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KeyCorp Annual Report, Year Ended Dec 31, 2001

Filing Date
Filed March 28, 2002
Period End
December 31, 2001
In the record · 2016–202610-K1110-Q348-K141

KEY filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 141 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Aug ’16Aug ’16
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Leadership change8-K · Dec ’21Dec ’21
  4. Leadership change8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K filed March 28, 2002. Cited figures are marked; the original filing is the authoritative source.

KeyCorp, headquartered in Cleveland, Ohio, reported a sharp decline in 2001 earnings driven by significant core charges.

Net income for 2001 was $132 milliona, or $.31 per diluted common share, compared with $1.002 billion, or $2.30 per share, in 2000. Core net income was $320 million, or $.74 per share, against $1.009 billion, or $2.32 per share, in 2000. The decline reflected a provision for loan losses of $1.350 billion for the year, a $150 million goodwill write-down tied to downsizing the automobile finance business, and weaker capital markets-sensitive businesses.

Total assets were $80.9 billionb at December 31, 2001, and total shareholders' equity was $6.2 billion, down $468 million from 2000. Nonperforming assets rose to $947 million, and the allowance for loan losses reached $1.677 billion, or 2.65% of loans. Management described strategic actions taken in May and December 2001, including exiting automobile leasing, de-emphasizing indirect prime auto lending, and eliminating nonrelationship leveraged and syndicated lending.

The competitiveness initiative is expected to reach an annual savings rate of approximately $360 millionc by the end of 2002, and the workforce is expected to shrink by about 4,000 positions by the end of the first quarter of 2002. Capital ratios remained above regulatory well-capitalized thresholds, with a Tier 1 risk-based capital ratio of 7.43% and a total risk-based capital ratio of 11.41% at year end. The quarterly dividend was increased to $.30 per share, effective with the March 2002 payment.

The filing also discloses material legal matters, including the Reliance Insurance residual value litigation, where KeyBank has filed claims of about $89 milliond through December 31, 2001, and the NSM securities litigation, where a January 2002 insurance settlement was disputed by the carriers. Management believes the settlement is valid.

02—Key points

Key Highlights

  1. Net income fell to $132 million ($.31 per diluted share) in 2001 from $1.002 billion ($2.30 per share) in 2000; core net income was $320 million ($.74 per share).
  2. Provision for loan losses rose to $1.350 billion in 2001 from $490 million in 2000, including $590 million added in the fourth quarter.
  3. Total assets were $80.9 billion at December 31, 2001, and total shareholders' equity was $6.2 billion, down $468 million year over year.
  4. Nonperforming assets totaled $947 million at year end, and the allowance for loan losses was $1.677 billion, or 2.65% of loans.
  5. Competitiveness initiative targets an annual savings rate of approximately $360 million by the end of 2002, with about 4,000 workforce positions to be eliminated by the end of Q1 2002.
  6. Tier 1 risk-based capital ratio was 7.43% and total risk-based capital ratio was 11.41% at December 31, 2001; each insured bank subsidiary was rated well capitalized.
  7. Quarterly dividend was increased to $.30 per common share, effective with the March 2002 payment, and KeyCorp is subject to pending litigation involving Reliance Insurance residual value claims and NSM securities lawsuits.

03—Questions

Frequently Asked Questions

  1. Why did KeyCorp's 2001 earnings decline so sharply?

    Management attributed the decline to a sluggish economy that weakened after September 11, 2001, erosion in borrower credit quality, and significant core charges taken in May and December 2001. These included an additional $300 million provision for loan losses in May and a $590 million provision in December, plus a $150 million goodwill write-down tied to the automobile finance business.

  2. What strategic actions did KeyCorp announce in 2001?

    In May 2001, KeyCorp announced it would exit automobile leasing, de-emphasize indirect prime automobile lending, and discontinue nonrelationship lending in leveraged financing and nationally syndicated lending. In December 2001, it recorded additional core charges to strengthen the balance sheet and restore its conservative risk management culture.

  3. How strong is KeyCorp's capital position?

    At December 31, 2001, the Tier 1 risk-based capital ratio was 7.43%, the total risk-based capital ratio was 11.41%, and the leverage ratio was 7.65%. The equity-to-assets ratio was 7.60%, and each insured depository institution subsidiary met the well capitalized requirements. Book value per common share was $14.52.

  4. What are the main legal exposures disclosed?

    KeyBank is pursuing litigation against Reliance Insurance and related parties over residual value insurance on leased automobiles. Claims filed through December 31, 2001, totaled about $89 million, with approximately $225 million of additional claims estimated through 2006. The NSM litigation involves McDonald Investments, and a January 2002 settlement with insurance carriers was disputed by the carriers, though management believes the settlement is valid.

04—Continue

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