<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): July 17, 1997
[KEY 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 July 17, 1997, the Registrant issued a press release announcing its
earnings results for the three month period and six month period ended June
30, 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 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 July 17, 1997, press release announcing its
earnings results for the three month period and six month period
ended June 30, 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: July 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 Norm Malek (216) 689-3468
Laurie Counsel (216) 689-4911
Web Site: http://www.keybank.com
FOR IMMEDIATE RELEASE
KEYCORP REPORTS RECORD EARNINGS PER SHARE
* Second quarter EPS of $1.02, up 11% from the year-ago quarter
* Strength in revenues, earning asset growth; efficiency ratio shows continued
improvement
* Rapid progress made on transforming Key's branch network to a single
nationwide organization
CLEVELAND, July 17, 1997 -- KeyCorp (NYSE: KEY) today reported
second quarter earnings of $223 million, up from $217 million in the
second quarter of 1996. Earnings per common share rose 11 percent to a record
$1.02, up from $0.92 reported for the year-ago quarter. For the first half of
1997, earnings were $435 million, or $1.98 per common share, compared with
$425 million, or $1.80 per common share, for the same period last year.
"The strong earnings performance for the second quarter reflected
continued growth in earning assets and fee income, as well as early momentum
resulting from our organizational and cost control initiatives," said Robert
W. Gillespie, KeyCorp chairman and chief executive officer. "Reflecting
progress in our expense control efforts, our efficiency ratio continues to
improve, decreasing 126 basis points during the quarter to 57.66 percent,
over 280 basis points better than the 60.50 percent of second quarter 1996."
Gillespie continued, "In August, our KeyCenter network will operate
as a single national financial services company, offering greater convenience
and service to our clients through a single streamlined organization. We are
confident that our efforts to reconfigure Key's operating
--more--
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 2
framework place us in the forefront of the banking industry's evolution in the
highly competitive national financial services marketplace. While this
restructuring has penalized prior periods' financial performance, we now feel
well positioned to build market share while many competitors begin a similar
process. In connection with the transformation to a nationwide structure
announced last November, we are on target with our reorganization and expense
control efforts, and we have consolidated 117 KeyCenters and sold or reached
agreements to sell another 96. Efforts like these free up capital to redeploy
in businesses with higher growth opportunities, such as Champion Mortgage Co.,
Inc., which we recently agreed to acquire, and Leasetec, an acquisition we
closed earlier this month."
Key's second quarter return on average total assets was 1.32 percent,
compared with 1.35 percent in the year-ago quarter and 1.30 percent in the
1997 first quarter. The return on average common equity was 18.9 percent,
up from 17.1 percent in the prior-year quarter and 18.1 percent in the previous
quarter.
Net interest income for the second quarter of 1997 totaled $696 million,
up slightly from the prior quarter as a 6 basis point reduction in the net
interest margin was more than offset by a $1.3 billion, or annualized 8 percent,
increase in average earning assets (primarily loans). Excluding the impact
of sales and securitizations, average loans, excluding single family mortgages
and loans held for sale, rose $1.3 billion during the second quarter, resulting
in an annualized growth rate of 13 percent for those loans. Relative to the
second quarter of 1996, net interest income rose $14 million, or 2 percent,
as the effect of an 11 basis point decline in the net interest margin was
more than countered by the 4 percent (8 percent adjusted for loan sales and
securitizations) growth in average earning assets.
Noninterest income for the 1997 second quarter totaled $288 million,
up $24 million, or 9 percent, from the year-ago quarter and up $29 million,
or 11 percent, from this year's first quarter. Primary contributors to the
year-over-year increase were growth in venture capital income and various
other service and advisory fees, which led to a $19 million increase in other
noninterest income. Furthermore, income from corporate owned life insurance
rose by $6 million and insurance and brokerage income rose by $5 million.
These increases were partially offset by an $11 million decrease in loan
securitization income, due in part to the impact of a new accounting standard
which took effect on January 1, 1997. Included in other noninterest income
for the second quarter was a branch sale gain of $10 million in 1997 and an
$8 million gain from the sale of a Florida savings bank in 1996. The branch
sale gain and growth in an array of service and advisory fees were primarily
--more--
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 3
responsible for the strong increase in noninterest income relative to the
first quarter.
Noninterest expense for the 1997 second quarter totaled $582 million,
up less than 1 percent from $579 million recorded a year ago. Excluding
capital securities distributions of $11 million recorded in the second quarter
of 1997, noninterest expense was below the second quarter 1996 level by $8
million, or 1 percent, due primarily to a decrease in personnel expense,
reflecting a 9 percent reduction in full-time equivalent employees since
June 30, 1996. Compared with the prior quarter, noninterest expense showed
a modest $7 million, or 1 percent increase, despite the impact of annual
merit increases which took effect on April 1 for a significant part of Key's
payroll.
During the second quarter Key repurchased nearly 2 million of its
common shares in connection with the anticipated closing of the Champion
acquisition in the third quarter and as part of the continuation of its 1997
share buyback program.
The provision for loan losses for the 1997 second quarter was $75
million, up from $67 million in the previous quarter and $10 million higher
than second quarter net charge-offs. Net loan charge-offs for the quarter
were $65 million, or 0.52 percent of average loans, little changed from $67
million, or 0.55 percent, for the prior quarter. Nonperforming assets ended
the second quarter at $433 million, or 0.84 percent of loans plus other real
estate owned and other nonperforming assets compared with $425 million, or
0.85 percent, at March 31, 1997. At June 30, 1997, the allowance for loan
losses was 1.70 percent of period end loans, with the nonperforming loan
coverage ratio at 237 percent.
# # #
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 4
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------
6-30-97 3-31-97 6-30-96
--------- --------- ---------
<S> <C> <C> <C>
Summary of operations
Net interest income (TE) $707 $700 $694
Provision for loan losses 75 67 47
Noninterest income 288 259 264
Noninterest expense 582 575 579
Net income 223 212 217
Per Common Share
Net income $ 1.02 $ .96 $ .92
Cash dividends .42 .42 .38
Book value at period end 22.04 21.29 21.63
Market price at period end 55.88 48.75 38.75
At period end
Full-time equivalent employees 25,882 26,603 28,319
Full-service banking offices 1,130 1,161 1,239
Performance ratios
Return on average total assets 1.32 % 1.30 % 1.35 %
Return on average common equity 18.85 18.07 17.15
Return on average total equity 18.85 18.07 16.93
Efficiency (1) 57.66 58.92 60.50
Overhead (2) 41.02 43.71 45.53
Net interest margin (TE) 4.69 4.75 4.80
Capital ratios at period end
Equity to assets (3) 6.91 % 6.88 % 7.71 %
Tangible equity to tangible assets (3) 5.67 5.58 6.27
Tier 1 risk-adjusted capital (4) 7.26 7.47 7.60
Total risk-adjusted capital (4) 11.82 12.31 11.72
Leverage (4) 6.67 6.68 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 and gain on branch sales).
(2) Calculated as noninterest expense (excluding certain nonrecurring
charges and distributions on capital securities) less noninterest
income (excluding net securities transactions and gain on branch sales)
divided by taxable-equivalent net interest income.
(3) Including capital securities receiving Tier I treatment, these ratios
at 6-30-97 are 7.63% and 6.39%, respectively, and at 3-31-97 are 7.62%
and 6.32%, respectively.
(4) 6-30-97 ratio is estimated.
TE = Taxable Equivalent
</FN>
</TABLE>
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 5
Financial Highlights
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
---------------------------
6-30-97 3-31-97 6-30-96
------- ------- -------
<S> <C> <C> <C>
Asset quality
Net loan charge-offs $ 65 $ 67 $ 46
Net loan charge-offs to average loans .52 % .55 % .38 %
Allowance for loan losses $880 $870 $870
Allowance for loan losses to
period end loans 1.70 % 1.75 % 1.82 %
Allowance for loan losses to
nonperforming loans 236.56 234.50 266.87
Nonperforming loans at period end $372 $371 $326
Nonperforming assets at period end 433 425 371
Nonperforming loans to period end loans .72 % .75 % .68 %
Nonperforming assets to period end
loans plus OREO and other nonperforming
assets .84 .85 .77
</TABLE>
<TABLE>
<CAPTION>
Six months ended
------------------
6-30-97 6-30-96
------- -------
<S> <C> <C>
Summary of operations
Net interest income (TE) $1,407 $1,376
Provision for loan losses 142 91
Noninterest income 547 513
Noninterest expense 1,157 1,149
Net income 435 425
Per Common Share
Net income $1.98 $1.80
Cash dividends .84 .76
Performance ratios
Return on average total assets 1.31 % 1.32 %
Return on average common equity 18.46 16.78
Return on average total equity 18.46 16.58
Efficiency (1) 58.28 60.86
Overhead (2) 42.36 46.29
Net interest margin (TE) 4.72 4.75
Asset quality
Net loan charge-offs $132 $89
Net loan charge-offs to average loans .54 % .37 %
</TABLE>
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 6
Consolidated Balance Sheets
(dollars in millions)
<TABLE>
<CAPTION>
6-30-97 3-31-97 6-30-96
------- ------- -------
<S> <C> <C> <C>
Assets
Loans $51,644 $49,724 $47,928
Investment securities 1,484 1,628 1,714
Securities available for sale 7,727 7,971 7,251
Short-term investments 653 502 511
------- ------- -------
Total earning assets 61,508 59,825 57,404
Allowance for loan losses (880) (870) (870)
Cash and due from banks 2,911 3,242 3,061
Premises and equipment 1,025 1,057 1,032
Goodwill 795 811 844
Other intangible assets 123 130 154
Corporate owned life insurance 1,562 1,535 1,192
Other assets 2,628 2,163 1,947
------- ------- -------
Total assets $69,672 $67,893 $64,764
======= ======= =======
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 9,519 $ 8,986 $ 8,877
Interest-bearing 33,655 34,318 34,448
Deposits in foreign offices-interest-bearing 1,452 935 1,092
------- ------- -------
Total deposits 44,626 44,239 44,417
Federal funds purchased and securities
sold under repurchase agreements 6,830 7,509 6,171
Other short-term borrowings 5,447 4,261 3,408
Other liabilities 2,023 1,936 1,598
Long-term debt 5,182 4,774 4,174
------- ------- -------
Total liabilities 64,108 62,719 59,768
Capital securities of subsidiary trusts 750 500 --
Shareholders' equity 4,814 4,674 4,996
Total liabilities, capital securities
of subsidiary trusts and ------- ------- -------
shareholders' equity $69,672 $67,893 $64,764
======= ======= =======
Common Shares outstanding (000) 218,380 219,582 230,979
</TABLE>
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 7
Consolidated Statements of Income
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
--------------------------
6-30-97 3-31-97 6-30-96
------- ------- -------
<S> <C> <C> <C>
Interest income $1,295 $1,255 $1,234
Interest expense 599 566 552
------- ------- -------
Net interest income 696 689 682
Provision for loan losses 75 67 47
------- ------- -------
621 622 635
Noninterest income
Service charges on deposit accounts 74 71 72
Trust and asset management income 64 64 61
Credit card fees 25 23 24
Insurance and brokerage income 21 21 16
Corporate owned life insurance income 21 19 15
Loan securitization income 3 1 14
Net securities gains -- -- 1
Other income 80 60 61
------- ------- -------
Total noninterest income 288 259 264
Noninterest expense
Personnel 283 290 298
Net occupancy 54 56 54
Equipment 44 43 40
Amortization of intangibles 21 21 22
Professional fees 13 11 13
Marketing 22 21 17
Other expense 145 133 135
------- ------- -------
Total noninterest expense 582 575 579
------- ------- -------
Income before income taxes 327 306 320
Income taxes 104 94 103
------- ------- -------
Net income $ 223 $ 212 $ 217
======= ======= =======
Net income applicable to Common Shares $223 $212 $213
Net income per Common Share 1.02 .96 .92
Wtd. avg. Common Shares outstanding (000) 218,973 221,670 231,341
Taxable-equivalent adjustment $11 $11 $12
</TABLE>
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 8
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Six months ended
-----------------
6-30-97 6-30-96
------- -------
<S> <C> <C>
Interest Income $2,550 $2,470
Interest Expense 1,165 1,119
------- -------
Net Interest Income 1,385 1,351
Provision for loan losses 142 91
------- -------
1,243 1,260
Noninterest Income
Service charges on deposit accounts 145 144
Trust and asset management income 128 119
Credit card fees 48 44
Insurance and brokerage income 42 34
Corporate owned life insurance income 40 27
Loan securitization income 4 27
Net securities gains -- 1
Other income 140 117
------- -------
Total noninterest income 547 513
Noninterest Expense
Personnel 573 589
Net occupancy 110 108
Equipment 87 78
Amortization of intangibles 42 44
Professional fees 24 29
Marketing 43 38
Other expense 278 263
------- -------
Total noninterest expense 1,157 1,149
------- -------
Income before income taxes 633 624
Income taxes 198 199
------- -------
Net income $ 435 $ 425
======= =======
Net income applicable to Common Shares $435 $417
Net income per Common Share 1.98 $1.80
Wtd. avg. Common Shares outstanding (000) 220,314 232,220
Taxable-equivalent adjustment $22 $25
</TABLE>
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 9
Consolidated Quarterly Average Balance Sheets
(in millions)
<TABLE>
<CAPTION>
Three months ended
-------------------------
6-30-97 3-31-97 6-30-96
------- ------- -------
<S> <C> <C> <C>
Assets
Loans $50,373 $49,215 $48,292
Investment securities 1,601 1,617 1,673
Securities available for sale 7,822 7,800 7,410
Short-term investments 497 411 491
------- ------- -------
Total earning assets 60,293 59,043 57,866
Allowance for loan losses (866) (868) (877)
Cash and due from banks 2,556 2,562 2,468
Other assets 5,795 5,617 5,166
------- ------- -------
Total assets $67,778 $66,354 $64,623
======= ======= =======
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,432 $ 8,408 $ 8,202
Interest-bearing 34,072 34,245 35,569
Deposits in foreign offices-interest-bearing 2,361 1,150 1,154
------- ------- -------
Total deposits 44,865 43,803 44,925
Federal funds purchased and securities
sold under repurchase agreements 6,461 7,028 5,899
Other short-term borrowings 4,350 3,912 2,922
Other liabilities 1,998 1,867 1,571
Long-term debt 4,772 4,486 4,152
------- ------- -------
Total liabilities 62,446 61,096 59,469
Capital securities of subsidiary trusts 588 500 --
Shareholders' equity
Preferred stock -- -- 158
Common equity 4,744 4,758 4,996
------- ------- -------
Total shareholders' equity 4,744 4,758 5,154
------- ------- -------
Total liabilities, capital securities
of subsidiary trusts and
shareholders' equity $67,778 $66,354 $64,623
======= ======= =======
</TABLE>
<PAGE>
KeyCorp Reports Second Quarter 1997 Earnings
July 17, 1997
Page 10
Consolidated Year-to-date Average Balance Sheets
(in millions)
<TABLE>
<CAPTION>
Six months ended
----------------
6-30-97 6-30-96
------- -------
<S> <C> <C>
Assets
Loans $49,797 $48,222
Investment securities 1,609 1,679
Securities available for sale 7,811 7,637
Short-term investments 454 499
------- -------
Total earning assets 59,671 58,037
Allowance for loan losses (867) (876)
Cash and due from banks 2,559 2,565
Other assets 5,707 5,141
------- -------
Total assets $67,070 $64,867
======= =======
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 8,420 $ 8,205
Interest-bearing 34,158 36,086
Deposits in foreign offices-interest-bearing 1,759 1,001
------- -------
Total deposits 44,337 45,292
Federal funds purchased and securities
sold under repurchase agreements 6,743 5,795
Other short-term borrowings 4,132 2,936
Other liabilities 1,933 1,561
Long-term debt 4,630 4,127
------- -------
Total liabilities 61,775 59,711
Capital securities of subsidiary trusts 544 --
Shareholders' equity
Preferred stock -- 159
Common equity 4,751 4,997
------- -------
Total shareholders' equity 4,751 5,156
Total liabilities, capital securities
of subsidiary trusts and ------- -------
shareholders' equity $67,070 $64,867
======= =======
</TABLE>
