EX-99 2 ex99.txt 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 REPORTS SECOND QUARTER 2000 EARNINGS -------------------------------------------- - REPORTED AND CORE EPS OF $0.57 - STABLE NET INTEREST MARGIN - CONTINUED EXPENSE REDUCTION - 6.7 MILLION SHARES REPURCHASED DURING THE QUARTER CLEVELAND, July 18, 2000 -- KeyCorp (NYSE: KEY) today announced second quarter core net income (which excludes significant nonrecurring items) of $249 million, or $0.57 per diluted common share. On a per share basis, this result represents an 8 percent improvement over adjusted core net income of $244 million, or $0.53 per share, for the same quarter last year. Last year's second quarter adjusted results exclude earnings from Key's Long Island district branches and the credit card business, both of which have been sold, and Champion Mortgage loan securitizations. Key's second quarter 2000 core earnings also improved from comparable first quarter 2000 results of $243 million, or $0.55 per share. On a reported basis, Key's earnings for the second quarter of 2000 were $248 million, or $0.57 per diluted common share, compared with $280 million, or $0.62 for the second quarter of 1999. For the first six months of the year, Key's reported net income was $615 million, up 7 percent from $573 million for the first half of 1999. This represents $1.40 per diluted common share, which amounts to a 10 percent increase from $1.27 reported for the same period last year. "Second quarter results reflect the impact of aggressive actions we have taken over the past year to facilitate our continued development as an integrated, multiline financial services company," said Robert W. Gillespie, Key's chairman and chief executive officer. 2 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 2 "Moreover, we are confident that these actions are having their intended strategic effect. Core earnings per share are growing on the strength of a stable net interest margin, strong commercial and home equity loan growth, 13 percent annualized growth in our Retail Bank's deposits and a $22 million, or annualized 12 percent, decrease in core noninterest expense. Such strong underlying trends are representative of the type of financial performance that we must achieve." Key's returns on average equity and average assets for the second quarters of 2000 and 1999 are presented below. Ratios shown on a core basis exclude the effects of significant nonrecurring items. Ratios presented on a cash basis exclude only the effects of goodwill and other intangibles that do not qualify as Tier 1 capital, as well as the related amortization of those assets.
Core Basis Cash Basis ------------------------------ ----------------------------- 2Q00 2Q99 2Q00 2Q99 ---- ---- ---- ---- Return on average equity 15.5% 17.7% 21.6% 25.9% Return on average assets 1.20% 1.37% 1.33% 1.54%
Net interest income for the second quarter of 2000 totaled $673 million, up $2 million from the first quarter. The net interest margin was stable from quarter-to-quarter at 3.68 percent, despite a challenging interest rate environment and the January sale of the low-growth, but higher-yielding credit card business. Compared with the second quarter of 1999, net interest income declined by $24 million, largely due to approximately $45 million of net interest income contributed to the year-ago quarter by the divested Long Island branches and credit card business. Core noninterest income was $475 million for the second quarter of 2000, nearly identical to the $476 million earned in the first quarter. Income from investment banking and capital markets activities grew by $9 million, but was offset by an $11 million reduction in brokerage commissions. Core noninterest income in last year's second quarter was $517 million and included $19 million from the divested Long Island branches and credit card business, as well as $21 million resulting from the securitization and sale of Champion home equity loans. The remaining $477 million of core noninterest income was nearly equaled by the $475 million of core noninterest income in the second quarter of 2000. Increases in income from trust and asset management (up $6 million) and service charges on deposit accounts (up $3 million) were 3 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 3 substantially offset by an $8 million reduction in brokerage commissions due to a lower volume of activity. Reflecting early progress made on Key's productivity improvement initiatives, core noninterest expense totaled $696 million for the second quarter of 2000, representing a $22 million reduction from that reported for the first quarter. Personnel expenses led the decline, decreasing by $21 million. Core noninterest expense was down $24 million from $720 million for the year-ago quarter. This improvement came from lower costs related to personnel (down $22 million) and equipment (down $7 million) that were largely the result of the strategic sales mentioned earlier and the impact of Key's productivity improvement initiative. These factors contributed to a reduction in Key's workforce of more than 2,700 positions from June 30, 1999, to June 30, 2000. The core provision for loan losses was $68 million for the second quarter of 2000, up $6 million from the prior quarter and down $8 million from that reported for the second quarter of 1999. On a comparable basis, net loan charge-offs totaled $68 million and were 0.42 percent of average loans outstanding for the quarter, compared with 0.39 percent for the prior quarter and 0.49 percent a year ago. The decrease in both the provision for loan losses and the level of net loan charge-offs relative to the second quarter of 1999 reflected, among other factors, the sale of Key's credit card portfolio. Key's nonperforming loans ended the second quarter at $489 million, or 0.75 percent of period-end loans, compared with $423 million, or 0.66 percent, at March 31, 2000. The increase of $66 million was nearly evenly distributed between commercial and consumer loans. Key experienced a modest increase in commercial nonperforming loans as these continue to trend to more normal levels after a lengthy period of exceptional performance. In addition, consumer nonperforming loans rose at June 30 to more customary levels after reaching unusually low levels at March 31. Key's capital ratios continue to exceed all "well-capitalized" benchmarks. At June 30, 2000, Key's estimated Tier 1 and total risk-adjusted capital ratios were 7.78 percent and 11.58 percent, respectively, and the estimated leverage ratio was 7.91 percent. The tangible equity to tangible assets ratio was 6.12 percent at June 30, 2000, compared with 6.16 percent last quarter and 5.95 percent a year ago. The decline from the first quarter reflects Key's second quarter 2000 repurchase of 6,700,000 of its common shares under an authorization that allows for the 4 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 4 repurchase of up to 20,000,000 shares. There were 6,935,000 shares remaining for repurchase under this authorization as of June 30, 2000. Cleveland-based KeyCorp is one of the nation's largest multiline financial services companies, with assets of approximately $85 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 about 2,500 ATMs; telephone banking centers (1.800.KEY2YOU); and a robust Web site, Key.com,(SM) that provide account access and financial products 24 hours a day. -------------------------------------------------------------------------------- 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 -- JUNE 30, 2000, MARCH 31, 2000 (THE PREVIOUS QUARTER), AND JUNE 30, 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. ### 5 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 5
FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts) THREE MONTHS ENDED ---------------------------------------------------- 6-30-00 3-31-00 6-30-99 ------------- ------------- ------------ SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $680 $678 $704 Provision for loan losses 68 183 76 Noninterest income 475 806 532 Noninterest expense 698 727 723 Net income 248 367 280 Net income - core 249 243 273 PER COMMON SHARE Net income $ .57 $ .83 $ .63 Net income - core .57 .55 .61 Net income - assuming dilution .57 .83 .62 Net income - assuming dilution - core .57 .55 .60 Cash dividends .28 .28 .26 Book value at period end 15.09 14.84 13.90 Market price at period end 17.63 19.00 32.13 AT PERIOD END Full-time equivalent employees 23,005 23,474 25,758 Branches 938 937 965 PERFORMANCE RATIOS Return on average total assets 1.20 % 1.77 % 1.40 % Return on average total assets - core 1.20 1.17 1.37 Return on average equity 15.40 22.68 18.16 Return on average equity - core 15.46 15.02 17.70 Efficiency (1) 60.26 62.27 59.21 Overhead (2) 32.50 35.75 29.97 Net interest margin (taxable equivalent) 3.68 3.68 3.97 CAPITAL RATIOS AT PERIOD END Equity to assets 7.68 % 7.78 % 7.71 % Tangible equity to tangible assets 6.12 6.16 5.95 Tier 1 risk-adjusted capital (3) 7.78 7.98 7.48 Total risk-adjusted capital (3) 11.58 12.04 11.74 Leverage (3) 7.91 7.89 7.41 ASSET QUALITY Net loan charge-offs $68 $134 $76 Net loan charge-offs to average loans .42 % .84 % .49 % Allowance for loan losses $979 $979 $930 Allowance for loan losses to period end loans 1.49 % 1.53 % 1.50 % Allowance for loan losses to nonperforming loans 200.20 231.44 247.34 Nonperforming loans at period end $489 $423 $376 Nonperforming assets at period end 521 447 412 Nonperforming loans to period end loans .75 % .66 % .61 % Nonperforming assets to period end loans plus OREO and other nonperforming assets .79 .70 .66
6 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 6
FINANCIAL HIGHLIGHTS (dollars in millions, except per share amounts) SIX MONTHS ENDED --------------------------------- 6-30-00 6-30-99 ------------- ------------- SUMMARY OF OPERATIONS Net interest income (taxable equivalent) $1,358 $1,397 Provision for loan losses 251 187 Noninterest income 1,281 1,147 Noninterest expense 1,425 1,477 Net income 615 573 Net income - core 492 521 PER COMMON SHARE Net income $1.40 $1.28 Net income - core 1.12 1.16 Net income - assuming dilution 1.40 1.27 Net income - assuming dilution - core 1.12 1.15 Cash dividends .56 .52 PERFORMANCE RATIOS Return on average total assets 1.48 % 1.45 % Return on average total assets - core 1.19 1.31 Return on average equity 19.04 18.81 Return on average equity - core 15.24 17.10 Efficiency (1) 61.27 60.16 Overhead (2) 34.12 31.57 Net interest margin (taxable equivalent) 3.68 3.96 ASSET QUALITY Net loan charge-offs $202 $157 Net loan charge-offs to average loans .63 % .51 %
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 6-30-00 ratio is estimated. 7 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 7
CONSOLIDATED BALANCE SHEETS (dollars in millions) 6-30-00 3-31-00 6-30-99 ------------- -------------- ------------- ASSETS Loans $65,612 $64,064 $61,971 Investment securities 1,128 1,053 967 Securities available for sale 6,249 6,269 6,404 Short-term investments 1,759 2,567 1,755 ------------- -------------- ------------- Total earning assets 74,748 73,953 71,097 Allowance for loan losses (979) (979) (930) Cash and due from banks 3,178 2,757 3,060 Premises and equipment 726 761 846 Goodwill 1,357 1,378 1,446 Other intangible assets 52 56 68 Corporate owned life insurance 2,159 2,132 2,056 Other assets 3,478 3,446 3,246 ------------- -------------- ------------- TOTAL ASSETS $84,719 $83,504 $80,889 ============= ============== ============= LIABILITIES Deposits in domestic offices: Noninterest-bearing $9,057 $8,283 $9,058 Interest-bearing 34,733 34,718 31,948 Deposits in foreign office-interest-bearing 5,286 3,035 2,010 ------------- -------------- ------------- Total deposits 49,076 46,036 43,016 Federal funds purchased and securities sold under repurchase agreements 3,511 2,621 4,727 Bank notes and other short-term borrowings 5,998 8,015 7,344 Other liabilities 4,287 4,312 3,405 Long-term debt 14,097 14,784 15,168 Capital securities of subsidiary trusts 1,243 1,243 994 ------------- -------------- ------------- TOTAL LIABILITIES 78,212 77,011 74,654 SHAREHOLDERS' EQUITY 6,507 6,493 6,235 ------------- -------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $84,719 $83,504 $80,889 ============= ============== ============= Common shares outstanding (000) 431,166 437,590 448,641
8 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 8
CONSOLIDATED STATEMENTS OF INCOME (dollars in millions, except per share amounts) THREE MONTHS ENDED SIX MONTHS ENDED --------------------------------------- ------------------------ 6-30-00 3-31-00 6-30-99 6-30-00 6-30-99 --------- --------- --------- --------- --------- INTEREST INCOME $1,540 $1,489 $1,392 $3,029 $2,773 INTEREST EXPENSE 867 818 695 1,685 1,391 -------- -------- -------- -------- -------- NET INTEREST INCOME 673 671 697 1,344 1,382 Provision for loan losses 68 183 76 251 187 -------- -------- -------- -------- -------- 605 488 621 1,093 1,195 NONINTEREST INCOME Trust and asset management income 116 115 110 231 216 Investment banking and capital markets income 98 89 100 187 166 Service charges on deposit accounts 85 86 82 171 163 Brokerage commission income 34 45 42 79 84 Corporate owned life insurance income 25 25 27 50 51 Credit card fees 2 6 21 8 31 Net loan securitization gains 7 2 18 9 50 Net securities gains 2 1 20 3 24 Gains from divestitures -- 332 -- 332 148 Other income 106 105 112 211 214 -------- -------- -------- -------- -------- Total noninterest income 475 806 532 1,281 1,147 NONINTEREST EXPENSE Personnel 361 382 383 743 755 Net occupancy 56 57 58 113 117 Computer processing 60 59 59 119 113 Equipment 42 48 49 90 105 Marketing 31 22 24 53 49 Amortization of intangibles 25 25 26 50 54 Professional fees 21 19 17 40 32 Restructuring charges -- 7 -- 7 -- Other expense 102 108 107 210 252 -------- -------- -------- -------- -------- Total noninterest expense 698 727 723 1,425 1,477 -------- -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 382 567 430 949 865 Income taxes 134 200 150 334 292 -------- -------- -------- -------- -------- NET INCOME $248 $367 $280 $615 $573 ======== ======== ======== ======== ======== Net income per common share $.57 $.83 $.63 $1.40 $1.28 Net income per common share - assuming dilution .57 .83 .62 1.40 1.27 Wtd. avg. common shares (000) 434,112 441,834 448,037 437,973 448,774 Wtd. avg. common shares and potential common shares (000) 436,022 443,757 452,733 439,889 453,461 Taxable-equivalent adjustment $7 $7 $7 $14 $15
9 KEYCORP REPORTS SECOND QUARTER 2000 EARNINGS JULY 18, 2000 PAGE 9
CONSOLIDATED AVERAGE BALANCE SHEETS (in millions) THREE MONTHS ENDED SIX MONTHS ENDED ---------------------------------------- ----------------------- 6-30-00 3-31-00 6-30-99 6-30-00 6-30-99 --------- --------- --------- --------- --------- ASSETS Loans $64,817 $64,024 $61,604 $64,420 $61,648 Investment securities 1,086 1,016 984 1,051 987 Securities available for sale 6,198 6,475 6,575 6,336 6,291 Short-term investments 1,757 2,164 1,725 1,961 1,849 -------- -------- -------- -------- -------- Total earning assets 73,858 73,679 70,888 73,768 70,775 Allowance for loan losses (976) (899) (919) (938) (904) Cash and due from banks 2,606 2,557 2,571 2,582 2,592 Other assets 7,917 7,850 7,485 7,884 7,479 -------- -------- -------- -------- -------- TOTAL ASSETS $83,405 $83,187 $80,025 $83,296 $79,942 ======== ======== ======== ======== ======== LIABILITIES Deposits in domestic offices: Noninterest-bearing $8,412 $8,160 $8,438 $8,286 $8,466 Interest-bearing 34,392 33,708 32,247 34,051 32,179 Deposits in foreign office-interest-bearing 3,029 1,206 1,096 2,117 804 -------- -------- -------- -------- -------- Total deposits 45,833 43,074 41,781 44,454 41,449 Federal funds purchased and securities sold under repurchase agreements 4,096 4,003 5,479 4,050 5,279 Bank notes and other short-term borrowings 6,972 8,680 6,786 7,826 7,991 Other liabilities 4,357 4,344 3,264 4,350 3,226 Long-term debt 14,425 15,334 15,368 14,879 14,754 Capital securities of subsidiary trusts 1,243 1,243 1,162 1,243 1,100 -------- -------- -------- -------- -------- TOTAL LIABILITIES 76,926 76,678 73,840 76,802 73,799 SHAREHOLDERS' EQUITY 6,479 6,509 6,185 6,494 6,143 -------- -------- -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $83,405 $83,187 $80,025 $83,296 $79,942 ======== ======== ======== ======== ========