-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UMLdpu6zMDYsMJSokvWqSlKJadUFENBBXsArZSQ3ePKrgkIk5jV7g+h+kUNqTF5B UNGrwydvFwMFfaBQcMEy9w== 0000950152-00-000262.txt : 20000202 0000950152-00-000262.hdr.sgml : 20000202 ACCESSION NUMBER: 0000950152-00-000262 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000119 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYCORP /NEW/ CENTRAL INDEX KEY: 0000091576 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 346542451 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11302 FILM NUMBER: 510005 BUSINESS ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 BUSINESS PHONE: 2166896300 MAIL ADDRESS: STREET 1: 127 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44114-1306 FORMER COMPANY: FORMER CONFORMED NAME: SOCIETY CORP DATE OF NAME CHANGE: 19920703 8-K 1 KEYCORP FORM 8-K 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 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. 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 EX-99 2 EXHIBIT 99 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." 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:
As Reported Cash Earnings Basis ---------------------------- ----------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- 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%
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. 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 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. ### 5 KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION JANUARY 19, 2000 PAGE 5 FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts)
THREE MONTHS ENDED ---------------------------------------------------- 12-31-99 9-30-99 12-31-98 ------------- ------------- ------------ 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
6 KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION JANUARY 19, 2000 PAGE 6
FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts) TWELVE MONTHS ENDED --------------------------------- 12-31-99 12-31-98 ------------- ------------- SUMMARY OF OPERATIONS 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 % 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
7 KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION JANUARY 19, 2000
PAGE 7\ CONSOLIDATED BALANCE SHEETS (dollars in millions) 12-31-99 9-30-99 12-31-98 ------------- -------------- ------------- ASSETS 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
8 KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION JANUARY 19, 2000 PAGE 8
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 --------- --------- --------- --------- --------- 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
9 KEYCORP'S RECORD 1999 EARNINGS SURPASS $1 BILLION JANUARY 19, 2000 PAGE 9
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 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 ======== ======== ======== ======== ========
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