<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): April 17, 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 April 17, 1997, the Registrant issued a press release announcing
its earnings results for the three month period ended March 31, 1997.
This press release is attached as Exhibit 99 to this report and
incorporated herein by reference.
PRIVATE SECURITIES 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 those contained in or implied by such
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
strategic initiatives designed to grow revenues and/or control
expenses, including 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
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99. The Registrant's April 17, 1997, press release announcing its
earnings results for the three month period ended March 31, 1997.
<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: April 17, 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 RECORD FIRST QUARTER NET INCOME,
EARNINGS PER SHARE
* First quarter EPS of $0.96 sets new all-time high
* Rapid progress made on expense control initiatives; efficiency
ratio shows significant improvement
* 5 million common shares repurchased during the quarter
* Targeted loans show strong growth, up 12% from the prior quarter
CLEVELAND, April 17, 1997 -- KeyCorp (NYSE: KEY) today
reported record first quarter earnings of $212 million, up from
$208 million in the first quarter of 1996. Earnings per common
share were $0.96, which is 9 percent above the $0.88 reported for
the year-ago quarter. Return on average common equity was 18.1
percent and return on average total assets was 1.30 percent for the
first quarter of 1997, both improved from 16.4 percent and 1.28
percent, respectively, for the same period last year.
"First quarter results demonstrate the tangible progress made
in areas of strategic focus," said Robert W. Gillespie, KeyCorp
chairman, president and chief executive officer. "We are
particularly pleased with the rapid progress that has been made in
our restructuring efforts and in implementing expense control
initiatives. Our first quarter divestiture and acquisition
announcements have set the stage to redeploy our capital from low
growth businesses to those with higher earnings potential and, due
to our strong internal capital generation, we were able to
aggressively continue our significant share repurchase program."
--more--
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
PAGE 2
Key announced a major restructuring effort last November,
centered around the formation of a single nationwide community bank
by mid-1997. Included in that announcement were efforts to merge
approximately 140 KeyCenters, or branch offices, into other
KeyCenters; to streamline operations and reduce the workforce by
approximately 10 percent, or 2,700 employees; and to divest another
approximately 140 KeyCenters, which are located in primarily rural
markets and are not critical to Key's strategy.
Gillespie continued, "We've streamlined operations and have
already reduced the workforce by nearly half of the 10 percent
projected at the announcement date. In addition, we've
consolidated over 100 of the 140 KeyCenters to be merged.
Contracts are also in place for the sale of more than half of the
140 branch offices announced in November as targeted for sale. We
intend to redeploy the proceeds from these sales to high growth
businesses, and in that vein were pleased to announce last week the
acquisition of Leasetec, a billion dollar leasing company. The
transaction is expected to close in the third quarter of 1997.
With historically high growth rates and returns on equity of 20
percent or more, this line of business is very attractive. This is
the kind of strategic transformation our shareholders can expect us
to energetically pursue."
Commenting on financial performance, K. Brent Somers, KeyCorp
senior executive vice president and chief financial officer, said,
"The earnings performance in the 1997 first quarter reflected the
increasing benefits of aggressive expense control and capital
management initiatives. We're particularly pleased to report early
progress on our year-long effort to reduce our efficiency ratio to
55 percent. Excluding the $100 million restructuring charge recorded last
December and capital securities (tax-advantaged preferred
securities) distributions recorded in both the current quarter ($10
million) and prior quarter ($3 million), noninterest expense for
the first quarter of 1997 was $565 million, down $32 million, or 5
percent, from $597 million in the fourth quarter of 1996, and was
below the first quarter 1996 level. Our efficiency ratio improved
to just under 59 percent; dramatic improvement from the nearly 61
percent reported just one quarter ago."
Somers added, "Key's share repurchase program also continued
with 5 million KeyCorp common shares repurchased during the first
quarter. This brings the total number of shares repurchased under
the 1997 program to 8 million of the 12 million shares authorized
by our Board."
--more--
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
PAGE 3
Net interest income for the first quarter of 1997 totaled $689
million, up slightly from the 1996 fourth quarter as a 5 basis
point reduction in the net interest margin was more than offset by
a $1.2 billion, or annualized 8 percent, increase in average
earning assets (primarily loans). Excluding the impact of sales
and securitizations, average targeted loans, which exclude single
family mortgages, rose $1.2 billion during the first quarter,
resulting in an annualized targeted loan growth rate of 12 percent.
Relative to the first quarter of 1996, net interest income rose $20
million, or 3 percent, due to a rise of 5 basis points in the net interest
margin to 4.75 percent, and a modest 1 percent improvement in
average earning assets. Excluding the impact of sales and
securitizations, average targeted loans increased $4.3 billion, or
11 percent, from the first quarter of last year.
Noninterest income for the 1997 first quarter totaled $259
million, up $10 million, or 4 percent, from the year-ago quarter.
This improvement reflected growth in insurance and brokerage income
(up 17 percent), credit card fees (up 15 percent), trust and asset
management income (up 10 percent) and other income (up 16 percent).
Contributing to the growth in the "other" category were increases
in income from corporate owned life insurance and dealer trading
activities. The above increases were partially offset by a $12
million decrease in loan securitization income, due in part to the
impact of a new accounting standard which took effect on January 1,
1997. Compared with the fourth quarter, traditionally KeyCorp's
peak quarter for loan securitization income, noninterest income
decreased $26 million, or 9 percent, reflecting not only lower
income from loan securitizations, but also seasonal fluctuations in
trust and asset management income and credit card fees.
Noninterest expense for the 1997 first quarter totaled $575
million, up less than 1 percent from $570 million recorded a year
ago. After excluding the $100 million restructuring charge from
the fourth quarter, noninterest expense declined by $25 million in
the first quarter of 1997. Decreases in personnel expense and
professional fees led the decline.
Asset quality trends in the 1997 first quarter continued to
approach more normalized levels. Nonperforming assets increased to
$425 million, or 0.85 percent of loans plus other real estate owned
and other nonperforming assets at March 31, 1997, from $400
million, or 0.81 percent, at year end 1996. This increase was
geographically broad based and spread across a number of commercial
and consumer loan product types. Net loan charge-offs totaled $67
million, or 0.55 percent of average loans, up from $57 million, or
0.46 percent, for the prior quarter, with the increases occurring
primarily in the credit card and indirect auto portfolios. The
provision for loan losses for the 1997 first quarter was increased
to $67 million from $57 million in the previous quarter to maintain
the provision at a level at least equal to net charge-offs. At
March 31, 1997, the allowance for loan losses as a percentage of
period-end loans was 1.75 percent, with the nonperforming loan
coverage ratio at 235 percent.
# # #
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
Page 4
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
---------------------------------------
3-31-97 12-31-96 3-31-96
--------- ---------- ---------
<S> <C> <C> <C>
Summary of operations
Net interest income (TE) $700 $695 $682
Provision for loan losses 67 57 44
Noninterest income 259 285 249
Noninterest expense 575 700 570
Net income 212 151 208
Per Common Share
Net income $ .96 $ .67 $ .88
Cash dividends .42 .38 .38
Book value at period end 21.29 21.84 21.43
Market price at period end 48.75 50.50 38.63
At period end
Full-time equivalent employees 26,603 27,689 28,902
Full-service banking offices 1,161 1,205 1,270
Performance ratios
Return on average total assets 1.30 % .92 % 1.28 %
Return on average common equity 18.07 12.53 16.42
Return on average total equity 18.07 12.53 16.22
Efficiency (1) 58.92 60.92 61.22
Overhead (2) 43.71 44.89 47.07
Net interest margin (TE) 4.75 4.80 4.70
Capital ratios at period end
Equity to assets (3) 6.88 % 7.22 % 7.88 %
Tangible equity to tangible
assets (3) 5.58 5.88 6.38
Tier 1 risk-adjusted capital (4) 7.70 7.98 7.71
Total risk-adjusted capital (4) 12.66 13.01 11.45
Leverage (4) 6.69 6.93 6.43
<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 3-31-97 are 7.62% and 6.32%,
respectively, and at 12-31-96 are 7.96% and 6.63 %, respectively.
(4) 3-31-97 ratio is estimated.
TE = Taxable Equivalent
</FN>
</TABLE>
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
Page 5
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
----------------------------------
3-31-97 12-31-96 3-31-96
--------- ---------- ---------
<S> <C> <C> <C>
Asset quality
Net loan charge-offs $ 67 $ 57 $ 43
Net loan charge-offs to average loans .55 % .46 % .36 %
Allowance for loan losses $870 $870 $875
Allowance for loan losses to
period end loans 1.75 % 1.77 % 1.81 %
Allowance for loan losses to
nonperforming loans 234.50 249.28 256.60
Nonperforming loans at period end $371 $349 $341
Nonperforming assets at period end 425 400 389
Nonperforming loans to period end loans .75 % .71 % .71 %
Nonperforming assets to period end
loans plus OREO and other
nonperforming assets .85 .81 .81
</TABLE>
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
Page 6
Consolidated Balance Sheets
(dollars in millions)
<TABLE>
<CAPTION>
3-31-97 12-31-96 3-31-96
Assets --------- ---------- ---------
<S> <C> <C> <C>
Loans $49,724 $49,235 $48,273
Investment securities 1,628 1,601 1,679
Securities available for sale 7,971 7,728 7,482
Short-term investments 502 696 507
--------- ---------- ---------
Total earnings assets 59,825 59,260 57,941
Allowance for loan losses (870) (870) (875)
Cash and due from banks 3,242 3,444 2,975
Premises and equipment 1,057 1,084 1,032
Goodwill 811 824 881
Other intangible assets 130 137 160
Corporate owned life insurance 1,535 1,515 1,177
Other assets 2,163 2,227 1,761
--------- ---------- ---------
Total assets $67,893 $67,621 $65,052
========= ========== =========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,986 $ 9,524 $ 8,571
Interest-bearing 34,318 34,455 36,451
Deposits in foreign offices-
interest-bearing 935 1,338 379
--------- ---------- ---------
Total deposits 44,239 45,317 45,401
Federal funds purchased and
securities sold under
repurchase agreements 7,509 6,925 5,820
Other short-term borrowings 4,261 3,969 2,952
Other liabilities 1,936 1,816 1,489
Long-term debt 4,774 4,213 4,266
--------- ---------- ---------
Total liabilities 62,719 62,240 59,928
Capital securities of subsidiary trusts 500 500 --
Shareholders' equity
Preferred stock -- -- 160
Common equity 4,674 4,881 4,964
--------- ---------- ---------
Total shareholders' equity 4,674 4,881 5,124
Total liabilities, capital securities
of subsidiary trusts and
shareholders' equity $67,893 $67,621 $65,052
========= ========== =========
Common Shares outstanding (000) 219,582 223,454 231,670
</TABLE>
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
Page 7
Consolidated Statements of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
----------------------------------
3-31-97 12-31-96 3-31-96
--------- ---------- ---------
<S> <C> <C> <C>
Interest income $1,255 $1,243 $1,236
Interest expense 566 560 567
--------- ---------- ---------
Net interest income 689 683 669
Provision for loan losses 67 57 44
--------- ---------- ---------
622 626 625
Noninterest income
Service charges on deposit accounts 71 75 72
Trust and asset management income 64 67 58
Loan securitization income 1 17 13
Credit card fees 23 25 20
Insurance and brokerage income 21 18 18
Other income 79 83 68
--------- ---------- ---------
Total noninterest income 259 285 249
Noninterest expense
Personnel 290 301 291
Net occupancy 56 56 54
Equipment 43 42 38
Amortization of intangibles 21 23 22
Professional fees 11 23 16
Marketing 21 20 21
Restructuring charge -- 100 --
Other expense 133 135 128
--------- ---------- ---------
Total noninterest expense 575 700 570
--------- ---------- ---------
Income before income taxes 306 211 304
Income taxes 94 60 96
--------- ---------- ---------
Net income $ 212 $ 151 $ 208
========= ========== =========
Net income applicable to Common Shares $212 $151 $204
Net income per Common Share .96 .67 .88
Wtd. avg. Common Shares outstanding (000)221,670 225,562 233,100
Taxable-equivalent adjustment $11 $12 $13
</TABLE>
<PAGE>
KEYCORP REPORTS FIRST QUARTER 1997 EARNINGS
APRIL 17, 1997
Page 8
Consolidated Quarterly Average Balance Sheets
(in millions)
<TABLE>
<CAPTION>
Three months ended
----------------------------------
3-31-97 12-31-96 3-31-96
--------- ---------- ---------
<S> <C> <C> <C>
Assets
Loans $49,215 $48,319 $48,152
Investment securities 1,617 1,615 1,685
Securities available for sale 7,800 7,271 7,864
Short-term investments 411 678 507
--------- ---------- ---------
Total earning assets 59,043 57,883 58,208
Allowance for loan losses (868) (866) (875)
Cash and due from banks 2,562 2,624 2,662
Other assets 5,617 5,422 5,116
--------- ---------- ---------
Total assets 66,354 65,063 65,111
========= ========== =========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,408 $ 8,615 $ 8,208
Interest-bearing 34,245 34,736 36,603
Deposits in foreign offices-
interest-bearing 1,150 793 848
--------- ---------- ---------
Total deposits 43,803 44,144 45,659
Federal funds purchased and securities
sold under repurchase agreements 7,028 6,087 5,691
Other short-term borrowings 3,912 3,568 2,950
Other liabilities 1,867 1,793 1,551
Long-term debt 4,486 4,567 4,102
--------- ---------- ---------
Total liabilities 61,096 60,159 59,953
Capital securities of subsidiary trusts 500 111 --
Shareholders' equity
Preferred stock -- -- 160
Common equity 4,758 4,793 4,998
--------- ---------- ---------
Total shareholders' equity 4,758 4,793 5,158
--------- ---------- ---------
Total liabilities, capital securities
of subsidiary trusts and
shareholders' equity $66,354 $65,063 $65,111
========= ========== =========
</TABLE>
