KEYCORP /NEW/
8-K, EX-99.1, 2001-01-17
NATIONAL COMMERCIAL BANKS
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EXHIBIT 99.1

             
Media Contact: John Fuller 216.689.8140 Analyst Contact: Vernon L. Patterson 216.689.0520
Key Media
Newsroom:		 www.Key.com/newsroom Investor Relations
Information: 		www.Key.com/ir

FOR IMMEDIATE RELEASE

KEYCORP REPORTS FOURTH QUARTER AND 2000 EARNINGS

•   Core EPS of $0.63 for the fourth quarter and $2.32 for the full year
 
•   Competitiveness initiative producing results
 
•   Core revenue trend favorable

      CLEVELAND, January 16, 2001 – KeyCorp (NYSE: KEY) today announced fourth quarter core net income of $272 million, or a record $0.63 per diluted common share, up from $245 million or $0.57 per share for the third quarter. Key’s reported fourth quarter net income totaled $266 million, or $0.62 per diluted common share.

      Key’s 2000 core net income totaled $1.009 billion, or $2.32 per diluted common share, compared with $1.051 billion, or $2.33 per share for the previous year. Key’s adjusted core earnings per diluted common share grew 10 percent from $2.10 in 1999 to $2.30 in 2000. Adjusted core results exclude earnings from divested businesses and Champion Mortgage loan securitization gains. On a reported basis, Key’s 2000 net income was $1.002 billion, or $2.30 per diluted common share.

      “Our record core earnings per share in the fourth quarter demonstrate the continued favorable effect of our competitiveness initiative,” said Robert W. Gillespie, Key’s chairman and chief executive officer. “Core revenue growth at Key was especially strong in the fourth quarter due in part to our net interest margin, which rose three basis points following three quarters in which the margin was stable at 3.68 percent. In addition, deposits in our Retail Bank have grown by 7 percent since the fourth quarter of last year. Key’s 2000 performance is particularly gratifying considering that this has been a year of significant change for the company. We fully expect that the internal operating practices implemented during the year will allow us to tap Key’s full economic potential.”

      Based on core earnings, Key’s return on average equity for the fourth quarter of 2000 was 16.53 percent and its return on average assets was 1.27 percent. On the same basis, Key’s returns on average equity and assets for the prior quarter were 14.97 percent and 1.16 percent, respectively.

      Net interest income for the fourth quarter of 2000 totaled $702 million, representing an $18 million increase from the prior quarter. This improvement resulted from an annualized 7 percent increase in average earning assets and a higher net interest margin.

 

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 2

      Core noninterest income was $508 million for the fourth quarter of 2000, significantly higher than the $460 million earned in the third quarter. Key experienced nearly across-the-board growth in traditional sources of fee income. While most of these sources showed modest increases from the third quarter, loan fees rose by $8 million. Fee income generated by traditional sources was supplemented by net gains from sales of securities.

      Key’s core noninterest expense totaled $708 million for the fourth quarter of 2000, up from $672 million for the third quarter. The increase was primarily attributable to higher personnel expense, which rose by $18 million. Higher incentive compensation associated with the production of fee income was part of the reason for this increase. In comparison with the fourth quarter of last year, personnel expense was down $14 million. This improvement was largely due to the reduction in Key’s workforce that resulted from actions taken by Key to improve its competitiveness. At December 31, 2000, the number of full-time equivalent employees totaled 22,142, compared with 22,457 at September 30, 2000, and 24,568 at the end of 1999.

      The provision for loan losses was $108 million for the fourth quarter of 2000 compared with $131 million for the prior quarter. Included in the current quarter provision is $13 million, representing an additional noncore adjustment made in connection with revised Federal consumer loan charge-off guidelines. On a core basis, net loan charge-offs totaled $95 million and were 0.57 percent of average loans outstanding for the quarter, compared with 0.63 percent for the prior quarter when the loan loss provision exceeded the level of Key’s net charge-offs by $27 million. At December 31, 2000, the allowance for loan losses was $1.0 billion, or 1.50 percent of loans. The level of Key’s nonperforming loans rose by $58 million during the fourth quarter, reflecting the impact of a weaker economy. At December 31, 2000, Key’s nonperforming loans totaled $650 million, or 0.97 percent of period-end loans, compared with $592 million, or 0.89 percent, at September 30, 2000.

      Key’s capital ratios continued to exceed all “well-capitalized” benchmarks at December 31, 2000. In light of its strong capital position, during the fourth quarter Key repurchased 5,000,000 of its common shares under an authorization that allows for the repurchase of up to 25,000,000 shares. There were 18,800,000 shares remaining for repurchase under this authorization as of December 31, 2000.

      Cleveland-based KeyCorp is one of the nation’s largest multiline financial services companies, with assets of approximately $87 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and 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 2,443 ATMs; telephone banking centers (1.800.KEY2YOU); and a Web site, Key.com,sm that provides account access and financial products 24 hours a day.

      A live Internet broadcast of KeyCorp’s conference call to discuss quarterly earnings and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at www.Key.com/ir at 1:00 p.m. EDT, on Tuesday, January 16, 2001. A tape of the call will be available until Tuesday, January 23. For information about Key lines of business, visit our Media Newsroom at www.Key.com/newsroom.

 

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 3

      This news release contains forward-looking statements that are subject to 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: changes in interest rates; continued softening in the economy which could materially impact credit quality trends and the ability to generate loans; failure of the capital markets to function consistent with customary levels; delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; consummation of significant business combinations or divestitures; changes in law imposing new legal obligations or restrictions or unfavorable resolution of litigation; and changes in accounting, tax or regulatory practices or requirements.

###

 

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 4

Financial Highlights
(dollars in millions, except per share amounts)

                             
Three months ended
12-31-00 9-30-00 12-31-99
Summary of operations
Net interest income (taxable equivalent) $ 709 $ 691 $ 713
Provision for loan losses 108 131 83
Noninterest income 508 405 672
Noninterest expense 705 787 885
Net income 266 121 264
Net income — core 272 245 264
Per common share
Net income $ .63 $ .28 $ .59
Net income — core .64 .57 .59
Net income — assuming dilution .62 .28 .59
Net income — assuming dilution — core .63 .57 .59
Cash dividends .28 .28 .26
Book value at period end 15.65 15.26 14.41
Market price at period end 28.00 25.31 22.13
At period end
Full-time equivalent employees 22,142 22,457 24,568
Branches 922 932 936
Performance ratios
Return on average total assets 1.24 % .57 % 1.27 %
Return on average total assets — core 1.27 1.16 1.27
Return on average equity 16.16 7.39 16.18
Return on average equity — core 16.53 14.97 16.18
Efficiencya 58.18 58.38 59.23
Overheadb 28.21 30.68 30.39
Net interest margin (taxable equivalent) 3.71 3.68 3.88
Capital ratios at period end
Equity to assets 7.59 % 7.63 % 7.66 %
Tangible equity to tangible assets 6.12 6.10 6.03
Tier 1 risk-adjusted capital c 7.45 7.59 7.68
Total risk-adjusted capital c 11.06 11.34 11.66
Leverage c 7.70 7.76 7.77
Asset quality
Net loan charge-offs $ 108 $ 104 $ 83
Net loan charge-offs to average loans .64 % .63 % .52 %
Allowance for loan losses $ 1,001 $ 1,001 $ 930
Allowance for loan losses to period end loans 1.50 % 1.51 % 1.45 %
Allowance for loan losses to nonperforming loans 154.00 169.09 208.05
Nonperforming loans at period end $ 650 $ 592 $ 447
Nonperforming assets at period end 672 617 473
Nonperforming loans to period end loans .97 % .89 % .70 %
Nonperforming assets to period end loans plus
OREO and other nonperforming assets 1.00 .93 .74

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 5

Financial Highlights
(dollars in millions, except per share amounts)

                   
Twelve months ended
12-31-00 12-31-99
Summary of operations
Net interest income (taxable equivalent) $ 2,758 $ 2,819
Provision for loan losses 490 348
Noninterest income 2,194 2,315
Noninterest expense 2,917 3,070
Net income 1,002 1,107
Net income — core 1,009 1,051
Per common share
Net income $ 2.32 $ 2.47
Net income — core 2.33 2.35
Net income — assuming dilution 2.30 2.45
Net income — assuming dilution — core 2.32 2.33
Cash dividends 1.12 1.04
Performance ratios
Return on average total assets 1.19 % 1.37 %
Return on average total assets — core 1.20 1.30
Return on average equity 15.39 17.68
Return on average equity — core 15.49 16.79
Efficiency a 59.75 59.61
Overhead b 31.74 31.52
Net interest margin (taxable equivalent) 3.69 3.93
Asset quality
Net loan charge-offs $ 414 $ 318
Net loan charge-offs to average loans .63 % .51 %

(a)   Calculated as noninterest expense (excluding significant nonrecurring items) divided by taxable-equivalent net interest income plus noninterest income (excluding significant nonrecurring items).
(b)   Calculated as noninterest expense (excluding significant nonrecurring items) less noninterest income (excluding significant nonrecurring items) divided by taxable-equivalent net interest income.
(c)   12-31-00 ratio is estimated.

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 6

Consolidated Balance Sheets
(dollars in millions)

                             
12-31-00 9-30-00 12-31-99
Assets
Loans $ 66,905 $ 66,299 $ 64,222
Investment securities 1,198 1,253 986
Securities available for sale 7,329 6,664 6,665
Short-term investments 1,884 1,570 1,860
Total earning assets 77,316 75,786 73,733
Allowance for loan losses (1,001 ) (1,001 ) (930 )
Cash and due from banks 3,189 2,691 2,816
Premises and equipment 717 711 797
Goodwill 1,324 1,339 1,389
Other intangible assets 44 48 60
Corporate owned life insurance 2,215 2,185 2,110
Accrued income and other assets 3,466 3,741 3,420
Total assets $ 87,270 $ 85,500 $ 83,395
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 9,076 $ 8,386 $ 8,607
Interest-bearing 35,519 35,016 33,390
Deposits in foreign office-interest-bearing 4,054 4,407 1,236
Total deposits 48,649 47,809 43,233
Federal funds purchased and securities sold under repurchase agreements 4,936 5,324 4,177
Bank notes and other short-term borrowings 6,957 6,407 8,439
Accrued expense and other liabilities 4,701 4,397 4,033
Long-term debt 14,161 13,800 15,881
Capital securities of subsidiary trusts 1,243 1,243 1,243
Total liabilities 80,647 78,980 77,006
Shareholders’ equity 6,623 6,520 6,389
Total liabilities and shareholders’ equity $ 87,270 $ 85,500 $ 83,395
Common shares outstanding (000) 423,254 427,260 443,427

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 7

Consolidated Statements of Income

(dollars in millions, except per share amounts)
                                             
Three months ended Twelve months ended
12-31-00 9-30-00 12-31-99 12-31-00 12-31-99
Interest income $ 1,652 $ 1,596 $ 1,489 $ 6,277 $ 5,695
Interest expense 950 912 784 3,547 2,908
Net interest income 702 684 705 2,730 2,787
Provision for loan losses 108 131 83 490 348
594 553 622 2,240 2,439
Noninterest income
Trust and investment services income 150 148 154 608 599
Investment banking and capital markets income 94 91 111 372 354
Service charges on deposit accounts 85 85 84 341 330
Corporate owned life insurance income 31 28 31 109 107
Letter of credit and loan fees 34 26 29 107 98
Credit card fees 2 1 16 11 63
Net loan securitization gains (losses) 1 (2 ) (18 ) 8 64
Net securities gains (losses) 19 (50 ) 3 (28 ) 29
Gains from branch divestitures — — 194 — 194
Gains from other divestitures — — — 332 161
Other income 92 78 68 334 316
Total noninterest income 508 405 672 2,194 2,315
Noninterest expense
Personnel 360 342 378 1,445 1,482
Net occupancy 55 55 64 223 239
Computer processing 62 59 63 240 236
Equipment 42 41 50 173 203
Marketing 28 29 22 110 106
Amortization of intangibles 25 26 25 101 104
Professional fees 19 30 20 89 70
Restructuring charges (7 ) 102 91 102 98
Other expense 121 103 172 434 532
Total noninterest expense 705 787 885 2,917 3,070
Income before income taxes 397 171 409 1,517 1,684
Income taxes 131 50 145 515 577
Net income $ 266 $ 121 $ 264 $ 1,002 $ 1,107
Net income per common share $ .63 $ .28 $ .59 $ 2.32 $ 2.47
Net income per common share — assuming dilution .62 .28 .59 2.30 2.45
Wtd. avg. common shares (000) 425,054 429,584 446,402 432,617 448,168
Wtd. avg. common shares and potential common shares (000) 430,634 431,972 449,678 435,573 452,363
Taxable-equivalent adjustment $ 7 $ 7 $ 8 $ 28 $ 32

KeyCorp Reports Fourth Quarter and 2000 Earnings
January 16, 2001
Page 8

Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates

(dollars in millions)
                                                     
Fourth Quarter 2000 Third Quarter 2000
Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
Assets
Loansa,b
Commercial, financial and agricultural $ 20,093 $ 451 8.92 % $ 19,647 $ 434 8.87 %
Real estate — commercial mortgage 6,855 162 9.42 6,932 160 9.29
Real estate — construction 5,164 129 9.97 4,866 121 9.98
Commercial lease financing 6,965 125 7.20 6,861 122 7.14
Total commercial loans 39,077 867 8.84 38,306 837 8.78
Real estate — residential 4,232 81 7.68 4,273 80 7.51
Home equity 9,591 228 9.45 9,095 219 9.68
Credit card — — — — — —
Consumer — direct 2,582 69 10.57 2,595 68 10.50
Consumer — indirect lease financing 3,023 62 8.16 3,052 62 8.08
Consumer — indirect other 5,813 141 9.72 5,952 142 9.55
Total consumer loans 25,241 581 9.18 24,967 571 9.17
Loans held for sale 2,220 51 9.13 2,504 56 8.96
Total loans 66,538 1,499 8.98 65,777 1,464 8.93
Taxable investment securities 898 8 3.73 787 8 3.63
Tax-exempt investment securitiesa 344 8 8.73 369 7 8.12
Total investment securities 1,242 16 5.12 1,156 15 5.06
Securities available for salea,c 6,807 121 7.02 6,275 107 6.67
Short-term investments 1,449 23 6.20 1,501 17 4.76
Total earning assets 76,036 1,659 8.69 74,709 1,603 8.61
Allowance for loan losses (989 ) (969 )
Accrued income and other assets 10,380 10,365
Total assets $ 85,427 $ 84,105
Liabilities
Money market deposit accounts $ 11,873 103 3.44 $ 11,956 102 3.43
Savings deposits 2,045 7 1.32 2,151 8 1.49
NOW accounts 600 2 1.55 592 2 1.59
Certificates of deposit ($100,000 or more) 5,789 94 6.44 5,269 84 6.40
Other time deposits 15,037 232 6.15 14,634 218 6.01
Deposits in foreign office 3,265 54 6.60 2,860 48 6.70
Total interest-bearing deposits 38,609 492 5.07 37,462 462 4.96
Federal funds purchased and securities sold under repurchase agreements 5,859 93 6.33 5,746 88 6.17
Bank notes and other short-term borrowings 6,446 101 6.22 6,403 99 6.19
Long-term debt, including capital securitiesd 15,235 264 6.91 15,356 263 6.91
Total interest-bearing liabilities 66,149 950 5.72 64,967 912 5.65
Noninterest-bearing deposits 8,363 8,377
Accrued expense and other liabilities 4,368 4,248
Total liabilities 78,880 77,592
Shareholders’ equity 6,547 6,513
Total liabilities and shareholders’ equity $ 85,427 $ 84,105
Interest rate spread (TE) 2.97 % 2.96 %
Net interest income (TE) and net interest margin (TE) $ 709 3.71 % $ 691 3.68 %
Capital securities $ 1,243 $ 24 $ 1,243 $ 24
Taxable-equivalent adjustment a 7 7

[Additional columns below]

[Continued from above table, first column(s) repeated]

 
                             
Fourth Quarter 1999
Average
Balance Interest Yield/Rate
Assets
Loansa,b
Commercial, financial and agricultural $ 18,311 $ 364 7.90 %
Real estate — commercial mortgage 6,824 147 8.52
Real estate — construction 4,438 100 8.88
Commercial lease financing 6,484 120 7.43
Total commercial loans 36,057 731 8.05
Real estate — residential 4,338 80 7.56
Home equity 7,497 168 8.71
Credit card — — —
Consumer — direct 2,560 63 9.85
Consumer — indirect lease financing 3,159 62 8.01
Consumer — indirect other 6,452 151 9.34
Total consumer loans 24,006 524 8.70
Loans held for sale 3,423 95 11.09
Total loans 63,486 1,350 8.46
Taxable investment securities 506 4 3.26
Tax-exempt investment securitiesa 468 11 8.69
Total investment securities 974 15 5.87
Securities available for salea,c 6,667 114 6.77
Short-term investments 1,954 18 3.48
Total earning assets 73,081 1,497 8.15
Allowance for loan losses (916 )
Accrued income and other assets 10,409
Total assets $ 82,574
Liabilities
Money market deposit accounts $ 12,836 100 3.09
Savings deposits 2,458 9 1.62
NOW accounts 610 4 1.76
Certificates of deposit ($100,000 or more) 5,151 71 5.48
Other time deposits 12,150 154 5.04
Deposits in foreign office 906 12 5.45
Total interest-bearing deposits 34,111 350 4.08
Federal funds purchased and securities sold under repurchase agreements 4,384 52 4.71
Bank notes and other short-term borrowings 8,243 116 5.57
Long-term debt, including capital securitiesd 17,095 266 6.17
Total interest-bearing liabilities 63,833 784 4.87
Noninterest-bearing deposits 8,430
Accrued expense and other liabilities 3,836
Total liabilities 76,099
Shareholders’ equity 6,475
Total liabilities and shareholders’ equity $ 82,574
Interest rate spread (TE) 3.28 %
Net interest income (TE) and net interest margin (TE) $ 713 3.88 %
Capital securities $ 1,243 $ 23
Taxable-equivalent adjustment a 8

(a)   Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory Federal income tax rate of 35%.
(b)   For purposes of these computations, nonaccrual loans are included in average loan balances.
(c)   Yield is calculated on the basis of amortized cost.
(d)   Rate calculation excludes ESOP debt.

      TE = Taxable Equivalent



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