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    ALBANY, N.Y., July 15 /PRNewswire/ -- KeyCorp (NYSE: KEY) reported record net income of $99.9 million in the second quarter of the year. This represents an increase of 31.9 percent over net income of $75.8 million for the same period in 1992.  Earnings per common share were $.95 for the quarter, up 30.1 percent over the $.73 reported in the second quarter of 1992.
    Net income for the first six months of 1993 rose 30.8 percent to $194.8 million, up from $149.0 million during the same period in 1992. This equalled $1.86 per common share, up 29.2 percent from $1.44 reported a year earlier.
    KeyCorp's 1992 results have been restated to reflect the acquisition of Puget Sound Bancorp, a pooling-of-interests transaction consummated on January 15, 1993.  In the first six months of 1992, Puget Sound Bancorp recorded a positive $6.6 million cumulative effect of accounting change resulting from the adoption of SFAS 109.  The comparative figures discussed above exclude that nonrecurring gain from the 1992 first-half results.
    Key performance ratios for the second quarter and first six months were as follows:
                                      2nd Qtr.   1st Qtr.    2nd Qtr.
                                       1993       1993         1992
    Return on Assets (ROA)             1.27 pct.  1.28 pct.    1.10 pct.
    Return on Common Equity (ROCE)    18.99 pct. 18.89 pct.   16.29 pct.
    Efficiency Ratio                  60.46 pct. 60.63 pct.   60.95 pct.
                                      1st Half     1st Half
                                         1993         1992
    ROA                                1.27 pct.    1.13 pct.
    ROCE                              18.94 pct.   16.96 pct.
    Efficiency Ratio                  60.54 pct.   61.14 pct.
    "Since last year we've said that KeyCorp's objectives for the full year 1993 include a 1.20 percent ROA, between 17 percent and 18 percent for ROCE, and an efficiency ratio of 60 percent or better," said Victor J. Riley, Jr., chairman, president and chief executive officer of KeyCorp.  "The results of the first six months indicate we are on our way to exceed those objectives."
    William H. Dougherty, group executive vice president and chief financial officer, commented on important aspects of the second quarter and six month performance.  "The net yield on average earning assets equalled 5.34 percent during the quarter, matching the yield earned in the second quarter of 1992, down from the 5.38 percent generated in the first quarter of 1993.  The good news is that expansion in the volume of our earning assets, assisted by our first quarter acquisitions, more than offset the decline in the linked-quarter yield.  Average earning assets climbed to $28.5 billion, a 5.6 percent increase over the first quarter's level of $27.0 billion.  As a result, taxable-equivalent net interest income grew by 5.4 percent in the second quarter compared to the first quarter of the current year.
    "One of the factors leading to the four basis point decline in the net yield during the second quarter was that late in the first quarter of this year we merged National Savings Bank of Albany (National) and First American Bank of New York (First American) into our system. Neither of these banks had net yields as high as ours, and it takes some time to bring newly acquired banks up to our traditional performance level.  Also, low interest rates in the United States have prompted record levels of mortgage loan refinancing, leading to reduced yields on our mortgage loan and mortgage-backed securities portfolios.
    "As expected, loan growth was modest during the second quarter, but headed in the right direction; that is, better than the first quarter's experience of 3.5 percent.  Excluding acquisitions, the second quarter's internal loan-growth rate approximated 5.5 percent when compared to average loans in the second quarter of 1992.  Loan expansion in the Western portion of our franchise continued to outpace that in the Eastern part.  Our Rocky Mountain banks enjoyed average internal loan growth of 11.0 percent in the second quarter, and in our Pacific Northwest banks the rate was 5.4 percent.  Our Eastern banks saw average internal loans remain flat during the quarter, but excluding run-off of out-of-market loans acquired through our regulator-assisted transactions in the state of New York, Eastern internal loan growth approximated 3.1 percent.
    "We still expect internal growth for KeyCorp as a whole to approximate 5 percent for all of 1993.  Including acquisitions, growth in the average loan portfolio is estimated to be in the range of 13 percent to 14 percent in the current year.
    "Fee income increased to $137.2 million, 37.5 percent over the $99.8 million earned in the second quarter of 1992 and 22.9 percent above the $111.6 million reported in the first quarter of 1993.  Compared to the first quarter, growth occurred in almost every category of fee income. The only exception was in the category of special asset management fees. During the first quarter, Niagara Portfolio Management, one of our two companies managing assets under contract with the FDIC, sold a significant portion of those assets which generated $13 million in fees.
    "Very strong performances were posted by our insurance and brokerage operations during the second quarter.  Commissions rose from $9.0 million in the first quarter to $12.1 million in the second quarter. Mortgage banking income was also robust, rebounding to $28.7 million in the second quarter, versus $13.0 million in the first quarter.  Most of the increase was generated by the sale of $1.6 billion in servicing at a gain of $10.2 million as well as a jump in origination fees of $5.2 million.  As in the first quarter, we accelerated the amortization of an additional $5 million in mortgage servicing rights during the second quarter in response to continued record levels of mortgage loan refinancings.  Our mortgage servicing portfolio stood at $22.1 billion on June 30, 1993."
    Dougherty added, "During the second quarter, noninterest expenses rose to $312.8 million, $48.0 million or 18.1 percent above the $264.8 million incurred in the second quarter of 1992.  This increase was affected by operating expenses related to the purchase of 48 former Security Pacific branches on September 3 of last year, our first quarter 1993 acquisitions of National and First American, as well as other nonrecurring expenses.  Excluding these expenditures, the rise in core noninterest expenses was less than 5 percent, a level we expect to continue over the remainder of the year.
    "Even with the 18.1 percent growth in expenses, the efficiency ratio continued to show improvement, since revenues grew at a faster 19.1 percent rate.  The efficiency ratio was 60.46 percent in the second quarter of 1993, compared to 60.95 percent in the same period last year and 60.63 percent in the first quarter of this year."
    Dougherty also said, "Improvement in KeyCorp's nonperforming assets continued for the fifth consecutive quarter, despite the addition of $2.4 million from the acquisition of Home Federal Savings Bank in Fort Collins, Colorado (Home Federal).  Nonperforming assets equalled $366.1 million at the end of June, versus $388.6 million at the end of the first quarter.  The June figure represented 1.68 percent of loans plus ORE, down from 1.80 percent reported on March 31 and down substantially from the year ago June 30 figure of 2.31 percent.
    "Consistent with the pattern in the level of nonperforming assets, loan losses continue to trend downward.  Net charge-offs fell to .67 percent of average loans, down from .94 percent in the same period last year although above the .58 percent experienced in the first quarter of 1993.  The decline in charge-offs allowed the second quarter provision for loan losses to be reduced to $41.5 million, a 15.8 percent improvement compared to the $49.3 million reported in the second quarter of 1992.  The provision, although lowered, still exceeded net charge- offs by $6.0 million for the quarter.  We expect net charge-offs for the full year to fall within a range of .55 percent to .65 percent of average loans.
    "Finally with respect to asset quality, the allowance for loan losses at June 30 totalled $306.7 million, which covered 163.7 percent of nonperforming loans, up from 157.9 percent at March 31."
    Riley concluded, "KeyCorp's excellent financial performance places us squarely among the premier companies in the banking industry, and we have recently announced a number of management changes intended to solidify and enhance our relative position. Gary Allen, after a very successful tenure as the top executive of Key Bank of New York, is now our chief banking officer.  This is a vital position within KeyCorp, as the banks are expected to generate over 80 percent of the company's total net income even after expansion of fee-based businesses as called for in our five-year strategic plan.  Gary's orientation to his new position will be brief, since he is a long-time Key executive and most recently he reported to the very position he now holds.  Moving in as chairman and CEO at Key Bank of New York is Jim Menzies, KeyCorp's long- tenured chief credit officer who developed the KeyCorp loan review function into an industry model for asset quality monitoring.  In addition, Deborah Bevier was named as chairman and CEO of Key Bank of Washington.  She spent the last six years at the helm of Key Bank USA N.A., starting it from scratch in 1987 and developing it into an exceptionally high-quality, high-performing bank with nearly $600 million in assets.  Both Jim and Deborah have set new standards for excellence in their long careers with KeyCorp, and are known for their leadership and team-building qualities."
    On June 30, 1993, KeyCorp consummated the previously-announced acquisition of Home Federal, which had approximately $175 million in deposits, $200 million in loans, and $250 million in total assets.  Its four branches opened as Key Bank of Colorado on July 1, 1993.  KeyCorp now has ten banks in nine states and three distinct regions of the country.  On June 23, KeyCorp announced that a definitive agreement had been signed to acquire Jackson County Federal Bank (JCF) in Medford, Oregon.  JCF has $350 million of assets and $317 million of deposits in eight branches and three loan production offices in southern Oregon.  It is expected to be merged into Key Bank of Oregon on or before December 31, 1993.  One further transaction remains pending, that of Northwestern National Bank, a $46 million-asset institution headquartered in Port Angeles, Washington.  It is expected to close later this month.
    KeyCorp (NYSE: KEY), with assets over $32 billion, is a multi- regional bank holding company headquartered in Albany, New York.  As "America's neighborhood bank", KeyCorp avoids overcrowded marketplaces, concentrating its resources in smaller communities.  KeyCorp focuses its business on consumers and small to medium-sized commercial enterprises.
                       Summary of Operating Results
    Summary of Operations      Three Months Ended     Six Months Ended
    (in thousands except             June 30              June 30
       per share data)             1993      1992       1993      1992
    Interest Income
       Basis)                   $600,367  $580,996 $1,179,067 $1,169,781
    Interest Expense             220,147   246,421    438,113    511,360
    Net Interest Income          380,220   334,575    740,954    658,421
    Less: Taxable-Equivalent
      Adjustment                  10,042    11,175     19,983     22,595
    Provision for Loan Losses     41,534    49,258     73,384     94,024
    Net Interest Income After
      Provision for Loan Losses  328,644   274,142    647,587    541,802
    Noninterest Income:
      Service Charges on Deposit
        Accounts                  39,452    33,126     76,260     65,907
      Mortgage Banking Income     28,735    20,554     41,715     39,257
      Trust Service Fees          10,115    10,010     19,660     20,371
      Other Service Charges
        and Fees                  16,648    13,325     29,190     25,929
      Insurance and Brokerage     12,090     7,361     21,057     14,474
      Special Asset Management
        Fees                       7,684       713     23,975      1,876
      Other                       22,517    14,726     36,986     27,831
      Total Fee Income           137,241    99,815    248,843    195,645
      Gains on Sales of Loans          -     1,271          -      2,832
      Trading Account Gains            -        54          -         40
      Investment Securities
        Gains (Losses)                 -     1,426       (464)     2,243
      Gains on Securities
        Available for Sale         1,616         -      2,183          -
      Total Noninterest Income   138,857   102,566    250,562    200,760
    Noninterest Expense:
      Personnel Expense          151,585   122,078    290,336    245,375
      Net Occupancy Expense       28,992    28,180     56,682     56,130
      FDIC Insurance              14,607    12,897     29,361     25,739
      OREO Expense                 7,993     8,319     16,030     12,273
      Other                      109,669    93,308    206,811    182,662
      Total Noninterest Expense  312,846   264,782    599,220    522,179
   Income Before Taxes           154,655   111,926    298,929    220,383
    Income Taxes                  54,706    36,136    104,093     71,432
        Net Income Before
          Accounting Change       99,949    75,790    194,836    148,951
    Cumulative Effect of
      Accounting Change                -         -          -      6,613
        Net Income              $ 99,949  $ 75,790 $  194,836 $  155,564
    Preferred Stock Dividends   $  4,450  $  4,450 $    8,901 $    8,901
    Net Income Applicable to
      Common Shares After
      Preferred Dividends       $ 95,499  $ 71,340 $  185,935 $  146,663
    Net Income Per Common Share
      Before Cumulative Effect
      of Accounting Change         $ .95     $ .73      $1.86      $1.44
    Net Income Per Common Share
      After Cumulative Effect
      of Accounting Change         $ .95     $ .73      $1.86      $1.51
    Average Common Shares
      Outstanding                100,603    97,262     99,933     97,041
    Significant Ratios
    Return on Average Assets (pct)  1.27      1.10       1.27       1.13
    Return on Average
      Common Equity (pct)          18.99     16.29      18.94      16.96
    Efficiency Ratio (pct)         60.46     60.95      60.54      61.14
    Efficiency Ratio excluding
      OREO Expenses (pct)          58.91     59.04      58.92      59.70
    Net Yield on Average
      Earning Assets (pct)          5.34      5.34       5.36       5.28
    Equity to Assets
     (Period-End)(pct)              7.05      7.15       7.05       7.15
    Nonperforming Loans to
      Period-End Loans (pct)         .87      1.13        .87       1.13
    Nonperforming Assets to
      Period-End Loans Plus
      OREO (pct)                    1.68      2.31       1.68       2.31
    Allowance for Loan Losses
      to Period-End Loans (pct)     1.42      1.48       1.42       1.48
    Allowance for Loan Losses
      to Nonperforming Loans (pct)163.69    131.81     163.69     131.81
    Net Charge-Offs to Average
      Loans (pct)                    .67       .94        .63        .92
    Credit Quality
    (dollars in thousands)
                  June 30  March 31  December 31  September 30  June 30
                     1993      1993         1992          1992     1992
    Loans on
     Nonaccrual  $180,794  $187,326     $202,743     $194,208  $210,758
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Publication:PR Newswire
Date:Jul 15, 1993

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