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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 20, 2000
[KEYCORP LOGO]
KeyCorp
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Ohio 0-850 34-6542451
------------------------------- ---------------------- ------------------------------------
(State or other jurisdiction of Commission File Number (I.R.S. Employer Identification No.)
incorporation or organization)
127 Public Square, Cleveland, Ohio 44114-1306
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (216) 689-6300
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ITEM 5. OTHER EVENTS
On April 20, 2000, the Registrant issued a press release announcing its earnings
results for the three-month period ended March 31, 2000. This press release,
dated April 20, 2000, is attached as Exhibit 99 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
--------
99 The Registrant's April 20, 2000, press release announcing its
earnings results for the three-month period ended March 31,
2000.
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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 21, 2000 /s/ Lee Irving
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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 REPORTS FIRST QUARTER 2000 EARNINGS
o CORE EPS OF $0.55
o SALE OF CREDIT CARD BUSINESS COMPLETED
o STRONG GROWTH IN COMMERCIAL AND HOME EQUITY LENDING
o FAVORABLE NONINTEREST INCOME AND EXPENSE TRENDS
CLEVELAND, April 20, 2000 -- KeyCorp (NYSE: KEY) today reported first
quarter earnings of $367 million, or $0.83 per diluted common share, up from
$293 million, or $0.65, for last year's first quarter. This improvement
represents a 25 percent increase in net income and a 28 percent increase in
earnings per diluted common share.
On a core basis, which excludes significant nonrecurring items, Key's
first quarter earnings were $0.55 per diluted common share, equal to the per
share amount for the first three months of 1999. Primary among the quarter's
nonrecurring items is a gain of $332 million ($207 million after tax, or $0.47
per diluted common share) from the previously announced sale of Key's credit
card business. This gain was partially offset by an additional provision for
loan losses of $121 million ($76 million after tax, or $0.17 per diluted common
share) and $10 million ($7 million after tax, or $0.02 per diluted common
share), of restructuring and other nonrecurring net charges, most of which
relate to the productivity improvement program announced by Key last November.
Core net income was $243 million for the first quarter of 2000,
compared with $248 million for the comparable quarter a year ago. The decline is
due in part to the effects of the October 1999 sale of Key's Long Island
district branches, the January 2000 sale of Key's credit card portfolio and the
absence of securitization activity in the first quarter of 2000. First quarter
1999 results included $32 million of net loan securitization gains, increasing
net income by $20 million.
"Our core results reflect the impact of actions we have taken recently
to continue our development as an integrated, multiline financial services
company," said Robert W. Gillespie, Key's chairman and chief executive officer.
"In January, we completed the sale of our profitable, but slow-growth credit
card business. We will redeploy a significant portion of the sales proceeds to
more attractive opportunities, such as our rapidly growing home equity business.
In that regard, we recently announced our intention to de-emphasize
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 2
the securitization and sale of certain home equity loans. We are confident that
these strategic actions will generate consistent longer-term growth that will
more than offset their unfavorable short-term effects on our earnings.
"In the first quarter, strong demand for our commercial and home equity
loans boosted earning assets and moderated the adverse effects of continued net
interest margin compression. Furthermore, Key's core noninterest income,
excluding net securitization gains, rose 9 percent from last year's first
quarter and currently represents 41 percent of the company's total core revenue.
The increase was driven by investment banking, capital markets, trust and asset
management activities and service charges on deposit accounts.
"Finally, our efforts to improve Key's overall productivity are gaining
momentum. Core noninterest expense, excluding significant nonrecurring items
recorded in the first quarters of 2000 and 1999, grew less than 2 percent from
the year-ago quarter. We are confident that our productivity improvement
activities will sustain these favorable results going forward."
Key's returns on average equity and average assets for the first
quarters of 2000 and 1999 are presented below. Ratios shown on a cash basis
exclude the effects of goodwill and other intangibles that do not qualify as
Tier 1 capital, as well as the related amortization of those assets.
As Reported Cash Basis
------------------- ------------------
1Q00 1Q99 1Q00 1Q99
---- ---- ---- ----
Return on average equity 22.7% 19.5% 31.0% 27.9%
Return on average assets 1.77% 1.49% 1.92% 1.64%
Net interest income for the first quarter of 2000 totaled $671
million, down $14 million from the first quarter of last year. Key anticipated
that decreases in net interest income would result from the October 1999
divestiture of its Long Island district branches and the January 2000 sale of
the credit card business. The decrease in net interest income from the first
quarter of 1999 resulted from a 27 basis point reduction in the net interest
margin of which 15 basis points was attributable to these divestitures. The
decline in the margin more than offset the impact of a 4 percent increase in
average earning assets (reflecting growth in both commercial and consumer
lending) to $73.7 billion.
Core noninterest income of $476 million for the first quarter of 2000
was $9 million higher than the $467 million reported for the same period last
year, despite a $30 million decline in net securitization gains. Factors
contributing to the improvement include increases in income from investment
banking and capital markets activities (up $23 million), trust and asset
management (up $9 million) and service charges on deposit accounts (up $5
million).
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 3
Core noninterest expense totaled $718 million for the first quarter of
2000, up less than 2 percent from $707 million for the year-ago quarter. Higher
costs related to personnel, computer processing and professional services were
largely offset by reductions in expenses associated with equipment, marketing
and the amortization of intangibles.
At March 31, 2000, the allowance for loan losses was $979 million, or
1.53 percent of loans, representing an increase of $49 million from the 1999
year end. Growth in the allowance resulted from a provision for loan losses that
exceeded net charge-offs. The provision for loan losses was $183 million for the
first quarter of 2000, up $72 million from that reported for the first quarter
of last year. The higher provision in the current quarter reflects enhancements
in Key's methodology for assessing credit risk which are designed to provide a
more detailed assessment of specific risk factors, particularly in the
commercial loan portfolio.
On a reported basis, net loan charge-offs totaled $134 million for the
first quarter of 2000. Included in the $134 million are $15 million of loans
from the sold credit card portfolio and $57 million of consumer loan charge-offs
resulting from the one-time, accelerated implementation of new Federal
guidelines applicable to all banking companies. Key elected to implement these
guidelines in the first quarter, although compliance is not required until
December 31, 2000. The remaining net loan charge-offs totaled $62 million and
were 0.39 percent of average loans outstanding for the first quarter. On a
comparable basis, net charge-offs for the year-ago quarter were $81 million and
0.53 percent of average loans outstanding.
Key's nonperforming assets ended the first quarter at $447 million, or
0.70 percent of loans plus other real estate owned and other nonperforming
assets, compared with $430 million, or 0.70 percent, at March 31, 1999.
Key's capital ratios continue to exceed all "well-capitalized"
benchmarks. At March 31, 2000, Key's estimated Tier 1 and total risk-adjusted
capital ratios were 7.75 percent and 11.70 percent, respectively, and the
estimated leverage ratio was 7.91 percent. The tangible equity to tangible
assets ratio was 6.16 percent at March 31, 2000, compared with 6.03 percent last
quarter and 5.86 percent a year ago. The improvement from the prior quarter
reflects Key's first quarter 2000 retained net income, offset in part by Key's
repurchase of 6,365,000 of its common shares under an authorization that allows
for the repurchase of up to 20,000,000 shares. There were 13,635,000 shares
remaining for repurchase under this authorization as of March 31, 2000.
Cleveland-based KeyCorp (NYSE: KEY) is one of the nation's largest
multiline financial services companies, with assets of approximately $84
billion. Key companies provide investment management, retail and commercial
banking, consumer finance, and investment banking products and services to
individuals and
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 4
companies throughout the United States and, for certain businesses,
internationally. The company's businesses deliver their products and services
through facilities located in 46 states; a network of more than 2,500 ATMs; a
robust Web site, Key.com(SM); and telephone banking centers (1.800.KEY2YOU) that
provide account access and financial products 24 hours a day.
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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; significant changes in law imposing new legal obligations or
restrictions or unfavorable resolution of litigation; 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 -- MARCH 31, 2000, DECEMBER 31, 1999 (THE PREVIOUS QUARTER),
AND MARCH 31, 1999. 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.
###
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
3-31-00 12-31-99 3-31-99
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<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income (TE) $ 678 $ 713 $ 693
Provision for loan losses 183 83 111
Noninterest income 806 672 615
Noninterest expense 727 885 754
Net income 367 264 293
PER COMMON SHARE
Net income $ .83 $ .59 $ .65
Net income - assuming dilution .83 .59 .65
Cash dividends .28 .26 .26
Book value at period end 14.84 14.41 13.63
Market price at period end 19.00 22.13 30.31
AT PERIOD END
Full-time equivalent employees 23,474 24,568 25,650
Branches 937 936 969
PERFORMANCE RATIOS
Return on average total assets 1.77% 1.27% 1.49%
Return on average equity 22.68 16.18 19.48
Efficiency(1) 62.27 59.23 61.16
Overhead(2) 35.75 30.39 33.19
Net interest margin (TE) 3.68 3.88 3.95
CAPITAL RATIOS AT PERIOD END
Equity to assets 7.78% 7.66% 7.63%
Tangible equity to tangible assets 6.16 6.03 5.86
Tier 1 risk-adjusted capital(3) 7.75 7.68 7.44
Total risk-adjusted capital(3) 11.70 11.66 11.92
Leverage(3) 7.91 7.77 7.21
</TABLE>
1 Calculated as noninterest expense (excluding certain nonrecurring charges)
divided by taxable-equivalent net interest income plus noninterest income
(excluding gains from certain divestitures and certain nonrecurring
charges).
2 Calculated as noninterest expense (excluding certain nonrecurring charges)
less noninterest income (excluding gains from certain divestitures and
certain nonrecurring charges) divided by taxable-equivalent net interest
income.
3 3-31-00 ratio is estimated.
TE = Taxable Equivalent
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 6
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
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<CAPTION>
THREE MONTHS ENDED
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3-31-00 12-31-99 3-31-99
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<S> <C> <C> <C>
ASSET QUALITY
Net loan charge-offs $ 134 $ 83 $ 81
Net loan charge-offs to average loans .84% .52% .53%
Allowance for loan losses $ 979 $ 930 $ 930
Allowance for loan losses to period end loans 1.53% 1.45% 1.52%
Allowance for loan losses to nonperforming loans 231.44 228.50 235.44
Nonperforming loans at period end $ 423 $ 407 $ 395
Nonperforming assets at period end 447 433 430
Nonperforming loans to period end loans .66% .63% .65%
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .70 .67 .70
</TABLE>
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 7
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<CAPTION>
3-31-00 12-31-99 3-31-99
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Loans $ 64,064 $ 64,222 $ 61,045
Investment securities 1,053 986 1,005
Securities available for sale 6,269 6,665 6,778
Short-term investments 2,567 1,860 1,630
--------- --------- ---------
Total earning assets 73,953 73,733 70,458
Allowance for loan losses (979) (930) (930)
Cash and due from banks 2,757 2,816 2,981
Premises and equipment 761 797 863
Goodwill 1,378 1,389 1,435
Other intangible assets 56 60 72
Corporate owned life insurance 2,132 2,110 2,032
Other assets 3,446 3,420 3,081
--------- --------- ---------
TOTAL ASSETS $ 83,504 $ 83,395 $ 79,992
========= ========= =========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,283 $ 8,607 $ 8,601
Interest-bearing 34,718 33,390 32,555
Deposits in foreign office-interest-bearing 3,035 1,236 167
--------- --------- ---------
Total deposits 46,036 43,233 41,323
Federal funds purchased and securities
sold under repurchase agreements 2,621 4,177 4,336
Bank notes and other short-term borrowings 8,015 8,439 8,242
Other liabilities 4,312 4,033 3,285
Long-term debt 14,784 15,881 15,457
Capital securities of subsidiary trusts 1,243 1,243 1,244
--------- --------- ---------
TOTAL LIABILITIES 77,011 77,006 73,887
SHAREHOLDERS' EQUITY 6,493 6,389 6,105
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 83,504 $ 83,395 $ 79,992
========= ========= =========
Common shares outstanding (000) 437,590 443,427 447,822
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 8
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------
3-31-00 12-31-99 3-31-99
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<S> <C> <C> <C>
INTEREST INCOME $ 1,489 $ 1,489 $ 1,381
INTEREST EXPENSE 818 784 696
-------- --------- --------
NET INTEREST INCOME 671 705 685
Provision for loan losses 183 83 111
-------- --------- --------
488 622 574
NONINTEREST INCOME
Trust and asset management income 115 115 106
Investment banking and capital markets income 89 111 66
Service charges on deposit accounts 86 84 81
Brokerage income 45 39 42
Corporate owned life insurance income 25 31 24
Credit card fees 6 16 10
Net loan securitization gains (losses) 2 (18) 32
Net securities gains 1 3 4
Gains from branch divestitures -- 194 --
Gains from other divestitures 332 -- 148
Other income 105 97 102
-------- --------- --------
Total noninterest income 806 672 615
NONINTEREST EXPENSE
Personnel 382 378 372
Net occupancy 57 64 59
Computer processing 59 63 54
Equipment 48 50 56
Marketing 22 22 25
Amortization of intangibles 25 25 28
Professional fees 19 20 15
Restructuring charges 7 91 --
Other expense 108 172 145
-------- --------- --------
Total noninterest expense 727 885 754
-------- --------- --------
INCOME BEFORE INCOME TAXES 567 409 435
Income taxes 200 145 142
-------- --------- --------
NET INCOME $ 367 $ 264 $ 293
======== ========= ========
Net income per common share $ .83 $ .59 $ .65
Net income per common share - assuming dilution .83 .59 .65
Wtd. avg. common shares (000) 441,834 446,402 449,520
Wtd. avg. common shares and potential
common shares (000) 443,757 449,678 454,197
Taxable-equivalent adjustment $ 7 $ 8 $ 8
</TABLE>
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KEYCORP REPORTS FIRST QUARTER 2000 EARNINGS
APRIL 20, 2000
PAGE 9
CONSOLIDATED AVERAGE BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
3-31-00 12-31-99 3-31-99
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<S> <C> <C> <C>
ASSETS
Loans $ 64,024 $ 63,486 $ 61,693
Investment securities 1,016 974 990
Securities available for sale 6,475 6,667 6,004
Short-term investments 2,164 1,954 1,975
-------- -------- --------
Total earning assets 73,679 73,081 70,662
Allowance for loan losses (899) (916) (888)
Cash and due from banks 2,557 2,725 2,613
Other assets 7,850 7,684 7,471
-------- -------- --------
TOTAL ASSETS $ 83,187 $ 82,574 $ 79,858
======== ======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,160 $ 8,430 $ 8,495
Interest-bearing 33,708 33,205 32,109
Deposits in foreign office-interest-bearing 1,206 906 509
-------- -------- --------
Total deposits 43,074 42,541 41,113
Federal funds purchased and securities
sold under repurchase agreements 4,003 4,384 5,077
Bank notes and other short-term borrowings 8,680 8,243 9,208
Other liabilities 4,344 3,836 3,188
Long-term debt 15,334 15,852 14,133
Capital securities of subsidiary trusts 1,243 1,243 1,039
-------- -------- --------
TOTAL LIABILITIES 76,678 76,099 73,758
SHAREHOLDERS' EQUITY 6,509 6,475 6,100
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 83,187 $ 82,574 $ 79,858
======== ======== ========
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