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KeyCorp Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 21, 2003
Period End
December 31, 2002
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 21, 2003. Cited figures are marked; the original filing is the authoritative source.

KeyCorp, headquartered in Cleveland, Ohio, is a bank holding company that reported consolidated total assets of $85.2 billiona at December 31, 2002, operating through three major business groups: Key Consumer Banking, Key Corporate Finance and Key Capital Partners, with 910 full-service KeyCenters and 2,165 ATMs in 17 states.

Net income for 2002 was $976 millionb, or $2.27 per diluted common share, compared with $132 million, or $.31 per share, in 2001, when results were burdened by $1.1 billion of pre-tax charges. Net interest margin rose to 3.97% from 3.81%, while average earning assets fell 4% to $72.3 billion, and noninterest expense declined 10% to $2.7 billion, the lowest since 1998, following completion of the competitiveness initiative. Credit quality remained a key focus.

Net loan charge-offs were $780 millionc, or 1.23% of average loans, and nonperforming assets totaled $993 million, or 1.59% of loans, OREO and other nonperforming assets, up from $947 million, or 1.49%, a year earlier. The allowance for loan losses was $1.5 billion, or 2.32% of loans. Capital ratios remained above well-capitalized thresholds, with a Tier 1 risk-based capital ratio of 8.09%, a total risk-based capital ratio of 12.51% and a leverage ratio of 8.15% at year-end.

Assets under management declined to $61.7 billiond from $72.7 billion, reflecting market declines and net outflows of approximately $4.1 billion. The filing also flags risks for investors, including an ongoing Internal Revenue Service challenge to certain leveraged lease investments, litigation over residual value insurance with Reliance Insurance Company, and the expected adoption of FIN 46 on variable interest entities, which management says will most significantly affect the balance sheet. Dividends were raised to $.305 per quarter from $.30 in early 2003.

02—Key points

Key Highlights

  1. Net income for 2002 was $976 million, or $2.27 per diluted share, versus $132 million, or $.31 per share, in 2001.
  2. Total assets were $85.2 billion at December 31, 2002, with 910 full-service KeyCenters and 2,165 ATMs in 17 states.
  3. Net interest margin improved to 3.97% from 3.81%, while average earning assets declined 4% to $72.3 billion.
  4. Noninterest expense fell 10% to $2.7 billion, its lowest level since 1998, after completing the second phase of the competitiveness initiative.
  5. Nonperforming assets rose to $993 million, or 1.59% of loans, OREO and other nonperforming assets, from 1.49% a year earlier; net charge-offs were 1.23% of average loans.
  6. Tier 1 risk-based capital ratio was 8.09%, total risk-based capital ratio 12.51% and leverage ratio 8.15%, with both affiliate banks rated well capitalized.
  7. Assets under management fell to $61.7 billion from $72.7 billion, with net outflows of approximately $4.1 billion during 2002.

03—Questions

Frequently Asked Questions

  1. How profitable was KeyCorp in 2002 compared with 2001?

    Net income was $976 million, or $2.27 per diluted share, in 2002, compared with $132 million, or $.31 per share, in 2001. The 2001 results included $1.1 billion of pre-tax charges tied to exiting automobile leasing, discontinuing credit-only relationships and increasing the allowance for loan losses, which the filing says hinder a direct comparison.

  2. Is KeyCorp's credit quality improving?

    Mixed. Net loan charge-offs were $780 million, or 1.23% of average loans, up from $673 million, or 1.02%, in 2001. Nonperforming assets were $993 million, or 1.59%, up from $947 million, or 1.49%. The allowance for loan losses was $1.5 billion, or 2.32% of loans, down from 2.65%.

  3. How strong is KeyCorp's capital position?

    At December 31, 2002, the Tier 1 risk-based capital ratio was 8.09%, the total risk-based capital ratio was 12.51% and the leverage ratio was 8.15%. Shareholders' equity was $6.8 billion, or 8.02% of total assets. Both affiliate banks were classified as well capitalized.

  4. What legal and regulatory matters could affect investors?

    The filing discloses that the Internal Revenue Service is challenging KeyCorp's tax treatment of certain leveraged lease investments, which management believes will be resolved without a material effect. It also describes litigation over residual value insurance policies with Reliance Insurance Company, where Key Bank USA has filed claims of about $259 million, with additional claims of about $102 million estimated through 2006. An adverse court decision could cause a material one-time expense. Interpretation No. 46 on variable interest entities may significantly change consolidated assets and capital ratios.

  5. What did KeyCorp say about its dividend and share repurchases?

    The 2002 quarterly dividend was $.30 per common share, and on January 16, 2003, it was increased to $.305, effective with the March 2003 payment. During 2002, KeyCorp repurchased 3,000,000 common shares at an average price of $25.58, and 13,764,400 shares remained authorized for repurchase under the September 2000 program.

04—Continue

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