<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): April 15, 1999
[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 April 15, 1999, the Registrant issued a press release announcing its earnings
results for the three-month period ended March 31, 1999. This press release,
dated April 15, 1999, is attached as Exhibit 99 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
--------
99 The Registrant's April 15, 1999, press release announcing its
earnings results for the three-month period ended March 31,
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
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(Registrant)
Date: April 16, 1999 /s/ Lee Irving
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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 FIRST QUARTER 1999 EARNINGS
-------------------------------------------
- - EARNINGS PER SHARE $0.65, INCLUDING GAIN RECOGNIZED FROM SALE OF INTEREST
IN ELECTRONIC PAYMENT SERVICES, INC.
- - FEE INCOME RISES 36 PERCENT FROM THE YEAR-AGO QUARTER
- - CONTINUED STRONG LOAN GROWTH
- - 5.5 MILLION SHARES REPURCHASED DURING THE QUARTER
CLEVELAND, April 15, 1999 -- KeyCorp (NYSE: KEY) today reported
first-quarter earnings of $293 million, or $0.65 per diluted common share, up
from $235 million, or $0.53 in the first quarter of 1998. Earnings per diluted
common share were $0.57 for the first quarter of 1999, after excluding an
aggregate $0.08 impact of a gain from the sale of Key's 20 percent interest in
Electronic Payment Services, Inc., certain nonrecurring charges and the
provision for loan losses in excess of net charge-offs.
Key's return on average equity was 19.5 percent (approximately 27.9
percent on a cash earnings basis) for the first quarter of 1999, compared with
18.3 percent (approximately 25.4 percent on a cash earnings basis) for the first
quarter of last year. Return on average total assets was 1.49 percent
(approximately 1.64 percent on a cash earnings basis) for the first quarter of
1999, compared with 1.32 percent (approximately 1.45 percent on a cash earnings
basis) in the first quarter of 1998.
"First quarter results were highlighted by growth in fee income, strong
consumer loan demand, and continued growth in commercial lending. Driven by
revenues from such areas as asset management, brokerage and loan
securitizations, core noninterest income increased 36 percent from the year-ago
quarter," said Robert W. Gillespie, KeyCorp chairman and chief executive
officer. "Our home equity loans, excluding the impact of sales, were up an
annualized 22 percent from the prior quarter and our commercial loan growth
exceeded 10 percent for the eighth consecutive quarter. At the same time, we
were able to maintain a high level of asset quality.
<PAGE> 2
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 2
"In our first full quarter of operation since the acquisition of
McDonald & Company, we are pleased with the smooth integration process, and
plans are in place to further leverage client relationships in the months
ahead," Gillespie said. "From a strategic perspective, Key is aggressively
moving toward its long-term goal of generating 50 percent of its revenue from
investment advisory and other noninterest income generating activities. In the
first quarter, 41 percent of Key's total revenue was provided by these
activities, up from 39 percent last quarter and 35 percent a year ago."
In the first quarter, Key reclassified the distributions on its capital
securities from noninterest expense to interest expense and restated prior
quarters. As measured using the new classification, net interest income in the
first quarter of 1999 totaled $685 million, up 5 percent from $650 million in
the first quarter of last year. This improvement reflected a 10 percent increase
in average earning assets (primarily commercial loans) to $70.7 billion, which
more than offset a 19 basis point reduction in the net interest margin to 3.95
percent. Compared with the prior quarter, net interest income was relatively
unchanged as an annualized 7 percent increase in average earning assets was
offset by a 4 basis point decline in the net interest margin. During the first
quarter, the growth in earning assets was moderated by the securitization and
sale of approximately $1.8 billion of consumer loans.
Noninterest income for the first quarter of 1999 was $609 million,
significantly higher than the $356 million reported a year ago. Included in
first quarter 1999 results was a $134 million gain from the sale of Key's
interest in Electronic Payment Services. Excluding this gain and branch
divestiture gains of $6 million recorded in the first quarter of last year,
noninterest income grew by $125 million, or 36 percent, and comprised 41 percent
of total revenue, compared to 35 percent a year ago. Strong increases in income
from insurance and brokerage (up $35 million), trust and asset management (up
$29 million) and investment banking and capital markets (up $19 million)
reflected the impact of the October 1998 acquisition of McDonald. In addition,
net loan securitization income rose by $29 million.
Noninterest expense totaled $748 million for the first quarter of 1999,
compared to $586 million in the year-ago quarter. Included in first quarter 1999
expense was a $20 million contribution to Key's charitable foundation made in
light of the gain realized from the sale of Electronic Payment Services.
Excluding this contribution and $27 million of other nonrecurring charges,
noninterest expense increased by $115 million, or 20 percent. On the same basis,
noninterest expense was $34 million, or 5 percent, above the fourth quarter of
1998. The increases came largely from the impact of the McDonald acquisition and
higher personnel costs associated with various incentive programs.
<PAGE> 3
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 3
The provision for loan losses was $111 million for the first quarter of
1999 and exceeded the level of net charge-offs by $30 million. The increase from
the $77 million provision recorded in both the prior quarter and the first
quarter of 1998 reflected a number of factors, including Key's continuing
commercial loan growth and an enhancement in the allowance for loan losses
allocation methodology pertaining to the credit card portfolio. Net loan
charge-offs were 0.53 percent of average loans outstanding for the quarter,
compared to 0.50 percent for the prior quarter and 0.58 percent for the year-ago
quarter. Key's nonperforming assets ended the first quarter at $430 million, or
0.70 percent of loans, plus other real estate owned and other nonperforming
assets, compared to $404 million, or 0.65 percent, at December 31, 1998.
Key's capital ratios continue to exceed all "well-capitalized"
benchmarks. The tangible equity to tangible assets ratio was 5.86 percent as of
March 31, 1999, compared with 5.93 percent last quarter and 5.81 percent a year
earlier. The decline from the prior quarter reflected Key's first quarter 1999
repurchase of 5.5 million of its common shares. This included the repurchase of
3.9 million shares to complete the authorization to repurchase up to 60 percent
of the shares issued in the McDonald transaction. The remaining shares were
repurchased under a separate authorization that provides for the repurchase of
up to 10 million common shares.
- --------------------------------------------------------------------------------
This news release contains forward-looking statements which 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 related to Year 2000 computer systems
issues; and significant changes in accounting, tax, or regulatory practices or
requirements.
- --------------------------------------------------------------------------------
# # #
<PAGE> 4
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 4
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------------
3-31-99 12-31-98 3-31-98
------------- ------------ --------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C>
Net interest income (TE) $ 693 $ 695 $ 659
Provision for loan losses 111 77 77
Noninterest income 609 447 356
Noninterest expense 748 667 586
Net income 293 260 235
PER COMMON SHARE
Net income $ .65 $ .58 $ .53
Net income - assuming dilution .65 .57 .53
Cash dividends .26 .235 .235
Book value at period end 13.63 13.63 12.15
Market price at period end 30.31 32.00 37.81
AT PERIOD END
Full-time equivalent employees 25,650 25,862 24,650
Full-service banking offices 969 968 1,006
PERFORMANCE RATIOS
Return on average total assets 1.49 % 1.31 % 1.32 %
Return on average equity 19.48 17.12 18.25
Efficiency 1 60.22 58.66 58.19
Overhead 2 33.19 32.37 36.12
Net interest margin (TE) 3.95 3.99 4.14
CAPITAL RATIOS AT PERIOD END
Equity to assets 7.63 % 7.71 % 7.29 %
Tangible equity to tangible assets 5.86 5.93 5.81
Tier 1 risk-adjusted capital 3 7.30 7.21 6.81
Total risk-adjusted capital 3 11.68 11.69 11.38
Leverage 3 7.21 6.95 6.61
<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 3-31-99 ratio is estimated.
TE = Taxable Equivalent
</TABLE>
<PAGE> 5
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
------------------------------------------------------
3-31-99 12-31-98 3-31-98
------------ ------------- ---------------
<S> <C> <C> <C>
ASSET QUALITY
Net loan charge-offs $ 81 $ 77 $ 77
Net loan charge-offs to average loans .53 % .50 % .58 %
Allowance for loan losses $930 $900 $900
Allowance for loan losses to
period end loans 1.52 % 1.45 % 1.64 %
Allowance for loan losses to
nonperforming loans 235.44 246.58 241.29
Nonperforming loans at period end $395 $365 $373
Nonperforming assets at period end 430 404 421
Nonperforming loans to period end loans .65 % .59 % .68 %
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .70 .65 .77
</TABLE>
<PAGE> 6
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 6
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<CAPTION>
ASSETS 3-31-99 12-31-98 3-31-98
----------- ------------ -----------
<S> <C> <C> <C>
Loans $ 61,045 $ 62,012 $ 54,900
Investment securities 1,005 976 1,182
Securities available for sale 6,778 5,278 7,115
Short-term investments 1,630 1,974 1,171
--------- --------- ---------
Total earning assets 70,458 70,240 64,368
Allowance for loan losses (930) (900) (900)
Cash and due from banks 2,981 3,296 3,287
Premises and equipment 863 902 924
Goodwill 1,435 1,430 1,052
Other intangible assets 72 79 99
Corporate owned life insurance 2,032 2,008 1,921
Other assets 3,081 2,965 2,447
--------- --------- ---------
TOTAL ASSETS $ 79,992 $ 80,020 $ 73,198
========= ========= =========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,601 $ 9,540 $ 9,083
Interest-bearing 32,555 32,091 32,253
Deposits in foreign offices-interest-bearing 167 952 325
--------- --------- ---------
Total deposits 41,323 42,583 41,661
Federal funds purchased and securities
sold under repurchase agreements 4,336 4,468 6,468
Bank notes and other short-term borrowings 8,242 9,728 7,442
Other liabilities 3,285 3,110 2,498
Long-term debt 15,457 12,967 9,041
Capital securities of subsidiary trusts 1,244 997 750
--------- --------- ---------
TOTAL LIABILITIES 73,887 73,853 67,860
SHAREHOLDERS' EQUITY 6,105 6,167 5,338
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 79,992 $ 80,020 $ 73,198
========= ========= =========
Common Shares outstanding (000) 447,822 452,452 439,315
</TABLE>
<PAGE> 7
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 7
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
3-31-99 12-31-98 3-31-98
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME $ 1,381 $ 1,411 $ 1,327
INTEREST EXPENSE 696 724 677
-------- -------- --------
NET INTEREST INCOME 685 687 650
Provision for loan losses 111 77 77
-------- -------- --------
574 610 573
NONINTEREST INCOME
Trust and asset management income 106 96 77
Service charges on deposit accounts 81 76 78
Investment banking and capital markets income 66 80 47
Insurance and brokerage income 57 43 22
Corporate owned life insurance income 24 32 23
Credit card fees 10 18 15
Net loan securitization income 39 3 10
Net securities gains 4 5 2
Gains from divestitures 148 27 29
Other income 74 67 53
-------- -------- --------
Total noninterest income 609 447 356
NONINTEREST EXPENSE
Personnel 372 343 294
Net occupancy 59 56 56
Equipment 56 51 43
Computer processing 54 49 40
Marketing 25 19 28
Amortization of intangibles 28 24 23
Professional fees 15 16 17
Other expense 139 109 85
-------- -------- --------
Total noninterest expense 748 667 586
-------- -------- --------
INCOME BEFORE INCOME TAXES 435 390 343
Income taxes 142 130 108
-------- -------- --------
NET INCOME $ 293 $ 260 $ 235
======== ======== ========
Net income per Common Share $ .65 $ .58 $ .53
Net income per Common Share - assuming dilution .65 .57 .53
Wtd. avg. Common Shares (000) 449,520 449,949 438,589
Wtd. avg. Common Shares and potential
Common Shares (000) 454,197 454,527 444,836
Taxable-equivalent adjustment $ 8 $ 8 $ 9
</TABLE>
<PAGE> 8
KEYCORP REPORTS FIRST QUARTER 1999 EARNINGS
APRIL 15, 1999
PAGE 8
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------
ASSETS 3-31-99 12-31-98 3-31-98
--------- --------- ---------
<S> <C> <C> <C>
Loans $ 61,693 $ 60,656 $ 53,946
Investment securities 990 1,002 1,196
Securities available for sale 6,004 6,066 7,457
Short-term investments 1,975 1,747 1,350
-------- -------- --------
Total earning assets 70,662 69,471 63,949
Allowance for loan losses (888) (888) (889)
Cash and due from banks 2,613 2,655 2,621
Other assets 7,471 7,730 6,441
-------- -------- --------
TOTAL ASSETS $ 79,858 $ 78,968 $ 72,122
======== ======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,495 $ 8,810 $ 8,409
Interest-bearing 32,109 32,072 31,980
Deposits in foreign offices-interest-bearing 509 366 1,245
-------- -------- --------
Total deposits 41,113 41,248 41,634
Federal funds purchased and securities
sold under repurchase agreements 5,077 5,205 7,117
Bank notes and other short-term borrowings 9,208 10,171 6,683
Other liabilities 3,188 3,057 2,390
Long-term debt 14,133 12,265 8,326
Capital securities of subsidiary trusts 1,039 997 750
-------- -------- --------
TOTAL LIABILITIES 73,758 72,943 66,900
SHAREHOLDERS' EQUITY 6,100 6,025 5,222
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 79,858 $ 78,968 $ 72,122
======== ======== ========
</TABLE>
