<PAGE> 1
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 21, 1999
[KeyCorp Logo]
KeyCorp
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 0-850 34-6542451
----------------------------- ------------------------ ---------------------
(State or other jurisdiction Commission File Number (I.R.S. Employer
of incorporation or Identification No.)
organization)
127 Public Square, Cleveland, Ohio 44114-1306
- ---------------------------------------- --------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (216) 689-6300
<PAGE> 2
ITEM 5. OTHER EVENTS
On October 21, 1999, the Registrant issued a press release announcing its
earnings results for the three-month and nine-month periods ended September 30,
1999. This press release, dated October 21, 1999, is attached as Exhibit 99 to
this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
--------
99 The Registrant's October 21, 1999, press release announcing its
earnings results for the three-month and nine-month periods
ended September 30, 1999.
<PAGE> 3
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 22, 1999 /s/ Lee Irving
--------------------------------------
By: Lee Irving
Executive Vice President
and Chief Accounting Officer
<PAGE> 1
EXHIBIT 99
MEDIA CONTACTS: ANALYST CONTACT:
John Fuller (216) 689-8140 Vern Patterson (216) 689-0520
Bill Murschel (216) 689-0457
WEB SITE: www.Key.com
FOR IMMEDIATE RELEASE
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
-------------------------------------------
- - CONTINUED STRONG LOAN GROWTH AND STABLE ASSET QUALITY
- - CAPITAL MARKETS-BASED FEES LOWER
- - NONINTEREST EXPENSE TRENDS FAVORABLE
CLEVELAND, October 21, 1999 -- KeyCorp (NYSE: KEY) today reported third
quarter earnings of $270 million, or $0.60 per diluted common share, up from
$252 million, or $0.57, in the third quarter of 1998. For the first nine months
of 1999, Key's earnings were $843 million, up 15 percent from $736 million for
the first nine months of 1998. On a diluted per common share basis, Key's
year-to-date earnings were $1.86, amounting to a 13 percent increase from $1.65
for the same period last year.
"Our third quarter results were driven by several positive factors,"
said Robert W. Gillespie, Key's chairman and chief executive officer.
"Commercial lending, home equity lending and consumer lease financing grew at
double-digit rates from the prior quarter, while asset quality measures remained
stable. The performance of our retail banking unit continued to improve,
benefiting from several profitability enhancement initiatives. In addition,
noninterest expense trends were favorable.
"Fee-based income from Key Capital Partners increased from the year-ago
quarter, bolstered by the October 1998 acquisition of McDonald & Company.
However, third quarter fees from investment banking and capital markets
businesses subsided from the second quarter's record levels due to less
favorable conditions in the financial markets that we serve. Market conditions
notwithstanding, we are encouraged by the successful integration we have
achieved with McDonald & Company, and the related impact on our strategy to
broaden Key's financial services capabilities and revenue sources.
"On October 18, we completed the sale of the Retail Bank's Long Island
branches. The positive effects of this on our capital ratios increase our
flexibility to allocate more capital to preferred uses, such as higher growth
opportunities and geographic markets."
<PAGE> 2
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 2
Gillespie added, "Cash basis return measurements will become
increasingly important disclosures in light of the pending discontinuation of
pooling-of-interests accounting for business combinations." Key's return on
average equity and return on average assets for the third quarter of 1999 and
1998, on both an as-reported and cash earnings basis, were as follows:
<TABLE>
<CAPTION>
As Reported Cash Earnings Basis
---------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Return on Average Equity 17.1% 18.1% 24.2% 24.4%
Return on Average Assets 1.32% 1.32% 1.45% 1.43%
</TABLE>
For the first nine months of 1999, Key's returns on average equity and assets
were 18.2 percent and 1.40 percent, respectively, compared with 18.3 percent and
1.33 percent for the first nine months of 1998.
Net interest income in the third quarter of 1999 totaled $700 million,
up slightly from the prior quarter and up $19 million from the third quarter of
last year. Continued growth in average earning assets accounted for the
improvement from the second quarter, although the net interest margin
experienced a slight decline of 5 basis points to 3.92 percent. This decline was
largely driven by the growth of loans at interest rate spreads narrower than the
second quarter margin. The increase in net interest income from the third
quarter of 1998 reflected a 7 percent increase in average earning assets
(primarily commercial and consumer loans) to $72.0 billion, which more than
offset a 16 basis point reduction in the net interest margin.
Noninterest income for the third quarter of 1999 was $489 million, up
$97 million, or 25 percent from the year-ago quarter, due principally to the
acquisition of McDonald & Company. Strong increases in income from trust and
asset management (up $30 million) and insurance and brokerage (up $24 million)
reflected the impact of that acquisition. However, while investment banking and
capital markets income rose $15 million from the year-ago quarter, it was $23
million below that reported for the second quarter of 1999, due to softer
conditions in certain financial markets. Net securitization gains of $32 million
were posted in the third quarter of 1999. Approximately $16 million of these
gains were due to an education loan securitization previously scheduled for the
fourth quarter of 1999. Key accelerated its planned securitization activity from
the fourth quarter as part of a strategy to reduce Key's need for funding
transactions in the fourth quarter, when they could be influenced by
millenium-induced market fears.
Noninterest expense totaled $701 million for the third quarter of 1999,
compared with $628 million in the year-ago quarter. The increase came largely
from higher personnel costs (up $39 million), due primarily to the McDonald
acquisition, and increases in both computer processing (up $14 million) and
marketing expense (up $10 million). In comparison with the prior quarter,
<PAGE> 3
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 3
noninterest expense was down $16 million due to lower levels of incentive
compensation. This decrease in incentive compensation is attributable in part to
the reduced level of investment banking and capital markets income from that of
the second quarter.
The provision for loan losses was $78 million for the third quarter of
1999, essentially the same as that reported in the prior quarter and $7 million
higher than that reported for the third quarter of last year. Net loan
charge-offs totaled $78 million and were 0.49 percent of average loans
outstanding for the quarter, compared with 0.49 percent for the prior quarter
and 0.48 percent for the year-ago quarter. Key's nonperforming assets ended the
third quarter at $407 million, or 0.64 percent of loans plus other real estate
owned and other nonperforming assets, compared with $412 million, or 0.66
percent, at June 30, 1999.
Key's capital ratios continue to exceed all "well-capitalized"
benchmarks. At September 30, 1999, Key's estimated Tier 1 and total
risk-adjusted capital ratios were 7.71 percent and 11.74 percent, respectively,
and the estimated leverage ratio was 7.86 percent. The tangible equity to
tangible assets ratio improved to 6.06 percent as of September 30, 1999, from
5.95 percent last quarter and 5.79 percent a year earlier. The improvement from
the prior quarter reflected Key's third quarter 1999 retained net income and the
absence of share repurchases during the third quarter.
- --------------------------------------------------------------------------------
This news release contains forward-looking statements that are subject to
numerous assumptions, risks and uncertainties. Actual results could differ
materially from those contained in or implied by such forward-looking statements
for a variety of factors including: sharp and/or rapid changes in interest
rates; significant changes in the economy which could materially change
anticipated credit quality trends and the ability to generate loans; failure of
the capital markets to function consistent with customary levels; significant
delay in or inability to execute strategic initiatives designed to grow revenues
and/or manage expenses; consummation of significant business combinations or
divestitures; unforeseen business risks stemming from Year 2000 computer systems
difficulties and related issues; and significant changes in accounting, tax, or
regulatory practices or requirements.
- --------------------------------------------------------------------------------
NOTE TO EDITORS: SOME OF THE FINANCIAL TABLES THAT FOLLOW INCLUDE QUARTERLY DATA
FOR THREE PERIODS -- SEPT. 30, 1999, JUNE 30, 1999 (THE PREVIOUS QUARTER), AND
SEPT. 30, 1998. PLEASE BE SURE TO USE THE APPROPRIATE COLUMN OF FIGURES FOR YOUR
DESIRED COMPARISONS, SINCE ONE OF THE PRIOR PERIOD COLUMNS ALLOWS FOR CURRENT
QUARTER VS. PRIOR YEAR COMPARISONS AND THE OTHER ALLOWS FOR CURRENT QUARTER
COMPARISONS TO THE IMMEDIATELY PRECEDING QUARTER.
# # #
<PAGE> 4
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 4
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
THREE MONTHS ENDED
----------------------------------------------------
9-30-99 6-30-99 9-30-98
------------- ------------- ------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $709 $704 $689
Provision for loan losses 78 76 71
Noninterest income 489 526 392
Noninterest expense 701 717 628
Net income 270 280 252
PER COMMON SHARE
Net income $ .60 $ .63 $ .57
Net income - assuming dilution .60 .62 .57
Cash dividends .26 .26 .235
Book value at period end 14.25 13.90 12.73
Market price at period end 25.81 32.13 28.88
AT PERIOD END
Full-time equivalent employees 25,523 25,758 24,586
Full-service banking offices 963 965 961
PERFORMANCE RATIOS
Return on average total assets 1.32 % 1.40 % 1.32 %
Return on average equity 17.06 18.16 18.14
Efficiency 1 58.61 59.26 58.09
Overhead 2 30.18 29.97 34.25
Net interest margin (TE) 3.92 3.97 4.08
CAPITAL RATIOS AT PERIOD END
Equity to assets 7.75 % 7.71 % 7.15 %
Tangible equity to tangible assets 6.06 5.95 5.79
Tier 1 risk-adjusted capital 3 7.71 7.48 7.01
Total risk-adjusted capital 3 11.74 11.74 11.61
Leverage 3 7.86 7.41 6.88
ASSET QUALITY
Net loan charge-offs $78 $76 $71
Net loan charge-offs to average loans .49 % .49 % .48 %
Allowance for loan losses $930 $930 $900
Allowance for loan losses to period end loans 1.47 % 1.50 % 1.51 %
Allowance for loan losses to nonperforming loans 245.38 247.34 250.00
Nonperforming loans at period end $379 $376 $360
Nonperforming assets at period end 407 412 402
Nonperforming loans to period end loans .60 % .61 % .61 %
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .64 .66 .68
</TABLE>
<PAGE> 5
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
NINE MONTHS ENDED
---------------------------------
9-30-99 9-30-98
------------- -------------
<S> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $2,106 $2,023
Provision for loan losses 265 220
Noninterest income 1,624 1,128
Noninterest expense 2,166 1,816
Net income 843 736
PER COMMON SHARE
Net income $1.88 $1.68
Net income - assuming dilution 1.86 1.65
Cash dividends .78 .705
PERFORMANCE RATIOS
Return on average total assets 1.40 % 1.33 %
Return on average equity 18.21 18.29
Efficiency 1 59.36 58.43
Overhead 2 31.10 36.13
Net interest margin (TE) 3.95 4.11
ASSET QUALITY
Net loan charge-offs $235 $220
Net loan charge-offs to average loans .50 % .52 %
<FN>
1 Calculated as noninterest expense (excluding certain nonrecurring charges)
divided by taxable-equivalent net interest income plus noninterest income
(excluding net securities transactions and gains from certain
divestitures).
2 Calculated as noninterest expense (excluding certain nonrecurring charges)
less noninterest income (excluding net securities transactions and gains
from certain divestitures) divided by taxable-equivalent net interest
income.
3 9-30-99 ratio is estimated.
TE = Taxable Equivalent
</TABLE>
<PAGE> 6
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 6
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
9-30-99 6-30-99 9-30-98
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Loans $63,181 $61,971 $59,444
Investment securities 989 967 984
Securities available for sale 6,567 6,404 5,928
Short-term investments 2,094 1,755 2,212
------------- -------------- --------------
Total earning assets 72,831 71,097 68,568
Allowance for loan losses (930) (930) (900)
Cash and due from banks 3,018 3,060 2,750
Premises and equipment 818 846 876
Goodwill 1,422 1,446 1,038
Other intangible assets 64 68 83
Corporate owned life insurance 2,080 2,056 1,974
Other assets 3,274 3,246 3,302
------------- -------------- --------------
TOTAL ASSETS $82,577 $80,889 $77,691
============= ============== ==============
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $9,050 $9,058 $8,732
Interest-bearing 34,029 31,948 31,841
Deposits in foreign office-interest-bearing 387 2,010 2,024
------------- -------------- --------------
Total deposits 43,466 43,016 42,597
Federal funds purchased and securities
sold under repurchase agreements 3,510 4,727 6,652
Bank notes and other short-term borrowings 8,551 7,344 7,576
Other liabilities 3,595 3,405 2,963
Long-term debt 15,815 15,168 11,353
Capital securities of subsidiary trusts 1,243 994 997
------------- -------------- --------------
TOTAL LIABILITIES 76,180 74,654 72,138
SHAREHOLDERS' EQUITY 6,397 6,235 5,553
------------- -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $82,577 $80,889 $77,691
============= ============== ==============
Common Shares outstanding (000) 448,824 448,641 436,092
</TABLE>
<PAGE> 7
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 7
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------------- --------------------------
9-30-99 6-30-99 9-30-98 9-30-99 9-30-98
----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME $1,433 $1,392 $1,415 $4,206 $4,114
INTEREST EXPENSE 733 695 734 2,124 2,117
----------- ----------- ----------- ------------ ----------
NET INTEREST INCOME 700 697 681 2,082 1,997
Provision for loan losses 78 76 71 265 220
----------- ----------- ----------- ------------ ----------
622 621 610 1,817 1,777
NONINTEREST INCOME
Trust and asset management income 112 110 82 328 239
Service charges on deposit accounts 83 82 77 246 230
Investment banking and capital markets income 77 100 62 243 159
Insurance and brokerage income 46 59 22 162 68
Corporate owned life insurance income 25 27 25 76 72
Credit card fees 16 21 18 47 50
Net loan securitization gains 32 18 7 82 7
Net securities gains 2 20 - 26 4
Gains from branch divestitures - - - - 39
Gains from other divestitures 13 - - 161 23
Other income 83 89 99 253 237
----------- ----------- ----------- ------------ ----------
Total noninterest income 489 526 392 1,624 1,128
NONINTEREST EXPENSE
Personnel 356 383 317 1,111 913
Net occupancy 58 58 58 175 170
Equipment 48 49 46 153 134
Computer processing 60 59 46 173 127
Marketing 35 24 25 84 81
Amortization of intangibles 25 26 22 79 67
Professional fees 18 17 14 50 46
Other expense 101 101 100 341 278
----------- ----------- ----------- ------------ ----------
Total noninterest expense 701 717 628 2,166 1,816
----------- ----------- ----------- ------------ ----------
INCOME BEFORE INCOME TAXES 410 430 374 1,275 1,089
Income taxes 140 150 122 432 353
----------- ----------- ----------- ------------ ----------
NET INCOME $ 270 $ 280 $ 252 $ 843 $ 736
=========== =========== =========== ============ ==========
Net income per Common Share $.60 $.63 $.57 $1.88 $1.68
Net income per Common Share - assuming dilution .60 .62 .57 1.86 1.65
Wtd. avg. Common Shares (000) 448,742 448,037 438,856 448,764 439,180
Wtd. avg. Common Shares and potential
Common Shares (000) 452,886 452,733 443,750 453,267 445,047
Taxable-equivalent adjustment $9 $7 $8 $24 $26
</TABLE>
<PAGE> 8
KEYCORP REPORTS THIRD QUARTER 1999 EARNINGS
OCTOBER 21, 1999
PAGE 8
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCE SHEETS
(in millions)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------------- ------------------------
9-30-99 6-30-99 9-30-98 9-30-99 9-30-98
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Loans $ 62,799 $ 61,604 $ 58,559 $ 62,036 $ 56,332
Investment securities 970 984 995 981 1,110
Securities available for sale 6,359 6,575 6,175 6,314 6,794
Short-term investments 1,836 1,725 1,728 1,845 1,502
-------- -------- -------- -------- --------
Total earning assets 71,964 70,888 67,457 71,176 65,738
Allowance for loan losses (920) (919) (888) (909) (888)
Cash and due from banks 2,589 2,571 2,481 2,591 2,558
Other assets 7,662 7,485 6,836 7,540 6,631
-------- -------- -------- -------- --------
TOTAL ASSETS $ 81,295 $ 80,025 $ 75,886 $ 80,398 $ 74,039
======== ======== ======== ======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,534 $ 8,438 $ 8,485 $ 8,489 $ 8,408
Interest-bearing 33,153 32,247 31,425 32,507 31,775
Deposits in foreign office-interest-bearing 776 1,096 954 794 1,097
-------- -------- -------- -------- --------
Total deposits 42,463 41,781 40,864 41,790 41,280
Federal funds purchased and securities
sold under repurchase agreements 4,495 5,479 7,456 5,015 7,117
Bank notes and other short-term borrowings 7,428 6,786 7,305 7,801 7,235
Other liabilities 3,561 3,264 2,724 3,339 2,555
Long-term debt 15,864 15,368 11,029 15,128 9,632
Capital securities of subsidiary trusts 1,205 1,162 997 1,136 839
-------- -------- -------- -------- --------
TOTAL LIABILITIES 75,016 73,840 70,375 74,209 68,658
SHAREHOLDERS' EQUITY 6,279 6,185 5,511 6,189 5,381
-------- -------- -------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 81,295 $ 80,025 $ 75,886 $ 80,398 $ 74,039
======== ======== ======== ======== ========
</TABLE>
