $57
</TABLE>
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 10
Consolidated Quarterly Average Balance Sheets
(in millions)
<TABLE>
<CAPTION>
Three months ended
---------------------------------
12-31-96 9-30-96 12-31-95
---------- --------- ----------
<S> <C> <C> <C>
Assets
Loans $48,319 $48,103 $48,038
Investment securities 1,615 1,709 7,011
Securities available for sale 7,271 7,152 3,890
Short-term investments 678 463 540
---------- --------- ---------
Total earning assets 57,883 57,427 59,479
Allowance for loan losses (866) (870) (879)
Cash and due from banks 2,624 2,622 2,883
Other assets 5,422 5,301 5,060
---------- --------- ---------
Total assets $65,063 $64,480 $66,543
========== ========= =========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,615 $ 8,467 $ 8,392
Interest-bearing 34,736 34,518 37,233
Deposits in foreign offices-
interest-bearing 793 1,189 1,048
---------- --------- ---------
Total deposits 44,144 44,174 46,673
Federal funds purchased and securities
sold under repurchase agreements 6,087 5,694 6,269
Other short-term borrowings 3,568 3,669 3,089
Other liabilities 1,793 1,661 1,379
Long-term debt 4,567 4,359 4,042
---------- --------- ---------
Total liabilities 60,159 59,557 61,452
Capital securities of subsidiary trusts 111 -- --
Shareholders' equity
Preferred stock -- -- 160
Common equity 4,793 4,923 4,931
---------- --------- ---------
Total shareholders' equity 4,793 4,923 5,091
---------- --------- ---------
Total liabilities, capital securities
of subsidiary trusts and
shareholders' equity $65,063 $64,480 $66,543
========== ========= =========
</TABLE>
<PAGE>
KeyCorp Reports Fourth Quarter 1996 Earnings
January 16, 1997
Page 11
Consolidated Year-to-date Average Balance Sheets
(in millions)
<TABLE>
<CAPTION>
Twelve months ended
----------------------
12-31-96 12-31-95
---------- ----------
<S> <C> <C>
Assets
Loans $48,216 $48,012
Investment securities 1,671 9,289
Securities available for sale 7,423 2,103
Short-term investments 535 799
---------- ---------
Total earning assets 57,845 60,203
Allowance for loan losses (872) (868)
Cash and due from banks 2,594 2,768
Other assets 5,252 4,539
---------- ----------
Total assets $64,819 $66,642
========== ==========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,374 $ 8,129
Interest-bearing 35,353 37,254
Deposits in foreign offices-interest-bearing 996 2,182
---------- ----------
Total deposits 44,723 47,565
Federal funds purchased and securities
sold under repurchase agreements 5,843 5,623
Other short-term borrowings 3,279 3,362
Other liabilities 1,644 1,373
Long-term debt 4,296 3,895
---------- ----------
Total liabilities 59,785 61,818
Capital securities of subsidiary trusts 28 --
Shareholders' equity
Preferred stock 79 160
Common equity 4,927 4,664
---------- ----------
Total shareholders' equity 5,006 4,824
Total liabilities, capital securities ---------- ----------
of subsidiary trusts and
shareholders' equity $64,819 $66,642
========== ==========
</TABLE>
