<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): January 19, 2000
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 January 19, 2000, the Registrant issued a press release announcing its
earnings results for the three-month and twelve-month periods ended December 31,
1999. This press release, dated January 19, 2000, is attached as Exhibit 99 to
this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
--------
99 The Registrant's January 19, 2000, press release announcing its
earnings results for the three-month and twelve-month periods
ended December 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
--------------------------------------
(Registrant)
Date: January 20, 2000 /s/ Lee Irving
--------------------------------------
By: Lee Irving
Executive Vice President
and Chief Accounting Officer
<PAGE> 1
EXHIBIT 99
MEDIA CONTACT: ANALYST CONTACT:
Bill Murschel (216) 689-0457 Vern Patterson (216) 689-0520
WEB SITE: www.Key.com
FOR IMMEDIATE RELEASE
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
-------------------------------------------------
- - FULL-YEAR NET INCOME UP 11 PERCENT OVER PRIOR YEAR
- - COMMERCIAL, CONSUMER LOAN GROWTH STRONG
- - RECORD FEE INCOME LEVELS ACHIEVED
CLEVELAND, January 19, 2000 - KeyCorp (NYSE: KEY) today reported 1999
earnings of $1.107 billion, or $2.45 per diluted common share, up 11 percent
from $996 million, or $2.23 per share for the previous year. For the 1999 fourth
quarter, earnings were $264 million, or $0.59 per diluted common share, up from
$260 million, or $0.57, for the same quarter a year ago.
On a core basis, which excludes significant nonrecurring items, Key's
1999 earnings were $1.051 billion, or $2.33 per diluted common share, up 11
percent from $948 million, or $2.12 per share in 1998. For the fourth quarter of
1999, core earnings were $264 million, or $0.59 per diluted common share, up
from $249 million, or $0.54 per share for the same quarter a year ago.
"Key's record annual earnings, which surpassed $1 billion for the first
time, reflect the underlying strength of our enterprise and reaffirm our
strategic direction," said Robert W. Gillespie, chairman and chief executive
officer. "We benefited from an improving performance by Key's retail bank,
strong commercial and consumer loan demand, and fee-income growth in several
important businesses, including investment banking and capital markets, trust
and asset management, and brokerage. These businesses ended the year on a strong
note. Consequently, consolidated fourth quarter operating results were more
positive than we expected.
"The strategic actions we have taken in the fourth quarter -- including
selling our Long Island retail business and reaching an agreement to sell our
credit card operations -- support our strategic transformation into an
integrated, multi-line financial services company and allow us to direct our
financial resources and people towards our faster growing businesses. In
addition, we have implemented several initiatives to improve Key's overall
efficiency."
<PAGE> 2
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 2
Results for the fourth quarter of 1999 include significant nonrecurring
items. Key recorded a gain of $194 million ($122 million after tax, or $0.27 per
diluted common share) from the October sale of branches in Long Island, NY. Key
also recorded restructuring and other nonrecurring charges of $194 million ($122
million after tax, or $0.27 per diluted common share). Of the $194 million in
charges, $145 million relates to the efficiency program announced by Key last
November, under which restructuring and other one-time charges of up to $180
million may be incurred. Key currently expects that the remainder of the charges
from this program will be recorded in the first half of 2000.
Key's returns on average equity and average assets for the 1999 and
1998 reporting periods are as follows:
<TABLE>
<CAPTION>
As Reported Cash Earnings Basis
---------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
For the fourth quarter:
Return on average equity 16.2% 17.1% 22.6% 24.0%
Return on average assets 1.27% 1.31% 1.40% 1.44%
For the full year:
Return on average equity 17.7% 18.0% 25.1% 24.7%
Return on average assets 1.37% 1.32% 1.51% 1.45%
</TABLE>
Net interest income in the fourth quarter of 1999 totaled $705
million, up slightly from the prior quarter and up $18 million from the fourth
quarter of last year. Continued growth in average earning assets accounted for
the improvement from the third quarter, while the net interest margin
experienced a slight decline of 4 basis points to 3.88 percent. The increase in
net interest income from the fourth quarter of 1998 resulted from a 5 percent
increase in average earning assets (reflecting continued momentum in commercial
and consumer lending) to $73.1 billion. This growth more than offset the impact
of an 11 basis point reduction in the net interest margin.
Noninterest income of $670 million for the fourth quarter of 1999 was
significantly higher than the $447 million reported a year ago, and included a
$194 million gain from the sale of the Long Island branches and $30 million of
nonrecurring charges. Excluding these items and $27 million in the fourth
quarter of 1998 that related to a nonrecurring event, noninterest income was up
$86 million, or 20 percent, from the year-ago quarter. Of the fourth quarter
1999 nonrecurring charges that reduced noninterest income by $30 million, the
most significant was a $19 million charge that resulted from a more conservative
valuation of assets related to securitizations completed in prior periods.
Factors contributing to the improvement included strong increases in income from
investment banking and capital markets activities (up $31 million), and trust
and asset management (up $19 million) which were attributable to Key's October
1998 acquisition of McDonald & Company.
<PAGE> 3
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 3
Noninterest expense totaled $883 million for the fourth quarter of
1999, compared with $667 million in the year-ago quarter. In addition to the
$145 million of charges related to Key's efficiency initiatives, $18 million of
other one-time charges were recorded. The largest of these one-time charges was
$7 million. Excluding nonrecurring charges in 1999 and $8 million of merger and
integration charges recorded a year ago, noninterest expense was up $61 million,
or 9 percent from the fourth quarter of 1998. Primary factors contributing to
this increase were higher costs for personnel (up $31 million) and computer
processing (up $14 million). The growth in personnel expense came largely from
the effect of the McDonald acquisition and the effect of various incentive
programs, including those related to investment banking and capital markets
activities.
The provision for loan losses was $83 million for the fourth quarter of
1999, up $5 million from that reported in the prior quarter, and $6 million
higher than that reported for the fourth quarter of last year. Net loan
charge-offs totaled $83 million and were 0.52 percent of average loans
outstanding for the quarter, compared with 0.49 percent for the prior quarter
and 0.50 percent for the year-ago quarter. Key's nonperforming assets ended the
year at $433 million, or 0.67 percent of loans plus other real estate owned and
other nonperforming assets, compared with $407 million, or 0.64 percent, at
September 30, 1999. Three commercial credits represent the majority of the
fourth quarter increase in nonaccrual loans.
Key's capital ratios continue to exceed all "well-capitalized"
benchmarks. At December 31, 1999, Key's estimated Tier 1 and total risk-adjusted
capital ratios were 7.65 percent and 11.59 percent, respectively, and the
estimated leverage ratio was 7.78 percent. The tangible equity to tangible
assets ratio was 6.03 percent at December 31, 1999, compared with 6.06 percent
last quarter and 5.93 percent a year earlier. The decline from the prior quarter
reflects Key's fourth quarter 1999 repurchase of 5,500,000 of its common shares
under an authorization that allows for the repurchase of up to 10,000,000
shares. There were 1,963,337 shares remaining for repurchase under this
authorization as of December 31, 1999.
Key also announced its intention to retain the home equity loans
originated by its Champion subsidiary on its balance sheet, de-emphasizing its
past practice of securitizing and selling these loans. "Loans originated through
Champion have become some of our most attractive assets," Gillespie noted.
"Retaining Champion's loans will provide a high-quality replacement asset for
those divested as part of the pending sale of our credit card portfolio." Key
expects that this action will reduce the company's 2000 earnings per diluted
common share by approximately $0.08.
Cleveland-based KeyCorp (NYSE: KEY) is one of the nation's largest
integrated multi-line financial services companies, with assets of about $83
billion. Through a nationwide network of offices, Key companies provide
investment management, retail and commercial banking, consumer finance, and
investment banking products and services to individuals and companies across the
U.S. In addition to its
<PAGE> 4
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 4
offices, Key operates a network of 2,600 ATMs and telephone banking centers
(1-800-KEY2YOU) that provide account access and financial products 24 hours a
day. Key's Web site is www.Key.com.
- --------------------------------------------------------------------------------
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 -- DEC. 31, 1999, SEPT. 30, 1999 (THE PREVIOUS QUARTER), AND
DEC. 31, 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> 5
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
12-31-99 9-30-99 12-31-98
------------- ------------- ------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $713 $709 $695
Provision for loan losses 83 78 77
Noninterest income 670 489 447
Noninterest expense 883 701 667
Net income 264 270 260
PER COMMON SHARE
Net income $ .59 $ .60 $ .58
Net income - assuming dilution .59 .60 .57
Cash dividends .26 .26 .235
Book value at period end 14.41 14.25 13.63
Market price at period end 22.13 25.81 32.00
AT PERIOD END
Full-time equivalent employees 24,568 25,523 25,862
Full-service banking offices 936 963 968
PERFORMANCE RATIOS
Return on average total assets 1.27 % 1.32 % 1.31 %
Return on average equity 16.18 17.06 17.12
Efficiency 1 59.16 58.61 58.66
Overhead 2 30.39 30.18 32.37
Net interest margin (TE) 3.88 3.92 3.99
CAPITAL RATIOS AT PERIOD END
Equity to assets 7.66 % 7.75 % 7.71 %
Tangible equity to tangible assets 6.03 6.06 5.93
Tier 1 risk-adjusted capital 3 7.65 7.84 7.21
Total risk-adjusted capital 3 11.59 11.94 11.69
Leverage 3 7.78 7.85 6.95
ASSET QUALITY
Net loan charge-offs $83 $78 $77
Net loan charge-offs to average loans .52 % .49 % .50 %
Allowance for loan losses $930 $930 $900
Allowance for loan losses to period end loans 1.45 % 1.47 % 1.45 %
Allowance for loan losses to nonperforming loans 228.50 245.38 246.58
Nonperforming loans at period end $407 $379 $365
Nonperforming assets at period end 433 407 404
Nonperforming loans to period end loans .63 % .60 % .59 %
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .67 .64 .65
</TABLE>
<PAGE> 6
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 6
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
TWELVE MONTHS ENDED
---------------------------------
12-31-99 12-31-98
------------- -------------
SUMMARY OF OPERATIONS
<S> <C> <C>
Net interest income (TE) $2,819 $2,718
Provision for loan losses 348 297
Noninterest income 2,294 1,575
Noninterest expense 3,049 2,483
Net income 1,107 996
PER COMMON SHARE
Net income $2.47 $2.25
Net income - assuming dilution 2.45 2.23
Cash dividends 1.04 .94
PERFORMANCE RATIOS
Return on average total assets 1.37 % 1.32 %
Return on average equity 17.68 17.97
Efficiency 1 59.43 58.49
Overhead 2 31.52 35.17
Net interest margin (TE) 3.93 4.08
ASSET QUALITY
Net loan charge-offs $318 $297
Net loan charge-offs to average loans .51 % .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 12-31-99 ratio is estimated.
TE = Taxable Equivalent
</TABLE>
<PAGE> 7
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
<TABLE>
<CAPTION>
PAGE 7\
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
12-31-99 9-30-99 12-31-98
------------- -------------- -------------
ASSETS
<S> <C> <C> <C>
Loans $64,222 $63,181 $62,012
Investment securities 986 989 976
Securities available for sale 6,665 6,567 5,278
Short-term investments 1,860 2,094 1,974
------------- -------------- -------------
Total earning assets 73,733 72,831 70,240
Allowance for loan losses (930) (930) (900)
Cash and due from banks 2,816 3,018 3,296
Premises and equipment 797 818 902
Goodwill 1,389 1,422 1,430
Other intangible assets 60 64 79
Corporate owned life insurance 2,110 2,080 2,008
Other assets 3,420 3,274 2,965
------------- -------------- -------------
TOTAL ASSETS $83,395 $82,577 $80,020
============= ============== =============
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $8,607 $9,050 $9,540
Interest-bearing 33,390 34,029 32,091
Deposits in foreign office-interest-bearing 1,236 387 952
------------- -------------- -------------
Total deposits 43,233 43,466 42,583
Federal funds purchased and securities
sold under repurchase agreements 4,177 3,510 4,468
Bank notes and other short-term borrowings 8,439 8,551 9,728
Other liabilities 4,033 3,595 3,110
Long-term debt 15,881 15,815 12,967
Capital securities of subsidiary trusts 1,243 1,243 997
------------- -------------- -------------
TOTAL LIABILITIES 77,006 76,180 73,853
SHAREHOLDERS' EQUITY 6,389 6,397 6,167
------------- -------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $83,395 $82,577 $80,020
============= ============== =============
Common Shares outstanding (000) 443,427 448,824 452,452
</TABLE>
<PAGE> 8
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 8
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
THREE MONTHS ENDED TWELVE MONTHS ENDED
-------------------------------------- ----------------------
12-31-99 9-30-99 12-31-98 12-31-99 12-31-98
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME $ 1,489 $ 1,433 $ 1,411 $ 5,695 $ 5,525
INTEREST EXPENSE 784 733 724 2,908 2,841
--------- --------- --------- --------- ---------
NET INTEREST INCOME 705 700 687 2,787 2,684
Provision for loan losses 83 78 77 348 297
--------- --------- --------- --------- ---------
622 622 610 2,439 2,387
NONINTEREST INCOME
Trust and asset management income 115 112 96 443 335
Service charges on deposit accounts 84 83 76 330 306
Investment banking and capital markets income 111 77 80 354 239
Brokerage income 39 33 30 156 71
Corporate owned life insurance income 31 25 32 107 104
Credit card fees 16 16 18 63 68
Net loan securitization gains (losses) (18) 32 (3) 64 4
Net securities gains 3 2 5 29 9
Gains from branch divestitures 194 -- -- 194 39
Gains from other divestitures -- 13 27 161 50
Other income 95 96 86 393 350
--------- --------- --------- --------- ---------
Total noninterest income 670 489 447 2,294 1,575
NONINTEREST EXPENSE
Personnel 378 349 343 1,482 1,256
Net occupancy 64 58 56 239 226
Equipment 50 48 51 203 185
Computer processing 63 60 49 236 176
Marketing 22 35 19 106 100
Amortization of intangibles 25 25 24 104 91
Professional fees 20 18 16 70 62
Restructuring charges 91 7 -- 98 --
Other expense 170 101 109 511 387
--------- --------- --------- --------- ---------
Total noninterest expense 883 701 667 3,049 2,483
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 409 410 390 1,684 1,479
Income taxes 145 140 130 577 483
--------- --------- --------- --------- ---------
NET INCOME $ 264 $ 270 $ 260 $ 1,107 $ 996
========= ========= ========= ========= =========
Net income per Common Share $ .59 $ .60 $ .58 $ 2.47 $ 2.25
Net income per Common Share - assuming dilution .59 .60 .57 2.45 2.23
Wtd. avg. Common Shares (000) 446,402 448,742 449,949 448,168 441,895
Wtd. avg. Common Shares and potential
Common Shares (000) 449,678 452,886 454,527 452,363 447,437
Taxable-equivalent adjustment $ 8 $ 9 $ 8 $ 32 $ 34
</TABLE>
<PAGE> 9
KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION
JANUARY 19, 2000
PAGE 9
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCE SHEETS
(in millions)
THREE MONTHS ENDED TWELVE MONTHS ENDED
-------------------------------------- -----------------------
12-31-99 9-30-99 12-31-98 12-31-99 12-31-98
-------- -------- -------- -------- --------
ASSETS
<S> <C> <C> <C> <C> <C>
Loans $ 63,486 $ 62,799 $ 60,656 $ 62,401 $ 57,422
Investment securities 974 970 1,002 979 1,083
Securities available for sale 6,667 6,359 6,066 6,403 6,610
Short-term investments 1,954 1,836 1,747 1,873 1,563
-------- -------- -------- -------- --------
Total earning assets 73,081 71,964 69,471 71,656 66,678
Allowance for loan losses (916) (920) (888) (911) (888)
Cash and due from banks 2,725 2,589 2,655 2,624 2,583
Other assets 7,684 7,662 7,730 7,577 6,908
-------- -------- -------- -------- --------
TOTAL ASSETS $ 82,574 $ 81,295 $ 78,968 $ 80,946 $ 75,281
======== ======== ======== ======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,430 $ 8,534 $ 8,810 $ 8,474 $ 8,509
Interest-bearing 33,205 33,153 32,072 32,683 31,850
Deposits in foreign office-interest-bearing 906 776 366 823 913
-------- -------- -------- -------- --------
Total deposits 42,541 42,463 41,248 41,980 41,272
Federal funds purchased and securities
sold under repurchase agreements 4,384 4,495 5,205 4,856 6,635
Bank notes and other short-term borrowings 8,243 7,428 10,171 7,912 7,975
Other liabilities 3,836 3,561 3,057 3,464 2,681
Long-term debt 15,852 15,864 12,265 15,311 10,296
Capital securities of subsidiary trusts 1,243 1,205 997 1,162 879
-------- -------- -------- -------- --------
TOTAL LIABILITIES 76,099 75,016 72,943 74,685 69,738
SHAREHOLDERS' EQUITY 6,475 6,279 6,025 6,261 5,543
-------- -------- -------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 82,574 $ 81,295 $ 78,968 $ 80,946 $ 75,281
======== ======== ======== ======== ========
</TABLE>
